HONG KONG CLAYS AND KAOLIN CO. LTD. v. THE DIRECTOR OF LANDS

1996 M.P. No. 3718

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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INTRODUCTION

1. The Applicant, Hong Kong Clays and Kaolin Co. Ltd. ("the Company"), mines kaolin and feldspar on a site in Cha Kwo Ling. It was originally granted a mining lease to extract minerals there in 1961, though it claims to have been conducting mining operations at the site since 1939. It has also been granted a lease of the site itself. Both leases are dependent on each other, because the lease for the site provides that the lease would automatically cease if the mining lease was determined. The two leases were due to expire on 31st July 1996. However, on 26th July 1996, the Director of Lands ("the Director") decided not to renew the leases on their expiry. It is that decision which the Company challenges on this application for judicial review. All references in this judgment to sections of an ordinance are references to the Mining Ordinance (Cap. 285) ("the Ordinance"), unless otherwise stated.

THE RELEVANT STATUTORY PROVISION

2. Section 24(2) provides :

"If, during the term originally granted or any renewal thereof -

(a) the lessee has carried on work in a normal and businesslike manner;

(b) the lessee has in all respects performed and observed all the terms and conditions of the lease; and

(c) the lessee has given to the Director of Lands not less than 6 months' prior notice in writing of his desire to obtain renewal of the lease,

the lessee may be granted, on payment of the prescribed fee and subject to the provisions of this section, a renewal of the lease for such term as may be approved by the Director of Lands, not exceeding twenty-one years, upon the conditions and subject to such rentals, fees, royalties, premiums and other payments as are then applicable to new leases and subject to such covenants and conditions as the Director of Lands may determine."

It is contended by Sir John Swaine Q.C. for the Company that, on its proper construction, section 24(2) required the Director to renew the leases (albeit on such terms as he determined) if the three conditions had been satisfied. Since the Company claims to have satisfied those conditions, the Company was entitled as of right to a renewal of the leases. Alternatively, if section 24(2), on its proper construction, gave the Director a discretion whether or not to renew the leases, he was obliged to renew them unless there was good reason for not doing so. For his part, Mr. Warren Chan Q.C. for the Director argues that section 24(2) conferred on the Director merely a power to renew the leases, not a duty to do so. Accordingly, he had a discretion whether or not to renew the leases, and an unfettered discretion at that.

3. The language of section 24(2) is permissive, not imperative : "the lessee may be granted ... a renewal of the lease". Although that is a strong indication that the Legislature intended to confer a discretion on the Director, it is not conclusive. It is necessary to consider the Ordinance as a whole to see whether, despite the language which the Legislature used, the Legislature must be regarded as having intended to impose a duty on the Director to renew a mining lease if the conditions in section 24(2) are satisfied. For example, licensing authorities who were empowered to renew the licences of taxi-drivers were held to be obliged to do so where an applicant had complied with prescribed procedural requirements : R. v. Metropolitan Police Commissioner ex p. Holloway [1911] 2 KB 1131.

4. The Company's argument is that the Ordinance is a complete code governing mining in Hong Kong. Thus, it includes provisions for the payment of compensation to the lessees of mining leases who are adversely affected by the closure of an area to mining (section 12) or whose sites are resumed because they are required for a public purpose (section 65). Compensation is necessary in such cases because of the substantial capital investment which a mining lessee inevitably makes when he engages in mining operations. Accordingly, it is said that the policy underlying the Ordinance is not to deny a mining lessee, who has complied with the terms of his lease and who has carried on his mining operations in a proper manner, the opportunity to continue mining unless he is compensated for it. That is claimed to be borne out by what was said by the Attorney-General when he moved the First Reading of the Bill which was later enacted as the Mining Ordinance :

"Under the new legislation, it will be possible for mining companies and firms to obtain leases for 21 years (or longer if the Governor in Council approves), and provided the lessee carries on mining in a businesslike manner, he will have security of tenure": Hong Kong Legislative Council, Reports of Proceedings, 28th July 1954.

