HONG KONG TELEVISION NETWORK LTD v. CHIEF EXECUTIVE IN COUNCIL

CACV 111/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 111 OF 2015

(ON APPEAL FROM HCAL 3/2014)

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J U D G M E N T

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Hon Cheung CJHC:

1. This is an appeal by the Chief Executive in Council (“CE in Council”), the respondent in the judicial review proceedings below, from the judgment and order of Au J dated 24 April 2015. In his judgment, the learned judge quashed the decision of the CE in Council contained in a letter dated 15 October 2013 to Hong Kong Television Network Limited, the applicant, rejecting its application for the grant of a domestic free television programme service licence under the Broadcasting Ordinance, Cap 562 (“the Ordinance”). The judge ordered that the application be remitted back to the CE in Council for reconsideration, with a direction that when reconsidering the matter, the CE in Council should have regard to and take into account the Government’s broadcasting policy made in 1998 as construed in the judgment and the applicant’s legitimate expectation deriving from the policy. The judge also awarded costs against the CE in Council.

THE FACTS

(a)   Background

2. The background facts leading to this litigation are important.

3. Since the late 1970s until 1991, Hong Kong only had two television operators, Television Broadcasts Limited (“TVB”) and Asia Television Limited (“ATV”).  Both were terrestrial broadcasters and had almost 100% local household penetration.  Since 1991, Hong Kong viewers could also watch programmes provided by regional satellite broadcasters.  On top of this, in 1993, one pay television operator (Wharf Cable) was given an exclusive right to operate subscription television for three years.  In February 1998, a commercial “Video on Demand” (“VOD”) licence was granted.  With the continuing advance in broadcasting science, the number of television channels technically possible was no longer limited by previous transmission technology which had become outdated by 1990s.

4. In his policy address in 1997, the (then) Chief Executive announced a comprehensive review of the television environment and the Government’s broadcasting policy in order to “keep Hong Kong in the forefront of technological development in the Information Age ahead”.

5. In the Government’s press release dated 2 February 1998, the objectives of the review and its policy were stated in these terms:

“3. As a long term policy objective and in line with the global trend of deregulation for the telecommunication and broadcasting industries, Government is committed to further liberalizing the television industry and opening up the market for more competition. This commitment is also guided by the long established and well‑recognized policy objective to encourage the exploitation of new technologies and the optimal use of resources in order to increase viewers’ programme choice as well as to enhance Hong Kong’s position as a pre‑eminent regional broadcasting hub. In an increasingly open and competitive market, Government will maintain its role to provide a conducive environment for the development of the broadcasting industry. In so far as market demands exist and the advance of technologies allows, no artificial limits should be set for the number of players in the field. Government’s role should be to ensure that there is free and fair competition and that all players will have the freedom to make business decisions and respond to market forces. Against this background, the 1998 review is set to achieve the following objectives :‑

a. to take stock of the current developments in local television broadcasting and to examine how new technologies impact on existing policies;

b. to review the existing regulatory regime in the light of technological developments and changing market demands; and

c.  to identify ways to further advance Government’s broadcasting policy objectives of broadening programme choice, encouraging innovation and promoting Hong Kong as a regional broadcasting hub.” 

(emphasis added)

6. In the government consultation paper dated 3 September 1998, paragraph 1.2 explained that advanced technology together with the excellent supporting information infrastructure invested by the private sector, the availability of a critical mass of talents in the related fields of programme production, film‑making and publishing and, “not least the pro‑competition policy of the Government”, were the main drivers behind the development of television services in Hong Kong.

7. In the Legislative Council brief (“LegCo brief”) dated 10 December 1998 on the 1998 review of television policy, the Government explained why the time was right to open up competition in domestic free television:

“12. Questions were raised as to why the Government had not proposed to open up the free‑to‑air television market for competition. TA [The Telecommunications Authority] has confirmed that, because of spectrum constraint, a fifth UHF television channel with territory‑wide coverage transmitted by analogue technology is technically not feasible at the moment. However, transmission of free television service is not limited to using the UHF spectrum. General and direct‑to‑home satellites, for example, can be used to provide free television services. Under the new technology‑neutral licensing regime, there would be no limit on the number of domestic free licences to be issued. Applications for domestic free licences transmitted through other technically feasible means will be considered.”

(emphasis added)

8. In paragraph 20 of the same brief, the Government explained why royalties on the terrestrial television licences would no longer be charged:

“20. Under the misguided belief that the Government does not intend to open up the free television market, a number of respondents have suggested that the charging of royalties on the terrestrial television licensees should continue. As explained in paragraph 12, there will be no limit on the number of domestic free television licences. Under the new regulatory regime, the free television market, like the pay television and other markets, will be opened up for competition. Thus, it is decided that the advertising and subscription royalties for all television and sound broadcasting licensees should be abolished as originally proposed. The abolition of royalties, together with the immediate application of full‑cost recovery licence fees, would take effect when the new regulatory regime has been put in place.”

(emphasis added)

9. The reference in paragraph 20 to the opening up of the pay television and related markets merits attention.  It was elaborated in the consultation paper itself:

“9.4 On the other hand, the Government recognises that television entertainment and information are moving towards increased interactivity and multimedia services. When the Government invited applications for the VOD programme services in 1997, there were four applications in total which showed that the private sector saw the potential business opportunities offered by VOD. If the private sector is willing to invest in or experiment with an innovative service, the Government should facilitate it by adopting a non‑interventionist and market‑led approach, in line with its fundamental economic philosophy to encourage and nurture free entrepreneurial spirit in the commercial sector. In the case of VOD, the technology involved offers virtually unlimited capability for carrying programme and other multimedia services. Under this circumstance, there is little justification for the Government to impose any artificial limit on the number of licences to be issued for such a service.

9.5 Having regard to the foregoing, we propose that the current administrative measure to limit competition in the pay television and VOD market should come to an end, and that we should facilitate new entry into the pay television and VOD markets in order to stimulate industry growth and increase viewers’ choice. Specifically, we propose to adopt the following policy measures to remove existing market entry barriers :

(a)   lift the moratorium on pay television and VOD programme service licences, i.e. no limit should be set on the number of such licences.  Each application should be considered on its merits …”

(emphasis added)

(b)  The Ordinance

10. As a result of the consultation and review, policy recommendations were made to the CE in Council who on 8 December 1998 decided to adopt them.  One consequence of that decision was the enactment of the Ordinance in 2000.  The broadcasting policy objectives which the Ordinance was enacted to further were explained in another LegCo brief dated 28 January 2000:

“3. The Bill seeks to further advance our broadcasting policy objectives, which are to :

(a) widen programming choice to cater for the diversified tastes and interests of the community;

(b) encourage investment, innovation and technology transfer in the broadcasting industry;

(c) ensure fair and effective competition in the provision of broadcasting services;

(d) ensure that broadcasting services provided are up to the expectations and do not offend the tastes and decency of the community; and

(e)   promote the development of Hong Kong as a regional broadcasting and communications hub.”

11. The Ordinance consists of eight parts in the main body and nine schedules.  It seeks to regulate television programme services originating from, or being provided for viewers in, Hong Kong.  The Ordinance sets out four categories of television programme services, that is, domestic free television programme service (the service we are concerned with in this litigation); domestic pay television programme service; non‑domestic television programme service and other licensable television programme service.  Sections 3 and 4 empower the Communications Authority, formerly the Broadcasting Authority (“the Authority”) to approve and issue codes of practice and to issue guidelines respectively.  Section 8 specifies to whom a licence may be granted, and section 8(4)(a) provides that in the case of a domestic free or domestic pay television programme service licence, the majority of the directors and the majority of the principal officers must meet the residence requirement stipulated in the subsection.

12. Section 9 provides that the Authority shall make recommendations to the CE in Council in relation to applications for domestic free or domestic pay television programme service licences.  Section 10(1) and (2) provide respectively for the grant by the CE in Council of domestic free and domestic pay television programme service licences, and for the grant by the Authority of licences to provide the other two categories of television programme services, subject to such conditions as may be thought fit.  Section 10(1) reads:

“ The Chief Executive in Council may, after considering recommendations made pursuant to section 9(2), grant a licence under section 8(1) [ie a domestic free or domestic pay television programme service licence] subject to such conditions as he thinks fit specified in the licence.”

13. Section 10(4) refers to “public interest”:

“ The Chief Executive in Council or the Authority, as the case may require, may, where he or it considers it is in the public interest to do so, vary a licence at any time during its period of validity after the licensee has been given a reasonable opportunity to make representations under subsection (5).”

14. Section 11 deals with extension or renewal of licences.

15. Although the Ordinance predated the Competition Ordinance (Cap 619) by more than a decade, it already contained various competition provisions when enacted (sections 13 to 16), to reflect the Government’s pro‑competition policy.

(c)  The guidance note

16. Pursuant to section 4(2)(a) of the Ordinance, the Authority has issued a guidance note for those interested in applying for domestic free television licences. Although the note has been revised from time to time, for our present purpose, the relevant provisions have never changed.  Thus, paragraph 1.3 of the guidance note says that it does not bind the CE in Council and/or the Authority to consider any application or to grant any licence, or to the terms and conditions of the licence to be granted.  It further says that the guidance note shall not be relied upon to create any expectation that a licence will be granted to the applicant on the terms and conditions referred to in the note or otherwise.  Paragraph 1.4 goes on to say: “There is no pre‑set ceiling on the number of licences to be issued” (emphasis added).

17. Part V of the guidance note sets out the criteria for assessment, that is, financial soundness and commitment to investment; proven managerial and technical expertise; the variety, quantity and quality of programmes; technical soundness and a satisfactory quality of service; service roll‑out; minimum inconvenience to members of the public; benefit to the local broadcasting industry, viewers/customers and the economy as a whole; quality control and compliance.

(d)  Three licence applications

18. Following a public statement by the then Secretary for Commerce and Economic Development (SCED) in July 2009 that the Government would welcome applications for domestic free television licences from interested parties, the applicant (then known as City Telecom (HK) Limited or simply “CTI” in the relevant documents) put in an application on 31 December 2009.  That was followed by a second application made by Fantastic Television Limited (“Fantastic TV”) of the i‑Cable group on 15 January 2010; and a third one by HK Television Entertainment Company Limited (“HKTVE”) of the PCCW group on 31 March 2010.

19. As required by section 9(2) of the Ordinance, the applications were considered by the Authority, which, amongst other things, retained a consultant (Spectrum Value Partners – “Spectrum”) to prepare reports on the applications.

(e)  The consultant reports

20. In the instructions given to Spectrum, the Authority specifically asked the consultant to advise on a number of matters (Spectrum’s first report dated April 2010, para 1.2):

“ · providing an updated economic analysis of the domestic free television market in Hong Kong, taking into consideration the trends and latest developments of the new media platforms and their impact on the traditional television broadcasting services;

· carrying out an overview assessment on how the possible new market entrants (i.e. the licence applicants) will impact on advertising revenue, investment, innovation, market share and size of the domestic free television market in both the short term and the longer term;

…

· having regard to the advertising market of Hong Kong and the PRD [Pearl River Delta] region as a whole and the relevant competitive forces, advising the maximum number of domestic free television programme service licensees that the market can sustain;

…”

21. This resulted in a lengthy report dated April 2010 entitled “Consultancy Service on the Competition Assessment of the Domestic Free Television Programme Service Market”.  Amongst other things, the executive summary of the report advised:

“Based on international benchmarks and industry interviews within Hong Kong, the cost of operating a low‑cost television channel in the Hong Kong market is estimated at HKD50m ‑ HKD100m. Given this cost profile and the expected revenues of new entrant licensees, it is envisaged that a single additional licence holder operating one English and one Chinese channel would likely be sustainable. The market may also potentially sustain two new licensees, albeit with lower profit margins. The business case for broadcasters allocated one of three new potential licensees is however borderline, as it is less likely that licensees could each run two viable television channels using much less annual operating expenditure than the HKD109m that they would be expected to generate in revenues under this scenario. It is unlikely that four new licensees could be sustainable in Hong Kong; assuming an equal distribution of revenue amongst licensees, revenues would likely be in the region of HKD98m five years after launch, which is even lower than the lower end of the estimated budget required to operate even two low‑budget television channels in Hong Kong.”

