YUNG CHI KEUNG v. PROTECTION OF WAGES ON INSOLVENCY FUND BOARD AND ANOTHER

HCAL 55/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 55 OF 2013

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J U D G M E N T

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1. This is an application for judicial review of a decision of the Protection of Wages on Insolvency Fund Board (“the Board”) made on 27 November 2012. This application is made pursuant to leave granted by me on 13 May 2013.

The issue

2. The difference between the applicant and the Board arose out of their different interpretations of the words “the applicant’s entitlement to severance payment” in section 16(2)(f)(i) of the Protection of Wages on Insolvency Ordinance, Cap 380 (“the PWI Ordinance”).  By virtue of the provisions in sections 15(1)(c), 16(1)(b) and 16(2)(f)(i), an employee who is owed severance payment by his employer may apply to the Board for an ex gratia payment from the Protection of Wages on Insolvency Fund (“the Fund”).  Section 15(1)(c) stipulates the situation in which an application can be made for the ex gratia payment.  Section 16(1)(b) authorises the Commission of Labour to effect the ex gratia payment.  Section 16(2)(f)(i) provides the calculation of the maximum amount of the ex gratia payment that the Commissioner can pay out of the Fund to the applicant. 

3. These sections in both English and Chinese are as follows:

“15. (1) Subject to this Part, an applicant to whom-

…

(c) the liability to be paid a severance payment has arisen and the severance payment is unpaid, whether or not the severance payment is then due;

may apply for an ex gratia payment from the Fund in respect of … the severance payment...”

15. (1) 在符合本部規定的情況下─

…

(c) 如向申請人支付遣散費的法律責任已產生，而該遣散費未獲支付(不論該遣散費當時是否已到期支付)；

則該申請人可就該…遣散費…，申請從基金撥付特惠款項。

16. (1) Subject to subsections (1B) and (2) where it appears to the Commissioner that an employer has failed to pay … severance payment… to an applicant and that-  

(a) in the case of an employer who is not a company-

(i) a bankruptcy petition has been presented against him; or
(ii) he would, but for the existence of section 6(2)(a) of the Bankruptcy Ordinance (Cap 6), be liable to have a bankruptcy petition presented against him; or

(b) in the case of an employer who is a company, a winding-up petition has been presented against that employer,

he may make an ex gratia payment to the applicant out of the Fund of the amount of the … severance payment...”

16. (1) 除第(1B)及(2)款另有規定外，如處長覺得僱主未有將…遣散費…付給申請人，而─  

(a) 如僱主並非一間公司，且─

(i) 已有人針對僱主提出破產呈請；或

(ii) 若非因《破產條例》(第6章)第6(2)(a)條的存在，便本可有一項破產呈請針對他而提出；或

(b) 如僱主是一間公司，且已有人針對僱主提出清盤呈請，

則處長可從基金中撥出數額相等於該…遣散費…的特惠款項支付給申請人。

16. (2) The Commissioner shall not make any payment under subsection (1)-

…

(f) in respect of a severance payment-

(i) of an amount exceeding the aggregate of $50000 and half of that part of the applicant's entitlement to severance payment in excess of $50000;

16. (2) 處長根據第(1)款付款時須受以下規定所限─

…

(f) 如處長就遣散費付款，則─

(i) 付款額不得超逾以下兩者的合計總數，即$50000之數和申請人有權得到的遣散費中減去$50000後之半數；”

(emphasis supplied)

4. The difference between the applicant and the Commissioner is on the interpretation of section 16(2)(f)(i).  The applicant’s stance is that the phrase “the applicant’s entitlement to severance payment” means the net amount of severance payment payable to him calculated in accordance with section 31G(1) of the Employment Ordinance, Cap 57 and deducting therefrom all gratuities, relevant occupational retirement scheme benefit or relevant mandatory provident fund scheme benefit as required by section 31I of that ordinance.  This net amount is then used to calculate the maximum amount of ex gratia as provided in section 16(2)(f)(i). 

5. The Commissioner however thinks that the phrase “the applicant’s entitlement to severance payment” should mean the amount calculated according to section 31G(1) of the Employment Ordinance without any deduction pursuant to section 31I.  The deduction pursuant to section 31I is to be made from the maximum amount of ex gratia payment calculated according to section 16(2)(f)(i). 

