Lam Kin Sum v. Hong Kong Housing Authority
Read the full judgment text of CACV 250/2003 on BabelCite. This Court of Appeal judgment was delivered on 22 November 2004.
1. The present appeal requires the determination of an important question regarding one facet of the Hong Kong Housing Authority’s responsibilities towards tenants of public housing estates : - how often are rent reviews (involving rent revisions) required to take place? A number of other questions also arise for determination which I shall in due course identify.
Cited by 2 cases · Cites 5 cases
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Judgment Summary (English Version) Judgment Summary (Chinese Version) CACV 250 & 251/2003 CACV 250/2003 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 250 OF 2003 (ON APPEAL FROM HCAL NO. 198 OF 2002) _________________________ BETWEEN
_________________________ CACV 251/2003 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 251 OF 2003 (ON APPEAL FROM HCAL NO. 174 OF 2002) _________________________ BETWEEN
_________________________ Before: Hon Ma CJHC, Stock & Yeung JJA in Court Dates of Hearing: 20 & 21 April 2004 Date of Handing Down Judgment: 22 November 2004 ______________ J U D G M E N T ______________
Hon Ma CJHC : 1.The present appeal requires the determination of an important question regarding one facet of the Hong Kong Housing Authority’s responsibilities towards tenants of public housing estates : - how often are rent reviews (involving rent revisions) required to take place? A number of other questions also arise for determination which I shall in due course identify. 2.The basic complaint of the Applicants in the judicial review proceedings before Chung J (there were two sets of proceedings but they were heard at the same time given the similar issues that arose) was that the Hong Kong Housing Authority (“the Housing Authority”) had failed to review rents for over 4 years. This was prejudicial to them since any review (for reasons which I shall elaborate) would inevitably have led to a reduction in the rents they were paying for the public housing units they occupied. 3.In a judgment handed down on 11 July 2003 (“the Judgment”), Chung J determined the judicial review applications in the Applicants’ favour. In a subsequent judgment handed down on 12 August 2003 (“the Second Judgment”), the learned judge determined the precise wording of the relief that should be granted. He ordered as follows : -
4.The Respondent in the judicial review proceedings, the Housing Authority, has appealed both decisions of the judge and these are the appeals before us. In these appeals, Mr David Pannick QC, with him Mr William Marshall SC and Mr P Y Lo, appeared for the Housing Authority. Mr Philip Dykes SC and Mr Johannes Chan SC appeared for the Applicants. 5.The statutory provision that falls to be examined in this appeal is section 16 of the Housing Ordinance, Cap.283 (“the Ordinance”), although a number of other provisions will also have to be considered as well. Section 16 provides, insofar as is relevant to this appeal, as follows : -
6.Within that section, section 16(1A) in particular requires careful consideration. This important provision, alongside others, was introduced by the Housing (Amendment) Ordinance 1997 (Ordinance No.108 of 1997) which was enacted on 29 June 1997 and brought into effect on 13 March 1998. 7.Before identifying the issues, I first set out the relevant facts. Facts 8.Hong Kong has a population of over 7 million people who need to be housed. Land is scarce which has meant that land prices are high. As a consequence, a large group within the population exists requiring affordable accommodation. The Housing Authority was set up in 1973 with the responsibility to build and maintain public housing and implement Hong Kong’s housing programme so that accommodation can be provided to persons who would otherwise find it difficult to afford proper housing. Over 30% of the population now live in public housing. There are nearly 200 housing estates managed by the Housing Authority providing a broad range of types of accommodation. 9.The rents chargeable for public housing are assessed by the Housing Authority with affordability being an important factor. This would explain the fact that public housing tenants pay less than half of the assessed market rent of their flats. The average monthly rent payable by tenants is in the region of $1,400. 10.One of the principal means used by the Housing Authority to calculate affordability of rents over the years has been the use of what is known as the median rent-to-income ratio (“MRIR”). This criterion has been used by the Housing Authority since about 1986. I can do no better than to adopt the definition used by the judge for this term in paragraph 6 of the Judgment : -
11.The evidence served by the Housing Authority shows that in the assessment of public housing rents, while affordability remains an important factor, it is not the only one. The Housing Authority takes into account factors such as general market rents (both public and private) and also its own financial resources. In the latter regard, our attention has been drawn to section 4(4) of the Ordinance : -
