CHEONG MAN FAI v. THE SECRETARY FOR JUSTICE

HCA7048/1995

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7048 OF 1995

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J U D G M E N T

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BACKGROUND

1. The plaintiff who was unrepresented before me is a retired civil servant. He reached 60 years of age on 28 November 1992 and allowing for accrued leave retired from the civil service at the rank of Senior Health Inspector on 21 May 1993.

2. At that time, he had served 40 years 3 months and 23 days since joining the Hong Kong Government on 28 January 1953. Upon his retirement, he received a pension. He commuted his pension benefits, as allowed him by the Hong Kong Government, by 50% and on 3 June 1993 received a lump sum gratuity of $1,551,335.52.

3. This action arises out of the plaintiff's claim that the Hong Kong Government, as embodied in the defendant for the purposes of these proceedings, has failed to allow him his full pension rights in its calculation of the pension benefits paid to him.

THE PLEADINGS

The plaintiff's claim

4. By his writ of summons, the plaintiff alleges that firstly, the government Treasury Department has miscalculated his paid pension benefits by basing their calculations upon only 90% of his highest pensionable emoluments for the period of his service between 28 January 1953 and 31 March 1965. The plaintiff claims that for this period a factor of 100% pensionability should have been applied. He says for this reason both his pension and the 50% commuted lump sum paid to him after 21 May 1993 were under calculated. He says upon his actual retirement on 21 May 1993 he was entitled to an actual lump sum representing a 50% commutation gratuity of $1,601,134.30 if the Government had properly calculated the period of his service from 28 January 1953 to 31 March 1965 at 100% pensionability.

5. Secondly, the plaintiff claims that in any event, he attained maximum pension status on 26 January 1991, some 22 months before he reached his retirement age of 60 years and, accordingly, was then entitled to retire and be re-employed on contract and gratuity terms until his eventual retirement.

6. He says, upon his actual retirement, he was entitled to the additional sum of $188,024.35 representing total contract gratuity of 25% calculated as his actual salary between 27 January 1991 and his actual retirement date.

7. Giving the government credit for the lump sum of $1,551,335.52 he was actually paid as a 50% lump sum commutation of his pension after his actual retirement, he claims the balance of $237,823.13 made up as follows :

Commuted lump sum entitled to as of actual date of retirement if allowed 100% pensionability status for the period 28 January 1953 to 31 March 1965	$1,601,134.30
Contract gratuity entitled to after retirement at 450 months service on 26 January 1991 and further re-employment until actual retirement	$188,024.35
Totalling	$1,789,158.65
Less: Amount actually paid to plaintiff as a 50% commuted lump sum following his actual retirement	$1,551,335.52
Leaving the claimed amount of	$237,823.13

8. In this way the plaintiff claims the sum of $237,823.13. His Statement of Claim also seeks "further and other relief" but no reliance other than inferentially was placed on this by the plaintiff during the course of trial. He made no request for any specified such other relief and adduced no evidence grounding any order for further and other relief other than by alleging in passing that his pension payments were not properly calculated. If this had become an issue account could have been taken of what his correct monthly pension payments should be but my judgment renders this unnecessary as will be seen.

9. The plaintiff's calculations as to the above claims are only inferentially set out in his pleadings. He agreed in the course of the trial that those calculations were somewhat of "a mess" for reasons that will be dealt with later in this judgment. The defendant, however, was prepared to proceed on the plaintiff's pleadings as they stand.

10. The accuracy or otherwise of the plaintiff's calculations aside the pleadings do sufficiently encompass, albeit not as directly as would normally be desirable, the substance of the plaintiff's claim. As I say, no objection was taken to them by the defendant.

The Defence

11. The issues in this case are really matters of law. No substantial issue of fact is joined other than the accuracy of the calculations presented by the plaintiff in his Particulars of Claim. By its defence, the defendant asserts firstly, that the plaintiff's pension entitlements were correctly calculated on the basis of the applicable legislation as being 90% pensionability for the period 28 January 1953 to 31 March 1965; and secondly, that the plaintiff, as a matter of law, could only attain an entitlement to early retirement and the possibility of re-employment on contract and gratuity terms if he reached maximum pensionable status prior to the age of 60 years. The defendant says he did not so reach maximum pensionable status and indeed would not have reached that status until 22 June 1994, over one year after the date of the plaintiff's actual retirement.