(pp 7‑8)

22. The executive summary was followed by a detailed analysis and assessment of the sustainability of not only the three intending entrants to the domestic free television market, but also the two incumbents, TVB and ATV.

23. The first report was followed by a stage two report dated 20 April 2011 by the same consultant also commissioned by the Authority.  Plainly, the Authority was keen to learn more about the competition that would be generated by granting new licences.  For Spectrum was specifically required to provide consultancy advice on the following:

“ · carrying out an analysis on the relative competitiveness of each new applicant for licence, having regard to, without limitation, their financial capability, investment plan, programming, service coverage and transmission arrangements as proposed in their applications;

· assessing the likely impact of the new applicants on the domestic free television market and broadcasting landscape in Hong Kong in the light of their proposed operations;

· assessing, having regard to the size and the potential growth of the domestic free television market, the maximum number of operators that can be sustained and the sustainability of each of the operators in the domestic free television market (including the existing licensees and the new applicants) in the short term and the longer term, taking into consideration, including without limitation, the likely changes in the media sector, traditional and new, and the advertising market, and the economic potential (e.g. advertising revenue) in Hong Kong and PRD markets;

· taking into account that the new licence applicants or their associated companies are also pay television operators in Hong Kong, analysing the possible impact of their entry into the domestic free television market on the development of the domestic free and pay television markets; identifying any potential competition concerns and providing any recommendations to address such concerns; and

…”

(para 1.2)

24. The stage two report accordingly ranked the relative competitiveness of the three applicants:

“Fantastic Television appears to be the most competitive out of the three submissions … and the relevant production capabilities and talent pool from its existing pay television operations, we believe Fantastic Television (‘FT’), a subsidiary of i‑CABLE, has a programming strategy that stands to have the most mass market appeal out of the three applicants. FT also appears to have a light non‑programming cost structure, through leveraging existing i‑CABLE operations, that allows it to have a stronger focus on programming investment. In addition, given FT’s delivery through i‑CABLE’s HFC [hybrid fibre coaxial cable] network which already has a high household coverage, FT is technically more ready to launch the free television service than CTI and HKTVE. Having said the above, financial support from i‑CABLE is relatively weak, with its declining business performance in recent years. Yet we believe i‑CABLE’s parent, Wharf Holdings, has the necessary financial strength to support the initiative should additional funding be required.

CTI is ranked second and edges out HKTVE on its competitiveness. Whilst we believe its programming strategy is the weakest out of all three applicants due to the multi-channelling approach which target niche segments and its relatively unproven local production capability, CTI’s relatively low and flexible cost structure has given it a better chance of being sustainable in the free television market. Technology wise, it needs to invest more than FT to reach a similar level of coverage, but we believe the recent improving performance of CTI and a continued positive outlook for its broadband business can generate sufficient financial support for free television venture.

HKTVE is ranked third largely due to its high non‑programming cost in the business plan, which significantly jeopardises its sustainability despite a programming strategy that is stronger than CTI.  HKTVE still targets the mass audience, albeit with a more limited appeal than FT… HKTVE is also backed by production capability and experience from nowTV.  PCCW also provides a strong financial backing to HKTVE.  The proposed transmission mechanism that predominantly leverages PCCW’s broadband platform, however, raises concern as there are multiple dependencies which could lead to a slower ramp up of service coverage.”

(p 4)

(f)   The Authority’s recommendations

25. These reports, together with other matters including the results of a public consultation, were duly taken into account by the Authority, which, in accordance with section 9(2) of the Ordinance, made recommendations on the three applications to the CE in Council on 13 July 2011, recommending that approval‑in‑principle be given for the grant of a domestic free television programme service licence to each of the three applicants.

26. Relevantly, the Authority took the view that all three applicants complied with the various formal and other requirements set out in the Ordinance and guidance note.  The Authority’s recommendations noted the findings of the consultancy study on competition assessment that the new entrants would not bring significant impact to the broadcasting landscape; they were expected to bring positive effect on programming investment as well as the local content production sector; and the impact on the competitive landscape of the pay television market would be marginal at most.  As regards market sustainability, the Authority noted the consultant’s ranking of the three applicants just described, and mentioned in paragraph 11 that TVB’s sustainability appeared to be still well assured, although it would likely lose both viewing share and advertising revenue to a certain extent, regardless of the number of new entrants in the market.  As for ATV, the Authority observed, whilst it was expected to continue to make a loss as in the past and might operate under more adverse situation, its Pearl River Delta revenue would help reduce its operating loss, thus supporting its sustainability.  The Authority also noted that there was historical willingness of financial investors to inject capital into ATV to support its operation.

27. Then in a section entitled “Overall Assessment”, the Authority expressed its views on whether the grant of licences would be “in the public interest”:

“12. In making its recommendations, the BA [ie the Authority] is mindful of the potential impact of new entrants to the two incumbent operators of ATV and TVB. Due to the relatively high barrier of entry and the limited availability of frequency spectrum, ATV and TVB have enjoyed limited competition in a form of a duopoly for decades. While the entry of new players may adversely affect the operating environment of the two incumbents, the BA does not consider that it has a duty to protect their interests by maintaining the status quo or limiting entry into the market. On the contrary, the BA should promote programme choice and diversity through competition and enhance Hong Kong’s position as a regional broadcasting hub for the benefit of the local broadcasting industry, the audience and the community as a whole. The BA considers that new entrants in the free television market would enhance competition, increase investment in programming and local content production, and substantially enhance viewers’ choice. The BA also notes that most of the public views received are in support of opening up the free TV market. The BA is therefore convinced that the grant of new licences would be in the public interest.”

(emphasis added)

28. The Authority then discussed market sustainability:

“13. On the sustainability of the free television market, the BA notes the consultant’s findings that the market may not be able to sustain a total of five players (two incumbents and three new licensees) based on the current business plan submitted by the applicants. However, the BA believes that the applicants themselves with their experience and expertise should be in the best position to evaluate market potential and the economic viability of their proposed services. While the consultant has called the sustainability of CTI and HKTVE into question, the BA notes that the consultant’s analysis was based on the static information provided by the applicants in their applications, and did not take into account the dynamic competitive environment where companies respond to market conditions and adjust their business strategies and operations accordingly. In view of the dynamic competitive environment and evolving business strategies of individual applicants, the BA is of view that the sustainability of the market or individual applicants should not be a primary consideration in deciding as to whether a licence should be granted or not, and that the BA should recommend granting licence to an applicant so long as it is considered to have met all the relevant requirements.”

29. The Authority concluded:

“14. On the whole, the BA considers that all three applicants have demonstrated their compliance with all the statutory requirements under the BO [the Ordinance]. It is satisfied that all three applicants have the requisite financial capability, expertise, transmission infrastructure and commitment to provide quality television programme services to the public. In short, the BA considers that all three applicants should be granted licences to provide domestic free television programme service.”

30. The Authority therefore recommended all three applications be approved‑in‑principle.  It then explained it had considered ranking the three applications but eventually decided not to do so:

“16. The BA has considered whether it should assign an order of priority to the three applications in its recommendations to the CE in C [CE in Council] on the basis of their proposed services and commitment. Members were of the view that the market would be the best judge of the applicants’ proposed services. As there is no pre‑set limit on the number of free television programme service licences to be issued, Members believed that it would be advisable to give all applicants meeting the relevant requirements the opportunity to compete for viewers’ support and let the market decide their success. After deliberation, the BA decided that it should recommend the grant of licence to all three applicants which have satisfied all the requisite requirements without an order of priority.”

(g)   Updated assessment on competitiveness

31. The recommendations were followed by an updated analysis to the stage two report, dated 10 January 2012, prepared by the consultant, who also prepared a supplementary analysis on the competition assessment on the new applications for licence.  Both documents were placed before the CE in Council.  In the updated analysis, the consultant concluded:

“Overall, based on our analysis, we believe that the free television market in Hong Kong will have difficulty sustaining five free television licensees. A three‑licensee scenario appears to be sustainable given the new applicant demonstrates enough competitiveness. As for a four‑licensee scenario, Spectrum believes it is possible that the market could sustain the additional two new licensees provided that both new applicants can execute competitive business plans or are supported by favourable market conditions. Such possibilities include committing more resources to programming, demonstrating higher programming production capabilities, and reduction in non‑programming related expenses.”

(p 24)

(h)   The CE in Council’s deliberations

32. The CE in Council first met to deliberate on the licence applications in January 2012. This was followed by a series of meetings in the same year and the following year up to October when a final decision was eventually made.  According to the evidence, right from the beginning, the CE in Council was already concerned with what would be in the public interest in granting additional domestic free television licences.  One of the issues considered in the deliberations was whether public interest should include considerations as to the sustainability of the domestic free television market as a whole, which had not seen any new operators for over four decades, if there were to be simultaneous introduction of three new players in accordance with the Authority’s recommendations.  “Sustainability” was used in the evidence in the sense of “sustainability of the free TV market in the broad sense of the impact of the grant of additional free TV licences on the broadcasting industry of Hong Kong and public interest”.  In other words, throughout the discussions, according to the evidence, “whilst generally acknowledging the importance of introducing competition”, the CE in Council was concerned if the overall effect of his decision was that the market would become “over‑saturated”, and this “might result in over‑competition, vicious competition or industry fallout”.  In turn, “this might lead to deterioration in programme quality, which would adversely affect the interests of the viewing public, and might have adverse impacts on the free TV market as a whole as well as the reputation of Hong Kong as a broadcasting hub”.  According to the evidence, that was the reason why a “broad consensus” during these deliberations “had always been that the exercise of the power to grant domestic free television licences should be approached cautiously”.  See affidavit of the SCED dated 1 April 2014.

33. Amongst other views expressed in these deliberations, it was considered that the CE in Council should take a “holistic approach” in considering all relevant factors, and market sustainability would be “relevant to public interest as well as the objects and purpose of [the Ordinance].”  There were concerns that simultaneous introduction of three new players might not be conducive to an “optimal competition environment”, and it might lead to adverse consequences in the form of over- or vicious competition, industry fallout, and decline in programme quality that would be prejudicial to the viewing public as well as the reputation of Hong Kong as a regional broadcasting hub.  Eventually and significantly, the CE in Council came to the provisional decision that it would be in the public interest to adopt a “gradual and orderly approach” in granting additional free television licences, and the CE in Council might not necessarily approve all three applications on this occasion, while not precluding the possibility of allowing more free television operators as and when appropriate in future.

34. The CE in Council considered that as a matter of fairness, the licence applicants should be informed of his provisional view under this “gradual and orderly approach” and be invited to make further representations.  That was done by means of letters dated 14 May 2013, which also enclosed the consultant reports.  The letters inviting representations asked the licence applicants not to use the opportunity to amend, revise or modify their applications, as any such attempt would be regarded as the submission of a new application, which would have to be processed by the Authority from step one again (and thus further delay).  Before that, it should be added, the Authority’s recommendations and a summary of the findings of the competition assessment made by the consultant to the Authority had already been disclosed to the licence applicants as well as the two incumbents, and their representations sought and obtained.

35. The licence applicants all made representations in response to the intended gradual and orderly approach and the possibility that less than three licences would be granted.  All three complained that the gradual and orderly approach was something new; in other words, the Government had “moved the goalposts”.

