LAW TING PONG SECONDARY SCHOOL v. CHEN WAI WAH

HCLA 22/2018

[2019] HKCFI 2236

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO 22 OF 2018

(ON APPEAL FROM LABOUR TRIBUNAL CLAIM NO 1236 OF 2018)

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J U D G M E N T

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Introduction

1.  This is the appellant’s appeal against the decision handed down by Deputy Presiding Officer Gary Chu (“Presiding Officer”) on 24 September 2018 whereby the appellant was ordered to pay the respondent HK$139,593.20 as payment in lieu of notice in breach of the employment contract between the appellant and the respondent (“Teacher Employment Contract”).

2.  Leave to Appeal was granted by this court on 16 November 2018 on the following grounds: –

(1)  The Presiding Officer erred in applying the legal principles related to interpretation of contractual terms (審裁官錯誤地應用詮釋合約條款的法律原則) (“First Ground of Appeal”); and

(2)  The Presiding Officer failed to adequately deal with the appellant’s submissions at trial that the term relied on by the respondent should be regarded as a penalty clause instead of a liquidated damages clause (審裁官沒有充分處理上訴人在原審時提出，答辯人申索所依賴的合約條款，在法律上應被理解為合約的懲罰性條款，而非算定損害賠償) (“Second Ground of Appeal”).

Material Documents Involved

3.  The material facts of this case are not in dispute.  It is not disputed by the appellant and the respondent that on 17 July 2017, the respondent gave the following documents to the appellant: – 

(1)  The Offer of Appointment as Teacher, Law Ting Pong Secondary School dated 17 July 2017 (“Offer of Appointment”);

(2)  The Conditions of Service for Teachers in Law Ting Pong Secondary School (“Conditions of Service”); and

(3)  The Letter of Acceptance to be completed by the teacher (“Letter of Acceptance”).

4.  It is also not in dispute that on 17 July 2017, the appellant signed on the Conditions of Service and Letter of Acceptance.

The Respondent’s Case

5.  The claim of the respondent in these proceedings stemmed from the Letter of Acceptance.  In particular, the first and second paragraphs of the Letter of Acceptance provide that: –

“ I accept the appointment offered in your letter dated 17th July 2017 in accordance with the attached Conditions of Service for Teachers in Law Ting Pong Secondary School.

I also understand that once I accept this contract, the conditions of the new contract will come to immediate effect e.g. I need to give three months’ notice to terminate my employment with the school.” (Emphasis supplied)

6.  The respondent’s case is that upon signing the Letter of Acceptance on 17 July 2017, the Teacher Employment Contract came into immediate effect.

7.  The respondent contends that as part of the Teacher Employment Contract, the “Termination of Appointment and Period of Notice” clause (“Termination Clause”) contained in the Conditions of Service should be applicable.  To terminate the Teacher Employment Contract, the appellant could: –

(1)  Give the respondent three months’ notice in writing;

(2)  Make a payment equal to the amount of three months’ salary in lieu of notice; or

(3)  A combination of the notices and an undertaking to pay wages in lieu of notice to satisfy the three months’ notice period.

8.  By failing to observe the Termination Clause after the commencement of the Teacher Employment Contract on 17 July 2017, the respondent was entitled to claim the payment in lieu of notice in the sum of HK$139,593.20.

The Appellant’s Case

9.  The case of the appellant was that despite having signed the Conditions of Service and Letter of Acceptance on 17 July 2017, the appellant’s employment would not commence until 1 September 2017.

10.  Further, even if the Teacher Employment Contract did come to immediate effect from 17 July 2017 by virtue of paragraph 2 of the Letter of Acceptance, the Termination Clause should be regarded as a penalty clause and should not be enforceable.

11.  In terms of quantum, an estimate made by the appellant of the loss caused by his unavailability to take up the employment by the respondent would only be HK$16,853.

First Ground of Appeal

12.  The Presiding Officer was of the view that the Teacher Employment Contract was constituted by reading together provisions of the Offer of Appointment, the Conditions of Service and the Letter of Acceptance.

13.  Citing Jumbo King Ltd v Faithful Properties Ltd & Ors [1999] 3 HKLRD 757, 773F-774A, the Presiding Officer explained that it could be ascertained from a reasonable person’s perspective that:

(1)  By signing the Letter of Acceptance containing a paragraph stating that the Teacher Employment Contract would come into immediate effect, the appellant should have understood and have agreed to be bound by such a paragraph; and

(2)  As such, there was a consensus between the appellant and respondent that the Termination Clause would become effective immediately.

14.  While the appellant agreed with the principles discussed by the Court of Final Appeal in Jumbo King Ltd, ibid, and cited by the Presiding Officer, the appellant submitted that the Presiding Officer failed to properly consider, inter alia, the following questions before applying Jumbo King Ltd to interpret the terms of the Teacher Employment Contract: –

(1)  What were the terms of employment offered by the respondent?

(2)  What were the terms of offer accepted by the appellant (and leading to the formation of the Teacher Employment Contract)?

(3)  What was the function of the Letter of Acceptance in relation to the Teacher Employment Contract?