Its recurrent expenditure includes the construction of buildings to provide public housing and their maintenance. 12.Notwithstanding what has just been said, the Housing Authority has since 1986 used the MRIR to assess the rents payable on public housing estates. Prior to the 1997 amendments to the Ordinance, the Housing Authority adopted two MRIR ceilings for newly built public rental housing estates : -
These MRIR figures were substantially lower than the corresponding MRIR figures for private sector rental housing. 13.The critical change made by the 1997 amendments in relation to MRIR is contained in section 16(1A)(b) which refers to a maximum MRIR “in respect of all classes of land” (therefore covering all public housing units) of 10%. This ceiling was, according to the Mr Lee Cert-Quinn (the Chief Manager of the Housing Department), one that was not apparently supported by any empirical study. 14.The calculation of MRIR had all along even prior to the 1997 amendments been the exclusive province of the Housing Authority. This is now confirmed by sections 16(1D) and (1E) of the Ordinance (see paragraph 5 above). 15.As the judge noted in the Judgment, for the 20 years prior to the 1997 amendments, public housing rents had been consistently reviewed and revised every 2 years. It seems reasonably clear from the material identified in paragraph 5 of the judgment that the reviews and revisions always resulted in increases in the rent charged. As the Paper on the “Adoption of 15% and 18.5% MRIR Ceilings for Public Rental Housing” CB(1) 1672/96-97(02) dated 22 May 1997 (prepared for the LegCo Housing Panel) states : -
16.Since the Housing (Amendment) Ordinance came into effect in 1998, the following events have occurred regarding the rents in public housing : -
17.I have gone through the events following the 1997 amendments in some detail as this will be relevant later in dealing with some of the Applicants’ arguments. For the time being, it suffices just to note that the effect of all the waivers and deferrals has been that, since the amendments to the Ordinance in 1997, there have been no rent increases. 18.However, the evidence before the Court also shows that for the period from the first quarter of 2000 through the fourth quarter of 2003, the applicable MRIR for public housing tenants has exceeded 10%. In fact, the trend has been to go upwards. In the first quarter of 2000, the MRIR was 9.9%. In the final quarter of 2003, this figure had risen to 14.2%. It is this excess beyond 10% (the figure, it will be recalled, stipulated in section 16(1A)(b) of the Ordinance) about which the Applicants complain. 19.The individual circumstances of the Applicants, Madam Ho Choi Wan and Mr Lam Kin Sum are described in paragraphs 10 and 11 of the Judgment : -
20.Both Applicants have highlighted their financial difficulties and hardship. On the other hand, the Housing Authority has alleged that if the MRIR of 10% had to be met, this would result in an annual loss of rent to the order of $1.52 billion. It is not necessary to determine the impact of these allegations when looking at the issues in this appeal, which I must now identify. 21.Before doing so, I would just like to refer to one fact which has some relevance. At the time of the amendments to the Ordinance in 1997, in fact for a long period even before then, Hong Kong went through a sustained period of inflation. Subsequent to the amendments, Hong Kong started to experience deflationary times. As the judge said in paragraph 9 of the Judgment : -
Thus, at the time the 31 October 2002 decision was made, Hong Kong was undergoing a period of deflation. The issues 22.The following issues fall to be determined in this appeal, being essentially those arguments raised by the Applicants before Chung J : -
23.The judge determined Issues 2 and 3 in favour of the Applicants. This was enough to enable them to succeed in the judicial review proceedings. Issues 1 and 4 were resolved in favour of the Housing Authority. The determination of Issue 5 was regarded as following from the resolution of Issues 2 and 3. Issue 6 was determined in the Applicants’ favour being the relief granted to them. 24.I now deal with these issues in turn. Issue 1 : Was the 31 October 2002 decision a “determination of variation of rent” under section 16(1A)(a)? 25.The submissions on this issue were made to us by Mr Johannes Chan SC on behalf of the Applicants. It was argued that the 31 October 2002 decision of the Housing Authority to freeze the rent payable by tenants such as the Applicants and to defer a rent review, was a “determination of variation of rent”. Reliance was placed on a number of arguments including the following : -
26.I regret I cannot agree with these submissions. With respect, I concur with the judge’s conclusion and reasoning contained in paragraph 24 of the Judgment : -
27.I emphasize the following points : -
