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Pre-contractual representations may create binding obligations on employer - by Elsie Chan and Bernie Ng, Deacons

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Publish Date: 2023-02-27

Key takeaways:

 

This decision serves as a reminder to employers that representations made by itself during the recruitment process, whether made or orally or in writing, may create binding obligations regarding the rules of recruitment (i.e. the rules, the recruitment procedures and criteria on which the applicants’ job applications are to be considered). It is, therefore, vital that adequate internal training be provided to HR personnel to ensure that they are well aware of the employer’s recruitment policies and processes so that the risk of misrepresentation could be minimized. It is also advisable that all communications between the employer and the applicants be made or reduced in writing to avoid future challenges.

In addition, to further protect the interest of the employer, where a decision has been made to offer an employment to a successful applicant, an appropriate entire agreement clause should be inserted into the employment contract to the effect that the written contract would supersede all prior understandings between the parties and that no pre-contractual communications between the parties would have any binding effect on the parties.

Legal Focus 2023 Q1 Employment Law

In a normal job recruitment process, usually the final step in concluding the relationship between an employing entity and a job applicant will be the execution of a written employment contract. Some employers may have the perception that nothing other than the employment contract would create binding obligations between the parties. This is unfortunately not necessarily the case.

In the recent case of Tong Wai-yee Winnie v Secretary for Education and another [2023] HKCFI 30, the Court of First Instance ruled that whilst at the end no formal employment offer was granted by the Education Bureau (the “EDB”) to the Applicant being an individual applying for a teaching role at a government primary school, there was a collateral contract formed between the parties during the recruitment process and EDB was in breach of such collateral contract. 

Background

The decision arose from a judicial review application made by the Applicant, Ms. Tong, against the Secretary for Education and the EDB in connection with her unsuccessful application for a role as a native-speaking English teacher (“NET”) at one of the Government primary schools (the “School”). In particular, the Applicant challenged the decision made by the EDB not to award her the employment contract (the “Decision”) on the purported basis of an unwritten internal policy which the Respondents claimed to have existed that government primary schools, including the School, can only accept CVs directly from the EDB but not from other sources (the “Policy”).

The Applicant was a NET at another government primary school prior to the events concerned. She took a year off after leaving her former school and successfully applied to re-join the EDB’s candidate pool (which is a pool of qualified teachers maintained by the EDB for the selection and employment by public sector schools) for the 2021/22 school year. The EDB distributed the Applicant’s CV to a list of schools which did not include the School.

In May 2021, the Applicant had a series of email correspondence with the EDB’s NET Administration Team. The Applicant asked if she may send her CV to primary schools that are currently recruiting NETs other than those to which her CVs had already been sent or will be sent and was informed that she may apply to individual schools with NET vacancy directly. The Applicant therefore applied directly to the School. The School invited her to interviews and it was common ground that the Applicant was chosen by the School and was effectively offered the position subject to the completion of the remaining formalities including the issuing and signing of a provisional offer.

The provisional offer did not come as expected as the EDB interfered with the recruitment process, citing “procedural error” by the School in accepting the Applicant’s CV, which was provided by her directly rather than through the EDB’s NET Administration Team, in contravention of the Policy. The Applicant disputed the existence of the Policy and challenged the Decision on public law grounds which are not relevant for present purposes.

After the main hearing, the Court ruled in favour of the Applicant and quashed the Decision. The Court then dealt with the issue of assessment of damages.

Decision

The Court awarded substantial damages to the Applicant for loss of income on the basis of a collateral contract between her and the EDB that the Applicant’s application (which was submitted by herself to the School directly) would be considered on the same footing alongside other CVs submitted via the NET Administration Team.

In particular, citing the English Court of Appeal case of Blackpool and Fylde Aero Club Ltd v Blackpool BC [1990] 1 WLR 1195, the Court acknowledged that the failure of contractual negotiation to mature into a binding contract does not prevent the Court from finding other collateral contracts to preserve the integrity of the negotiation process where the parties have laid down clear rules of negotiation.

Applying the principle to the present case, it was found that the relevant rules of negotiation (or recruitment) were clearly conveyed to the Applicant in writing through the May 2021 emails. Had the Applicant asked if she could rely on the statement made by the NET Administration Team that her CV, submitted by herself to the School directly, would be considered on the same footing as other CVs submitted via the NET Administration Team, the answer from the EDB would be positive. In other words, the reply email from the NET Administration Team was in effect an offer to the Applicant to the limited extent that the Applicant’s direct submission to the School would be admitted into consideration, and the Applicant’s subsequent direct submission of CV and the completion of the entire interview process amounted to her acceptance of such offer. A collateral contract was therefore established.

The collateral contract was found to have been breached by the EDB’s Decision, which ruled out the Applicant’s application on the very basis that she submitted her CVs directly to the School. The Court awarded damages in the amount of HK$695,238 with interest taking into account the circumstances that the Applicant would have been offered the contract had the Applicant’s application been properly considered in accordance with the collateral contract, the Applicant’s duty to mitigate and the tax liabilities which would have been charged on such income.
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