THE FACTS

12. As I say, there is no dispute as to the substantial facts of this case. I will set out the more important: -

13. On 28 January 1953, the plaintiff joined the Hong Kong Government in a non-established office.

14. On 1 April 1956, he was transferred to an established office and remained in such an office until the last day of his service with the Hong Kong Government on 20 May 1993. He had, accordingly, served with the Hong Kong Government a period of 40 years 3 months and 23 days.

15. During that period of service, there were certain changes to the plaintiff's pensionability status.

16. By Circular No.2/67, Exhibit B12 dated 5 January 1967, a serving officer was given the option to retain his existing vacation leave entitlement, but to do so had to accept a reduced pensionability in the sense that only 90% of the officers' eventual pensionable emolument was to be taken into account in calculating the officers' pension entitlements.

17. This election was said by that circular to be irrevocable. Its effect was retrospective to 1 April 1965. The information contained in that circular correctly set out the provisions of amending legislation to the Pensions Ordinance, Cap.89. The plaintiff chose to accept the option allowed him by the terms of Circular No.2/67 and elected for 90% pensionability and his existing vacation leave entitlements. That election is contained in Exhibit B22, an election form signed by the plaintiff. It is retrospective in effect being backdated to 1 April 1965.

18. That state of affairs continued for 20 years.

19. In 1987 the Hong Kong Government incorporated what was known as the New Pension Scheme. That scheme was embodied within the new Pension Benefits Ordinance, Cap.99 which, so far as serving officers within its ambit were concerned, effectively replaced in part the earlier Pensions Ordinance, Cap.89.

20. The New Pension Scheme was promulgated to serving civil servants, including the plaintiff by Circular No.12/87 on 1 July 1987. It allowed serving officers to transfer to the New Pension Scheme and relevantly, so far as the plaintiff was concerned, to transfer to 100% pensionability. On 10 August 1987, the plaintiff elected to join the New Pension Scheme and transferred to 100% pensionability.

21. The plaintiff then continued in service under the terms of the New Pension Scheme as applicable to him and reached the age of 60 years, his retirement age, on 28 November 1992. He continued to serve until his accumulated leave was exhausted and then retired from service with the Hong Kong Government on 21 May 1993.

22. On 3 June 1993, the plaintiff was paid a sum of $1,551,335.52 reflecting a 50% commutation of his pension benefits as calculated by the Hong Kong Government pursuant to his application and to the provisions of Section 24 of the Pension Benefits Ordinance, Cap.99.

23. As a result of an upward revision of the plaintiff's salary backdated to 1 April 1993 which was not allowed for in that commuted lump sum payment made on 3 June 1993, a further $165,301.78, and other monies, was paid to the plaintiff. The sum of $165,301.78 reflected an upward revision of the plaintiff's lump sum payment as a result of the 1 April 1993 increase in his salary.

THE ISSUES

24. As I say the issues raised before me are effectively restricted to questions of law. The claims raised by the plaintiff in his pleadings and the defence to them proceed on the basis of facts which are common ground.

25. I will deal with each of the aspects of the plaintiff's claim in turn.

CLAIM FOR LOSS OF PENSION BENEFITS

26. So far as the plaintiff's claim that the Hong Kong Government has incorrectly calculated his pension benefits is concerned, the issue to be resolved is whether the government's calculation correctly took into account only 90% of the plaintiff's pensionable emoluments for the period between 28 January 1953 and 31 March 1965.

27. It is common ground that following the plaintiff's election under the terms of Circular No.2/67 that for the period 1 April 1965 to 11 August 1987, after which the provisions of the New Pension Scheme took effect, the plaintiff was correctly assessed at 90% of his highest pensionable emoluments.

28. The plaintiff says that prior to this, i.e. for the period 28 January 1953 to 31 March 1965, he should have been assessed at 100% of his highest pensionable emoluments rather than at the rate of 90% at which he was in fact assessed.

29. He said in his evidence that in fact prior to his election pursuant to the terms of Circular No.2/67 and the corresponding provisions of the Pensions Ordinance, Cap.89, he was on a pensionable rate of 100% of his eventual highest pensionable emoluments.

30. He said his election on 20 January 1967, which had retrospective effect to 1 April 1965, and operated only from that date so far as his assessment at 90% of his highest pensionable emolument was concerned, did not effect his entitlement to have the period of his service prior to the 1 April 1965 assessed at 100% pensionability.

31. There was no evidence before me as to what pensionability rate prior to 1 April 1965 the plaintiff was, or was entitled to be, assessed at other than his own assertion that it was 100%.

