BEELAB SEMICONDUCTOR LIMITED V. THE OMBUDSMAN

HCAL151/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO. 151 OF 2008

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J U D G M E N T

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1.  In this application for judicial review, BeeLab sought a declaration that the Ombudsman’s[1] decision dated 16 September 2008 (“the Decision”) declining to accept continued legal representation of BeeLab by its solicitors, Messrs Boase Cohen & Collins (“BCC”) was unlawful and an order of certiorari to quash the same.

2.  The background circumstances may be briefly stated as follows. 

A.      BACKGROUND CIRCUMSTANCES

3.  In July 2005, BeeLab applied to the Innovation and Technology Commission (“ITC”) for a patent application grant for “a multiple mode charge pump based power supply apparatus”.  Hong Kong Productivity Council (“HKPC”) processed the application on behalf of ITC. 

4.  In processing the application, HKPC requested the Australian Patent Office to prepare a search report on BeeLab’s invention. In its report dated 18 August 2005, the Australian Patent Office identified 7 prior art documents which resembled BeeLab’s concept.  BeeLab disputed the report and engaged in long correspondence with the Australian Patent Office.  HKPC then proposed to BeeLab to seek advice from a registered attorney on the patentability of the invention, which was rejected. 

5.  On 6 January 2006, BeeLab complained to ITC about, among other things, HKPC’s ignorance of its questions and failure to ensure the quality of the report. 

6.  On 7 April 2006, ITC refused BeeLab’s application for a patent application grant because in the absence of a favourable professional opinion on the patentability of the invention, HKPC could not recommend it. 

7.  ITC’s refusal prompted BeeLab to lodge a complaint with the Ombudsman about maladministration by HKPC and ITC on 28 August 2006. 

8.  On 14 September 2006, the Ombudsman replied that she had no jurisdiction over HKPC.  She further stated that there was no evidence that ITC had failed to monitor HKPC or had processed BeeLab’s application in an unfair manner.  BeeLab persisted.  After further correspondence the Ombudsman by a letter dated 27 October 2006 responded that there was enough evidence to substantiate further enquiries.  Lengthy correspondence then ensued between BeeLab and the Ombudsman. 

9.  On 3 May 2007, the Ombudsman gave BeeLab a substantive reply which, in short, stated that after inquiry the Ombudsman found no maladministration and decided to conclude the case.  BeeLab was deeply dissatisfied.  By a letter dated 18 September 2007, it leveled criticisms against the Ombudsman’s decision.  The Ombudsman treated that letter from BeeLab as an application to review its decision of 3 May 2007.  What followed was another round of correspondence.  BeeLab then engaged BCC who further communicated with the Ombudsman on behalf of BeeLab between June and August 2008. By letter dated 13 August 2008, the Ombudsman informed BCC that she had decided to review BeeLab’s complaint. 

10.  On 9 September 2008, BCC wrote to the Ombudsman demanding her to pay BeeLab’s legal costs of some HK$160,000 for engaging BCC to correspond with the Ombudsman.  By letter dated 16 September 2008, the Ombudsman rejected the demand by citing section 18A of the Ombudsman Ordinance, Cap. 397 (“the Ordinance”).  It continued :

“8. The Ombudsman Ordinance stipulates that avenues of complaints under that Ordinance are free to any aggrieved person seeking to invoke them. The Ombudsman’s investigations are not intended to be quasi-judicial proceedings, and the Ombudsman does not normally accept request by complainants to be legally represented. Nevertheless, we accepted BeeLab’s request in the belief that this would be a helpful gesture. If a complainant chooses to seek professional advice in an attempt to strengthen the case, he/she is at liberty to do so. However, there is no justification for such costs to be allowed to pass onto taxpayers by seeking The Ombudsman to bear those costs.

