KONE ELEVATOR (HK) LTD v. CONSTRUCTION INDUSTRY COUNCIL

DCMP 4552/2022

[2023] HKDC 1216

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 4552 OF 2022

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JUDGMENT

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A.  Introduction

1.  This is an appeal under section 57 of the Construction Industry Council Ordinance, Cap 587 (“the Ordinance”). Unless otherwise stated, all references to parts, sections and schedules in this judgment are references to parts, sections and schedules of the Ordinance.

2.  The appellant is KONE Elevator (HK) Ltd (“KONE”), which is represented by Mr Eric Kwok SC leading Mr Ernest Ng in this appeal (“KONE’s counsel”).

3.  The respondent, Construction Industry Council (“CIC”), is represented by Mr Abraham Chan SC leading Mr Harrison Cheung (“CIC’s counsel”).

B.  Essential background

4.  The following background is not disputed.

5.  KONE is one of the key players in the lift and escalator industry both locally and internationally. It is currently responsible for the maintenance of about 8,000 lifts and escalators in Hong Kong.

6.  By a certificate dated 18 February 2022, the MTR Corporation Limited (“MTRC”) certified that a sum of HK$4,759,277.22 was payable to KONE in respect of “work executed or as required under the terms and conditions of this Contract during the period ending 31 October 2021 as set out in the attached statement” (“the MTRC Certificate”). The certificate identified “Contract M1176-18E(K) Maintenance Services for Lifts and Escalators (Packages A1, A2-2, A3 and B3)” as the underlying contract (“the Subject Contract”).

7.  By a notice dated 20 June 2022, CIC notified KONE that the levy payable in respect of “the above construction operations” was assessed at HK$504,738 (“the Payment Notice”). The notice identified the Subject Contract as the “construction operations” concerned and labelled the assessment “Estimated Assessment under S40(1)”.

8.  By a notice of objection dated 13 July 2022 served on CIC pursuant to section 55(3), KONE objected to the assessment.

9.  KONE’s objection was referred to the Objections Board for consideration in accordance with section 56(1). By a letter dated 25 October 2022, CIC informed KONE in pursuance of section 56(3) that the Objections Board had rejected KONE’s objection in its entirety and confirmed the assessment (“the Decision”).

10.  Aggrieved by the Decision, KONE appeals to this court.

C.  The scope of this appeal

11.  An issue arose during oral submissions as to the scope of this appeal.

12.  Two types of levy were demanded under the Payment Notice:

(a)  a levy under section 32(1); and

(b)  a levy under section 23(1) of the Construction Workers Registration Ordinance, Cap 583 (“Cap 583”).

13.  Insofar as the latter is concerned, section 29 of Cap 583 provides that any person who is notified of an assessment under Cap 583 may object to it and the objection is to be dealt with “in accordance with section 56 of the Construction Industry Council Ordinance (Cap 587) [ie the Ordinance]”.

14.  But unlike the Ordinance as we shall see, Cap 583 is silent on any appeal. The parties focused on the Ordinance in their submissions and did not touch upon Cap 583. When the court raised the issue at the hearing, they held different views as to whether the Cap 583 assessment formed part of this appeal. They asked for an opportunity to address me fully in writing. I am grateful for their subsequent submissions.[1]

15.  The parties are now in agreement that this court does have the jurisdiction to entertain an appeal in respect of a Cap 583 assessment. This is because section 57(1) provides for a right to appeal to the District Court against “a decision” of the Objections Board. Insofar as the decision under appeal covers an objection submitted under Cap 583, a Cap 583 assessment may form the subject matter of an appeal under section 57(1).

16.  It is evident from the papers that KONE had indeed objected to the whole Payment Notice including the Cap 583 assessment. The Objections Board rejected KONE’s objection in its entirety including KONE’s objection against the Cap 583 assessment. According to the Amended Notice of Originating Motion (“the ANOM”), KONE is seeking, inter alia, to set aside “[t]he decision of the Objections Board of the Respondent in the Objection to [the Payment Notice]” which covered the Cap 583 assessment as well.

17.  Thus, this appeal encompasses both levies. Nevertheless, there is no argument pertaining solely to Cap 583.

D.  The grounds of appeal and issues for determination

18.  In the ANOM, KONE enumerated 11 grounds of appeal which are summarized below:

Ground (1) –  The Objections Board and/or the Decision were tainted by apparent bias.

Ground (2) –  The Objections Board failed to give reasons for the Decision and, in refusing to give reasons, deprived KONE of the opportunity of satisfying itself that the Objections Board was acting lawfully.

Ground (2A) –  The Objections Board and the process whereunder the Decision was made were systemically procedurally unfair on the basis that sections 54, 55 and/or 56 and/or the “Levy Guide No 2 Guidelines relating to objection made to the Objections Board” (“Levy Guide No 2”) fail(s) to provide a fair and public hearing by a competent, independent and impartial tribunal established by law.

Ground (2B) –  Therefore, (a) the proceedings before the Objections Board necessarily infringe an appellant’s (including KONE’s) right under Article 10 of the Hong Kong Bill of Rights (“BOR10”) whether disproportionately or otherwise and (b) BOR10 remains engaged and applicable in full before this court.

Ground (2C) –  The Decision was unlawful and/or unreasonable in the public law sense.

Ground (2D) –  For the reasons set out in paragraphs (2A), (2B) and (2C) above (individually or cumulatively), this court should hear (and/or decide) appeals under section 57, including but not limited to this appeal, de novo (and/or afresh) without regard to the proceedings and purported reasons (if any) of the Decision given by the Objections Board.

Ground (2E) –  Without prejudice to the above, KONE further advances Grounds (3), (4), (5) and (6) in the event that the Decision is to be considered.

Ground (3) –  The Objections Board erred in law in concluding that CIC has authority to conduct a provisional assessment under section 40 as stated on the Payment Notice. In particular, unlike section 37, section 40 does not empower CIC to make a “provisional assessment”. Further and/or in any event, the court ought to hold otherwise.

Ground (4) –  The Objections Board erred in law in concluding that maintenance contracts for lifts and/or escalators fall within the definition of “construction operations” under section 1(c)(i) of Schedule 1. Further and/or in any event, this court ought to have hold otherwise.

Ground (5) –  Alternatively, the Objections Board erred in law and in fact in concluding that all works covered by the MTRC Certificate fall within the scope of “construction operations” and therefore are subject to levy. Further and/or in any event, this court ought to hold otherwise.

Ground (6) –  Alternatively, the Objections Board erred in law and in fact in concluding that items 1.1.2 (Full Load Test), 1.2.2 (Fully Load Test) and 1.5 (Variation Orders) on the MTRC Certificate are “integral parts of the maintenance work” and are subject to levy. Further and/or in any event, this court ought to hold otherwise.

19.  They may be seen as a recast of the objections taken before the Objections Board.[2]

20.  At the appeal hearing, KONE’s counsel reorganized these grounds into three broad complaints. According to their submissions:

(a)  The point of Grounds (1), (2), (2A), (2B), (2C), (2D) and (2E) is that “the process of objections under the Ordinance is both systemically and individually unfair vis-à-vis [KONE]. Thus this appeal should be heard de novo to prevent any unfairness suffered by [KONE] below and breaches of human rights law and/or common law standard of fairness.” For ease of reference, I shall call it “the Unfairness Complaint”.

(b)  The point in Ground (3) is that CIC “failed even to understand its statutory task that it was [not] empowered to conduct an ‘estimated assessment’ and there was no ‘completion’ within the meaning therein. The Payment Notice is invalid in limine.”

(c)  The point in Grounds (4), (5) and (6) is that CIC “did not have the power/jurisdiction to issue the Payment Notice to [KONE] because the works under [the MTRC Certificate] were not ‘construction operations’ within the meaning of the Ordinance. In any case, [CIC] erred in issuing the Payment Notice in respect of Items 1.1.2, 1.2.2, 1.5 on the basis that they were ‘integral parts of the maintenance work’.”

21.  Through their diligence, counsel from both sides have identified the following pertinent issues for resolution of the above complaints:

(a)  Whether this appeal should be a hearing de novo? (“Issue 1”)

(b)  Whether CIC has power to issue the Payment Notice under section 40(1)? (“Issue 2”)

(c)  Whether the operations covered by the Payment Notice amount to “construction operations” for the purposes of the Ordinance? (“Issue 3”)

(d)  As an alternative to (c), whether the operations identified by items 1.1.2, 1.2.2 and 1.5 in the statement attached to the MTRC Certificate fall within the definition of “construction operations”? (“Issue 4”)

22.  The determination of the above issues turns on the proper construction of the Ordinance.

E.  The legislative framework of the Ordinance

23.  The principles governing statutory construction are well settled. The Chief Justice recently reiterated in HKSAR v Chan Keen [2023] HKCFA 11 that:

“10. ... It is certainly true that statutory language should be construed in the light of its context and purpose. Words are given their natural and ordinary meaning with context and purpose to be considered alongside the express wording at the outset – not merely at some later stage when an ambiguity is thought to arise. This is because the meaning of words is inevitably coloured by the context in which they are employed. It is unhelpful to look at words in a vacuum or to adopt a literal or dictionary meaning of the words being construed, without also paying regard to the context.

