CHAN NOI HEUNG AND OTHERS v. THE CHIEF EXECUTIVE IN COUNCIL

CACV 197/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 197 OF 2007

(ON APPEAL FROM HCAL NO. 126 OF 2006)

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J U D G M E N T

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Hon Ma CJHC :

Introduction

1.  The Trade Boards Ordinance, Cap.63 (“the TBO”), enacted in 1940, has its roots in the Treaty of Versailles 1919, itself made in the aftermath of the First World War.  Under the Treaty, there was created the International Labour Organization (“the ILO”), now an agency within the United Nations.  In 1928, as part of the ILO’s objective of promoting social justice and international labour rights, the International Labour Convention No.26 came into existence.  Article 1 of this Convention called on Member States (of which the United Kingdom was one) to have in place machinery for the fixing of minimum wages where they were reasonably low in any given trade.  Hong Kong, then a colony, became subject to this Convention.

2.  The Minimum Wage Ordinance was passed in 1932 to fulfill the obligations imposed by the International Labour Convention No.26.  This Ordinance was superseded in 1940 by the TBO.

3.  Relevant to the present case are the provisions of section 2 of the TBO : -

“2.  Trade Boards and minimum wages

    (1)  The Chief Executive in Council may, at any time he thinks fit, by Government notification published in the Gazette, fix minimum rates of wages for any trade in Hong Kong either generally or in any specified area or district in any case in which he is satisfied that the minimum rates of wages being paid to any persons employed in any such trade are unreasonably low.  Every notification fixing minimum rates of wages may be varied from time to time or revoked.

    (2)  For the purpose of instituting, making, and conducting any inquiry that may be deemed advisable in connection with fixing any minimum rates of wages in any trade under this Ordinance, and for reporting thereon, the Chief Executive may at any time establish for any trade, or for any branch of work in a trade, a Trade Board, consisting of members representing employers and members representing workers, in this Ordinance referred to as representative members, in equal proportions, and of appointed members, provided that the number of appointed members shall be less than half the total number of representative members.  Where a Trade Board has been established for any branch of work in a trade, any reference in this Ordinance to the trade for which the Board is established shall be construed as a reference to the branch of work in the trade for which the Board has been established.”

4.  The 3rd Applicant in the present proceedings (I shall simply refer to him as the Applicant) is a Legislative Councilor.  It is his contention that the Respondent, the Chief Executive in Council (in other words, the Government) (“the CEIC”), has failed and continues to fail to even consider using the Ordinance.  His argument before us proceeded on the factual basis that the CEIC has effectively indicated that he will never under any circumstances utilize the powers given to him under the TBO; in other words, the CEIC has renounced the TBO (the reason for this being, according to the Applicant, that the Government takes the view that the Ordinance is obsolete).

5.  It is on this factual premise that the Applicant therefore seeks in this appeal (and this is taken from the written submissions of Mr Philip Dykes SC (for the Applicant)) the following relief : -

“(1)  A declaration that CEIC has a constitutional duty under Article 48(2) of the Basic Law (“BL”) to implement TBO in accordance with its provisions and underlying policy, insofar as it is required by, or is consistent with, BL and may not decline to exercise a relevant power only on the ground that the ordinance is obsolete or that it reflects a policy with which CEIC disagrees;

 (2)   Further or alternatively, a declaration that, as part of the aforesaid constitutional duty and/or as part of his functions under TBO, CEIC is at least bound to consider, from time to time, exercising the power conferred on him by s.2(1) of TBO to fix minimum rates of wages for trades, either generally or in specified areas or districts.”

6.  Both the relief and the arguments in support were pitched on a different basis to those maintained in the Court below.  It is unnecessary to detail the arguments that were pursued before Hartmann J but the following passages from his judgment provide an indication of them : -

“19.    Expressed in the broadest of terms, the applicants contend that the Chief Executive in Council, notwithstanding any economic policy he may wish to espouse, has a constitutional duty to exercise his powers under the Trade Boards Ordinance.  The Chief Executive has recognised that cleaners and security guards receive unreasonably low remuneration.  He is therefore constrained to exercise his powers under s.2 of the Ordinance to fix minimum wages rather than leaving persons employed in these two sectors to the mercies of the free market.

…..

21. The applicants have therefore sought a declaration to the following effect; namely, that Chief Executive in Council has a constitutional duty under arts.48(2) and 64 to implement and enforce the Trade Boards Ordinance in accordance with its provisions and underlying policy insofar as it is required by or is consistent with the Basic Law.”