9. Given that our proceedings are free, we see no need for BeeLab to incur hefty legal costs in pursuing its complaint through this Office. While we respect BeeLab’s free choice in this matter, The Ombudsman does not consider it in the public interest to accept BeeLab’s wish or attempt to pass its costs via this Office onto taxpayers. In this context, The Ombudsman has decided under section 12(4) of The Ombudsman Ordinance that she is not prepared to accept continued representation of BeeLab by your firm.

10.     We shall communicate directly with BeeLab from now on as regards our review of its complaint.”

11.  On 20 October 2008, the Ombudsman wrote to BeeLab informing it that they were reviewing its case. 

12.  BeeLab however did not respond to the Ombudsman.  Instead, it sought leave to apply for judicial review against various decisions of the Ombudsman in December 2008.  The statement in Form 86 set out 3 grounds of challenge. 

13.  In the meantime, the Ombudsman wrote to BeeLab on 9 January 2009, advising it that as a result of preliminary inquiries under section 11A of the Ordinance, they had found enough evidence to warrant a full investigation and would carry out the full investigation under section 12(1) of the Ordinance. 

14.  BeeLab’s leave application came before Reyes J, who refused to grant leave on 13 February 2009.  BeeLab appealed.  The Court of Appeal allowed the appeal on 25 August 2009 but only granted leave in respect of Ground 2 as set out in Form 86.  The substantive hearing of the present application eventually came before me. 

B.      GROUND 2 : ILLEGALITY OF THE DECISION

15.  Ground 2 attacked the Decision in these terms :

“The Applicant contends that [the Decision], based on s.12(4) of the Ordinance, is illegal because on proper construction of the section, it does not apply to the Applicant as complainant.”

16.  Five reasons were then advanced to support what BeeLab contends to be the correct construction of section 12(4) :

(1)     “Investigation” referred to in section 12(4) does not cover the proceedings before the Ombudsman which are not investigations undertaken by him.  It is therefore wrong to invoke section 12(4) to make the Decision when the Ombudsman was then merely carrying out preliminary inquiry and had yet to begin the investigation. 

(2)     The original legislative intent when section 12(4) was enacted was to target the organization under investigation rather than a complaint such as BeeLab.  

(3)     Sections 12 and 13 should be read together. The words “right of audience” and “appear before him” in section 12(4) refer to an actual hearing before the Ombudsman under section 12(5) or the person concerned is summoned before the Ombudsman under section 13(1).  “The right of audience should not be equated with the acts of lodging complaints or receiving decisions, comments, or investigation results.”  Section 12(4) therefore does not apply to BeeLab when BCC was representing it in writing. 

(4)     Since the Ombudsman had misused her power and might give rise to an action of misfeasance in public office, BeeLab was entitled to engage BCC as its legal representative.  Section 12(4) was not enacted to exclude legal representation of an aggrieved complainant such as BeeLab. 

(5)     Section 12(4) targets those being investigated and not a complainant such as BeeLab. 

Some of the above reasons are in fact not related to construction alone but also deal with the alleged wrongful application of section 12(4) by the Ombudsman to the present case. 

C.      THE OMBUDSMAN’S STANCE

17.  The Ombudsman argued :

(1)     On a proper construction, section 12(4) applies to the present case when the Ombudsman made the Decision. 

(2)     The Decision, properly understood, did not deny BeeLab of the right to legal representation. 

(3)     BeeLab suffers no prejudice as the Ombudsman already decided on 9 January 2009 to carry out a full investigation into its complaints against both ITC and HKPC.  The whole proceedings have been over taken by event and have become an academic exercise. 

(4)     The Ombudsman’s position has been and remains that BeeLab is entitled to enlist legal assistance provided that it does not seek to pass on its legal costs to the Ombudsman and hence the taxpayers.  The Ombudsman is still prepared to communicate with BeeLab through its legal representatives on that basis. 

D.      TWO MAIN ISSUES

18.  At the hearing before me, the parties’ submissions boiled down to two main issues :

(1)     Whether on a proper construction section 12(4) enabled the Ombudsman to make the Decision. 

(2)     Whether the present application has become an academic exercise.  In this context, I will consider what, on a proper reading, the effect of the Decision is. 