5. I cannot go along with this argument. There are circumstances in which a mining lessee who has complied with the terms of his lease and who has carried on his mining operations in a proper manner loses the opportunity to continue mining without compensation. Section 9 provides that "No ... mining lease ... shall be deemed to authorize ... mining" on certain sites. One such site is a site within 100 metres of a building (except with the owner's written consent). Accordingly, if, during the term of the lease, such a building is erected, and the owner does not consent to the mining continuing, the mining has to stop. No compensation is payable in such circumstances.

6. I accept that mining involves a long-term commitment on the part of the mining lessee. That, no doubt, is why the Legislature gave the Director the power to grant leases for long periods. Section 24(1) gives the Director power to grant mining leases for terms up to 21 years, and section 24(3) gives the Governor-in-Council the power to grant mining leases for even longer than that. Accordingly, the protection which a mining lessee needs against the early cessation of his mining operations is reflected in the length of the term which the Director and the Governor-in-Council are empowered to grant. Since it is open to prospective mining lessees to obtain security of tenure by negotiating the grant of leases for many years, the "security of tenure" which the Attorney-General could well have had in mind was security during the period of tenure. The intensive nature of mining operations does not, therefore, amount to a compelling need to give mining lessees the additional protection which the Company's construction of section 24(2) provides for.

7. Moreover, to construe section 24(2) in the way contended for by the Company would enable mining lessees, who comply with the terms of their leases and carry on their mining operations in a proper manner, to obtain perpetually renewable leases, subject only to the Governor's power under section 11 to close areas for mining and the Governor-in-Council's power under section 65 to resume the site if it is required for a public purpose. Such a construction would result in a number of anomalies. To give just two examples :

(i) If the site might be required for a public purpose in the near future, but was not required for that purpose at the time the lease came up for renewal, the Director would be required to renew the lease.

(ii) The same is true if the mine is close to exhaustion. Section 22(1) provides that a mining lease can only be granted if the Commissioner of Mines "is satisfied that the mineral-bearing qualities and quantities ..... are such as to justify the grant of a mining lease". On the Company's construction of section 24(2), the Director would have to renew the lease even if the Commissioner is not so satisfied.

I take the point that it would be open to the Director to renew the leases for short periods only, i.e. until the date when it was expected that the site would be required for a public purpose or the mine would be exhausted. But it may be very difficult for the Director to assess those dates with precision. Why should he be obliged to renew the leases, and thereby run the risk of doing so for longer than is appropriate and rendering the Government liable to pay compensation on resumption? A power to renew a mining lease, rather than a duty to do so, avoids these anomalies, and enables the Director to take into account the whole range of considerations which might militate against the renewal of the lease - planning, environmental and the like.

8. For these reasons, I construe section 24(2) as conferring on the Director a power to renew a mining lease, not a duty to do so, provided that the mining lessee has satisfied the conditions set out in section 24(2). That discretion is an unfettered one, though it is reviewable by the court by way of judicial review.

THE EXERCISE OF THE DIRECTOR'S DISCRETION

9. The Company's request for the renewal of the leases was considered by various officers at a meeting held on 17th July 1996. At the meeting, it was decided that the Company's request for leases for a further term of not less than 10 years should be refused. There had been a recommendation to renew the leases for two years, but it was decided not to approve that recommendation.

10. The document in which the views of the officers at the meeting were recorded is a document headed Land Administration Meeting. Paras. 1-12 of the document set out the background facts, paras. 13-15 set out the views and recommendations of the officer briefing the meeting, paras. 16-19 summarises the discussion at the meeting, and para. 20 sets out the decisions reached at the meeting and the reasons for them. Three reasons were given for the decision not to renew the leases :

(i) the site was no longer being used for the purposes for which the leases had originally been granted;

(ii) the site was required for public purposes; and

(iii) the current use of the site caused environmental problems.

Para. 21 recorded the fact that the Ordinance did not confer on the Director the authority to delegate his power of renewal under section 24(2). Accordingly, a copy of this document, together with the four appendices to it, was placed before the Director. He endorsed the decisions made, and did so for the same reasons.

