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Mackinlay Andrew Antony v Hong Kong Dragon Airlines Ltd

Judgment Cited authorities 1 Cited in Precedent Map Related
Vincent
Judgment Date13 January 2020
Neutral Citation[2020] HKDC 64
Year2020
Judgement NumberDCCJ2228/2016
Subject MatterCivil Action
CourtDistrict Court (Hong Kong)
DCCJ2228/2016 MACKINLAY ANDREW ANTONY v. HONG KONG DRAGON AIRLINES LTD

DCCJ 2228/2016

[2020] HKDC 64

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2228 OF 2016

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BETWEEN
MACKINLAY ANDREW ANTONY Plaintiff

and
HONG KONG DRAGON AIRLINES LIMITED Defendant
(港龍航空有限公司)

-------------------------

Before: His Honour Judge Harold Leong in Court
Dates of Hearing: 8, 9 and 15 October 2019
Date of Judgment: 13 January 2020

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JUDGMENT

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1. The plaintiff is a recently retired commercial airline pilot and this is a claim of alleged underpayment by his employer of:

i) Statutory holiday pay (pursuant to s.41 of the Employment Ordinance Cap.57 (“EO”);

ii) Statutory annual leave pay (pursuant to s.41C EO); and

iii) Contractual pay for leave in excess of statutory annual leave (“Excess Leave Pay”)

2. The disputes between the parties regarding paragraphs 1(i) and 1(ii) are on statutory interpretation. As for paragraph 1(iii), the disputes are matters of contractual interpretation.

3. I will deal with paragraphs 1(i) and 1(ii) first.

A) Statutory holiday pay and statutory annual leave pay

Background

4. This concerned with the provisions in EO which deal with how much an employer should pay an employee on each day of statutory holiday pay and annual leave taken. The EO provides a formula which aims to calculate the average wage of a working day of that employee.

5. However, the ruling of the Court of Final Appeal in the case of Lisbeth Enterprises Limited v Many Luk [2006] (1HKLD 1005) exposed a “loop hole” in the formula: the commission accrued by an employee and calculated on a monthly basis could not be taken into the calculation.

6. To plug this hole, the EO was amended by the Employment (Amendment) Ordinance 2007 which revised the formula (“EO Formula”).

7. The EO Formula applied for both statutory holiday pay and statutory annual leave pay, as the relevant statutory provisions are materially identical and can be summarized as follows:

DAW = [W – (D Wages)] / [365 (or 366 on a leap year) – D]

Where:

“DAW” is the daily average wage for the period of 12 months immediately before the statutory holiday / annual leave;

“W” is the total wages earned by an employee in the preceding 12 months;

“D” is the disregarded period under s.41(3) and 41C(3) EO (“Disregarded Period”; “Disregarded Provisions”)

“D Wages” is the wages paid to an employee for the Disregarded Period.

8. The rationale for this is obvious: “that “wages” inclusive of commission of a contractual nature, however designated or calculated, should be used as the basis of all calculations. This is to ensure that an employee’s take home pay would not be affected if he / she enjoys a statutory entitlement such as taking a statutory holiday or a period of annual leave.” (paragraph 2, Legislative Council Brief on Employment (Amendment) Bill 2006, page 2967 of Trial Bundle 10)

9. The EO Formula, as it now stands, aims to provide a method for fair calculation of the remuneration of an average working day by ensuring that the calculation would not be “diluted” by including days that the employee was not paid “wages or full wages” for reasons as stipulated under s.41(3)(a) (for statutory holiday pay) and s.41C(3)(a) (for statutory annual leave pay). Such days would be disregarded in the calculation.

10. The dispute between the parties is in the interpretation of what days should be “disregarded” given the particular circumstances of the plaintiff’s employment and remuneration system.

11. The crux is whether on any particular day, the plaintiff was paid “full wages” or not, and if not, whether the reason for not being paid such fell within the reasons stipulated in the legislation so the day should be “disregarded”.

12. As a preliminary issue, with regard to the interpretation of the EO Formula, the court has been referred to two documents which may assist to gain an insight into the legislative intent.

13. The first document was titled “Administration’s Response to the Submission by the Employment Law Committee of the Law Society of Hong Kong” by the Bills Committee on Employment (Amendment) Bill 2006 (page 2993 Trial Bundle 10).

