MAN HING MEDICAL SUPPLIERS (INTERNATIONAL) LTD v. THE DIRECTOR OF HEALTH AND ANOTHER

HCAL 62/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 62 OF 2014

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REASONS FOR DECISION

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1. This is the applicant’s application for an interim relief. After hearing submissions, I refused the application and gave brief reasons for my decision. I indicated that I would give more detail written reasons later. This is what I do now.

BRIEF BACKGROUND

2. For the purpose of the present application, the relevant brief background (as summarised in the 1^st respondent’s skeleton) is as follows:

(1)  The applicant is a licensed wholesaler of proprietary Chinese medicines (“pCm”).  Since January 2014, the applicant had been distributing (a) Ryukakusan Direct water free moisturizing throat granular candy (Mint Flavour) and (b) Ryukakusan Direct water free moisturizing throat granular candy (Peach Flavour) (“the Products”) in various retail outlets.

(2)  On 27 March 2014, inspectors from the Department of Health (“DoH”), on the authorization of the Director of Health (“the Director”) under s 146 of Chinese Medicine Ordinance (Cap 549) (“CMO”), attended the applicant’s premises to investigate the Products which were suspected to be unregistered pCm.

(3)  The applicant confirmed that all the ingredients of the Products were as listed on the labels of the package of the Products.  The applicant also claimed that the Products were not pCm but was not in a position to produce further evidence on the spot.  The inspectors proceeded to seize the Products pursuant to s 146(2)(f) of CMO.

(4)  At the same time, the inspectors instructed the applicant to recall the Products from consumers and handed to the applicant a pro forma form (set out as Appendix 2 to the Recall Guidelines (中藥產品回收指引) issued by the Chinese Medicine Board (“CMB”) under the Chinese Medicine Council of Hong Kong (“CMC”), the 2^nd respondent herein), which the applicant completed and returned to the DoH on the same day.[1]

(5)  Later that day, the DoH issued a press release on the internet regarding the recall of the Products from consumers.

(6)  Correspondence between the parties ensued.  The applicant contended that the Products are not pCm but are only “Japanese herbal candies”.  The DoH disagreed and refused to retract the instructions to recall or the press release.

3. On 6^th June 2014, the applicant filed its application for leave to apply for judicial review to challenge the following decisions:

(1)  The Director (the 1^st respondent)’s instructions dated 27 March 2014 to the applicant to take steps to recall the Products from the consumers (“Instructions to Recall”).

(2)  Decision of the Director dated 27 March 2014 to issue public announcements, which were posted on the Director’s website and the Government’s Information Service website, concerning the instructions to recall.

(3)  The Director’s decision dated 25 April 2014 to (a) refuse the applicant’s request to revoke or suspend the instructions to recall and (b) continue to detain the Products which were seized from the applicant on 27 March 2014.

4. The grounds of challenge can be summarised as follows:

(1)  The Products are not pCm as defined under the CMO.[2]

(2)  Even if the Products are pCm which are unregistered under the CMO:-

(a)  the Director has no power to issue the Instructions to Recall;[3]

(b)  the Instructions to Recall can only be issued if:-

(i)   the Products are “found to be dangerous, injurious to health, or unfit for human consumption”;[4] or

(ii)  there are “existing problems relating to quality, efficacy or safety” of the Products,[5]

and the applicant contended that none of the above conditions was satisfied on the facts of the present case.

5. I granted leave to apply for judicial review on papers on 11 July 2014.

6. In the Form 86, the applicant also seeks an interim stay of the Instructions to Recall.  This is the hearing of the interim stay application.

THE INTERIM STAY APPLICATION

The applicable principles

7. There is no dispute that I should apply the well established principles under American Cyanamid governing the grant of interlocutory injunction as necessarily modified in the context of public law. These principles are that (a) whether there is a serious issue to be tried in the judicial review, (b) if so whether damages are sufficient remedy for either parties, and (c) if damages are not sufficient for both parties, whether the balance of convenience should lie in favour or not in granting the interim relief.  In this last stage, in the public law context, it is important to look at the wider perspective of public interest: Lewis, Judicial Remedies in Public Law, paragraph 8-024 - 026.

Serious issues to be tried

8. In the present case, given that I have granted leave to the judicial review, I accept that there is a serious issue to be tried.  I accept that from the evidence filed so far by both sides, there is a triable issue as to whether the Products fall within the definition of pCm under the CMO.  I further accept that there is a triable issue as to whether the Director had acted ultra vires the power under the CMO to make the various decisions concerning the recall of the Products.