11. It is apparent that the Director did not in terms address the question whether the Company had satisfied the three conditions in section 24(2). The Director's view that the site was no longer being used for the purpose for which the leases had originally been granted did not necessarily mean, for example, that the Company had failed to comply with section 24(2)(a) - although there is obviously a significant degree of overlap between the two. Accordingly, the Director's approach was to exercise his discretion not to renew the leases, irrespective of whether the Company had or had not satisfied the conditions in section 24(2). In those circumstances, the issue which this application raises is whether the exercise of that discretion was so flawed, so Wednesbury unreasonable, that the decision he made cannot stand. Sir John attacks each of the three reasons on which the Director based his decision, and I will deal with each of them in turn.

(i) Non-use of the site. The New Territories Leases (Extension) Ordinance (Cap.150) extended the terms of New Territories leases until 2047. However, leases for special purposes, including the Company's leases, were excluded, and in 1987 the Government issued a pamphlet explaining what its policy on the extension of such leases was. Para. 13

12. read :

"Each lease granted for a special purpose will be examined before a decision is taken on extension. However, in general, leases for special purposes will be extended unless the land is required for a public purpose or is no longer being used for the purpose for which it was originally granted. Most extensions will be to 30th June 2047; some might be for a shorter period if the land is likely to be required for a public purpose before that date or is unlikely to be needed for its original purpose for the full period."

Accordingly, in deciding not to renew the leases on the ground that "the land was no longer being used for the purpose for which it was originally granted", the Director was applying existing Government policy. There is no challenge to the fairness or legality of that policy.

13. The document placed before the Director explains why the Director came to the view that the site was no longer being used for mining. For some time, an associated company of the Company had wanted to develop the site. Various proposals had been presented to the Town Planning Board, the latest proposal being for the construction of five residential blocks of 1,600 flats, a hotel with 450 rooms, two primary schools, a public open space and various community facilities. In addition, section 10 of the Ordinance required the Company to pay royalties on all minerals obtained in the course of its mining operations, and the document noted that royalties were only being paid in respect of "the disposal of the stock minerals on site".

14. That statement is important. The Company operated a ceramic tile factory on the site. The kaolin and feldspar which the Company had been mining were used in the factory in the manufacture of ceramic tiles. Royalties were payable in respect of the kaolin and feldspar mined and used in the factory: see reg. 30(4A)(a) of the Mining (General) Regulations. The point which the document was making was that royalties were being paid by the Company only on sales of old stocks. Since it was not paying royalties on the kaolin and feldspar which it claimed still to be mining and using in its factory, it had to be presumed that the Company had ceased mining for kaolin and feldspar. I appreciate that it was for the Commissioner of Mines to specify a rate per tonne at which royalties would be payable for such kaolin and feldspar as the Company used in its factory, but he can only do that if he is told that the kaolin and feldspar used in the factory came from mining at the site. It is not suggested that the Company did that. In these circumstances, it was, in my view, open to the Director reasonably to conclude on the material before him that the Company had run down its mining operations on the site pending the proposed development of the site by its associated company.

15. The Company wishes to challenge that finding. It has filed evidence which sets out to show that it was still carrying out mining operations on the site when the renewal of the leases was refused, and that it is still carrying out mining operations to this day. However, Sir John recognised the difficulties which the Company faced in challenging a finding of fact which was exclusively within the jurisdiction of the Director to make, and which I have now found was one which was reasonably open to him to make. In the light of Nguyen Ho v. The Director of Immigration [1991] 1 HKLR 576, the evidence which Sir John sought to rely on would only be admissible if it showed that the Director's conclusion that the site was no longer being used for mining was "plainly wrong".

16. I have read that evidence with care. It consists of affirmations from the Company's plant manager and from one of its directors. I have also read the evidence filed on behalf of the Director disputing the Company's evidence. That consists of affirmations and an affidavit from two geo- technical engineers in the Civil Engineering Department (one in the Mines and Quarries Division and the other in the Geological Survey Section of the Planning Division) and from a mining/minerals processing engineer in the Department. I have also read the affirmation of another of the Company's directors filed in response to that evidence. Some of the evidence touched upon an issue which was not referred to in the document placed before the Director, and which the Director did not take into account, namely whether the site had been "mined out" and its mineral-bearing capabilities exhausted. However, the rest of the evidence does indeed address the question whether the Director was "plainly wrong" to conclude that the site was no longer being used for mining.

