HONG KONG RIFLE ASSOCIATION v. HONG KONG SHOOTING ASSOCIATION

CACV 174/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 174 OF 2012

(ON APPEAL FROM HCAL NO. 21 OF 2012)

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REASONS FOR JUDGMENT

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Hon Kwan JA (giving the Reasons for Judgment of the Court):

1.  On 20 July 2012, Poon J refused to grant leave to the Hong Kong Rifle Association (“the HKRA”) to bring an application for judicial review against the Hong Kong Shooting Association (“the HKSA”) on jurisdictional grounds, in that the decision of the HKSA that is being challenged is not amenable to judicial review. The HKRA brought this appeal against the refusal of leave. The focus of this appeal is whether the judge was correct in holding that the decision under challenge is not a matter of public law and hence not susceptible to judicial review. Unless and until this jurisdictional hurdle is overcome, it is unnecessary to go into the merits of the intended application for judicial review.

2.  The decision of the HKSA that is being challenged is its decision on 15 December 2011 to reject the application of the HKRA for reinstatement of its membership with the HKSA (“the Decision”).  For this appeal, we are concerned with the memorandum and articles of association of the HKSA that were in force at the time of the Decision.  The memorandum and articles of association have since been amended at an Extraordinary General Meeting on 10 December 2012, making very substantial changes to its membership structure.  These changes make one question what useful purpose the application for judicial review could serve, because even if the Decision were to be set aside, the HKSA could not be directed to reconsider the application of the HKRA under the old articles of association no longer in force.  Any application for admission of the HKRA as a member would have to be dealt with under the new articles of association and the HKRA has made an application under the new articles on 28 May 2013.

3.  At the conclusion of the hearing, we dismissed the appeal with costs.  These are the reasons for our judgment.

The HKSA

4.  We will first set out the relevant factual background relating to the HKSA.  Unless otherwise stated, all references below are to the old memorandum and articles of association.

5.  The HKSA is a company limited by guarantee incorporated in Hong Kong in 1994.  It is the sole governing body of all shooting sport in Hong Kong under the rules of the Union International de Tir (“UIT”; now known as the International Shooting Sport Federation, “ISSF”), the International Olympic Committee (“IOC”) and the Commonwealth Games Federation (“CGF”).  Among the objects of the HKSA are the selection of teams from the public to represent Hong Kong in international competitions in the UIT, IOC and CGF[1], the promotion of the sport of shooting under the rules and regulations of the UIT, IOC and CGF, the taking of such steps as deemed necessary or advisable for preventing infringements of the rules or other improper methods or practices and for protecting the sport from abuses.

6.  The two founding members of the HKSA were the HKRA, which had a history going back to the 1920s as an unincorporated body and was incorporated as a company limited by guarantee in 1986, and the Hong Kong Gun Club (“the HKGC”), which was first incorporated in 1949.  At all material times, the HKRA and the HKGC remained as the only two Members of the HKSA.  A “Member” was defined in article 2(e) to mean a shooting association or club legally constituted in Hong Kong participating in shooting UIT events and maintaining at least three permanent and distinct UIT regulation ranges suitable for selection shoots (i.e. 10 metres, 25 metres, 50 metres and/or a clay target range) and which has been admitted to full membership of the HKSA.

7.  The other class of members in the HKSA is “Associate Member”[2].  There were three Associate Members at all material times.  An important difference between the rights of a Member and those of an Associate Member is that the latter is not entitled to vote at any General Meeting[3].

8.  The HKSA is a holder of a licence under section 21 of the Companies Ordinance, Cap 32, which provides that where it is proved to the satisfaction of the Registrar of Companies that an association about to be formed as a limited company is to be formed for promoting commerce, art, science, religion, charity or any other useful objects, and intends to apply its profits, if any, or other income in promoting its objects, and to prohibit the payment of any dividend to its members, the Registrar may by licence direct that the association may be registered as a company with limited liability, without the addition of the word “Limited” to its name.  The HKSA is not a profit-making entity[4] and is dependent to a large extent on Government subvention for funds to operate. It is not however registered as a charitable body qualified for tax exemption under section 88 of the Inland Revenue Ordinance, Cap 112.

9.  Under the existing framework for sports management of the Government, “National Sports Associations” (“NSAs”) are responsible for administering and promoting their sports in Hong Kong.  NSAs are sanctioned by both the International Federation (“IF”) for that particular sport and by the Sports Federation & Olympic Committee of Hong Kong, China (“SF&OC”).  NSAs are independent legal entities with full autonomy and the expertise to administer their sports in compliance with the codes and standards promulgated by their respective IFs and they are the highest-level internationally authorised sports body responsible for their respective sports locally.  The Government, through the Home Affairs Bureau (“HAB”) as a policy bureau and the Leisure and Cultural Services Department as an executive department, works in partnership with NSAs to facilitate development of sport by providing venues and funding support.  The Government respects the autonomy of NSAs to develop their respective sports and manage their operations[5].

