Legislative Council

LC Paper No. CB(2)2640/98-99
(These minutes have been
seen by the Administration)

Ref : CB2/BC/23/98

Bills Committee on
Provision of Municipal Services (Reorganization) Bill

Minutes of Meeting
held on Friday, 4 June 1999 at 8:30 am
in Conference Room A of the Legislative Council Building

Members Present :

Hon Andrew WONG Wang-fat, JP (Chairman)
Hon Kenneth TING Woo-shou, JP
Hon Cyd HO Sau-lan
Hon LEE Wing-tat
Hon Fred LI Wah-ming
Hon Ronald ARCULLI, JP
Hon Ambrose CHEUNG Wing-sum, JP
Hon CHAN Wing-chan
Hon CHAN Kam-lam
Hon Jasper TSANG Yok-sing, JP
Hon Howard YOUNG, JP
Hon YEUNG Yiu-chung
Dr Hon TANG Siu-tong, JP
Hon CHOY So-yuk
Hon FUNG Chi-kin

Members Absent :

Hon HO Sai-chu, JP
Hon James TO Kun-sun

Public Officers Attending :

Mrs Maureen CHAN
Deputy Secretary for Constitutional Affairs

Deputy Secretary for Home Affairs

Principal Assistant Secretary for Constitutional Affairs

Mrs Lesley WONG
Principal Assistant Secretary for the Treasury
(Management Accounting)

Miss Doris NG
Assistant Director of Urban Services (Finance)

Mr Johnny WOO
Assistant Director of Urban Services (Leisure Management)

Ms Agnes TANG
Assistant Director of Regional Services
(Culture & Entertainment) (Acting)

Assistant Director of Regional Services
(Environmental Health Policy)

Senior Staff Officer of Urban Services (Leisure Policy)

Senior Assistant Law Draftsman (Department of Justice)

Miss Selina LAU
Government Counsel (Department of Justice)

Clerk in Attendance :

Mrs Constance LI
Chief Assistant Secretary (2) 2

Staff in Attendance :

Mr LEE Yu-sung
Senior Assistant Legal Adviser

Miss Connie FUNG
Assistant Legal Adviser 3

Miss Flora TAI
Senior Assistant Secretary (2) 2

I. Meeting with the Administration

Fee-setting mechanism
[Paper No. CB(2)2204/98-99(01)]

Members noted the paper provided by the Administration on the fee-setting mechanism as requested by members at the previous meeting on 25 May 1999. As the paper arrived only in the late afternoon of 3 June 1999, the Chairman suggested and members agreed to defer discussion of the paper to the next meeting, in order to allow more time for members to study the paper.

Delegation of statutory powers to public officers
[Appendix III to Paper No. CB(2)2204/98-99(01)]

2. Members noted the Administration's paper describing the existing and future arrangements for delegation of statutory powers. Mr Howard YOUNG asked the Administration to confirm whether an alignment exercise would be necessary for delegation of statutory powers to public officers following the transfer of powers from the two PMCs to the new authorities. Deputy Secretary for Constitutional Affairs (DS for CA) replied that it was the Administration's intention to preserve the existing arrangements for delegation of statutory powers to public officers as far as possible. However, alignment might be required if there were differences in delegation between the two Provisional Municipal Councils (PMCs). To facilitate further discussion, the Chairman requested the Administration to provide a comparison table showing the delegation and authorization arrangements for transfer of the statutory powers, and the categories of authorized officers, under different sections of the Public Health and Municipal Services Ordinance (Cap. 132).Adm

3. As the Administration's paper was received only in the preceding afternoon of the meeting, members agreed to defer discussion of this paper to the next meeting.

II. Clause-by-clause examination

4. The Bills Committee continued clause-by-clause examination of the Bill starting from clause 4.

Clause 4 - Vesting of property, rights and liabilities of the Councils in Government and saving of validity of their acts

5. At the invitation of the Chairman, DS for CA briefed members on the content of clause 4 which sought to vest the property, rights and liabilities of the PMCs in the Government after their abolition.

6. In view of the significant impact of the transfer, Mr Ronald ARCULLI expressed concern whether clause 4 could provide adequate effect for the transfer of property, rights and liabilities from PMCs to the Government. Senior Assistant Law Draftsman (SALD) advised that clause 4 only set out the general principles for the transfer, and clause 5 gave the detailed principles. DS for CA added that clause 7 also sought statutory amendments to transfer the functions exercised by PMCs under various existing ordinances and enactments, whereas clause 8 contained detailed transitional and saving provisions for the transfer. In this regard, Senior Assistant Legal Adviser (SALA) advised that clause 11 empowered the Chief Executive in Council by way of an order to make consequential, transitional and saving provisions if the Ordinance did not contain adequate provisions which were necessary to give effect to the purposes of the Ordinance. The order would be subject to positive vetting of the Legislative Council (LegCo). It would be a matter of policy for members to consider whether these consequential, transitional and saving provisions should be made by way of subsidiary legislation or in the form of an amendment bill.