17. I have to say that the evidence is far from demonstrating that the Director was "plainly wrong". I say that for three reasons :

(a) The Company claims that the royalties which were being paid by it did not relate to old stock which had been stockpiled. It claims that the royalties were being paid in respect of a product known as "washed sand", which is a by-product of the process in which kaolin and feldspar are separated. But even on the assumption that that is correct, it does not explain why royalties were paid by the Company on washed sand only, if kaolin and feldspar were still being mined at the site.

(b) On the day of the visit in November 1996 by the three engineers who have filed evidence on behalf of the Director, no mining was taking place.

(c) The Company admits that the processing of the kaolin and feldspar which it claims still to be mining had not been taking place in the processing plant on the site since early 1996. It asserts that the reason for that was because the plant provoked complaints from local residents. The Company claims that the kaolin and feldspar which it is still mining is sent for processing to other plants, and once processed it is returned to the site for use in the factory. However, in the view of one of the three engineers, the processing plant was seriously rusted and overgrown. He could tell from the condition of the plant that it had not been used "for years".

It follows there are no grounds on which the Company can challenge in these proceedings the Director's finding that the site was no longer being used for mining.

18. However, the final point made on behalf of the Company is a more powerful one. It points out that it was never warned that its request for a renewal of the leases might be refused on the ground that the site was no longer being used for mining. Had it been warned of that possibility, it would have made suitable representations on the issue. In particular, it would have placed before the Director the evidence which it has placed before me (admittedly to show that the Director's finding was "plainly wrong"), and that may have caused the Director to take a different view of the matter.

19. The Director's response to this argument is conveniently summarised in Mr. Chan's skeleton argument :

" No leave has been given to the Applicant to rely on any natural justice ground. Anyway, the Applicant has no right to a hearing as the Director of Lands does not act in any judicial or quasi-judicial function. The exercise of the discretion is administrative and is therefore not subject to the rules of natural justice [In re an application for judicial review by K.O.Y. Investment Co. Ltd. (1983) HKLR 28]. There is nothing in the Mining Ordinance which requires the Director of Lands to hear representations from the Applicant but of course the decision he makes has to be Wednesbury reasonable."

20. I cannot go along with this argument. Para. 27 of the Notice of Application contained the assertion that the Company should have been given "an opportunity to address any concerns that Government may have in its consideration whether to renew or not", and the leave to apply for judicial review was not limited to any particular grounds in the Notice of Application. Moreover, the Company does not contend that it was entitled to a hearing. Its case is simply that the duty on the Director to act fairly required him to notify the Company of his concerns so as to enable the Company to make representations to him on the topic. The K.O.Y. Investment case did not absolve the maker of a purely administrative decision from the duty to act fairy. In any event, procedural fairness is no longer restricted by the distinctions between judicial and administrative functions, and the term "natural justice" is being increasingly replaced by the general duty to act fairly, which is the key element of procedural propriety: see De Smith, Woolf and Jowell, "Judicial Review of Administrative Action", 5th ed., para. 8-001.

21. I have no doubt that the importance to the Company of the renewal of the leases imposed on the Director a duty to act fairly. However, the requirements of fairness are not engraved on tablets of stone. They depend on the circumstances of each case. The question is whether, when considering the request to renew the leases, fairness required the Director to notify the Company of his provisional view that mining was no longer taking place at the site so as to enable the Company to make representations to him on the topic. The general rule is clear. If prejudicial information is going to be taken into account by a person charged with making a decision in the administrative field, fairness would normally require the body which could be adversely affected by that information to be given the opportunity "to controvert, correct or comment" on it: see De Smith, Woolf and Jowell, ibid., para. 9-018. Apart from anything else, it makes the ultimate decision a more informed one. The prejudicial information in this case was the fact that royalties were only being paid in respect of "the disposal of stock minerals on site".

22. Mr. Chan's response was not without force. He argued that the duty on the Director to act fairly in considering the renewal of a mining lease did not include informing the lessee of the reasons he had in mind for refusing the renewal. It would be absurd to expect that every time a landlord decides not to renew a tenancy. Prior notice is not required when the Governor-in-Council decides to order the resumption of land for a public purpose under section 3 of the Crown Lands Resumption Ordinance (Cap. 124). Most important to all, when the Director has it in mind to revoke a mining lease, he is required to give the lessee "an opportunity to show cause why the lease should not be revoked" : see section 31(2). The express requirement of such an opportunity under section 31(2) is in stark contrast to the absence of such a requirement in section 24.