7.  The reference in the above passage to cleaners and security guards is a reference to those persons who appear, in recent years, to have been the recipients of low wages.  The judicial review proceedings were initially commenced by three applicants : the 1st Applicant was a cleaner, the 2nd Applicant was and is another Legislative Councilor who has for years advanced the cause of minimum wages in Hong Kong; the 3rd Applicant I have already introduced.  The 2nd Applicant (Mr Leung Yiu Chung) withdrew his application before the substantive hearing in the Court below.  The 1st Applicant withdrew her appeal from Hartmann J’s decision, thereby leaving only the Applicant to pursue the appeal.  As can be seen from the declarations now sought, the Applicant’s arguments are now pitched on a much more general and vague basis.  In the Court below, as shown by the passages in the judgment quoted in the previous paragraph, the Applicant was contending that the CEIC had a positive duty actually to impose a minimum wage in accordance with the TBO.

The issues on appeal

8.  The issues on appeal can, in my view, be condensed into two parts : -

(1)    Is the CEIC entitled to refuse to apply under any circumstances the TBO; in other words, effectively to renounce its existence?

(2)    If not, does the evidence show that this is in fact the view of the CEIC?

9.  Before dealing with these issues, it would be convenient first to identify the statutory framework and secondly, to set out the relevant decisions of the Respondent that have led to the present proceedings.

The statutory framework : section 2 of the TBO

10.  Two important matters must be emphasized at the outset purely upon a true reading of that provision.  First, section 2 of the TBO (see paragraph 3 above) does not impose any obligation on the CEIC to fix minimum wages for any trade.  Secondly, the TBO does not constitute the only way of dealing with any perceived problem of unreasonably low wages.

11.  The statutory scheme can be summarized as follows : -

(1)    It is of course only when the wages paid to any persons employed in a trade in Hong Kong (whether generally or in any specified area or district) are “unreasonably low” that the mechanism for imposing minimum wages can even be considered by the CEIC to be used.

(2)    However, the existence of unreasonably low wages does not automatically trigger off any obligation to fix minimum wages on the part of the CEIC.  The CEIC is given a discretion to do so - “may, at any time he thinks fit”.  He is in no way bound to do so even he is of the view that wages are unreasonably low.

(3)    This discretion is a wide one (although for reasons I shall elaborate on, it is not an absolute one).  It is wide in that it is entirely up to the CEIC to decide when, if at all, minimum wages should be imposed using the section 2(1) mechanism (that is, publication in the Government Gazette).

(4)    This freedom to decide when the section 2(1) mechanism should be used allows the CEIC to take into account prevailing circumstances and indeed to consider whether the problem of unreasonably low wages can be or is being addressed by other means.  As stated above, the TBO does not purport to be the only means by which the question of low wages can be addressed.  For example, on the assumption that there exist unreasonably low wages in any sector but this problem is being specifically addressed by the Government or by the Legislative Council or even by the relevant employers, the CEIC can in my view quite legitimately decide not to use the section 2(1) mechanism at all.  In other words, he can ‘wait and see’.  Or, if the CEIC is of the view that advice is required, he may decide to set up a Trade Board under section 2(2) of the Ordinance.

(5)    The crucial point to bear in mind is that nothing in section 2 obliges the CEIC to use the section 2(1) mechanism to fix minimum wages and that he is given the liberty of considering all available options open to the Government in dealing with any problem caused by low wages.  This liberty is a wide one and must, I think, include the right not to impose any system of minimum wages where the CEIC is of the view that better options exist.

12.  Earlier (in paragraph 11(3) above), I mentioned that the discretion vested in the CEIC, wide though it is, is not absolute.  It is not absolute in the sense that the CEIC cannot irrationally refuse to use it or to consider using it.  It must be accepted that a decision-maker such as the CEIC cannot exercise a discretion so as to frustrate the policy and objects of a statute : - see Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997.  An unreasonable refusal to use powers under a statute or even to consider using such powers is a classic instance of frustrating the policy and objects of the enactment.  However, in order to determine the policy and objects of a statute and the extent of the duties and responsibilities owed by the relevant decision-maker, one must of course primarily look at the true construction of the relevant statute.  In a very well-known passage in his speech, Lord Reid said at 1030B-D : -

“ It is implicit in the argument for the Minister that there are only two possible interpretations of this provision – either he must refer every complaint or he has an unfettered discretion to refuse to refer in any case.  I do not think that is right.  Parliament must have conferred the discretion with the intention that it should be used to promote the policy and objects of the Act; the policy and objects of the Act must be determined by construing the Act as a whole and construction is always a matter of law for the court.  In a matter of this kind it is not possible to draw a hard and fast line, but if the Minister, by reason of his having misconstrued the Act or for any other reason, so uses his discretion as to thwart or run counter to the policy and objects of the Act, then our law would be very defective if persons aggrieved were not entitled to the protection of the court.  So it is necessary first to construe the Act.”

