LAU HON CHEONG AND ANOTHER v. THE ATTORNEY GENERAL

CACV95/1987

IN THE COURT OF APPEAL

Civil Appeal
No. 95 of 1987

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J U D G M E N T

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Clough, J.A. :

1.  This is an appeal by two Crown servants, against the dismissal by His Honour Judge Ryan sitting as a deputy judge of the High Court of their claim against the Attorney General for arrears of overtime allowance claimed against the Crown.

2.  The two plaintiffs were at all material times drivers employed by the Hong Kong Government in the Transport Section of the Public Works Department. Their claim to overtime allowance related to periods of time between 1976 and 1982 when they had been on stand-by duty for spells of 15 hours from 5 p.m. to 8 a.m. but had only received reduced “notional” overtime allowance in respect of each spell of night duty. They claimed that over the years they had been wrongly denied overtime allowance referable to the 7 hours of stand-by duty performed by them between 1 a.m. and 8 a.m. during each 15 hour spell of night duty. Instead of being paid overtime allowance of the 7 hours of stand-by duty in question they had only been paid in respect of the time when they had actually been working. The importance of the matter to the parties is demonstrated by the fact that the plaintiffs each claimed a sum of $213,796.80 in the action.

3.  They deputy judge was asked to deal only with the issue of liability below, on the footing that the parties had agreed that quantum was to be assessed. The plaintiffs by their notice of appeal therefore seek interlocutory judgment in their favour with an order for damages to be assessed.

4.  It was evidently common ground below that the plaintiffs’ conditions of service were contractual and subject inter alia to Civil Service Regulations (“C.S.R.s”) made by His Excellency the Governor of Hong Kong. None of the constitutional niceties which were under consideration by this court in Lam Yuk-ming v. Attorney General(1) were introduced at the hearing. The validity of the relevant C.S.R.s as affecting the contractual conditions of service of the plaintiffs was not in question. By the time the action was tried the parties had decided to call no witnesses and the deputy judge was invited to decide the matter on the documents before him.

5.  The plaintiffs’ case was that they were entitled to the overtime claimed by them under C.S.R. 666 of Chapter IV of the C.S.R.s because C.S.R. 681 in that chapter provided that stand-by duty was to be treated as duty. Rates of pay for approved overtime worked were specified in C.S.R. 677. The Crown accepted that stand-by duty was generally to be so treated but contended that the plaintiffs were excluded pursuant to C.S.R. 3(d) (which provides that the operation of any C.S.R. to a particular Government servant may be excluded by the terms of his employment) from any such entitlement by Public works Department Establishment Circular No. 3/76 under which they were only entitled by the lesser payments they had received. To this the plaintiffs replied in substance that they Circular was issued in the purported exercise by the Director of Public Works of a discretion which had been vested in him by the Establishment Secretary in excess of his powers under the C.S.R.s.

6.  At the trial it was common ground between the parties that the judge was being asked to decide one question, namely whether or not Circular No. 3/76 did govern the remuneration payable to the plaintiffs for their relevant stand-by duties is the Transport Section to the exclusion of the more generous overtime payments generally authorized by Chapter IV of the C.S.R.s. In an admirably careful and succinct reserved judgment the deputy judge examined the history of the case and went on to answer this question in the affirmative in favour of the Crown.

7.  The issue between the parties has to be considered, as indeed the deputy judge considered it, in the light of the relevant regulations, departmental circulars and inter-departmental correspondence. Government Regulations made by the Governor are divided into 5 parts of which the C.S.R.s are one Part, but each Part begins with a number of common introductory Government Regulations. For convenience I have referred to those introductory regulations as C.S.R.s. They comprise C.S.R.s 1 to 16.

8.  C.S.R. 1 explains that Government Regulations regulate a number of matters concerning Government’s affairs including conditions of service for Government servants, but that such regulations do not provide for necessary and self-evident exceptions. C.S.R. 2 explains that Government Regulations are made by or with the authority of the Governor and provides that the sole authority for their interpretation and application is the Governor, or those to whom he has delegated authority. C.S.R. 3(d) is referred to above.