10.  The HKSA is the NSA for the sport of shooting in Hong Kong.  It is the organisation recognised by the ISSF as the sole controlling body for the sport of shooting in Hong Kong and has the sole authority to select Hong Kong team members to participate in major sports games.

Cessation of membership of the HKRA in the HKSA

11.  Shortly before 2006, matters of difference arose between the HKRA and the HKSA.  They were unable to resolve the differences amicably.  As a result, the HKRA decided not to pay its annual subscription to the HKSA for the year 2006.

12.  By virtue of article 15, if a Member’s subscription is unpaid for 90 days, the Member shall ipso facto cease to be a Member of the HKSA but the membership may be reinstated upon full payment of the outstanding subscription. Accordingly, on 1 April 2006, the HKRA ceased to be a Member.

13.  The HKRA subsequently applied to be reinstated as a Member pursuant to article 15 but was turned down.  The HKRA brought proceedings against the HKSA and other relevant parties in HCMP 2316/2006.  On 10 August 2007, Saunders J gave judgment in favour of the HKRA ([2007] 4 HKLRD 121).  After hearing the parties on the form of the orders that should be made in the light of his judgment, on 20 December 2007 he made various declarations, including a declaration that under article 15, the HKRA is not entitled as of right to be reinstated as a Member upon payment of the annual subscription and the Council of the HKSA has a discretion whether or not to reinstate the HKRA.  It was held in the judgment that this discretion was not to be exercised capriciously or unreasonably.  The judge further ordered an injunction be granted against the HKSA to convene a meeting of its Council within a month and in any event not later than 20 January 2008 to reconsider the application of the HKRA for reinstatement of its membership and to inform the HKRA of the result of its application and, in the event it is refused, to inform the HKRA of the reasons for refusal within one week after the conclusion of the meeting.

14.  On the appeal of the HKSA against the judgment of Saunders J, on 15 January 2009 the Court of Appeal allowed the appeal in part and set aside some of the declarations ([2009] 2 HKLRD 249).  The Court of Appeal upheld the judgment below that there was residual discretion as to any reinstatement and if reinstatement was not to be permitted, the HKSA should give reasons because it held a “semi-public position” and performed an important public role.  However, the judge should not have made declarations as to the matters that might, or might not, be taken into consideration in the exercise of that discretion in considering any application by the HKRA for reinstatement.  So to that extent the appeal was allowed.

Applications for reinstatement of the HKRA

15.  On 13 February 2009, the Council of the HKSA held a meeting to consider the application of the HKRA for reinstatement and rejected it.  The HKRA was informed of the decision and the reasons for rejection on 20 February 2009.  There was no legal challenge to this decision.

16.  On 12 March 2010, the HKRA applied to the HKSA to become a Member.  This application was rejected on 15 March 2010 on the ground that there had not been any material change of circumstances warranting consideration of the application for reinstatement.  On 31 March 2011, a fresh application was made.  Again, it was rejected on 12 April 2011 on the same basis there had not been any material change of circumstances to warrant re-consideration of the application.  A fourth application was made on 26 April 2011.  The rejection letter came on 29 July 2011, in which the HKSA referred to “bad faith actions” of the HKRA as a result of which the HKSA had lost trust and confidence in the HKRA.  No legal action was taken by the HKRA to challenge any of the above rejections of its applications.

17.  The fifth application was made on 28 November 2011 for reinstatement or re-admission as a Member, with an offer of an undertaking by the HKRA that those members of its council who had served in 2006 would voluntarily resign, with a view to eliminating the “bad faith” element and restoring the trust and confidence.  The decision of the HKSA to reject this application on 15 December 2011 was the Decision that is sought to be challenged, not by proceedings in private law as in HCMP 2316/2006, but by judicial review.

18.  In the re-amended notice of application for leave to apply for judicial review, the HKRA seeks an order of certiorari to quash the Decision and an order of mandamus to compel the HKSA to admit or reinstate it as a Member.