28.For the above reasons, I am of the view that the 31 October 2002 decision was not a determination of variation within the meaning of section 16(1A)(a) of the Ordinance. The requirements of section 16(1A)(b) therefore did not on this particular basis arise. But does any other basis exist? I now turn to the other Issues. Issue 2 : The statutory duty on the Housing Authority to conduct a rent review once every 3 years 29.Here, the judge concluded that by a combination of the true construction of section 16(1A) and the Housing Authority’s previous practice of reviewing rent once every 2 years, a duty arose on the Housing Authority’s part to review rents for public housing every 3 years. In circumstances where rents had not been reviewed for 4 years, the Housing Authority were therefore in breach. 30.I shall be dealing in greater detail with the Housing Authority’s previous practice of rent reviews later in this judgment under Issue 3 (Legitimate Expectation). For the time being it suffices merely to make reference to what the judge regarded as evidence of the Housing Authority’s previous practice. In the debate in the Legislative Council on 27 June 1997 regarding the proposed amendments to the Ordinance, the Secretary for Housing said this : -
31.Although the judge stated that the existence of the duty was “not in any doubt”, he had more difficulty in finding the legal basis for this view. It was in these circumstances that the judge saw the basis as being a combination of section 16(1A) and the Housing Authority’s previous practice of biennial rent reviews. In my view, the judge fell into error on this issue and I cannot agree with his conclusions : -
32.The judge was influenced by the view he took that the mischief aimed at in section 16(1A) (in other words its object) was the protection of tenants and ensuring that the rent they paid was affordable. Section 16(1A)(b) provides for the MRIR not to exceed 10%, as we have seen. I do not quarrel with this view but wish to make the following observations : -
Issue 3 : Legitimate Expectation 33.It is first important to identify the relevant legitimate expectation that the Applicants allege they were entitled to enforce. In the Judgment, this is stated to be an expectation that the Housing Authority would regularly review rents for public housing, meaning that the Authority would review rents (prior to the 1997 amendments) every 2 years and (after the amendments) every 3 years. The expectation is put slightly differently by the Applicants, namely, that : -
34.Before dealing with the question whether such a legitimate expectation existed, I should just set out some relevant principles. 35.The Court of Final Appeal has recently in Ng Siu Tung & Others v Direction of Immigration (2002) 5 HKCFAR 1 dealt with the principle regarding legitimate expectations : - at 40B-47B. The following statements of principle are relevant in the present appeal : -
36.In my view, there was no legitimate expectation to the effect either as held by the judge or as submitted by the Applicants in this appeal. It was certainly not clear and unambiguous to this effect : -
37.The point made in the last paragraph also paves the way for the argument that in any event, an adherence to a legitimate expectation (even assuming it to exist) that the Housing Authority would conduct rent reviews every 3 years would mean that such an inflexible procedure would undermine the statutory requirement in section 16(1A)(a) that any determination of rent should last “at least 3 years” : - see paragraph 31(2)(a) above. This would provide a reason for the suggested legitimate expectation, even if it were established, not to be enforced in the present case : c.f. the principle stated in paragraph 35(3) above. 38.Even if it could be said that the representation made by the Housing Authority (either as held by the judge or as asserted by the Applicants) is a possible construction, the alternative construction referred to in paragraphs 36(2) and (6) above is also (at least) a rational interpretation of it by the Housing Authority. If this be correct, the Housing Authority’s decision on 31 October 2002 cannot be impugned : - c.f. the principle set out in paragraph 35(2) above. 39.In view of my conclusion on this aspect, it is not necessary to deal with Mr Pannick’s alternative submission that in any event, even if the statements or representations were clear and unambiguous, the Housing Authority was entitled to change its policy. In this respect, he relied on the principles enunciated in Hughes v Department of Health and Social Security [1985] AC 776 and In re Findlay [1985] AC 318. I should perhaps only say this. As Mr Dykes rightly pointed out, in Ng Siu Tung at 41F-I (paragraph 93), while a policy can be changed, the adoption of a new policy by a decision-maker does not relieve him of the duty to take the legitimate expectation fully into account. In the present case, the Housing Authority has at no stage accepted that a legitimate expectation existed. This would perhaps explain just why no evidence was therefore filed in relation to any change of policy and the question whether, upon such change of policy, the legitimate expectation had been taken into account. 40.Further, it is not necessary either in the circumstances to resolve the question of whether detrimental reliance is a requisite ingredient in the enforcement of legitimate expectations. This aspect was touched upon by the majority in Ng Siu Tung : - see 46D-J (paragraphs 109-110) but not resolved. I would also not resolve this difficult aspect in this appeal and would leave it for when the point become necessary to resolve. 41.For the reasons articulated above, I am of the view that there was no legitimate expectation to the effect either as found by the judge or as contended by the Applicants. Issue 4 : Section 19 of IGCO 42.Section 39(1) of IGCO states : -