11. At the same time, it has to be firmly borne in mind that the court’s task is to give effect to the legislative intent within the permissible bounds of interpretation. Thus, a purposive approach does not allow the court to disregard or distort the plain meaning of the text and read the provision in any manner it wants. The court is, after all, an interpreter not a legislator. It cannot attribute to a statutory provision a meaning which the language of the statute, understood in the light of its context and purpose, simply cannot bear. Its role in the interpretative exercise is, and has always been, to ascertain and give effect to the intention of the legislature. The task remains one of construction of the words the legislature has actually used.

12. It follows that the legislature’s intention is to be gleaned from the text, context and purpose of the statute. In this regard:

(1) The context of the relevant statutory provision should be taken in its widest sense and will obviously include the other provisions of the statute. All relevant provisions within a statute must be read together as a purposive unity. It is necessary to identify the interpretative considerations involved and then, if they conflict, to weigh and balance them. So far as possible, a statute should be construed as a consistent whole.

(2) It may be relevant and necessary, depending on the case, to consider the recommendation of a report such as that published by the Law Reform Commission, the explanatory memorandum to the relevant bill or a statement by the responsible official of the government in relation to that bill in the Legislative Council. It may also be relevant in any given case to look at the history of the provision concerned, and read it in the historical context of the situation which led to its enactment. The existing state of the law may also be relevant.

(3) Regard must also be had to the practical consequences of opposing constructions. Construction is an exercise in common sense and sound reason. The courts will presume that the legislature did not intend a statute to have consequences which are inconsistent with fundamental rights, or are objectionable or undesirable; or absurd; or unworkable or impracticable; or merely inconvenient; or anomalous or illogical; or futile or pointless.”

24.  The Ordinance was enacted in 2006. Its aims, as stated in the long title, are:

(a)  to replace the Industrial Training (Construction Industry) Ordinance, Cap 317 (“the repealed Cap 317”) (see Part 9);

(b)  to establish CIC to replace the Construction Industry Training Authority (“CITA”) which was established by the repealed Cap 317 (see Parts 2-4 & 7-8); and

(c)  to set up a system of payment of levy known as “Construction Industry Levy” by contractors in the construction industry in respect of construction operations (see Parts 5-6).

25.  As provided in Parts 2 and 4, the functions of CIC include advising the Government on construction-related matters, administering the Construction Industry Training Board in providing training to construction workers, and implementing the registration and management regime for construction workers under Cap 583.

26.  Whilst its members are appointed by the Secretary for Development (“the Secretary”) (section 9), CIC is not to be regarded as part of the Government (section 4(4)). As provided in Part 3, CIC is financially independent from the Government. Its main source of income, apart from grants, loans, donations, fees, rent or interest received, is the levy, surcharge, penalty and further penalty imposed under the Ordinance (section 21). For each financial year, CIC has to submit a programme forecast together with financial estimates to the Secretary (section 22). At the end of each financial year, it is to report on its activities and submit a statement of accounts (sections 25 & 27). Its accounts are subject to audit (section 26).

27.  As provided in Part 5, contractors are statutorily required to pay a levy in respect of “construction operations” carried out by them in Hong Kong (sections 32 & 33). That term is defined in section 2(1) and Schedule 1. Construction operations with a total value not exceeding the statutory threshold (currently at HK$3 million) are exempted (section 32(3) & Part 1 of Schedule 5). The levy is charged at 0.5% of the value of the construction operations concerned (section 32(1) & Part 2 of Schedule 5). The value of a construction operations is ascertained in accordance with the rules set out in Part 6.

28.  To facilitate an assessment, contractors are required to notify CIC when they carry out (section 34), receive payment for (section 35) and complete (section 36) a construction operations. Surcharges may be imposed when a contractor fails to give the required statutory notice without reasonable excuse (section 41).

29.  There are two means by which CIC may make an assessment of levy. The assessment under section 37 is based on receipt of either a section 35 notice of payment or a section 36 notice of completion. Where no statutory notice is received, CIC may still make an assessment under section 40.

30.  There is an elaborate procedure of objection and appeal against an assessment of CIC in Part 7. Penalties are imposed for non-payment of levy or surcharge (section 46).

31.  For the purpose of this appeal, the parties do not dispute the following interpretive purposes of the Ordinance:

(a)  CIC is to work for the general good of the construction industry.

(b)  The Construction Industry Levy is to fund the work of CIC.

(c)  To facilitate the above, the statutory scheme of levy must be clear, workable, efficient and cost-effective. A levy is chargeable so long as the operation concerned falls within the scope of the scheme, which should be clear for everyone – employers, contractors, authorized persons as well as CIC – to see. The duty that is imposed on CIC to administer the scheme must not be onerous and must be proportionate in terms of cost.

F.  Issue 1: Whether this appeal should be a hearing de novo?

32.  Whilst both parties agree that this should be an appeal de novo, they submit very different reasons for it. KONE refers to the Unfairness Complaint and argues that the hearing should be de novo “in order to purge the unfairness at the level of the [Objections Board]” and to “correct any unfairness suffered by [KONE]”. CIC, on the other hand, submits that this should be a de novo hearing as a matter of statutory construction and the Unfairness Complaint is irrelevant to the appeal. In reply, KONE criticizes CIC for “cosmetically not contest[ing]” the issue and emphasizes that the issue has “an important impact on the question of burden”.

33.  As said before, there is a mechanism in Part 7 for a contractor to object to a notice of assessment (section 55). The objection is referred to the Objections Board, which may “confirm, cancel or reduce the levy” (section 56). An objector who is aggrieved by the decision of the Objections Board may further appeal to the District Court (section 57).

34.  Section 57 is in these terms:

“57. Appeals against decision of Objections Board

(1) An objector who is aggrieved by a decision of the Objections Board may appeal to the District Court against that decision.

(2) An appeal shall be lodged within 30 days after the objector receives the notification of the decision.

(3) An appeal may not be heard unless the amount of the levy or surcharge which is the subject of the appeal, including the amount of any penalty or further penalty, has been paid.

(4) On hearing an appeal, the District Court may confirm, cancel or reduce the levy or surcharge and make any order as to costs as it thinks fit.

(5) If the District Court cancels or reduces a levy or surcharge, it may order the repayment of the cancelled or reduced amount, and any amount of the penalty or further penalty that has been paid.

(6) The District Court may order repayment with interest, at a rate determined by the court, calculated from the date of payment to the Council, or without interest.”

35.  Whereas the District Court Rules Committee is specifically empowered by section 58 to make rules of court for the purpose of such appeals, no rules have been made.

36.  According to the parties, this is the first appeal under section 57. Previously, the District Court had only dealt with appeals under the repealed Cap 317.[3]

37.  I agree with CIC that this should be an appeal de novo as a matter of statutory construction.

38.  In Chou Shih Bin v HKSAR (2005) 8 HKCFAR 70 at para 18, the Court of Final Appeal cited the judgment of the High Court of Australia in Harris v Caladine (1991) 172 CLR 84 at 125 on the characteristics of different classes of appeals:

“A hearing de novo may be contrasted with an appeal stricto sensu and an appeal by way of rehearing. In an appeal stricto sensu the question is whether, upon the material before the tribunal below, the conclusion which was reached was correct. An appeal by way of rehearing involves the rehearing of the matter as at the date of the appeal, but upon the evidence called before the tribunal below, subject to a power to receive further evidence. On an appeal by way of rehearing the rights of the parties must be determined by reference to the circumstances, including the law, as they exist at the time of the rehearing. But an appeal by way of rehearing does not call for a fresh hearing as does a hearing de novo; the appeal court does not hear the witnesses again: see Builders Licensing Board v Sperway Constructions (Syd) Pty Ltd (1976) 135 CLR 616 at pp 619-620; Quilter v Mapleson (1882) 9 QBD 672, at p 676; and Victorian Stevedoring and General Contracting Co Pty Ltd and Meakes v Dignan (1931) 46 CLR 73 at pp 107-111.”

39.  Thus, an appeal de novo has the following characteristics:

(a)  The appeal is not a review of the decision below but a hearing of the matter afresh.

(b)  The appeal is to be determined by reference to the circumstances that exist at the time of the appeal, including any changes in the law since the hearing below.

(c)  The appeal court forms its own judgment on the merits of the matter independent of any findings or determination of the tribunal below and, in that regard, may hear witnesses and accept new evidence.

