Yung Chi Keung v. Protection of Wages on Insolvency Fund Board and Another
Read the full judgment text of HCAL 55/2013 on BabelCite. This High Court CFI judgment was delivered on 19 December 2013.
1. This is an application for judicial review of a decision of the Protection of Wages on Insolvency Fund Board (“the Board”) made on 27 November 2012. This application is made pursuant to leave granted by me on 13 May 2013.
Cited by 6 cases · Cites 7 cases
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HCAL 55/2013 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 55 OF 2013 ____________
______________ J U D G M E N T ______________ 1.This is an application for judicial review of a decision of the Protection of Wages on Insolvency Fund Board (“the Board”) made on 27 November 2012. This application is made pursuant to leave granted by me on 13 May 2013. The issue 2.The difference between the applicant and the Board arose out of their different interpretations of the words “the applicant’s entitlement to severance payment” in section 16(2)(f)(i) of the Protection of Wages on Insolvency Ordinance, Cap 380 (“the PWI Ordinance”). By virtue of the provisions in sections 15(1)(c), 16(1)(b) and 16(2)(f)(i), an employee who is owed severance payment by his employer may apply to the Board for an ex gratia payment from the Protection of Wages on Insolvency Fund (“the Fund”). Section 15(1)(c) stipulates the situation in which an application can be made for the ex gratia payment. Section 16(1)(b) authorises the Commission of Labour to effect the ex gratia payment. Section 16(2)(f)(i) provides the calculation of the maximum amount of the ex gratia payment that the Commissioner can pay out of the Fund to the applicant. 3.These sections in both English and Chinese are as follows:
4.The difference between the applicant and the Commissioner is on the interpretation of section 16(2)(f)(i). The applicant’s stance is that the phrase “the applicant’s entitlement to severance payment” means the net amount of severance payment payable to him calculated in accordance with section 31G(1) of the Employment Ordinance, Cap 57 and deducting therefrom all gratuities, relevant occupational retirement scheme benefit or relevant mandatory provident fund scheme benefit as required by section 31I of that ordinance. This net amount is then used to calculate the maximum amount of ex gratia as provided in section 16(2)(f)(i). 5.The Commissioner however thinks that the phrase “the applicant’s entitlement to severance payment” should mean the amount calculated according to section 31G(1) of the Employment Ordinance without any deduction pursuant to section 31I. The deduction pursuant to section 31I is to be made from the maximum amount of ex gratia payment calculated according to section 16(2)(f)(i). The severance payment provisions 6.I now deal with the relevant sections in the Employment Ordinance. Section 2 defines the meaning of severance payment, occupational retirement scheme, relevant occupational retirement scheme benefit, mandatory provident fund scheme and relevant mandatory provident fund scheme benefit. Section 31B stipulates the situation in which severance payment is payable. Section 31G provides the calculation of the amount of severance payment payable. Section 31I provides for deduction of gratuities, relevant occupational retirement scheme benefit and relevant mandatory provident fund benefit from the severance payment arrived under section 31G. 7.These sections in both English and Chinese are as follows:
The difference illustrated 8.The different amounts of ex gratia payment that are produced by the different interpretations can be illustrated by examples based on assumed figures:
9.The Commissioner’s approach thus results in a smaller maximum amount of ex gratia payment. In either case, the employee will not be given the full amount of $120,000 equivalent to his severance payment calculated according to section 31G. There are however cases that by applying the applicant’s calculation, the employee will receive a total sum of ex gratia payment and section 31I benefit equal to the severance payment calculated under section 31G. The applicant’s own case is an example. 10.The applicant was employed by his previous employer from 6 November 1999 to 7 October 2011 when his former employer entered into voluntary liquidation. The Commissioner calculated his severance payment under section 31G at $131,696.54. The section 31I benefit payable to him is at $106,319.04. According to the Commissioner’s calculation, the maximum amount of ex gratia payment payable to him should be:
11.The section 31I benefit of $106,319.04 should be deducted from the maximum ex gratia payment. The net maximum sum of ex gratia payment payable to the applicant is:
12.Hence, no ex gratia payment is payable to the applicant. The net sum payable to him is the section 31I benefit at $106,319.04. 13.According to the applicant’s calculation, the maximum amount of ex gratia payment should be:
14.The total sum of $144,007.79 exceeds the severance payment under section 31G at $131,696.54. He should therefore be paid an ex gratia payment of $25,377.50 only. This sum plus the section 31I benefit of $106,319.04 equals to the section 31G amount of $131,696.54. The legal principles 15.Regarding the legal principles applicable in interpreting and construing a statutory provision, I have been reminded of the approach summarised by Li CJ in HKSAR v Cheung Kwun Yin (2009) 12 HKCFAR 568 at paras 11 to 14:
16.It is also important to bear in mind the words of Lord Millet NPJ in China Field Ltd v Appeal Tribunal (Buildings) (No 2) (2009) 12 HKCFAR 342 at para 36:
The Commissioner’s submissions on legislative intent 17.I now deal with the Commissioner’s submissions of legislative intent in support of his interpretation of section 16(2)(f)(i). The Commissioner relies on the speeches by government officials recorded in the Hansard and argues that it is not the legislative intent that the Fund should meet the employer’s default in full but only to provide a safety net against hardship for the workers. 18.The Commissioner further argues that by his mode of calculation, all employees entitling to the same sum of severance payment under section 31G will, upon the employer’s default, receive the same total sum by way of ex gratia payments from the Fund and section 31I benefits. This total sum remains the same regardless of the amount of section 31I benefit available or even when there is no such benefit. If an employer should provide section 31I benefits for some but not all his employees, those employees who are provided with such benefits will still not be better off in the event of the employer’s default in paying severance payment. The reason being that the section 31I payment paid or payable to the employee is deducted from the ex gratia payment payable. The Commissioner considers this approach as fair, consistent and certain. 19.However, the applicant argues that such an approach deprives him all the section 31I benefit that his employer has saved up for him over the years prior to the employer encountering financial difficulty. The applicant does not agree that the Board, when giving him the ex gratia payment, should wipe out all his section 31I benefit. Viewed objectively, one cannot say that the applicant’s argument has no merit. 20.Despite the fact that the legislature did not intent to provide a full indemnity for the employer’s default in severance payment, if the clear meaning of the statute would produce such result in at least some cases, then it is the clear meaning that will prevail (see China Field Ltd per Lord Millet above). 21.The Commissioner’s next argument is that the applicant’s mode of calculating ex gratia payment will result in an unjustifiably hefty burden to the Fund. The Commissioner says that the applicant’s mode of calculation will shift the liability of the defaulting employer further to the Fund and could promote contrived insolvency or discourage employees from pursuing the defaulting employer’s first. 22.The Commissioner also advised that the Fund currently is in a sound financial position with an accumulated surplus of over $3,400 million as at July 2013 owing to the favourable economic climate and a low payout of ex gratia payment in recent years. Owing to this improved financial position of the Fund, the rate of levy for the Fund was in fact reduced from $450 per year to $250 per year commencing from 19 July 2013. 23.Whilst it is not for the court to comment on the wisdom of reducing the levy rather than increasing the ex gratia payment, I doubt if it is the correct approach to interpret the PWI Ordinance so as to keep the Fund in good financial health. The Fund does not exist for its own sake. It was set up to assist the employee who suffers from the double misfortune of losing his job and not getting his deserved severance payment according to the law. Hence, to keep the fund in good financial health is not one of the purposes for setting up the Fund. The main purpose is to effect ex gratia payments to help the employees in terms of the PWI Ordinance. 24.Furthermore, the worry about contrived insolvency being promoted by ex gratia payment from the Fund has always been there. It however has not prevented the setting up of the Fund or the subsequent improvements in the amount of ex gratia payments. 25.The worry that more generous ex gratia payments may discourage employees from pursuing their employers is also not backed by evidence. One should bear in mind that employees can only apply for ex gratia payments when petitions of bankruptcy or winding up have been filed against their employers. Furthermore, the Commissioner’s performance pledge is to effect payment of ex gratia payment within 10 weeks from receipt of all the necessary information justifying such payment. This worry needs to be backed up by evidence before it can be given weight. 26.Hence, this argument of a hefty burden to the Fund does not assist me in deciding which mode of calculation is the correct one according to section 16(2)(f)(i). The applicant’s interpretation 27.In construing the words “the applicant’s entitlement to severance payment” in section 16(2)(f)(i), Mr Ng, counsel for the applicant, starts off by referring to the definition of severance payment in section 2 of the PWI Ordinance which provides (in English and Chinese):
This definition refers to the severance payment as mentioned in section 265(1)(ca) of the Companies Ordinance, Cap 32 and section 38 (1)(ca) of the Bankruptcy Ordinance, Cap 6. However, these two sections merely refer back to the Employment Ordinance for what is severance payment. 28.Mr Ng then refers to section 15(1) of the PWI Ordinance (quoted above). That is the qualifying section for payment of ex gratia payment. This section allows the employee to apply for ex gratia payment when there is a default in payment of severance payment. Mr Ng submits that this unpaid severance payment must be the part of the severance payment that is outstanding after the deduction of the section 31I benefit. If the section 31I benefit should wholly offset the severance payment, then there would be no unpaid severance payment. 