43.The duty that Mr Dykes identified was that the Housing Authority had to conduct periodic reviews so as to discharge its responsibility under the Ordinance regarding the rents payable for public housing. Here, he said, the Housing Authority had to “keep an eye” on the MRIR. In support of his submissions, Mr Dykes relied on Taylor and Others v Munrow (District Auditor) [1960] 1 WLR 151. 44.I confess having some difficulties in accepting the Applicants’ submissions here. True it is that the Ordinance sets out the responsibilities of the Housing Authority. Section 4 sets out the general powers and duties of the Housing Authority while section 16 deals with the Authority’s responsibilities in relation to rents for public housing. Mr Pannick, for his part, accepts that the Housing Authority does have a duty to monitor the rental situation and to consider from time to time whether or not to revise rents. However, the evidence quite clearly shows that the Housing Authority has been monitoring the rental situation for public housing estates each year since the 1997 amendments. The various decisions to revise, freeze and waive rents referred to in paragraph 16 above, demonstrates this. The decision made on 31 October 2002 to defer the rent review for a year was made after the RHC had carefully considered many factors. The affirmation of Mr Ng Shui-lai (the Chairman of the RHC) dated 14 February 2003 provides details of this meeting. Further, the Housing Authority set up an ad hoc committee on domestic rent policy in January 2001 to conduct a comprehensive review of the rental situation in Hong Kong. 45.In my view, this is far from the situation that prevailed in Taylor v Munrow where the local authority, despite being given the power to fix rents (and therefore according to the Court having the duty to do so), simply did nothing. 46.The Applicants have not challenged the Housing Authority’s decision on the basis that it has done nothing. Nor is the challenge based on any assertion that the Housing Authority was refusing to act in the face of actual hardship suffered by tenants of public housing. The challenge has really only been on the basis that the RHC has not conducted a rent review in light of the fact that the MRIR has since 2000 exceeded 10%. However, as I have already observed, nothing in the Ordinance requires the Housing Authority to achieve the target of 10%. If this had been its obligation, this would have been expressly stated in the Ordinance. I would only add that if this were indeed the Housing Authority’s obligation, the duty on the authority would not merely have been (as the Applicants allege) to conduct a review once every 3 years. Rather, in this situation, regular rent reviews would have to be carried out in order to ensure that the MRIR figure of 10% was not exceeded. 47.When considering the scope of an authority’s duties, the first point of reference must be the relevant statute. The Ordinance in the present case does not spell out the Housing Authority’s duties in the way suggested by the Applicants. Section 19 of IGCO does not take the matter any further. The judge’s conclusions on this aspect were, with respect, entirely correct. Issue 5 : Was the 31 October 2002 decision Wednesbury reasonable? 48.Upon analysis, this ground raises no different arguments than the other grounds relied on by the Applicants to impugn the 31 October 2002 decision and therefore falls away in view of my conclusions of the other issues. This was the way it has been treated by the judge as well. Issue 6 : Relief 49.This issue concerns the relief that was eventually granted by the judge following a contested hearing. In the Second Judgment, the judge rejected the argument that the Housing Authority be given a discretion as to what type of rent review was appropriate, including a discretion to determine that no variation of rent should take place. Instead, the learned judge made it clear that the Housing Authority was actually required to review rents and to vary them in accordance with the requirements of section 16(1A). By this was meant that the rents had to be varied so that the MRIR maximum of 10% was not exceeded. 