40.  According to section 57:

(a)  The District Court is tasked with adjudicating on the same subject matter that has been decided by the Objections Board, namely, whether the levy or surcharge in question should be confirmed, cancelled or reduced.

(b)  The court is given wide and unfettered discretion to decide on the merits. There is nothing to confine the court’s consideration to the circumstances before the Objections Board. And the court is not bound by the findings or determination of the Objections Board.

(c)  As elaborated below, (i) the parties are free to submit evidence and arguments during the appeal process, including those not having been considered by the Objections Board and (ii) the court has power to receive oral evidence.

41.  In this appeal:

(a)  KONE has recast its objections to the assessment. Its counsel go beyond fault-finding and argue for cancellation or reduction of the levy on the merits. CIC has likewise argued on the merits for confirmation of the levy. Thus, both parties have in fact proceeded on the basis that this is a hearing de novo.

(b)  Apart from the papers that had been considered by the Objections Board including the report of KONE’s expert Mr Chan Kwok Keung (“Mr Chan”) and the statement of KONE’s witness Mr Wong Wai Keung (“Mr Wong”), the parties have put new materials before this court in terms of one affirmation in support of the appeal by KONE, two affirmations in opposition by CIC and two affirmations in reply by KONE.

(c)  The appeal was commenced by means of a Notice of Motion. No issue is taken on this mode of commencement.[4] Whilst no rules have been made under section 58, the Rules of the District Court, Cap 336H (“the RDC”) which are generally applicable in the District Court apply to these proceedings: see Order 1, rule 2 of the RDC.

(d)  In terms of the originating motion procedure, the court has power to direct a hearing with witnesses or oral evidence: see Hong Kong Civil Procedure 2023, para 8/5/15.[5] As recorded in the order dated 16 January 2023 herein, both parties have agreed to set this appeal down for argument without oral evidence or cross-examination of the deponents.

(e)  Whether or not the Objections Board is shown to have been in error, this court will have to perform its statutory function and determine whether the assessment should be confirmed, cancelled or reduced based on the evidence and arguments submitted by the parties.

42.  Thus, an appeal under section 57 including this appeal bears all the characteristics of and is a de novo hearing.

43.  My decision to go down the statutory construction route has implications for KONE in two respects.

44.  First, KONE has spent considerable effort in developing its Unfairness Complaint. To recapitulate its argument:

(a)  The process of objection under sections 54 to 56 necessarily engages BOR10 ^[6] which is the same as the standard of fair hearing by an independent and impartial tribunal under common law.

(b)  The process infringes BOR10 and the common law standard both systemically and individually.

(c)  Consequently, this court must hear the appeal de novo in order to purge the unfairness at the level of the Objections Board and to correct any unfairness suffered by KONE.

45.  The individual allegations of KONE are summarized below:

(a)  lack of guarantee of public and/or oral hearings;

(b)  lack of opportunity to make worthwhile or effective representation, including lack of any pre-decision reasons in that KONE is not informed of (i) the legal advice or comments received by CIC on whether there could be an estimated assessment under section 40 and on the interpretation of Schedule 1 pertaining to the statutory meaning of “construction operations”, and (ii) why CIC rejected Mr Chan’s expert evidence and Mr Wong’s evidence;

(c)  apparent bias in that (i) there is no structural independence between CIC and the Objections Board giving rise to conflict of interest that CIC is both the enforcer and the adjudicator, (ii) Levy Guide No 2 which governs the objection process was promulgated by CIC as opposed to the Objections Board, (iii) it is CIC who informs the objector of the decision of the Objections Board under section 56(3), (iv) instead of referring KONE’s objection to the Objections Board for determination, CIC had intervened in the decision-making process by purportedly “checking the accuracy” of the notice of objection, “considering the grounds put forward” and speaking for the Objections Board in correspondence, and (v) CIC drafted and/or prepared the Decision for the Objections Board; and

(d)  lack of provision for reasoned decision in that (i) there is no statutory duty on the Objections Board to give reasons, and (ii) the Decision was “wholly inadequate and unintelligible”.

46.  Initially, KONE insisted on a ruling on the Unfairness Complaint. It argued that a finding of unfairness alone would lead to cancellation of the levy and it would then be for CIC to “do it again properly without treating the appellant unfairly.” CIC objected on the ground that any procedural unfairness would be “cured” by the statutory appeal process.

47.  The Court of Appeal discussed the curative principle in Wong Tak Wai v Commissioner of Correctional Services [2010] 4 HKLRD 409 (omitting the footnotes):

“67. Simply stated, this principle means that decisions which do not comply fully with procedural fairness requirements can be cured, if the person affected has recourse to a further hearing or appeal which itself provides fairness. It is well established in the case law of the European Court of Human Rights that the requirements of article 6(1) of the ECHR are satisfied if either the initial decision-making body is independent and impartial, or it is subject to subsequent control by a judicial body that has full jurisdiction and does provide the guarantees of article 6.

68. The expression ‘full jurisdiction’ does not mean full decision-making power. It means ‘full jurisdiction to deal with the case as the nature of the decision requires’. In Lam Siu Po v Commissioner of Police, Ribeiro PJ said this about a ‘court of full jurisdiction’ in viewing the entire determination process in assessing compliance with article 10 of the HKBOR:

‘A court of full jurisdiction may deal with the case in the manner required in at least two different ways. It may do so by supplying one or more of the protections mandated by Article 10 which were missing below, for instance, by assuming the role of the necessary independent tribunal or by giving the individual concerned the needed public hearing. Or it may do so by exercising its supervisory jurisdiction so as to correct or quash some non-compliant aspect of the determination by the authority or tribunal concerned, for instance, where there has been a want of impartiality or some unfairness in the original process. If in assuming such a role, the court is armed with full jurisdiction to deal with the case as the nature of the challenged decision requires, there is compliance with Article 10’s requirements.’

69. The common law has developed a similar doctrine in that the courts have declined to intervene on grounds of procedural unfairness where the impugned decision is subject to correction by a procedure which has proper procedural safeguards. This approach is based in large part on an assessment if, in all the circumstances of the original hearing and subsequent appeal, the procedure as a whole would satisfy the requirements of fairness. ‘Of particular importance are (a) the gravity of the error committed at first instance, (b) the likelihood that the prejudicial effects of the error may also have permeated the rehearing, (c) the seriousness of the consequences for the individual, (d) the width of the powers of the appellate body and (e) whether the appellate decision is reached only on the basis of the material before the original tribunal or by way of fresh hearing, or rehearing de novo’. I do not propose to deal with the common law position separately, as there is no substantial difference with the approach in the case law discussed below in assessing the compatibility of the composite procedure with article 10 of the HKBOR.”

48.  KONE does not dispute the applicability of the curative principle, which it calls “the Tehrani principle” in its submissions by reference to the English cases of Tehrani v United Kingdom Central Council for Nursing, Midwifery and Health Visiting [2001] IRLR 208 and Lloyd v McMahon [1987] AC 625.

49.  Given the independent and wide jurisdiction of the District Court as discussed above, there is no suggestion (and certainly not from KONE) that the scope of appeal is limited. The proceedings before the Objections Board is subject to subsequent control of the District Court which provides the BOR10 and common law guarantees. Assuming without deciding that the Decision is vitiated by unfairness, such defect would be fully cured by this appeal process.

50.  As I said at the hearing, this would be a de novo appeal even without any complaint of unfairness in the proceedings below. As CIC has not really engaged in argument, this would not be the right occasion to deliberate on KONE’s argument and individual allegations in detail. Eventually, KONE agrees there is no need to make any findings on the Unfairness Complaint.

51.  Secondly, the discussion on Issue 1 has spun off an argument over burden of proof. In the end, KONE is still concerned that “[t]o impose a burden (or more precisely a legal burden) on the appellant to demonstrate that the Assessment per the Payment Notice is unlawful and/or excessive would be tantamount to reviving the systemic unfairness below...”.

52.  As CIC is seeking to confirm the levy in this appeal, there can be no dispute that it bears the burden of justifying the assessment. Unlike a section 37 assessment which is based on the information provided on the statutory notice, CIC has to (a) identify the construction operations concerned, (b) confirm that such construction operations has completed and (c) justify its calculation. There must be proper evidential basis for all these.

53.  The Payment Notice identified the Subject Contract as the construction operations concerned and gave the following particulars of the assessment:

	Amount (HK$)
Cumulative value of Construction works / operations	95,233,592.00
Less: Retention money	0.00
Cumulative net assessable value of Construction works / operations	95,233,592.00
*Levy thereon at 0.53%	504,738.00
Less: Levy previously Imposed	0.00
Levy Payable	504,738.00
*0.03% of the levy is collected in accordance with the Construction Workers Registration Ordinance.