13.  In the context of the limits to the exercise (or non-exercise) of a power, I would also draw attention to section 39 of the Interpretation and General Clauses Ordinance, Cap.1 : -

“39.  Exercise of powers

  (1) Where any Ordinance confers any power or imposes any duty, then the power may be exercised and the duty shall be performed from time to time as occasion requires.

 (2)  Where any Ordinance confers any power or imposes any duty on the holder of any public office as such, then the power may be exercised and the duty shall be performed by the holder for the time being of that public office.”

14.  The policy and objects of the TBO are evident : to deal with the problem of unreasonably low wages.  However, the discretion in the CEIC to tackle this problem is, for the reasons stated above, a wide one.

15.  I did not understand Mr Dykes to be contending otherwise than the above in relation to the true construction of section 2 of the TBO.  Rather, it was the Applicant’s case that the CEIC has indeed frustrated the policy and objects of the TBO by renouncing it in the way I have described.  In his written submissions, Mr Dykes said this : -

“No other relief is sought.  It will be clear from the arguments below that the case on appeal is simply that CEIC has either totally ignored TBO, or has unreasonably downgraded its significance on the basis of supposed obsolescence.  If the court grants the declarations, the Government, when dealing with the problem ‘unreasonably low wages’, would have to factor into its decision-making TBO as a practical means of addressing the problem.  This is important if the problem does not go away.”

In the Court below, on this aspect, the Judge identified the argument in the following way : -

“Mr Pun has contended that, on all the evidence, it is apparent that the Chief Executive in Council has turned his back on the exercise of the power vested in him because, as a matter of economic principle, he is opposed to fixing minimum wages.  That, he has said, amounts to frustrating the policy and object of the Ordinance.”

16.  As I have already indicated, the crucial factual issue that has to be determined is whether the CEIC has indeed renounced the TBO.

The relevant decision

17.  In the Form 86A in these proceedings, two letters dated 11 October 2006, sent behalf of the CEIC, are identified as containing the relevant decisions not to implement or perform the duties imposed on him under the TBO.

18.  These letters were in response to letters from Mr Leung Yiu Chung (the former 2nd Applicant) and the Applicant.

19.  In a letter dated 6 October 2006 to the Chief Executive, Mr Leung made essentially the following points : -

(1)    He described the plight of a number of types of workers such as cleaners in terms of the low salaries some of them received.

(2)    He then referred specifically to the TBO and to what the Secretary for Economic Development and Labour had said earlier in the year about that Ordinance being outdated and containing some provisions that might breach the Bill of Rights.

(3)    The letter then pressed the Chief Executive to use the mechanism in the TBO to fix minimum wages and generally address the problem of low wages.

20.  The letter also dated 6 October 2006, from the Applicant made essentially the same points as Mr Leung and demanded a reply, failing which it was indicated judicial review proceedings would be instituted.

21.  The Office of the Chief Executive replied to Mr Leung (and the Applicant) on 11 October 2006 in the following way : -

(1)    The point was made that many of the provisions of the TBO were outdated and could not meet the needs of modern-day Hong Kong.

(2)    It was also pointed out that some of its terms may also breach the Bill of Rights; specific reference was made to section 5(5) wherein was stated that in any prosecution for failure to pay minimum wages, the burden was on the accused to prove his innocence (rather than on the prosecution to prove his guilt).

(3)    Reference was made to the Policy Address made by the Chief Executive that same day in which the Government announced an initiative – that the Wage Protection Movement (“the WPM”) – for cleaners and security guards whereby these types of workers would receive minimum wages.  This was an initiative that was launched by the Government, the business community and the labour sector.

(4)    The letter ended (as translated) : -

“We believe this is a positive and pragmatic approach.  We will review the effectiveness of the Wage Protection Movement two years after implementation.  If the review finds that the Movement has failed to yield satisfactory results, we will set out to prepare for the introduction of legislation for a minimum wage in the two sectors of cleansing and guarding services.”

22.  Given these replies from the CEIC, can it be said that he has renounced the TBO?  I now deal with the two issues set out in paragraph 8 above.

Is the CEIC entitled to refuse to apply under any circumstances the TBO; in other words, effectively to renounce its existence?