19.  I will first construe section 12(4). 

E.      CONSTRUING SECTION 12(4)

20.  Section 12(4) of the Ordinance provides :

“(4) Every investigation shall be conducted in private and counsel and solicitors shall not have any right of audience before the Ombudsman, but may appear before him if he thinks fit.”

21.  As can be seen above, the bone of contention is whether “investigation” includes other stages of processing a complaint than an investigation undertaken by the Ombudsman.  The question is : what does the word “investigation” mean? 

22.  “Investigation” is defined in section 2 of the Ordinance to mean “an investigation by the Ombudsman under the Ordinance”. So for the purposes of section 12(4), “investigation” must mean an investigation undertaken by the Ombudsman under the Ordinance.  This brings me to the statutory scheme of the Ordinance. 

E.1.   The statutory scheme

23.  Pursuant to section 7(1), the Ombudsman may carry out an investigation into the administrative actions of those organizations as set out in Schedule 1, whether upon complaint or on his own motion. Section 9 gives the Ombudsman the discretion, subject to the provisions of the Ordinance, to decide whether to undertake, continue or discontinue an investigation.  A complaint does not necessarily trigger an investigation.  If it is caught by the restrictions in section 10(1), the Ombudsman shall not undertake an investigation.  If the case falls within section 10(2), the Ombudsman may decide not to investigate.  Under section 11A, the Ombudsman may conduct such preliminary inquiries as he considers appropriate for the purposes of determining whether to undertake an investigation. 

24.  If the Ombudsman decides to carry out an investigation :

(1)     Before investigating any action, he shall inform the head of the organization affected of his intention to do so (section 12(1)) or informs the Chief Secretary of the same (section 12(2)). 

(2)     The investigation shall be conducted in private and lawyers have no right of audience before the Ombudsman but may appear before him if he thinks fit (section 12(4)). 

(3)     It shall not necessary for the Ombudsman to hold any hearing and no person shall be entitled to be heard by the Ombudsman (section 12(5)). The only exception is if at any time during the course of an investigation it appears to the Ombudsman that there may be sufficient grounds for him to make any report or recommendation that may criticize or adversely affect any officer, organization or person, he shall give to that officer, organization or person an opportunity to be heard (section 12(6)). 

(4)     The Ombudsman may summon any person or any complaint to give evidence and to produce documents for the purpose of an investigation (section 13(1)). 

25.  After the investigation is completed, the Ombudsman may report his opinion to the head of the organization affected or to the Chief Executive (section 16(1)).  He may also publish the report if he thinks it is in the public interest to do so (section 16A(1)).  He shall also inform the complaint of the result of the investigation (section 17(1)) or the head of the affected organization if a report has not been made to him already (section 17(2)). 

E.2.   Different phases of the process

26.  It can be readily seen from the statutory scheme outlined above that the processing of a complaint is divided into phases. 

27.  At the initial phase, the Ombudsman determines if the complaint is duly made and if necessary, conducts preliminary inquiries under section 11A as he considers appropriate before determining if he should undertake an investigation.  I will call this the First Phase.  Plainly, the legislative intent behind section 11A is to ensure that investigations are undertaken in appropriate cases only.  As explained by Mr Tony Ma Kai Loong, the Assistant Ombudsman in charge of the Investigation Division 1 of the office of the Ombudsman, in his affirmation dated 30 October 2009 :

“33. Given the large number of complaints referred to the Ombudsman and the variation in their nature and seriousness, the Ombudsman has adopted a number of different approaches, depending on the circumstances of the case, in processing the complaints.

(1) The Ombudsman is expressly empowered under section 11A of the Ordinance to conduct preliminary inquiries as he considers appropriate. There are two types of preliminary inquiries, the Internal Complain Handling Programme (‘INCH’) and Rendering Assistance/Clarification (‘RAC’).