36. There were, as a matter of fact, several rounds of representations, upon the completion of which the applications were brought up before the CE in Council again in October 2013 for a final decision.  In this final round of deliberation, the CE in Council took into account various factors, including the “overriding consideration” of public interest, and particularly, “sustainability of the free TV market in the broad sense” as described as a facet of public interest.  The deliberation resulted in the decision to adopt the gradual and orderly approach, which meant, in the instant case, that not all three applications would be granted approval‑in‑principle on this occasion, whilst not precluding the possibility of allowing more operators as and when appropriate in future.  This being the case, it therefore became necessary to rank the three applications.  That was done by the CE in Council by reference to financial capability; programming investment; programming strategy and capability; and technical soundness.  The CE in Council further took the view that amongst these four criteria, programming strategy and capability – on which the applicant was ranked lowest by the consultant – should be given “relatively more weight”.

(i)  The CE in Council’s decision

37. In the end, the CE in Council took the view that if one free television licence were to be granted, it should be awarded to Fantastic TV; whereas if two licences were to be granted, the second one should be awarded to HKTVE.  The CE in Council accordingly decided to grant approval‑in‑principle to Fantastic TV and HKTVE, whilst rejecting the applicant’s application.  The three licence applicants were notified of the results by letters dated 15 October 2013.  The CE in Council informed the applicant that he had taken into account eleven factors set out in an annex to the letter of rejection in reaching his decision, but otherwise did not explain in detail the reasons for rejecting the application.  Amongst other things, those factors included the Government’s prevailing broadcasting policy; market sustainability; and public interest (as clarified in the evidence, market sustainability was regarded as a facet of public interest).

(j)  The judicial review

38. Aggrieved by the rejection, and amidst much public controversy, the applicant lodged the judicial review proceedings below.  Amongst other things, the applicant was aggrieved particularly by the so‑called new goalposts involved in the adoption of the gradual and orderly approach, as well as its being ranked by the CE in Council behind HKTVE – a licence contender who was ranked behind the applicant in relation to all but one criteria (that is, programming strategy and capability), and who was regarded by the consultant as having the least chance of surviving amongst the three licence applicants if all three applications were approved.

(k)  The decision below

39. The learned judge heard the application for judicial review in late August 2014 and, as expected, many grounds were run before him.  In a careful judgment, the judge dealt with the grounds raised systematically, explained the competing arguments and gave his views and decisions.  Eventually, he held in favour of the applicant on two related grounds, that is, misinterpretation of (and thus non‑adherence to) the Government’s own broadcasting policy since 1998, and legitimate expectation.  He rejected, on the other hand, the other grounds relied on by the applicant, that is, the CE in Council failed to seek the views of the Authority; the applicant was precluded from amending its application; the CE in Council failed to give reasons for his decision; and the CE in Council’s reliance on the consultant reports was flawed.  He further rejected a constitutional challenge against the decision based on freedom of speech guaranteed in article 27 of the Basic Law and article 16 of the Hong Kong Bill of Rights (incorporating article 19 of the International Covenant on Civil and Political Rights (“ICCPR”) pursuant to article 39(1) of the Basic Law).  Finally, he also rejected a challenge against the decision based on conventional public law grounds (that is, the decision was irrational and contrary to the policy and legislative aim).

40. As mentioned, the judge decided against the CE in Council and quashed his decision, and thus this appeal.

(l)  This appeal

41. In this appeal, Mr Benjamin Yu SC (Ms Eva Sit with him) naturally contended that the judge was wrong in holding against the CE in Council in relation to the interpretation of policy and legitimate expectation, but supported the judge’s rejection of the other bases relied upon by the applicant to mount its application for judicial review.  Mr Russell Coleman SC (Mr Jin Pao with him) submitted otherwise.  By way of a respondent’s notice, Mr Coleman relied on most of the rejected grounds below as further or alternative bases to support the judge’s quashing of the CE in Council’s decision.  I will turn to these arguments in turn.

INTERPRETATION OF GOVERNMENT POLICY AND LEGITIMATE EXPECTATION

(a)  The judge’s views

42. First and foremost, this appeal raises the issue of the proper reading of the Government’s broadcasting policy.  It is common ground that the Government’s published broadcasting policy has remained unchanged since 1998.  This, therefore, gave rise to the applicant’s main argument, which succeeded below, that in processing its application for a domestic free television licence, the CE in Council has moved the goalposts by adopting the “gradual and orderly approach”, thereby imposing a pre‑set limit on the number of licences to be granted.  It is the contention of the applicant that under the broadcasting policy, there is to be no pre‑set limit or ceiling as to the number of domestic free television licences that may be granted, subject only to physical or technological constraints.  The judge expressed his interpretation of the government policy in this way (para 58):

“ I therefore conclude that, on a proper construction, the meaning of the Policy of no pre‑set limit is that, other than physical or technological constraints, the Administration would not effectively reject an application for FTV [free television] licence on the basis of or by reference to the reason that there is already a pre‑fixed number of licences that could be granted.”

43. Earlier on, he set out his understanding of the government policy in a slightly different way (para 55):

“ However, I do not understand HKTVN [Hong Kong Television Network Limited]’s case is as such. This is confirmed by Mr Coleman SC (leading Mr Jin Pao) for HKTVN, who submits at the hearing that HKTVN’s case is that under the Policy, there would not generally be a pre‑set limit on the number of licences that can be granted in assessing any applications for FTV licences. What it means is that an application (which say has met all the basic requirements as provided in the Guidance Note) cannot be rejected effectively on the ground and by the reason that there is already a fixed number of licences that would be granted. The CEIC [CE in Council], in considering the applications, is however still entitled in the exercise of his discretion to reject an application for other reasons, for example say qualitative reasons targeted at the subject application and wider public interest considerations. It is only that, given the Policy, the CEIC cannot reject an application effectively by reference to the reason that there is already a pre‑fixed number of licences that the Administration would grant.”

44. This being the case, the judge took the view that the CE in Council had “in substance” decided to reject the applicant’s application “by reference to the reason that there was a pre‑fixed number of [free television] licences that can be granted” (para 64).  He explained (same paragraph):

“(1) By adopting the gradual and orderly approach in considering the three applications (and given that the reasons in adopting it is to avoid too many players in the market which might in the CE [Chief Executive]’s view affect programme quality), the CEIC in effect and in substance decided that there should be a limit of no more than two licences that could be granted. This is further borne out by the fact that, under this approach, the CEIC then went on to consider and rank which of the three applicants should be given the AIP [approval-in-principle] if either one or two AIP were to be granted.

(2) Inherent in having to rank the applicants, instead of assessing each of them individually on its own merits as to whether its application for licence should be granted, is that there would be a pre‑fixed limit on the number of licences that can be granted.”

45. The judge concluded that the CE in Council had misinterpreted the Government’s own broadcasting policy and had therefore failed to adhere to the policy.  Given that it was not the CE in Council’s position that there had been a change of policy, he came to the conclusion that the decision had to be quashed.

46. By the same token, he held in favour of the applicant on substantive legitimate expectation.  He took the view that arising from the broadcasting policy, there was a substantive legitimate expectation that an application would not be rejected by reason of a ceiling imposed on the number of licences to be granted, unless there were technological or physical constraints warranting otherwise; that the application would not be approached on the basis that there would be a fixed number of licences to be issued such that a licence applicant would have to justify in terms of relative merit why its application ought to succeed in priority to the other licence applicants; and that the application would not be rejected on account of the fact that there were, or would be, a sufficient number of licence holders in the market at a particular time.  He concluded that this legitimate expectation was frustrated because by adopting the gradual and orderly approach in making the decision, the CE in Council effectively and in substance failed to take into account the legitimate expectation.  The judge observed that the Government did not take the stance that there had been a change of policy and even if that were the Government’s stance, no reason was given for the change.  The judge therefore also held against the CE in Council on this basis.  As the judge recognised, this additional basis for his quashing of the CE in Council’s decision would stand or fall together with his understanding of the true meaning of the Government’s broadcasting policy.

(b)  The policy and the Ordinance

47. This being the case, everything boils down to the correct reading of the Government’s broadcasting policy.  I would presently turn to the general principles regarding the proper reading of a decision maker’s policy guiding his or her exercise of discretion conferred by law.  Such principles are not in dispute.  Before I do so, it should be pointed out that in a case of the present type, that is, where the exercise of a statutory discretion is under challenge, the logical starting point should be the Ordinance which confers the discretion in the first place, rather than any governmental policy guiding the exercise of the statutory discretion.  In other words, one should start not with a proper “construction” of the government policy; rather, one should start with a proper interpretation of the Ordinance and the provisions conferring the discretion.  However, on the facts of the present case, it does not really matter.  For it is common ground that the Government’s broadcasting policy has since 1998 remained unchanged (leaving aside, for the time being, the introduction of the gradual and orderly approach in 2013 in the course of deciding the three applications). It is also common ground that not only did the policy lead to the enactment of the Ordinance in 2000, it also informs its interpretation.  For these reasons, I have no objection to one starting the analysis of the issue by reference to the Government’s broadcasting policy.  However, as will become apparent in this judgment, it is still necessary, at some juncture, to bear in mind firmly the distinction between the proper interpretation of the Ordinance (which dictates how the CE in Council must exercise his discretion) and the proper reading of the Government’s broadcasting policy (which guides how the CE in Council would generally exercise his seemingly wide and unfettered discretion).

(c)  The legal principles

48. As I said, the principles governing the proper reading of a government policy of the type under discussion are not controversial. It is for the court to determine as a matter of law what the words of a policy document are capable of meaning.  If the decision maker attaches a meaning to the words which they are not properly capable of bearing, then he or she will have made an error of law, and will have failed properly to understand the policy.  That is a ground for judicial review.  But this is not to say that a policy statement should be construed as if it were some statutory or contractual provision.  A policy statement is not analogous in its nature or purpose to a statute or a contract.  Where the provisions of a policy statement are framed in language whose application to a given set of facts requires the exercise of judgment, such matters would fall within the jurisdiction of the decision maker, and his or her exercise of judgment can only be challenged on the ground that it is irrational or perverse.  See R v Derbyshire County Council, ex parte Woods [1997] JPL 958, 967‑968; and Tesco Stores Ltd v Dundee City Council [2012] PTSR 983, paras 19 to 20, a planning case where Lord Reed JSC observed (at para19) that:

“… planning authorities do not live in the world of Humpty Dumpty: they cannot make the development plan mean whatever they would like it to mean.”

49. As regards statements made by a minister in Parliament relating to policy matters, it is not right to adopt the same technical approach to understand these statements as if one were construing a statute or a contract.  It is essential that statements of administrative policy “should not be construed as though settled by parliamentary counsel but should be given effect to for what they are, viz. administrative announcements setting out in layman’s language and in broad terms the policies which are to be followed”: R v Secretary of State for the Home Department ex p Pierson [1998] AC 539, 576 G/H to 577A, per Lord Browne‑Wilkinson (dissenting).  In Ng Siu Tung v Director of Immigration (2002) 5 HKCFAR 1, a case concerning statements by government officials on immigration policy as reported in the press, the Court of Final Appeal remarked that it was the understanding of the “reasonable reader” of newspaper reports of those statements which mattered for the purpose of legitimate expectation in issue in that case.

50. Furthermore, as the judge correctly summarised, it is well settled that an administrative decision made in departure from a stated policy by the decision maker’s misinterpretation of its meaning or misunderstanding of the policy itself is defective and unlawful and may be quashed in a judicial review.  See paragraph 37 of his judgment and the local authorities he referred to in that paragraph.

