Hong Kong Standard Newspapers Ltd. v. Mass Transit Railway Corporation

1992, No. MP2587

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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1. The Applicants are seeking Judicial Review of the Decision of the Mass Transit Railway Corporation (MTR) to enter into an Agreement with Hong Kong Transit Publishing Co. Ltd. (HKTP) to grant them exclusive distribution rights of their newspaper 'Recruit'. They also attack the Agreement itself which was signed on the 7th April 1992.

2. The complaint which is made is that it was ultra vires for MTR to enter into the activity envisaged by the Agreement.

3. The Relief sought is :-

"1) Certiorari to quash the decision of MTRC to enter into the said agreement;

2) A declaration that MTRC had no power to enter into the said agreement and that the said agreement is null and void;

3) An injunction to prevent MTRC from carrying out the said agreement;

4) If and so far as the said decision and/or the said agreement were made more than three months prior to the date of this application, an extension of time for the making of the application."

4. Mr. Barlow who represented the Applicants advised me at the commencement of the hearing that his clients did not wish to pursue the 1st Relief Sought.

5. He also informed me that the 4th Relief was only included in the exercise of extreme caution as he did not accept that there had been delay.

6. A considerable amount of time was spent by Counsel in analysing the terms of the Agreement complained of. It is a fairly lengthy Agreement. I do not though consider that it is necessary for me to spell out all of its terms in detail. I propose, however, to describe the main features and to comment upon aspects of the Agreement which seem to me to be of significance for the purposes of these proceedings.

7. Under the Agreement HKTP agree to publish a Newspaper known as 'Recruit'. As its title might suggest the contents of the papers overwhelmingly contains advertisements for situations vacant. Indeed it is clear that the revenue for the paper is derived from the charges which are imposed for inserting Notices in the paper.

8. It must be added that the Agreement provides that 2 pages in the paper are reserved for MTR to insert such material as they may wish to include. Mr. Ribiero for MTR emphasised that this reservation was important as one of the main purposes of 'Recruit' was to provide a channel of communication between MTR and passengers using the railway.

9. Under the Agreement HKTP are required in addition to publishing the paper to distribute it. The modus operandi was that a large number of copies would be placed within the Exit areas of all MTR stations on a Friday evening and passengers leaving the stations would be able to pick up copies as they departed free of charge. As might be imagined the circulation of the paper is very large and accordingly it is highly attractive to prospective advertisers.

10. Other important provisions in the Agreement include a right to MTR to effectively control editorial content. In addition to their right to use the paper as a channel of communication they also hoped to profit from the venture. There were provisions included which entitled them to receive 30% of the net profits. I was told that it will take some time for MTR to obtain a share of the profits as the various start up expenses have to be paid for before this eventuality arises.

11. The Applicant is a competitor of 'Recruit'. Advertising revenue forms an important part of their operation. Put very simply they consider that 'Recruit' has an unfair competitive advantage in having what was described as the captive audience of commuters on the MTR.

12. They complained that MTR's involvement in the Scheme was ultra vires.

13. The relevant sections in the Mass Transit Railway Corporation Ordinance Cap. 270 dealing with the powers of MTR are contained in sections 3, 6 and 13. These are as follows :-

" 3. (1) There is hereby established a body corporate, to be known as the Mass Transit Railway Corporation.

(2) The purposes of the Corporation are -

(a) to construct the Mass Transit Railway and to operate it having regard to the reasonable requirements of the public transport system of Hong Kong;

(b) to engage in such other activities, and to perform such functions, as the Governor may, after consultation with the Corporation, permit or assign to it by order published in the Gazette.

(3) The Corporation shall have perpetual succession and a common seal and be capable of suing and being sued and of doing and suffering all such other acts and things as bodies corporate may lawfully do and suffer.

6. (1) The Corporation may do such things as are expedient for or conducive to the attainment of the purposes declared in or permitted or assigned under section 3(2) or of any purpose reasonably incidental to or consequential upon any of those purposes.

(2) Without restricting the generality of subsection (1) the Corporation may for the purposes referred to therein -

(a) acquire, hold and dispose of all kinds of property movable and immovable and in any manner which it thinks fit;

(b) improve, develop or alter any property held by it;

(c) enter into, assign or accept the assignment of, and vary or rescind any contract or obligation;

(d) carry on any business either alone or in partnership with any other person or persons;

(e) employ an agent or contractor to do any thing which the Corporation may do;

(f) determine the fares payable by persons travelling on the railway.

