MICHAEL REID SCOTT v. SECRETARY FOR JUSTICE

HCAL 38/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO.38 OF 2004

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Dates of Hearing : 25 and 26 January 2005

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J U D G M E N T

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Introduction

1. The applicant, Mr Scott, seeks by way of judicial review to challenge the constitutional validity of the Public Officers Pay Adjustment (2004/2005) Ordinance, Cap.580 (‘the 2003 Ordinance).

2. The applicant is an employee of the Hong Kong Government, employed on civil service terms of appointment.  He holds a rank in the directorate grade.  As a result of the 2003 Ordinance coming into force, his pay has been reduced.

3. The applicant challenges the constitutional validity of the 2003 Ordinance on the basis that it is inconsistent with various articles of the Basic Law.

4. The 2003 Ordinance is not the first statute promulgated since the change of sovereignty for the purpose of reducing the pay of public officers.  An earlier Ordinance, the Public Officers Pay Adjustment Ordinance, Cap.574 (‘the 2002 Ordinance’) purported to do so too.  The constitutional validity of that earlier Ordinance was also challenged, judicial review proceedings being instituted by two public service representative organisations and a number of individual officers, one of them being the applicant, Mr Scott.

5. Although at first instance I dismissed those applications that were brought to hearing, in a judgment given in November 2004 the Court of Appeal, by a majority, ruled that the 2002 Ordinance was inconsistent with art.100 of the Basic Law.  In so far as that judgment applies to the various challenges made by the applicant in those present proceedings, I am bound by it.

6. In respect of the 2003 Ordinance, the applicant has however raised one entirely new challenge.  It is that challenge which forms the basis of this judgment.  To understand the context in which this new challenge is made, some further background must first be given.

A brief history

7. On 19 July 2002, the 2002 Ordinance was enacted.  The effect of the Ordinance was to reduce the pay of the great majority of public officers.  The terms of s.10 of the 2002 Ordinance were as follows :

“The contracts of employment of public officers are varied so as to expressly authorize the adjustments to pay and the amounts of the allowances made by the Ordinance.”

8. In May 2003, leave having earlier been granted, I heard two applications for judicial review challenging the constitutional validity of the 2002 Ordinance.  They were made by the Government Park and Playground Keepers Union and by a public officer, Mr Lau Kwok Fai.  In a judgment handed down in June 2003 (‘the June judgment’) I dismissed those applications, holding that the provisions of the 2002 Ordinance were not inconsistent with the Basic Law and were lawful.

9. Several months later, in October 2003, I heard the application of the present applicant, Mr Scott, in respect of the constitutional validity of the 2002 Ordinance.  In a judgment handed down in November 2003 (‘the November judgment’), I dismissed Mr Scott’s application, it being based substantially, but not entirely, on the same grounds as the two earlier applications.

10. Both the June and November judgments were appealed to the Court of Appeal.

11. On 19 December 2003, while these appeals were pending, the 2003 Ordinance was enacted.  The effect of this second piece of legislation was to further reduce the pay of those public officers whose pay had already been reduced pursuant to the provisions of the 2002 Ordinance.  This second reduction was to be effected in two tranches, the first on 1 January 2004, the second on 1 January 2005.  S.15 of the 2003 Ordinance states :

“The contracts of employment of public officers are varied so as to expressly authorize the adjustments to the pay and the amounts of the allowances made by sections 4 to 13.”

12. The enactment of the 2003 Ordinance resulted in two challenges being made to its constitutional validity by way of applications for judicial review.  In each case leave was granted.  The one application was made by a Mr Tang Keung Hong.  That application still awaits determination at first instance, Mr Tang having sought legal aid.  The other application, as I have said, was made by Mr Scott.  It is Mr Scott’s challenge which is the subject of this judgment.

The commonality of the present challenges with challenges made in respect of the 2002 Ordinance

13. In challenging the constitutional validity of the 2003 Ordinance, Mr Scott has submitted that it is inconsistent with arts.6, 11, 25, 39, 100, 102, 103, 105 and 160 of the Basic Law.  On the basis that these challenges were largely of the same nature as the challenges made in respect of the 2002 Ordinance, when the present application came before me it was directed that its hearing be held over until the Court of Appeal had determined the appeals pending before it in respect of the 2002 Ordinance.