23.  The answer is clearly No.  I have already dealt with the limits of the discretion of the CEIC as far as the TBO is concerned : see paragraphs 12 to 14 above.  If the CEIC has indeed made it clear the Government will never under any circumstances use or contemplate using the TBO, this would be an unreasonable and indefensible position to take.  This would, if true, indeed frustrate the policy and objects of that Ordinance.

If not, does the evidence show that this is in fact the view of the CEIC?

24.  As I have explained earlier, the Applicant’s stance has moved from one of insisting that the Chief Executive should now be compelled to exercise his powers under the TBO to fix a minimum wage (this being the position in the Court below) to a much watered down approach in seeking the declarations identified in paragraph 5 above.  However, in order to establish his entitlement to the relief sought, the Applicant must demonstrate that the CEIC has actually indicated that the Government will forever refuse to utilize the TBO; in other words, effectively renounced it.

25.  The Applicant faces a not inconsiderable hurdle here.  The evidence in support of this contention must, necessarily, given the quite extraordinary and extremely far reaching nature of its effect, be compelling.  It is one thing for the Government (or the Chief Executive) of the day to question the effectiveness of a statute but quite another to renounce its applicability altogether.

26.  The Applicant relies on the following facts to support his case : -

(1)    At no stage since its enactment has the TBO ever been used by the Government.

(2)    The Government has consistently over the years been very much against the implementation of any system of minimum wages in Hong Kong.  We were taken to numerous statements in the Legislative Council made by Government officials rejecting as a matter of principle the idea of the implementation of a minimum wage.  For example, in a debate on minimum wages in the Legislative Council on 24 April 2002, the Secretary for Education and Manpower said the following : -

“ As to the issue of minimum wage, it was put up for debates held in 1999 and 2000 and I believe Honourable Members are very familiar with the pros and cons.  The stand of the SAR Government in this has been very clear and we oppose any form of a statutory system of minimum wage, for this will make the labour market less flexible and affect its adaptability to changes.  A system of minimum wage will not only distort the wage structure in the labour market, but also impede the development and restructuring of our economy.  The system will also make those low-skilled and low-income workers less enthusiastic about making improvements to and upgrading the quality of their work, hence denying economic development the impetus.”

(3)    This erstwhile policy of the Government was confirmed in the affidavit in these proceedings of the Permanent Secretary for Economic Development and Labour.  I say ‘erstwhile’ because, as the Secretary makes clear, this reflected the previous position and the present position is rather more receptive to the idea.

(4)    The Government has also, on numerous occasions stated that the TBO is obsolete.  References were made to statements from officials over the years that the TBO was a historical leftover (as the Judge below observed, the TBO has remained in existence notwithstanding that the International Labour Convention No.26 (see paragraph 1 above) has ceased to apply in Hong Kong since 1986) and that serious consideration was being given to its being repealed.

(5)    The Applicant also relies on the statement made by the Chief Executive on 12 October 2006 in the Legislative Council in response to a question about the application of the TBO.  It is useful to set out in full the following brief exchange (again, as translated) : -

“MR KWONG CHI-KIN (in Cantonese): Chief Executive, everybody knows that wages in the guarding and cleansing service trades are very low.  Some employees are earning as little as $10 an hour.  They can only earn a monthly income of around $3,000 by working 30 days a month.  I am sure the Chief Executive will agree that wages in these two trades are below the reasonable level, otherwise, he would not have singled out these two trades and said in the policy address that something needed to be done for them.

To put it simply, under the Trade Boards Ordinance (TBO) (Cap.63), if the Chief Executive considers that the wage of a certain trade is below the reasonable level, he may appoint a board to formulate the minimum wage for the trade.

Chief Executive, my question is very simple.  Will you invoke the Chief Executive’s power under the TBO to appoint two trade boards in order to formulate the minimum wages for these two trades?

CHIEF EXECUTIVE (in Cantonese): As far as I know, the TBO you mentioned was enacted 60 years ago.  It was about 1940 when the TBO was enacted in response to the situation then prevailing.  But it has never been applied after enactment.  Having gone through some provisions of the TBO, I found that many are outdated and incompatible with the current needs and standards of our society.  So, its applicability is very low.  If we invoke the TBO, it will be very difficult for us to do anything.  Moreover, we cannot just do so in a straightforward manner because we will face a lot of legal challenges.  So, after deliberation, my colleagues and counsel have come to the view that it is impossible to formulate a minimum wage for a particular trade by virtue of the TBO without facing legal challenges.”

It is the reference to ‘impossibility’ that is particularly emphasized although, on a fair reading, this was a reference to the problem of legal challenges.  It is also to be noted that it was said that the applicability of the TBO was “low”, not non-existent.

