LAU WAI KIN, DANDY v. COMMISSIONER FOR TELEVISION AND ENTERTAINMENT LICENSING AND ANOTHER

HCAL 43/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW PROCEEDINGS

NO. 43 OF 2006

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J U D G M E N T

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Introduction

1.  This is an application for judicial review to challenge the following administrative decisions:-

(a) the order of the Commissioner for Television and Entertainment Licensing (“the Commissioner”) dated 30 June 2005;

(b) the decision of the Amusement Game Centres Appeal Board (“the appeal board”) contained in a letter dated 29 December 2005;

(c) the appeal board’s decision on costs contained in the said letter dated 29 December 2005.

In short, the first two decisions were a refusal of the applicant’s application for the grant of an amusement game centre (“AGC”) licence, while the third decision was an order that the applicant should pay costs in the sum of $25,000 to the Commissioner.

Background Facts

2.  The applicant has been the holder of an AGC licence of an AGC called “Mongkok Castle Game Centre” (旺角堡遊戲機中心) (“the applicant’s AGC”) since about 1995.

3.  Another AGC nearby called “Cyber City” (“Chan’s AGC”) was licensed to a Mr. Chan Ting Wah (“Chan”).

4.  Since about July 2004, the applicant and Chan began negotiations for jointly operating a new AGC (“the proposed AGC”) in the vicinity of the above two AGCs.  The proposed AGC would occupy an area of about 650 square metres in a new commercial building.  The applicant indicated 88 amusement game machines would be installed there.

5.  In August 2004, an application was made, in the applicant’s name, to the Commissioner under s. 5, Amusement Game Centres Ordinance (Cap. 435) for the grant of an AGC licence.  The applicant and Chan agreed between themselves that:-

(1) the AGC licences for the applicant’s AGC and Chan’s AGC would be surrendered upon the AGC licence for the proposed AGC being granted;

(2) Chan’s AGC would cease to operate from November 2004 onwards.

6.  Further, the applicant informed the Commissioner on 4 August 2004 he would surrender the licence of the applicant’s AGC for revocation.

7.  Renovation work commenced at the proposed AGC in September 2004.  Inspection of the proposed AGC was carried out by the Commissioner also in the same month.  The inspection report noted that, within a radius of 100 metres from the main entrance of the proposed AGC, there were:-

(a) two other AGCs, namely, Chan’s AGC and another AGC (“the third AGC”);

(b) two educational institutions.

8.  No objection was raised against the application for the grant of AGC licence.

9.  By a letter dated 3 November 2004, the Commissioner notified the applicant that the application for the grant of AGC licence was refused because:-

“Our staff has conducted an on-site inspection of the above premises and discovered that two other AGCs and two educational institutions existed within 100-meter radius measuring from the main entrance of the Proposed [AGC].  Having carefully considered your case, I intend to refuse your application … on the ground that the proposed premises is not located in an area suitable for the operation of an [AGC]” (emphasis supplied).

The Commissioner also invited the applicant to make representations latest by 18 November 2004.

10.  Chan’s AGC ceased business in late November 2004.  The applicant notified the Commissioner of this in December 2004.

11.  By a letter dated 21 December 2004, Chan informed the Commissioner of the agreement to operate the proposed AGC and Chan’s promise to surrender his AGC licence if the application for the grant of AGC licence were successful.  The applicant also informed the Commissioner of the joint venture and repeated his intention to surrender his AGC licence for revocation.

12.  In two letters respectively dated 26 January and 9 June 2005, representations were made to the Commissioner which included the surrender of the AGC licences of the applicant’s AGC and Chan’s AGC once the application was approved.

13.  The Commissioner refused the application in a letter dated 30 Jun 2005.  The reason given was:-

“… one AGC and two educational institutions exist within a radius of 100 metres from the main entrance of the Proposed AGC”.

14.  The applicant filed a notice of appeal on 7 July 2005.  Following a hearing on 26 November 2005, and in a letter dated 29 December 2005, the appeal board dismissed the appeal and ordered the applicant to pay $25,000 by way of costs to the Commissioner.

Relevant Statute and Rules

15.  The Commissioner’s power with regard to AGC licences can be found in s. 5, Cap. 435, s.5(3) and s. 5(4) of which provide:-

“(3) Subject to subsection (4), the Commissioner may grant a licence, and may impose such conditions in relation to the operation, keeping, management or other control of the amusement game centre as he thinks fit.