14. The appeals in respect of the 2002 Ordinance were heard by the Court of Appeal in July 2004, judgment being handed down in November 2004 : Lau Kwok Fai and Another v. Secretary for Justice and Another [2004] 3 HKLRD 570 (‘the Court of Appeal judgment’).

15. By a majority, the Court of Appeal held that the 2002 Ordinance offended art.100 of the Basic Law.  In this regard, the majority judgment said (at 614, para.119) :

“In our view, art.100 (which prohibits any change, inter alia, in the conditions of service which renders the terms ‘less favourable than before’) is infringed by the introduction, post-handover, of a term that permitted the reduction of pay otherwise than by agreement with the servant.  Since s.10 of the Ordinance brings about that effect, there is no question but that it infringes art.100.  It follows that its enactment was beyond the powers of the Legislature.”

16. Later in the majority judgment, still with respect to art.100 of the Basic Law, the following was said (at 615, para.123) :

“… the Government, whether by exercising executive, legislative or even prerogative or any other power, should do nothing in connection with contracts of service of public servants which would render the conditions of service less favourable than they were before 1 July 1997.  Unfortunately, in our view, the Ordinance changes the conditions of service of public servants in a manner that is clearly less favourable than it was before.  It does not do that indirectly.  It does it specifically, purposely and directly.”

17. The majority judgment also looked to the submission that the 2002 Ordinance was inconsistent with art.103 of the Basic Law but held, in the context in which the challenge was then made, that it was not inconsistent.  The majority did not look to the challenges made in respect of arts.6, 25, 39, 102, 105 and 160 of the Basic Law.

18. The Chief Judge, however, in giving his dissenting judgment, did look to the challenges made in respect of these articles, holding that the 2002 Ordinance was not inconsistent with them.

19. In light of the Court of Appeal judgment, I am bound to hold that s.15 of the 2003 Ordinance is inconsistent with art.100 of the Basic Law.  To that extent, Mr Scott, the applicant, is entitled to a declaration that s.15 is unconstitutional and that he is not bound under his contract of service to accept any reduction in pay mandated by the 2003 Ordinance.

20. However, in respect of the other challenges asserting inconsistency with the Basic Law which are a mirror of the challenges argued before the Court of Appeal —as the Court did not find any of them to be inconsistent and as the Chief Judge, in his dissenting judgment, found them to be consistent — while the applicant has not abandoned those grounds before me, they have not been the subject of further submissions.  In respect of these grounds, not being bound to hold otherwise by the Court of Appeal judgment, I remain satisfied for the reasons given in my June and November judgments, those reasons being supported by the Chief Judge in the Court of Appeal judgment, that they do not evidence the inconsistencies alleged.

The new challenge

21. The new challenge raised by Mr Scott asserts that the 2003 Ordinance is inconsistent with art.103 of the Basic Law.  Leaving out the first sentence of art.103, which is not relevant to Mr Scott’s challenge, the article reads as follows :

“Hong Kong’s previous system of recruitment, employment, assessment, discipline, training and management for the public service, including special bodies for their appointment, pay and conditions of service, shall be maintained, except for any provisions for privileged treatment of foreign nationals.”

[my emphasis]

22. Mr Scott’s challenge may be summarised as follows :

(a)    In assessing any adjustment in public officers’ pay, the Government is obliged to adhere to the ‘system’ established before the change of sovereignty.  Art.103 guarantees the continuance of that system in that it guarantees the continuance of the ‘special bodies’ responsible for operating that system and, in addition, guarantees that the public service system of ‘employment’ and ‘management’, which must include matters of remuneration, will be maintained.

(b)    However, in assessing the adjustment of public officers’ pay for the purpose of the 2003 Ordinance, there was a failure to adhere to the system.  That failure was a failure to conduct what is known as a Pay Trend Survey, such a survey having become an established part of the system employed for assessing adjustments to public service pay.

(c)    Instead of conducting the Pay Trend Survey, thereby adhering to the constitutionally entrenched system, the Government purported to reach agreement with staff representatives as to the amount of the pay adjustment and the manner in which that adjustment would be implemented.

(d)    As it was, however, there was no genuine consensus reached with staff representatives.  But even if a genuine consensus was reached, that could not justify a failure to comply with art.103.