32. His assertion in this regard was based on his interpretation, which he urged upon me, of the definition of "pensionable emoluments" in Section 2 of Cap.89. That definition on its face may well have restricted the effect of the elected 90% pensionability rate to the period from 1April 1965 and by inference mean that the plaintiff was entitled to be assessed at 100% pensionability for his service prior to that date.

33. But I do not have to resolve that question. In my view, the provisions of the Pensions Ordinance, Cap.89 have been superceded in this regard because of the plaintiff bringing himself within the terms of the Pension Benefits Ordinance, Cap.99 as a result of his election on 10 August 1987 to join the New Pension Scheme set up pursuant to the provisions of that Ordinance. By Section 4(1)(b) of Cap.99, that Ordinance applies to every "serving officer".

34. That term is defined by Section 2 of the Ordinance as:-

"... an officer who has opted in accordance with subsection (1) of section 8 and whose option has not been rejected under subsection (2) of that section."

35. Section 8 of the Ordinance is the provision under which the plaintiff exercised his option to join the New Pension Scheme on 10 August 1987. It provides :

"(1) Subject to subsection (2), an officer who is eligible for a pension or annual allowance under the Pensions Ordinance (Cap.89) may opt under and in accordance with the terms of a Circular to be issued under and for the purposes of this section by the Secretary for the Civil Service, that all his service attracting pension or annual allowance under that Ordinance shall be taken into account as pensionable service under this Ordinance.

...

(3) A serving officer in respect of whom 90% only of his substantive salary and special allowance, and 50% only of expatriation pay, is taken as pensionable emoluments under the Pensions Ordinance (Cap.89) may further opt, at the same time as he opts under subsection (1) under and in accordance with the terms of the Circular referred to in subsection (1) that 100% of his substantive salary, special allowance and expatriation pay shall be taken into account as pensionable emoluments under this Ordinance.

...

(5) An option exercised under subsection (1) or (3) shall be irrevocable."

36. I am satisfied that in completing and submitting Exhibit B56, the New Pension Scheme Option Form which was accepted by the Hong Kong Government, the plaintiff fell within the provisions of Section 8(1) of Cap.99 and thereby pursuant to Section 2 of the Ordinance became a "serving officer" to whom all the relevant provisions of Cap.99 applied by way of the operation of Section 4(1)(b) of that Ordinance.

37. Accordingly, the plaintiff's reliance upon the definition of "pensionable emoluments" in Section 2 of the Pensions Ordinance, Cap.89 is misplaced. That definition contained within that Ordinance cannot be determinative of his rights so far as the provisions of Cap.99 apply.

38. The latter Ordinance in Section 2 itself defines "pensionable emoluments" as being : -

"(a) in respect of service of an officer under the government, the emoluments specified in section 22(1)(a),(b),(c) or (ca)."

39. The applicable provision is Section 22(1)(b). It states :

"(1) Except as otherwise provided in this Ordinance and the regulations -

(b) in the case of an officer to whom section 4(1)(b) applies and who has opted under section 8(3) -

(i) in respect of his service prior to the material date -

(A) 90% of his salary ... and

(ii) in respect of his service after the material date, 100% of his salary ... shall be taken as his pensionable emoluments ... and for the purposes of this paragraph 'material date' means a date to be determined in accordance with the terms of a circular issued under and for the purposes of this paragraph by the Secretary for the Civil Service .."

40. That circular was in fact Exhibit B23 and the material date for the plaintiff was, taking accrued leave into account, calculated as being the date of 12 August 1987.

41. In my view, the provisions of Section 22(1)(b) of Cap.99 plainly apply to the plaintiff as a result of his election pursuant to Section 8(1) and thereby his inclusion in the category of "serving officer" in Sections 2 and 4(1)(b) of Cap.99.

42. The provisions of Section 22(1)(b) plainly state that prior to the material date, only 90% of the plaintiff's salary was to be taken into account for the calculation of his pension benefits. For the period after that material date, 100% of his salary is taken into account for the purposes of calculating his pension benefits. Those provisions were amended in 1993 by Section 22 of 4/93 but in a way which is irrelevant to the issues in this case.

43. The plaintiff effectively, by his submissions on this issue, wants me to read into the provisions of Section 22(1)(b)(i) a further provision that the phrase "prior to the material date" is restricted to any period prior to the material date when, by any other provision of law, the plaintiff's entitlement to pension benefits was only 90% of his salary and to not include any period when he was entitled to his pension benefits being calculated on the basis of 100% of his salary.