9.  C.S.R. 4 provides that the Secretary for the Civil Service (the successor of the Establishment Secretary) has been authorized “to amend, supplement, apply, interpret and make exceptions to the C.S.R.s. C.S.R. 5 provides that Civil Service Branch Circulars may be issued with the approval of the Secretary for the Civil Service to supplement C.S.R.s and that the instructions contained in such circulars are to have equal application and force as the C.S.R.s.

10.  C.S.R.s 10 and 12 are the following terms:-

“10. It is the duty of all Government servants other than staff on daily rates of pay to be thoroughly acquainted with all Government Regulations and Circulars on Conduct and Discipline and such other Government Regulations and Circulars as appertain to their duties.”

12. It is the responsibility of a Head of Department to see that all his staff (other than on daily rates of pay) are provided with or have made available to them Government Regulations and Circulars on Conduct and Discipline and such other Government Regulations and Circulars as appertain to their duties.”

11.  Although the plaintiffs’ claims do not relate to payments allegedly due until 1976, it is necessary to go back to 1972 when the C.S.R.s relating to overtime were revised to regulate the procedure for approval of the working of overtime (C.S.R. 696), to provide that stand-by duty of the kind performed by the plaintiffs was to be treated as duty (C.S.R. 681(a)) and to revise the amount of monthly cut-off point for overtime payment. This was not welcomed by the Director of Public Works because he considered the revised procedure for approval of overtime work created grave difficulties for his department. He also objected to the overtime changes. In particular the requirement that stand-by duty be treated as duty was contrary to established arrangements in his department whereby in certain cases “notional” overtime payment arrangements were operated.

12.  The Director expressed his objections to the revised regulations in a memorandum to the Establishment Secretary dated the 8^th June 1972. After dealing with the problems concerning the procedure for the approval of overtime work the Director raised his objections to the new overtime provisions. He had this to say about the revision of the stand-by regulation:-

“10. A number of departmental units are committed to special standby arrangements. These are time-proven and no case is at present seen for varying them. However, with “standby” to be regarded as duty, heavy overtime payments would be due, for example, to the sewer gangs which standby overnight on either side of the harbor (following their period of day duty) for 3 months continuously and this could present problems of equity with other grades. It will be necessary therefore to afford the Department authority to exempt certain forms of standby time from counting as duty and to permit the introduction (or the retention) of a notional overtime payment system, such as operates at present, in recognition of such standby duties. Alternatively, arrangements may have to be re-organised, and time must be allowed for this and for any staff increases which would result.”

13.  The penultimate paragraph of the Director’s memorandum was in the following terms:-

“Summary of Recommendation

12. It is therefore required that authority be delegated to the Director of Public Works:-

(a) to authorise officers to the P.W.D., of a rank appropriate to the responsible discharge of such authority, to approve overtime in excess of 20 hours in two consecutive weeks where such overtime working is considered essential;

(b) to authorise appropriate officers (usually of not less than “Chief” rank) to approve overtime working in retrospect, where it could not reasonably have been foreseen or avoided; and,

(c) to identify certain forms of “standby” time as being non-duty and to authorise notional overtime payments as considered reasonable and appropriate to cover such periods.

It is also recommended that the overtime cut-off point proposed be removed from al P.W.D. grades accommodated on salary scale W.I. 1.”

14.  The Director was thus asking under paragraph 12(c) for delegated authority to do two things, namely (1) to identify certain forms of stand-by time (which had not been specified in paragraph 10) as being non-duty and (2) to authorize notional overtime payments “as considered reasonable and appropriate” in respect of those forms of stand-by time. Although the Director had indicated in paragraph 10 of his memorandum that the existing special stand-by arrangements were time proven and that there was no case “at present” for varying them it is , in my judgment, significant that in summarising his application to the Establishment Secretary he did not in terms ask for authority merely to keep in force and identify existing non-duty stand-by situations and to continue in force in relation to those situations existing notional overtime payments at the same rates as had previously pertained. Furthermore the request for authority to authorize such payments as were considered reasonable and appropriate necessarily implied the exercise of judgment by the Director.