The decision not to conduct a Pay Trend Survey

23. It is accepted that, in determining the 2003 pay adjustment exercise, the Government did not conduct a Pay Trend Survey even though such surveys had been regularly conducted in the past.  As I understand Mr Scott’s challenge, it stands or falls on the submission that, in terms of art.103, there was a constitutional obligation to conduct a Pay Trend Survey and that the failure to do so, whatever the reasons, constituted a breach of art.103.

24. Expressed briefly, and viewed from the Government’s perspective, the reasons why it made the decision not to conduct a Pay Trend Survey arise out of the following chronology :

(i)    In December 2001, Government announced its decision to carry out a comprehensive review of the civil service pay system.  The objects of the review were to—

“… identify ways to improve the civil service pay system having regard to best practices elsewhere, with a view to making it simpler and easier to administer, and building in more flexibility to facilitate better matching of jobs, talents and pay.”

(ii)    In April 2002, the task force given the responsibility of carrying out the review published a study.  In that study it was recommended that an improved system should be created.  In making its recommendations, the task force identified a number of criticisms of the methodology of the annual Pay Trend Survey.

(iii)    After a period of public consultation, Government accepted the recommendations of the task force and the infrastructure was set up to design an improved system.  That design process is still to be completed.

(iv)    In respect of the 2003 annual pay adjustment; that is, the adjustment reflected in the 2003 Ordinance, in September 2002 a working group was formed.  It comprised members of Government and staff representatives. A number of meetings were held to try and reach consensus.

(v)    In December 2002, the working group was told that Government was facing severe fiscal deficit problems.  In this regard, Ms Jessie Yip, Deputy Secretary for Civil Service, in her affirmation filed for the present proceedings, made the following observations :

“The consolidated deficit was $72.4 million as at end October 2002 and it was expected that the full year consolidated deficit for 2002-03 would be much larger than the original estimate of $45.2 billion.  The Financial Secretary briefed the Legislative Council on the fiscal deficit and exchanged views on proposed measures to tackle the problem.  It was clear that the Government had to tackle the fiscal deficit resolutely and proactively; otherwise the stability of the monetary system and the economy of Hong Kong would be at stake.”

(vi)    On 21 February 2003, the Secretary for Civil Service attended what has been described as an ‘informal meeting’ of the working group.  He put two matters in particular to the working group.  First, that it was considered inappropriate to conduct an annual Pay Trend Survey until the criticised methodology of its operation had been fully considered and, second, having regard to the state of the economy, civil service pay should not be frozen, as many staff representatives had suggested, but should be brought back to the levels at which it had stood on 30 June 1997, immediately before the change of sovereignty.

(vii)    This informal meeting resulted in a consensus being reached.  This consensus was to the following effect; first, that civil service pay would be reduced (in two tranches) to the levels suggested by the Secretary for Civil Service; second, that the reduction would be implemented by way of legislation, and, third, as a separate exercise, Government would work in consultation with civil service representatives to improve the existing system of civil service pay including the methodology of Pay Trend Surveys.

(viii)    On 25 February 2003, the Chief Executive in Council made orders that accorded with this consensus.  A consequential order was that there would be no annual Pay Trend Survey for the two years covered by the two-tranche reduction of pay but that thereafter a Pay Trend Survey would be conducted on the basis of improved methodology.

25. In his submissions, Mr Scott suggested that Government had sought to excuse its failure to conduct a Pay Trend Survey by relying on the alleged consensus — no consensus at all, he said — reached with staff representatives.  However, I have not understood Mr Fok SC, leading counsel for the respondent, to have argued that, if there was a breach of art.103, it was remedied by the consensus reached with staff representatives.  I have always understood the respondent’s case to be that there is no constitutional obligation to conduct a Pay Trend Survey but that, in any event, Government’s decision not to conduct a survey was a consequence of adhering to the established system of consulting with staff representatives, that process of consultation resulting in an agreement that, in light of the fiscal difficulties facing Hong Kong, and without the need to conduct a survey, there would be a reduction in pay.

26. In respect of what Government has described as the consensus reached, Mr Scott said that the ‘overwhelmingly likely reason’ why it was reached, on its face at least, is because ‘duress’ was applied.  But, while no doubt a number of staff representatives agreed only reluctantly to compromise, on the evidence before me I simply do not see how it can be said that Government acted in bad faith in obtaining that compromise or acted in some way that constitutes the application of unfair and undue pressure.

