RE BEELAB SEMICONDUCTOR LTD

CACV 35/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 35OF 2009

(ON APPEAL FROM HCAL NO. 151 OF 2008)

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RE

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REASONS  FOR  JUDGMENT

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Hon Hartmann JA (giving the judgment of the Court):

Introduction

1.  In July 2005, in terms of a Government funding scheme, the appellant, BeeLab, made an application to the Innovation and Technology Commission (‘the ITC’) for a grant of money to enable it to meet the expenses of applying for the registration of a patent. The appellant sought to patent a power supply apparatus known as a charge pump.

2.  While the scheme was administered by the ITC, the assessment of whether there was a reasonable chance of obtaining a patent was carried out by its agent, the Hong Kong Productivity Council (‘the HKPC’). In discharging this responsibility, the HKPC informed the appellant that it would request a search report from the Australian Patent Office.

3.  The Australian Patent Office identified a number of existing patents that, in its opinion, resembled the appellant’s concept. This was disputed by the appellant which argued that the difference between its invention and the patented charge pumps lay in the electric circuitry. The appellant sought unsuccessfully to persuade the Australian Patent Office to alter or withdraw its report and rejected a suggestion made by the HKPC for the appointment of an intellectual property lawyer to advise on the patentability of its charge pump.

4.  In the result, in April 2006 the ITC informed the appellant that its application for a grant had been refused.

5.  Some four months later, in August 2006, the appellant wrote a letter to the Ombudsman complaining of the manner in which its application had been processed and, in addition, outlining what it saw as numerous areas of maladministration in the management of the funding scheme and, arising out of that maladministration, the sub-standard manner in which its application for funding had been assessed by the ITC and its agent, the HKPC. In that letter, the following was said:

“… the root of all the problems is that the HKPC does not possess the necessary professional knowledge to judge the patentability of an application.  However, the HKPC is empowered to recommend or dis-recommend (sic) an application.  Since the ITC is equally naïve in patent application, ITC could only rely wholly on the HKPC to give advice on everything and would never question their decisions.  Thus, ITC is simply incapable of monitoring or supervising the HKPC to ensure that their service is up to an expected level.”

6.  The Ombudsman’s enquiry into the appellant’s complaint has had a chequered history. On two occasions the Ombudsman has informed the appellant that no maladministration could be identified and on both occasions has been persuaded to look further into the complaint.

7.  In December 2008 the appellant filed an application for leave to apply for judicial review of certain of the decisions already made by the Ombudsman, notwithstanding that the Ombudsman’s undertaking to continue her investigation was on-going.

8.  The decisions of the Ombudsman that the appellant sought leave to have reviewed were set out (in the amended application) as follows:

(i)  The refusal, communicated in a letter of 20 October 2008, to investigate the merits of the appointment by the ITC of the HKPC as its agent responsible for assessing funding applications.

(ii)  The refusal, communicated in a letter dated 16 September 2008, to accept the continued representation of the appellant by a firm of solicitors which the appellant had instructed to represent it.

(iii)  The failure to give adequate reasons in support of her decisions, that is, to refuse to investigate the full ambit of the appellant’s complaints and, in her letter of 3 May 2007, her assertion that no maladministration had been found and that the investigation was therefore concluded.

9.  In early February 2009, Reyes J considered the application for leave to apply for judicial review, having directed that there should be an ex parte oral hearing. In his judgment of 13 February 2009 the judge held that none of the three grounds was reasonably arguable and refused the application for leave.

10.  That refusal came before us on appeal. Having heard submissions, we concluded that the judge below had been correct in finding that the first and third proposed grounds of judicial review were untenable. However, we were of the view that the second ground was arguable and, in respect of that ground only, we granted leave.

11.  We said that we would give our reasons in due course and do so now.

12.  Although nothing now turns on the matter, it should be recorded that, at the beginning of the hearing before us, an application was made for the introduction of further evidence relevant to part of the reasoning of the judge below. We allowed the application.

Background

13.  In its original letter of complaint to the Ombudsman (in August 2006), having set out in considerable detail the history of its own application for funding and the difficulties that had been encountered, the appellant went on to list some nine matters which, in its opinion, constituted instances of maladministration by the ITC and/or the HKPC.

14.  By letter dated 14 September 2006, the Ombudsman informed the appellant that, in terms of the Ombudsman Ordinance, Cap. 397, she had no jurisdiction over the HKPC and, while she did admittedly have jurisdiction over the ITC, she found no basis for taking up the appellant’s complaint in respect of that body.

15.  Thereafter, the appellant requested a reconsideration of the position and, by letter dated 27 October 2006, the Ombudsman agreed to make further enquiries into the actions of both the ITC and the HKPC in processing the appellant’s application for funding.

