NEW TERRITORIES CARGO TRANSPORT ASSOCIATION LTD AND ANOTHER v. DIRECTOR OF MARINE

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JUDGMENT

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1. For some 20 years, the Hong Kong Government had been regulating cargo work carried out on the water-fronts of Hong Kong by a statutory scheme. By Port Control (Cargo Working Areas) Ordinance which came into force in 1974 ("the Ordinance"), any area of unleased Crown Land (including any road) and any area of water adjoining any such area could be declared by the Government by order published in the Gazette as either a public water-front or a public cargo working area or an excluded water-front (section 3 of the Ordinance). Under section 6 of the Ordinance, the Governor in Council is given power to make regulations for a variety of purposes. By the Ordinance and Regulations made thereunder, the management of the Public Water-fronts and Public Cargo Working Areas are entrusted to the Director of Marine.

2. For some years after 1974, a number of areas in Hong Kong were declared by orders published in the Government Gazette, as public water-fronts. Over time, a number of other areas were also declared by orders in the Government Gazette, as public cargo working areas. By orders in the Government Gazette, some of the public water-fronts were declared as ceasing to be public water-fronts and the services previously provided by public waterfronts were replaced by public cargo working areas. The picture presented to the Court on this application is that slowly over the years, the Government's public water-fronts were replaced by public cargo working areas. The Public Water-fronts of Tuen Mun (some three in total) were the last of the public water-fronts to be closed down and this took place formally in August 1996. To replace the Tuen Mun Public Water-fronts, the Marine Department opened in August 1996, the Tuen Mun Public Cargo Working Area which became the 10th public cargo working area of Hong Kong. The controversy in this case resulted from the closing of the Public Water-fronts at Tuen Mun known as No. 44 ("Old Area 44") and the forced move to Tuen Mun Public Cargo Working Area known as No. 16 ("New Area 16"). Old Area 44 was closed by order in the Government Gazette and the Applicants had moved from Old Area 44 to New Area 16. This Judicial Review has been brought by the Applicants in their objection to the new method of working at the New Area 16 put in place by the Marine Department. The Applicants contended that the old method of work prevailing at the Old Area 44 up and until August/September 1996 should be used at New Area 16, notwithstanding the move to New Area 16. The question this Court has to decide is to what extent, if any, this new working method implemented by the Marine Department at the New Area 16 since September 1996 should be stopped.

3. The method of work prevailing at Old Area 44 is what is known as the First Come First Served system. For the sake of convenience, I will call this First Come First Served system as the Permanent Berth System. The First Come First Served system was not intended to be a permanent berthing system but was meant to be a fair and equitable system of serving every vessel wishing to use the public water-front on the first come first served basis. However, by reason of a number of factors including the geographical restriction of the area, this system as implemented became in effect a system which allowed the permanent berthing of the Applicants' vessels which took up, at all times all 16 berths at the Old Area 44. What was seen everyday or often at Old Area 44 was 16 vessels of the Applicants lying alongside the 16 berths with waiting in the water immediately to each berth, three other vessels of the Applicants, so that each berth area had vessels four deep of the Applicants, using or waiting to use that berth. With 64 vessels of the Applicants (16 berths times 4 vessels deep each berth area) constantly occupying and using the whole of Old Area 44, the Permanent Berth System became a system whereby the Applicants achieved monopoly of work at Old Area 44. No outsider could get in. In order to understand how a system, which was meant to give every vessel a fair and equal opportunity to use Old Area 44, became a monopoly system giving exclusive usage to the Applicants and to the vessels of the Applicants, it is necessary to understand the way the First Come First Served system was operated.

4. In paragraph 11 of the Affidavit of Mr. Lambourn, he described why the First Come First Served system did not live up to its name and could not ensure a fair enjoyment of the berthing facilities to the general public or users:-

"...It is common practice that berths are occupied by up to 4 tiers of vessels tied on the seaward side and "queued" to handle cargo. When the vessels are queuing alongside the berths, they report their arrivals to the supervisor of the Marine Department and the vessels would be issued berthing permits. The first vessel in the queue which is berthed nearest to the seafront would be allocated to a berth for its use. The first vessel has 48 operating hours to work on their cargo and after it finishes, the berth would be allocated the second vessel in the queue. The vessel which has just finished the cargo work could then return to the end of the queue and await the allocation of berth the second time. It is by way of such rotation of the vessels which are usually under the control of the same or related cargo handlers that a de facto "permanent" right to the use of a berth is ensured. There is no requirement to vacate the berth when cargo handling has been completed. Some operators take advantage of this by occupying the berths with idle vessels. The queuing "system" used by the related cargo handlers in effect controlled and monopolised the use of particular berths."