14. In response to the Law Society’s comments on “employees without variable elements of pay” (i.e. employees on fixed pay) on a 12-month “moving average” being too complicated etc. and whether employees on fixed pay should be singled out for different treatment in the calculation, the Committee “pointed out that that it would be very difficult if not impossible to provide a simple definition of “fixed” wages”, and that the proposed approach “is that a workable mode of calculation is provided for all categories of employees. Given the evolving and increasingly complex nature of the remuneration systems in Hong Kong, what we need is a simple, predictable and consistent mode of calculation for all statutory entitlements.”

15. In response to the Law Society’s comments that the “Formula not being sufficiently detailed” and suggestion that “a single definition of “daily average” or “monthly average” be used, together with a detailed formula”, the Committee replied that “the Bill has already spelt out the general principle of calculating statutory entitlements...The rationale for taking this general approach instead of providing a detailed calculation formula is that given the wide-ranging and ever-changing remuneration systems in the labour market, it is impossible to have one detailed formula that could cater for all possible scenarios. Indeed, a one-size-fits-all approach to cover all wage reckoning methods would be impracticable.”

16. The second document was from the Legislative Council titled “Report of the Bills Committee on Employment (Amendment) Bill 2006”.

17. In reply to the comment of the Law Society that “a definition should be given to the term “full wages” to differentiate it from the term “wages” provide under s.2(1) of the EO”, the Administration “considers that the term “full wages” is clear enough in the relevant context and need not be given a statutory definition. Again, given the evolving and increasingly complex nature of the remuneration systems in Hong Kong, detailed statutory definitions could easily become unclear and may be subject to different interpretations...Whether an employee was paid his “full wages” would hinge upon the terms of his employment contract and the definition of wage under EO.”

18. It is thus clear that it is the intention of Administration to avoid specific and detailed definitions in order that there is a flexibility to cover all wide-ranging and evolving remuneration systems in Hong Kong. Having a “general approach” is so that there is no need for the legislation to draft detailed definitions for each and every different employment remuneration system in Hong Kong and then to draft a “one-size-fit-all formula” for each such defined remuneration system.

19. In other words, whilst the EO Formula should remain “a simple, predictable and consistent” mode of calculation, one would need to look at the actual remuneration system on a case by case basis (e.g. looking at the “the terms of his employment contract and the definition of wage under EO”) to determine what is a fair calculation of the remuneration of an average working day under this formula.

The relevant legislation of the Disregard Provision

20. The relevant paragraph of s.41 and s.41C states as follows:-

“(3) In calculating the daily average of the wages earned by an employee during the period of 12 months or the shorter period –

(a) Any period therein for which the employee was not paid his wages or full wages by reason of –

(i) any maternity leave, paternity leave, rest day, sickness day, holiday or annual leave taken by the employee; (“Type 1 Reason”)

(ii) any leave taken by the employee with the agreement of his employee; (“Type 2 Reason”)

(iii) his not being provided by his employer with work on any normal working day; (“Type 3 Reason”)

(iv) (not relevant in this case); and

(b) Any wages paid to him for the period referred to paragraph (a),

are to be disregarded.”

The test

21. There is no dispute that there should be a two-stage test for this Disregarding Provision:

i) Firstly, what days, if any, should be considered as days that the plaintiff was not paid “wages or full wages”; and

ii) Secondly, for those days, whether the non-payment of “wages or full wages” was by way of reasons as prescribed, that is, whether it could be considered Type 1, Type 2 or Type 3 Reasons and as such should be disregarded in the calculation.

Legal principles of statutory interpretation

22. The legal principle is trite and were summarized by Ma CJ in Town Planning Board v Town Planning Appeal Board (2017) 20 HKFCAR 196. In short, the court construes the relevant words having regard to their context and purpose. In ascertaining the purpose of a statutory provision, the court adopts a flexible and open-minded approach, and it may have regard to the legislative history.

23. Further, in Cathay Pacific Airways Ltd v Kwan Siu Wa Becky (2012) 15 HKCFAR 615 (“the Becky Kwan case”), Ma CJ stated:

“As a general approach to statutory interpretation, particularly where a piece of legislation deals with a subject matter which most people would expect to be dealt with in a common sense and purposive approach (and I would put holiday pay and annual leave pay in this category), the court should aim to arrive at an interpretation that, as far as the wording of the legislative provision in question will follow, will accord with such common sense and which can be easily applied.”

The plaintiff’s remuneration system

24. The plaintiff performed his duties...

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