16.  Some six months later, by letter dated 3 May 2007, the Ombudsman informed the appellant that she had completed herenquiries and was satisfied that there had been no maladministration. The Ombudsman therefore considered the case to be concluded.

17.  The appellant was not prepared to let matters rest and in or about June 2008 instructed solicitors, Messrs Boase, Cohen & Collins to make further representations on its behalf.

18.  In a letter dated 24 July 2008 addressed to the Ombudsman, the solicitors stated that the appellant was complaining not only about the manner in which its own application for funding had been processed but, on a more general basis, was complaining about the deficiencies of the scheme as a whole:

“… it appears that you may have also neglected an important administrative issue, which is the appointment of HKPC by ITC as the implementation agent for the scheme.  HKPC does not possess the necessary professional knowledge about patents and hence [is] unqualified to handle applications under the scheme.”

19.  No objection was taken by the Ombudsman to dealing directly with the appellant’s solicitors rather than with the appellant itself and she informed the solicitors that she had decided to review the complaint.

20.  In response, the appellant’s solicitors said that, while welcoming the decision to conduct a review, the appellant had been ‘left stranded’ with a legal bill in the sum of $160,000 and it was instructed to demand payment of that sum on the basis that such costs could have been avoided if, in the first place, the Ombudsman had dealt with the appellant’s complaints in accordance with her statutory responsibilities.

21.  The Ombudsman replied to this demand by letter dated 16 September 2008. Having advised the solicitors that, in terms of s 18A of the Ordinance, the Ombudsman and her staff were protected from liability in respect of any act done in good faith and that therefore any claim for costs would be resisted, she went on to say the following:

“… The Ombudsman does not normally accept request by complainants to be legally represented.  Nevertheless, we accepted BeeLab’s request in the belief that this would be a helpful gesture.  If a complainant chooses to seek professional advice in an attempt to strengthen the case, he/she is at liberty to do so.  However, there is no justification for such costs to be allowed to pass onto taxpayers by seeking The Ombudsman to bear those costs.

9.  Given that our proceedings are free, we see no need for BeeLab to incur hefty legal costs in pursuing its complaint through this Office.  While we respect BeeLab’s free choice in this matter, The Ombudsman does not consider it in the public interest to accept BeeLab’s wish or attempt to pass its costs via this Office onto taxpayers.  In this context, The Ombudsman has decided under section 12(4) of The Ombudsman Ordinance that [he] is not prepared to accept continued representation of BeeLab by your firm.

10.  We shall communicate directly with BeeLab from now on as regards our review of its complaint.” [Our emphasis]

22.  Thereafter, by letter dated 20 October 2008, the Ombudsman wrote directly to the appellant saying:

“We are reviewing your case according to our established procedures and based on the arguments and additional information provided by [your solicitors] on your behalf.  For avoidance of doubt, our review will focus on whether maladministration was involved in the [ITC’s] processing of your application for [a grant], including any administrative action taken by [HKPC] on its behalf in such processing.

We will not examine the merits of ITC’s appointment of HKPC as its implementation agent, since it would be too far-fetched to relate that issue to the particular case of alleged improper handling of your application by HKPC.”

23.  There does not appear to have been any response from either the appellant or its solicitors. The next step appears to have been the filing of the application for leave to apply for judicial review.

24.  As we have said earlier, Reyes J directed that there should be an ex parte hearing in respect of the application. Shortly before that hearing, however, the appellant received a letter from the Ombudsman dated 9 January 2009 to the following effect:

“… we have completed preliminary enquiries under s. 11A of the Ombudsman Ordinance into your case.

As a result of these enquiries, we have found information which warrants a full investigation.  Accordingly, we have informed the Commerce and Economic Development Bureau of The Ombudsman’s decision to conduct a full investigation into the case under s. 12(1) of the Ordinance.

Having considered legal advice, we will, inter alia, examine the Innovation and Technology Commission (‘ITC’)’s monitoring of the Hong Kong Productivity Council (‘HKPC’)’s operation, including ITC’s mechanism, if any, for reviewing its engagement of HKPC.”

25.  Despite the fact that, notwithstanding the earlier difficulties, the Ombudsman had now given a formal undertaking to conduct a “full investigation”, the appellant still wished to proceed with its application. It therefore persevered in its application before Reyes J and, having had its application rejected at first instance, brought the matter before this Court of Appeal.

