|
CACV 180/2016
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF APPEAL
CIVIL APPEAL NO. 180 OF 2016
(ON APPEAL FROM DCCJ NO. 2792 OF 2013)
________________________
BETWEEN
LO KWOK KUEN DANWAY
|
Plaintiff
|
and
|
SECRETARY FOR JUSTICE
for and on behalf of
THE GOVERNMENT OF
THE HONG KONG SPECIAL ADMINISTRATIVE REGION |
Defendant
|
________________________
| Before: Hon Cheung, Yuen and Kwan JJA in Court |
| Date of Hearing : 23 February 2017 |
| Date of Judgment : 25 April 2017 |
________________________
J U D G M E N T
________________________
Hon Cheung JA :
I. The appeal
1. The issue in this appeal is ‘Can the Government (the defendant in the present case) deduct from the pension benefits of a civil servant (the plaintiff in the present case) debts owing to it by the civil servant who was made a bankrupt but has since been discharged from bankruptcy’? Deputy District Judge Maurice Chan’s answer to the question was ‘yes’. The plaintiff now appeals.
II. Facts
2.1 I will respectfully adopt the summary of facts by the Judge below :
1) The plaintiff was a police officer who, in about 1998, was subject to disciplinary proceedings as a result of which the Commissioner of Police (‘the Commissioner’) imposed upon him a penalty on 3 February 1999, whereby he was compulsorily retired on 11 February 1999 with deferred pension benefits. Due to the penalty, his entitlement to his accrued pension rights governed by the Pension Benefits Ordinance (‘PBO’) (Cap. 99) was deferred to 19 February 2012, when he would attain the age of 55.
2) However, soon after the penalty, the plaintiff applied for a judicial review of the Commissioner’s decision in HCAL No. 49 of 1999. On 30 September 1999, his application was dismissed by the High Court with costs, later certified by an allocatur dated 12 July 2002 at $328,360. By 3 November 2004, he became indebted to the Commissioner for $493,586.71 consisting of, among other things, the taxed costs, the garnishee costs, and the interest thereon.
3) On 4 November 2004, the Secretary for Justice, acting for the Commissioner, served upon the plaintiff a statutory demand under section 6A(1)(a) of Bankruptcy Ordinance (‘BO’) (Cap. 6) demanding immediate payment of the debt. By 7 September 2005, due to the plaintiff’s continuing indebtedness, bankruptcy proceedings under HCB No. 6923 of 2005 were instituted against the plaintiff, and a bankruptcy order was subsequently made against him on 14 December 2005. By the time the proof of debt was submitted on 7 February 2006 by the Secretary for Justice (who turned out to be the only creditor), the outstanding debt had increased to around $525,473.42, due mainly to interest on the taxed costs being calculated up to the grant of the bankruptcy order.
4) By 14 December 2009, which was four years after the making of the bankruptcy order on 14 December 2005, the debt still remained unpaid. On 4 October 2010, a Certificate of Discharge was granted, discharging the plaintiff from bankruptcy under section 30A of the BO.
5) The plaintiff’s contention is that by reason of the discharge, and by virtue of section 32 thereof, he has since 14 December 2009, been released from all bankruptcy debts, including the then proven debt of $524,473.
6) However, on about 17 February 2012, just before the plaintiff had attained the age of 55 on 19 February 2012, the Government’s Treasury informed him that it would be entitled to make a 25% deduction from the pension benefits payable to him in settlement of the then outstanding debt of $520,837.87.
7) The plaintiff objected, saying that by reason of the Certificate of Discharge, he was entitled to be paid his pension benefits in full without deductions, consisting of pension gratuity payable on 19 February 2012 in the lump sum of $960,108.63, and thereafter, monthly pensions at the rate of $5,714.93 per month. In the events which followed, the Treasury nevertheless deducted $240,027.15 from the lump sum pension of $960,108.63, being 25% thereof, and since then, has been deducting $1,428.73 every month from the monthly pension of $5,714.93, being 25% of the monthly pension.
8) The plaintiff sought, amongst other things, declaratory relief that he was released from all his bankruptcy debts upon his discharge from bankruptcy and the defendant is not entitled to deduct his debt from his pension benefits.
III. Statutory schemes
1) Bankruptcy Ordinance
3.1 For the purpose of this appeal, it is sufficient to point out that, subject to further orders by the Court, a bankruptcy order will be automatically discharged four years after the making of the order.