54.  According to CIC’s counsel:

(a)  MTRC was paying for a set of works which had, as a practical reality and as a matter of commercial common sense, been “completed”.

(b)  The valuation in the MTRC Certificate was arrived at by reference to the underlying contract between KONE and the MTRC and therefore consistent with the rules of valuation of “construction operations” in Part 6 (specifically, section 52(1)(a)(ii)).

55.  CIC’s submissions, together with KONE’s counter- submissions, will be considered below with reference to the evidence. This is not one of those exceptional cases where the tribunal of fact cannot reasonably make a finding one way or the other and has to dispose of the case by reference to burden of proof: see para 6-07 of Phipson on Evidence, 20^th edition (2022).

56.  Similar argument over burden of proof was raised in Blendoran Limited v Appeal Tribunal (Buildings), unreported, CACV 196/2016, 20 October 2017. There, Blendoran was served with a demolition order in respect of unauthorized building works found on its premises. Blendoran appealed to the Appeal Tribunal (“the Tribunal”) but the appeal was dismissed. Blendoran then applied to the Court of First Instance (“the CFI”) for judicial review. One of the main arguments taken before the CFI was that “[t]he Tribunal had wrongly placed the legal burden of proof on the applicant to establish that the Structures were unauthorized on a balance of probabilities (‘the burden of proof issue’).” (para 11(1)). That argument was rejected and Blendoran further appealed to the Court of Appeal.

57.  On the burden of proof issue, the Court of Appeal said:

“15. It is common ground that the legal burden of proof was on the BA [ie the Building Authority] to establish that the Structures were unauthorized before it could issue a demolition order. Ms Eu [for the applicant/appellant] repeated her argument before the judge that the Tribunal had wrongly placed the legal burden on the applicant instead, to establish that the Structures were authorized.

…

18. The contention about the burden of proof must be put in context. I agree with Mr Yu [for the interested party/respondent] that … the findings of the Tribunal were not based on who had the burden of proof. The judge had noted in §42 of the Judgment [of the CFI] that the Determination [of the Tribunal] was arrived at on the evidence and not on the burden of proof. That the BA would have to establish that the Structures were not authorized does not mean inferences may not properly be drawn by the Tribunal in support of BA’s case, albeit a negative case, and it was far removed from a situation that there was no evidence either way. As stated by Tang PJ in Lui Fai Yang v Chui Kin Man (2012) 15 HKCFAR 803 at §16, what is a proper inference to draw depends on the circumstances of the particular case, and not on who has the burden of proof…

19. … To focus on the burden of proof issue without paying any or any sufficient regard to the factual findings and the cogency of the evidence to support those findings is to look at the matter back to front…

20. In any event, the judge was correct in holding in §24 of the Judgment that the Tribunal was referring to the evidential burden and not the legal burden in §38 of the Determination…

21. The contention that the applicant is entitled to remain silent and put the BA to proof ignores the Tribunal’s finding in §37 that the evidence effectively points all one way and is sufficient to demonstrate in itself that there are significant unauthorized building works in the Property…”

58.  In the present case, CIC’s assessment is based on the information contained in the MTRC Certificate. Whether that is sufficient for the purpose of the levy will be considered below but it is important to appreciate that the determination will be based on evidence.

59.  In the course of argument, KONE took exception to CIC’s submissions that KONE also bore a burden in disputing the assessment. According to KONE’s counsel, “the imposition of a burden (whether to adduce evidence or otherwise: See eg CIC’s submissions §§15, 26, 36 and 59) on the Appellant to show that the Respondent and/or the [Objections] Board erred is fundamentally at odd with the nature of an appeal de novo, and wrong.”

60.  I believe CIC was referring to an “evidential burden” in its submissions, which obliges the party on whom the burden rests to adduce sufficient evidence for the issue to go before the tribunal of fact. Where a party has an evidential burden, it may be satisfied either by adducing evidence himself or by eliciting evidence from his adversary.[7] In the context of this appeal, it behooves KONE to provide the evidential basis of its objections. This is not a legal burden as KONE has feared.

G.  Issue 2: Whether CIC has power to issue the Payment Notice under section 40(1)?

61.  There are two limbs to KONE’s argument:

(a)  There is no power or jurisdiction for CIC to make any “estimated assessment” under section 40(1).

(b)  In any event, there is no “completion” without which CIC could not have made any assessment under section 40(1).

G1.  No “estimated assessment”?

62.  On (a), CIC is criticized for “fail[ing] to grapple with their statutory task under s 40 of the Ordinance”. KONE contrasts section 37 with section 40(1) and argues that CIC is only empowered to make “provisional assessment” under the former but not “estimated assessment” under the latter by reason of the expressio unius principle. It is said that CIC should have “[asked] the correct question and [taken] reasonable steps to acquaint sufficient information to answer the question” instead of “blindly adopting the figure used in [the MTRC Certificate]” in coming up with an “estimated” assessment. Whereas notice of payment in respect of an interim or partial payment is expressly mentioned in section 37(3), the legislature has not adopted such method of assessment for section 40. There is also no power to correct any “over-estimation” under section 40, as section 40(2) only provides for “additional assessment”.

63.  In response, CIC argues that KONE’s objection is semantic at best. The point of substance, according to CIC’s counsel, is that section 40(1) is applicable when no statutory notice is submitted and CIC can only assess the value of the completed construction operations based on the best-known information available to it such as the MTRC Certificate in this case. Hence, the assessment was called “Estimated Assessment under S40(1)” on the Payment Notice.

64.  In my view, the fact that “provisional assessment” is mentioned in section 37 does not exclude the possibility of CIC making similar assessment under section 40.

65.  According to Bennion, Bailey and Norbury on Statutory Interpretation, 8^th edition (2022):

(a)  The expressio unius principle primarily means “[w]here an Act mentions one or more things, by implication it excludes other things of the same kind.” (at 23.12(1))

(b)  “It applies in particular where a general formula is accompanied by words of extension or exception naming only some members of that class. The remaining members of the class are taken to be excluded from these words. There is no room for the application of this principle where some reason other than the intention to exclude certain things exists for mentioning some but not others…”. (at 23.12(3) & (4))

66.  Section 37 is in these terms:

“37. Assessment pursuant to notice of payment or notice of completion

(1) On receiving a notice of payment, the Council shall assess the amount of the levy payable in respect of the construction operations or the stage or part of the construction operations to which the notice relates.

(2) If no assessment has been made under subsection (1), on receiving a notice of completion, the Council shall assess the amount of the levy payable in respect of the construction operations or the stage of the construction operations to which the notice of completion relates.

(3) If the notice of payment is given in respect of an interim payment or partial payment, subject to subsection (4)—

(a) the assessment shall be a provisional assessment; and

(b) a final assessment shall be made on the final payment for the construction operations.

(4) If an assessment made under this section is in respect of a stage or part of any construction operations, or in respect of any construction operations, which constitute a stage or part of any other construction operations—

(a) the assessment shall be a provisional assessment; and

(b) a final assessment shall be made on the completion of those other construction operations.”

67.  CIC may make a “provisional assessment” under section 37 in two situations: (a) if the notice of payment received relates to an interim or partial payment;[8] and (b) the assessment is in respect of a stage or part of a construction operations. The purpose of making a “provisional” assessment is to facilitate “final” assessment to be made later when final payment is received (as confirmed by a subsequent notice of payment) or when the remaining stage(s) or part(s) is/are completed (as confirmed by a subsequent notice of completion). Thus, a section 37 assessment is premised on the information contained in statutory notices received by CIC.

68.  On the other hand, section 40 provides that:

“40. Powers of Council to make assessment

(1) The Council may, subject to sections 42 and 44, assess the amount of the levy payable in respect of any construction operations or any stage or part of any construction operations, after the completion of the construction operations or the stage or part of the construction operations, notwithstanding that neither a notice of payment nor a notice of completion has been given to the Council.

(2) If it appears to the Council that any assessment of levy made by it is less than the proper amount, subject to sections 42 and 44, the Council may make an additional assessment of the levy.”

69.  Thus, CIC is empowered to make an assessment under section 40(1) when no statutory notice is received and no information is volunteered by the contractor. Whereas “provisional assessment” and “final assessment” are used in section 37, no name is given to section 40(1) assessments.

70.  In my view, whether one calls a section 40(1) assessment “estimated assessment” or by some other names is neither here nor there as CIC is clearly empowered by the legislation to make an assessment in such a situation. As section 37 and section 40 deal with different scenarios, the fact that “provisional assessment” is mentioned in the former does not proscribe CIC from making similar assessment under the latter provision if the circumstances call for the exercise of such power. There is no room for the application of the expressio unius principle.