27. It should also be mentioned that Mr Scott criticised Government’s role in seeking and obtaining the consensus on the basis that, in reality, it was not facing severe fiscal deficit problems at all or, if it was, these problems were of its own making and should not be visited on civil servants to the exclusion of the public at large.  These criticisms, however, go to the merits of the Government’s case for proposing a reduction in pay.  It is not this court’s role to involve itself in a detailed study of the merits, a matter quite patently of complex economics in which there may be many opposing views, all of them legitimate.

28. In any event, whatever the factual background, and while no doubt there will be disputes as to the validity of negotiating positions adopted during the course of the process that led to the reduction in pay, it seems to me that the issue remains a narrow one; namely, whether art.103 imposes an obligation, on each and every occasion that an exercise to adjust civil service pay is undertaken, to conduct a Pay Trend Survey.

Interpreting art.103

29. In its judgment in Ng Ka Ling & Others v. Director of Immigration (1999) 2 HKCFAR 4, the Court of Final Appeal identified the approach that must be adopted in interpreting the Basic Law.  In that judgment, the Chief Justice made the following observation :

“As is usual for constitutional instruments, it uses ample and general language.  It is a living instrument intended to meet changing needs and circumstances.”

30. The Chief Justice spoke of the need for a purposive approach, the provisions to be read in context, and warned of the need to avoid a ‘literal, technical or rigid approach’.  He said the following (at 28) :

“It is generally accepted that in the interpretation of a constitution such as the Basic Law a purposive approach is to be applied.  The adoption of a purposive approach is necessary because a constitution states general principles and expresses purposes without condescending to particularity and definition of terms.  Gaps and ambiguities are bound to arise and, in resolving them, the courts are bound to give effect to the principles and purposes declared in, and to be ascertained from, the constitution and relevant extrinsic materials.  So, in ascertaining the true meaning of the instrument, the courts must consider the purpose of the instrument and its relevant provisions as well as the language of its text in the light of the context, context being of particular importance in the interpretation of a constitutional instrument.

…

As to the language of its text, the courts must avoid a literal, technical, narrow or rigid approach.  They must consider the context.  The context of a particular provision is to be found in the Basic Law itself as well as relevant extrinsic materials including the Joint Declaration.  Assistance can also be gained from any traditions and usages that may have given meaning to the language used.”

31. As to the meaning and extent of art.103, it is important, I think, to recognise that what is to be continued as it was before the change of sovereignty is Hong Kong’s ‘system’ of public service.  But that system has always been in a state of adaption.  In my June judgment, I said :

“That is a characteristic of all large organizations charged with maintaining operative capability.  That ability (and requirement) to adapt was an integral part of Hong Kong’s ‘previous system’ of public service and, in terms of art.103, has been maintained.  Art.103 does not attempt as at 30 June 1997 to lock the public service into a reliquary.  Art.103 cannot therefore be interpreted in such a narrow way as to inhibit all introduction of new measures for the good governance of the public service and thereby for the good governance of Hong Kong, the public service being the constitutionally recognised servant of Hong Kong.”

32. It is the degree of change which I consider to be crucial.  As I said in the June judgment—

“A system is defined by the fact that it consists of parts, those separate parts co-ordinating to make the whole.  Some of those separate parts may change, they may be modified or replaced, but the system, seen as such, may continue as before.  Whether it does continue or is materially changed so that it becomes another system is, of course, determined by the degree of internal change.”

33. As I understand Mr Scott’s submissions, he has never argued that art.103 must be read in such a narrow way as to prevent any change no matter what its nature.  He has argued instead that the failure to conduct the Pay Trend Survey for the purposes of the 2003 Ordinance was such a material change that it resulted in an abandonment of the previous system, part of that abandonment being the prevention of the ‘special bodies’ responsible for pay and conditions from fulfilling their constitutionally protected obligations.

34. In looking to the meaning and extent of art.103, it is important, I believe, to recognise — as the Chief Judge recognised in the Court of Appeal judgment (page 594, para.49) — that the article, while it guarantees the continuation of the system of public service ‘employment’ and ‘management’, does not directly guarantee the continuation of any system of public service ‘pay and conditions of service’.  What it guarantees is something different.  It guarantees instead the continuation of those ‘special bodies’ responsible for matters of public service pay and conditions.