44. I am not prepared to read any such proviso into the terms of Section 22(1)(b)(i). The terms of that provision are clear, precise and unambiguous. No absurdity or injustice is occasioned by a literal interpretation of the phrase "prior to the material date".

45. These provisions were in fact clearly and accurately summarised in Circular No.12/87, of 1 July 1987, at Annexure D (B46) so far as officers such as the plaintiff were concerned :-

"3. Upon transfer to 100% pensionability the officers pension will be calculated in the following manner -

(a) 90% of highest pensionable emoluments to be taken (into account) in the computation of pension benefits in respect of service prior to the material date; and

(b) 100% of highest pensionable enrolments to be taken (into account) in the computation of pension benefits in respect of service as from the material date."

46. All these provisions in my judgment were correctly applied by the government in a calculation of the plaintiff's pension benefits provided to him through his head of department dated 5 October 1990 (B86) in response to enquiries by the plaintiff, the last of which in evidence before me was dated 3 September 1990.

47. The actual calculation of the plaintiff's pension, including the lump sum commutation of 50% provided to him of $1,551,355.52 (prior to the upward salary linked adjustment calculated from 1 April 1993), is contained in Exhibit B152 which is a computer print-out of the computation of his pension benefits. So far as the issues in this case are concerned, that calculation plainly complies with the provisions of Section 22(1)(b)(i) of Cap.99.

48. In my view, the plaintiff has not established any miscalculation by the Hong Kong Government of his pension benefits for the period prior to 1 April 1965. The government was obliged by the plain terms of Section 22(1)(b)(i) to allow him only 90% of his salary for the purposes of that period as that period fell within the provisions of Section 22(1)(b)(i) in that it was a period of service prior to the material date of 12 August 1987.

49. In my judgment, the plaintiff has failed to show any miscalculation of his pension benefits because of the government wrongly applying 90% pensionability to the complained of period of 28 January 1953 to 31 March 1965.

50. I might add that I have not referred to the further conversion rate of 675/800 for the purposes of the Government's calculation applied to the plaintiff's pensionability for the period of 28 January 1953 to 31 March 1956 as shown in Exhibit B152 in Part II. That was a period when he was in a non-established office and it is accepted by both the Plaintiff and Defence that that was the correct conversion factor to be applied to that period pursuant to Regulation 17(2) of the Pension Benefits Regulations, Cap.99.

CLAIM FOR LOSS OF CONTRACT GRATUITY ON RE-EMPLOYMENT

51. I will now deal with the second and related aspect of the plaintiff's claim which is his assertion that he achieved maximum pensionable status after having served a total of 450 months with the Hong Kong Government, which period expired on 26 January 1991, and that pursuant to the provisions of paragraph 277 of the Civil Service Regulations and paragraph K of Annexure A to Circular No.12/87 Exhibit B23, he would then have been entitled to be re-employed in his existing rank as he had not yet achieved retirement age of 60 years. If so re-employed, he would have been further entitled to a gratuity of 25% of his salary.

52. As I have said this aspect of his claim is particularised as a loss of $188,024.35.

53. Fundamental to the plaintiff's claim for lost gratuity entitlements in this regard is the question of when he reached maximum pensionable status.

54. The plaintiff claims he did so after having served 450 months of employment with the Hong Kong Civil Service.

55. By his calculations, though there was some uncertainty of one or two days in this regard, he says he arrived at 450 months service on 26 January 1991. He says as 450 months service was determinative of maximum pensionable status, he was then, by way of paragraph 277 of the Civil Service Regulations and paragraph K of Annexure A to Circular No.12/87 (Exhibit B23), entitled to retire.

56. The plaintiff's case in this regard is based wholly on the period of 450 months as being determinative of maximum pension status.

57. In evidence, he relied upon the terms of a Civil Service Newsletter No.14, June 1988, Exhibit B73. That newsletter purports to compare the provisions of the old and new pension schemes and so far as the terms of the New Pension Scheme which the plaintiff joined on 10 August 1987 are concerned, it summarises them as being inter alia :-

"... on completion of 450 months service in an established office or 450 months service in a non-established office .... officers may retire on obtaining maximum pension status and be immediately re-employed in the same rank on gratuity bearing terms until the age of 60 ..."

From that the plaintiff asserts that "maximum pension status" equates with 450 months service.

58. It is true also that in the examples to Annexure E of Circular No.12/87 at Exhibit B52, the period of 450 months is again referred to as equating, for the purpose of the calculations there illustrating the effect of the New Pension Scheme, with maximum pension status.