3.2 Section 32 of BO is important in that section 32(2) provides that where a bankrupt is discharged from bankruptcy, the discharge releases him from all the bankruptcy debts. This is, however, subject to section 32(3) which provides that the discharge does not affect the right of any secured creditor of the bankrupt to enforce the security for the payment of a debt from which the bankrupt is released.
2) Pension Benefits Ordinance
3.3 Section 28(1) of the PBO provides that if any person to whom a pension has been granted is adjudicated bankrupt, then subject to sub-section (5), payment of the pension shall cease as from the date on which he is so adjudicated.
3.4 Section 28(5) provides for the restoration of the payment of the pension upon the discharge of the bankruptcy order :
‘ (5) Where, by virtue of subsection (1) or (2), payment to a person of a pension granted to him is not being made and the person obtains his discharge from bankruptcy or insolvency, as the case may be, payment of the pension shall be restored to him as from the date on which he is so discharged.’
3.5 Section 31(1) imposes a restriction on the assignment of the pension benefits except, among other things, for the purpose of satisfying a debt due to the Government. It allows the Government to apply the pension benefits for the satisfaction of the debts owing by the civil servant to the Government. The amount to be deducted is limited to 25% of the pension benefits if the civil servant who owes a debt does not consent to the deduction :
‘ 31. (1) Save as otherwise provided by the Public Officers (Assignment of Employments) Ordinance (Cap. 363), pension benefits granted to an officer shall not be assignable or transferable except for the purpose of—
(a) satisfying (either in whole or in part) a debt due to the Government; or
(b) satisfying an order of any court for the payment of money towards the maintenance of the spouse or former spouse or minor child of the officer,
and pension benefits shall not be liable to be attached, sequestered or levied upon for or in respect of any claim or debt other than a debt due to the Government.
(2) (a) Where any person to whom pension benefits are granted owes a debt to the Government, subject to paragraph (b), the Director of Accounting Services may apply those benefits, either in whole or in part, for the satisfaction, or partial satisfaction, of the debt.
(b) Where—
(i) a person owes a debt to the Government arising otherwise than on account of tax payable under the Inland Revenue Ordinance (Cap. 112); and
(ii) the person has not consented to the exercise, in relation to pension benefits granted to him, of the power conferred on the Director of Accounting Services by this subsection,
the amount applied in such exercise shall not, as regards a particular such benefit, exceed an amount equal to 25% of the benefit.’
3) Public Officers (Assignment of Emoluments) Ordinance
3.6 Section 3 of the Public Officers (Assignment of Emoluments) Ordinance (‘PO(AE)O’), Cap. 363 restricts the assignment by a civil servant of his emoluments (which includes pension) without the consent of the Government :
‘ 3. Assignability of emoluments
(1) A public officer may with the written permission of an authorized officer assign such proportion or part of his emoluments for such period as the authorized officer may approve.
(2) Where an assignment is made under subsection (1), it shall, subject to section 6, be irrevocable during the period approved by an authorized officer under that subsection.
(3) Upon the making by a public officer of an assignment under subsection (1), the Government may, until that assignment is revoked in accordance with this Ordinance, deduct from the emoluments due to the public officer the amount assigned and remit it to the assignee.’
3.7 Section 5 limits the deduction of payment made in pursuance of such an assignment to not more than 25% or a maximum of 50% of the civil servant’s pension payable at the time of the making of the assignment :
‘ 5. Assignment not to reduce emoluments below certain level
(1) Subject to subsection (2), except with the written approval of an authorized officer, no deduction or payment shall be made in pursuance of an assignment under section 3(1) which has the effect of reducing the amount a public officer receives in any month to below 75% of the officer’s emoluments payable at the time of the making of the assignment:
Provided that in no case shall any such deduction or payment have the effect of reducing the amount a public officer receives in any month to below 50% of such emoluments.
(2) In calculating the amount to be deducted under subsection (1) there shall be disregarded any other deductions made by the Government from the officer’s emoluments.’
3.8 Section 6 provides that the assignment shall be revoked by the making against the civil servant of a bankruptcy order :
‘ 6. Revocation of Assignments
(1) Notwithstanding section 3(2), an assignment made by a public officer under...
| 