(d)  The Ordinance

51. As regards the proper construction of the Ordinance (in so far as that is relevant in the present case), one must adopt the purposive approach.  On the facts of the present case, such a purposive interpretation must be heavily informed by the Government’s long‑standing broadcasting policy, as correctly understood.  Thus, it can be fairly and safely said that the purpose of the Ordinance is to promote the long‑term broadcasting policy objectives already referred to in the earlier part of this judgment, including the opening up of the domestic free television market for competition, and thus the non‑imposition of any artificial or pre‑set limit on the number of licences to be granted.  That is, as Mr Coleman pointed out, reflected in the fact that the Ordinance does not impose any such limit on the number of licences that may be granted by the CE in Council under section 10(1). Indeed, it can be said that so far as the exercise of discretion under section 10(1) is concerned, the Ordinance is relatively silent.  Apart from requiring the CE in Council to take into account the mandatory recommendations of the Authority, the industry’s specialist regulator, and apart from the formal or other requirements laid down in the Ordinance, there is little in the Ordinance itself to guide or control how the CE in Council is to exercise his “unfettered discretion”.  Indeed this forms the basis of the constitutional challenge which I will turn to in due course.  However, for my immediate purpose, the point to make here is that so far as the Ordinance is concerned, subject to one matter which I will come back to, there does not seem to be any relevant consideration that the Ordinance mandatorily requires the CE in Council to take into account.  In other words, basically everything is left to the general law.

(e)  The arguments

52. I now turn to the arguments of the parties.  I have already set out the judge’s reading of the policy regarding the number of licences to be granted.  It was essentially based on the applicant’s submissions which the judge accepted.  They were repeated before us and I therefore need not repeat them here.

53. For the Government, Mr Yu contends that “no pre‑set limit” does not mean that the CE in Council cannot have regard to wider public interest considerations, including, in particular, market sustainability, to reject a particular application.  He essentially argues that “no pre‑set limit” does not preclude the CE in Council from adopting the gradual and orderly approach.  On the factual level, he submits that the application of the gradual and orderly approach to the three applications, resulting in the grant of two licences and rejection of the remaining one, does not mean that the CE in Council has proceeded from a pre‑set limit.  The rejection was due not to any pre‑set limit as such, but to consideration of wider public interest in terms of market sustainability, which suggested that only two new licences should be granted on this occasion.

54. Mr Yu also emphasises, as does the evidence filed on behalf of the CE in Council, that the reference to no artificial or pre‑set limit was made in the context of the previous constraints on the number of operators possible due to technological reasons.  Once those constraints were gone, Hong Kong was in a position to grant more licences.  That is how the reference to no artificial or pre‑set limit should be understood in the context.

(f)  My views

55. In my view, this case illustrates once again the importance of context in public law, and the proper reading of policy statements is no exception.  Policy statements must be read in their proper contexts and with common sense.  More often than not, they are not prepared by lawyers but by politicians and government officials.  Technical approaches to their interpretation such as those adopted in interpreting statutes, wills, contracts or constitutional documents should generally be avoided.  Moreover, a policy statement must be read as a whole, and undue emphasis on individual expressions or passages in isolation is inappropriate.  This applies equally where there are more than one policy statements, or where these statements are made over a period of time, or where they are contained in addresses or speeches, or answers to the legislature, or where they are found in lengthy government papers and they form only one of the many topics mentioned therein.  In all cases, one must bear firmly in mind the context and background, in order to have a full and complete understanding of the policy concerned.

56. Adopting that approach, it seems to me the intention of the Government (as objectively judged) in terms of its broadcasting policy, is reasonably clear.  Since early to mid‑1990s, Hong Kong was no longer constrained by the previous technological limitations in terms of the number of domestic free television operators that she could have.  So far as technology was concerned, Hong Kong could accommodate many more television operators.  But should we have more television operators?  That was answered by the Government’s policy statements.  In essence, the Government was saying that Hong Kong should have more domestic free television operators.  Competition was a good thing.  Increased competition would mean more choices, better quality, additional employment, wider opportunities, higher revenue, increased business, talents multiplied, and Hong Kong’s reputation as a regional broadcasting hub and technology pioneer in the field of television broadcasting further enhanced – thus the reference to no pre‑set limit or artificial limit in the policy statements.  These were indeed what the policy objectives set out in the LegCo brief accompanying the Broadcasting Bill were essentially about.

57. It is therefore too narrow a reading of the various policy statements to say, as Mr Yu argued, that no pre‑set or artificial limit was only mentioned in response to the previous physical and technological constraints, and meant simply that Hong Kong is no longer bound by those restrictions.  Apart from that, plainly there was also a positive government policy to encourage and facilitate competition, which was, for reasons explained, regarded as the right direction forward.  That said, a moment’s reflection would suggest that an overdose of competition may not always be desirable.  It does not take much imagination to realise, as the evidence from the Government pointed out, that prolonged over- or vicious competition may have adverse consequences, and could even lead to industry fallout, decline in programme quality and so forth.  That would be prejudicial to the viewing public as well as the reputation of Hong Kong as a regional broadcasting hub.  Moreover, there could be other reasons why the Government would, for good governmental reasons, want to limit the number of licences to be granted at a particular point of time.  There would be no reason to exclude those possibilities either.

58. These are certainly rather obvious points. For our present purpose, it must be pertinent to ask whether it is reasonable to attribute to the Government an intention that whatever happens, Hong Kong will have as many television operators as there are willing and capable investors to enter into the competition, no matter how saturated the market may already be, or regardless of whether other governmental considerations and policies may indicate otherwise.  Of course, the Government can always change its policy.  But a prior question is whether the Government did intend to adopt such a narrow and rigid policy in the first place when even common sense would suggest that things should better be left suitably fluid and flexible?

59. In this regard, context is crucial.  As was pointed out in the 1998 consultation paper (para 11.2(a)), domestic free television programme services cover free‑to‑air television programme services targeting the whole population in Hong Kong and are supported by local advertising revenue.  They are “the most pervasive and universally accessible and exert the greatest influence in society”.  They take up the largest slice of the local television advertising pie (worth more than HK$3 billion in 1997/8).  They are thus major mass media which “the community would expect relatively more Government regulation of the content”.  The consultation paper therefore proposed, and this was eventually adopted in the Ordinance passed two years later, that the licensing authority for these services should remain with the CE in Council, quite unlike the other types of licences, which may be granted by the Authority under section 10(2) of the Ordinance.  For domestic free (and domestic pay) television licences, they can only be granted by the CE in Council, the highest executive authority in Hong Kong.  Whilst the specialist regulator (that is, the Authority)’s recommendations must be taken into account, the CE in Council is not bound by such recommendations.  All this reflects the importance of domestic free television services in Hong Kong.

60. In those circumstances, viewed objectively, it is highly unlikely, absent any compelling linguistic or other reasons to the contrary, that the Government would have wanted to promulgate a broadcasting policy that would effectively tie its hands on the number of licences that could be granted at any given time, whether by requiring all qualifying applicants to be granted a licence, or, for that matter, by imposing a pre‑set limit, regardless of market constraints or other relevant considerations.  A pro‑competition approach does not mean, or require to be adopted, such an inelastic position.  On the facts, I do not believe such a position has actually been adopted.

61. The clue to understanding all this, in my view, is public interest, which is a common thread and overarching consideration that informs the understanding of the policy statements and the language used, as well as the policy objectives and considerations behind.  In other words, the Government was saying in 1998 that it was no longer in the public interest for Hong Kong to only have two domestic free television operators providing viewers with only four channels to watch.  Given the technological advance, it was certainly in the public interest for Hong Kong to have more operators. It was in the public interest to have more competition, that is, open and fair competition, which would bring along with it all the known benefits that healthy competition would bring.  It would, for instance, be in the public interest to develop Hong Kong as a regional broadcasting hub.  It was certainly in the public interest of Hong Kong to “promote the sustainable development of the local broadcasting industry” (government press release dated 6 January 2010). On the other hand, according to government officials’ evidence, it would not be in the public interest to have over- or vicious competition, industry fallout, or a decline in programme quality that would be prejudicial to the viewing public as well as the reputation of Hong Kong as a regional broadcasting hub.  And plainly, there could be other good governmental reasons to limit the number of domestic free television licences at any given time based on wider public interest considerations.

62. As mentioned, all these are quite obvious points.  When our government officials formulated a policy as important as the present one, relating as it does to domestic free television licences in Hong Kong, it is not unreasonable, viewed objectively, to attribute to them all these background considerations.

63. What the preceding discussion means is that the likelihood of the Government wanting, when considered objectively, to adopt a policy that in effect says, whatever may happen, there will not be any limit on the number of domestic free television licences to be granted at any time regardless of where the public interest for the time being may lie, subject only to there being no physical or technological constraint, and so long as there are willing and competent investors to enter into the market, is quite low.

64. I now turn to the language that the Government has chosen to use.  If, notwithstanding the general considerations above, government officials have chosen to use language which, when read objectively by those in the industry as well as the people on the street, can only mean that the Government has nonetheless chosen to put itself into such a straitjacket, the court must give effect to that objective reading.  It would then be up to the Government to change its policy if it so wishes, and do it in appropriate language.

65. Turning to the language used, I have recited the more important statements made over the years in relation to the Government’s broadcasting policy, and highlighted in the extracts the sentences particularly relied on by the applicant.  There have also been other statements made on various occasions, including answers to questions raised in the Legislative Council which mentioned the policy.  It is not necessary to set them out here. In my view, these policy statements must be read as a whole.  Take the press release of 2 February 1998 as an example.  While it said that “no artificial limits should be set for the number of players in the field”, and the Government’s role was “to ensure that there is free and fair competition and that all players will have the freedom to make business decisions and respond to market forces”, it also said that no artificial limit should be set “in so far as market demands exist …”. Moreover, the “no limits” reference was qualified by the word “artificial”, thus suggesting – without being over‑technical – that limits that are supported by good reasons will not be counted towards “artificial” limits.  Furthermore, whilst the press release said the Government was “committed to further liberalizing the television industry and opening up the market for more competition”, it did not set a timetable for so doing.  Nor – and this is important – did it commit the Government to any particular mode and manner of opening up the market.  In other words, it did not say whether this “long term policy objective” of opening up the market for more competition was to be achieved (bearing in mind that this was a “long term” objective) in one go so that all at once, there would be free‑for‑all competition in the domestic free television market, or whether the opening up was to be achieved, for instance, in a “gradual and orderly” fashion.  The policy objective to promote Hong Kong as a regional broadcasting hub mentioned in the press release is also significant.  Whether a particular method of opening up the market would be conducive to promoting Hong Kong as a regional broadcasting hub must depend on the circumstances prevailing from time to time.

66. The more one reads the press release, the more one gets the impression that what it did was to make a broad statement of the Government’s intention to open up, in a manner and at a time(s) to be decided or announced later, the free television market for more competition, with the ultimate aim that, everything being in equal shape, Hong Kong may have as many television broadcasters as there are willing, competent and suitable investors.  As for the details, they were to be worked out later, just like all broad, general government statements of policy intention and objectives.

67. Take the LegCo brief for the 1998 review of television policy as another example.  Certainly, the brief said that under the new technology neutral licensing regime there would be no limit on the number of domestic free television licences to be issued, and the free television market, like the pay television and other markets, would be “opened up for competition”: paragraphs 12 and 20.  It is also true that in the consultation paper, as mentioned, the proposal was to put an end to the pre‑existing administrative measures to limit competition in the pay television and VOD markets, and in particular, to lift the moratorium on pay television and VOD programme service licences, “i.e. no limit should be set on the number of such licences” and “[e]ach application should be considered on its own merits …” (para 9.5(a)). However, one must, once again, avoid reading these passages narrowly or technically.  What these documents did say was that the pay television and VOD markets would be opened up for competition.  The tone of the relevant paragraphs would also seem to suggest that the opening up would be quite a full and immediate one.  But even if one were to proceed on that assumption, still the mere reference in the LegCo brief that like the pay television and other markets, the domestic free television market would also be opened up for competition would not necessarily mean that the latter market would be opened up in the same manner and at the same speed as the pay television and VOD markets.  For the truth is, these statements and these passages were simply silent on the mode, manner and timing of opening up the domestic free television market.