15.  Be that as it may, the Establishment Secretary sent his reply to the Director in a memorandum dated the 26^th June 1972 (“the Establishment Secretary’s memorandum) signed by one of his officers on his behalf. The delegated authority sought pursuant to C.S.R. 696 in relation to the approval of overtime work was granted, the removal of the cut-off point proposal was refused and the application relating to stand-by duty was dealt with as follows:-

“3. It is agreed that certain “standby” time as described in para.10 of your memo (12) in PWD 3/8191/71, should be, at your discretion, exempt from counting as full duty and that the existing form of notional overtime should be retained for such standby duties.”

16.  Four days later, on the 30^th June 1972, the Director issued Departmental General Instruction No. 6/72 in which he expressed his understanding of the effect of paragraph 3 of the Establishment Secretary’s memorandum. In paragraph 2 of the Director’s Instruction he stated:-

“… the Establishment Secretary has delegated authority to the Director of Public Works:-

(i) ……….

(ii) ……….

(iii) To identify certain forms of “standby” time as being non-duty and to authorize notional overtime payments, as considered reasonable and appropriate to cover such periods.”

17.  The language of sub-paragraph (iii) above is identical with that of sub-paragraph (c) of paragraph 12 of the Director’s memorandum dated the 8^th June 1972. The Director therefore appears to have understood that he had been granted the delegated authority that he had sought in relation to stand-by time.

18.  Paragraph 3 of the Director’s Instruction is expressed to exercise his “delegated powers” and by paragraph 3(iv) he directed that the stand-by situations thereinafter specified were “to be regarded as non-duty and to attract overtime payments on the basis indicated”. There followed a list of such situations in the Highways Office and the Waterworks Office with directions, which were not uniform, regarding overtime payments which were authorized in those situations.

19.  There was no reference in paragraph 3 to the Transport Section, in which the plaintiffs were employed. However, paragraph 5 of the Instruction contained the following direction:-

“5. It is important to note that the purpose underlying the delegation cited at 2(iii) above is to permit the Department to maintain its present arrangements for the remuneration of stand-by time. Where therefore stand-by time is at present regarded as ‘non-duty’, and if it is not covered in the schedule under 3(iv) above, the position should be reported immediately and the pay arrangements followed prior to the introduction of the new regulations must be adhered to until the position is regularized.”

20.  In August 1973 the Director issued Public Works Departmental Establishment Circular No. 10/73 which he described at the head of the Circular as up-dating and a Re-issue of Departmental General Instruction No. 6/72. The Circular was for all material purposes in the same terms as the earlier Instruction save that the specific situations of stand-by duty directed to be regarded as non-duty for overtime purposes were substantially increased and were set out in an attached Appendix I. The sweeping up general direction contained in paragraph 5 of the earlier Instruction (which was reproduced as paragraph 6 of the Circular) had evidently resulted in additional affected situations being reported to the Director. One such situation seems to have been the Transport Section which was specifically mentioned as item VII under the rubric “Electrical and Mechanical Office” in Appendix I attached to the Circular.

21.  The judge appears to have accepted that prior to the revision of the C.S.R.s regarding stand-by duty the plaintiffs were only paid “notional” overtime, as is implicit from the Director’s Circulars. On the hearing of the appeal Mr. Lee representing the plaintiffs contended that the Crown had failed to prove that this was the case. For my part, I consider that the judge was entitled, in the absence of evidence in rebuttal from the plaintiff, to accept the implication in the Director’s Circulars as prima facie evidence that at the time of the Establishment Secretary’s Memorandum the plaintiffs and other drivers in the Transport Section were within the “notional” overtime arrangements.