50.In this appeal, it becomes, strictly speaking, unnecessary in view of my conclusions on the other issues to deal with this issue on relief. However, I ought to deal with it out of completeness. It had been argued by the Housing Authority that the order for relief (see paragraph 3 above) was too widely drawn and ought to have been confined just to the two Applicants. This cut down quite substantially on the objections that had been raised by the Housing Authority in the Court below. In my view, Mr Pannick’s arguments have merit. There is no reason for the judge to have granted an order that was in the wide terms that were made. That said, however, even restricting the relief to varying the rent for the two Applicants, applying the criteria in section 16(1A) of the Ordinance, may well involve the same exercise as having to conduct a rent review for the whole class of tenants in public housing units to which the Applicants belong. However, this would have been a matter for the Housing Authority to decide. Nevertheless, as I have said, the issue of relief does not really arise in view of my earlier conclusions. Conclusion 51.For the reasons given above, I conclude that the Housing Authority is not under a duty to review rents in public housing estates every 3 years, nor was there a legitimate expectation to this effect. I would therefore allow the appeals and set aside the orders made in each case by Chung J. 52.As to costs, I would make an order nisi that the Housing Authority be entitled to its costs here and below, such costs to be taxed if not agreed and that the Applicants’ costs are to be taxed in accordance with the Legal Aid Regulations. Hon Stock JA : 53.I have had the advantage of reading in draft the judgment of the Chief Judge. I respectfully agree with it and with the orders he proposes to make. 54.The phrase ‘determination of variation of rent’ is, as a matter of ordinary usage, an odd one to have chosen to express that which I consider to be the obvious intention of the legislature as revealed by the full statutory context. The genesis of the phrase has been explained by the evidence to which we have been taken, namely, that the words ‘of variation’ were inserted so as to exclude from the operation of section 16(1A) the initial setting of rents for new estates. But in that it is said that we are not entitled to look at that history unless there be ambiguity, the meaning of the words in context is in any event clear enough, and they do not reasonably bear the meaning for which the respondents contend. 55.Context is vital to statutory interpretation, and the interpretation which the respondents would have this court apply seems to me to offend a proper contextual interpretation. The duty of the Housing Authority is to provide housing and ancillary amenities to such classes of persons as it may, subject to the approval of the Chief Executive, determine (section 4(1)). In order to do so, it needs to acquire property, construct property, manage property, carry out land clearance where necessary, lay out streets, and “to do all such other acts as reasonably necessary for the exercise or performance of all or any of the powers and duties of the Authority under this Ordinance...” (section 4(2)); and by reason of section 4(4) “the policy of the Authority shall be directed to ensuring that the revenue accruing to it from its estates shall be sufficient to meet its recurrent expenditure on its estates.” The Authority is also empowered to grant leases on “payment of such rent as the Authority may determine”: section 16(1). The countervailing factors with which the Authority has therefore to tackle are complex, and whilst affordability of the housing provided is key, so necessarily is the requirement to maintain the financial viability of the Authority. In this setting, had it been intended that rents for the many estates and many thousands of units for which the Authority is responsible would, come what may, be reviewed every three years, and that there was a responsibility, come what may, to fix rents so that the overall MRIR would not exceed 10%, very clear words would have been required to convey such duties. The fact is that those words are not there; which is perhaps not a matter of surprise for the practical ramifications of such a provision would be alarming: the figures we have seen show that the suggested three year cycle would affect different units at different times, so that in some years the number is small, with the possible consequence that in order to satisfy the overall allegedly mandatory 10% mark in times of deflation, some rents – those of a disproportionate few which happen to be the subject of review in a particular year – would have to be reduced to zero, and even then that might not achieve the suggested requirement (see core appeal bundle, pages 108-109). Such a bizarre result could never have been intended. The whole flavour of the section in question, in context, is protective of the tenants against overly frequent increases in rent, and designed to ensure that such increases as are demanded are kept within reasonable bounds. A “determination” in itself is a concept different from a “variation”; and a “waiver of rent” and “deferral of a review” are, as matter of plain language, concepts essentially different from both a determination of rent, and from a variation of rent, and the gloss that the respondents seek to impose on the section does not survive the application of any of the recognized routes of statutory interpretation. In the case of a waiver or of a deferral, there is nothing to ‘take effect’ as is contemplated by section 16(1A)(a); and the fact that the argument of the respondents was driven to suggest that “each time the HA decided to further defer a rent increase it made a ‘determination’ that the rent would be varied by 0% ….” (my emphasis) illustrates the strain to language that is invited by the respondent’s case. 56.To found a legitimate expectation, there must be established a representation or practice that, objectively viewed, is clear and unambiguous, the test for which must be contextual. See De Smith, Woolf and Jowell “Judicial Review of Administrative Action, 1995, 8-055.” 