71.  Hence, where it has come to the attention of CIC that a certain contractor has received payment in respect of a construction operations or a stage or a part thereof that has completed but not filed any statutory notice, it may invoke section 40(1) to make an assessment based on the available information subject to the time limits set out in sections 42 and 44. As submitted by its counsel, CIC may later make “additional assessment” (under section 40(2)) or refund any overcharged amount (under section 49(1))[9] if necessary when further information comes to light.

72.  There is no merit in the complaint that CIC had failed to ask the correct question or taken the necessary steps in making the assessment in this case. Prior to invoking section 40(1), CIC had invited KONE for submission of statutory notices in respect of the Subject Contract but to no avail. CIC therefore turned to other related parties (such as the MTRC as the project employer of the Subject Contract) for information under section 59. That was how it got hold of the MTRC Certificate based on which the assessment was made.[10]

73.  In oral closing submissions, KONE further criticized CIC for not having investigated further, for example, by demanding sight of the Subject Contract to find out the meaning of “Packages A1, A2-2, A3 and B3” in the title of the MTRC Certificate. But it is already clear from the statement attached to the MTRC Certificate what those packages entail.[11] In my view, KONE’s nitpicking approach is without regard to the information already available and against the interpretive purpose that the statutory scheme should be efficient and cost-effective.

74.  The MTRC Certificate contains information such as the underlying contract, the construction operations or the stage/part thereof concerned, the fact that it is an “Interim Payment Certificate”, and the “Net Valuation” involved. Insofar as KONE is disputing any such information, it is for it to say so with justification. As said before, this is not a “legal burden” to demonstrate the unlawfulness of the Payment Notice but an “evidential burden” to adduce sufficient evidence for its objection to be evaluated.

75.  In my view, CIC is entitled to act on the information contained in the MTRC Certificate. Whether that is sufficient to enable it to make the assessment per the Payment Notice is a different matter. All in all, I reject KONE’s contention that CIC has no power to make an “estimated assessment” under section 40(1).

G2.  No “completion”?

76.  Turning to (b), KONE principally relies on Mr Chan’s expert evidence in arguing that “[p]lainly, the assessment of works cannot be ‘time-based’ under s 40 according to its text”.

77.  CIC’s response is that KONE was paid for a set of works or operations which had, as practical reality and as a matter of commercial common sense, been “completed”. Such works or operations were either “stages” or “parts” of the long-term construction operations to be carried out by KONE under the Subject Contract. Its counsel submit that Mr Chan’s evidence should be “accorded nil weight” as it is “contrary to law”.

78.  Section 40(1) specifically empowers CIC to “assess the amount of the levy payable in respect of … any stage or part of any construction operations”. KONE gives two reasons why section 40(1) is inapplicable here. Its contention that maintenance of lifts and escalators fall outside the scope of “construction operations” will be dealt with under Issue 3 below. It also contends that “stage” and “part” used in section 40(1) are technical terms and according to its expert (Mr Chan), “[i]t is therefore very clear that section 40 which adopts the phrase ‘the stage or part of the construction operation’ and more importantly, the ‘completion’ of ‘the stage or part of the construction operation’, has no application to the periodical maintenance fee for lift and escalators.”[12]

79.  Mr Chan is an engineer by profession and his expert report is at pp 158-160 of Bundle B. The main thrust of his evidence is that:

(a)  For construction works such as new build and addition & alteration works (“A&A Works”), (i) the work content is broken down by professionals (typically Quantity Surveyors) into work items with measurements (in terms of number, weight, area or volume) in a document known as Bills of Quantities (para 7); (ii) given the huge sum of expenses and long production cycle involved, it is common practice for the client to make interim payments to the contractor by means of stage payments or progress payments (para 8); (iii) both stage payments and progress payments are dependent on completion of the works identified in the Bills of Quantities as certified by an independent professional Quantity Surveyor (para 9(a) & (b)); and (iv) interim payments are provisional and subject to final measurement to be conducted when the project is practically completed and final accounts can be prepared (para 9(c)).

(b)  On the other hand, “[p]roperty owners are required to engage the service of a registered contractor (‘RC’) to provide periodic maintenance work to lifts and escalators.” (para 12)

(c)  “Corresponding to the statutory obligation to perform periodic maintenance on a monthly basis (at minimum), the interim payment made to RC is usually an agreed monthly fee, which did not involve consideration of the amount of work done nor engagement of any independent professional (Quantity Surveyor, Architect etc) to perform valuation of any ‘stage or part of the construction operation’ or to certify the payment as representing the value of ‘stage or part’ of the construction work done…”. (para 16)

(d)  As “… contracts for periodic maintenance of lifts and escalators are not quantified by using Bills of Quantities with identified and itemized works to be performed by the RCs[,] [m]aintenance works of lifts and escalators are simply not ‘stage’ sensitive, nor ‘part’ sensitive as commonly understood in the construction industry.” (para 15)

80.  As a general rule, “[q]uestions of construction, whether of domestic or foreign documents, being matters of law and not of fact, belong exclusively to the court, and the opinions of experts thereon are inadmissible, eg the construction of, or meaning of particular terms in a modern statute…”: see para 33-107 of Phipson (above).

81.  Whilst “[e]vidence may be given of the meaning of words used in a technical sense, … [i]t is for the court to determine whether a term was intended in a technical sense [and] evidence is admissible to establish whether a term has a technical meaning as well as to determine what that technical meaning is”: see p 671 of Bennion (above).

82.  It is said that the evidence of Mr Chan has established a special technical meaning for the words “stage” and “part” in the present instance and that I should give effect to such meaning. But I do not think that a technical meaning has been proved. Whilst it is his evidence that “[t]he practice of interim payments (be it stage payment or progress payment) by going through the ‘valuation process’ with [the] involvement of professional (Quantity Surveyor, Architect, etc) is well recognized and commonly adopted in the construction industry”[13] for construction works such as new build and A&A Works, he also says that “unlike new build and A&A Works which have defined stages or parts to be completed by reference to the Bills of Quantities, maintenance works of lifts and escalators are out-come based: the responsibility of the contractor, amongst others, is to ensure that the works are carried out ‘to render the lift or escalator in a proper state of repair and in safe working order’. This goes beyond merely performing physical works, but is in fact a continuing duty during the period of engagement to properly and safely carry out the works in full compliance with the laws including the requirements prescribed in the code.”[14] Thus, it is his evidence that maintenance of lifts and escalators are by nature different from construction works in new build and A&A Works. I do not think he may legitimately employ the experience in new build and A&A Works to rule out other means of dividing operations of a different nature (such as maintenance of lifts and escalators) into stages or parts.

83.  In the present case,

(a)  It is stated on the MTRC Certificate that the payment was in respect of “work executed or as required under the terms and conditions of this Contract during the period ending 31 October 2021…”.

(b)  KONE has confirmed that it was “… engaged to perform periodic maintenance on a monthly basis and is paid a monthly fee through effluxion of time.”[15]

(c)  Its counsel also said that “the contract in question was a time-based one.”

Thus, CIC is correct in saying that the MTRC Certificate is evidence of payment for the work performed by KONE (periodic maintenance) under a long-term contract (the Subject Contract) in accordance with the terms of the underlying contract (monthly, up to the end of October 2021).

84.  Whilst there may not be any Bills of Quantities in this case, the work covered by the Subject Contract is clearly broken down with reference to time periods. As evidenced by the MTRC Certificate and confirmed by KONE, monthly payments are in fact made through effluxion of time.

85.  According to the Oxford Shorter English Dictionary, the word “stage” means “division of a journey or process” and the word “part” means “portion or division of a whole”. I do not see why the terms used in the context of section 40(1) cannot bear their ordinary dictionary meanings and refer to divisions of a whole. In my view, section 40(1) is applicable here with reference to the monthly stages/parts that KONE performed its work under the Subject Contract.

86.  As KONE has refused to adduce the Subject Contract in evidence, it is not known if there was any mechanism involving professionals to validate the work done by KONE under the Subject Contract. But I do not think that matters as it is KONE’s evidence that “if part of the tasks designated to be carried out during a particular month was not in fact carried out due to technical or emergency or other reasons, such work would not be considered as ‘completed’ for that month, and yet KONE would still receive monthly maintenance fee in full.”[16] In other words, completion is judged solely by effluxion of time according to the terms of the Subject Contract.

87.  Lastly, KONE rides on the requirement of section 66 for the appointment of an authorized person in respect of any construction operations and submits that “if there is no AP, there would be no commencement and no completion (whether as a whole or as ‘stage or part’), both are necessary to trigger the application for s 40. Both are absent. Thus, [CIC] plainly acted unlawfully in issuing the Payment Notice in question.”