35. On my reading of art.103 therefore, while the special bodies responsible for pay and conditions which were part of the previous system must be maintained, they are not themselves obliged to maintain any previous system specifically related to pay and conditions of service.  These bodies may therefore change any such previous system provided only that the change does not go so far as to change the previous system of public service ‘recruitment, employment, assessment … and management’.

36. Of course, as the majority of the Court of Appeal made clear in its judgment (page 616, para.127), “it can hardly be said that an article such as art.103 which provides for the preservation of special bodies would do so except on the basis that those bodies would serve their purpose and function.”  But if those special bodies themselves have as part of their powers the jurisdiction to recommend (or make) changes to pay and conditions of service then, in so doing, they are, it seems to me, serving their purpose and function.

37. As to the identification of those ‘special bodies’, the Basic Law does not condescend to detail.  Ascertaining their identity is therefore an issue of fact.

The previous system of pay adjustment

38. For 30 years or more the desire to maintain broad comparability between civil service pay and private sector pay, in so far as that is possible, has been one of the principles governing the mechanism by which the pay of officers in the public service is adjusted.

39. Speaking in broad terms, in order to put the principle of fair comparison to practical effect, two mechanisms have been employed :

(i)    First, from time to time Pay Level Surveys have been conducted.  In her affirmation filed for the purposes of these proceedings, Ms Jessie Yip has described these as reviews of the pay relativities between the civil service and the private sector.  The purpose of these reviews has been, in so far as it is possible, to ensure that pay levels for comparable jobs should be broadly the same.

(ii)    Second, to try and ensure that pay levels remain broadly the same, reviews have been conducted of the year-on-year movement in private sector pay.  These Pay Trend Surveys, as they are called, indicate the trends in private sector pay, whether inflationary, deflationary or static, so that they may be reflected in public service pay adjustments.

40. In 1979, the Standing Commission on Civil Service Salaries and Conditions of Service (‘the Standing Commission’), in a report on the principles and practices that should govern civil service pay, rejected the suggestion made by certain parties that the principle of fair comparison should be abandoned.  It was of the view that the principle should continue to be ‘an important factor’ in setting civil service pay.  It was not however of the view that the principle should be the first principle or an overriding principle.  If there was to be a first principle of civil service pay, it should be what the Commission described as the ‘old but well-tried principle that salaries should be sufficient to attract and retain candidates of a calibre who will provide the public with an efficient service’.

41. Importantly, as the Chief Judge noted in the Court of Appeal judgment (page 578, para.14(4)) the Standing Commission recommended that Hong Kong’s economic circumstances should when necessary be perhaps a decisive factor in determining public sector pay.  In this regard, the Standing Commission said the following in its report (para.19) :

“… from the point of view of the public, civil service pay must have regard to the economic circumstances of Hong Kong as a whole.  If the economy is buoyant it is right and proper that civil servants should share in the benefits.  If the economy is depressed it is equally right that civil servants should share the burden of any necessary measures to limit expenditure.

[my emphasis]

42. In her affirmation filed in respect of the proceedings challenging the constitutional validity of the 2002 Ordinance, Ms Jessie Yip made plain that the recommendations of the Standing Commission in respect of the fair comparison principle have been followed and that the principle is therefore only one of a number of guiding principles that may, depending on the prevailing circumstances, be taken into account when considering the annual adjustment of civil service pay.  In this regard, she said :

“Under the prevailing annual civil service pay adjustment mechanism, the Government decides on the size of any annual civil service pay adjustment having regard to the following factors : (i) the net pay trend indicators derived from a private sector Pay Trend Survey, (ii) the state of the economy, (iii) budgetary considerations, (iv) changes in the cost of living, (v) the pay claims of the staff sides of the central consultative councils and (vi) civil service morale.  Each year’s pay adjustment is a separate and independent exercise, to be determined by the circumstances prevailing at the time.”

43. Indeed, in respect of the Pay Trend Survey, Ms Jessie Yip made clear that there have been many occasions when the results of the survey have not been taken into account in assessing an adjustment to public service pay.  This was noted by the Court of Appeal in its majority judgment, the following observation being made (page 603, para.79) :

“Although the Pay Trend Survey has been adopted in the years since 1974 it has not always been followed.  Indeed there is a helpful chart set out in para.36 of Ms Yip’s affirmation which demonstrates that in a significant number of years, in fact, over 40% of the time between 1975 and 2000 (inclusive), the results of the Pay Trend Survey have not been followed when adjustments to civil service pay have been made.”