68. In any event, pay television is very different from free television in terms of household penetration, source of revenue, and in terms of influence.  It is true paragraph 9.4 of the consultation paper said that if the private sector was willing to invest in or experiment with an innovative service, the Government “should facilitate it by adopting a non‑interventionist and market‑led approach, in line with its fundamental economic philosophy to encourage and nurture free entrepreneurial spirit in the commercial sector”, it has to be remembered the statement was made in relation to the manner or perhaps timing of how the pay television market was to be opened up.  Even if, for the sake of argument (as the evidence is unclear here) it was part of the Government’s broadcasting policy that the pay television and VOD markets were to be opened up fully and immediately for good reasons of its own, yet when the LegCo brief referred to the fact that the domestic free television market was to be opened up likewise, it would simply not follow that the same policy must have also dictated that the domestic free television market would be opened up at the same pace and in the same manner.  The language used does not require such a reading.  Moreover, the context, as already explained, would tend to suggest that any such restrictive reading was unlikely to be intended (when viewed objectively).

69. The above reading of the Government’s policy statements can be tested against the understanding of those in the industry, whilst bearing firmly in mind that ultimately, the correct reading of a policy statement is a matter of law for the court, not anyone else.  However, built into the court’s approach would be a consideration of the understanding of a reasonable reader who has good reason to read the policy statement in question.  In this regard, the understanding of the Authority must be relevant, although by no means binding on the court.  Therefore, to this extent, and to this extent only, I take into account the Authority’s understanding of the Government’s policy.  In my view, the Authority certainly considered that first, public interest is a highly relevant consideration, as evidenced by the reference to that consideration in the recommendations made to the CE in Council in the passages extracted above.  Secondly, the Authority clearly considered market sustainability and the relative competitiveness of the incumbents and the three licence applicants as relevant considerations.  This is borne out by the fact that the Authority had commissioned the consultant to prepare the several competition assessment reports, to give detailed advice on these matters.  Moreover, it was based on those instructions that the consultant came up with, amongst other things, its views on the likely survival chances of the three licence applicants as well as the incumbents under different scenarios, including scenarios where all three applications were granted as well as ones where only one or some of those applications were granted.

70. It is true that in the Authority’s recommendations, it mentioned the Government’s policy that there would be no pre‑set limit on the number of licences to be granted, when discussing whether it should rank the licence applicants for the benefit of the CE in Council (para 16).  In my view, paragraph 16, when fairly read, did not suggest that the Authority understood the “no pre‑set limit” policy as precluding the CE in Council from rejecting, even for good reasons, some of the applications, so long as they were qualified otherwise.  Rather, paragraph 16 represented the Authority’s own policy consideration and decision to rely on the market as the best arbiter of the three licence applicants’ proposed services.  In other words, the decision not to rank the applicants was a result of the Authority’s own policy assessment on market sustainability and public interest, rather than any perceived requirement imposed by the government policy that qualified applications had to be approved because of the “no pre‑set limit” representation.

71. It is also true that at a later stage when these three licence applicants were informed of the CE in Council’s gradual and orderly approach (which would possibly lead to less than three new licences being granted), all three complained that the Government had moved the goalposts.  However, as Mr Yu submitted, their complaints must be viewed in context and against the fact that they were all interested parties.  It seems to me singularly ironic that whilst the underlying consideration of opening up the market was to encourage competition, an intending television service provider would consider that when applying for a licence, he or she need not bear possible competition with other licence applicants in mind.  I do not accept the suggestion that the policy statements, when properly read, would give rise to that conclusion.  If anything, they emphasised competition.

72. Recognising that public interest, including market sustainability, must be a relevant consideration under section 10(1) to take into account in deciding whether a licence should be granted, Mr Coleman was forced to take the rather unattractive position that public interest and market sustainability had already been taken into account, not by the CE in Council, but by the legislature when enacting the Ordinance.  In other words, he argued that the Ordinance, when properly construed in light of the policy statements, had decided in advance for the CE in Council that public interest and market sustainability might only be taken into account in so far as this would not result in pre‑setting any limit on the number of licences that might be granted at any given time.  With respect, I have no hesitation in rejecting such an argument.  As explained, I do not believe the policy statements bore that meaning.  Nor can I see anything in the Ordinance itself, or the enactment history, to suggest that on its true and proper construction, the Ordinance imposes such a restriction on the consideration of public interest.  In fact, as mentioned, public interest is specifically mentioned in section 10(4) in the context of varying a licence where the CE in Council considers “it is in the public interest to do so”.  When used in that context, there is no qualification on what public interest considerations the CE in Council may take into account.  Certainly, it does not say that no account can be taken of market sustainability as a facet of public interest.  Nor does it say that while public interest considerations may be taken into account, this cannot result in setting or pre‑setting any limit on the number of licences that may be granted at any given time.

73. Quite to the contrary, in my view, on its proper interpretation, and for reasons already mentioned, the Ordinance implicitly requires the CE in Council to take into account all relevant public interest considerations when exercising his discretion to grant or refuse an application for a domestic free television licence.  In particular, such public considerations would include considerations pertaining to market sustainability.  For, as explained, the policy objectives informing the enactment of the Ordinance placed a great deal of emphasis on competition and building up Hong Kong as a regional broadcasting hub.  In relation to all these matters, market sustainability is a highly relevant consideration.  There is a world of difference between a pro‑competition policy and a policy that turns a blind eye to cut‑throat or vicious competitions.  Unlike the close down of a fashion shop on the high street or an electrical appliance retailer in a shopping mall, the closure of a domestic free television station in Hong Kong is a matter of some significance affecting directly or indirectly many people if not the entire viewing public.  Hong Kong experienced the sudden collapse of such a station (Commercial Television) back in the 1970s and quite a few were affected.  And we have, as a matter of fact, just witnessed the close down of another station (ATV) which has been around for a long long time, an event which has also been causing some ripples in our society.  Vicious competition in the domestic free television market is not a matter to be taken lightly.  The influence of television on society may, some would say, be on the decline when compared with before, after the arrival of the internet age and mobile devices.  Yet one is here seeking to construe the meaning of a broadcasting policy made in the late 1990s when television was still playing, indisputably, an extremely important and influential role in society.  The court would be very slow to impute the suggested intention to the legislature when enacting the Ordinance, with the practical effect that the CE in Council is powerless to prevent oversaturation of the television market at any given time, all because of a vague and general representation that there will be no “pre‑set” or “artificial” limit on the number of licences to be granted.

74. With respect to the learned judge, he has placed too much emphasis on the wording used (see paragraphs 47 and 49 of his judgment) and adopted an unduly narrow approach to the reading of the broad policy statements involved in the present case.

75. Indeed, taking the present discussion a step further, I take the view that, if the true interpretation of the policy statements were indeed as that contended by the applicant or decided by the judge, the policy statements would, to that extent, be unlawful as being contrary to the requirement that the CE in Council shall take into account relevant public interest considerations in exercising his discretion under section 10(1) on a true and proper construction of the Ordinance.  In case of a conflict between the statute and a policy statement, the statute prevails: R v Secretary of State for Education and Employment, ex p Begbie [2000] 1 WLR 1115.

76. This being my view, it must follow that by adopting the gradual and orderly approach, the CE in Council was not departing from the general policy statements.  He was simply adopting a particular mode or manner in which to implement the policy statements and achieve the policy objectives concerned.  In other words, instead of choosing (as he was perfectly entitled to) to open up the domestic free television market in one go, the CE in Council decided, for good reasons of his own, to do it step by step, that is, to adopt an incremental approach.  I can see no mutual inconsistency between a policy of no pre‑set or artificial limit on the number of licences to be granted and granting such licences in a gradual and orderly manner over a period of time (whether short or long).  The latter simply does not contradict the former.  Rather, it is one way, although there can be other ways, to achieve the opening up of the market.  There is neither a misunderstanding of the relevant policy statements nor a departure from them.

77. Depending on the facts, the adoption of the gradual and orderly approach may, and did in the present case, result in not approving all applications under consideration.  Whether that became evident even before the final deliberation on the three applications or only during the course of it, or whether the adoption of this particular approach should be described as resulting in a pre‑set limit, is really of no significance or a matter of semantics.  Either way, it does not detract from the fact that there was no departure from the policy statements.  The limit for the time being imposed on the number of licences that should be granted based on market sustainability consideration was a limit imposed for good public interest reasons, something which the policy statements, when properly read, never sought to preclude.  (In fact, as explained, it would be unlawful for the policy statements to so restrict the CE in Council’s discretion as a matter of proper interpretation of the Ordinance.)  As I see it, for the reasons explained, the dispute over whether the fact that only two licences were eventually granted means there was a pre‑set limit or whether it was simply a result obtained after deliberations, is an argument of no significance.  In either case, so long as the grant or rejection of application was made as a result of public interest consideration relating to, amongst other things, market sustainability, there was no departure from the policy statements.

78. I do not accept Mr Coleman’s argument that the policy statements, as read by me, would become devoid of meaning. Far from it.  The statements clearly spelt out the Government’s ambition to become a regional broadcasting hub and other policy objectives, by means of opening up the domestic free television market.  How and when that opening up would be done and completed is a matter for the Government to decide.

79. As for legitimate expectation, for the reasons explained, this ground for judicial review stands or falls together with the first ground based on misapprehension of or departure from government policy.  I take the view that if there was any expectation on the part of the applicant as contended, it was due to its own misinterpretation of the government policy.

80. In so far as may be necessary, for the reasons explained, I would be prepared to hold that there could be no “legitimate” expectation attracting protection by public law when the expectation was based on a statement of policy which contradicted the Ordinance: Ng Siu Tung, at para 112, where it was pointed out that a decision maker cannot give effect to an expectation by exercising his statutory discretion “in a way which undermines the statutory purpose”.

81. For all these reasons, with respect, I take the view that the learned judge has erred in relation to the two grounds for judicial review under discussion.

THE CONSTITUTIONAL CHALLENGE

(a)   The level of challenge

82. I turn to the constitutional challenge mounted by the applicant.  According to Mr Coleman, the challenge, based on the “prescribed by law” requirement and proportionality, is directed at the decision rejecting the applicant’s application for a licence under section 10(1) of the Ordinance.  There is no systemic challenge against the licensing regime established under the Ordinance as such.  This is done for a very practical reason.  As an applicant for a domestic free television licence, it does not really assist the applicant in achieving its goal to ask the court to declare the existing licensing regime unconstitutional, the result of which would only be that unless and until a constitutional regime is established by the Government and/or legislature, there simply is no valid regime to process the licence application.  As a way to get around this practical difficulty, the applicant has chosen to direct its constitutional challenge at the decision level.

(b)   “Prescribed by law”

83. Again, the law involved is not in dispute.  Article 27 of the Basic Law protects Hong Kong residents’ freedom of speech.  Article 16 of the Hong Kong Bill of Rights, incorporating article 19 of the ICCPR, protects everyone’s right to freedom of expression, including freedom to seek, receive and impart information and ideas of all kinds, either orally, in writing or in print, in the form of art, or through any other media of his choice.  Article 16(3) specifies that the exercise of such rights may be subject to restrictions, but these restrictions shall only be such as “provided by law”.  Likewise, article 39(2) of the Basic Law provides that the rights and freedoms enjoyed by Hong Kong residents, including those rights and freedoms stipulated in the ICCPR as applied to Hong Kong and implemented through the Hong Kong Bill of Rights Ordinance (Cap 383), shall not be restricted unless as “prescribed by law”. It is common ground that there is no difference between “provided by law” and “prescribed by law”.