19.  The reason why the HKRA is so eager to be reinstated as a Member is due to its desire to save its shooting range in Kau Wah Keng, which is on the roof top of a reservoir and was granted for its use by the Government under a short term tenancy.  On 4 November 2009, the HKRA received a letter from the Water Supplies Department stating that it had been informed by the HKSA that the HKRA is no longer its affiliated member and as one of the major considerations for granting permission to a private organisation to use the reservoir roof deck for sport activities is that “the organisation must be a recognized governing body for the sport concerned or an affiliated member of the recognized governing body”, the Water Supplies Department gave the HKRA six months to take steps to restore its status to satisfy that condition, failing which it would consider taking action not to allow the HKRA to continue with the short term tenancy.

20.  As the various applications of the HKRA to be reinstated as Member were unsuccessful, on 16 May 2011, the District Lands Office served a notice to quit of the short term tenancy on the HKRA, requiring it to deliver up possession of the area on top of the Kau Wah Keng High Level Service Reservoir No 1 on 31 August 2011.  The Secretary for Justice brought proceedings against the HKRA in June 2012 to recover vacant possession of the premises and summary judgment was granted against the HKRA on 11 June 2013 by M Chan J.[6]

The judgment below

21.  Poon J held that the Decision is not amenable to judicial review.  He applied the law in the leading authority of R v Jockey Club, Ex parte Aga Khan [1993] 1 WLR 909.  In gist, it was held by the English Court of Appeal that although the Jockey Club exercised dominant control over racing activities in Great Britain, its powers and duties were in no sense governmental but derived from the contractual relationship between the club and those agreeing to be bound by the Rules of Racing published by the club.  Such powers gave rise to private rights enforceable by private action.  Accordingly, the decision of the disciplinary committee of the club to disqualify the horse of a racehorse owner registered with the club and to fine the horse’s trainer was not amenable to judicial review.

22.  Poon J also held that the present application is entirely inconsistent with the earlier position of the HKRA in the private law proceedings in HCMP 2316/2006.

This appeal

23.  On appeal, Ms Heung Wing Yan for the HKRA contended that the judge had wrongly applied the judicial statements in the Jockey Club (at 923F to H, 931B to D and 932H) to the present situation “with equal force” (at paras 11 to 13 of the judgment).  She also sought to rely on R v Panel on Take-overs and Mergers, Ex parte Datafin plc & Anr [1987] 1 QB 815.  Her arguments may be summarised as follows:

 (1)     The HKSA is “governmental in operation” because it has power over a not insubstantial area of economic activity.  It has private power that affects the livelihoods of many individuals, and it receives significant levels of public funding.  A body that is not obviously public may perform some functions that fall within the ambit of judicial review.  The court does not just look at the source of the power but at the nature of the power, and if the body in question is exercising public law functions, or if the exercise of its functions have public law consequences, then that may be sufficient to bring the body within the reach of judicial review (the Datafin case, at 847C, per Lloyd LJ).

 (2)     The judge took the view that the grant or termination of the short term tenancy for the Kau Wah Keng Service Reservoir is a matter of private law between the Government as landlord and the HKRA as tenant.  He should have held there was public policy involved whether to grant a short term tenancy of government land to the HKRA and that the HKSA was performing an important public duty, since the HKSA is in a position to grant or refuse any application for its membership and this essentially means that it has the power in deciding which organisation would be eligible to the use of the government land at a nominal rent to operate a shooting range at the Kau Wah Keng Service Reservoir.

 (3)     The shooting sport cannot be compared with other leisure sports due to the fact that a shooting club cannot operate without high levels of government involvements.  Strict laws and regulations must be applied to ensure the safety and legality of practising the sport of shooting.  The Police Licensing Office of the Hong Kong Police acts as the licensing authority for a number of licences and permits including arms licences and works closely with a shooting club.  The decisions that the HKSA makes do not affect only those who voluntarily and willingly subscribe to its rules and procedures but affect the rights and safety of all citizens in Hong Kong.  Because of this special nature of its decisions, the decisions of the HKSA are susceptible to judicial review.

 (4)     The contractual relationship of the HKSA with its members does not serve to exclude the application for judicial review.

 (5)     The present situation is comparable to the Datafin case in that members of the public have no choice but to join the HKSA or to join a shooting club that is a member of the HKSA if they wish to use the shooting range at Kau Wah Keng.

 (6)     As for the private law proceedings in HCMP 2316/2006, the courts at first instance and on appeal had refused to grant an injunction to compel the HKSA to reinstate the membership of the HKRA.  The mechanisms in the private law proceedings available to the HKRA were exhausted and judicial review is pursued as a remedy of last resort.