5. Some of the significant features of this Permanent Berth System which were brought out at the hearing are the following:-

There is no dispute at the hearing that by reason of these features amongst others what was originally intended to be a system of equal opportunities became in practice the Permanent Berth System giving the Applicants a monopoly in Area 44. This was obviously of great commercial advantage to the Applicants although at the hearing, the precise extent or the monetary value of this commercial advantage was not revealed to the Court.

6. It is clear from the evidence that the Marine Department was aware of the shortcomings of this Permanent Berth System and that from about 1986 onwards, the Marine Department had been trying to change this system by introducing what is known as the Fast Working Berth system. In essence, under this Fast Working Berth system the cargo operators have to apply for a berthing permit every day and the operators have one day to handle their cargoes at the berth allocated and further the cargo operators have to vacate the berth after they finished their cargo handling. As was said at paragraph 13 of the Affidavit of Mr. Lambourn:-

"The FWB system was applied to individual berths wherever possible, when a vacant berth became available".

However, the Marine Department was unable to employ this Fast Working Berth system on 100% basis in Hong Kong and I was told that the percentage varied from one Public Cargo Working Area to another Public Cargo Working Area but on the average, something like 93% of the public cargo work was being carried out on the Permanent Berth System and 7% being carried out on the Fast Working Berth System.

7. It is against this background of the 9 Public Cargo Working Areas of Hong Kong being operated on the mixed system of some Permanent Berth System and some Fast Working Berth System that the events of 1995 and 1996 took place which resulted in the Marine Department implementing the Fast Working Berth System one hundred percent at the New Area 16.

8. In January 1995, the Marine Department commissioned Coopers & Lybrand to undertake a consultancy study. In the Report of Coopers & Lybrand of September 1995 under the heading Executive Summary, the main reason for the low productivity levels at existing Public Cargo Working Areas is described as to be

"the current berth allocation arrangement, where berths are allowed to be occupied more or less permanently by existing operators, even when these berths are not fully utilised for cargo operations."

The Coopers & Lybrand Report then went on to give a number of options available to the Marine Department including amending the current allocation of berths.

9. The examination of this sorry state of affairs stemming from the current berth allocation system was then taken up in October 1995 by the Director of Audit who in his Report said at paragraph 7.50:-

",,, The MD's attempts to regain control of the allocation of berthing spaces since 1982 have failed. These failures, in turn, have strengthened the vested interests of the habitual users and have become obstacles to attempts to privatize the management of PCWAs. These problems have continued to exist without any breakthrough. Since the late 1980's, the MD conducted many reviews leading finally to the 1995 consultancy study. I consider that, in so far as fact finding and assessments of options are concerned the MD should be given credit for conducting the in-depth study. What has seemingly been lacking, however, is the will to act."

As will be seen later, the Marine Department subsequently did have the will to act and the debate in this Judicial Review is whether the Court in the circumstances, is prepared to endorse the Marine Department's action.

10. The Director of Audit informed the Director of Marine by paragraph 7.51 of his Report the following audit conclusions:-

These damning audit conclusions are followed by the Audit Recommendation which included amongst others that the Director of Marine should decide to act positively to tackle the problems in the PCWAs.

11. The October 1995 Report of the Director of Audit (including the central problem of the unsatisfactory berthing allocation system operated by the Marine Department resulting in monopolisation of berths and under-utilisation of berths) was the subject of public inquiry held by the Public Accounts Committee ("PAC") in November 1995 and January 1996. In the January 1996 Report of PAC, under the heading Conclusions and Recommendations, it said that the Committee:-

The public condemnation by PAC of the Marine Department's Permanent Berthing System is in my view wholly natural and justified. The combination of the Coopers & Lybrand's Report, the Director of Audit's Report and the PAC Report forced even the Marine Department to act and it seems that after January 1996, a Government Working Group was formed to carry out management reform in the PCWAs. From late January 1996, a series of public consultation on the management reform proposed by the Government Working Group were carried out. The representatives and organizations of cargo operators including I believe the Applicants were all involved in this consultation process since late January 1996. It is of course to be remembered that the reform proposed by the Government was permanent reform which would involve changes in the legislation. The Government intended to bring into force by the end of 1996, the permanent reform covering all of the Hong Kong's public cargo working areas.