The first ground of judicial review

26.  In her letter dated 20 October 2008, the Ombudsman informed the appellant that there would be a review of its complaint. However, for the avoidance of doubt, the Ombudsman informed the appellant that the review would focus on whether there had been any maladministration by ITC and/or HKPC in the processing of the appellant’s application for funding and would not examine the merits of ITC’s appointment of HKPC as its implementation agent because –

“… it would be too far-fetched to relate that issue to the particular case of alleged improper handling of your application by HKPC.”

27.  This, it was submitted, demonstrated a misunderstanding of the appellant’s complaint. It was submitted that the appellant’s complaint, which it sought to have investigated by the Ombudsman, had two separate parts. While the first concerned the manner in which its own application for funding had been processed, the second looked to the broader issue of the structure of the scheme, that is, to the appointment of HKPC as the implementation agent of ITC and to the monitoring of HKPC by ITC.

28.  There is no evidence to suggest that the Ombudsman, in restricting the area of review, misunderstood the true nature of the appellant’s complaint. Indeed, the Ombudsman’s explanation as to the scope of her review made it plain that the review would not include the complaint made as to the appointment of HKPC as ITC’s implementation agent.

29.  The issue that the Ombudsman agreed to investigate was whether the HKPC had processed the appellant’s application properly. That was the issue of direct concern to the appellant.

30.  There was no obligation on the Ombudsman to investigate everything that the appellant demanded. If the Ombudsman was made a slave to every demand of every complainant no matter how all-encompassing, it would be impossible to discharge the responsibilities of the post. On an ordinary reading of the Ordinance, it is plain that the Ombudsman is given a discretion as to what matters (and what aspects of what matters) to investigate. In this regard, s. 9 of the Ordinance provides that:

“In determining whether to undertake, continue or discontinue an investigation, the Ombudsman shall, subject to the provisions of this Ordinance, act in accordance with his own discretion ….”

31.  Moreover, s. 10(2) provides that the Ombudsman may in her discretion decide not to undertake an investigation into a complaint if she is of the opinion, having regard to all the circumstances, that an investigation is for any reason “unnecessary”.

32.  Clearly, in the present case, the Ombudsman was of the view that it was unnecessary, in addition to investigating the manner in which the appellant’s claim for funding had been processed, to consider the broader issues including, for example, whether the structure should be revamped so that it followed the Singapore model as suggested by the appellant.

33.  An explanation as to why the Ombudsman had chosen to exercise her discretion in this manner, was given to the appellant, namely, that the issue was too remote, being of limited relevance in light of the fact that all material issues concerning the manner in which the appellant’s own application for funding had been handled would be taken into account in the review.

34.  Whether, on the merits, the Ombudsman was correct to exercise her discretion in the way she did is not to the point. Judicial review looks to the lawfulness of the decision-making process not to whether an exercise of discretion resulted in the right or wrong determination. We would add that no assertion was made that the decision was irrational in the sense that it fell outside the parameters of the Ombudsman’s discretion.

The second ground of judicial review

35.  Although the Ombudsman had no objection initially to dealing directly with the appellant’s solicitors, after demand for payment of $160,000 had been made in respect of wasted legal costs, the Ombudsman exercised her discretion under s.12(4) of the Ordinance to refuse to accept the continued representation of the appellant by its solicitors. The section reads:

“Every investigation shall be conducted in private and counsel and solicitors shall not have any right of audience before the Ombudsman, but may appear before him if he thinks fit.”

36.  S.12(4) is to be read in conjunction with s.12(5) which provides that:

“It shall not be necessary for the Ombudsman to hold any hearing and… no person shall be entitled to be heard by the Ombudsman.”

37.  Although the issue was not argued before us, it appears from a reading of the judgment of Reyes J that submissions were made at first instance to the effect that the Ombudsman had been wrong in law in refusing to pay the appellant’s wasted legal costs. Insofar as it is necessary to state the point, we agree entirely with the judge that, in law, the Ombudsman correctly rejected the claim for wasted costs.

38.  Before us, however, the complaint concerned the Ombudsman’s refusal to accept the continued representation of the appellant by its solicitors. It is correct, as the judge pointed out, that the Ombudsman did not refuse to communicate with the appellant directly or to accept further representations from it. The decision was limited to a refusal to have further direct dealings with the solicitors. As the judge at first instance correctly observed:

“Contrary to Ms Chan’s submission, there is no interference with Beelab’s right to consult whatever legal adviser of its choice.  Obviously, Beelab may continue to employ [the solicitors] for private advice if Beelab wishes, but that must be at Beelab’s own expense.”

39.  However, while the decision of the Ombudsman did not prevent the appellant from taking advice from its solicitors, it did prevent the appellant from leaving the matter in the hands of its solicitors. That, in our opinion, arguably may constitute not only a material prejudice but – in the circumstances of this case – an infringement of the right of an individual to legal representation.