7. Mr Ronald ARCULLI noted that the two Provisional Municipal Councils (PMCs) had objected to the proposed abolition of the municipal councils. He therefore asked whether the Administration had consulted PMCs or their executive departments as to whether the provisions in the Bill would give adequate legal effect for the transfer. DS for CA replied that legal advisers of PMCs had provided input via the executive departments in the drafting of the Bill. The Administration had also forwarded the Bill to PMCs but no feedback had been received. In this regard, Dr TANG Siu-tong commented that the legal advisers of PMCs were seconded from the Government and they might be unwilling to give advice contrary to the Administration's position. Mr Ambrose CHEUNG also reminded the Administration that the executive departments of PMCs could not represent PMCs on policy matters.

8. In response, DS for CA said that the Administration noted the difficult position of the legal advisers of PMCs. However, the legal advisers of PMCs could still give legal opinion on aspects relating to implementation of the various provisions in the Bill. She added that it had been the usual practice of the Administration to gather factual information on municipal services through Urban Services Department (USD) and Regional Services Department (RSD). DS for CA stressed that the Administration was most willing to discuss the Bill with the PMCs, but noted that PMC members were still opposed to the abolition of PMCs. As the Bill had been introduced into LegCo, the Bills Committee would be the more appropriate venue for detailed discussion of the Bill. In this connection, she noted that some members of the Bills Committees were also PMC members.

9. Mr CHEUNG expressed dissatisfaction with the Administration's response. He pointed out that while the Administration had previously undertaken to discuss the Bill with PMCs, no discussion actually took place except on the consultancy studies concerning the provision of municipal services under the new structure. He maintained the view that the Administration should discuss with PMCs on the Bill and the transfer arrangements, for example, the transfer of venues and the alignment of fees. Referring to DS for CA's earlier comments on the position of PMCs, Mr CHEUNG clarified that PMCs had adopted a co-operative approach in providing information to the Administration through USD and RSD. He hoped the Administration would take the initiative to discuss the transfer arrangements with PMCs. DS for CA thanked Mr CHEUNG for his clarification and undertook to continue discussion with PMCs.

10. Mr Ronald ARCULLI said that although the relevant provisions were intended to protect the interests of the parties to the contracts with PMCs, he was concerned about the transfer arrangements as the effect of these provisions would constitute a novation of contract by compulsion. He queried whether the contractual rights of parties as guaranteed by the Basic Law were still protected under these circumstances. Mr ARCULLI remarked that the proposed re-organization was not the same as the establishment of the Hospital Authority, as many quasi-government bodies were involved in the provision of municipal services. There might be cases that parties to the contracts with PMCs might not wish to have contractual relationship with the Government. SALD responded that the transfer provisions were similar to the usual arrangement applicable to an acquisition or amalgamation. She added that the Government might be sued for the liabilities to which it was subject under clause 4, therefore the interest of the other party would not be prejudiced. DS for CA acknowledged Mr ARCULLI' s concern about the availability of an option for the other party to discontinue the contract after the transfer. She said that suitable administrative arrangements could be made, at an appropriate time, with parties to the contracts with PMCs about the transfer.

11. In response to Mr Ronald ARCULLI, SALA explained that the relevant provisions of the Bill in respect of transfer of contracts and agreements were based on the assumption that parties to the contracts would consent to the continuation of the contracts and agreements. While the question of whether these contracts could be rescinded would be decided in accordance with general contract law under the Common Law. When the parties wished to continue with the contracts and agreements, the express provisions in the Bill would enable the continuation after the transfer. SALA also pointed out that the legal position of the Government under the Crown Proceedings Ordinance (Cap. 300) was different from that of the PMCs. In this connection, the Chairman suggested that an express provision allowing re-negotiation of contracts would provide a level-playing field for both parties. Deputy Secretary for Home Affairs (DS for HA) responded that the other party might then seek re-negotiation of the contract and fee increases in the new contract. He said that it would be necessary to provide legal certainty to the validity of these contracts in order to maintain the existing level of services to the public after the transfer.

12. Mr Ambrose CHEUNG pointed out that parties to the existing contracts with PMCs might not be qualified as a contractual party with the Government which had set specific requirements for its contractors. If that was the case, the validity of these contracts might be questionable as clause 4 only provided a simple transfer of the rights and liabilities to the Government. Mr CHEUNG further pointed out that the Government was currently exempted from certain obligations or liabilities under existing legislation. The interest of the parties to contracts might therefore be jeopardised as they might not be able to sue the other contractual party which would be the Government, after the transfer.