(4) The Commissioner shall not grant a licence unless he is satisfied in relation to the proposed operation of the amusement game centre, that-

(a) the person applying for a licence is an individual person who-

(i) has attained the age of 18 years;

(ii) is a fit and proper person to operate an amusement game centre;

(iii) will adequately and personally supervise the operation of the amusement game centre;

(iv) is not the agent, representative or servant of any person whose licence has been revoked or whose application to renew a licence has been refused under section 9;

(b) the place of proposed operation is-

(i) suitable for the operation of an amusement game centre; and

(ii) located in an area suitable for the operation of an amusement game centre” (emphasis supplied).

16.  In relation to the costs of an appeal to the appeal board, s. 13(4)(g), Cap. 435 stipulates:-

“Prior to or at the hearing of an appeal the Appeal Board may … make an award to the Commissioner or to the appellant of such sum, if any, in respect of the costs involved in the appeal as is just and equitable in all the circumstances of the case”.

17.  Further, the Commissioner has issued “Guidelines for the Granting of Licences for Amusement Game Centre” (“the Guidelines”).  The Guidelines have been referred to in Wong Wei Man v. The Amusement Game Centres Appeal Board and Another HCAL 775/2000 (2 November 2000):-

“From time to time, guidelines have been issued to govern the grant or refusal of licences for such centres … ” (para. 8, judgment).

18.  The Guidelines have received judicial blessing in Wong Wei Man where the court said:-

“The rationale for the policy reflected by these guidelines is not difficult to see. It is explained in an affirmation before me on behalf of the Commissioner as aimed at ensuring security, or the concern about security, of residential areas (hence the restriction to commercial buildings), and to minimize the possibility of school children being drawn from schools close at hand to the game centres. The 1988 guidelines were endorsed by the Executive Council” (emphasis supplied) (para. 11);

“And in coming to a conclusion about the plain meaning of the words used, let it not be forgotten that the 1988 document was not some hastily or loosely drawn document. There had, as we have seen, been a policy in 1984 and it was amended, but its amendment was only made after extensive consultation with District Boards, and also with the approval of the Executive Council. I think that one can safely assume, though I have not seen the relevant Executive Council memorandum, that the words of the policy were placed before that body. I do not see why the Commissioner should not be bound by the policy thus expressed” (emphasis supplied) (para. 30).

19.  The part of the Guidelines relevant to this application is:-

“An Amusement Game Centre Licence will not normally be granted unless [the Commissioner or the appeal board, as the case may be] is satisfied that … existing amusement game centre(s) or educational institution(s) is/are not within a radius of 100 metres from the main entrance of the proposed amusement game centre” (para. (g)).

Grounds in Support of This Application

20.  The grounds set out in the “Notice of Application for Leave to Apply for Judicial Review” can be summarised as follows:-

(1) the Commissioner misinterpreted the words “an area” in s. 5(4)(b)(ii), Cap. 435;

(2) the Commissioner misinterpreted s. 5(4), Cap. 435 as conferring a discretionary power when in fact it does not;

(3) because of the proper meaning of the words “an area” in s. 5(4)(b)(ii), Cap. 435, para. (g) of the Guidelines is wrong and the Commissioner misdirected herself in taking heed of the same;

(4) the Commissioner has fettered the discretionary power conferred by s. 5(3), Cap. 435 in following para. (g) of the Guidelines;

(5) the Commissioner’s refusal was excessively affected by the existence of the third AGC and the educational institutions;

(6) the Commissioner’s refusal failed to take into sufficient account (a) the application was in effect a replacement or relocation application, (b) the applicant’s AGC and Chan’s AGC have operated without untoward events, (c) the proposed AGC would be located in a commercial building, (d) there was no objection, (e) there would be a decrease in the number of AGC and a decrease in the number of amusement game machines, (f) the practical distance between the proposed AGC and the educational institutions would be more than 100 metres and (g) there would be employment opportunities;

(7) because the appeal board confirmed the Commissioner’s refusal despite the above errors, the appeal board also erred in the ways set out above;

(8) further, the appeal board wrongly speculated that there might be an increase of the number of amusement game machines inside the proposed AGC;

(9)     the appeal board also erred in depriving the applicant of a right to be heard before ordering him to pay costs.