24.  We agree with Mr Paul Lam, SC, who appeared for the HKSA here and below, that the judicial statements in the Jockey Club case as quoted by the judge apply, as the judge has said, with equal force to the present situation.  Notwithstanding that the HKSA is the NSA for the sport of shooting in Hong Kong and operates largely on government subvention, it is not in its origin, history, constitution or membership a public body.  There is no public source for any of its powers.  There is a difference between what may affect the public and what amounts to a public duty (the Jockey Club case, at 930A, per Farquharson LJ).  As stated by Hoffmann LJ in the Jockey Club case at 932H:

“… the mere fact of power, even over a substantial area of economic activity, is not enough. In a mixed economy, power may be private as well as public. Private power may affect the public interest and the livelihoods of many individuals. But that does not subject it to the rules of public law.”

25.  Ms Heung’s assertion that the HKSA is “governmental in operation” merely because it has power over a not insubstantial area of economic activity must be rejected.  As for her reliance on the fact that the HKSA receives significant levels of public funding, this is not an indication that such a body or its functions are public, as many indisputably private bodies, such as many bodies whose activities are cultural, and many charities, receive public funding (Mullins v The Appeal Board of the Jockey Club [2005] EWHC 2197 (Admin) at para 35).

26.  The facts in the Datafin case are not comparable to the present situation and do not advance the arguments of Ms Heung.  That case was considered by all the member of the English Court of Appeal in the Jockey Club case (at 919B to 921C; 926H to 928A; 931D to 932C).  As Sir John Donaldson MR stated in the Datafin case at 835G, the lack of a statutory base for the Panel on Take-overs and Mergers, which was in fact operating as an integral part of a governmental framework for the regulation of financial activity in the City of London, was a “complete anomaly” and the explanation was that it was an historical “happenstance”.

27.  In Datafin, Lloyd LJ said at 847A to C that the source of power is not the sole test whether a body is subject to judicial review; in between the two extremes in which the source of power is statutory (therefore clearly subject to judicial review) or contractual (hence not subject to judicial review), it is helpful to look at not just the source of the power but at the nature of the power.  He also stated that the source of the power will often, perhaps usually, be decisive. In the present case, as pointed out by Mr Lam, the source of the power exercised by the HKSA in deciding whether to admit or reinstate a Member is consensual and contractual in nature, based on its memorandum and articles of association (article 5 on the admission of Member, article 15 on reinstatement as a Member).

28.  Quite apart from the source of the power, it cannot be said that in deciding whether to admit or reinstate a Member, the HKSA is exercising a public law function or that its decision would have public law consequences.  Ms Heung sought to argue that by deciding who may be members, the HKSA has the power to decide who would be eligible to use the government land at Kau Wah Keng as a shooting range and so the HKSA is performing a public duty.  As a matter of fact, the government has already terminated the short term tenancy by the notice to quit served in May 2011.  On 18 May 2012, Poon J set aside the leave granted in another application for judicial review in HCAL 67/2011brought by a private individual against the decision of the District Lands Office to issue the notice to quit to the HKRA.  We are unable to see how the right to operate the shooting range on government land at Kau Wah Keng, which has been terminated, would impact on the power exercised by the HKSA in deciding whether to admit or reinstate the HKRA as a Member. In any event, the government policy regarding the permission to use government land as a shooting range has no direct bearing on the power of the HKSA to admit or reinstate a shooting club as a Member.

29.  We agree also with the judge that the grant or termination of the short term tenancy at Kau Wah Keng is a matter of private law and does not have public law consequences.  In obtaining the right to use government land under a short term tenancy, it cannot be said that the HKRA or the HKSA was performing a public duty as asserted.

30.  We disagree with Ms Heung’s submission whether the powers exercised by the governing body of a particular sport could be regarded as public or private would depend on the nature of the sport.  The fact that the sport of shooting is subject to stringent firearms control of the government is irrelevant for present purpose.  Governmental power, whether de facto or de jure, is simply not exercised by the HKSA as the sole governing body of the sport of shooting in Hong Kong.

31.  The HKRA cannot pursue an application for judicial review after it has failed to obtain the remedy of reinstatement sought in the private law proceedings.  As Mr Lam rightly submitted, by seeking private law remedies in HCMP 2316/2006, the HKRA must have accepted that the decision of the HKSA to refuse its reinstatement as a Member is a private law matter.  It cannot blow hot and cold.

32.  None of the grounds advanced on appeal are of merit.  The appeal must be dismissed with costs against the HKRA.

33.  Mr Lam submitted that indemnity costs should be awarded against the HKRA as this appeal is misconceived and is tantamount to an abuse of process.  We have taken into consideration that the HKSA only filed a further affirmation on 20 May 2013 to give information of the changes in its membership structure in December 2012, which has rendered it pointless for the HKRA to pursue its challenge to the Decision made under the old articles of association.  In the circumstances, we have decided to award costs to the HKSA on the standard basis.