84. In The Sunday Times v The United Kingdom (1979-80) 2 EHRR 245, the European Court of Human Rights noted that the common law operates in a different way from the civil law system and explained its understanding of the meaning of prescribed by law in the context of a common law norm:

“47. The Court observes that the word ‘law’ in the expression ‘prescribed by law’ covers not only statute but also unwritten law. Accordingly, the Court does not attach importance here to the fact that contempt of court is a creature of the common law and not of legislation. It would clearly be contrary to the intention of the drafters of the Convention to hold that a restriction imposed by virtue of the common law is not ‘prescribed by law’ on the sole ground that it is not enunciated in legislation: this would deprive a common law State which is Party to the Convention of the protection of Article 10(2) and strike at the very roots of that State’s legal system.

…

49. In the Court’s opinion, the following are two of the requirements that flow from the expression ‘prescribed by law’. First, the law must be adequately accessible: the citizen must be able to have an indication that is adequate in the circumstances of the legal rules applicable to a given case. Secondly, a norm cannot be regarded as a ‘law’ unless it is formulated with sufficient precision to enable the citizen to regulate his conduct: he must be able – if need be with appropriate advice – to foresee, to a degree that is reasonable in the circumstances, the consequences which a given action may entail. Those consequences need not be foreseeable with absolute certainty: experience shows this to be unattainable. Again, whilst certainty is highly desirable, it may bring in its train excessive rigidity and the law must be able to keep pace with changing circumstances. Accordingly, many laws are inevitably couched in terms which, to a greater or lesser extent, are vague and whose interpretation and application are questions of practice.

…

52. …

  To sum up, the Court does not consider that the applicants were without an indication that was adequate in the circumstances of the existence of the ‘prejudgment principle’.  Even if the Court does have certain doubts concerning the precision with which that principle was formulated at the relevant time, it considers that the applicants were able to foresee, to a degree that was reasonable in the circumstances, a risk that publication of the draft article might fall foul of the principle.”

85. In the more recent case of Centro Europa 7 Srl v Italy (2012) 32 BHRC 417, the European Court of Human Rights had to deal with the deprivation of an applicant’s use of a radio licence granted ten years before due to a subsequent failure to allocate frequencies. The court focused its discussion on the question of foreseeability:

“141. One of the requirements flowing from the expression ‘prescribed by law’ is foreseeability. Thus, a norm cannot be regarded as a ‘law’ unless it is formulated with sufficient precision to enable citizens to regulate their conduct; they must be able – if need be with appropriate advice – to foresee, to a degree that is reasonable in the circumstances, the consequences which a given action may entail. Such consequences need not be foreseeable with absolute certainty: experience shows this to be unattainable. Again, whilst certainty is highly desirable, it may bring in its train excessive rigidity, and the law must be able to keep pace with changing circumstances. Accordingly, many laws are inevitably couched in terms which, to a greater or lesser extent, are vague and whose interpretation and application are questions of practice (see Sunday Times v UK (No 1) [1979] ECHR 6538/74 at para 49;Kokkinakis v Greece[1993] ECHR14307/88 at para 40; and Rekvenyi v Hungary (1999) 6 BHRC 554 at para 34).

142. The level of precision required of domestic legislation – which cannot in any case provide for every eventuality – depends to a considerable degree on the content of the law in question, the field it is designed to cover and the number and status of those to whom it is addressed (see RTBF v Belgium (App no 50084/06) (judgment, 29 March 2011) at para 104;Rekvenyi v Hungary (1999) 6 BHRC 554 at para 34; and Vogt v Germany[1995] ECHR 17851/91 at para 48).

143.  In particular, a rule is ‘foreseeable’ when it affords a measure of protection against arbitrary interferences by the public authorities (see Tourancheau v France (App no 53886/00) (judgment, 24 November 2005) at para 54) and against the extensive application of a restriction to any party’s detriment (see, mutatis mutandis, Baskaya v Turkey [1999] ECHR 23536/94 at para 36).”

86. In Mo Yuk Ping v HKSAR (2007) 10 HKCFAR 386, a case concerning the common law offence of conspiracy to defraud and the element of dishonesty in the offence, the Court of Final Appeal examined the question of whether the offence was legally certain enough:

“61. For present purposes, it is sufficient to summarise the principles enunciated in these decisions. A criminal offence must be so clearly defined in law that it is accessible and formulated with sufficient precision to enable the citizen to foresee, if need be with appropriate advice, whether his course of conduct is lawful or unlawful. It is, however, accepted that absolute certainty is unattainable and would entail excessive rigidity. Hence it is recognised that a prescription by law inevitably may involve some degree of vagueness in the prescription which may require clarification by the courts.

62. The concept of legal certainty recognizes that in a common law system, the common law, declared as it is by the judges, involves an incremental element of judicial lawmaking, whether by way of moulding the law to meet new circumstances and conditions or to correct errors of principle or doctrinal error. In any event, with the common law, as with the interpretation of statute law, it is inevitable that questions continue to arise which require clarification by judicial decision. That is one reason why absolute certainty is unattainable and why some degree of vagueness is inherent in the formulation of laws, especially laws expressed in general terms.

63.   It is also to be expected that, in the case of a general offence expressed in broad and abstract terms, that the degree of vagueness will be perhaps greater than that to be expected in the case of a specific offence directed to a particular situation or particular situations. Many efforts have been made to frame and enact specific offences with a view to bringing certainty to this area of the criminal law. Nevertheless it has been generally accepted that there is a need to have a general offence, even if some law reform agencies and commentators believe that a newly minted general offence would be preferable to conspiracy to defraud. It has been widely recognized that there is no limit to the ingenuity of fraudsters in engineering novel means of defrauding others. This ingenuity leads to the conclusion that the enactment of specific offences is not an adequate safeguard unless they are accompanied by a general offence. …”

87. In Winnie Lo v HKSAR (2012) 15 HKCFAR 16, a case concerning maintenance and champerty, the question of legal certainty again arose.  The court specifically noted the characteristics of the common law to develop concepts on a case by case basis:

“77. And, as noted in the summary above, in a common law system, the courts develop the law over time, clarifying it and modifying it to meet new circumstances and conditions. As Sir Anthony Mason NPJ made clear, such a process of development is not constitutionally objectionable provided that it does not result in judicially extending the boundaries of criminal liability …

84.   Doctrinal issues undoubtedly remain to be addressed and clarified. … But if and when it falls to be resolved by the courts, that would provide another illustration of the common law at work. The existence of such debatable issues surrounding a settled core does not make the offence legally uncertain. …”

88. The threshold for a holding of vagueness is relatively high: R v Nova Scotia Pharmaceutical Society [1992] 2 SCR 606, 632, per Gonthier J; adopted in Shum Kwok Sher v HKSAR (2002) 5 HKCFAR 381, para 90.  Sufficient precision is not to be equated with absolute certainty.  The degree of precision required depends on the context or subject matter: Shum Kwok Sher, para 89; Secretary for Justice v Ocean Technology Ltd [2009] 1 HKC 271, para 107.

(c)   The arguments

89. The applicant’s argument is essentially that the unfettered discretion given to the CE in Council under section 10(1) is too uncertain to satisfy the prescribed by law requirement.  In particular, the suggestion that the CE in Council may take into account “public interest” in the exercise of his discretion makes the discretion a legally uncertain one inasmuch as the rubric “public interest” is legally uncertain.  Amongst the several authorities cited to the court by Mr Coleman in support of his argument, particular emphasis was placed on the Canadian decision of R v Morales [1992] 3 SCR 711, where the legislation in issue permitted pre‑trial detention when the “detention is necessary in the public interest or for the protection or safety of the public, having regard to all the circumstances including any substantial likelihood that the accused will, if he is released from custody, commit a criminal offence or interfere with the administration of justice”.  The Supreme Court stated that the authorities cited to the court “do not establish any ‘workable meaning’ for the term ‘public interest’.  On the contrary, these authorities demonstrate the open‑ended nature of the term” (p 731).  The cases “expressly recognized that ‘public interest’ imports a standard which is completely discretionary” (same page).

(d)   My views on “prescribed by law”

90. Although many points were made below, at the hearing of the appeal, all arguments focused on whether public interest as an important consideration to take into account by the CE in Council under section 10(1) is legally certain enough to satisfy the “prescribed by law” requirement.  As has been pointed out in the authorities, whether a norm or legal concept is legally certain to pass the prescribed by law requirement depends to a considerable degree on the content of law in question, the field it is designed to cover and the number and status of those to whom it is addressed.  In particular, a norm is “foreseeable” when it affords a measure of protection against arbitrary interference by the public authorities.  In other words, it is important to bear in mind the relevant factual and legal contexts when authorities are cited and considered, even though the same norm may be involved.  For context is all important, and as mentioned, the degree of precision required would vary according to the context or subject matter of the law.

91. For these reasons, I do not find the actual decision in the Canadian case of Morales particularly helpful. There, it was concerned with public interest in the context of pre‑trial detention when every accused is presumed under the Canadian constitution to be innocent until the contrary is proved.  One would have thought that in that type of situation, it would not be particularly difficult to set out, whether exhaustively or otherwise, the circumstances that an accused may be refused bail pending trial, such as where there is a real risk of re‑offending or absconding, or a real risk of interfering with witnesses, and so forth.  There would be no need and little reason to invoke public interest in the context of pre‑trial detention as an element of the law.  Rather, I find the discussion by Gonthier J (dissenting on the point of legal certainty) on whether public interest as a general legal concept is legally certain enough illuminating (at pp 751‑752, 756, 757):

“ I am unable to reach the conclusion that this is so. Public interest is a concept long recognized in our legal system. It is a notion which has traditionally been recognized as affording a means of referring to the special set of considerations which are relevant to those legal determinations concerned with the relationship of the represented private interest or interests and the broader interest of the public. The phrase ‘public interest’ is used to capture substantive law criteria in matters of law ranging, for example, from the boundaries of privilege in relation to the ordering of the production of documents to the formulation of rules governing the restraint of trade. While these substantive rules are not relevant here, it is significant that the accommodation within this phrase ‘the public interest’ of numerous and varied considerations has not been traditionally viewed as grounds for its exclusion from operation in any particular legal domain. To view it in such a way would suggest that it is not appropriate to have recourse to the context in which a concept exists or is applied in the law in order to elaborate that concept properly. Similar to the process of the application of the notions of ‘due process’ in the administration of justice and ‘fairness’ in the exercise of discretionary powers, the evaluation and elaboration of a public interest criterion must proceed with reference to the particular context in which it is to operate.

…

At the same time, it is clear that the notion of public interest also operates as a reference for the rules of law which bear upon legal determinations of when the interest of the public will be specially considered, the relationship which those interests will have to other interests which fall to be considered, and the extent to which the public interest is to be protected by the law. It is therefore important to refer to two aspects of the context in which the criterion of public interest is to be considered. The first relates to the application of a public interest criterion in relation to a matter which involves the power of the state to limit the rights of the individual. I agree with the Chief Justice that cloaking whims in judicial robes is not sufficient to satisfy the principles of fundamental justice, and this concern is of particular weight in matters like the decision to grant bail which involve a liberty interest. However, far from being an alien consideration with respect to the adjudication of matters involving a liberty interest, consideration of the public interest is often a necessary element of the proper articulation of the reasons for a determination. In Attorney‑General v. Times Newspapers Ltd., [1973] 3 All E.R. 54, the House of Lords restored an injunction on modified terms against the proprietors of the Sunday Times restraining them from publishing a newspaper article which related to pending litigation for the recovery of loss caused by the drug thalidomide. It was held that it was with reference to the concept of the public interest that the proper considerations ought to be weighed and evaluated. Doing so did not mean that only certain interests would be discussed or only one side of the debate would be considered. Indeed, the public interest was viewed as a suitable means for approaching both, albeit opposed, interests which were put in issue in the litigation. As Lord Reid concluded, the proper approach to the question was as follows (at p. 66):

… I think that a balance must be struck between the public interest in freedom of speech and the public interest in protecting the administration of justice from interference.