59. Neither of these documents purported to give an exhaustive summary of the effects of the new legislation.

60. The difficulty the plaintiff has in his argument in this regard, is that "maximum pension" is clearly and specifically defined in the Pensions Benefits Ordinance, Cap.99 (as it was in the Pensions Ordinance, Cap.89) pursuant to Section 21 as being :-

"21. Maximum pension

(1) Except in cases referred to in subsection (2), a pension ... granted to an officer shall not exceed two-thirds of -

(a) the highest pensionable enrolments enjoyed or drawn by him, or

(b) the notional highest pensionable enrolments deemed to have been enjoyed or drawn by him in the course of his service.

whichever is the greater."

61. It is plain that the legislature intended that an officer would reach his maximum pension status only when his entitlement to pension equalled two-thirds of his highest pensionable emoluments, i.e. when his pension benefits were two-thirds of his highest salary.

62. The question of when an officer reaches maximum pension status is therefore determined not by the period of time he has been in government service but by the level of his entitlement to pension benefits.

63. In my judgment, the meaning of Section 21 is clear and unequivocal. Whatever meaning may have been placed upon it by the volume of the Civil Service Newsletter relied upon by the plaintiff, or indeed any such meaning which may have been inferentially suggested by the examples of the operation of the New Pension Scheme as contained in Annexure E of Circular No.12/87, cannot affect the plain meaning of the legislated provisions contained in Section 21 of Cap.99 itself.

64. The plaintiff's contention that he reached maximum pension status after 450 months government service is wrong.

65. He could only reach maximum pension status after his entitlement to pension equalled two-thirds of his highest pensionable enrolment as provided by Section 21(1)(a) of Cap.99.

66. It may well be that for an officer who has served always on terms of 100% pensionability that the terms of Section 21 are satisfied after 450 months service. That is a matter of simple mathematics given the pension factor of 1/675 provided for in Regulation 4(a) of the Regulations to Cap.99.

67. But in the case of an officer who for a significant period of his service has served at only 90% pensionablility the period of 450 months will be considerably extended. That is the plaintiff's position.

68. He, as I have found, was for the purposes of Section 22(1)(b)(i)A of Cap.99 assessable at only 90% pensionability prior to the material date of his election to join the New Pension Scheme and his transfer back to 100% pensionability. The material date for him was 12 August 1987. That is a period of 33 years 6 months and 5 days. That period is the basis of the calculations contained in Exhibit B152 also. That is the Treasury Computer print-out setting out the calculations of the plaintiff's pension entitlement.

69. In my view, those calculations are correct. This effectively means that at the plaintiff's actual date of retirement on 20 May 1993, he had not reached, in terms of his pension benefits, the level of two-thirds of his pensionable enrolments, i.e. he had not reached maximum pension status as defined by Section 21 of Cap.99.

70. As a result of his earlier service on 90% pensionability as established by Section 22(1)(b)(i)A of Cap.99, he would not reach maximum pensionability until 22 June 1994, i.e. over a year after he actually retired from government service. Those calculations are again set out correctly in the memorandum and attachment at B85 and B86.

71. What must follow from that is that the plaintiff had never attained maximum pensionable status at the time of his actual retirement on 21 May 1993. He, accordingly, had not reached maximum pensionable status prior to reaching the age of 60 on 28 November 1992, and had not therefore qualified under the terms of Civil Service Regulations 277 (Exhibit B79), or indeed paragraph K of Circular No.12/87 (Exhibit B23) for early retirement and re-employment on agreement and gratuity terms.

72. For these reasons, the plaintiff must fail on this second and final limb of his claim also.

73. Accordingly I order judgment for the defendant. I make an order nisi that the plaintiff pay the defendant's costs, to be taxed if not agreed.

74. Finally, in regard to these issues I should say, I am satisfied that the calculations of the plaintiff as to his claim as set out under the heading "Particulars" in his Statement of Claim are plainly wrong. That is because he claims the sum of $237,823.13. That sum comes from his calculation that as of 20 May 1993 when he in fact retired, he was entitled to a 50% commuted pension of $1,601,134.30, together with a sum of $188,024.35 representing the gratuity of 25% of his salary received after he says he was entitled to retire i.e. after 450 months' service on 26 January 1991.

75. He has, in his own calculations therefore incorporated together a commuted lump sum entitlement based on his actual date of retirement which reflects his period of service up to that time as well as a gratuity based on part of that period of service. That simply cannot be done.

76. Accordingly his calculations in this regard are factually flawed and would have had to be recalculated to sustain his claim had I found his claim made out in law.