Question 1 - Terms of Employment offered by the Respondent

15.  The textbook definition of an “offer” was recently adopted by the English Court of Appeal in JLT Specialty Limited v James Craven [2018] EWCA Civ 2487.  When deciding whether the employer was making an offer through a letter, Newey LJ held as follows at paragraph 15: –

“JLT cannot be considered to have made an offer in its letter of 29 September 2015.  An offer is “an expression of willingness to contract on specified terms made with the intention that it is to become binding as soon as it is accepted by the person to whom it is addressed” (Chitty on Contracts, 33rd ed., at [2-003]). No such “expression of willingness” is, as it seems to me, to be found in the 29 September 2015 letter.  JLT was not purporting to put forward any proposal of its own, but just to “confirm that [Mr Craven’s] resignation is accepted …” (Emphasis supplied)

16.  The definition of an offer discussed in JLT Specialty Limited, ibid highlights 2 features of an offer.

(1)  There must be an expression of willingness to contract by the offeror; and

(2)  Such a willingness to contract is subject to specified terms.

17.  Looking at the Offer of Appointment in the present case, the respondent’s willingness to contract with appellant was clearly stated in the first paragraph: –

“The Incorporated Management Committee of Law Ting Pong Secondary School (“LTPSS”) hereby offers you an appointment as a Teacher in the school.”

18.  As to the terms specified in the offer, it was stated in the second paragraph of the Offer of Appointment that: – 

“If you wish to accept this offer of appointment in the above school under the conditions set out in the attached Conditions of Service for Teachers in Law Ting Pong Secondary School, please sign both copies of the Letter of Acceptance; and both copies of the Conditions of Service for teachers in Law Ting Pong Secondary School and return one copy of each document to me direct or through the Principal. The second copy is for your retention.” (Emphasis in bold supplied)

19.  It is clear that the offer made by the respondent in relation to the Teacher Employment Contract was on the terms set out in the Conditions of Service but not the Letter of Acceptance.

20.  To decide whether to accept or decline such an offer, a person would have to read the Offer of Appointment in conjunction with the Conditions of Service to ascertain what terms would be agreed between the offeror and the offeree.

21.  Turning to the Conditions of Service, there was no provision in the Conditions of Service specifically referring to the Letter of Acceptance.

22.  I agree with the appellant’s submission that if it were the wish of the respondent that the employment under the Teacher Employment Contract should come into immediate effect, the respondent could have put such a term in the Offer of Appointment or the Conditions of Service so that the attention of the offeree could be drawn.

23.  As correctly submitted by the appellant, the offer made by the respondent in relation to the Teacher Employment Contract was only subject to terms of the Conditions of Service.  In particular, the period of employment under the Teacher Employment Contract was expressly stated as: “From 1^st September 2017 to 31^st August 2018”.

Question 2 – Acceptance of Respondent’s Offer by the Appellant

24.  It is trite law that an acceptance by the offeree has to “mirror” the offer made by the offeror.  In Day Morris Associates v Voyce and Anor [2003] EWCA Civ 189 at paragraph 35, the English Court of Appeal described an acceptance as follows: –

“A contractual acceptance has to be a final and unqualified expression of assent to the terms of the offer.”

25.  Applying this to the present case: –

(1)  As held above, any terms purportedly set out in the Letter of Acceptance could not have formed part of the offer made by the respondent.

(2)  What the appellant could (and which he did) accept was an offer with terms subject to the Conditions of Service only, as proposed by the respondent in the Offer of Appointment.

(3)  If the appellant purported to accept the terms stated in the Letter of Acceptance in addition to the offer made by the respondent in the Offer of Appointment, this could not have been an acceptance according to the rule discussed in Day Morris Associates, ibid.

Question 3 – Function of the Letter of Acceptance

26.  The function of the Letter of Acceptance can be ascertained from the second paragraph of the Offer of Appointment set out at paragraph 18 above.  To accept the offer made by the respondent, the appellant would have to: –

(1)  Sign both copies of the Letter of Acceptance; and

(2)  Sign both copies of the Conditions of Service.

27.  Therefore, I agree the appellant’s act of signing the Letter of Acceptance was simply to comply with the prescribed mode of acceptance stated in the Offer of Appointment.  It would be inappropriate to go a step further and to hold that the terms contained in the Letter of Acceptance constitute part of the offer made by the respondent.

28.  Based on the above analysis, I hold that: –

(1)  Any alleged terms stated in the Letter of Acceptance should not be considered to form part of the Teacher Employment Contract because such terms were not included in the offer made by the respondent at the outset;

(2)  It follows that the acceptance of offer by the appellant, in the manner prescribed by the Offer of Appointment, could not have included any terms purportedly stated in the Letter of Acceptance; and

(3)  By reading the Offer of Appointment, it is clear that the Letter of Acceptance merely served as a document to be signed by the appellant to complete the acceptance process, instead of adding further terms to the offer made by the respondent.

29.  Further and in any event, the second paragraph of the Letter of Acceptance merely stated that “… I need to give three months’ notice to terminate my employment with the school” (emphasis supplied).  Under the Conditions of Service, clearly the “employment” of the appellant by the respondent did not commence until 1 September 2017.

30.  For the reasons stated above, I am of the view that the appellant’s employment would not commence until 1 September 2017, and the appellant was not liable to make any payment in lieu of notice by backing out on 22 August 2017.

Second Ground of Appeal

31.  In view of my finding on the First Ground of Appeal, it is not necessary and I do not propose to discuss or consider the Second Ground of Appeal.

Conclusion

32.  For the reasons stated above, I allow the appellant’s appeal.  Accordingly, I set aside the order of the Presiding Officer made on 24 September 2018 and dismiss the respondent’s claim against the appellant.

33.  I further order that the costs of the appeal be paid by the respondent to the appellant, such costs are to be taxed if not agreed.

34.  The above order as to costs is nisi and shall become absolute in the absence of any application within 14 days to vary the same.

35.  Lastly, I express my gratitude to counsel on both sides for their helpful assistance in this matter.