Ground 1 : Erroneous Interpretation of s. 5(4), Cap. 435

21.  This pertains to para. 20(1) and (2) above.

22.  The applicant contends that the Commissioner erred in her interpretation of s. 5(4), Cap. 435 in two inter-related respects.  First, she erroneously considered that her discretionary power was conferred by s. 5(4) when in fact it was conferred by s. 5(3).  Secondly, she misunderstood the meaning of the words “an area” in s. 5(4)(b)(ii).

23.  In relation to the first respect, the applicant’s contention is based in gist on the language of two provisions.  In relation to s. 5(3), the relevant words are:-

“[the] Commissioner may grant a licence … ”.

This, so the applicant argues, is the sole source of her discretionary power.  In relation to s. 5(4), the applicant’s argument is based on the words:-

“[the] Commissioner shall not grant a licence unless … ”

she is satisfied that the matters required by that provision exist.  These words, so it is argued, in truth impose a duty on the Commissioner.

24.  Because s. 5(4) has imposed a duty (and has not conferred a power), the applicant argues that Commissioner does not have a discretion to waive the requirements set out in s. 5(4).

25.  This leads to the second respect of the applicant’s contention; namely, the true meaning of the words “an area” in s. 5(4)(b)(ii).  Because:-

(a) the meaning of those words is a matter of statutory construction; and

(b) s. 5(4) has merely imposed a duty,

the Commissioner cannot, by way of the Guidelines (or some other administrative means) give to those words some other meanings, such as that given in para. (g) of the Guidelines.  To do so will in effect be giving the Commissioner a discretion where there is none under Cap. 435.

26.  For present purposes, I consider it nothing more than a semantic difference to speak of s. 5(3) and s. 5(4) as:-

(1) the former having conferred a discretion whereas the latter having imposed a duty, or

(2) the latter specifying the limits of the discretion conferred by the former.

If it were necessary to determine this matter, I would conclude that the proper way of looking at those provisions would be that set out in sub-para. (2) above.  It is true s. 5(3) has not specified the matters which may be taken into account when exercising her discretion, but this does not mean she cannot take into account matters other than those set out in s. 5(4) as well.  S. 5(4) only sets out those with which the Commissioner must be satisfied before a licence can be granted. 

27.  But whichever of the 2 ways those provisions should be looked at, the real issue is: what should the Commissioner consider (or not consider) when applying the provisions in s. 5 (in particular, s. 5(4)(b)(ii)), Cap. 435 to the facts of an application for the grant of a AGC licence?

28.  In order to answer that, one has to examine the legislative intention of Cap. 435 for regulating the setting up of AGCs.  That in turn necessitates an examination of s. 5(3) and s. 5(4) (while bearing in mind the overall legislative intention: see para. 30 and 31 below).

29.  As stated above, whereas s. 5(3) has not spelt out expressly when the Commissioner can properly grant an AGC licence, s. 5(4) has expressly set out the matters without which an AGC licence cannot be granted.  These matters can be categorised as:-

(a) the fitness and suitability of an applicant applying for the grant of a licence (s. 5(4)(a)(i) to (iv));

(b) the suitability of the place proposed to be operated as an AGC (s. 5(4)(b)(i));

(c) the suitability of the area in which the proposed AGC will operate (s. 5(4)(b)(ii)).

Because the refusal involved in this application was based purely on the last-mentioned matter, the other two matters need not be further considered in this application.

30.  The legislative intention of Cap. 435 has been commented upon in Wong Wei Man, albeit in the context of the Guidelines (see para. 18 above).  Further, the long title of Cap. 435 states:-

“[Cap. 435 is an] Ordinance to regulate amusement game centres”.

31.  The need for regulation of AGCs is obvious.  First and foremost, they are places to which children and young people are most likely to be attracted and hence will frequent.  The Hong Kong community, quite justifiably, must see to it that:-

(1) children and young people are not overly attracted to, or attracted to improper materials available in, these places;

(2) the AGC operators are not undesirable elements;

(3)     the AGCs are not operated in a way which may create public order concern, noise and/or nuisance and the like to the neighbourhood.

This must have been one of the reasons for submitting the Guidelines for consultation with the District Boards and endorsement by the Executive Council: see the remarks to this effect in Wong Wei Man in para. 18 above.