The severance payment provisions

6. I now deal with the relevant sections in the Employment Ordinance.  Section 2 defines the meaning of severance payment, occupational retirement scheme, relevant occupational retirement scheme benefit, mandatory provident fund scheme and relevant mandatory provident fund scheme benefit. Section 31B stipulates the situation in which severance payment is payable. Section 31G provides the calculation of the amount of severance payment payable.  Section 31I provides for deduction of gratuities, relevant occupational retirement scheme benefit and relevant mandatory provident fund benefit from the severance payment arrived under section 31G.

7. These sections in both English and Chinese are as follows:

“2. (1) In this Ordinance, unless the context otherwise requires-

2. (1) 在本條例中，除文意另有所指外─

“severance payment” (遣散費) means the severance payment payable by an employer to an employee under section 31B(1);

“遣散費”(severance payment) 指僱主根據第31B(1)條須付給僱員的遣散費；

“occupational retirement scheme” (職業退休計劃) means a scheme or arrangement under which benefits, based on length of service, are payable in respect of employees on retirement, death, incapacity or termination of service, but does not include a mandatory provident fund scheme;

“職業退休計劃”(occupational retirement scheme) 指一項計劃或安排，而根據該項計劃或安排，在僱員退休、去世、喪失行為能力或終止服務時，須就僱員支付按服務年資支付的利益，但不包括強制性公積金計劃；

“relevant occupational retirement scheme benefit” (有關職業退休計劃利益), in relation to an employee, means a benefit payable under an occupational retirement scheme on the retirement, death, incapacity or termination of service of the employee, but does not include any part of the benefit that is attributable to the contributions paid to the scheme by the employee;

“有關職業退休計劃利益” (relevant occupational retirement scheme benefit), 就任何僱員而言，指在該僱員退休、去世、喪失行為能力或終止服務時根據某職業退休計劃須支付的利益，但不包括該利益中可歸因於該僱員支付予該計劃的供款的任何部分；

“mandatory provident fund scheme” (強制性公積金計劃) means a provident fund scheme registered under the Mandatory Provident Fund Schemes Ordinance (Cap 485);

“強制性公積金計劃”(mandatory provident fund scheme) 指根據《強制性公積金計劃條例》(第485章)註冊的公積金計劃；

“relevant mandatory provident fund scheme benefit” (有關強制性公積金計劃權益), in relation to an employee, means the accrued benefits of the employee held by the approved trustee of a mandatory provident fund scheme in respect of the employee, but does not include any part of the benefit that is attributable to the contributions paid to the scheme by the employee;

“有關強制性公積金計劃權益” (relevant mandatory provident fund scheme benefit)，就任何僱員而言，指由強制性公積金計劃的核准受託人就該僱員而持有的該僱員的累算權益，但不包括該權益中可歸因於該僱員支付予該計劃的供款的任何部分；”

“31B. (1) Where an employee who has been employed under a continuous contract for a period of not less than 24 months ending with the relevant date-

(a) is dismissed by his employer by reason of redundancy; or

(b) is laid off within the meaning of section 31E,

the employer shall, subject to this Part and Part VC, be liable to pay to the employee a severance payment calculated in accordance with section 31G.”

31B. (1) 凡僱員在有關日期前，根據連續性合約受僱一段不少於24個月的期間─ 

(a) 因裁員而遭僱主解僱；或

(b) 被停工(第31E條所指的停工)，

除本部及第VC部另有規定外，僱主有責任付給該僱員一筆遣散費，款額按照第31G條計算。”

“31G. (1) Subject to this Part, the amount of a severance payment to which an employee is entitled in any case shall be calculated by allowing-

(a) in the case of a monthly rated employee, two-thirds of this last full month's wages, or two-thirds of $22500, whichever is less; and

(b) in any other case, 18 days' wages based on any 18 days chosen by the employee and occurring during his last 30 normal working days, or two-thirds of $22500, whichever is less,

for every year (and pro rata as respects an incomplete year) of employment under a continuous contract by his employer subject in all cases to a maximum payment not exceeding, where the relevant date occurs in a period specified in column 1 of Table A in the Seventh Schedule, the amount specified in column 2 of that table opposite to the period.”