22.  The Director appears to have regarded himself as having authority to alter the conditions of “notional” overtime applicable in “non-duty” situations because the Instruction had only permitted specified sewer gangs to be paid 2 hours of overtime (in addition to overtime payments for periods of actual work) during specified periods of stand-by duty, whereas the Circular authorized the enlargement of the basic overtime entitlement for stand-by duty by those gangs to 4 hours.

23.  The process of updating and re-issuing was repeated by Public Works Department Establishment Circulars No. 3/76 (upon which the Crown relied in paragraph 7 of its amended defence) and No. 2/78 which were issued by the Director in January 1976 and January 1978 respectively.

24.  In deciding that Circular No. 3/76 (and by implication the Director’s subsequent Circulars) effectively governed the plaintiff’s conditions of service regarding entitlement to overtime payments for stand-by duty, the deputy judge had this to say about the Director’s memorandum dated the 8^th June 1972:

“The problem which the Director of Public Works directed to the Establishment Secretary in this memo of 8th June 1972 was that within the circumstances peculiar to the Public Works Department there were certain forms of stand-by time which should be treated as non-duty that these times should therefore be exempted from the provision in the regulations stating that they were to be treated as duty and that they should be paid under the existing notional payment system.

25.  The deputy judge then expressed his views on the meaning and effect of paragraph 3 of the Establishment Secretary’s memorandum in the following crucial passage of his judgment (the underlining is mine):-

“Having considered the position, the decision which the Establishment Secretary took was to agree that there were certain forms of stand-by time which should be so treated as non-duty and exempt from the Regulations. This was a policy decision which he took under the authority vested in him by the Regulations. Had he refused the Director’s request that would have been the end of the matter and the Director could not have issued the circulars. The decision that certain stand-by times should be exempted was a decision of the Establishment Secretary, not of the Director of the Public Works.

Having taken this decision, the Establishment Secretary very sensibly, in my view, left the implementation of that decision to the head of the Department to whom the decision to the head of the Department to whom the decision was specifically directed, the Director of Public Works. The Director was the person with the knowledge as to the stand-by times which should be treated as non-duty and it was proper for the Establishment Secretary to delegate this discretion to him in the interest of administrative efficiency and convenience. I do not consider that there was any wrongful or improper delegation of power by the Establishment Secretary.”

26.  The deputy judge was here concluding that by paragraph 3 of his memorandum the Establishment Secretary was expressing his decision that certain forms of stand-by time described (but not specified) in paragraph 10 of the Director’s memorandum dated the 8^th June 1972 should be treated as non-duty and “exempt” from the C.S.R.s. The vital words “at your discretion” in paragraph 3 of the Establishment Secretary’s memorandum are not referred to expressly in the above passage but in the second paragraph cited above the deputy judge indicates by implication that the discretion conferred on the Director related only to the implementation of the Establishment Secretary’s decision to “exempt” (“except” would have been a more appropriate term) the relevant stand-by times.

27.  Before concluding that the Establishment Secretary had not made any wrongful or improper delegation of power to the Director the deputy judge made the observation which I have underlined above. With respect to the deputy judge, I feel constrained to say that I find that crucial observation obscure. It seems to me to beg the real question in this case, namely what did the Establishment Secretary mean by the words “at your discretion” appearing in paragraph 3of his memorandum. If, as the deputy judge held, paragraph 3 expressed the decision of the Establishment Secretary that the unspecified stand-by times described in paragraph 10 of the Director’s earlier memorandum were to be excepted from the C.S.R.s relating to stand-by duty and overtime payments there would have been no need to confer any “discretion” on the Director regarding the stand-by times affected because they would have been readily identifiable by reference to the existing arrangements for “notional” overtime payments pertaining in the Director’s department.