57.There are at least three different representations that could be suggested to arise from statements or practice in this case: that the Housing Authority would consider periodically whether to review rents; or that rents would not be increased more frequently than once every three years; or that affordability of rents would be reviewed once every three years and that, in consequence of this last exercise, rents would have to be adjusted every three years so that the overall MRIR would not exceed 10%. It is the last of these three that is the representation that is put forward (see paragraph 57 of the Notice of Application in HCAL 198 of 2002; and paragraph 56 of the Notice in HCAL 174 of 2002). Putting aside for the moment the consideration that the facts do not, I think, establish the suggested settled practice after section 16A came in effect, it seems to me obviously difficult for the applicants to show that the representation or practice was the third rather than any of the others. If that is so, then the representation which must found the substantive right is not established as a clear one, for which reason alone this limb of the applicants’ case must fail. Hon Yeung JA : 58.I have the advantage of reading the draft judgment of the Chief Judge of the High Court. I agree with his judgment. I only wish to add the following. 59.Though oddly worded, the meaning of Section 16(1A), introduced by the Housing (Amendment) Ordinance 1997 (the 1997-amendment) is plain and clear. 60.Instead of compelling the Authority to review rent for public housing units every three years, the 1997-amendment only permits the Authority to review rent at most once every three years with the further restriction that rent determined in such review and in such review only shall not exceed 10% of MRIR (emphasis added). 61.No doubt, as the judge rightly held, that the legislature, by the 1997-amendment, intended to give tenants of public housing units greater protection by controlling the frequency and the extent of rent increases. However, it is important to ascertain the exact nature and scope of such intended protection. 62.Did the legislature intend that rent for public housing units should never exceed 10% of MRIR, otherwise it should be reduced or did it simply intend to confine further rent increases subsequent to the 1997-amendment by restricting the frequency of rent reviews and by limiting the increased rent to the maximum of 10% of MRIR should there be such rent reviews? 63.The 1997-amendment was introduced after Hong Kong had experienced a prolonged period with double-digit annual increase both in economy and in inflation. 64.If the Authority were allowed more frequent rent reviews (obviously it was in the financial interest of the Authority to do so in the then prevailing economic circumstances if its aim was to generate more rent), tenants of public housing units were likely to be prejudiced as rent was bound to adjust upwards. 65.The judge was right in saying that “…the 1997-amendment was obviously enacted with an inflationary economy in mind. Tenant’s protection would be enhanced by a longer rent review cycle…” (para. 46 of the judgment). 66.The judge was also right in concluding that the subsequent deflationary economic condition “was not apparent at the time of the 1997-amendment” (para. 30 of the judgment). 67.If the legislature had anticipated the possibility of the economic depression and deflation in the post 1997-amendment period that had plagued Hong Kong, and had also intended that rent for public housing units would not exceed 10% of MRIR even in such economic conditions, the 1997-amendment would not have restricted the frequency of the rent reviews to not more than once every three years in its attempt to give greater protection to the tenants (emphasis added). 68.The Authority did have the practice of reviewing rent for public housing units (invariably upwards) every two years in the pre1997-amendment period. However, when such practice was in place, there was no statutory limit that the reviewed rent should not exceed 10% of MRIR. In fact, the then prevailing MRIR ceiling (by means of executive measures) was much higher, at 15% to 18.5%. 69.With the 1997-amendment that restricts the frequency of rent reviews to not more than once every three years and the highest level of the increased rent at 10% of MRIR, the Authority should not be compelled to adhere to the previous practice of having rent review for public housing units once every two or three years. 