31G. (1) 除本部另有規定外，僱員在任何情況下有權獲得的遣散費款額，須按以下方法計算─

(a) 如屬按月計薪的僱員，則根據連續性合約為僱主工作每滿一年(不足一年者按比例計算)，可獲其最後一個月全月工資的三分之二，或$22500的三分之二，兩者以較小款額為準；及

(b) 如屬其他情況的僱員，則根據連續性合約為該僱主工作每滿一年(不足一年者按比例計算)，可獲從其最後工作的30個正常工作日中由僱員選任何18天為依據的18天工資，或$22500的三分之二，兩者以較小款額為準，

惟如有關日期在附表7表A第1欄所指明的期間內，則遣散費最高限額在任何情況下不得超過該表內與該期間相對列於第2欄內的款額。”

“31I. If an employee becomes entitled to payment of a severance payment under this Part and-

(a) because of the operation of the employee's contract of employment, one or more gratuities based on length of service or one or more relevant occupational retirement scheme benefits have been paid to the employee; or

(b) a relevant mandatory provident fund scheme benefit is being held in a mandatory provident fund scheme in respect of the employee, or has been paid to or in respect of the employee,

the severance payment is to be reduced by the total amount of all of the gratuities and benefits to or in respect of the employee to the extent that they relate to the employee's years of service for which the severance payment is payable.

31I. 如任何僱員根據本部有權就其服務年數獲付一筆遣散費，而—

(a) 因為該僱員的僱傭合約的施行，一筆或多於一筆按服務年資支付的酬金或一筆或多於一筆有關職業退休計劃利益已支付予該僱員；或

(b) 在某強制性公積金計劃中有有關強制性公積金計劃權益就該僱員而被持有，或有關強制性公積金計劃權益已支付予該僱員或就該僱員而支付，

則須從該筆遣散費中扣除就該僱員而被持有、已向該僱員支付或就該僱員而支付的所有該等酬金及利益或權益的總款額，但以該等酬金及利益或權益是與上述服務年數有關的款額為限。”

The difference illustrated

8. The different amounts of ex gratia payment that are produced by the different interpretations can be illustrated by examples based on assumed figures:

Example according to the applicant’s calculation
Employee’s severance payment calculated		$120,000
according to section 31G
Gratuities, relevant occupational retirement		$40,000
scheme benefit and relevant mandatory
provident fund scheme benefit under section 31I
Maximum amount of ex gratia payment
under section 16(2)(f)(i) with section 31I amount
deducted from section 31G amount for calculating
the ex gratia payment
($50,000 + ($120,000 - $40,000 - $50,000) ÷ 2)		$65,000
Total amount of section 31I amount +
maximum amount of ex gratia payment to be
received by the employee = $40,000 + $65,000		$105,000
Example according to the Commissioner’s calculation
Employee’s severance payment calculated
according to section 31G		$120,000
Gratuities, relevant occupational retirement		$40,000
scheme benefit and relevant mandatory
provident fund scheme benefit under section 31I
Maximum amount of ex gratia payment under
section 16(2)(f)(i) without deduction of section 31I
amount from the section 31G amount for calculating
the ex gratia payment
($50,000 + ($120,000 - $40,000) ÷ 2)		$90,000
This $90,000 is the maximum amount of ex gratia
payment before deduction of section 31I amount
The maximum amount of ex gratia payment to be paid
should be net of the section 31I amount and is thus at
($90,000 - $40,000)		$50,000
Total amount of section 31I amount +
maximum amount of ex gratia payment to be
received by the employee = $40,000 + $50,000		$90,000

9. The Commissioner’s approach thus results in a smaller maximum amount of ex gratia payment.  In either case, the employee will not be given the full amount of $120,000 equivalent to his severance payment calculated according to section 31G.  There are however cases that by applying the applicant’s calculation, the employee will receive a total sum of ex gratia payment and section 31I benefit equal to the severance payment calculated under section 31G.  The applicant’s own case is an example.

