XCHRX SINO ASIA INVESTMENT LTD. and Another v. SECRETARY FOR JUSTICE

1998, No. AL 37 & 38

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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REASONS FOR JUDGMENT

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The Applications

1. On 5 June 1998, the Commissioner of Police, as licensing authority under the Massage Establishments Ordinance, Chapter 266, (the Commissioner) refused an application by Mr Chan Wa Chung (Mr Chan) for renewal of his licence in respect of the Diamond Palace Sauna. Sino Asia Investments Limited (Sino Asia) is the proprietor of that establishment. Mr Chan was licensee for Sino Asia because Chapter 266 requires that a natural person be the licensee.

2. On 12 June 1998, both applicants applied for leave to bring that decision under judicial review. The papers came before Stone, J, who, in accordance with the applicants' request for an oral hearing if the judge was minded to refuse leave, directed that the matter be heard on an inter partes summons.

3. On 16 June 1998, the applicants issued such summonses.

4. The matters came before me on 19 June 1998. After hearing the arguments advanced by Mr Cheng and Mr Pow, I refused leave, and said that I would provide my reasons in writing later. These are those reasons.

The Facts

5. It is necessary to go into the history of the Diamond Palace a little because Sino Asia places some reliance on this.

6. During 1993, the Commissioner expressed some concern about the way in which the Diamond Palace was being operated and the suitability of the licensee at that time. After hearing both the licensee and Sino Asia, the Commissioner revoked the licence. Sino Asia was granted leave to bring that decision under judicial review. The parties then negotiated. It was agreed that the Commissioner would allow Sino Asia to replace the licensee, and Sino Asia would abandon its application with costs to the Commissioner. The licensee was replaced. The new licensee was also replaced because the Commissioner expressed doubts as to his suitability. In 1995, this licensee was also replaced because the Commissioner gave a warning to Sino Asia about his suitability. The licence was granted to Mr Chan.

7. Mr Chan renewed his licence for a period of 12 months from 8 August 1996. On 12 May 1997, Mr Chan applied to renew this licence.

8. On 31 July 1997, the Commissioner wrote to Mr Chan saying that there had been "a number of vice incidents" at the Diamond Palace, citing incidents of masseuses rendering "sexual services" on 18 March, 3 June and 7 June 1997. The Commissioner said that the application for renewal of the licence was being held in abeyance until the outcome of the case.

9. On 20 August 1997, Mr Chan was charged with keeping a vice establishment contrary to section 139 of the Crimes Ordinance, Chapter 200. He was acquitted.

10. On 30 March 1998, the Commissioner wrote to Mr Chan. The letter again recited the three incidents of "sexual services", and said that they had caused "grave concern on whether you are a fit and proper person to operate a massage establishment, whether you are able to adequately and personally supervise the massage establishment and whether the premises are being operated in a manner contrary to the public interest.". The Commissioner commented that the "prosecution has established a prima facie case even though you were finally acquitted after trial being given the benefit of the doubt". The Commissioner gave notice of his intention not to renew the licence, but invited Mr Chan to make representations.

11. On 15 May 1998, Mr Chan's solicitors made such representations.

12. On 5 June 1998, the Commissioner wrote to Mr Chan saying that, having taken into account the representations, he refused to renew the licence. The Commissioner pointed out that, in the prosecution, the court had accepted the sexual services had been rendered, but had been unable to conclude that Mr Chan had the requisite knowledge, and that the magistrate had said that there was serious suspicion and that "he was definitely in doubt as to your client's continued suitability to be a licensee.". The letter pointed out that Mr Chan could appeal to the Administrative Appeals Board.

Grounds for Review: Irrationality

13. Both applicants raise the allegation of irrationality of the decision by the Commissioner as a ground for judicial review. It is the only ground raised by Mr Chan.

14. The Commissioner was entitled to conclude that the incidents of "sexual services" had occurred. Clearly, the Commissioner agreed with the magistrate's comment that there was doubt as to Mr Chan's suitability to be a licensee. Mr Cheng, who appeared for Mr Chan in the prosecution, accepted that the magistrate had said this. There is, I think, some suggestion that the Commissioner placed undue weight on this remark. There is no basis for this submission. The magistrate came a conclusion that the Commissioner shared, and not surprisingly. There is no reason to fault the Commissioner reasoning,

15. In the light of this, it is impossible to hold the view rationally that the Commissioner's decision was irrational. It is simply not possible to argue sensibly that no reasonable authority in the Commissioner's position would have concluded as he did. In fact, as I indicated to Mr Cheng during argument, it is my view that a decision by the Commissioner to renew the licence in the face of the material before him would have been irrational.