70.As the biggest landlord (with 178 housing estates consisting of over 600,000 public housing units), the Hong Kong Government, through the Authority, is providing heavily subsidized housing benefit to over one-third of the population in Hong Kong. 71.The Authority, in line with the declared Government policy, is of course obliged to keep rent of public housing units at affordable levels. On the other hand, the Authority also has the statutory obligation to ensure “that the revenue from its estates shall be sufficient to meet its recurrent expenditure on its estates” (See section 4 of the Housing Ordinance Cap. 283). 72.If the Authority were obliged to have rent review every two or three years in the post 1997-amendment period and were then compelled to lower rent of all public housing units to the 10% MRIR level, it would have suffered an annual rent loss of over $1.5 billion, rendering it impossible to have sufficient revenue to meet the recurrent expenditure without further injection of funds from the Government. 73.On this issue, it is fair to point out that the general population in Hong Kong who do not have the benefit of subsidized Government housing very often have to incur housing expenses in excess of 30% of their incomes. 10% of MRIR is an exceedingly low percentage in terms of rental expenses in Hong Kong. 74.Limiting rent payable by tenants of public housing units to 10% of MRIR in deflationary economic circumstances means even greater housing benefits to those tenants at the expenses of the general population. 75.It must also be remembered that there are other rent relief measures to assist public housing tenants who genuinely need assistance, such as rent-increase waivers, the Comprehensive Social Security Assistance Scheme, the implementation of Rent Assistance Scheme and the choice of cheaper units. The Government would no doubt take such reasonable steps as may be necessary to ensure that those less privileged members of the society and those in need would be properly looked after. 76.Mr Dykes SC, leading counsel for the Applicants, argues that as soon as the minimum period of three years has expired since the last determination, and if the MRIR exceeds 10%, the Authority has a duty to review rent to bring it down to not more than 10%. 77.Mr Dykes’s argument is predicated on the assumption that by the 1997-amendment, the legislature intended that rent for public housing units should never exceed 10% of MRIR and to ensure such (low) level of affordability, the rent payable before the 1997-amendment would have to be adjusted downward. 78.I do not agree with such argument. In the light of the legislative history and the wording used in s 16(1A), the legislature only intended to limit the post 1997-amendment increased rent (should there be a rent review) to the maximum level of 10% of MRIR. The legislature did not intend to reduce the level of rent payable before the 1997-amendment even if such rent exceeds 10% of MRIR. 79.I also reject the suggestion that s 16(1A) imposes a duty on the Authority to carry out a rent review every three years or at all. S 16(1A) does not allow an interpretation that imposes such a duty on the Authority. The section only restricts the Authority to have more frequent rent reviews than once every three years. It further restricts the Authority, on such review and on such review only, from charging rent for public housing units in excessive of 10% of MRIR. 80.When enacting s 16(1A), the legislature did not envisage the post 1997-amendment deflationary economic circumstances at all, as found by the judge. It was intended to be circumscriptive in its operation rather than liberal or permissive. 81.In a dissenting judgment in Royal College of Nursing of the United Kingdom v Department of Health and Social Security [1981] AC 800, Lord Wilberforce made the following comments which have since be widely adopted and followed in other cases :
82.Similar sentiment was expressed by the Chief Justice in Director of Immigration v Chong Fung Yuen [2001] 4 HKCFAR 211, at 233 H-J as referred to in the judgment of the Chief Judge. 83.Mr Dykes further argues that the Authority has a duty to periodically review rent for public housing units in the discharge of its statutory duties under the Housing Ordinance to ensure affordability and to achieve a balanced budget. 84.I can find no statutory support for such suggestion at all. Quite the contrary, the phrase - “any determination of variation of rent…shall only take effect at least 3 years from…” suggests that a rent review may not take place every 3 years or at all. 85.The pre 1997-amendment practice of reviewing rent every two years took place in a highly inflationary economic environment. When such practice was in place, the rent for public housing units was set at the MRIR ceiling of 15% to 18.5%. The 1997-amendment was enacted to protect tenants from more regular reviews, and hence more frequent rent increases. 