But must the survey nevertheless be conducted?

44. In his submissions, Mr Scott accepted that the fair comparison principle was not the sole or overriding principle to be taken into account in adjusting the pay of public officers.  He accepted therefore that private sector pay trends could be ignored — provided it was rational to do so — without there being a deviation from the established system.  It was his submission, however, that, in order for the Government to know whether the results of a survey should be taken into account, if at all, those results still had to be obtained.  That being so, the collection of relevant data, he argued, was still essential to the operation of the established system and meant that the bodies responsible for collecting and analysing that data had to be seen as ‘special bodies’ in terms of art.103.

45. I have difficulties with Mr Scott’s submissions.  In my judgment, the established system, in so far as I am obliged to have regard to such a system in respect of public service pay, has since at least 1979 (when the Standing Commission submitted its report) operated on the basis that the Government may take into account the principle of fair comparison but is not obliged to do so.  That is because, depending on the circumstances prevailing at the time, other principles may be viewed as being of such overriding importance as to render a consideration of the fair comparison principle unnecessary.  It must follow, in my view, that if a consideration of the fair comparison principle may be wholly set to one side by the influence of prevailing circumstances there can be no requirement to conduct a Pay Trend Survey, not when to do so would constitute a sterile exercise.

46. To put it shortly, I do not find the conduct of a Pay Trend Survey to be so inherent to the established system of determining pay adjustments that a failure to conduct a survey will of itself, no matter what the circumstances, constitute a breach of art.103.

‘Special bodies’

47. As I have said earlier, art.103 does not directly protect any previous system of pay and conditions.  It protects the continuation of those ‘special bodies’ which have a responsibility for pay and conditions.

48. In her affirmation filed in respect of the proceedings challenging the constitutional validity of the 2002 Ordinance, Ms Jessie Yip spoke of the bodies responsible for conducting and analysing Pay Trend Surveys.  She said that the surveys are carried out by a body called the Pay Survey and Research Unit (‘the Unit’).  This unit, she said, falls under the Standing Commission.  The results of the surveys, she said, are then ‘analysed and validated’ by a second body called the Pay Trend Survey Committee (‘the Committee’).  This committee is chaired by a member of the Standing Commission and has on it a number of representatives drawn from the following bodies : the Standing Commission, the Standing Committee on Disciplined Services Salaries and Conditions of Service, the staff sides of the central consultative councils and the Government.

49. The Unit and the Committee produce what are called gross pay indicators which are submitted to the Administration so that adjustments may be made according to a settled formula in order to produce net pay indicators.  It is these net pay indicators to which the Executive has regard in determining any pay adjustment.

50. It is pertinent, I think, to mention here that, in accordance with established procedures, the staff sides of the central consultative councils are consulted before the Chief Executive in Council reaches a final determination on any pay adjustment.

51. It was Mr Scott’s submission that both the Unit and the Committee are ‘special bodies’ in terms of art.103.  Accordingly, whenever a pay adjustment exercise takes place, no matter what the circumstances, they must be allowed to serve their purpose and function; that is, to conduct a Pay Trend Survey and to attend to its analysis and validation.

52. I am unable to agree.  It must follow from what I have said earlier that if there is no constitutional obligation to conduct a Pay Trend Survey then the bodies responsible (only) for that Pay Trend Survey cannot themselves be constitutionally protected.

53. I am fortified in this finding by having regard to the terms of reference of the Standing Commission which is one of three principal bodies given the responsibility of advising the Government and making recommendations to it in respect of matters of public service pay and conditions.  These three bodies, which were formed before the change of sovereignty, continue to discharge their responsibilities today.  They may be described as follows :

(i)    the Standing Commission; that is, the Standing Commission on Civil Service Salaries and Conditions of Service, which advises the Government in respect of all public servants other than members of the public service directorate, the disciplined services and the judiciary;

(ii)    the Standing Committee on Disciplined Services Salaries and Conditions of Service which advises Government in respect of all members of the disciplined services (‘the Standing Committee for Disciplined Services’) and;

(iii)    the Standing Committee on Directorate Salaries and conditions of Service which advises Government in respect of members of the public service holding directorate ranks (‘the Standing Committee for the Directorate’).