12. But in the meantime, in advance of the introduction of permanent reforms, the Public Cargo Working Area at New Area 16 was due to be opened in July/August 1996, with Old Area 44 due to be closed. What was it supposed to do. Three choices were open to the Marine Department:-

The clear choice of the Director of Marine in the circumstances could only be to open the New Area 16 with 100% Fast Working Berth System.

13. In anticipation of the opening of the New Area 16, the Marine Department on 18th of June 1996, held a crucial meeting at the Tuen Mun Marine Office with cargo operators of Tuen Mun including the Applicants. The meeting was held so that the Marine Department could brief the cargo operators of Tuen Mun as to the intended implementation of the new policy of the Marine Department in relation to berthing allocation at the New Area 16, namely the adoption of the Fast Working Berth System for all berths at the New Area 16 as an interim measure pending the permanent reform. Mr. Lambourn of the Marine Department explained to the cargo operators that the Permanent Berth System would cease altogether in Hong Kong when the permanent reform was introduced at the end of 1996 and that in the meantime, the Marine Department could not open a new Public Cargo Working Area at Tuen Mun using the Permanent Berth System. In answer to the objection of Mr. Ng of the First Applicant that the Fast Working Berth System was unfair, Mr. Lambourn said that it was the fairest and most suitable berthing system for a new PCWA as an interim arrangement and that "it was not appropriate to open TMPCWA using a berth allocation system which was to be phased out." At that Meeting the standard condition for Fast Working Berths was read out and there were discussions as to the possible modification of the conditions. There was then agreement that another meeting would be held in a week's time to discuss the cargo operators' proposals for modifying the conditions.

14. Subsequent to that 18th June Meeting, strong representations were made by the Applicants and those representing them against the adoption of the Fast Working Berth System at New Area 16. Meetings were held by the Marine Department with the 1st Applicant on 10th July, 7th August, 21st August 1996 to discuss the operation which would be carried out at New Area 16. Old Area 44 was in fact degazetted on 9th August 1996 as a Public Cargo Water-front and New Area 16 was gazetted on the same day as a Public Cargo Working Area. But notwithstanding the degazetting of Old Area 44, a grace period which eventually extended to 2nd September 1996 was given to the Applicants to enable them to make the transition from Old Area 44 to New Area 16. On the 10th of September 1996, with the closure of the road leading to Old Area 44, the cargo operators eventually moved to New Area 16. As of the 16th September 1996, the Applicants as well as some operators not members of the Applicants have been using the New Area 16 for cargo operation.

15. The new Berth Permit Conditions for the New Area 16 show quite clearly why the Fast Working Berth system is a fairer allocation of berthing. The following are some of the features:-

Mr. Ma does not seek to challenge the superior merits of the Fast Working Berth System which for convenience I will hereinafter referred to as the Daily Berth System.

16. At the hearing of the Judicial Review, it was made clear from the outset that there was no complaint against the closing of Area 44 or the stoppage of cargo work in Old Area 44. Having regard to Old Area 44 being degazetted as a Public Water-front, it is not surprising that there is no issue on this. It would be illegal for any cargo operator to carry on any cargo work at a degazetted water-front.

17. Two Issues were raised by Mr. Ma for the Applicants. The first issue is what I call Wednesbury irrationality and the second issue is procedural impropriety.

WEDNESBURY IRRATIONALITY

18. The attack under the Wednesbury Irrationality Issue is on two basis. It is said that the Marine Department's action or decision was irrational, firstly because there was a legitimate expectation that such action would not be taken and secondly because it was unequal treatment.