86.With the 1997-amendment, which came into effect in March 1998, the situation had completely changed. Not only was the inflationary economic environment completely reversed, the frequency of the reviews was restricted to not more than once every three years and the MRIR ceiling was also reduced to a much lower level of 10%. 87.The Authority must be allowed to adopt a new policy as long as such policy is not in conflict with the statutory provisions and not irrational in the Wednesbury sense. After all, housing policy is a very important aspect of the overall Government policy. It affects 30% of the population and has tremendous impact on Government revenues. 88.The Authority must be allowed discretion to implement its housing policy in such a way as to properly meet the changing circumstances of the society. 89.I have considered all the Legislative Council and other materials. I agree with the Chief Judge that there is no promise, representation, practice of policy made, adopted or announced by or on behalf of the Hong Kong Government or the Authority to form any proper foundation of a legitimate expectation that rent for public housing units would be reviewed every three years subsequent to the 1997-amendment. 90.The pre 1997 bi-annual review of rent for public housing units, as known to the tenants was in operation under a very different economic environment in pursuant to the then existing policy. 91.With the introduction of the 1997-amendment, whatever expectation based on the practice or policy of the Government in the pre 1997-amendment period would be replaced by the only legitimate expectation that the Authority would carry out a new policy that is reasonable and permissible under the 1997-amendment. 92.It is, in my view, not unfair, and certainly not Wednesbury unreasonable for the Authority not to have a rent review for public housing units every three years subsequent to the 1997-amendment so that rent for public housing units would be brought to a level lower than that of the pre 1997-amendment period. 93.The fact that rent for public housing units is primarily determined according to the affordability of tenants with the use of MRIR as the criterion does not mean that the affordability level must be set at a level below 10% of MRIR. There is no statutory duty to maintain rent for public housing units at such low level in the absence of any review. 94.Mr Dykes’s argument, based on legitimate expectation also fails. 95.In so far as the judge found that the 1997-amendment obliges the Authority to have a rent review for public housing units every three years and that there is such a legitimate expectation, the judge was in error. 96.The only remaining issue is the one that arises out of the Respondent’s notice. The suggestion by Mr Johannes Chan SC, on behalf of the Applicants, is that the decision of the Authority to freeze rent and to deter a rent review made on 31 October 2003 was a “determination of variation of rent”. 97.The judge held that the Authority’s decision to defer rent review or not to review rent for public housing units did not constitute a “determination of variation of rent” so as to evoke the operation of s 16(1A)(b) requiring the reviewed rent to be under 10% of MRIR. 98.Again, in my view, the wording of s 16(1A)(a) is clear. It refers to a determination of variation of rent, instead of a determination of no variation of rent or a decision to defer a rent review (emphasis added). 99.If a determination of variation includes a determination not to vary rent or a decision to defer a rent review as suggested by Mr Chan, it does not fit comfortably with the requirement that such determination “shall only take effect at least three years from the date on which any immediately preceding determination…came into effect”. 100.A determination not to vary rent or a decision to defer a rent review must necessarily take immediate effect and cannot be bound by the three-year requirement. 101.I reject the suggestion that “Any determination of variation of rent” in s 16(1A)(a) includes a determination not to vary rent and/or a decision to defer a rent review. 102.I agree with the conclusion reached by the judge that section 39(1) of the Interpretation and General Clauses Ordinance (Cap.1) does not assist the Applicants either. 103.I would also allow the appeal and make the orders proposed by the Chief Judge. Hon Ma CJHC : 104.It follows that the appeals are allowed and that in respect of each appeal the orders made by Chung J are set aside. There will be a costs order nisi that the Housing Authority shall have its costs here and below to be taxed if not agreed, and that the Applicants’ costs shall be taxed in accordance with the Legal Aid Regulations.
Mr Philip Dykes SC & Mr Johannes Chan SC, instructed by Messrs Ho, Tse, Wai & Partners for the Applicants/Respondents Mr David Pannick QC, Mr William Marshall SC & Mr P Y Lo, instructed by Messrs Simmons & Simmons for the Respondent/Appellant Appeal by the Applicant of CACV251/2003 to Court of Final Appeal dismissed. Please refer to FACV1/2005 dated 21 November 2005 |
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