88.  KONE’s submissions, which amount to fiat accompli, must be rejected. As submitted by CIC, “[t]aken to its end, [KONE]’s contention is that it will always be possible to evade a levy assessment by ensuring that no ‘authorized person’ is appointed under s 66. Such a contention is absurd.” The fact that no authorized person is appointed and no notice of commencement or completion is given is no proof that there was in fact no construction operations or no completion.[17] Rather, failure to appoint an authorized person is an offence which attracts a fine (section 66(4)). Similarly, those who fail to give a notice of commencement or a notice of completion without reasonable excuse commits an offence (sections 34(5) and 36(6)) and CIC may impose a surcharge in the latter case (section 41(1)).

89.  For all these reasons, I reject KONE’s contention that section 40(1) is inapplicable or that there was no completion in this case.

H.  Issue 3: Whether the operations covered by the Payment Notice amount to “construction operations” for the purposes of the Ordinance?

90.  The term “construction operations” is specifically defined in Schedule 1 to mean:[18]

“1. In this Ordinance, construction operations means operations of any of the following descriptions —

(a) building works as defined in section 2(1) of the Buildings Ordinance (Cap 123);

(b) street works as defined in section 2(1) of the Buildings Ordinance (Cap 123);

(c) construction, alteration, repair, maintenance, extension, demolition or dismantling of —

(i) any buildings, or other temporary or permanent structures forming, or to form, part of land;

(ii) any works forming, or to form, part of land;

(iii) any industrial plant or any industrial installations for the purposes of land drainage, coast protection, water supply or defence; or

(iv) any power-lines, telecommunications apparatus or pipelines,

including walls, pylons, aircraft runways, docks and harbours, railways, inland waterways, reservoirs, water-mains, wells and sewers;

(d) supply and installation of fittings or equipment in any buildings, or other structures forming part of land, including systems of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, refuse collection, water supply, fire protection, security or communications, lift or escalator and other extra low voltage works;

(e) external or internal cleaning of any buildings, or other temporary or permanent structures forming part of land, to the extent that it is carried out in the course of construction, alteration, repair, maintenance, extension or restoration of such buildings or structures;

(f) painting or decorating any external or internal surfaces or parts of any buildings, or other temporary or permanent structures forming part of land;

(g) operations which form an integral part of, or are preparatory to, or are for rendering complete, any of the operations described in paragraphs (a), (b), (c), (d), (e) and (f), including site clearance and investigation, earthmoving, excavation, tunnelling and boring, laying of foundations, erection, maintenance or dismantling of scaffolding, site restoration, landscaping and the provision of roadways and other access works.”

91.  There is no dispute that supply and installation of electrical and mechanical works (“E&M works”) such as lifts or escalators in any buildings or structures forming part of land come within section 1(d).

92.  CIC takes the view that “E&M works, once installed, should form part of the buildings, structures or lands and therefore come within the scope of ‘construction operations’ as repair and maintenance of ‘any buildings, or structures’ forming part of the land” under section 1(c)(i).[19]

93.  On the other hand, KONE argues that “‘construction operations’ under the Ordinance does not include the works (or at least part thereof) purported to be levied under the Payment Notice, viz repair and maintenance services for lifts and escalators under the [MTRC Certificate].” “‘[L]ift & escalator’ was carefully added to only a circumscribed situation, ie supply and installation. The Legislature had been careful not to extend coverage to ‘repair and maintenance’ of lifts and escalators, and such had been carried to the Ordinance in the present time.”

94.  The argument turns on the legislative history and interpretation of sections 1(c)(i) and 1(d) of Schedule 1.

H1.  The legislative history

95.  Both parties refer to the legislative history of the Ordinance in argument.

96.  Prior to June 2004, the repealed Cap 317 imposed a levy on the value of all “construction works” undertaken in Hong Kong (section 21 thereof) and the definition specifically excluded inter alia:

“the installation, repair and maintenance of any –

(i) air conditioning plant;

(ii) electricity supply system, including the wiring, appliances and fittings;

(iii) lift, escalator or belt conveyor system;

(iv) fire services installation or equipment;” (section 2(3)(a) thereof)

97.  In July 2002, the Government announced that:[20]

“4. … When [the repealed Cap 317] was first drafted in 1975, consideration was given to including E&M works within its scope as well. However, as the scale of E&M works then was relatively small and the technical institutes (ie Vocational Training Council’s predecessor) and the industry itself were providing adequate training, the E&M industry objected to the proposal and E&M works were subsequently excluded from the scope of ‘construction works’.

…

7. In response to the industry’s recommendation, the Education and Manpower Bureau (EMB) agreed to take forward a proposal to extend the existing construction industry levy to cover E&M works in the construction industry so that the income so derived could be used to provide expanded training courses and trade tests for E&M workers. The purpose is to enhance the quality, industrial safety, and productivity of E&M workers…”

98.  When the Construction Industry Levy (Miscellaneous Amendments) Bill 2003 was introduced into LegCo, the LegCo Brief accompanying the Bill carried this elaboration on the legislative intention:

“5. To extend the coverage of the levy, we propose to replace the current definition of ‘construction works’ under [the repeals Cap 317], which specifically excludes E&M works, with a new definition of ‘construction operations’, which will encompass E&M works…

…

7. The additional levy collected from E&M works in the construction industry would be used by the CITA to expand the scope of construction industry related E&M training courses and to cover the costs of the corresponding trade tests…”

99.  The above intention was repeated by the Secretary for Education and Manpower on 11 February 2004 at the Second Reading of the Bill:

“Madam President, let me repeat here the primary objective of the Bill which seeks to amend the Industrial Training (Construction Industry) Ordinance and the Pneumoconiosis (Compensation) Ordinance, so as to extend the levy imposed on the construction industry to cover E&M works in the construction industry. The additional levy collected from E&M works would be used by the Construction Industry Training Authority (CITA) to expand the scope of construction industry related E&M training courses and trade tests presently not offered by the CITA.”

100.  The definition of “construction operations” that was adopted in the 2003/2004 amendment is, for all intent and purposes, the same as the current definition.

101.  What is to be noted from the legislative history is that:

(a)  Previously, all aspects of E&M works including the installation, repair and maintenance of lifts and escalators were specifically excluded from the scope of the levy.

(b)  The professed intention of the 2003/2004 amendment was to bring all aspects of E&M works into the scope of the levy.

(c)  There was nothing to indicate an intention to bring into the scope of the levy only part of E&M works such as the supply and installation but not the repair and maintenance of lifts and escalators.

H2.  Interpretation

102.  KONE submits that:

(a)  “[T]he acts listed out by the provisions, such as ‘construction, alteration, repair, maintenance, extension, demolition or dismantling’, which clearly relates to building works as opposed to ‘supply and installations’ which clearly relates to equipment. In terms of ‘E&M works’, it is clearly more appropriate to use ‘supply and installation’ under §1(d).”

(b)  “[T]he specific fact that there is no enumeration of ‘lift and escalator’ under §1(c), which is, by contrast, specifically provided for under §1(d).”

(c)  “[T]he important context is that ‘construction operations’ is not ‘inclusively’ defined but rather ‘exhaustively’ defined under s 2 and Sch 1 of the Ordinance, which is a clear manifestation of the principle that a subject is only to be taxed upon clear words, not upon ‘intendment’ or upon the ‘equity’ of an act. The Court should not read further into §1(c).”

(d)  “Any perceived incongruence (which there is not) between §1(c) and §1(d) can be resolved by the maxim of generalibus specialia derogant (special provisions override general ones) … [T]he general words in s 1(c)(i) should defer to s 1(d) given that ‘lift and escalator’ is specifically provided for thereunder, and there is no other factor to override this presumptive maxim…”

103.  The maxim invoked by KONE is a principle of construction that, in the absence of any contrary intention, the general gives way to the specific. It does not apply where, instead of a specific provision and a more general provision, they are simply provisions with overlapping aims and applications.[21] I agree with CIC’s counsel that “§1(c) and §1(d) are capable of overlapping applications” and the maxim has no application. I do not read section 1(c) as subject to section 1(d) as KONE’s counsel would have it. In my view, each subsection represents a different facet of the definition and together they bring out its full scope. That should be apparent from the words “any of the following descriptions” in the preamble which requires the subsections to be read disjunctively. The fact that “lift or escalator” is mentioned in section 1(d) as an example of “fittings or equipment” the supply and installation of which is caught by the definition is no indication that other operations pertaining to lifts and escalators may not fall within other limbs of the definition. Indeed, KONE’s interpretation will lead to an odd conclusion that the supply and installation of lifts and escalators are caught by the definition but not their subsequent alteration or dismantling which is clearly E&M works. According to the stated intention of the 2003/2004 amendment, all aspects of E&M works should be covered.

104.  A similar issue arose in the English case of Nottingham Community Housing Association Ltd v Powerminster Ltd (2000) 75 ConLR 65. The provision in question in that case was section 105 of the Housing Grants, Construction and Registration Act 1996 which bears close resemblance to our Hong Kong definition:

“105. (1) In this Part ‘construction operations’ means, subject as follows, operations of any of the following descriptions – (a) construction, alteration, repair, maintenance, extension, demolition or dismantling of buildings, or structures forming, or to form, part of the land (whether permanent or not); … (c) installation in any building or structure of fittings forming part of the land, including (without prejudice to the foregoing) systems of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection, or security or communications systems…”.