28.  The Establishment Secretary’s memorandum is not to be construed as an ordinance or as subsidiary legislation, but it is a very important instrument which the Crown relies upon for the validity of the Director’s Circulars purporting to affect the conditions of service of servants of the Crown which may only be deprived of the benefit of the C.S.R.s relating to overtime payments for stand-by duty by an exception made by the Establishment Secretary pursuant to the powers conferred upon him in that behalf by His Excellency the Governor under C.S.R. 4.

29.  Accordingly, in my judgment, the courts should not be astute to strain either way the language used by the establishment Secretary in paragraph 3 of his memorandum. He should be taken to have meant what he said in his memorandum and if his language was unambiguous the Crown should be held to it. The ordinary meaning of “discretion” at law is defined in Jowitt’s Dictionary of English Law (2^nd edition) as a man’s own judgment as to what is best in a given case, as opposed to a rule governing all cases of a certain kind. The primary meaning of the word “discretion’ given in the Concise Oxford Dictionary is liberty of deciding as one thinks fit, absolutely or within limits.

30.  Whether the matter is considered in the light of the legal or ordinary meaning of the word discretion, the use of that word clearly implies the exercise of a power of decision as one thinks fit, either absolutely or within limits. In the present case paragraph 3 of the Establishment Secretary’s memorandum confined the exercise of the Director’s “discretion” to “certain ‘stand-by’ time as described in paragraph 10” of the Director’s earlier memorandum. However, within the ambit of those limits it seems to me to be the unavoidable conclusion that the Director was being given power to decide which of the relevant stand-by times should be excepted from the C.S.R.s.

31.  The Director was thus given a power of determination which was, in my judgment, an unauthorized delegation of the Establishment Secretary’s power under D.S.R. 4 to make exceptions to the C.S.R.s. I accept Mr. Lee’s argument that the principles applied in Allingham v. Minister of Agriculture and Fisheries(2) are applicable. The fact that the Director indicated in his subsequent circulars that he intended to maintain all previous “notional” overtime arrangements so that they were all to be excepted from the C.S.R.s seems to me to be nihil and rem, because by expressing himself to be agreeing that certain stand-by times as described in paragraph 10 of the Director’s earlier memorandum “should be at your discretion exempt …” the Establishment Secretary was in effect saying that the relevant stand-by times were to be excepted from the C.S.R.s if the Director thought fit. In short there was only to be an exception if the Director so decided.

32.  For the Crown, Mr. Strawbridge advanced an alternative argument upon which I understood him to rely if it should be held against the Crown that the Establishment Secretary had authorized the Director to decide which stand-by situations described in paragraph 10 of the Director’s memorandum should be excepted from the relevant C.S.R.s. In reliance on the principles enunciated in Carltona Ltd. v. Commissioner of Works(3) andapplied in a line of cases cited in and including In re Golden Chemical Products Ltd.(4) it was contended that there was here not a purported delegation of authority by the Establishment Secretary to the Director but a lawful devolution of authority to the Director as an official who, while not in the same department as the Establishment Secretary, was bound to act in accordance with his instructions appertaining to the C.S.R.s. It was further contended that it would be anomalous for the Carltona⁽³⁾ principle to be applied in cases where there was no express authority but not where express authority existed.

33.  In support of this argument Mr. Strawbridge stressed that the Secretary for the Civil Service (the successor to the Establishment Secretary) had responsibilities across all Government departments and was responsible for the management of the public service as a whole so that departmental heads must act under the direction of the Secretary for the Civil Service in personnel matters including exceptions to the C.S.R.s.

34.  For my part, I accept that if the Establishment Secretary had informed the Director of Works that he had decided to except all the stand-by times described in paragraph 10 of the Director’s memorandum from the C.S.R.s and directed him to maintain previous “notional” overtime arrangements in respect of such times, the Director would have been obliged to implement that direction. However, having in terms given the Director the discretion he did, I consider that the Establishment Secretary acted in breach of C.S.R.s in purporting to delegate his powers to the Director. In taking this course he was, in my judgment making a wholly unauthorized transfer to the Director of his function relating to C.S.R.s of the kind disapproved by the dicta of Scott L.J. in Jackson Stansfield & Sons Ltd. v. Butterworth(5) upon which Mr. Lee relied.

