FWD Life Insurance Co (Bermuda) Ltd v Poon Cindy
Court of Appeal
Civil Appeal No 181 of 2015
Lam V-P, Cheung and Chu JJA
30 May, 24 June 2019

Employment law — termination of employment — wrongful termination —appeal against findings in favour of employer on “valid reason” implied term — allowed, with case remitted for consideration of such term and of newly raised issues of “good faith” and “rationality” implied terms

P, the former employer of D, sued D for the repayment of three sums, namely a Signing Fee (“SF”), a Performance Bonus (“PB”), and a Monthly Special Bonus (“MSB”). Under the terms of a Letter of Offer issued by P to D on D’s employment, the sums were repayable to P if D’s engagement was terminated within 30 months (for SF and MSB) or 12 months (for PB) from the date of her contract. D’s engagement was terminated within 12 months of her contract. In 2015, P succeeded in its claim after trial. The Judge accepted D’s argument that the cause of her termination was her refusal to accept a demotion. However, he found that D’s employment had not been wrongfully terminated in breach of agreement, and P was entitled to recover the SF, MSB and PB. In doing so, the Judge rejected D’s arguments that: (a) there was a collateral contract stemming from oral representations made by the 1st and 2nd Third Parties, under which P was not to terminate D’s employment within 30 months if she fulfilled the terms in the Letter of Offer or without valid reason (Collateral Contract); or (b) there were implied terms in D’s employment agreements to give valid reasons for termination and demotion (“Valid Reason Implied Term”). As a result, the Judge also dismissed D’s Counterclaim and Third Party claims against the two Third Parties which were based on the existence of the Collateral Contract. Subsequently, D obtained leave to rely on appeal on the argument that P’s power to terminate her employment or demote her was subject to an implied term of good faith and rationality (“Good Faith and Rationality Implied Term”).

Held, allowing D’s appeal and remitting the case to the Judge for consideration, that:

Good Faith and Rationality Implied Term

1) The question of whether the Good Faith and Rationality Implied Term could have arisen would be remitted to the Judge. This was because the factual matrix of D’s case concerning such implied term had already been canvassed in evidence at trial, and the common law in this area had developed since 2015. The most relevant authorities in a similar context had not been decided when the trial took place. Therefore, it would not be just to deprive D of the chance to rely on this implied term. Although further evidence might be adduced, it could not be said at this stage that D’s case based on this implied term was unarguable (British Telecommunications plc v Telefónica O2 UK Ltd [2014] Bus LR 765, Braganza v BP Shipping Ltd [2015] 1 WLR 1661, Tadjudin Sunny v Bank of America, National Association (CACV 12/2015, [2016] HKEC 1128), So Sheung Hin Ben v Chubb Life Insurance Co Ltd [2018] 5 HKC 47 considered). (See paras. 23–46.)

Valid Reason Implied Term

2) The question of whether the Valid Reason Implied Term could have arisen would also be remitted to the Judge. This was because the Judge had not given much consideration to whether such a term arose in relation to demotion. This was necessary because it would appear easier to establish such a term in relation to demotion, as opposed to termination, and if the Court was satisfied that there was such a term concerning demotion, it would go far to establish a Valid Reason Implied Term for termination based on a refusal to accept demotion. Otherwise, any such term relating to demotion would be rendered illusory as P could simply resort to exercising its power of termination if D refused to accept a demotion (Blakeney-Williams v Cathay Pacific Airways (2012) 15 HKCFAR 261 considered). (See paras. 47–52.)

Valid Reason Implied Term

3) The ground of appeal based on the Collateral Contract was rejected. The Judge was correct in dismissing the third party proceedings. He had not overlooked the evidence nor erred in disbelieving part of D’s evidence. (See paras. 53–56.)

Appeal

This was an appeal by the defendant against the judgment of Deputy Judge Tony Poon concerning whether the defendant’s employment had been wrongfully terminated by the plaintiff-employer. The facts are set out in the judgment.

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