27.  In my judgment, the evidence really goes nowhere near the requisite threshold to found a case along the lines run by the Applicant.  At no stage has the CEIC committed the Government to a position in which the TBO has been renounced for all or (indeed, for any) time : -

(1)    The response of the CEIC on 11 October 2006 to the letters from Mr Leung Yiu Chung and the Applicant (see paragraph 21 above) indicates the present approach of the Government in launching the WPM.  As stated, if this initiative does not work out, then it is said that legislation might be introduced.

(2)    Mr Jat Sew Tong SC (for the Respondent) pointed out in the course of his submissions to another exchange during a debate involving the Secretary for Economic Development and Labour in the Legislative Council on 3 May 2006 in which the applicability of the TBO was again directly raised (as translated) : -

“MR LEUNG YIU-CHUNG (in Cantonese): President, I believe the Secretary will also agree that given the prevailing economic situation in Hong Kong, the earnings of some workers are extremely low, the establishment of minimum wage is thus called for and the discussion of the issue by the LAB is required.  This principle is actually the same as the one adopted in enacting the TBO in 1940.  May I ask the Secretary, since the principle of the two are the same, whether he will refer the Ordinance to the LAB for discussion, so that the LAB can identify any imperfection in the enforcement details and make amendments?  Since the principle is already there now, we should no longer drag on the discussion of principle but should focus on the enforcement details.

SECRETARY FOR ECONOMIC DEVELOPMENT AND LABOUR (in Cantonese): President, I have in fact stated that in my reply to Mr KWONG Chi-kin’s supplementary question earlier; I will give the same answer to Mr LEUNG Yiu-chung’s supplementary question.  I think all proposals, so long as they are conducive to solving the problem, are absolutely welcome to be brought up for discussion, and that includes the proposal just made by LEUNG Yiu-chung.

 However, I have to point out that all along the Government has actually been moving ahead and putting in a lot of effort in this respect.  I believe Members are also aware of that.  For instance, the Census and Statistics Department has now adopted an average wage rate for cleansing and guarding services.  The Government has taken the lead.  Many public organizations, subvented agencies and schools have now followed suit.  And this is good news that the MTRCL has recently adopted the same practice.  At present, about 26,000 employees can benefit from this practice.  We will definitely continue discussing this at the LAB with a view to working out a solution.  In the meantime, we will continue encouraging other organizations but not only public organizations to adopt this practice.  We hope that all companies will follow suit.

MR LEUNG YIU-CHUNG (in Cantonese): The Secretary merely stated in his earlier reply that proposals were welcome and all proposals could be discussed, but he did not say whether enforcement details under the Ordinance would be discussed.  If those details cannot be enforced, amendments may as well be proposed.

SECRETARY FOR ECONOMIC DEVELOPMENT AND LABOUR (in Cantonese): President, I have in fact answered the question.  All proposals, whether they are provisions of the Ordinance or other options, can be discussed so long as they are acceptable to both the employers and employees.”  (emphasis added)

Clearly then, the TBO would be considered as a viable option if the circumstances merited it.

(3)    In that same debate, the Secretary referred to the Government’s position being an “open-minded” one and this has been confirmed in his affidavit before us as well.

(4)    As for the statements that the TBO is in parts obsolete, this is hardly indicative of a position that the Government has effectively renounced its application.  The present position is that there are provisions in the TBO that might breach the Bill of Rights (see paragraph 21(2) above).  Other provisions can be said to be outdated : for example, the level of fines set out in section 5(4) of the TBO, while effective in 1940, can hardly be said to have kept up with modern times.

(5)    As for the assertion that the Government has been against the idea of the imposition of minimum wages in Hong Kong as a matter of principle, two points have to be made.  First, as can be seen from the evidence, it is, with respect, not right to say that the Government will always reject this as an option.  Reference can be made to the statements of the CEIC and the Secretary for Economic Development and Labour referred to in paragraphs 21(4) and 27(2) above.  Secondly, the CEIC is at liberty, as part of the discretion vested in him under the TBO, to look at solutions other than the imposition of a minimum wage structure in Hong Kong to deal with any problem regarding low wages (see paragraph 11 above).

Conclusion

28.  For the above reasons, I would dismiss the appeal.  I would also make an order nisi that the Applicant do pay the costs of the Respondent in this appeal, such costs to be taxed if not agreed.

Hon Tang VP :

29.  I agree.

Hon Lam J :

30.  I agree.

Hon Ma CJHC :

31.  The appeal is accordingly dismissed.  We also make an order nisi that the Applicant do pay the costs of the Respondent in this appeal, such costs to be taxed if not agreed.