10. The applicant was employed by his previous employer from 6 November 1999 to 7 October 2011 when his former employer entered into voluntary liquidation.  The Commissioner calculated his severance payment under section 31G at $131,696.54.  The section 31I benefit payable to him is at $106,319.04. According to the Commissioner’s calculation, the maximum amount of ex gratia payment payable to him should be:

$50,000 + ($131,696.54 - $50,000) ÷ 2 = $90,848.27

11. The section 31I benefit of $106,319.04 should be deducted from the maximum ex gratia payment.  The net maximum sum of ex gratia payment payable to the applicant is:

 $90,848.27 - $106,319.04 = -15,470.77

12. Hence, no ex gratia payment is payable to the applicant.  The net sum payable to him is the section 31I benefit at $106,319.04.

13. According to the applicant’s calculation, the maximum amount of ex gratia payment should be:

$50,000 + ($131,696.54 - $106,319.04 - $50,000) ÷ 2 = $37,688.76. 

The total sum including the section 31I benefit payable to him is:

$37,688.75 + $106,319.04 = $144,007.79. 

14. The total sum of $144,007.79 exceeds the severance payment under section 31G at $131,696.54.  He should therefore be paid an ex gratia payment of $25,377.50 only.  This sum plus the section 31I benefit of $106,319.04 equals to the section 31G amount of $131,696.54.

The legal principles

15. Regarding the legal principles applicable in interpreting and construing a statutory provision, I have been reminded of the approach summarised by Li CJ in HKSAR v Cheung Kwun Yin (2009) 12 HKCFAR 568 at paras 11 to 14:

“Approach

11. In interpreting a statute, the court’s task is to ascertain the intention of the legislature as expressed in the language of the statute.  This is of course an objective exercise.  The court is not engaged in an exercise of ascertaining the legislative intent on its own.  As Lord Reid pointed out in Black-Clawson International Ltd v Papierwerke Waldhof – Aschaffenburg AG [1975] AC 591 at 613G.

‘We often say that we are looking for the intention of Parliament, but that is not quite accurate. We are seeking the meaning of the words which Parliament used.’

12. The modern approach is to adopt a purposive interpretation.  The statutory language is construed, having regard to its context and purpose.  Words are given their natural and ordinary meaning unless the context or purpose points to a different meaning.  Context and purpose are considered when interpreting the words used and not only when an ambiguity may be thought to arise.  In HKSAR v Lam Kwong Wai (2006) 9 HKCFAR 574 at 606E, Sir Anthony Mason NPJ stated:

‘The modern approach to statutory interpretation insists that context and purpose be considered in the first instance, especially in the case of general words, and not merely at some later stage when ambiguity may be thought to arise.’

See also Medical Council of Hong Kong v Chow Siu Shek (2000) 3 HKCFAR 144 at 154 B-C.  As the Court pointed out in Town Planning Board v Society for the Protection of the Harbour Limited (2004) 7 HKCFAR 1 at 14 A-C, the mischief rule is an early example of the purposive approach.  And the purposive approach (including the mischief rule) has been reflected in Hong Kong in s.19 of the Interpretation and General Clauses Ordinance (Cap.1).

13. The context of a statutory provision should be taken in its widest sense and certainly includes the other provisions of the statute and the existing state of the law.  See Town Planning Board v Society for the Protection of the Harbour Limited at 13 I-J and Attorney-General v Prince Ernest Augustus of Hanover [1957] AC 436 at p. 461.

14. The purpose of a statutory provision may be evident from the provision itself.  Where the legislation in question implements the recommendations of a report, such as a Law Reform Commission report, the report may be referred to in order to identify the purpose of the legislation.  The purpose of the statutory provision may be ascertained from the Explanatory Memorandum to the bill.  Similarly, a statement made by the responsible official of the Government in relation to the bill in the Legislative Council may also be used to this end.  See PCCW–HKT Telephone Ltd v Telecommunications Authority (2005) 8 HKCFAR 337 at 351 F-J and Director of Lands v Yin Shuen Enterprises Ltd (2003) 6 HKCFAR 1 at 15 A-H.”