40.  The Ombudsman stated that in law she (and her officers) were indemnified against any claim for payment of legal costs. That meant that, if the appellant still wished to employ solicitors, it had to do so at its own expense. That was a private matter for the appellant. Accordingly, it may be argued that, the fact that an abortive claim for costs had been made, was not a reason supportable in law for the Ombudsman then to refuse to deal directly with the solicitors and to give as her reasons for that decision the promotion of the broader public interest.

41.  This is sufficient to outline why we chose to differ from the judge in holding that this ground was reasonably arguable and why we granted leave.

The third ground for judicial review

42.  In her letter of 20 October 2008 the Ombudsman informed the appellant that she would restrict her investigation into matters concerning the circumstances of the appellant’s own failed application for a grant of money from the ITC and would not look to the broader issues. It is plain that the Ombudsman had the statutory discretion to restrict the ambit of an investigation in this manner. However, the appellant further complained that the Ombudsman failed to give adequate reasons for this decision, that itself being a ground of challenge to the lawfulness of the Ombudsman’s actions.

43.  In our judgment, while the reason given for the Ombudsman’s decision was succinct, we find no basis for suggesting that it was inadequate. In the course of submissions it was suggested that the reason was ambiguous or that it did not make sense. We do not agree. The meaning was plain.

44.  When he considered the first proposed ground, the judge, correctly in our view, took into account the letter of 9 January 2009 in which the Ombudsman said that she would now be conducting a “full investigation” into the appellant’s complaint. In this regard, he said:

“By any yardstick, that means that the Ombudsman will be looking into the appointment of HKPC and whether the same was appropriate whether now or at any time.  There is no ambiguity or lack of clarity.  To the contrary, the ombudsman could not be clearer: a “full” investigation means a “full” investigation.”

45.  Mr Cooney SC, leading counsel for the appellant, referring to the further evidence that we admitted, said that, while the judge – who had no knowledge of that evidence – was entitled to look to the ordinary meaning of the phrase, in fact the phrase “full investigation” was, in accordance with the internal procedures of the Office of the Ombudsman, effectively a term of art. As such, a “full investigation” occurred when, in response to a complaint, preliminary enquiries revealed the need for a comprehensive investigation. By contrast, a “direct investigation” took place when the Ombudsman, of her own volition, prompted perhaps by community concern, decided that there was a need for a comprehensive investigation.

46.  The documents put before us, which included the Ombudsman’s Review of June 2007, confirm that the difference between a “full” and a “direct” investigation relates only to the provenance of any concern giving rise to an investigation. We do not see that in the present case anything turns on that point. The 2007 Review makes it plain that a “full” investigation is just that, an examination of matters that is extensive and intensive. To that extent, therefore, the observation of the judge remains valid.

47.  It was a further submission under this third ground that, in her letter of 3 May 2007, when (prematurely as it turned out) the Ombudsman said she had completed her investigation, she had failed to give adequate reasons to explain how she had come to that decision.

48.  The Ombudsman’s letter of 3 May 2007 was, in our view, sufficiently comprehensive. While it may not have contained a blow by blow assessment of what had happened when the appellant had made its unsuccessful application for funding, it had looked to the systems in place that had been used to assess the appellant’s application and, albeit briefly, had come to a conclusion based on the Ombudsman’s investigations. It was debatable therefore whether, in the circumstances, adequate reasons had been given.

49.  If the appellant had been dissatisfied with the lack of reasoning in the letter it was open to it to request that fuller reasons be given. It did not do so. It chose an alternative course of action. Instead it instructed solicitors to represent it to urge that the investigation continue.

50.  The solicitors made very detailed representations which were considered by the Ombudsman who then agreed to continue the investigation. In the result, whether the Ombudsman had or had not given adequate reasons for the decision that she expressed in her letter of 3 May 2007, the issue was no longer of relevance. Put simply, at the urging of the appellant itself, events had overtaken it.

51.  In his judgment, Reyes J emphasized that, in her letter of 9 January 2009, the Ombudsman had given an undertaking to conduct a “full investigation” and that accordingly, certainly as to the issue of whether or not the Ombudsman had earlier given adequate reasons for her various decisions, the appellant’s application for leave to apply for judicial review was premature and/or had been rendered academic. In our view, in the circumstances of this matter, the judge was correct to make that finding. To proceed on the basis that there had been a lack of adequate reasons in earlier decisions when a full investigation remained on-going and would in all probability result in a report supported with reasons would constitute an entirely arid exercise.

Costs

52.  In respect of costs having made no order at the time we gave our judgment, we do so now. Costs of this appeal are to be costs in the cause.