Prudential Hotel (BVI) Ltd. v. Secretary for Justice

IN THE COURT OF APPEAL

1997, No. 35
(Civil)

________________

________________

________________

J U D G M E N T

________________

Godfrey, J.A. :

Introduction

1. This is an appeal from an order of Jerome Chan, J. made on 13 December 1996, whereby he quashed a notice dated 15 September 1996 given by the Secretary for Home Affairs ("the Secretary") to the Prudential Hotel (BVI) Limited ("the applicant") directing the provision/extension of sprinkler heads in the 16th floor corridor in the Prudential Hotel, 222 Nathan Road, Kowloon. The Secretary now appeals.

Chronology

2. The judge, in a long and careful judgment reciting the history of the matter, set out the chronology, which may be summarised as follows.

3. On 1 September 1993, the applicant was granted a licence under the Hotel and Guest House Accommodation Ordinance, Cap. 349 ("Cap. 349") to operate the hotel for a year, until 31 August 1994.

4. On 1 September 1994, the licence was renewed for another year, until 31 August 1995.

5. On 14 October 1994, a fire hazard abatement notice was issued against the applicant pursuant to s.9(1) (a) of the Fire Services Ordinance, Cap. 95 ("Cap. 95").

6. On 15 September 1995, the notice of 14 October 1994 was followed by the notice to which I have already referred ("the s.19 notice") given by the Secretary under s.19 of Cap. 349.

7. On 15 December 1995, the applicant commenced proceedings for a judicial review. It succeeded. The s.19 notice was quashed, and as I have said, the Secretary now appeals.

Background

8. It will be convenient, before turning to the factual background, to set out the legislative background.

The legislative background

9. Cap. 349 contains provisions relating to the issue of hotel licences. Under s.8(2), the Secretary must, on receipt of an application for a licence, determine it by issuing the applicant with the licence for the hotel, or by refusing to issue the licence. Under s.8(3)(a)(ii), he may refuse to issue a licence for reasons connected with the protection of life and property under Cap. 95. Under s.10, the Secretary may cancel or suspend the licence or refuse to renew the licence or amend or vary any condition of the licence on any ground which would have entitled him to refuse to issue a licence. Under s.19 the Secretary may give such directions as appear to him to be required to secure that the safety of guests is promoted in a proper manner; that adequate apparatus and equipment required as safeguards against fire or other hazard are provided; and that the provisions of Cap. 349 are complied with.

The factual background

10. The judge referred to "the alarming frequency", as he called it, of hotel and guesthouse fires which had led to the introduction of Cap. 349. He recited its short title:

"An Ordinance to provide for the regulation, control and safety of hotel and guesthouse accommodation and for connected purposes."

11. He mentioned that general guidelines were prescribed in Cap. 349 as to the manner in which the Secretary might exercise his discretion in the issue or renewal of a licence or a refusal to issue or renew the same.

12. He pointed out that Cap. 349 provided only a framework for the regulation of the industry. He said that it became necessary for the Secretary to negotiate with the industry to devise a practical and workable code. He noted that a code of Policy Guidelines had been agreed by the Secretary with the industry; and that one Mr. Lee Tak Samuel, the chairman and executive director of the applicant, had been prominent in the negotiations.

13. The judge, in an expressive phrase, said that the Policy Guidelines gave "bone and flesh" to the generalities of Cap. 349, and formed the foundation upon which the industry and the Secretary negotiated and defined the detailed conditions to be imposed for each individual hotel and guesthouse.

14. He noted that the Policy Guidelines included the following paragraph 7:

"Once a scheduled licence is issued, no new conditions would be imposed on the licensee when the licence is renewed unless the building layout or use or facilities are materially changed or a threat to safety is apparent."

15. He noted that the Secretary agreed with the applicant a schedule of conditions to be imposed in the licence to be granted to the applicant; and before us it is said by the applicant and conceded by the Secretary that the guidelines give rise to a legitimate expectation on the part of a licensee that, after a licence is granted to him, there will be no new condition imposed on him other than in the circumstances mentioned in paragraph 7 of the guidelines.