(a) The INCH is for relatively simple cases, where, with the complainant’s consent, the complaint will be referred to the subject organization for it to reply direct to the complainant (copied to the Ombudsman), and the Ombudsman may request specific information, monitor progress and scrutinize the reply from the subject organization. If the Ombudsman is not satisfied with the reply, the matter may be referred to RAC or full investigation.

(b) Under RAC, the case officer in the office of the Ombudsman will collect key facts relating to the case. If the matter can be fairly and fully explained, the Ombudsman will present the findings with observations to the complainant and make suggestions to the subject organization for remedy and improvement where necessary. If further inquiries are called for, a full investigation may be conducted.

(c) There is now produced and shown to me marked ‘MKLT-4’ copies of a publicity leaflet published by the Ombudsman and page 14 of the 21^st Annual Report of the Ombudsman (April 2008-March 2009) setting out the same.

(2) For complex cases involving issues of principle, serious maladministration, gross injustice, systematic flaws or procedural deficiencies, or where further inquiries are called for after RAC, a full investigation will be ordered.

(3)   In the year 2008 to 2009, the Ombudsman concluded 5,701 complaints, of which 2,684 were pursued (the rest were either ‘screened out’ as outside the Ombudsman’s jurisdiction or were not pursued).  Among those pursued, 2,437 were concluded after preliminary inquiries (with 148 through INCH and 2,289 through RAC), and 247 were concluded after full investigation.”

28.  If he so decides, the Ombudsman will then conduct the investigation.  I will call this the Second Phase.  At this phase, all the provisions in the Ordinance pertaining to an investigation apply.  

29.  Now, there is a further phase, which is not prescribed by the Ordinance.  It is the review procedure installed in the process by the Ombudsman, which I will call the Third Phase.  Mr Ma explained :

“40. The Ombudsman has an established procedure on review of complaint cases. A complainant who is dissatisfied with the Ombudsman’s findings or conclusions may seek a review of his case. Such request will first be referred to the original investigator, who will examine the complainant’s grounds for review and submit his views to the Chief Investigation Officer of his team. The Chief Investigation Officer will then consider the complaint afresh, focusing on any new evidence or new angles, before submitting the request to one of the Assistant Ombudsmen for consideration. The Assistant Ombudsman will then consider the views of the Chief Investigation Officer, determine whether the grounds of review are properly made, what further course of action (if any) should be taken, and prepare a draft reply to that effect. The draft reply would then be referred to the Deputy Ombudsman for consideration, and the Ombudsman will make the final determination based on such recommendations. The availability of this review procedure is well-publicized in the Ombudsman’s website as well as in its annual reports. There are now produced and shown to me marked ‘MKLT-5’ copies of an extract from the Ombudsman’s website www.ombudsman.gov.hk on ‘frequently asked questions’ (answer to question 8) and page 15 of the 21^st Annual Report of the Ombudsman (April 2008 – March 2009) on the same.”

30.  After reviewing the matter, the Ombudsman may well wish to undertake an investigation into the complaint.  That investigation is, of course, an investigation within the meaning of the Ordinance. 

E.3.   Investigation does not cover preliminary inquiry or review

31.  Viewed within the context of the statutory scheme, an investigation for the purposes of the Ordinance can only mean an investigation undertaken by the Ombudsman during the Second Phase or subsequent to a successful review.  It does not include the preliminary inquiries conducted by him for the purpose of determining whether to undertake an investigation at the First Phase.  Nor does it cover a review made by the Ombudsman at the Third Phase, whether the review arose as a result of his decision made after some preliminary inquiries or a full investigation. 