32.  The applicant submits that the words “an area” in s. 5(4)(b)(ii) should mean the vicinity or neighbourhood of the place where an AGC may be located, which is usually defined by geographical and/or social indicia.  That may well be so.  But, bearing in mind the legislative intention of Cap. 435, the phrase:-

“… located in an area suitable [for operating an AGC] … ”

cannot simply mean the physical suitability of an area.  Whether an area is “suitable” for that purpose has to be determined also using some other criteria.

33.  Further, it has to be remembered that s. 5(4)(b)(ii) is essentially concerned with the “suitability of an area”, and not simply “an area”.  The purpose of the regulatory regime set up by Cap. 435 has already been set out in para. 18 and 31 above.  With this in mind, matters like the distribution and density of AGCs and their proximity to institutions of concern (such as educational institutions) must be highly relevant to the Commissioner’s decision; hence, para. (g) of the Guidelines.

34.  There is also a hint in the applicant’s argument that the 100-metre distance referred to in para. (g) of the Guideline is arbitrary.  I do not understand the applicant to be putting forward a separate point here; rather, this is put forth in the context of the applicant’s argument set out in para. 20(1), 25 and 32 above (which has been dealt with above).  In case this is in fact an additional point, I also find it unmeritorious.  From time to time, statutes or rules may have to specify a determinative criterion; s. 5(4)(a)(i) is an example.  Taken to its logical extreme, it can almost always be argued that there is an element of arbitrariness in all such provisions.  However, such arguments often lose sight of the underlying rationale.  This is one of those instances.

35.  I am therefore convinced that the applicant’s way of analysing this aspect of this application is wrong and has no substance.

Ground 2 : The Guidelines are Wrong

36.  This is related to para. 20(3) above.

37.  Because of the conclusion reached under the previous heading, I conclude that there is no substance under this heading either.

38.  The applicant also refers to para. (a) to (d) of the Guideline and submits that they show a misunderstanding of s. 5(4), Cap. 435 on the Commissioner’s part.  These paragraphs read:-

“An [AGC] Licence will not normally be granted unless …

(a) the applicant has attained the age of 18 years;

(b) the applicant is a fit and proper person to operate an [AGC];

(c) the applicant will adequately and personally supervise the operation of the [AGC];

(d) the applicant is not the agent, representative or servant of any person whose [AGC] Licence has been revoked or whose application to renew an [AGC] Licence has been refused” (emphasis supplied).

39.  The applicant points out that the matters set out in the above paragraphs fall squarely within s. 5(4)(a)(i) to (iv), Cap. 435, which do not permit the Commissioner to have a discretion if the requisite matters do not exist.

40.  I agree the above parts of the Guidelines may not have been satisfactorily worded.  However, because of the conclusion reached under the previous heading, I do not regard those parts of the Guidelines to be able to advance the applicant’s case.

Ground 3 : Fettering of Discretion

41.  This is regarding para. 20(4) above.

42.  The main complaint here is directed at an alleged rigid implementation of a fixed rule of policy, namely, para. (g) of the Guidelines.  The applicant emphasises (among other things) the point that in reality the proposed AGC is nothing more than a replacement or relocation exercise (of the applicant’s AGC and Chan’s AGC for the proposed AGC).

43.  The history leading to the appeal before the appeal board does not support such a complaint.

44.  In the Commissioner’s letter dated 3 November 2004 (see also para. 9 above), the Commissioner also said:-

“… If you wish to make representation, please submit it …  If we do not receive your reply on the date aforesaid, we will assume that you do not intend to make any representation and we will make decisions at our discretion” (emphasis supplied).

45.  A course of correspondence followed.  In a letter dated 30 June 2005 (see also para. 13 above), the Commissioner said:-

“You have … submitted your representations …  I have given sufficient consideration to the above representations.

I hereby refuse your application pursuant to Section 5(4)(b) … ”.

46.  From the events summarised above, there is no evidence to suggest that the Commissioner regarded the Guidelines as a binding set of rules.  On the contrary, the letters indicate that the Commissioner was prepared to (and did) give the applicant an opportunity to be heard, and to consider any matter(s) which he might put forth.