13. Mr CHAN Kam-lam said that the interests of both parties to the contract would be protected so long as the contract was lawfully and properly signed. He was of the view that it would be more important for the Bill to put beyond doubt the validity of such contracts and preservation of contractual rights after 31 December 1999.

14. Dr TANG Siu-tong asked whether the Bill had provided sufficient legal basis for the Government to take over the premises and facilities currently owned by the PMCs. SALA advised that this would be covered by clause 4(1) which provided that all property, rights and liabilities of the Councils would be vested in the Government as from the appointed day, and that the term "property" would cover premises and facilities. As regards the transfer of property owned by PMCs, DS for CA confirmed that PMCs did not hold any land and they were only allowed to use the land.

15. Dr TANG further asked whether representatives of the Administration could enter premises of the PMCs to prepare for the transfer prior to 1 January 2000. SALA advised that, from the legal point of view, the Government could not take over the statutory functions or the property of PMCs before the legislation effecting the transfer came into operation. In this regard, DS for CA said that the Administration had maintained close liaison with USD and RSD for the necessary information. She hoped that PMCs would co-operate and give assistance in this respect to ensure a smooth transition. Mr Ambrose CHEUNG reiterated that PMCs and their executive departments had adopted a co-operative approach in dealing with requests for information from the Administration. He requested the Administration to notify PMCs of any request for information from their executive departments. DS for CA said the Administration normally approached the executive departments in the first instance.

16. Mr LI Wah-ming asked whether the Administration had considered the arrangements for the armorial bearings of PMCs as these appeared in all PMC venues and staff uniforms. DS for CA replied that there was no urgent need to deal with this issue before 1 January 2000. The Administration would consider the appropriate arrangements in due course, with the objective of incurring the least additional public expenditure for the transfer.

17. In response to Mr LI Wah-ming's enquiry about the use of the letters "UC" and "RC" in vehicle numbers after 31 December 1999, DS for CA said that all PMC vehicles also had corresponding numbers under the "AM" series. Moreover, there was no legal necessity to change these car numbers before 31 December 1999. DS for CA undertook to provide a written response clarifying the arrangements. SALA advised that another part of the Bill had sought to repeal relevant provisions of the Road Traffic (Registration and Licensing of Vehicles) Regulation which reserved the marks consisting of the letters "UC" and "RC" to the PMCs.Adm

18. The Chairman said that by virtue of clause 4(3), anything which was in the process of being done could be continued as long as it was consistent with the Ordinance. Nevertheless, he considered that the Administration should carefully examine whether there would be any material difference in the conditions of contracts now under negotiation by the PMCs or their executive departments after the enactment of the Bill. He was concerned that the other prospective contracting party might suffer financial loss if the contract under negotiation with the PMCs subsequently turned out to be inconsistent with the Bill upon enactment. At Mr Kenneth TING's suggestion, the Chairman asked USD and RSD to provide, in consultation with the PMCs, a list of contracts which were now under negotiation by the PMCs or their executive departments and which would likely take effect or continue in force after 31 December 1999.Adm

Clause 5 - Provisions incidental and supplemental to section 4

19. DS for CA briefed members on the proposed provisions in clause 5. She explained that clause 5 contained supplementary provisions the purpose of which was to set out the consequences and effects in various situations under the general principles in clause 4. Clause 5 gave details of the arrangements to vest all property, rights and liabilities of the PMCs in the Government as from the appointed day. DS for CA also highlighted that all legal claims including present and future claims by or against the PMC could be continued or enforced by or against the Government.

20. SALD explained that "chose in action" in subclause (4) referred to the right of action. The purpose of the provision was to ensure that Government could enforce its right of action without having the need to give notice of the transfer to a person bound by that right of action. In response to the Chairman, SALA said that while no particular drafting problem was noted at this stage, the application of these broad provisions in clause 5 would have to be tested in court.

21. Mr Howard YOUNG asked whether the transfer arrangements would give rise to additional legal costs or affect the legal claims now in process involving PMCs. SALD explained that subclause 6 provided for the continuation of legal claims, including the present, future, actual and contingent claims by or against a PMC after the transfer. She added that according to subclause 2(b), reference to PMCs in any process or other document issued for the purpose of any proceeding before a court would be taken as referring to the Government. No additional legal costs should therefore be incurred.