54. As I have noted earlier, the Standing Commission was established in 1979.  At the change of sovereignty, its terms of reference included the responsibility to—

“… advise and make recommendations to the Governor in respect of the non-Directorate civil service, other than the Judiciary and the Disciplined Services, on whether overall reviews of pay scales (as opposed to reviews of the salary of individual grades) should continue to be based on surveys of pay trends in the private sector conducted by the Pay Survey and Research Unit, or whether some other mechanism should be substituted.”

55. The Standing Committee for Disciplined Services was established in 1989.  At the change of sovereignty, its terms of reference included the responsibility to—

“… advise and make recommendations to the governor in respect of the disciplined services on any matters affecting the disciplined services that require to be specially considered in relation to the machinery for the regular overall review of public service pay below the bottom point of the directorate in the general civil service; and annual pay awards for ranks and grades remunerated at levels equivalent to or above the bottom point of the directorate in the general civil service.”

56. These terms of reference, in their meaning and extent, remain the same today.

57. In respect of the Standing Commission, it will be seen that its terms of reference include a responsibility to advise Government whether ‘overall reviews’ of pay scales should continue to be based on Pay Trend Surveys or whether ‘some other mechanism should be substituted’.  The Standing Commission’s powers therefore extend to recommending to Government that the conduct of Pay Trend Surveys should cease and should be replaced with some other mechanism.  That power, by its very nature, has as its consequence the power to recommend that the Unit and the Committee (their existence being entirely related to the conduct of Pay Trend Survey) should cease to function.  That being the case, I fail to see how those two bodies can nevertheless be afforded the constitutional protection under art.103 propounded by Mr Scott.

58. It was, however, Mr Scott’s submission that the terms of reference of the Standing Commission, in speaking of ‘overall reviews of pay scales’, do not refer to the annual pay adjustment exercise but rather to overall salary structure reviews which take place from time to time and which, among other things, look to comparative pay levels between the private and public sectors.  It was his submission therefore that, in respect of the annual pay adjustment exercise, the terms of reference do not permit the Standing Commission to recommend a mechanism which does away with the Pay Trend Survey and the bodies responsible for that survey.

59. Again, I am unable to agree.  I accept that the phrase ‘overall reviews of pay scales’ is not open to a concise definition.  But that phrase is qualified by the phrase that follows; namely, whether such reviews ‘should continue to be based on surveys of pay trends in the private sector’.  On the evidence, it is only in respect of annual pay adjustment exercises that Pay Trend Surveys have been (and continue to be) employed.  I am therefore satisfied, whatever the breadth of the meaning of the phrase ‘overall reviews of pay scales’, that it must include annual pay adjustment exercises in respect of which on each occasion there does take place an overall review of salary scales.

60. In so far as the matter may remain unclear — and I do not think it does — the terms of reference of the Standing Committee for Disciplined Services makes it clear that the similar phrase used there; namely, the ‘overall review of public service pay’ must refer to, or at least include, the annual pay adjustment exercise.

61. For the reasons given, I am therefore satisfied that art.103 does not guarantee the continuance of either the Unit or the Committee.  I am further satisfied that, in guaranteeing the continuance of the public service system of ‘employment’ and ‘management’, art.103 is not to be read as guaranteeing that a Pay Trend Survey must be conducted each and every time that it is contemplated that public service pay may be adjusted.

62. In the course of his submissions, Mr Scott spoke of the contradictory approach adopted by Government in respect of the 2002 and 2003 Ordinances, relying on the results of a Pay Trend Survey to justify the pay reduction contained in the 2002 Ordinance then, in defending the lawfulness of the 2003 Ordinance, saying that no such survey was required.  But, viewed in context, I do not see that Government’s approach has, in law, been contradictory.  The system of adjusting civil service pay and conditions has not, on the evidence, been a restrictive system tied to a single and narrow method of processing.  In my judgment, it has always had within it room for some flexibility to react to prevailing conditions.  To that extent, therefore, the system may be employed differently from year to year.

Conclusion

63. In accordance with the reasons given in the Court of Appeal judgment, the applicant is entitled to a declaration that s.15 of the 2003 Ordinance is inconsistent with art.103 of the Basic Law and is not therefore bound under his contract of service to accept any reduction in pay mandated by that Ordinance.

64. For the reasons given in this judgment, the applicant’s other grounds of challenge fail.

65. As to costs, I will need to hear from the parties.