LEGITIMATE EXPECTATION

19. There is no dispute that the Permanent Berth System had been in place at Old Area 44 for a long time and that the Marine Department was aware of it. But that does not in my judgment give rise to any legitimate expectation that the Marine Department would forever allow this state of affairs to continue. That the Marine Department had been trying since around 1986 to find a way to change the berthing allocation system was notorious and even though the Marine Department was irrationally unsuccessful in its attempts, it does not mean that the cargo operators could have a legitimate expectation that the Marine Department would continue to be either incompetent or weak-willed forever.

20. Furthermore, once the high level criticism against the Permanent Berth System started in September 1995, by early or mid 1996 the Applicants could hardly be under any illusion that the days of their monopoly would soon be over and that a major policy change was taking place in the Marine Department against the Permanent Berth System.

21. Where it was clear to the Applicants that they had to move from Old Area 44 to New Area 16, could it be said that they had any legitimate expectation that the old discredited Permanent Berth System would be allowed to operate at the New Area 16. In my judgment, the evidence shows that during the months prior to June and July 1996, the Applicants knew that they were fighting a losing cause and that their expectation was that something like the Daily Berth System would be implemented at the New Area 16. This was the reason why the Applicants were so opposed to moving.

22. I do not find that the actions and conduct of the Marine Department were of such clear and unambiguous representation as to give rise to a legitimate expectation in the Applicants that at the New 16 Area, the Permanent Berth System would be operated by the Marine Department. On the facts therefore, the case of Wednesbury irrationality based on legitimate expectation just does not run. But what is fatal to the Applicants on legitimate expectation is that in any event in law a change of policy overrides legitimate expectation. After the errors of its discredited berthing allocation system were pointed out to the Marine Department in the three Reports of September 1995, October 1995 and January 1996, it would be suicidal for any Government Department to ignore these warnings and recommendations. The Marine Department was told to be strong, to adopt a new policy and to prevent monopolization of berths. These it did at New Area 16, which is the first Public Cargo Working Area to open after the public condemnations. The change of policy was rational, necessary and in the public interest. In the circumstances, even if there had been substantial legitimate expectation (which I find there was not), the action of the Marine Department in implementing the Daily Berth System is not in my judgment Wednesbury irrational. What is curious in this case is that in the view of any fair-minded person the actions of the Marine Department in operating a system which perpetuated monopoly of berths, would be regarded as irrational because the actions of the Marine Department were feeble, ineffective and against public interest. When at long last in August 1996, the Marine Department decided to acquire some backbone, its action was branded by the Applicants as irrational and unreasonable. There is no substance in the accusation.

UNEQUAL TREATMENT

23. In the course of his submissions, Mr. Ma concentrated his considerable fire power on the issue of irrationality due to unequal treatment. The case was simply put, namely that the Marine Department should not discriminate between the various Public Cargo Working Areas of Hong Kong and by doing so, its action was Wednesbury irrational. At the other 9 PCWAs, mixed systems were allowed, namely a small percentage on Daily Berth System and something like 93% on Permanent Berth System. Why should Tuen Mun Public Cargo Working Area, namely New Area 16 be singled out for different treatment and be subjected to 100% Daily Berth System. I must say I was initially very attracted to the argument. Upon fuller and longer reflection, I believe that the answer to the argument can be found in the deceptively simple case of the Crown, namely a major policy change to abandon the Permanent Berth System. With that policy change, the interim position at New Area 16 could not be anything but on 100% Daily Berth System.

24. In my judgment what had been overlooked in the criticism of the Applicants of unequal treatment are the following two factors:-

It is not right to equate New Area 16 with the other 9 PCWAs because the 9 PCWAs were being managed on the mixed system before the major criticisms and before the change of policy. There would be greater force in Mr. Ma's complaint if two similar PCWAs both being opened after July 1996, were managed differently by the Marine Department, one on the mixed system and one on the 100% Daily Berth System. That would amount to selective application of a policy (see the powerful judgment of AG v Quin [1990] 93 A.L.R. 1 at 43). This is not the situation here. The decision making of the Marine Department was to choose between opening New Area 16 with the mixed system, which was condemned in the Reports or opening with 100% Daily Berth System. Posing the question this way, it seems to me that the answer is obvious and that the decision of the Marine Department is not Wednesbury irrational or Wednesbury unreasonable in the sense that no reasonable Government Department can come to. Given the history of the matter and what I have learnt about the case. I rather think that the Marine Department would find it difficult to justify opening a brand new Public Cargo Working Area with a berthing allocation system which perpetuates the monopolization of berths and which is contrary to the public interest. At the end of my deliberation, I am fully satisfied that there was no unequal treatment. In fact, having regard to the vital, necessary and legitimate policy change, even if I should find that there was inequality, it would not induce this Court to interfere.