  The second aspect of the context in which the criterion of public interest must be considered is the specific context in which the provision operates.  The decision to grant bail is one which involves a consideration of likely future conduct, and the potential consequences for the applicant, the justice system and society of a grant of bail.  The broad nature of these considerations makes a consideration of the public interest appropriate.  The bearing of the public interest on a decision regarding the liberty of a potential detainee is recognized not only in Canada, but also in the United States.  In Hilton v. Braunskill, 481 U.S. 770 (1987), the Supreme Court of the United States affirmed that the proper test for whether to stay a district court order granting relief to a petitioner claiming habeas corpus rights, pending the state appeal, is not limited to a consideration of the risk of flight but includes a consideration of ‘where the public interest lies’ (p. 776).  Indeed, a consideration of the context in which the Canadian provision appears suggests that the concern that arises is not as to meaning but rather as to potential broadness.”

92. On the facts of the present case, I see public interest as wholly appropriate a concept to be employed as a primary consideration for the exercise of the discretion granted under section 10(1).  The understanding of the concept is guided by the context, that is, regulation of domestic free television programme services in Hong Kong.  The context also includes the publicly announced government broadcasting policy and policy objectives.  It is further guided by the guidance note issued by the Authority pursuant to the provisions in the Ordinance which, amongst other things, deals with the content requirements of the programmes, including news and information, and also topics such as education, thus providing guidance on what type of public interest consideration one should be alerted to.

93. Specifically, so far as market sustainability as a facet of public interest is concerned, this is quite plainly a reasonably foreseeable aspect of public interest in the present context, given all the reasons explained above in relation to the pro‑competition policy and policy objectives.

94. It is true that unlike common law, the modus operandi of the CE in Council is such that he does not consider himself as being under a general duty to provide reasons in each and every case, so that there may not be a comparable development of precedents.  However, it does not follow that under our system, given time and experience, no pattern of how and what public interest may be taken into account will and can be observed, particularly if, as here, the CE in Council will, when faced with a legal challenge in court, provide reasons to explain his decision to the court and to the parties concerned.

95. Furthermore, built into our common law system is the requirement of fairness.  This general concept would require the CE in Council to give a licence applicant a fair opportunity to be heard in relation to material matters, including any specific public interest considerations, which were not reasonably foreseeable at the time of making the application.  The introduction of the gradual and orderly approach in the middle of the deliberation process provides a good illustration.  This approach, already decided by me to be consistent with the broad policy that there will be open competition with no pre‑set limit of licences, was introduced after the applications were made.  The CE in Council, very correctly in my view, recognised the common law requirement of fairness meant that the three licence applicants should be given a chance to make representations regarding their applications in the light of this gradual and orderly approach proposed to be adopted by the CE in Council and the resulting possibility that less than three licences would be granted.  The three licence applicants were accordingly invited to make representations, which they all did.  The net picture was that all three licence applicants were able to deal with all matters pertaining to public interest before any decision was made on their applications.  To my mind, this is important, because the bottom line of the requirement of legal certainty is fairness.

96. In my view, in determining whether a concept such as public interest is legally certain enough, one should adopt a holistic approach and bear in mind all relevant requirements and characteristics of the common law, which, as explained, includes the requirement of fairness.  Whether fairness would require the CE in Council to allow a licence applicant to modify or amend his application, without needing to submit a fresh one, is a totally separate question.  What is important, for the purpose of the present discussion, is that this requirement of fairness has to be fully taken into account as part of our common law system when evaluating, in accordance with the Convention requirement of prescribed by law which is applicable both to a common law jurisdiction as well as a civil law jurisdiction, whether the concept of public interest in the present context is sufficiently legally certain.

97. On the facts, the requirement of fairness would, in particular, be useful in avoiding uncertainty by requiring a licence applicant to be given an opportunity to be heard on any particular policy consideration that was not reasonably foreseeable at the time of making an application.

98. Quite inevitably, there will be marginal or fringe cases where there are doubts.  But as Ribeiro PJ emphasised in Winnie Lo, what is important is whether there is “a settled core” of meaning of the norm in question.  If the answer is in the affirmative, the mere existence of debatable issues surrounding the settled core does not make the norm legally uncertain (para 84).  What this means is that in our common law system, the courts develop the law over time, clarifying it and modifying it to meet new circumstances and conditions.

99. Indeed many concepts that the courts employ and work with day in and day out, concepts such as “in the interest of justice”, “good reasons”, “good cause”, “where the court considers it is just or convenient”, or even “fairness”, are broad, general norms, the meaning of which would depend heavily on the context in which they are used.  They are well established rubrics which we, at common law, are used to work with.  They are valuable and useful concepts providing reasonable guidance to lawyers and laymen alike as to how a particular law would be applied, as well as providing the necessary degree of flexibility for the courts to deal with ever different and changing circumstances, to develop the law and to move with the times.  I do not believe the requirement of prescribed by law has the effect of outlawing all these well established and highly useful norms in our system.

100. For these reasons, and also for the reasons given by the judge in rejecting this argument for judicial review (see paras 117‑140 of his judgment) with which I am in general agreement, I reject the applicant’s argument based on “prescribed by law”.

(e)   The arguments on proportionality

101. As regards proportionality, Mr Coleman’s argument is that the court should apply the proportionality test in reviewing the decision of the CE in Council rejecting the applicant’s licence application.  He argues that as the fundamental right of freedom of expression is at stake, it is only right to conduct the review based on the proportionality test.

102. Whilst Demuth v Switzerland (2004) 38 EHRR 20, paras 40‑42, suggests that a less stringent standard of review is appropriate where commercial speech is involved, Mr Coleman points out, quite correctly, what is involved in the present case is only partial but not total commercial speech.  Counsel therefore maintains that proportionality is the right standard of review.

(f)   My views on the standard of review

103. I have serious reservations regarding this argument.  As explained, for reasons of its own, the applicant has chosen not to challenge the licensing regime itself as infringing its constitutional right to freedom of expression.  It accepts that the restriction necessarily involved in the licensing system on its (and everyone else’s) freedom of expression is constitutional.  This must mean it accepts that the licencing regime, including the discretionary grant of licence under section 10(1), does not constitute a disproportionate restriction on its freedom of expression, or put another way, the regime does no more than is necessary to restrict its freedom.  That being the case, it is not easy to see why and how the proportionality test should be applied a second time in reviewing the discretionary decision made under section 10(1) pursuant to and under this licensing regime, which, ex hypothesi, is a constitutional one passing the proportionality test.  Rather, it seems to me the correct way to look at the situation is that, given the acceptance of the constitutionality of the licensing regime, the applicant has no right as such to express its views by means of broadcasting television programmes.  All it has is a right to be considered in accordance with the licensing regime for a licence to do so.  Following from that, in reviewing the decision to grant or refuse its application, all one has to do is to look at whether the decision of the CE in Council was unlawful, or was unreasonable in the public law sense, or was otherwise arbitrary or procedurally improper; in other words, the conventional public law grounds.

104. This, in my view, was the approach adopted by the House of Lords in R (ProLife Alliance) v British Broadcasting Corporation [2004] 1 AC 185, where, like the present case, there was no challenge against the censorship regime imposed by law, but only a challenge against the particular decision made by the terrestrial broadcasters refusing to transmit the applicant’s video that contained graphic footage of an actual abortion including images of aborted foetuses to promote its political cause against abortion.  A similar approach has been adopted by this court in Hysan Development Company Limited v Town Planning Board, CACV 232/2012 and CACV 233/2012, 13 November 2014 (Lam VP, Chu JA and Au J), para 87, where there was likewise no systemic challenge against the Town Planning Ordinance (Cap 131) but only a challenge against the actual application of the law.

105. I accept that the House of Lords’ decision in Belfast City Council v Miss Behavin’ Ltd [2007] 1 WLR 1420, involving an application for a licence to use premises as a sex shop which was refused by the local city council, appears to suggest that the refusal should be reviewed in accordance with the proportionality test as a Convention right was involved, despite that there was no challenge against the licensing system itself.

106. It is unnecessary to resolve this difference in approach.  In any event, it should be pointed out that even under a conventional public law review, given that freedom of expression is involved, the intensity of review has to be a heightened one so as to be commensurate with the fundamental right at stake.

(g)   My views on proportionality

107. Turning to the facts of the present case, even applying the proportionality test as the correct standard of review, that is, the “no more than is necessary” standard, I take the view that the challenge fails.

108. The main thrust of Mr Coleman’s argument is that the consultant has in general ranked the applicant second, behind Fantastic TV.  It only ranked the applicant below HKTVE in relation to one aspect, namely, programming strategy and capability.  The CE in Council has decided to give this criterion more weight than the other three criteria.  The CE in Council has never considered the possibility of imposing licensing conditions, particularly licensing conditions relating to programme quality and contents, to make up for the perceived deficiencies on the part of the applicant in that area.  Rather, the CE in Council has chosen to reject the application altogether.  Therefore, Mr Coleman argues, the decision was more than was necessary in the present case.

109. I do not accept the argument.  The overriding reason of the CE in Council in granting only two licences out of the three applications was his concern about market sustainability.  That is a policy matter which cannot be challenged and is not challenged.  Given Fantastic TV’s obvious superiority over the applicant and HKTVE, the comparison was really between the latter two.  It is true that the applicant was superior to HKTVE in all aspects except one, that is, programming strategy and capability. But that precisely was a criterion on which the CE in Council decided to give more weight, a matter that cannot be challenged or questioned in legal proceedings no matter what test or standard of review one employs.  Nor can there be any challenge regarding what weight the CE in Council chose to give to the four criteria in question respectively.  The court is not asked to substitute its own opinion for that of the CE in Council.  The Ordinance has entrusted the CE in Council, not the court, with the power and responsibility to decide who should be granted a domestic free television licence.  Ranking the licence applicants is not the function of judicial review.  That being the case, the decision to rank the applicant third cannot be challenged either.

110. That only leaves the applicant’s argument that even coming third does not mean that it has to be refused a licence.  Its position can be remedied by imposing licensing conditions on programme contents and so forth.

111. This argument must be rejected.  There is no evidence to suggest that the imposition of licensing conditions would have the effect, as opposed to there being a requirement only, that the applicant’s programme strategy and capability would be substantially improved. But more fundamentally, given that the CE in Council has decided to adopt a gradual and orderly approach and under that approach only two licences will be granted on this occasion – policy matters which cannot be challenged by way of judicial review regardless of what test or standard of review one uses, it is simply not open for the applicant to say that nonetheless, a third licence should be granted albeit subject to conditions.  To so argue is in fact to challenge via the backdoor the CE in Council’s discretion to adopt the gradual and orderly approach and to grant only two licences on this occasion.

112. In this regard, it should be remembered that when a court applies the proportionality test to a situation which engages a fundamental right, where the issue encountered is one involving a complicated polycentric social economic issue raising sensitive questions of resource allocation, a broad margin of appreciation must be accorded to the Government’s decision on that issue, when deciding whether the relevant restriction is or is not “no more than is necessary”: Kwok Cheuk Kin v Secretary for Constitutional and Mainland Affairs [2015] 5 HKLRD 881, para 8.  In the present case, the CE in Council’s concern as to the risk of vicious competition arising from an over‑saturated market was a matter plainly within the broad margin of appreciation afforded to the Government.  The option chosen by the CE in Council was clearly supported by reasons.  As submitted by Mr Yu, the concern being the risk of industry fallout in an over‑saturated market, the CE in Council was entitled to take a prudent and cautious view that an over‑crowded market should be avoided so that the risk would not materialise, instead of allowing the market to become over‑crowded and then try to apply ex post facto measures to curb the problem which by then would have been a reality as opposed to a risk.  See Secretary of State for the Home Department v Rehman [2003] 1 AC 153 para 22.  That option, as Mr Yu submitted, must also be considered against the context that the CE in Council has by the same decision granted his approval‑in‑principle to add two broadcasters, thereby increasing the number of licences by 100%, and did not preclude the grant of further licences in the future.  What, in essence, was involved in the present case was a temporal decision dictated basically by prevailing economic and commercial considerations over a choice of which of the three contenders should be permitted to exploit the free television medium for commercial expression for the time being.  I agree with Mr Yu’s submission.