The s.19 notice

16. In the present case, what happened was this. When the licence was originally granted to the applicant, the view of the Secretary (whatever views may have been expressed internally by the Fire Services Department) was that it was not necessary to insist on the provision/extension of sprinklers on the 16th floor (where a corridor existed as a result of certain unauthorised building works, which had the effect of confining those sprinklers which had been installed to the upper part of what was now a two-storey floor). The absence of sprinklers directly protecting the corridor below did, however, later become a matter of some concern to the Secretary. As has been said in the course of argument, he "changed its mind". What I apprehend is meant that he re-assessed the matter and came to the view (contrary to his original view) that there was a need for the provision/extension of sprinklers for the protection of the corridor. We were told that the total number of sprinklers needed would be only six; but we appreciate that, although this may seem a small number, there may be reasons of principle and of expense which justify the present litigation.

The issue

17. The real issue in the case is whether this change in assessment of the position by the Secretary was one upon which he could legitimately rely in order to insist on the provision/extension of sprinklers to protect the corridor. It is said that, if originally it was thought there was no need for the sprinklers, the Secretary would not be entitled, in the absence of evidence to justify his change of assessment of the position, in deciding to order the provision or extension of the further sprinklers. I would accept this. The judge therefore was right, as it seems to me, to look at the material before him in order to decide whether or not there was any such evidence upon which the Secretary could rely. The judge put the point in this way. He said:

"The task for the court was to consider the rationality of the Secretary's conclusion that the expert evidence before him entitled him to find an increased risk to public safety or fire hazard."

18. I would not dispute this formulation; save that I do not think the word "increased" is a necessary part of it. The question simply is - was there evidence before the Secretary when he "changed his mind" which entitled him to find that there was, after all, a need for the provision/extension of these sprinklers? The judge, as I understand his judgment, concluded that there was no such evidence.

Was the judge right to find there was no such evidence?

19. It is at this point of the judgment that I think the judge fell into error. He embarked on an evaluation of the evidence given by Mr. Lam, Chief Fire Officer, for the Secretary, on the one hand, and by Dr. Smith, a fire engineering consultant from London (who had not himself inspected the premises and who it appears may not have fully appreciated the configuration of the 16th floor), on the other hand. That was not, as it seems to me, an appropriate course for the judge to take. It was not for the judge to compare the evidence of Mr. Lam and Dr. Smith, and to express, not only a preference for the evidence of Dr. Smith, but to conclude that the evidence of Mr. Lam ought to be disregarded altogether. It was not the function of the judge even to consider which of the two was to be preferred. The function of the judge was simply to see whether there was evidence before the Secretary upon which he could legitimately and rationally conclude, in giving the s.19 notice, that there was a need for the provision/extension of these sprinklers notwithstanding his original assessment that there was no such need. As it seems to me, there was evidence before the Secretary to justify his conclusion that there was such a need. What actually happened is recorded in an internal memorandum, agreed by the Secretary, paragraph 2 of which reads as follows:

"After the meeting we have reviewed the situation concerning this matter. My opinion is that we have difficulty to enforce the licensing condition in terms of proper maintenance and efficient working order of the FSI. In actual fact, the existing sprinkler system is properly maintained and in efficient working order. It was certified by the registered contractor. The existing sprinkler heads in the 16/F corridor are functional to the additional floor (UBW) [unauthorised building works] but leaving the corridor below the UBW unprotected. As the UBW has been tolerated by this office without any conditions at the early stage of issuing the licence, we cannot make additional requirements to the licence in accordance with the Policy Guidelines. However, we can make use of S.19 of HAGAO [the Ordinance] directing the operator of the hotel to provide adequate equipment to protect the corridor against fire or other hazard."

20. I do not express any opinion on whether that view of the matter was right or wrong; but it does explain the genesis of the s.19 notice.

Conclusion

21. The judge, in my opinion, was plainly wrong to conclude, as it seems he did, that the notice ought to be quashed on the ground that there was no evidence to justify the Secretary's change in his assessment of the position. I am satisfied that the Secretary had material before him when giving the s.19 notice on which he could rationally form the view that a threat to safety had become apparent. The judge, with great respect, seems to have misapprehended the issue which he had to decide.

22. For these reasons, I would, for my part, allow this appeal.

Gall, J. :

23. I agree.

Power, Acting Chief Judge :

24. I also agree.