16. It is also important to bear in mind the words of Lord Millet NPJ in China Field Ltd v Appeal Tribunal (Buildings) (No 2) (2009) 12 HKCFAR 342 at para 36:

“…There can be no quarrel with the principle that statutory provisions should be given a purposive interpretation, but there has been a distressing development by the courts which allows them to distort or even ignore the plain meaning of the text and construe the statute in whatever manner achieves a result which they consider desirable. It cannot be said too often that this is not permissible. Purposive construction means only that statutory provisions are to be interpreted to give effect to the intention of the legislature, and that intention must be ascertained by a proper application of the interpretative process. This does not permit the Court to attribute to a statutory provision a meaning which the language of the statute, understood in the light of its context and the statutory purpose, is incapable of bearing: see HKSAR v Lam Kwong Wai (2006) 9 HKCFAR 574 per Sir Anthony Mason NPJ at para 63).”

The Commissioner’s submissions on legislative intent

17. I now deal with the Commissioner’s submissions of legislative intent in support of his interpretation of section 16(2)(f)(i). The Commissioner relies on the speeches by government officials recorded in the Hansard and argues that it is not the legislative intent that the Fund should meet the employer’s default in full but only to provide a safety net against hardship for the workers.

18. The Commissioner further argues that by his mode of calculation, all employees entitling to the same sum of severance payment under section 31G will, upon the employer’s default, receive the same total sum by way of ex gratia payments from the Fund and section 31I benefits.  This total sum remains the same regardless of the amount of section 31I benefit available or even when there is no such benefit.  If an employer should provide section 31I benefits for some but not all his employees, those employees who are provided with such benefits will still not be better off in the event of the employer’s default in paying severance payment.  The reason being that the section 31I payment paid or payable to the employee is deducted from the ex gratia payment payable.  The Commissioner considers this approach as fair, consistent and certain.

19. However, the applicant argues that such an approach deprives him all the section 31I benefit that his employer has saved up for him over the years prior to the employer encountering financial difficulty. The applicant does not agree that the Board, when giving him the ex gratia payment, should wipe out all his section 31I benefit.  Viewed objectively, one cannot say that the applicant’s argument has no merit.

20. Despite the fact that the legislature did not intent to provide a full indemnity for the employer’s default in severance payment, if the clear meaning of the statute would produce such result in at least some cases, then it is the clear meaning that will prevail (see China Field Ltd per Lord Millet above).

21. The Commissioner’s next argument is that the applicant’s mode of calculating ex gratia payment will result in an unjustifiably hefty burden to the Fund.  The Commissioner says that the applicant’s mode of calculation will shift the liability of the defaulting employer further to the Fund and could promote contrived insolvency or discourage employees from pursuing the defaulting employer’s first.

22. The Commissioner also advised that the Fund currently is in a sound financial position with an accumulated surplus of over $3,400 million as at July 2013 owing to the favourable economic climate and a low payout of ex gratia payment in recent years.  Owing to this improved financial position of the Fund, the rate of levy for the Fund was in fact reduced from $450 per year to $250 per year commencing from 19 July 2013.

23. Whilst it is not for the court to comment on the wisdom of reducing the levy rather than increasing the ex gratia payment, I doubt if it is the correct approach to interpret the PWI Ordinance so as to keep the Fund in good financial health.  The Fund does not exist for its own sake.  It was set up to assist the employee who suffers from the double misfortune of losing his job and not getting his deserved severance payment according to the law.  Hence, to keep the fund in good financial health is not one of the purposes for setting up the Fund.  The main purpose is to effect ex gratia payments to help the employees in terms of the PWI Ordinance.

24. Furthermore, the worry about contrived insolvency being promoted by ex gratia payment from the Fund has always been there.  It however has not prevented the setting up of the Fund or the subsequent improvements in the amount of ex gratia payments.

25. The worry that more generous ex gratia payments may discourage employees from pursuing their employers is also not backed by evidence.  One should bear in mind that employees can only apply for ex gratia payments when petitions of bankruptcy or winding up have been filed against their employers.  Furthermore, the Commissioner’s performance pledge is to effect payment of ex gratia payment within 10 weeks from receipt of all the necessary information justifying such payment.  This worry needs to be backed up by evidence before it can be given weight.

26. Hence, this argument of a hefty burden to the Fund does not assist me in deciding which mode of calculation is the correct one according to section 16(2)(f)(i).