32.  Ms Sit, counsel for the Ombudsman, contended that “investigation” covers preliminary inquiries made at the First Phase, which are in substance investigations.  I disagree.  Ms Sit’s contention does violence to the language of section 11A, which clearly draws a distinction between an investigation and preliminary inquiries, which essentially serve as a filter preceding the investigation proper.  Such a distinction also exists in the actual processing of a complaint, as Mr Ma’s affirmation confirms.  The distinction is important because specific provisions apply to an investigation.  For example, before embarking an investigation, the Ombudsman must inform the head of the organization affected or the Chief Secretary as the case may be (sections 12(1) and (2)).  After conducting an investigation, the Ombudsman may make a report (section 16(1)) or even publish it (section 16A(1)).  The legislature could not have possibly intended them to be applicable to preliminary inquiries, a screening process, as well.  The investigatory nature of the steps taken for the preliminary inquiries alone does not turn them into an investigation within the meaning of the Ordinance. 

33.  Ms Sit readily accepted that a review at the Third Phase does not necessarily amount to an investigation but she argued that when conducting a review, the Ombudsman may need to carry out in substance further investigation into the complaint.  So it is an investigation after all.  I also disagree.  An investigation under the Ordinance is plainly different from a review at the Third Phase.  An investigation focuses on maladministration. A review looks at the grounds of review to see if any further action, including an investigation, should be taken.  Like preliminary inquiries, the investigatory nature of any step taken during a review alone does not turn it into an investigation for the purpose of the Ordinance. 

34.  For completeness, I will deal with the five reasons advanced by BeeLab on the interpretation of section 12(4) briefly as follows.  The five reasons have been set out in Part B above. I shall not repeat them here. 

35.  I agree with the first reason. 

36.  The second reason is plainly wrong. I can discern nothing in the Ordinance which unduly restricts the application of section 12(4) to the organization affected only. 

37.  The third reason is wrongly premised on a very narrow construction of “the right of audience” for the purposes of section 12(4).  On a fair reading, it must include representations in writing made by a complaint’s lawyer.  This is supported by section 12(5), under which the Ombudsman is not obliged to conduct a hearing.  In the absence of a hearing, the only way the lawyer may be heard is of course by way of writing. 

38.  The fourth reason is entirely misconceived. As rightly submitted by Ms Sit, BeeLab has confused the conduct complained of before the Ombudsman and the recourse it may have against the Ombudsman. Section 12(4) has nothing to do with the latter scenario. 

39.  Finally, the fifth reason asserts a right that a complaint must be entitled to legal representation before the Ombudsman.  This is clearly wrong.  It contradicts the clear wording of section 12(4).  The legislative intent of creating the office of the Ombudsman is to allow maladministration to be addressed in a simple, speedy and cost-efficient manner by an independent and impartial establishment.  The Ombudsman’s discretion for allowing or refusing legal representation must be viewed with this principal objective in mind.  In this respect, Mr Ma said :

“42. It is clear … that the function of the Ombudsman is to investigate into complaints or allegations of maladministration for the purpose of maintaining the standard of good administration. With the emphasis on investigation, the ombudsman system is essentially inquisitorial in nature. The Ombudsman will not determinate the parties’ rights, be that the complainant’s or that of the organization affected. He also has no power to impose sanction on the organization affected even if maladministration can be established.

43. The ombudsman machinery, with its emphasis on simple, inexpensive and efficient procedures, is designed to give effect to the function and purpose of the Ombudsman set out above. An important feature of this machinery is the provision that there is no absolute right to legal representation before the Ombudsman. Instead, the Ombudsman has a discretion to allow legal representation in an appropriate case. This is so for a number of reasons.

(1) The Ombudsman is established to provide an avenue for the public to raise issues of maladministration, and the public is encouraged to make use of this machinery. Simplicity is a key feature. An ‘over-lawyering’ approach, which is likely to follow if legal representation is allowed generally, will defeat this purpose and discourage the public from making use of this machinery.

(2) Where complaints or allegations of maladministration are raised, it is in public interest that they should be attended to and investigated with due expedition. Involvement of legal representatives will inevitably lengthen the time for such inquiries, which is not in the public interest.

(3) The Ombudsman handles a large number of complaints every year. These cases vary in nature and seriousness, but the majority of them are relatively simple. To allow legal representation in all of these cases will only serve to complicate the proceedings and will not bring any or any tangible benefit to the complainant, the organization affected or the Ombudsman.