23. I cannot go along with these arguments. It is wrong to compare the Director's power under section 24 with the power of a private landlord in relation to the renewal of a tenancy. When the Director is deciding whether to renew a mining lease, he is exercising a public function. He has to balance the interest of the lessee in having his lease renewed against the interests of the public which may be affected by mining continuing at the site. The analogy with the power of the Governor-in-Council under the Crown Lands Resumption Ordinance is not apt : the former owner of the land is entitled to claim statutory compensation.

24. The more difficult point is the one raised by section 31. On balance, however, I do not think that I can infer, from the absence of an express requirement to give the lessee an opportunity to show cause why the lease should not be renewed, that the Legislature intended that no such opportunity should be given. The revocation of a mining lease involves the loss of an existing right, i.e. a right to continue mining at the site until the lease would have expired. The non-renewal of a mining lease does not involve the loss of an existing right. The Legislature may have intended that whether the opportunity to show cause why the lease should not be renewed should be left to the discretion of the Director. There is no evidence before me that the Director even considered whether or not to give the Company an opportunity to show cause. In any event, if the Legislature is to be regarded as having sanctioned a departure from the universally acknowledged duty to act fairly, clear words of enactment are necessary. That is not the case with section 24.

25. In my view, fairness to the Company in this case did require the Director, before he made a final decision on whether the leases should be renewed, to inform the Company that he was minded to conclude that it was no longer carrying on mining at the site, to notify the Company that that was because the Company had ceased to pay royalties on the minerals which it was claimed were being mined there, and to invite the Company to comment on that assertion, if it wished to, or to controvert it if the Company could. The Director did not do that. To that extent, there was an element of procedural unfairness in the decision-making process. Whether it should result in his decision being quashed is a matter to which I shall have to return in due course.

26. In the interests of completeness, I should add that Sir John argued that the Company had a legitimate expectation of being notified of any concerns which the Director may have had about the renewal of the leases so that the Company could make representations on them. However,

"alegitimate expectation must be induced by the conduct of the decision-maker. It does not flow from any generalised expectation of justice, based upon the scale or context of the decision" : De Smith, Woolf and Jowell, ibid., para. 8-050.

As Lord Fraser put it in Council of Civil Service Unions v. Minister for the Civil Service [1985] AC 374 at p.401B, a legitimate expectation may arise

"either from an express promise given on behalf of a public authority or from the existence of a regular practice which the claimant can reasonably expect to continue."

If the Company was expecting the opportunity to make representations on any concerns which the Director might have had about the renewal of the leases, such an expectation was not induced by anything which the Director had done.

(ii) Public purpose. Since the leases were originally granted, two large residential developments had been built in the vicinity : Laguna City and Sceneway Garden. There was a need for schools to be established in the area for children living there. That need was referred to in the document which the Director considered. Para. 7 recorded that site investigation and the construction of two primary schools on the site were due to commence in the last quarter of 1998 and early in 1999 respectively. In addition, para. 17 recorded one of the officers present at the meeting as reporting that the Director of Education "haad decided to put the school projects into the Official School Building Programme for bidding funds in the 1997 RAE [Resource Allocation Exercise] so as to commence site investigation works as scheduled in 1998. The site would therefore definitely be required for public purposes in the near future." It is not suggested on the Company's behalf that this was not an accurate summary of the position.

27. Two points are taken on the Company's behalf. First, there was no guarantee that the Director of Education's bid for funds to build the schools would be successful. Accordingly, there was no certainty that the site would be required for a public purpose at all. Secondly, even if the site would be required for the schools by 1998, the site would not be required for that purpose until then. Accordingly, there was no reason why the Director should not have renewed the leases for the two years which would have elapsed until the site was required for the schools. That would have been consistent with the recommendation made to the meeting.