9. However, under this issue and in support of the interim application, Mr Ho SC for the applicant at this hearing seeks to go further.  He submits that the applicant is bound to win on the contentions that the Director had acted ultra vires in issuing the Instructions to Recall as there is simply no express power provided in the CMO and the Chinese Medicine Regulations (“the Regulations”) to give the Director power to issue recall instructions.  The Instructions to Recall therefore unarguably have no statutory underpinning and are ultra vires.  On that basis alone, Mr Ho says the applicant should be entitled to the interim stay.

10. The respondents however rely on Regulation 20(g) of the Regulations as the statutory basis to empower the Director to issue the recall instruction.

11. Regulation 20(g) provides as follows:

“Section 20 General duties of holders of wholesaler licenses in proprietary Chinese medicine: -

…

(g) a system of control is set up and maintained, which will enable the rapid and, so far as practicable, complete recall of any proprietary Chinese medicine sold or distributed by him in the event of the medicine being found to be dangerous, injurious to health or unfit for human consumption.” (emphasis added)

12. The respondents further rely on the Practising Guidelines for Wholesalers of Proprietary Chinese Medicine (“Practising Guidelines”).  The Practising Guidelines are issued by the CMC.

13. Paragraph 6.2 of the Practicing Guidelines reads: -

“6.2 Recall System: -

The wholesalers of proprietary Chinese medicines should set up a proper recall system to ensure that they can rapidly recall any proprietary Chinese medicine identified to have quality or safety problems. In addition, the Medicines Board under the Council may order any wholesaler of proprietary Chinese medicines to carry out recall when necessary.” (emphasis added)

14. In this respect, it is the Director’s case that:

(1)  Under the CMO, the professional regulatory body is the CMC.

(2)  The CMC has the statutory duty to supervise, among others, the CMB.

(3)  At the same time, the Director may authorise a public officer to be an inspector for the purpose of enforcing any provisions under the CMO and its regulations.  Thus, the Director has a duty to supervise the enforcement of, among others, the Practising Guidelines, including paragraph 6.2.

15. In response to the reliance on Regulation 20(g), Mr Ho submits that there are simply no express powers provided in the provision to authorise the Director to issue any recall instructions.  All they say are only that a Chinese medicine wholesaler must maintain a system of recall. This, Mr Ho says, is a far cry from authorising the Director to issue any recall instructions, which have (in Mr Ho’s words) “coercive” effect on the wholesalers.  Insofar as paragraph 6.2 of the Practising Guidelines is concerned, Mr Ho contends that, taking it to the highest, it is the CMB which could order a recall, but not the Director.  In the present case, there is no evidence to show that the CMB had ordered the relevant recall.

16. As this is only an interim application, suffice for me to say that I think it is at least arguable (and thus there is a triable issue) as to whether, on a proper construction of Regulation 20(g), in particular in the context of protecting public health and safety, there is an implied power to issue the Recall Instructions.  The maintenance of a recall system is clearly to, among others, facilitate the operation of a recall.  It is thus at least debatable that, if there were no implied power to instruct the wholesalers to recall products, it is doubtful as to whether Regulation 20(g) would serve any useful purposes.  It is also at least arguable that it is unlikely that that legislature would, on the one hand, impose a statutory duty on the wholesalers to maintain a recall system, but on the other hand, did not by implication intend to give any power to the Director to issue recall instructions.

17. Mr Ho however further submits that, even if (although he does not accept it) there is an implied power to issue recall instructions under Regulation 20(g), it can only be exercised when the relevant product has been “found” (the statutory wording) to be dangerous, injurious to health or unfit for human consumption.  This means, says Mr Ho, that any such power can only be exercised when it is already proved at the time of the exercise that the product concerned is dangerous, injurious to health or unfit for human consumption.  Since it is common ground that when the Instructions to Recall were issued, there was no evidence to confirm or prove that the Products were as such, Mr Ho argues that it must be the case that any such power had been exercised wrongfully and thus ultra vires.

18. Although there is some force in these submissions, with respect, I am of the view that it is at least arguable (and thus triable) as to whether, on the wording of the provision and in the context of the protecting the public, the implied power to issue recall instructions under Regulation 20(g) can be regarded as having been validly exercised if (as contended by Mr Chang for the Director) it can be shown by subsequent evidence that at the time of the exercise, the concerned products are dangerous or harmful to the public.  In other words, in the present case, it is at least arguable that, even though at the time of the issue of the Instructions to Recall, there was no evidence to show that the Products were dangerous, as long as if subsequently it could be so proven (and the Director would seek to show that by evidence at the substantive hearing), it cannot be said that the Instructions to Recall are ultra vires.