16. Both Mr Cheng and Mr Pow argue that the strongest point in favour of the applicants is that, since 7 June 1997, no further incidents of the rendering of sexual services have been established. I do not accept that this is a good point, strong or otherwise. For one thing, common sense dictates that applicants would have been careful after 7 June 1997, knowing that the establishment was under scrutiny and the licence was in jeopardy. Secondly, the three incidents came to light by police operations. It is not probable that the police would waste valuable manpower undertaking further operations against the establishment when a prosecution was being mounted and renewal of the licence was being considered. This argument certainly does not indicate that Mr Chan was suitable to be a licensee.

17. This is a application for leave, and the threshold to obtain this is not high. Nevertheless, I should not grant leave if the case is hopeless. It is hopeless. There is no point in granting leave in these circumstances.

18. Accordingly, I refused leave on this ground.

Grounds for Review: Breach of Natural Justice

19. Sino Asia also complains that the Commissioner did not, as Mr Pow expresses it, give it "an opportunity to be heard despite clearly knowing that [Sino Asia] would be seriously affected by the decision" and Sino Asia "was clearly denied his legitimate expectation to be informed directly" of the Commissioner's view on the desirability of Mr Chan so that Sino Asia could make representations and consider a replacement.

20. Mr Pow does not pretend that Sino Asia did not know what was going on in relation to the Commissioner's consideration of the renewal of the licence, hence Mr Pow's use of the phrase "to be informed directly". The complaint is, then, that the Commissioner did not write to Sino Asia directly, but to its licensee. There was, of course, nothing at all to prevent Sino Asia from making representations to the Commissioner, and nothing at all to indicate that the Commissioner would not take these into account. As had happened in the past, Sino Asia, if so advised, could have suggested to the Commissioner that another licensee be appointed; one who was beyond reproach and able to run the establishment properly within the law. It did not do so. Clearly, Sino Asia decided not to do so. If it had done so, it may be that it would not have found itself in the position it now complains about; having to close its business, dismiss employees and lose a lot of money. Presumably, Sino Asia made a business decision, and it must now live with the consequences of that.

21. Sino Asia suggests in its Form 86A that it was surprised to learn that the Commissioner had decided not to renew Mr Chan's licence. To say this in the light of what happened here is quite incredible. To the knowledge of Sino Asia, the Commissioner warned that he was considering not renewing, and for reasons that must have appeared to Sino Asia to be, at least, of some merit. To maintain in the face of this that it was surprised when the Commissioner did what he said he was considering is little short of insolent.

22. I see no duty on the Commissioner to give notice directly to Sino Asia of its concerns regarding Mr Chan. The Commissioner knew that Mr Chan was the licensee and an employee of Sino Asia. It is inevitable that Sino Asia would know about those concerns. It was then for Sino Asia to decide what to do. It decided to do nothing. That was its own decision about which it has now no legitimate complaint.

Alternative Remedy

23. Judicial review is, of course, a remedy of last resort. In this case, Mr Chan had the remedy of an appeal to the Administrative Appeals Board. Sino Asia did not because an appeal is only open to "any person aggrieved by a decision in respect of him".

24. An appeal provided under the Administrative Appeals Board Ordinance is a comprehensive and sophisticated appeal procedure, and the court should not allow judicial review procedure to be used in its place unless it is shown that there are special reasons.

25. Mr Cheng says that judicial review is open to Mr Chan for various reasons. In my view, only one of these has any merit; that the alternative appeal procedure does not provide a remedy that should be granted. That remedy is a stay pending the outcome of the review procedure. Mr Cheng accepts that, if I do not grant leave, this remedy is not available under judicial review procedure. I have determined that leave should not be granted so this matter does not arise. But it seems to me that it is of relevance that, although under the Miscellaneous Licences Ordinance, Chapter 114 provision is made for a stay pending the outcome of an appeal, no such provision is made under the Massage Establishments Ordinance, Chapter 266. That omission must be assumed to have been deliberate. The legislature did not contemplate that there should be a stay pending the outcome of appeals under Massage Establishment Ordinance, perhaps because it was not thought in accordance with the public interest that an establishment should be permitted to stay open under a licensee in respect of whom there had been, at least, a preliminary finding that he was not a fit and proper person to be a licensee.

26. In these circumstances, it seems to me doubtful that it is legitimate to use the judicial review procedure to overcome a limitation that is built into the appeal procedure designed for this type of case.

The Costs

27. On 19 June 1998, I also ordered the applicants to pay the respondent's costs. Although this was an application for leave, the respondent was required to deal it by reason of the order of Stone, J. There was no reason why costs should not follow the event.

JK FINDLAY

Judge of the High Court
Court of First Instance