The Court of First Instance overturned the decision made by the Labour Tribunal relating to how to interpret the terms of an employment contract and liability to make a payment in lieu of notice when an employee backs out of his employment prior to the agreed commencement date. At the Labour Tribunal, the Respondent (the “School”) succeeded in its claim for 3 months’ payment in lieu of notice in the sum of HK$139,593, and the appellant (“Chen”) appealed to the Court of First Instance.
On 17 July 2017, the School gave the following documents to Chen:
a) Offer of Appointment as a Teacher (“Offer”);
b) Conditions of Service (“Conditions”); and
c) Letter of Acceptance (“Letter of Acceptance”).
Chen signed the Conditions and Letter of Acceptance on 17 July 2017. The Conditions expressly stated that the period of employment was from 1 September 2017 to 31 August 2018. The employee backed out on 22 August 2017.
The Letter of Acceptance stated; “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 added)
The School’s position was that upon signing the Letter of Acceptance, the employment contract (“Contract”) came into immediate effect. The Contract contained a “Termination of Appointment and Period of Notice” clause (“Termination Clause”), where Chen would need to give three months’ notice or payment in lieu in order to terminate the Contract. By failing to observe the Termination Clause, the School argued (and the Labour Tribunal agreed) that it was entitled to payment in lieu of notice in the sum of HK$139,593.20 as a consequence of Chen’s breach of the Contract.
Chen argued that despite signing the Conditions and Letter of Acceptance, the employment did not commence until 1 September 2017, as stated in the Conditions.
The Presiding Officer (“PO”) at the Labour Tribunal was of the view that the Contract was constituted by reading together provisions of the Offer, the Conditions and the Letter of Acceptance.
Citing Jumbo King Ltd v Faithful Properties Ltd & Ors , the PO explained that it could be ascertained from a reasonable person’s perspective that:
a) By signing the Letter of Acceptance containing a paragraph stating
that the Contract would come into immediate effect, Chen should have understood and have agreed to be bound by such a paragraph; and
b) As such, there was a consensus between the School and Chen that the Termination Clause would become effective immediately.
While Chen agreed with the principles discussed in Jumbo King Ltd, he submitted that the PO failed to properly consider the following questions:
a) What were the terms of employment offered by the School?
b) What were the terms of offer accepted by Chen?
c) What was the function of the Letter of Acceptance in relation to the Teacher Contract?
The above questions were further analysed by the Court below.
Terms of Employment offered by the School
The School’s willingness to contract with Chen was clearly stated in the Offer, “the Incorporated Management Committee of Law Ting Pong Secondary School (“LTPSS”) hereby offers you an appointment as a Teacher in the school”.
The offer made by the School in relation to the Contract was on the terms set out in the Conditions, as the Offer stated, “If you wish to accept this offer of appointment...under the conditions set out in the attached Conditions of Service for teachers...please sign both copies of the Letter of Acceptance and both copies of the Conditions of Service for teachers...”. (Emphasis added)
To decide whether to accept or decline such an offer, a person would have to read the Offer and the Conditions to ascertain what terms would be agreed as between the offeror and the offeree. The Court was of the view that the offer made by the School was on the terms set out in the Conditions only. Given that the Conditions did not have a specific provision referring to the Letter of Acceptance, it was held that the School’s offer was subject only to the Conditions which stated that the commencement date of employment was 1 September 2017.
Acceptance of the Schools offer by Chen
The Court relied on the legal principle that an acceptance by the offeree has to “mirror” the offer made by the offeror. As such, what Chen could accept was an offer with terms subject to the Conditions only, as proposed by the School in the Offer. The Court held that it would be inappropriate to hold that the terms contained in the Letter of Acceptance constituted part of the offer made by the School.
Function of the Letter of Acceptance
Chen’s act of signing the Letter of Acceptance was simply to comply with the prescribed mode of acceptance stated in the Offer; and the Court held that the Letter of Acceptance was not a part of the offer made.
As the “employment” would only commence on 1 September 2017 and the employee backed out on 22 August 2017, the Court held that there was no applicable notice period and therefore Chen was not liable to make any payment in lieu of notice. Chen’s appeal was allowed, and the order made by the PO was set aside and the Schools claim was dismissed.
This was an appeal by an individual against the decision by the Labour Tribunal requiring the individual to make a payment in lieu of notice for backing out of a contract of employment.