19. These are not straight forward legal and factual questions which I think should only be determined after more mature debates and submissions at the substantive judicial review hearing.  I therefore do not accept Mr Ho’s submissions that it is clear at this interim stage that the Director had no statutory power or had wrongfully exercised the power to issue the Instructions to Recall, and the applicant is bound to win on this ground.

20. Given my above views on the triable issues raised in relation to the statutory interpretation on Regulation 20(g), it is not necessary for me for the present purpose to delve into further discussions on the other contentions relating to the Practising Guidelines.

21. I am therefore only satisfied that the applicant at the highest has only raised triable issues in relation to the question of the vires of the Instructions to Recall.

22. It is thus necessary for me to move on to look the next question of whether damages are sufficient remedy for the parties.

Sufficiency of damages as remedy

23. In relation to the applicant, it is contended that damages are not a sufficient remedy if the interim stay is wrongly not granted as the applicant would suffer damage to its reputation during this period. With some reluctance (see paragraph 27 below), I am prepared to accept that damages are not a sufficient remedy for the applicant.

24. At the same time, if the stay is shown to be wrongly granted, in a sense that the Products are shown to be pCm and need to and should be registered before they could be sold, the 1^st respondent’s “loss” in being prevented from discharging the duty imposed upon them to protect the public’s health is clearly not quantifiable and not compensatible by damages.  Similarly, there is a duty on the 1^st respondent to enforce the law by ensuring that no one is suspected of selling unregistered pCm. This must also be considered in the context that there is a risk that the public’s health may be affected if the interim stay is shown to be wrongly granted later.  This is similarly not compensatible by damages.

25. As damages are not sufficient remedy for both parties, I should proceed to consider the question of the balance of convenience.

Balance of convenience

26. For this question, the balance lies clearly in favour of refusing the stay.

27. This is so as the protection of the public’s health must outweigh the claimed damage to the applicant’s reputation, in particular in the context of the present circumstances where:

(1)  It is at least the applicant’s own evidence that the damage could be partly remedied or rescued by an aggressive or proactive advertising scheme (the cost of which is estimated to be in the region of $2m).

(2)  Given that the recall events have happened only for a few months, there are ample means at the applicant’s disposal to correct any adverse effect of the recall that may have on the applicant’s reputation.  For example, by publishing that leave has been granted by the court for it to judicial review the Decisions, and later, if successful, by a host of advertising means to show that it has been right in selling the Products all the time.  This is particularly so as the substantive hearing of the judicial review is now fixed to be heard soon in late January 2015.  Cf: R v ASA Ltd ex p Vernons Ltd [1992] 1 WLR1289 at pp 1293H-1294C per Laws J (as he then was).

28. The applicant however contends that even if the Products are to be allowed to be sold now, there is no evidence that they could cause harm to the public’s health.  Thus, there is no question that the public’s health is at risk.

29. I am unable to accept this argument:

(1)  The statutory regime requires that pCm to be registered before it could be sold.  The registration involves a detailed process as provided under s 122 of the CMO and the Registration of Proprietary Chinese Medicines Application Handbook.  All these show that the registration process looks at and focuses on, among others, the safety, quality and efficacy of these products in relation to their Chinese herbal medicinal ingredients as well the place and process of their manufacturing.  In short, the registration is to ensure that the products are safe and would not pose health risk to the public.

(2)  In other words, it is only pCms that have been shown to be safe and not posing health risk to the public which could be registered and sold to the public.

(3)  In the premises, if a pCm which has not been registered, it cannot be assumed that it is safe and would not pose any health risk to the public.  It is pertinent to note that selling unregistered pCm is an offence and is liable for a fine and imprisonment up to 2 years, and that does not require the proof that the unregistered pCm is unsafe or would pose any risk to the public’s health.

(4)  I therefore do not accept the submissions that, since there have not been any complaints that the Products had caused any ill effects on people who had consumed them, or that there is no positive evidence that they are unsafe or would pose any ill effect on health, there is therefore no risk that it would be unsafe to permit them to be sold to the public before the resolution of this application.

30. For these reasons, the balance of convenience weighs clearly in favour of refusing the interim stay application.  I therefore refused the application.