(3) Any land held by the Corporation for any purpose referred to in subsection (1) may be improved, developed and altered by it in such manner and to such extent as the law would allow if the land were held by a natural person in the same interest and the Corporation shall not be required to show that such improvement, development or alteration is itself undertaken for any purpose referred to in subsection (1).

13. (1) The Corporation shall conduct its business according to prudent commercial principles and shall ensure as far as possible that, taking one year with another, its revenue is at least sufficient to meet its expenditure.

(2) Subject to the provisions of sections 14 and 14A the profits of the Corporation in any financial year shall be applied by it in such manner as it may, with the prior approval of the Financial Secretary, think fit, being a manner consistent with this Ordinance. (Replaced, 61 of 1983, s.2)

(3) For the purpose of this section and sections 14 and 14A the profits of the Corporation in any financial year are the excess of revenue of the Corporation over the total sum required by it -

(a) to meet the total outgoings of the Corporation properly chargeable to revenue account; and

(b) to enable the Corporation to make such provision for depreciation and renewal of capital assets, bad debts and other purposes, being provision properly chargeable to revenue account, as it may reasonably consider adequate. (Replaced, 61 of 1983, s.2)"

REVIEWABILITY

14. While Mr. Ribiero accepted that MTR was a Public Body he contended that the decision to enter into the Agreement was not such as it could be characterised as being of a Governmental nature. He placed reliance upon the speech of Lord Diplock in C.C.S.U. v. Minister for the Civil Service 1985 1 AC 374 at p.409.

" For a decision to be susceptible to judicial review the decision-maker must be empowered by public law (and not merely, as in arbitration, by agreement between private parties) to make decisions that, if validly made, will lead to administrative action or abstention from action by an authority endowed by law with executive powers, which have one or other of the consequences mentioned in the preceding paragraph. The ultimate source of the decision-making power is nearly always nowadays a statute or subordinate legislation made under the statute; but in the absence of any statute regulating the subject matter of the decision the source of the decision-making power may still be the common law itself, i.e. that part of the common law that is given by lawyers the label of "the prerogative." Where this is the source of decision-making power, the power is confined to executive officers of central as distinct from local government and in constitutional practice is generally exercised by those holding ministerial rank."

15. He also referred to several other cases where the distinction between what constitutes a public act and a private act were considered. I consider quite a good illustration can be seen from Re An Occupation Permit No. 18555 1991 2 HKLR 104. This was a case heard by me. I considered the authorities and said at p. 108.

" The Crown's main ground in opposition to this application is that when the Housing Authority issued the Occupation Permit to Mr. Yu it was acting in a private and not a public capacity. This being the case the present application was misconceived as private acts are not amenable to Judicial Review. Miss Hartstein placed reliance upon a passage from the speech of Lord Edmund Davies in Hang Wah Chong Investment Co. Ltd. v. Attorney General [1981] HKLR 336 at p.341:

"Somewhat more formidable than the foregoing is the point (scarcely hinted at in the appellants' printed Case, but nevertheless spaciously developed by their learned counsel) relating to the role assigned to the Director of Public Works under the contract and particularly in relation to Special Conditions 6 and 7. It has already been observed that he is by definition also the Building Authority, and he is charged with many duties falling within the public domain, in relation to which it might well amount to an abuse of power were he to demand a premium as a condition precedent to acceding to a suppliant's request. Was the Director, ask the appellants, not operating in the public domain when saddling his approval of the appellants' building plans in 1976 with a demand for an extremely high premium which bore no apparent relation to the terms of the appellants' application? And, in consequence, was he not therefore imposing an insupportable condition on his compliance amounting to an abuse of power?

It has to be observed in the first place that it is common ground that the Conditions of Sale operate in lieu of the terms of the contemplated Crown lease which was never granted. Secondly, no difference relevant to the present appeal can be drawn between a lease granted by a public body, or indeed the Crown, and a private lease (Wade, Administrative Law, 4th ed. p.644). Thirdly, the view expressed by Huggins, J.A. in the Supreme Court that 'The Director of Public Works has many responsibilities besides those imposed by the Buildings Ordinance' appears well-established, one of those responsibilities being that of acting as the Crown's land agent. And appellants' counsel did not challenge the conclusion of Huggins, J.A. that '... the Director of Public Works can bind himself in his capacity as the Building Authority without binding himself in his capacity as land agent and vice versa'."