The applicant’s interpretation

27. In construing the words “the applicant’s entitlement to severance payment” in section 16(2)(f)(i), Mr Ng, counsel for the applicant, starts off by referring to the definition of severance payment in section 2 of the PWI Ordinance which provides (in English and Chinese):

“2. In this Ordinance, unless the context otherwise requires-

severance payment (遣散費) means a severance payment in respect of which an applicant would, on the winding up of a company, be entitled to priority under section 265(1)(ca) of the Companies Ordinance (Cap 32) or would, on a bankruptcy, be entitled to priority under section 38(1)(ca) of the Bankruptcy Ordinance (Cap 6), save that the amount specified in section 265(1)(ca) of the Companies Ordinance (Cap 32) or section 38(1)(ca) of the Bankruptcy Ordinance (Cap 6) (as the case may be) as the maximum amount in respect of which an applicant would be entitled to priority, or any amount substituted therefor under section 265(1B) of the Companies Ordinance (Cap 32) or section 38(2B) of the Bankruptcy Ordinance (Cap 6) (as the case may be), shall not apply;

2. 在本條例中，除文意另有所指外─

遣散費 (severance payment) 指公司清盤時，申請人根據《公司條例》(第32章)第265(1)(ca)條會有權獲優先償還的遣散費，或在破產案中，申請人根據《破產條例》(第6章)第38(1)(ca)條會有權獲優先償還的遣散費，但《公司條例》(第32章)第265(1)(ca)條或《破產條例》(第6章)第38(1)(ca)條(視屬何情況而定)所指明為申請人會有權獲優先償還的最高款額，或根據《公司條例》(第32章)第265(1B)條或《破產條例》(第6章)第38(2B)條(視屬何情況而定)取代該最高款額的任何款額，並不適用；”

This definition refers to the severance payment as mentioned in section 265(1)(ca) of the Companies Ordinance, Cap 32 and section 38 (1)(ca) of the Bankruptcy Ordinance, Cap 6.  However, these two sections merely refer back to the Employment Ordinance for what is severance payment.

28. Mr Ng then refers to section 15(1) of the PWI Ordinance (quoted above).  That is the qualifying section for payment of ex gratia payment.  This section allows the employee to apply for ex gratia payment when there is a default in payment of severance payment.  Mr Ng submits that this unpaid severance payment must be the part of the severance payment that is outstanding after the deduction of the section 31I benefit.  If the section 31I benefit should wholly offset the severance payment, then there would be no unpaid severance payment.

29. Mr Ng then refers to section 16(1) of the PWI Ordinance which empowers the Commissioner to pay ex gratia payment when an employer has failed to pay severance payment.  This unpaid severance payment again must be the amount outstanding after the deduction of the section 31I benefit.  He further submits that the amount of ex gratia payment must be in respect of the unpaid or outstanding portion of the severance payment.

30. I agree with Mr Ng that when section 15(1) of the PWI Ordinance talks about the severance payment being unpaid and section 16(1) refers to the employers’ failure to pay severance payment, they are referring to the outstanding portion of the severance payment after deduction of the section 31I benefit.  But then these two sections are not for the purpose of defining the amount of ex gratia payment payable.  Section 15(1) is to define eligibility for the employee to apply for ex gratia payment.  The employee is only eligible if the section 31I benefit is insufficient to offset his section 31G severance payment entitlement.  If the section 31I benefit is large enough to offset his section 31G entitlement, he will not be eligible.  For section 16(1), it is to authorize the Commissioner to pay ex gratia payment.  If the section 31I benefit is large enough to offset the section 31G entitlement, the Commissioner will not be authorized to make such payment.  I also agree that the ex gratia payment is paid in respect of the unpaid portion of the severance payment, but it need not be of the same amount of the unpaid severance payment.

31. Mr Ng then submits that his interpretation of section 16(2)(f)(i) is consistent with the Board’s right of subrogation under section 24 of the PWI Ordinance to the effect that the Board will subrogate into the employee’s right to claim the defaulting employer to the extent of the ex gratia payment effected.  But I think this right of subrogation is consistent with the Commissioner’s interpretation too.

The Commissioner’s interpretation

32. Mr Chang, counsel for the Commissioner, submits that section 16(2)(f)(i) of the PWI Ordinance does not talk about the unpaid or outstanding portion of the severance payment but the severance payment entitlement.  Hence, it is talking about the amount of severance payment before deduction of the section 31I benefit.