105.  By a contract between the parties, Powerminster agreed to provide service and repairs for the gas appliances (including gas central heating) installed in Nottingham’s properties. The issue before the court was whether the work to be carried out under the contract constituted “construction operations” within the meaning of section 105 of the Act.

106.  Dyson J ruled that “the maintenance and repair of heating systems etc which have been installed in a building are operations within para (a).” (at para 15) The learned judge reasoned (at para 14) that:

“… there is no warrant in para (a) for distinguishing between different types of operations carried out in relation to a building or structure. Take the construction of a building. Paragraph (a) applies as much to the installation of a demountable wall partition as it does to the installation of a central heating, air-conditioning, sanitation system or any other of the fittings mentioned in para (c). There is no distinction in property law: once installed, they all become part of the land…”

“There is no justification for distinguishing between the repair and maintenance of the roof or cladding panels of a building and the repair and maintenance of the various systems described in para (c). They are all part of a building. It is not a misuse of language to say that the maintenance of a building includes the maintenance of the various items mentioned in para (c). It is worth emphasizing the scope of those items. They include not only heating and air-conditioning systems, but also lighting, power supply, drainage, sanitation and water supply. These are all vital parts of a building, whose proper functioning is required if a building is to be fit for habitation.”

107.  Like Dyson J, I do not see why, as a matter of statutory construction, section 1(c)(i) of Schedule 1 cannot apply to E&M works such as repair and maintenance of lifts and escalators. Once installed, the lift or escalator should form part of the building and therefore its repair and maintenance should come within the scope of “construction operations”. There is, in my view, no conceivable or logical reason for KONE’s dichotomy that E&M works is “more appropriate” for section 1(d).

108.  CIC’s counsel have in fact argued that “the subject lifts and escalators are structures forming part of the land within the meaning of [section 1(c)(i) of Schedule 1], and so their maintenance and repair are clearly ‘construction operations’” (my emphasis). They addressed me on the meaning of “structure” and “forming, or to form, part of land” with reference to the English case of Savoye v Spicers Ltd [2015] Bus LR 242 at paras 17-19 & 36.[22]

109.  As I understand, CIC’s argument is premised on the fact that KONE has provided no particulars of the lifts and escalators covered by the Subject Contract. It is not known if the lifts and escalators concerned are installed in buildings or not. In the circumstances of this case, even if a particular lift or escalator is not installed in a building, it must be a structure forming part of land in terms of section 1(c)(i) for the following reasons submitted by CIC:

(a)  Lifts and escalators are “structures”, ie things which have been constructed and have a connotation as having “a function of supporting or servicing something else”: see Savoye paras 17-19.

(b)  In terms of degree of annexation, lifts and escalators must be firmly affixed to the floors or a lift shaft and permanently connected to the building or land. They cannot be removed without damage to the building or land and are not intended to be removed frequently: see Savoye paras 36(f), (h), (j) & (k).

(c)  In terms of the purpose of annexation, lifts and escalators are vital parts of the MTR operation and play a key role in catering for its users. They have a relatively permanent role to play in MTR buildings or stations, and KONE’s work was precisely to repair and maintain them for future use: see Savoye para 36(g).

110.  For the above reasons and subject to the discussion on Issue 4 below, I find that the operations covered by the Payment Notice do amount to “construction operations” for the purposes of the Ordinance.

I.  Issue 4: Whether the operations identified by items 1.1.2, 1.2.2 and 1.5 in the statement attached to the MTRC Certificate fall within the definition of “construction operations”?

111.  The argument focused on section 1(g) of Schedule 1: see para 90 above.

112.  Based on Mr Wong’s evidence, KONE argues that “item 1.1.2 (Full Load Test), 1.2.2 (Fully Load Test), and part of 1.5 (Variation Orders) on [the MTRC Certificate] are not ‘integral parts of the maintenance work’ within the meaning of Sch 1 §1(g), thus in any case not falling under ‘construction operations’ and not leviable.”

I1.  Full load test

113.  According to Mr Wong, “[i]tems 1.1.2 and 1.2.2 are the considerations for the full load tests conducted on the lifts located at the subject location. As is clear from the two documents used by our workers when conducting such tests, namely ‘KONE Hong Kong 自動梯 / 乘客輸送機定期安全測試事項’ and ‘KONE Hong Kong Work Instruction: 升降機定期安全測試事項’, it is clear that none of the steps involved repair and maintenance. These two items should not be taken into account in levy assessment. There are now produced and shown to me marked ‘B’ and ‘C’ copies of the two documents.”

114.  There is, however, no elaboration of what “full load test” is in Mr Wong’s evidence and the documents, which are mostly in Chinese, contain no definition. There is only a scant reference to “放置負載進行試驗” in the instructions for “五年度檢查之程序及事項” in para 5.3 of both documents.

115.  As said before, this is the first appeal under the Ordinance and section 1(g) of Schedule 1 has not attracted judicial attention in Hong Kong before.

116.  CIC makes reference to some English authorities on the construction of similar legislation in the UK[23] and submits that the scope of section 1(g) should be interpreted widely.

(a)  In Equitix ESI CHP (Wrexham) Ltd v Bester Generacion UK Ltd, [2018] EWHC 177 (TCC) at paras 30-32, Coulson J commented: “Starting with the preliminary or ancillary works, it is, in my view, wrong in principle to say that preparatory arrangements, such as the preparation of the bonds or a business plan, are excluded operations. Such things are often preparatory steps prior to a major construction contract and therefore caught by s 105(1)(e)… The fact that the preparation of bond or drawings or a business plan are not physical sit works, like the other examples of preparatory works in s 105(1)(e), is nothing to the point. Those are merely examples, as denoted by the word ‘including’: they are not to be taken as exhaustive. The draftsman was there dealing with physical operations because that is what both parts of s 105 focus on. It would make a nonsense of the Act if every preparatory/ancillary operation not expressly identified in s 105(1) became an excluded operation. That would require s 105(1) to list everything that might ever be preparatory or ancillary, making it absurdly long…”

(b)  In Baldwins Industrial Services Plc v Barr Limited [2002] EWHC 2915 (TCC) at para 21, it was held that the hire of a crane and a driver was “… a contract for an operation which formed an integral part of or was preparatory to or was for the rendering complete of work of construction…”.

117.  CIC must be right when it submits that “ensuring that the lifts and escalators were safe would have been part and parcel of repairing and maintaining them. Without ascertaining the fundamental position on safety, how else can the operations of repair and maintenance have been properly conducted?” Presumably, items 1.1.2 and 1.2.2 correspond to the requirement of periodic examination of lifts with load under section 23 of the Lifts and Escalators Ordinance, Cap 618 and the requirement of periodic examination of escalators under section 53 of that ordinance. In my view, these periodic examinations (with or without load) serve to ensure that the lifts and escalators concerned are safe to use and are (i) integral part of their maintenance, (ii) preparatory to any necessary repair and (iii) for rendering complete the operations undertaken by KONE under the Subject Contract.

I2.  Variation orders

118.  Mr Wong also said:

“6. Item 1.5 contains Variation Orders No M1176-18E(K)/VO/001 to 047. I have reviewed all of them and have prepared a table setting out the amounts of considerations in some of those Variation Orders that were not ‘attributable’ to the repair and maintenance of lifts and escalators. There are now produced and shown to me marked ‘D’ copy of the Summary of Variation Orders I prepared, and marked ‘E’ copies of the Variation Orders containing items that are not attributable to repair and maintenance of lifts and escalators.

7. Majority of these items are the considerations in relation to standby services, which are extra services requested by MTR Corporation Limited (“MTR”). Our workers were not commissioned to conduct repair and maintenance of lifts or escalators. Another type of services is the provision of escalator padlock and to provide assistant service for advertisement service, which also has nothing to do with repair and maintenance of lifts or escalators.

8. Another example is the additional service requested by MTR for design, supply and installation of lift photoelectric call buttons in response to the COVID-19 pandemic (see Variation Order No M1176-18E(K)/VO/013 dated 16 July 2020), and supply and replacement of braille plate (see Variation Order No M1176-18E(K)/VO/037 dated 9 July 2021). Such services do not affect the structural part of the lifts, and such simple works do not constitute repair and maintenance of lifts.

9. KONE is advised by its legal advisors and verily believes that the considerations for these items should not be subject to levy under [the Ordinance].”