PROCEDURAL IMPROPRIETY

25. The complaint of the Applicants under this Issue of Procedural Impropriety is basically that the Applicants were not properly consulted and that therefore the Marine Department arrived at its decision on the application of Daily Berth System on 18th June 1996 in the absence of proper consultation with the Applicants, who were not given an opportunity to voice their concerns to the Marine Department.

26. There was no dispute at the hearing that the Marine Department was entrusted and empowered under the Ordinance and its Regulations to manage and control the Public Cargo Working Areas of Hong Kong. It was the duty of the Marine Department therefore to find the best or most reasonable means to carry out that statutory intention. In the discharge of its duties, the Marine Department is bound to have regard to the public interest and to decide to what extent and at what time the monopoly of berths should be stopped.

27. As result of the severe criticism in late 1995 and early 1996 of the Marine Department's management of the berth allocation system, there were six rounds of consultation between January 1996 and May 1996 on territory wide reform (see paragraph 10 of the May 1996 Paper sent to Legislative Council's Economic Services Panel Paper on Management Reform of Public Cargo Working Area). The Applicants attended the meetings at the Legislative Council. The Applicants were well aware of the criticisms against the Permanent Berth System and that the heart of these criticisms is that the System resulted in monopoly of berths, the very things which the Applicants were trying to protect. The Applicants knew full well what they were facing and why.

28. The intention of the Marine Department on the interim measure of reform at New Area 16 was announced at the Meeting of the 18th June 1996. There was then a series of consultation with the Applicants and the views of the Applicants were then taken into account in modifying the proposed berth allocating system at New Area 16. Even after Area 16 was formally opened on 9th August 1996, the consultation process still continued and modifications were made to the Daily Berth System to accommodate the Applicants. The berthing time for example had been increased from one day to two days. The Marine Department was well aware of the opposition of the Applicants to the Daily Berth System being operated at New Area 16 and took them into account but nevertheless went ahead to implement the more effective and fair system of berth allocation. There were long exchanges of correspondence (see for example letters from the Marine Department dated 29th July 1996 and 8th August 1996) up to the time of the Judicial Review application. The fact that the Marine Department did not stop implementing the Daily Berth System, does not mean that it had not consulted the Applicants or had not taken into account the matters put forward by the Applicants. The Applicants had plenty of opportunities to present their case to the Marine Department and to those who could influence the Marine Department such as the Legislative Council and the District Board. They bombarded these and other bodies and their members with their objections to the Daily Berth System. They pressed their case forcefully on the Marine Department. Nearly two months elapsed between the 18th June Meeting and the 9th August 1996 opening of the New Area 16. Notwithstanding the representations, the Marine Department stood firm and when appropriate made changes to the proposed Daily Berth System. There was in my judgment no procedural impropriety.

29. What the Marine Department is required to do is to act fairly towards the Applicants so that the Applicants could present their case against the Daily Berth System if they wished to. They did present their case in opposition to the Daily Berth System being applied to Area 16. Mr. Ma complained that there was insufficient consultation and that detailed points against Permanent Berth System were not put to the Applicants. In my judgment, Mr. Ma has exaggerated the function of the Court in Judicial Reviews. The manner and scope of consultation depends on the context and the circumstances and generally speaking is a matter best left to the body being charged by the legislature to make the decision or to carry out the administrative acts. Having regard to the interim nature of the Daily Berth System, pending permanent reform in a few months time, in my judgment the Court should only interfere where it can come to a clear view that the Applicants were unfairly treated by a procedure which no reasonable Marine Department could possibly adopt I do not find this was the case and there was no unfairness or procedural impropriety.

30. My conclusion on this application for Judicial Review is therefore that no case had been made out which calls for interference by this Court. The application for Judicial Review is dismissed. I also make a costs order nisi, with certificate for two counsel, in favour of the Respondent.