Miss Hartstein submitted that in the present case the Housing Authority performed many acts and that it was necessary to distinguish between those which were in the private domain and those in the public domain.

Some assistance can be derived from a consideration of s. 16 of the Housing Ordinance (Cap. 283) :

"16. Leases of land in estates

(1) Subject to this Ordinance, the Authority may -

(a) let to any person, for any period, any land in an estate, subject to the payment of such premium, rent or other consideration as the Authority may determine; and

(b) fix the terms, covenants and conditions on which any land in an estate may be let or occupied.

(2) Where the Authority grants a lease under sub-s. (1) of Crown land in an estate of which control and management has been vested in it under s. 5, 37 or 38, the person occupying the land under and in accordance with the lease shall be deemed, for the purposes of ss. 4 and 6 of the Crown Land Ordinance (Cap. 28), to be occupying the land under a licence issued under s.5 of that Ordinance."

I am satisfied that when the Housing Department issues to a party an occupation permit it is performing a function which is analogous to that of a landlord and that it should be characterised as an act in the private domain."

16. These cases in my view make it clear that a public authority performs acts in both the public and the private domain. It is necessary to analyse the nature of the act which is being performed and then to decide into which category it falls.

17. Mr. Barlow did not accept that it was a valid exercise to arbitrarily distinguish between public and private acts. In support of this he referred to a passage from the speech of Lord Wilberforce at p.276 of Davy v. Spelthorne B.C. 1984 1 AC 262.

" It is said that, in this case, the right should be denied because the claim involves consideration of a question not of "private law" but of "public law" - namely whether the respondent had or would have had a defence against the enforcement notice; that this consideration cannot take place in an ordinary action but can only take place in a proceeding of what is now called "judicial review" under the provisions of R.S.C., Ord. 53.

The expressions "private law" and "public law" have recently been imported into the law of England from countries which, unlike our own, have separate systems concerning public law and private law. No doubt they are convenient expressions for descriptive purposes. In this country they must be used with caution, for, typically, English law fastens, not upon principles but upon remedies. The principle remains intact that public authorities and public servants are, unless clearly exempted, answerable in the ordinary courts for wrongs done to individuals. But by an extension of remedies and a flexible procedure it can be said that something resembling a system of public law is being developed. Before the expression "public law" can be used to deny a subject a right of action in the court of his choice it must be related to a positive prescription of law, by statute or by statutory rules. We have not yet reached the point at which mere characterisation of a claim as a claim in public law is sufficient to exclude it from consideration by the ordinary courts: to permit this would be to create a dual system of law with the rigidity and procedural hardship for plaintiffs which it was the purpose of the recent reforms to remove."

18. I believe that these observations are of a general nature. The warning given is certainly to be heeded. It does not though in my view detract from the description given by Lord Diplock of the type of situation which is amenable to Judicial Review.

19. If the acts of the MTR are properly analysed I do not think that it is possible to avoid coming to the conclusion that entering into the contract with HKTP was an act in the private domain which as such cannot be the subject of Judicial Review.

20. This is a matter of importance in deciding whether any remedy is available to the Applicants. Mr. Barlow contended that they had a legitimate interest by virtue of the fact that they were competitors with "Recruit" and suffered loss as a consequence of MTR's ultra vires activities. I do not think that this is right. It is of paramount importance to establish whether the act complained of is of a public or a private nature. In the latter case I am satisfied that the acts of the Public Body are not susceptible to Judicial Review.

21. In case I am mistaken in this I will consider the other issue ventilated at the hearing.

DELAY

22. Section 21K(6) of the Supreme Court Ordinance Cap. 4 provides :-

"Supreme Court Ordinance (Cap 4), s 21K(6) :-

Where the High Court considers that there has been undue delay in making an application for judicial review, the Court may refuse to grant -

(a) leave for the making of the application; or

(b) any relief sought on the application, if it considers that the granting of the relief sought would be likely to cause substantial hardship to, or substantially prejudice the rights of, any person or would be detrimental to good administration."

and Order 53 rule 4(1) of the Rules provides :-

"Order 53 rule 4:-

(1) An application for leave to apply for judicial review shall be made promptly and in any event within three months from the date when grounds for the application first arose unless the Court considers that there is good reason for extending the period within which the application shall be made."