33. Mr Chang also refers to section 16(2B)(a) of the PWI Ordinance.  That section provides (in English and Chinese):

“(2B) (a) Where it appears to the Commissioner that-

(i) an applicant’s wages have been reduced during the period of 12 months immediately before he is dismissed or laid off; and

(ii) before the wage reduction took effect, the employer of the applicant had given an undertaking to the applicant to the effect that if the applicant was dismissed or laid off after the wage reduction, the severance payment payable to him would be calculated in a manner more favourable to him than that provided for in section 31G of the Employment Ordinance (Cap 57),

then, for the purposes of subsection (2)(f)(i), the applicant’s entitlement to severance payment may, if it is more favourable to the applicant, be calculated-

(A) subject to paragraph (c), in accordance with section 31G of the Employment Ordinance (Cap 57); or

(B) in the manner specified in the undertaking,

whichever results in a lesser amount.

(2B) (a) 如處長覺得—

(i) 在申請人遭解僱或停工之前12個月內，申請人的工資曾被削減；而

(ii) 在削減工資生效之前，申請人的僱主曾向申請人作出承諾，表明假如申請人在工資被削減之後遭解僱或停工，應支付給他的遣散費將會以較《僱傭條例》(第57章)第31G條所規定者對他更有利的方式計算，

則就第(2)(f)(i)款而言，申請人有權得到的遣散費可按下述辦法計算(如對申請人更有利的話)—

(A) 在符合(c)段的規定下，按照《僱傭條例》(第57章)第31G條計算；或

(B) 按承諾中所指明的方式計算，

以計算所得款額較小者為準。”

34. Mr Chang submits that section 31G is expressly adopted as one option for calculating “the applicant’s entitlement to severance payment” in the particular scenario contemplated in section 16(2B).  Hence, for the sake of consistency, “the applicant’s entitlement to severance payment” in section 16(2)(f)(i) should also mean the entitlement calculated according to section 31G and without any deduction of the section 31I benefit.

35.  Mr Ng however argues that section 16(2B) was introduced at a much later stage than section 16(2)(f)(i).  Hence, the meaning of the entitlement in section 16(2)(f)(i) should not be coloured by that in the later enacted provision of section 16(2B). 

Decision

36.  In order to properly understand the meaning of “the applicant’s entitlement to severance payment” in section 16(2)(f)(i) of the PWI Ordinance, it is necessary to go back to the Employment Ordinance to see how “the employee’s entitlement to severance payment” is defined there. 

37.  Having analysed sections 31G and 31I of the Employment Ordinance, I think it is tolerably clear that the first step to ascertain the amount of severance payment payable to an employee is to calculate the same according to the formula provided in section 31G.  That formula is comprehensive for ascertaining the amount of severance payment payable.  But the actual amount to be paid has to be reduced by the section 31I benefit.  The section 31I benefit takes effect as a part-payment of the severance payment entitlement to the employee so that the employer needs only to pay the balance.  But the original entitlement is the amount calculated according to section 31G, not the net sum after deducting the section 31I benefit. 

38.  I also agree with Mr Chang that since both sections 16(2)(f)(i) and (2B) are to provide for the calculation of the ex gratia payment, the same words should bear the same meaning.  Otherwise, there will be inconsistency in interpretation.  There is also every reason to suppose that the draftsman in formulating the later enactment would have intended that the same words used in the old and new enactments would carry the same meaning. 

39.  I also agree with Mr Chang that section 16(2)(f)(i) of the PWI Ordinance does not talk about the unpaid or outstanding portion of the severance payment and should mean the amount of severance payment before deduction of the section 31I benefit.

40.  I am of the view that “the applicant’s entitlement to severance payment” in section 16(2)(f)(i) of the PWI Ordinance should mean the sum calculated according to section 31G without any deduction therefrom of the section 31I benefit.  If the entitlement in section 16(2)(f)(i) should be the net severance payment after deduction of the section 31I benefit, then section 16(2)(f)(i) should have so provided.

41.  In the premises, I dismiss the application.  I also make a costs order nisi that the applicant do pay the 2nd respondent the costs of this application and that the applicant’s own costs be taxed in accordance with the Legal Aid Regulations.