22. Referring to clause 5(3) which expressly provided that Government could be sued on the liabilities of PMCs after the transfer, Ms Cyd HO pointed out that Government was currently exempt from certain obligations and liabilities under existing legislation. SALD responded that Government was liable in tort under the Crown Proceedings Ordinance. She added that the lawsuits involving PMCs were mostly civil proceedings and Government would have no exemptions. In this regard, SALA advised that although Government was currently exempt from the regulation of some legislation such as the Employment Ordinance (Cap. 57), clause 5(3) expressly provided that Government might be sued for the liabilities of PMCs to which it was subject under clause 4. Ms HO clarified that she was concerned as to whether the drafting of clause 5(3) had provided adequate legal effect to ensure that Government could be sued for the liabilities incurred by PMCs. In this connection, the Chairman asked and DS for CA agreed to provide a written response. Adm

23. Referring to subclause 5 on the transfer of records, Mr Howard YOUNG asked whether "an entry in the book" in subclause (5) would adequately cover electronic entries. SALD replied that the interpretation of "book" in the General and Interpretation Clauses Ordinance (Cap. 1) covered electronic document in any form. Mr YOUNG further asked why it was necessary to include "upon request of the Government" in the subclause. He was concerned that the bank, company or corporation keeping the record of property for PMCs might charge Government for the transfer of records. SALD responded that the phrase was added to make sure that the bank, company or corporation concerned must effect the transfer in their books. As regards the cost for transfer of records, SALA supplemented that the bank or company could charge reasonable fees based on normal commercial practice.

Clause 6 - Express saving of certain property of the Councils

24. DS for CA informed members that clause 6 identified specific property and rights of PMCs to be transferred to Government. These would include the land allocated to PMCs, the insurance policies, intellectual property, copyrights and trademarks, and the right to collect fees and rates under any statutory or contractual authority held by PMCs.

25. Mr Howard YOUNG said that the land allocated to a PMC was subject to specific land use restrictions. He asked whether it would be possible for Government to change the land use of such premises after the transfer. DS for CA explained that the land use had been specified before allocation and any changes in land use would require the approval of the Town Planning Board. She added that the respective District Council would be consulted if there were proposals on changes of the use of existing premises. Assistant Director of Urban Services (Leisure Management) also explained the present procedures of PUC. He said that PUC usually consulted the respective District Board on the proposed use of Government land for the provision of markets and recreational/leisure facilities such as swimming pools, tennis courts, children playgrounds or parks.

26. Mr CHAN Wing-chan asked why express saving provisions had to be made for the insurance polices held by the PMCs under clause 6(b). SALD replied that the provision was only to put beyond doubt that insurance policies, and other property specified in clause 6, would be preserved upon the transfer, in accordance with previous practice.

27. In response to Mr CHAN Wing-chan's enquiry about the other provisions concerning the trade marks, copyright and other intellectual property rights currently held by PMCs, DS for CA said that clause 6(c) sought to expressly save these property so that they would not be used for commercial purposes, when the Provisional Urban Council Ordinance (Cap. 101) and the Provisional Regional Council Ordinance (Cap. 385) were repealed. In this connection, the Chairman drew the Administration's attention to the fact that the armorial bearing of PRC was not included in its existing legislation, while that of PUC was provided in the Provisional Urban Council Ordinance. He therefore inquired whether clause 6(c) could give adequate effect to save the armorial bearings of PRC. DS for CA undertook to provide a written response.Adm

28. Ms Cyd HO asked about the current arrangement for copyright ownership of the publications and artistic works of artists/companies employed by or having contracts with the PMCs. In response, Acting Assistant Director of Regional Services (Culture & Entertainment) explained the existing arrangements of PRC. She said that the copyright of an original and commissioned artistic work was normally owned by the originator, while PRC could have priority of use during a period of time as prescribed in the respective contract. As for publications and research findings, PRC would have the copyright of those works undertaken by its employees. For work undertaken by companies/institutions commissioned by the PRC, copyright would be subject to contractual agreement. Ms HO then inquired about the arrangement for an artist or a company to discontinue the contract after the transfer, if he or she so wished. DS for CA responded that it would depend on the contract conditions and other relevant legislation in force, since clause 4(2) already provided for the continuation of those contracts signed by PMCs. She undertook to provide a written response.Adm

29. As many members had expressed concern about the legal effect of the general provisions in the Bill concerning the transfer, the Chairman advised the Administration to provide a written response as to whether the relevant provisions in the Bill would adequately cover all aspects of the transfer arrangements to avoid legal uncertainty or ambiguity. In particular, the Chairman asked the Administration to carefully consider whether these provisions could adequately deal with claims for compensation by parties to the contracts or by the third party affected by the transfer of contracts or property, on the grounds that the transfer of authority constituted a change in contract conditions or circumstances. The Administration agreed to provide a response to these concerns.Adm


III. Any other business

30. The Chairman reminded members that the next meeting would be held on Friday, 11 June 1999 at 8:30 am.

31. The meeting ended at 10:35 am.

Legislative Council Secretariat
27 July 1999