23. What is clear is that time starts to run from the date when the grounds for the application first arose.

24. Mr. Barlow submitted that time started to run from the date when 'Review' was first made available to the public - that is the 3rd July 1992. I do not think that this can be right. At the beginning of this Judgment I referred to the matters complained of by the Applicant. These were the decision to enter into the said Agreement and the act of doing so. At the latest that was the 7th April 1992. The Notice of Application for leave to proceed was dated the 21st August 1992. This was more than 3 months after the 7th April so there has undoubtedly been delay. It is, therefore, incumbent upon the Applicant to explain and justify it.

25. According to the evidence which was before me Mr. Armsden, the Group General Manager and Editor in chief of the Applicant was not aware of this venture until the 8th June 1992. I have no reason to disbelieve this statement. It is, however, rather surprising as evidence was also filed which indicated that a number of other people in the media world were aware of the position. Indeed applications from 28 applicants were received in response to an advertisement inserted in the press by MTR for parties interested in such a scheme to communicate with them at an earlier stage. I do not think that Mr. Armsden's ignorance of the scheme is a satisfactory excuse.

26. Mr. Barlow argued that if I were to be satisfied that MTR were acting ultra vires I should not decline to exercise any discretion reposed in me in favour of the Applicants as otherwise I would be condoning such acts. I do not think that this can be correct. The consequence of this would be to virtually eliminate any time bar.

27. So far as section 21K(6) is concerned hardship would be occasioned to HKTP if the time limit is waived. They have entered into on going financial obligations in publishing the paper and it would cause them loss if I were to grant the relief sought.

28. For the reasons I have given I would not have been prepared to waive the time limit.

ULTRA VIRES

29. Mr. Barlow very helpfully produced a table of 12 cases where the issue of vires arose. Understandably each was to a large extent dependent upon its own facts.

30. On account of the view I have taken concerning the Reviewability of the Application and the fact that delay is not waived, I will not consider all of these cases in detail. It is, however, possible to draw some principles from the cases.

31. The fact that an Agreement or scheme may be convenient or profitable does not of itself save it from being ultra vires Hazell v. Hammersmith B.C. 1992 2 AC 1.

32. Also in the context of the Sections in Cap. 270 which I have referred to it is imperative to demonstrate that the activity countenanced by the Agreement must be 'reasonably incidental to or consequential upon' the operation of the Mass Transit Railway and have 'regard to the reasonable requirements of the public transport system of Hong Kong'.

33. According to Mr. Noble, the Marketing and Planning Director of MTR, the idea behind Recruit is to provide a channel of communication between MTR and the travelling public and to make a profit from the operation.

34. To achieve these ends they have permitted HKTP to distribute Recruit at their stations on Friday evenings.

35. I do not accept the validity of the submission made by Mr. Barlow that by virtue of the editorial control they are able to exercise or by the fact that they may be entitled to a share of the profits that MTR can be said to be Partners in the venture.

36. The rights and duties of the parties are set out in detail in the Agreement and it is clear to me that each party should be considered as being at arms length to each other.

37. I think that the case in Mr. Barlow's schedule which most closely resembles the facts of this case is Foster v. London Chatham & Dover Railway Co. 1895 1 QB 711. The Plaintiff contended that the leasing of space under railway arches was ultra vires. At the conclusion of his judgment at p. 718 Lord Halsbury said :-

" I have now to see whether there is anything in the Act of Parliament which prevented this use of the railway arches; and I think the question must come to that. If the company have the right to let the railway arches it is impossible to contend that they cannot let these little pieces of land, which give additional accommodation to the railway arches, in the form in which they are let. I for one entirely deny that there is any established proposition of law which prevents the railway company using this land and their arches for some collateral purpose that may give profit to them. A great variety of examples have been given by various judges of things which may be done by railway companies besides their own particular business. It is familiar to us all that coal stores and bookstalls, and a great variety of things may be set up by railway companies which, although not actually used in the business of carrying passengers and goods, are nevertheless things which they may do, and yet carry on their own particular business quite consistently. I for one should be sorry to place any restriction on their power to make, to the best of their ability, their undertaking profitable to their shareholders and a convenience to the public. In anything I have said I am not in the least endeavouring to undervalue the inconvenience and annoyance - and in one sense injury - that this possibly may be to the present plaintiff. I can quite understand it may be an annoyance to him. All I say is, I cannot see that any legal right of his has been infringed."

38. I consider that the activity provided for in the Agreement was intra vires. Accordingly, I would have dismissed this application on its merits.

39. I propose making an order nisi that the Respondents are to have their costs.