35.  As to the Carltona⁽³⁾ principle, I understand that to be no more than the settled principle that the administrative functions of a Minister under the English parliamentary system must as a matter of necessary implication be exercisable either by the Minister or through this authorized departmental officials, so that the Minister is not obliged to apply his mind personally to such matters although he is answerable to Parliament for their incompetence; see the dictum of Lord Greene M.R. in the Carltona Case⁽³⁾ at p. 563 A-C and the dicta of Denning L.J. and Jenkins J. in Lewisham Metropolitan Borough and Town Clerk v. Roberts(6) cited by Brightman J. in Re Golden Chemical Products⁽⁴⁾ at pp. 307H – 308.

36.  In the present case, where the Director was in no sense a departmental official appointed on the authority of or for whose actions the Establishment Secretary was in any way responsible to the Governor or the legislature of Hong Kong, I am unable to accept that the Carltona⁽³⁾ principle can have any relevance to or curative effect on the Establishment Secretary’s unauthorized delegation of his powers to the Director.

37.  As I would uphold Mr. Lee’s argument that the Plaintiff’s entitlement to overtime pay in this case is governed by the relevant C.S.R.s and not by the Director’s Circulars it is not necessary to deal with Mr. Lee’s argument based on the plaintiffs’ lack of knowledge of the Director’s Circulars. However I mention that I agree with the deputy judge’s reliance on C.S.R. 10 when rejecting that argument.

38.  Accordingly, for the above reasons, I would allow the appeal. If the parties are still not agreed on quantum it will be necessary to hear them on the order to be made for the assessment of the amount due to the plaintiffs from the Crown.

Cons, V.-P.:

39.  After a certain amount of hesitation I have come to agree with my Lord. For a long time I was attracted to the suggestion that the true construction of the crucial paragraph in the Establishment Secretary’s memorandum of the 26^th June was that all existing situations of the kind described in the Director’s memorandum of the 8^th June were to be exempted unless the Director should otherwise order, that is to say the Director could not of his own motion exercise the discretion granted to the Establishment Secretary, but could, if he thought fit restrict the ambit of the particular exercise of that discretion which the Secretary was then making. In that case, since so far as the Plaintiffs are concerned the Director has not at any time thought fit to impose any restriction, room is left for the argument that in this instance there has in fact been no improper exercise of the discretion.

40.  However on reflection I have come to the conclusion that the indefinite qualification of “‘stand-by’ time”, by the words “certain’ and “as described etc.”, together with the express subjection of the ‘should be exempt” to the phrase “at your discretion” can only indicate that the Establishment Secretary was deliberately intending to pass his responsibility for the choice of appropriate situation to the Director. That was beyond the rights accorded to him by the C.S.R.s and the purported exercise of his responsibility by the Director cannot now avail the Crown.

41.  I would merely like to add, lest there be any misunderstanding, that in coming to this conclusion I have not been in any way influenced by the subsequent words or conduct of the Director or by the requests he made in his memorandum of the 8^th June. As to the first, the understanding of his position by the Director is of no relevance, and as to the second, it does not necessarily follow that he was granted what he asked for.

42.  For the reasons I have given I take the view that the plaintiffs are entitled to remuneration in accordance with the general provisions regarding overtime, and in particular those promulgated by C.S.R. 681. I too would therefore allow the appeal.

Barker, J.A.:

43.  I agree also that the appeal should be allowed.

(1) [1980 H.K.L.R. 815

(2) [1948] 1 All E.R. 780 (C.A.)

(3) [1943] 2 All E.R. 560 (C.A.)

(4) [1976] Ch. 300

(5) [1948] 2 All E.R. 558 (C.A.)

(6) [1949] 2 K.B. 608