DR WANG TZE SAM, WILSON O.B.E, JP v. ATTORNEY GENERAL

1996, No.MP 936

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. This is an application for judicial review by Dr Wang Tze Sam, Wilson ("Dr Wang") of a so-called decision of the Director of Education dated February 16th 1996 permitting the New Method College to enter the Direct Subsidy Scheme ("D.S.S.") only upon the condition that the existing scheme of grant - the Bought Place Scheme ("B.P.S.") is terminated.

2. Dr Wang is the proprietor and principal of the New Method College, which has two premises, one at Prince Edward Road, and the other at Man Fuk Road, Kowloon. The B.P.S. enables the Government to pay a sum of money to a particular school and those students are educated free of charge. There are some 2,200 odd pupils at this school which is a secondary school catering from Secondary 1 to Secondary 7 generally for pupils of the age of 12 to 18 or so.

3. What has happened since 4th July 1990 when an agreement was entered into between the Government, acting through the Director of Education, and Dr Wang is that the Government have been funding his school. He has only persons who can be called "bought place students". That means that the Government, through a method which is not necessary to detail, nominates students to attend the school and they tell them that they attend free of charge. The applicant makes available his school premises, the staff and all the facilities of the school and the Government pay him a sum of money. It is generally calculated on a class basis - on a per caput basis - it is something like $24,000 a year. So there are 2,000 odd students at $24,000 and one can see the substantial amount of money the Government is paying. However, as is pointed out, the applicant provides all the facilities for a school.

4. This agreement is set out in the bundle of papers and I do not recite all of it but it was for a period to 2001, and it could be terminated on 5-year's notice. That means that it could be first terminated in something like 1996 and it had to go on for that period of time obviously because Dr Wang was relying upon the placement of students in his school and has budgeted accordingly.

5. There was, in the agreement, mention made of another subsidy scheme called the D.S.S. D.S.S. is a scheme whereby the Government subsidizes a private school on their enrollment. It would inspect the school, make sure it is up to standard, has all the appropriate facilities, is financially sound and a number of matters, and then it subsidizes that school which is enabled to recruit its own students and charge its own fees.

6. So it can be seen that there is a substantial difference between these two types of schemes. For the B.P.S. Dr Wang has to take the students that are given to him. He has not the means of selection, they are told to come there and he educates them. In return, the Government pays him this money. However, if he would go into the D.S.S., he would have far greater control over his own school in the sense that he could select the students and charge them what monies he wanted. So one can see immediately very substantial benefits occurring to Dr Wang or any person in a similar position.

7. The Agreement had a clause in it (Clause 14) which has given rise to certain argument with regard to what is called "joining the Direct Subsidy Scheme" and it recites that the school may apply to join it and that if the PSRC Committee approves, then the Director may allow the school to join and that the current agreement, i.e. the B.P.S. agreement, would come to an end upon a date to be agreed between the parties.

8. Now what has happened here quite simply is that Dr Wang has decided, for reasons the court need not go into (he has given notice already to terminate the Agreement which takes effect on 31st August 1999) to join this new scheme. The Government, I should say insofar as the funding of schools are concerned, does not have any direct power under the Education Ordinance, it derives its power from various appropriation bills which it is empowered to do to grant sums of money to a variety of public services. For example in education, the budget is prepared, it goes before either Exco or Legco and the Government is empowered to pay a sum of money for that service. In the same way as, for example, in the Judiciary, there is a voted amount that pays for the services of the Judiciary, the judges and the courts and so on.

9. From a public point of view, education should be provided so that students in Hong Kong benefit. But there is not an unlimited purse. Government cannot just pay any money for education because education is a competing service with, for example, the provision of hospitals, care of elderly persons and sick people and all the variety of public services which the Government has to pay for. Therefore the Education Branch itself examines ways in which it can save the public money.

10. What has happened here is that a circular which is currently published, found at page 350 of one of the bundles, dated June 1995 invites applications from these non-government secondary schools to join the D.S.S. and a number of matters have to be satisfied which indeed the PSRC have to approve. Those are matters which must be satisfied from a purely educational point of view, i.e. the facilities of the premises, the ability of the staff, the financial standing. All those matters such as that the teachers are properly qualified, the schoolrooms are properly equipped, etc. are found in Appendix II to the circular.

11. In Appendix III it is pointed out to the applicant that what happens in effect is that when a school converts from one scheme to another, within the school are all the B.P.S. students whom the Government had nominated and they are there free of charge. Whereas, as I have already said, the new D.S.S. pupils will be there paying themselves. So one would have an unusual position that for the B.S.S. students, once that scheme comes to an end, it might be thought that they could be charged, which from an educational point of view, would be very unfortunate because they and their parents had been told the children are being educated free. So it is pointed out in the circular that the schools are not allowed to charge the pupils - that is the existing Bought Place pupils - additional fees for a period of either two or four years and that is because there is a different method of entry into the classes. For example, there is an entry S1 - S3, which is a three-year period; S4-S5, which is two years and S6-S7.