113. It should also be noted that the CE in Council’s concern was not only confined to programme quality as a result of vicious competition, but related also to avoiding too drastic and unpredictable changes, enhancing healthy competition in the market, and developing Hong Kong’s reputation as a regional broadcasting hub.  The CE in Council was entitled to adopt a cautious approach.  On the evidence, he did consider whether the problem could be dealt with by control of programme quality but rejected this on the basis that there should not be pre‑censorship and it would be contrary to the opening up of the market to impose stringent conditions. All these matters were policy considerations, falling within the broad margin of appreciation that the court should accord to the CE in Council’s judgment on them.

114. In any event, the rejection of the applicant’s licence application was only for the time being.  The applicant is not forever barred from applying for a licence.  As a matter of fact, since the rejection, the applicant has put in a fresh application, which will have to be considered by the Authority and then the CE in Council in accordance with the Ordinance and the then circumstances prevailing.

115. For these reasons, I reject the applicant’s proportionality argument.

FAILURE TO CONSULT THE AUTHORITY

(a)   The arguments

116. The applicant complains that the CE in Council failed to seek the views of the Authority in relation to fundamental matters which determined the outcome of its licence application.  Specifically, these matters include whether the gradual and orderly approach ought to be adopted; the number of licences to be granted under such an approach; and the ranking of the three applications if some but not all were to be successful. Mr Coleman, despite some wavering at the hearing of the appeal, eventually confirmed that he was not suggesting the CE in Council had breached the statutory requirement to obtain and consider the recommendations of the Authority before exercising his discretion under section 10(1).  He accepted that the requirement had been fulfilled – the Authority had made its recommendations, which had in fact been taken into account by the CE in Council.  His complaint was directed at a lower level, that is, as a matter of common law, based on authorities such as Secretary of State for Education and Science v Tameside Metropolitan Borough Council [1977] AC 1014, there was a duty on the part of the CE in Council to take reasonable steps to equip himself with the necessary relevant information to enable himself to make an informed decision, and he failed to do so.  He submitted that the CE in Council, as decision maker under section 10(1), could not proceed to exercise his discretion and allow it to be swayed by a factor which was inadequately presented to him: Prest v Secretary of State for Wales [1983] 1 EGLR 17, 21.  Mr Coleman pointed out that in relation to other matters, the CE in Council did ask the Authority for further information or clarification, but not the three crucial matters described above.

117. Mr Yu did not dispute the law, but pointed out that there was a distinction between opinion and fact.  Relying on CREEDNZ Inc v Governor‑General [1981] 1 NZLR 172, 200, Mr Yu submitted that when taking into account relevant considerations, the decision maker should not be misinformed as to established and material facts, including in that expression incontrovertible expert opinion.  However, “[t]he emphasis must be on what is reasonable in all the circumstances and that obligation does not, of course, require the decision‑maker to ascertain and consider the views of everyone who may have an opinion on the point” (p 200).

(b)  My views

118. In my view, these general principles are perfectly fine as far as they go.  But the facts and context are all‑important.  In the present case, it is plain that the Ordinance does not require the CE in Council to take into account any particular consideration, apart from the recommendations of the Authority as well as, for reasons explained, public interest.  It is for the CE in Council to decide what he thinks is relevant and should be taken into account, and the weight to be attached to any such relevant consideration.  As has been accepted, the CE in Council has received the very detailed recommendations of the Authority supported by the consultant reports.  The Authority has clearly expressed the view, particularly in the passages extracted above, that it would be in the public interest to grant all three applications and leave the licensees to the market to compete.  For that reason, the Authority did not find it necessary to rank the licence applicants.  The Authority was fully aware of the question of the relative competiveness of the three licence applicants, as well as the question of market sustainability.  A substantial portion of the recommendations and, in fact, several reports were devoted to these topics. However, the Authority took the view that competition and market sustainability should best be left to the market to test and decide.  Thus, the Authority came to its ultimate recommendations that all three licences should be granted, all three licence contenders should be given a chance to compete with each other and with the two incumbents in the market, and therefore there was no need to rank them – although the consultant did.  Plainly, the Authority came to these views after a consideration of, amongst other things, public interest.  The Authority said it in so many words in paragraph 12 specifically (“[t]he BA is therefore convinced that the grant of new licences would be in the public interest”).  On those facts, the CE in Council had already received the views of the Authority in terms of whether, as a matter of public interest, all three licences should be granted and all three licence applicants left to the market to find out who would survive and flourish and who (if any) would perish.  The CE in Council had already got the Authority’s view on the number of licences to be granted.  Furthermore, although the Authority, based on its own reasoning, did not find it necessary to rank the three licence applicants, the CE in Council had already received, as part of the recommendations, the various reports of the consultant which did rank the licence applicants under different scenarios and according to various criteria.

119. Plainly, the CE in Council took a different view from the Authority.  However, on the question of whether the CE in Council ought to have returned to the Authority for further advice, on those facts as outlined above, I do not think the CE in Council was under any Tameside duty to do so.  He might, if he wanted to; but if, as was the case, he did not, he could not be criticised for not doing so.  The CE in Council had already been told the Authority’s views on whether all licences should be granted in one go and let the market be the final arbiter.  I do not think he was under any common law duty to go back to the Authority on the gradual and orderly approach if (as was the case) he did not want to do so.  Likewise, as regards the number of licences to be granted, the CE in Council had already got the consultant reports telling him the chances of failure of the licence applicants and the incumbents in terms of the number of licences that might be granted.  It was a matter of judgment that the CE in Council could exercise, assisted by the consultant reports.  I do not think by not going back to the Authority, the CE in Council had failed to equip himself with all necessary information to enable himself to make an informed decision.  As regards ranking the licence applicants, again the consultant had done the rankings in its reports.  In the Authority’s recommendations, the Authority did not express any disagreement with or adverse comments on the rankings done by the consultant.  The CE in Council obviously felt himself able to digest the reports and rankings, and rank the licence applicants accordingly. I do not believe the Tameside duty would go so far as to require the CE in Council, if (as was the case) he did not think it necessary or desirable to do so, to go back to the Authority for further advice nonetheless.  The Authority and the CE in Council may, and on the facts of this case, did, disagree with each other.  But that is not the issue here.  The issue is whether, on the facts of this case and as a matter of common law, the CE in Council had to go back to the Authority for further advice, despite the absence of any such requirement in the Ordinance.  I do not think so.

120. A related point here run by Mr Coleman is that none of the two incumbents were ranked together with the three applicants.  The CE in Council should have either gone back to the Authority, or at least to the consultant, to ask for further information to equip himself with the necessary facts and expert advice before doing the ranking himself.

121. Again, on the facts, I reject the point.  As was pointed out at the hearing, the licences of the two incumbents were not in issue.  Each had a licence already.  The occasion was not one for the CE in Council to consider the early termination or renewal of the licences.  So one had to start with the status quo that there were already two incumbents in the market, and both of them had been around for decades. In fact, the consultant advised in its reports that ATV was likely to survive even with added competition following the grant of licences.  In those circumstances, given the adoption of the gradual and orderly approach (which, for reasons explained, cannot be challenged), the CE in Council was perfectly entitled to simply rank the three applicants and decide to grant only two licences.  In any event, in the very detailed reports by the consultant, various scenarios had been discussed, and the survivability of the two incumbents had been specifically considered.  I do not accept the CE in Council did not have all the necessary information before him to do the ranking himself. Whether it was desirable to ask for further information is neither here nor there.  That is not the Tameside duty test.

122. It is true that the Authority is a specialist industry regulator with expertise in the broadcasting industry.  But it does not follow, and the Ordinance actually provides otherwise, that the CE in Council must heed the recommendations of the Authority.  Nor does it say that the CE in Council must always go back to the Authority for views and advice every time he is minded to disagree with the Authority.  The fact that he has, for good reasons of his own, chosen to go back to the Authority for information and advice in relation to other matters – whether they were matters constituting necessary relevant information to enable the CE in Council to make an informed decision or not – is neither here nor there.  What is in issue is whether in relation to the three matters relied on by Mr Coleman, they were matters which, without the Authority’s further input, the CE in Council did not have all the necessary information to enable himself to make an informed decision.  I am unable to come to that view.  I reject this ground of judicial review.

Procedural unfairness

123. The applicant complains that the procedure adopted by the CE in Council was unfair in that although it was given an opportunity to comment on the newly adopted gradual and orderly approach and make representations accordingly, it was not permitted to amend, modify or revise its application.  If it were to do so, its application would be regarded as a new one and the statutory process would have to start all over again (and thus delay etc).

124. As was pointed out at the hearing, this argument is rather academic.  If the applicant succeeded on the misinterpretation or misapplication of government policy argument, it would be home.  If, on the contrary, there was no misunderstanding or misapplication of the policy on the part of the CE in Council, it would mean it was actually the applicant who had misunderstood the policy to mean that there would be no competition amongst different applicants for licence, in which case it would lie ill in the mouth of the applicant to complain that the CE in Council did not allow it to revise, amend or modify its application midway through the process.

125. In any event, I agree with the judge that everything that the applicant had wanted to say regarding the gradual and orderly approach and its implications had been said in the very detailed representations it made in response to the CE in Council’s invitation (paras 94 to 96 of the judgment).  The only matter that was not covered (management team) was not something on which the CE in Council’s refusal was based.

Reliance on the consultant reports

126. The applicant contends that the CE in Council ought not to have relied on the consultant reports, which were prepared on the (flawed) basis that there was to be no pre‑set limit as understood by the applicant.  Mr Coleman vaguely mentioned some part of the evidence to the effect that a director of the consultant had, after the event, said publicly that the reports of the consultant were prepared on its understanding of the government policy of no pre‑set limit, and it would have prepared the reports differently had it been informed of the gradual and orderly approach.

127. I do not accept the point.  As mentioned, the instructions by the Authority and the reports by the consultant were squarely on the relative competitiveness of the licence applicants and market sustainability.  Different scenarios were looked at and the licence applicants were ranked respectively in accordance with these scenarios, and also in accordance with the various criteria adopted. Obviously, both the Authority and the consultant knew what they were talking about.  Whether the reports would have been written in any other manner or style is a matter of speculation; one director’s post‑event comments cannot reasonably be taken to be indicative of what the consultant might have done or not done at the time.  As mentioned, the Authority and the CE in Council obviously took different views as to whether it would be in the public interest to give all three licence applicants a chance to compete and let the market be the final arbiter, or whether to take a gradual and orderly approach.  The consultant had done its part.  It had supplied to the Authority all the primary information, and gave its opinion on the relative strengths and weaknesses of the parties concerned as well as its rankings.  Itwas for the CE in Council to make up his mind.  He did so, and in my view, his decision cannot be faulted for his not returning to the Authority or the consultant again, or for his reliance on any part of the consultant reports.  What the CE in Council was entitled to do, including referring the matter back to the Authority and/or the consultant for further consideration and advice, and what he was, as a matter of law, required to do, are two different matters.

128. I therefore reject this ground of judicial review.

Disposition

129. For all these reasons, I would allow the appeal, set aside the judgment and order of the learned judge and order that the application for judicial review be dismissed.  I would make an order nisi that the CE in Council shall have the costs of this appeal as well as the costs of the proceedings below, together with a certificate for two counsel; such costs are to be taxed if not agreed.

Hon Barma JA:

130. I agree with the judgment of the Chief Judge.

Hon Poon JA:

131. I agree with the judgment of the Chief Judge.

Hon Cheung CJHC:

132. Accordingly, we allow this appeal and make the orders as indicated in paragraph 129.