29.Mr Ng then refers to section 16(1) of the PWI Ordinance which empowers the Commissioner to pay ex gratia payment when an employer has failed to pay severance payment. This unpaid severance payment again must be the amount outstanding after the deduction of the section 31I benefit. He further submits that the amount of ex gratia payment must be in respect of the unpaid or outstanding portion of the severance payment. 30.I agree with Mr Ng that when section 15(1) of the PWI Ordinance talks about the severance payment being unpaid and section 16(1) refers to the employers’ failure to pay severance payment, they are referring to the outstanding portion of the severance payment after deduction of the section 31I benefit. But then these two sections are not for the purpose of defining the amount of ex gratia payment payable. Section 15(1) is to define eligibility for the employee to apply for ex gratia payment. The employee is only eligible if the section 31I benefit is insufficient to offset his section 31G severance payment entitlement. If the section 31I benefit is large enough to offset his section 31G entitlement, he will not be eligible. For section 16(1), it is to authorize the Commissioner to pay ex gratia payment. If the section 31I benefit is large enough to offset the section 31G entitlement, the Commissioner will not be authorized to make such payment. I also agree that the ex gratia payment is paid in respect of the unpaid portion of the severance payment, but it need not be of the same amount of the unpaid severance payment. 31.Mr Ng then submits that his interpretation of section 16(2)(f)(i) is consistent with the Board’s right of subrogation under section 24 of the PWI Ordinance to the effect that the Board will subrogate into the employee’s right to claim the defaulting employer to the extent of the ex gratia payment effected. But I think this right of subrogation is consistent with the Commissioner’s interpretation too. The Commissioner’s interpretation 32.Mr Chang, counsel for the Commissioner, submits that section 16(2)(f)(i) of the PWI Ordinance does not talk about the unpaid or outstanding portion of the severance payment but the severance payment entitlement. Hence, it is talking about the amount of severance payment before deduction of the section 31I benefit. 33.Mr Chang also refers to section 16(2B)(a) of the PWI Ordinance. That section provides (in English and Chinese):
34.Mr Chang submits that section 31G is expressly adopted as one option for calculating “the applicant’s entitlement to severance payment” in the particular scenario contemplated in section 16(2B). Hence, for the sake of consistency, “the applicant’s entitlement to severance payment” in section 16(2)(f)(i) should also mean the entitlement calculated according to section 31G and without any deduction of the section 31I benefit. 35.Mr Ng however argues that section 16(2B) was introduced at a much later stage than section 16(2)(f)(i). Hence, the meaning of the entitlement in section 16(2)(f)(i) should not be coloured by that in the later enacted provision of section 16(2B). Decision 36.In order to properly understand the meaning of “the applicant’s entitlement to severance payment” in section 16(2)(f)(i) of the PWI Ordinance, it is necessary to go back to the Employment Ordinance to see how “the employee’s entitlement to severance payment” is defined there. 37.Having analysed sections 31G and 31I of the Employment Ordinance, I think it is tolerably clear that the first step to ascertain the amount of severance payment payable to an employee is to calculate the same according to the formula provided in section 31G. That formula is comprehensive for ascertaining the amount of severance payment payable. But the actual amount to be paid has to be reduced by the section 31I benefit. The section 31I benefit takes effect as a part-payment of the severance payment entitlement to the employee so that the employer needs only to pay the balance. But the original entitlement is the amount calculated according to section 31G, not the net sum after deducting the section 31I benefit. 38.I also agree with Mr Chang that since both sections 16(2)(f)(i) and (2B) are to provide for the calculation of the ex gratia payment, the same words should bear the same meaning. Otherwise, there will be inconsistency in interpretation. There is also every reason to suppose that the draftsman in formulating the later enactment would have intended that the same words used in the old and new enactments would carry the same meaning. 39.I also agree with Mr Chang that section 16(2)(f)(i) of the PWI Ordinance does not talk about the unpaid or outstanding portion of the severance payment and should mean the amount of severance payment before deduction of the section 31I benefit. 40.I am of the view that “the applicant’s entitlement to severance payment” in section 16(2)(f)(i) of the PWI Ordinance should mean the sum calculated according to section 31G without any deduction therefrom of the section 31I benefit. If the entitlement in section 16(2)(f)(i) should be the net severance payment after deduction of the section 31I benefit, then section 16(2)(f)(i) should have so provided. 41.In the premises, I dismiss the application. I also make a costs order nisi that the applicant do pay the 2nd respondent the costs of this application and that the applicant’s own costs be taxed in accordance with the Legal Aid Regulations.
Mr Ng Man Sang, Alan, instructed by Kwok, Ng & Chan, for the applicant The 1st respondent was not represented and did not appear Mr Jonathan T Y Chang, instructed by Department of Justice, for the 2nd respondent Please refer to CACV37/2014 for the relevant appeal(s) to the Court of Appeal. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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