Ground 4 : Unreasonableness

47.  This is concerned with para. 20(5) above.

48.  This is primarily about the Commissioner placing excessive weight on the presence of the third AGC and the two educational institutions.

49.  Emphasis is also placed by the applicant on the matters summarised in para. 20(6) above.  These will be dealt with under the next heading.

50.  Applications for the grant of AGC licence may sometime result in the applicants’ favour; other times they may not.  What is important is that the proper procedure has been followed, and the decisions made are reasonable.

51.  When the Commissioner has done so, merely because an application is refused does not necessarily mean that the Commissioner has placed excessive weight on one or more matters.  There must be evidence to substantiate a complaint to this effect.  In the factual context of this application, there is insufficient evidence to do so.

Ground 5 : Failure to Take Into Account Relevant Matters

52.  The matters relevant to this ground have been summarised in para. 20(6) above.

53.  The observations made in para. 50 and 51 above equally apply here.  For this reason, I do not find any merit in this ground.

54.  In particular, the applicant contends that the Commissioner failed to consider that there was a decrease in the number of AGCs in the vicinity.

55.  From the contents of the Commissioner’s letters respectively dated 3 November 2004 and 30 June 2005, the Commissioner was obviously aware of the decrease in the number of AGCs since the cessation of business of the applicant’s AGC and Chan’s AGC.

Ground 6 : Speculation

56.  This only concerns the appeal board’s decision (see para. 20(8) above).

57.  The applicant’s complaint is that the appeal board speculated in its decision the proposed AGC might later increase the number of video game machines in it.

58.  In order to understand if this complaint has merit, the matter has to be put in proper context.  One of the applicant’s arguments before the appeal board was that there would be a decrease in the number of video game machines as a result of the cessation of business of the applicant’s AGC and Chan’s AGC.

59.  The appeal board rejected this argument in its decision:-

“The Board considers [this] is neither a relevant factor nor an exceptional circumstance to warrant a departure from Clause (g). … the Board noted that the Proposed AGC occupies premise that are only slightly smaller in size to [Chan’s AGC], which was licensed for 179 machines (253 devices).  Although the number of machines for the Proposed AGC is stated to be 88 in the application, it has a great capacity to grow.  Once the application is granted, the [applicant] is always entitled to apply to increase the number of machines which, as the Board understood from past cases, will normally be granted … ” (emphasis supplied) (para. 23).

60.  The appeal board cannot be faulted for making the above remark.  The applicant does not dispute the following facts referred to in remark:-

(a) the size of the proposed AGC is only slightly smaller than that of Chan’s AGC;

(b) Chan’s AGC used to house 179 machines (253 devices);

(c) the proposed AGC was said to house 88 machines;

(d) accordingly, the proposed AGC has a great capacity to grow;

(e) it is up to the applicant to apply to increase the number of machines;

(f) such application will normally be granted.

The reasonable inference is therefore that the above parts of the appeal board’s remark are not factually wrong.

61.  That being so, the appeal board’s conclusion that the matter contended for did not constitute a relevant factor or exceptional circumstance is fully justified.

Ground 5 : Procedural Irregularity (Costs)

62.  This pertains to para. 20(9) above and is solely about the costs of the appeal to the appeal board.

63.  The Commissioner has not conceded this matter.  On the other hand, there are 3 paragraphs in the Commissioner’s skeleton arguments (out of a total of about 30) which covers this matter.  Effectively no hearing time has been spent on it on the Commissioner’s part.

64.  I agree the appeal board should have afforded the applicant an opportunity to be heard regarding:-

(a) whether the usual rule that costs should follow the event should be adopted;

(b) the quantum of costs payable.

65.  It has not been argued whether RHC Ord. 42 r. 5B(6) can be extended to appeals before the appeal board (relying on s. 13(5) and/or 13(9), Cap. 435).  In any event, the costs order made in its decision was not expressed to be a costs order nisi.

Conclusion

66.  By virtue of the above matters, this application is refused, save in relation to the appeal board’s costs order where this application is granted and the costs order is brought up and quashed.  Any dispute regarding costs of the appeal hearing is remitted to the same appeal board for reconsideration.

Costs Order Nisi

67.  The parties have indicated at the hearing of this application they may wish to argue on the costs of this application after decision herein has been pronounced.  For this reason, no costs order nisi pursuant to Ord 42 r 5B(6) will be made.