28. In my view, there was nothing irrational about the Director's decision not to renew the leases on this ground. There may have been no certainty that funds for the building of the two schools would be made available, but provided that there was a chance that they would, there was at the very least the possibility of the site being required for a public purpose in the near future. In those circumstances, it would have been absurd for the Director to renew the leases for at least 10 years. To do so would have laid the Director open to the legitimate charge that he had run the real risk of the Government having to pay very substantial compensation to the Company under section 65, because the Government would have had to resume the site if, as was entirely possible, funds for the building of the schools were approved.

29. Was it irrational for the Director not to renew the leases for just two years? What the Director had to do was to balance the Company's desire to continue its operations for the time being against the possibility that the site would be required in two years' time. The decision may have been a fine one, but I cannot say that it was not reasonably open to the Director to conclude that in the circumstances the leases should not be renewed at all.

(iii) Environmental problems. Para. 6 of the document which the Director considered said :

"Over the past few years, a number of complaints regarding the adverse environmental nuisance generated by the mine and the ceramic tile factory have been received by DLO/KE [the District Lands Officer for Kowloon East] from residents of Laguna City and Kwun Tong DB [District Board] members. A recent complaint letter [from a resident of Laguna City] dated 18.6.1996 is attached at Appendix III."

30. Two points are taken on the Company's behalf. First, it is contended that environmental considerations was not a relevant factor for the Director to take into account. Mining is by definition inimical to the environment. The fact that it scars the landscape and may cause environmental pollution is inherent in mining. The remedy for any environmental problems which mining creates lies in the enforcement of those laws which govern the control of pollution (for example, the Air Pollution Control Ordinance (Cap. 311)) and of those provisions in the Mining Ordinance which seek to protect the environment (sections 6, 27, 28 and 28A). That is said to be in line with Pilling v. Abergele Urban District Council [1950] 1 KB 636. In that case, an appeal from the decision of a local authority to refuse a licence for land to be used as a caravan site was upheld. The licence had been refused on the ground that it would be too close to other dwellings, whereas the Act which had conferred the power of granting such licences related only to matters of health and sanitation.

31. I cannot accept this argument. The very fact that the Mining Ordinance deals, albeit in a modest way, with the environmental problems which mining might cause shows that concern for the environment is an issue which the Ordinance addresses. That being so, it would be surprising if the Director could not take environmental considerations into account when deciding whether to renew a mining lease - especially when the impact of environmental pollution has become greater since the original grant of the lease as a result of the construction of large residential developments in the vicinity. In my view, it does not follow that simply because certain environmental concerns are specifically addressed in the Mining Ordinance, the Director cannot take the whole gamut of environmental concerns into account.

32. Secondly, the Company makes the same point as it makes about the Director's belief that it was no longer carrying on mining on the site. It points out that it was never warned that its request for a renewal of the leases might be refused on environmental grounds. Had it been, it would have made suitable representations to the Director on the issue. In particular, it would have supplied the Director with copies of two reports dated December 1995 and March 1996 which had been commissioned by the Company from the Hong Kong Productivity Council and which had been supplied to the Environmental Department. * ¹

¹ footnote: * Although the March 1996 report purports to be a revised version of the December 1995 report, I have not discerned any difference between the two reports.

33. For the reasons I have already given, I agree with that criticism of the Director. Fairness required the Director, before he made the final decision not to renew the leases, to inform the Company that there had been complaints from local residents about the effect which the Company's mining operations had had on the environment, to notify the Company what the gist of those complaints were, and to invite the Company to comment on those complaints or to controvert them if it could. His failure to do so amounted to a flaw in the decision-making process. Whether that flaw should result in his decision being quashed is again a matter to which I shall have to return in due course.

THE VERBAL ASSURANCE

34. Earlier leases of the Company had expired in 1980. During the next 2-3 years, negotiations continued between representatives of the Company and officers in the Registrar-General's Department over the terms on which the leases would be renewed. Those negotiations centred on leases for a further 10 years expiring in 1990. The Company's case is that in the course of those negotiations it made it clear that it would be pointless to proceed any further "if the leases could not be renewed in 1990". The Company claims that eventually one of its directors was "assured that the leases would be renewed when the time came". It was on that basis, so it is said, that the Company agreed to a renewal of leases which did not contain any express terms providing for their automatic renewal in 1990. In those circumstances, the Company contends that it had a legitimate expectation in 1996 that the leases would be renewed for a further period.