(4)   The Ombudsman has finite resources.  If legal representation is allowed in all cases referred to the Ombudsman, there is likely to be a proliferation of correspondence with and applications to the Ombudsman, which will cause a serious drain in the Ombudsman’s resources.”

40.  I agree with Mr Ma and reject the fifth reason. 

E.4.   Scope of section 12(4)

41.  It follows from the above analysis that section 12(4) only applies to an investigation undertaken by the Ombudsman at the Second Phase or subsequent to a successful review. 

E.5    Section 12(4) does not apply to the present case

42.  As can been seen from the background set out in Part A above, after receiving BeeLab’s compliant, the Ombudsman conducted preliminary inquiries and on 3 May 2007 found no maladministration.  BeeLab then applied for review.  The matter proceeded to the Third Phase.  When the Ombudsman made the Decision, she had yet to decide if to undertake an investigation.  In the absence of an investigation within the meaning of the Ordinance, the Ombudsman could not invoke section 12(4) to make the Decision. 

43.  That is however not the end of the matter. 

F.       LEGALITY OF THE DECISION

44.  Section 12(3) of the Ordinance provides :

“(3) Subject to the provisions of this Ordinance, the Ombudsman–

(a) may obtain any information, document or thing from such persons, and make such inquiries, as he thinks fit, and

(b)   may regulate his procedure in such manner as he thinks fit.”

45.  On a proper reading, subsection (3) applies to the entire process of the Ombudsman’s handling of a complaint, beginning from the First Phase up to and including the Third Phase and any steps taken thereafter.  It empowers the Ombudsman to decline legal representation when reviewing a complaint.  The same rationale behind the discretion conferred upon the Ombudsman for refusing legal representation under subsection (4) is equally applicable here. 

46.  Mr Cheng, for BeeLab, argued that subsection (3) applies to an investigation only because the other subsections in section 12 all refer to investigation and no more.  I disagree. Subsection (3) is couched in very general terms.  It is clearly intended to cover the entire proceedings before the Ombudsman in handling complaints, as the heading of section 12 — Proceedings of Ombudsman — suggests.

47.  It follows that the Ombudsman did have the power to make the Decision under section 12(3). 

48.  What Ground 2 in substance asserts is that the Ombudsman did not have the power to refuse legal representation while considering BeeLab’s application for review.  While the Ombudsman had wrongly thought that section 12(4) was the source of the power to make the Decision, her subjective view does not distract from the fact that she did have the power to do so, albeit under subsection (3). 

49.  In the circumstances, the legality of the Decision cannot be disputed.  For this reason alone, the application for judicial review must fail. 

G.      ACADEMIC EXERCISE

50.  Another reason why the present application must fail is that BeeLab’s complaint had been overtaken by subsequent events and has now rendered the present application for judicial review an entirely academic exercise. 

51.  The Decision must be understood in context. It was made while the Ombudsman was considering BeeLab’s application for review.  Because of the wholly unwarranted demand for legal costs[2], the Ombudsman declined to accept the continued representation of BeeLab by BCC.  She would “communicate directly with BeeLab as regards [her] review[3] of its complaint.”  Properly understood, the Decision was confined to the review process alone.  Eventually on 9 January 2009, the Ombudsman decided to launch a full investigation.  The Decision had since become spent. 

52.  As for the subsequent investigation, the Ombudsman’s stance had all along been that BeeLab was entitled to enlist the assistance of legal advisers provided that it did not seek to pass on its legal costs to the Ombudsman and hence the taxpayers.  This is well supported by section 18A of the Ordinance.  Mr Cheng has made no submission to the contrary. 

53.  No useful purpose is to be served by challenging the Decision now. 

H.      CONCLUSION

54.  For the above reasons, I dismiss BeeLab's application for judicial review.  The parties agree that costs should follow the event.  I therefore order BeeLab to pay the Ombudsman the costs of the application including all the costs reserved, to be taxed if not agreed.