12. When the applicant therefore made the application, he was well aware of the provisions in the Circular. What happened then was that he made an earlier application which was turned down and then subsequently made an application but for only one of his premises, that is the Man Fuk Road premises. This appears to me to have given rise to some of the problems in that the Government when it processed the application pointed out that he had had to register this school separately.

13. What this case is all about at the end of the day is this - assuming that schools have similar contracts and a clause which deals with the method of termination, once they made an application to change from one scheme to another, does the Government have to continue paying for the B.P.S. students or does the school have to continue educating those students but are not permitted to increase their fees? I am told in this instant case that Dr Wang would lose something in the region of $5 million a year by virtue of the fact that he would be unable to increase the fees for these students, and it is submitted on his behalf by Mr Andrews that this really is unfair and that the action of the Government is quite unreasonable.

14. First of all, it must be understood that this is a judicial review dealing with public law. Insofar as matters relating to contract are concerned, they are matters, in my judgment, of private law. Insofar as an application is made to the Education Department pursuant to this published circular, the question of public law does come into it, because the Director of Education must exercise his discretion insofar as the application is concerned, on well recognised principles. In fact, what has happened here is that a grant has been made, there has been no refusal at all. All that is pointed out in the letter of 16th February is a factual position which the Government said exists in that once one scheme comes into being, the other scheme finishes. So this is a very unusual judicial review because there has not been a refusal at all. All that the Government is doing is stating what they say is their policy and what they say is also contained in the contract. But I shall deal with the policy.

15. Circulars have no legal force, but they may be challenged by judicial review. Declarations may be granted to settle arguments about the legality of action recommended in circulars - see Royal College of Nursing v. Department of Health and Security [1981] AC 800 (issue of abortion) and Gillick v. West Norfolk and Wisbech Area Health Authority [1986] AC 112 (contraceptive advice to girls under 16).

16. The circular that I have in front of me is perfectly lawful. It is a straightforward document telling people to make an application on satisfying certain criteria. So what has the Government done wrong here? All that has happened is that they have pointed out that if you join one scheme you cannot be in the other one. That only needs stating to demonstrate what a common sense approach that is. It is not only common sense, it accords with the underlying principle, in my judgment, of separate financial aid. It would be most unusual for a school to be receiving aid on the basis of one scheme and at the same time receiving it on the other. Dr Wang made an application to join this new scheme and it must have been recognised that the earlier scheme would come to an end.

17. Does the circular then contain anything that in any way can be challenged? In my judgment, it does not. It is not irrational, it is not unreasonable at all. It may be that Dr Wang's particular school finds itself in a difficulty in that it cannot increase the fees of some of its students and Dr Wang complains that he will lose money. This case was opened on the basis that some point of principle was involved. I can see none. It seems to be a straightforward matter of finance.

18. I have been taken through a number of other circulars to demonstrate that at one time the Government intended to pay a transitional amount of money. This was originally going to be for what are called "Aided Schools" and when the matter was processed, it went before the appropriate legislative committee, which was against this method of finance because it would cost too much money. It must be recognised that all this money comes out of the public purse, that is the taxpayers of Hong Kong have to pay for it all in a variety of ways. Therefore the transitional payments that might have been made were altered. I can find nothing wrong or unlawful in that. That is just a fact of life.

19. I turn then to this contract, which as I said is, generally speaking, a matter of private law. It states that an application can be made to join the D.S.S. but the application to join, in my judgment, is governed by the circular and the criteria involved there. But if it is necessary to examine Clause 14 which is in unusual words - "this Agreement should terminate upon a date" - in my judgment, I must construe this clause in the context of the whole contract and the contract clearly indicates that there is a method of bringing it to an end, but there is also another scheme. Any proper construction of this clause indicates that once a school goes into new scheme, it is out of the old scheme and the words "terminated upon a date" must mean "terminated upon a date prior to the new scheme starting". You can make your application and you have been told in principle that you can join it but if you want to join it, then the old scheme comes to an end.

20. I therefore can find nothing in the stance of the Government which in itself may be amenable to judicial review if it is said to based upon some unlawful matter. I can find nothing unlawful that the Government has done. Dr Wang will have to register this school separately. He has made an application for part of his premises and he has to register them separately. If he wants to go into the D.S.S., he must go into it on the basis that he is not permitted to charge the existing B.P.S. students additional sums of money. It is his decision what scheme he wants to be in and he must act accordingly. If it transpires that he is losing some money, that is unfortunate. But on the other hand he will obtain very substantial benefits from going into this new scheme, as I said he can charge whatever fees he wants. He is no longer bound by the Government nominating his students, he can go into the market place and get them in. He can charge them what he wants and not only that, he also gets from the Government what is called a block grant so quite substantial money is still being paid to him. So I can see great financial benefits he gets and I can find nothing, in any shape or form, that the Education Department has acted in anyway improperly. They appear to have dealt with this matter perfectly fairly and properly.

21. I would only finish by saying that I am grateful to counsel for giving me the help which they always do, providing skeleton arguments and their solicitors for setting the matters out very clearly. At the end of the day, this application for judicial review fails and it is dismissed.

(R.A.W. Sears)

Judge of the High Court