35. This argument was relied on in the Company's Notice of Application. However, although Sir John did not abandon it, he elected not to make any submissions in support of it. I can understand why. On the assumptions (which are disputed) that the Company was given this assurance, and that the officer who gave it had the authority (actual or ostensible) to give it, the assurance related only to the renewability of the leases which expired in 1990. In the event, they were renewed for a further six years. True, it was necessary for the Company to issue proceedings in 1991 to force the Director to renew the leases, but the fact remains that he eventually did so. It is not possible to construe the assurance alleged to have been given in 1983 as relating to a further renewal of the leases in 1996.

RELIEF

36. In the normal course of events, the procedural defects which I have identified in the decision-making process would result in the quashing of the Director's decision not to renew the leases, and in his being required to reconsider the Company's request for their renewal. However, four reasons have been advanced for not granting any relief in this case. I must deal with each in turn.

(i) Even though the decision-making process was flawed in respect of two of the three reasons given by the Director for not renewing the leases, it is claimed that it would still have been open to the Director not to renew the leases on the ground which was not procedurally flawed, namely that the site would be required for a public purpose in the not too distant future. I cannot accept this argument. The Director has not identified what weight he attached to each of the three reasons which persuaded him not to renew the leases. It may be that the fact that the site was likely to be required for a public purpose would alone have persuaded him not to renew the leases. However, he has not said that, and I cannot assume that that would have been the case. It may have been open to the Director not to renew the leases on that ground alone, but the question is whether he would have decided not to renew them on that ground alone. It may be that he would have renewed them for just two years if their use in the future for a public purpose was the only valid reason for their non-renewal.

(ii) It is claimed on behalf of the Director that the Company had not satisfied two of the three conditions in section 24(2). If that is right, the Director's discretion to renew the leases had not even been triggered, and his decision not to renew them should not be quashed. But who is to decide whether the Company satisfied the three conditions? If it is for the Director to decide that (with his decision on the issue being open to review by the court), there could be no question of relief being denied on this ground. That is because the Director has not addressed the question of whether the Company has satisfied the three conditions. His decision not to renew the leases would have to be quashed, and on a reconsideration of whether the leases should be renewed, he could decide whether the Company has satisfied the three conditions. On the other hand, if the issue of whether the Company has satisfied the three conditions is for the court to decide, there would have had to be a further hearing for that issue to be gone into.

37. In my view, the issue of whether the Company has satisfied the three conditions is for the Director to decide. The problem is conveniently summarised in Wade and Forsyth, "Administrative Law", 7th ed., pp.291-292 as follows :

"Asa general rule, limiting conditions stated in objective terms will be treated as jurisdictional, so that the court will consider any admissible evidence of their non-fulfillment. In the majority of cases these 'limiting conditions' are easy to identify. But there are borderline cases where the question may, on a true view, be part of the matter which the administrative authority is empowered to decide conclusively, so that it is squarely within its jurisdiction."

One such case was R. v. Special Commissioners of Income Tax (1888) 21 QBD 313. Lord Esher M.R. identified at p.319 the two situations which the legislature might create :

"It may in effect say that, if a certain state of facts exists and is shewn to such tribunal or body before it proceeds to do certain things, it shall have jurisdiction to do such things, but not otherwise. There it is not for them conclusively to decide whether that state of facts exists, and, if they exercise the jurisdiction without its existence, what they do may be questioned, and it will be held that they have acted without jurisdiction. But there is another state of things which may exist. The legislature may intrust the tribunal or body with a jurisdiction, which includes the jurisdiction to determine whether the preliminary state of facts exists as well as the jurisdiction, on finding that it does exist, to proceed further or do something more."

38. I think that section 24(2) falls into the second category of legislative drafting. The first condition which section 24(2) requires the lessee to satisfy - that he carries on work in a normal and businesslike manner - is a matter of evaluation rather than of objective fact. The Director is in a much better position than the court to make a value judgment on the topic. It would be surprising if the Legislature had intended an evaluation of this kind to be a jurisdictional fact of the type to which the first of Lord

Esher's two categories of legislative drafting relates.