119.  In the summary marked “D”, Mr Wong identified the variation orders that he said should be “VO not subject to levy”. Out of 47 orders with a total amount of HK$5,359,185.45, he said 27 of them totalling HK$3,368,220.01 should not be subject to levy. He gave only one reason for his contention and that is that those orders were not attributable to the repair and maintenance of lifts and escalators. He purported to elaborate with the examples of (i) “standby services”, (ii) provision of “escalator padlocks”, (iii) provision of “assistant service for advertisement service”, (iv) design, supply and installation of lift photoelectric call buttons in response to the COVID-19 pandemic, and (v) supply and replacement of “braille plate”. It is said that they were extra services requested by the MTRC which did not affect the structural part of the lifts.

120.  As discussed above, the MTRC Certificate is prima facie evidence of the construction operations and its value. It behooves KONE to articulate its objections clearly with the necessary evidence. With respect, Mr Wong’s evidence and the documents marked “E” do not quite measure up to that standard.

121.  First, three variation orders with exceptionally large amounts make up the bulk (about 87%) of the HK$3,368,220.01.

	Description	HKD	VO not subject to levy	Bundle B
VO/033	Installation of photoelectrical call button to ERL, WRL and TML stations	864,000	864,000	122-124
VO/035	Installation of photoelectrical call button to URL and AT&D stations	1,884,000	1,884,000	128-131
VO/045	Trial to step riser of escalator KET-E4 with advertisement panel (Moving Media)	200,340	200,340	150-152

122.  The first two orders issued by the MTRC refer back to the same quotation of KONE dated 2 September 2020 (at p 124 or p 130 of Bundle B). That quotation was for “design, supply and install lift photoelectrical call button at various station” involving 44 sets (with the unit price of HK$3,000) to be performed at “NTH” and the total amount came to HK$132,000. It is not readily apparent and Mr Wong did not care to explain how that quotation translated to the amounts charged under VO/033 and VO/035.[24]

123.  Likewise, VO/045 is purportedly supported by the quotation of KONE dated 26 August 2020 (at p 152 of Bundle B). That quotation was for the “supply, replace and maintenance step with advertisement panel (Moving Media)” with unit rates ranging from HK$12,166.20 per unit to HK$14,310 per unit. It is not readily apparent and Mr Wong did not care to explain how that quotation translated to the amount charged under VO/045.

124.  Without the necessary evidence and elaboration, this court is unable to fully appreciate KONE’s submissions in relation to those variation orders. For present purpose, I shall continue with the discussion with reference to the examples cited by Mr Wong, with VO/033 and VO/035 corresponding to (iv) and VO/045 corresponding to (iii) in para 119 above.

125.  Secondly, Mr Wong did not identify the variation orders involving “standby services”. Doing the best I can, the following orders may be relevant: VO/002, VO/004, VO/005, VO/006, VO/024, VO/026, VO/031, VO/034, VO/038, VO/041 and VO/043.

126.  Take VO/002 as an example: That order is for HK$12,650, out of which Mr Wong claims that HK$11,440 should not be subject to levy. According to the supporting schedule at p 70 of Bundle B, HK$11,440 was charged for (i) 4 hours of 2 persons’ work “to provide support for replacement of lighting for standby service”, (ii) 4 hours of 2 persons’ work “to provide support for replacement of lighting for standby service” and (iii) 3 hours of 2 persons’ work “to provide support for replacement of lighting for standby service”. There is no elaboration as to what exactly was done. But according to the instruction letter dated 12 March 2020 of the MTRC (p 69 of Bundle B), KONE was instructed “to provide non-regular maintenance services” for the period “December 2019 to January 2020” “in accordance with Clause 2.1 of the [Subject Contract]”. Based on the information contained in the instruction letter, maintenance should come under section 1(c)(i) and the related “standby services” would be an integral part of or preparatory to or for rendering complete such maintenance within section 1(g) and chargeable with levy.

127.  I have similarly examined the documents relating to the other variation orders and come to the same conclusion.

128.  Thirdly, Mr Wong did not care to identify the variation orders involving provision of “escalator padlock” or “assistant service for advertisement service”. Doing the best I can, the following orders may be relevant: VO/003, VO/005, VO/008, VO/009, VO/014, VO/016, VO/025, VO/027, VO/029, VO/032, VO/036 and VO/045.

129.  Take VO/003 as an example: That order is for HK$22,110, out of which Mr Wong claims that HK$11,440 should not be subject to levy. According to the supporting schedule at p 73 of Bundle B, HK$11,440 was charged for (i) 4 hours of 2 persons’ work “to padlock for standby service”, (ii) 3.5 hours of 2 persons’ work “to object identification system at escalator comb for standby service” and (iii) 3.5 hours of 2 persons’ work “to object identification system at escalator comb for standby service”. There is no elaboration as to what exactly was done. But according to the instruction letter dated 20 March 2020 of the MTRC (p 72 of Bundle B), KONE was instructed “to provide the non-regular maintenance services” during “December 2019 to January 2020” “in accordance with Clause 2.1 of the [Subject Contract]”. Based on the information contained in the instruction letter, such maintenance should fall within section 1(c)(i) and (g) of Schedule 1 and chargeable with levy.

130.  Take VO/005 as another example: That order is for HK$23,209, out of which Mr Wong claims that HK$21,394 should not be subject to levy. According to the supporting schedule at p 79 of Bundle B, HK$21,394 was charged for (i) 8.5 hours of 2 persons’ work “to crowd control for standby service”, (ii) 7.5 hours of 2 persons’ work “to crowd control for standby service”, (iii) 4 hours of 2 persons’ work “to M1112-15E_PM works for LED Ad Panels”; and (iv) 4 hours of 2 persons’ work “to escalator padlock”. There is no elaboration as to what exactly was done. But according to the instruction letter dated 28 April 2020 of the MTRC (p 78 of Bundle B), KONE was instructed “to provide the non-regular maintenance services” during “December 2019 to March 2020” “in accordance with Clause 2.1 of the [Subject Contract]”. Based on the information contained in the instruction letter, such maintenance should fall within section 1(c)(i) and (g) of Schedule 1 and chargeable with levy.

131.  The instruction letter of MTRC dated 9 December 2021 for VO/045 (at p 150 of Bundle B) refers to the works “detailed and instructed in” another instruction letter (at p 151 of Bundle B) by which KONE was instructed “to proceed Upgrading work for KONE Escalator - Step riser trial (KET-E4 Total 14 Steps)” in accordance with the quotation dated 26 August 2020 (at p 152 of Bundle B). That quotation gave the unit prices for the “[s]upply, replace and maintenance step with advertisement panel (Moving Media)”. Mr Wong did not explain what exactly was done. Based on the information contained in the instruction letters and the quotation, the maintenance part of such upgrading work should fall within section 1(c)(i) and (g) whereas the supply and replacement part should fall within section 1(d) and (g) of Schedule 1.

132.  I have examined the documents relating to the other variation orders and found them to be similarly chargeable with levy.

133.  Fourthly, according to the description in the summary marked “D”, VO/013, VO/033, VO/035 and VO/039 relate to “installation of photoelectrical call button”. I take them to be the variation orders on design, supply and installation of lift photoelectric call buttons referred to in Mr Wong’s evidence.

134.  As argued by CIC, lifts and escalators are structures forming part of land (see paras 108-109 above). In terms of section 1(d) of Schedule 1, the supply and installation of “fittings or equipment in … structures forming part of land, including … lift or escalator…” is caught by the definition. There is no requirement that the “fittings or equipment” supplied or installed must “affect the structural part of the lifts” before they can be levied.

135.  Lastly, Mr Wong’s objection pertaining to “braille plate” should be referring to VO/037.

136.  Similar to the variation orders concerning “photoelectrical call button”, there is no requirement that the braille plate supplied or installed must “affect the structural part of the lifts” before its supply and installation can be charged with levy under section 1(d) in Schedule 1.

137.  KONE has failed to convince me that items 1.1.2, 1.2.2 and 1.5 fall outside of the scope of the levy.

J.  Conclusion

138.  For the above reasons, I find that:

(a)  CIC has the power to issue the Payment Notice under section 40(1);

(b)  the operations covered by the Payment Notice, including items 1.1.2, 1.2.2 and 1.5 in the statement attached to the MTRC Certificate, fall within the definition of “construction operations”; and

(c)  they are a stage or part of the construction operations carried out under the Subject Contract and have completed; and

(d)  they are chargeable with levy under the Ordinance and Cap 583.

139.  There is otherwise no challenge to either the use of “Net Valuation” (ie HK$95,233,592.38) in the calculation or the calculation itself. Pursuant to section 57(4), I confirm the levy.

140.  The appeal is therefore dismissed.

141.  The parties tentatively agree that costs should follow the event. I make an order nisi for KONE to pay CIC the costs of this appeal with certificate for counsel, to be taxed if not agreed.

142.  I thank counsel of both sides for their able assistance.