(iii) Section 9(a) provides :

"No...mining lease granted under this Ordinance shall be deemed to authorize ... mining on ... land set apart for ... any public purpose."

The Company's site was included in a draft Outline Zoning Plan ("OZP") gazetted in December 1993. The land to which the draft OZP related encompassed 5 zonings : open, green belt, industrial, road, and land reserved for Government, institution and community purposes. Mr. Chan contends, therefore, that by this route the Company's site had been set apart for a public purpose. Accordingly, the Director's decision not to renew the leases should not be quashed because the grant of a new mining lease would not enable the Company to carry on its mining operations. I reject this argument. However detailed a draft OZP is, and whatever rights may flow from its gazetting, the fact remains that it is still a draft plan. It may be amended. It may or may not be approved. It constitutes the Town Planning Board's proposals for the layout of a particular area, but that is all. In my view, land has not been set apart for any public purpose for the purposes of section 9(a) merely by reason of its inclusion in a draft OZP, until at least such time as the draft OZP has been approved by the Governor-in-Council. Only then can it be used by public officers and bodies as standards for guidance in the exercise of any powers vested in them.

(iv) Even if the Company had been able to address the Director's

belief that the site was no longer being used for mining, and his concerns about the environment, it is said that there is no chance that such representations as would have been made would have affected his views on those issues. He would still have concluded that the site was no longer being used for mining, and that environmental considerations militated against the renewal of the leases. Mr. Chan contends that requiring him to reconsider those issues, therefore, would be an exercise in futility, because the result would inevitably be that the same decision would be made.

39. The court should be very slow to conclude that even if the decision-making process had not been procedurally flawed, the decision-maker would have come to the same decision. Bingham L.J. (as he then was) gave a number of reasons for that in R. v. The Chief Constable of The Thames Valley Police ex p. Cotton [1990] IRLR 344 at para. 60 :

"1. Unless the subject of the decision has had an opportunity to put his case it may not be easy to know what case he could or would have put if he had had the chance.

2. As memorably pointed out by Megarry J. in John v. Rees [1970] Ch. 345 at p.402, experience shows that that which is confidently expected is by no means always that which happens.

3. It is generally desirable that decision-makers should be reasonably receptive to argument, and it would therefore be unfortunate if the complainant's position became weaker as the decision-maker's mind became more closed.

4. In considering whether the complainant's representations would have made any difference to the outcome the court may unconsciously stray from its proper province of reviewing the propriety of the decision-making process into the forbidden territory of evaluating the substantial merits of a decision.

5. This is a field in which appearances are generally thought to matter.

6. Where a decision-maker is under a duty to act fairly the subject of the decision may properly be said to have a right to be heard, and rights are not to be lightly denied."

I accept that not all of these reasons apply in the present case. For example, with one exception, I do know what representations the Company would have made if it had been given the opportunity to do so. The exception is what explanation the Company would have given to the Director for not having paid royalties on the kaolin and feldspar which it claimed still to be mining.

40. I think that it is unlikely that the Director's concern about the effect on the environment of the renewal of the leases would have been changed by the reports which the Company would have submitted to him. After all, it would not have been suggested to the Director that the Company had in fact taken any of the steps recommended in the reports on which it relied. I think that it is also unlikely that the Director's belief that the site was no longer being used for mining would have been changed if the evidence which has been placed before me would have been submitted to him. But on balance, I cannot exclude the possibility of his views being changed by such representations as the Company would have chosen to make. If I were to exclude that possibility, I fear that I would be straying into the very territory which is barred to me.

CONCLUSION

41. In these circumstances, I have not been persuaded that there is a sound basis on which the primary relief which the Company seeks should be denied. I make an order of certiorari quashing the decision of the Director not to renew the leases. It follows that he will now have to reconsider the Company's request for a renewal of the leases according to law. As it is, the Company has succeeded on the very narrow basis, albeit an important one, of procedural impropriety. Its primary arguments relating to the construction of section 24(2) and the exercise of the Director's discretion on the material before him have failed. In the circumstances, I do not think that the costs should follow the event in their entirety. The order nisi which I make as to costs is that the Director should pay to the Company one-half of its costs to be taxed if not agreed.