KWOON CHUNG MOTORS CO LTD v. COMMISSIONER FOR TRANSPORT AND ANOTHER

HCAL67/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

  NO. 67 OF 2009

-----------------------------

-----------------------------

-------------------------------------------------------

REASONS  FOR  JUDGMENT

-------------------------------------------------------

Introduction

1. The applicant operates non-franchised public bus service under two passenger service licences nos. 9396A and 3658A (“PSL9396A” and PSL3658A”) issued by the Commissioner for Transport.  PSL9396A authorizes the applicant to provide, inter alia, A08 Service.  One of the buses included by PSL9396A is HV6656. 

2. By decision dated 24 January 2008, the Commissioner (a) determined that the applicant had in November 2006 used HV6656 to operate a public service in contravention of, inter alia, Condition 1 of PSL9396A and the service so provided was unauthorized and (b) suspended PSL9396A for a period of 6 months and to cancel the vehicle licence in respect of HV6656 during the suspension period.  On 21 April 2009, upon review by the applicant, the Transport Tribunal confirmed the Commissioner’s determination on contravention but reduced the sanction to a suspension of PSL9396A in respect of HV6656 for 4 months. 

3. By this application for judicial review, the applicant sought to quash the decisions of the Commissioner and the Tribunal on contravention and the sanction imposed by the Tribunal.  On 2 March 2010, after hearing the parties, I dismissed the application with costs.  I have indicated that I would hand down the reasons for judgment in writing, which I now do. 

Contravention

4. The circumstances under which the applicant contravened Condition 1 of PSL9396A are not in dispute. 

5. Condition 1 stipulates :

“The operation of any service, either solely or with other Passenger Service Licence holders(s), whether jointly or otherwise, by any bus specified in this licence or under the control of the same licensee, other than any type of public bus services specified in Section 4(3) of the Public Bus Services Ordinance (Cap. 230) [‘PBSO’], with the same origin and destination areas, for more than 2 days either intermittently or consecutively in a period of 30 days, shall be subject to the prior approval of the Commissioner for Transport in writing …”

6. The Transport Department conducted 3 surveys on 3, 24 and 30 November 2006 on HV6656.  It transpired that HV6656 was used in providing free passenger service to the public between Millennium City in Kwun Tong and Hiu Lai Court in Sau Mau Ping with the same origin and destination areas (“the Subject Service”) without any approval from the Commissioner.  Based on the surveys, an inquiry was conducted on 18 April 2007.  The public officer later submitted his report to the Commissioner in May 2007. 

Decisions by the Commissioner

7. After considering the report, the Commissioner was satisfied that HV6656 was used by the applicant to operate a public bus service in contravention of, inter alia, Condition 1 of PSL9396A and the service so provided was unauthorized.  In imposing the sanction, the Commissioner took into account a similar contravention by the applicant in respect of PSL3658A.  The Commissioner then notified the applicant of his decision on 24 January 2008. 

Decisions by the Tribunal

8. At the review before the Tribunal, the applicant did not dispute that it had contravened Condition 1.  It however argued that the Subject Service was not unauthorized.  The Tribunal said :

“29.   The Tribunal considered that, for the purposes of establishing a breach of the condition of the license by a PSL holder and determining the consequential sanction to be imposed, it was not necessary to distinguish whether either the allegation under section 30(1)(a)[1] [the Road Traffic Ordinance (Cap. 374) (‘RTO’)] or that under section 30(1)(b)[2] of RTO or allegations under both section 30(1)(a) and 30(1)(b) of RTO were established.  It would be sufficient to establish the liability of the PSL holder to subject to sanction if any allegation either under section 30(1)(a) or 30(1)(b) of RTO was established.  Having satisfied that liability under either section 30(1)(a) or 30(1)(b) of RTO was established, the Commissioner would consider the circumstances of the breach and determined the appropriate sanction to be imposed under section 31 of RTO.  The Tribunal did not consider that it would make any material difference if only one allegation against the Applicant under section 30(1)(b) of RTO was established rather than if both allegations under both section 30(1)(a) and 30(1)(b) of RTO were established.  In any event, the Tribunal considered that it would be appropriate for the Commissioner and the Tribunal to consider the circumstances of the breach including the seriousness of the breach, the mitigation as well as the aggravating factors and the Commissioner’s guideline (see below) in each case to determine the appropriate sanction to be imposed. 

30.     In the present case, the Applicant admitted that it was in breach of Condition 1 of the PSL by providing free shuttle bus service plying the same origin and destination for more than 2 days within a period of 30 days without prior approval and the matter under section 30(1)(b) of RTO was clearly established.  In that event, the Commissioner proceeded to consider the circumstances of the breach and the guideline and determine the appropriate sanction to be imposed no matter whether TD’s allegation under section 30(1)(a) of RTO was also established.  The Tribunal did not see any reason to disturb the Commissioner’s decision on the appropriate sanction on the first ground submitted by the Applicant.”

9. The applicant further argued that the Commissioner should not have taken into account the applicant’s record of contravention in relation to PSL3658A.  The Tribunal dealt with the matter thus :

“31.   The Tribunal was informed by the Respondent that the Commissioner had a guideline in determining the appropriate sanction : Firstly, a suspension of 3 months would be imposed against a PSL holder found in breach for the first time.  However, a suspension of 4 months would instead be imposed against breach involving operation of Mun Mo bus service (bus service open to public, plying unauthorized routes and involving the charging of separate fares from passengers).  Secondly, a suspension of 6 months would be imposed for a breach for the second time.  Third, a cancellation of the PSL in respect of the bus involved in the breach would be imposed for a breach for the third time or more.  The guideline was adopted for reference purpose only.  The Commissioner would also consider if there was any special features in each individual case, including any mitigation or aggravating factors in each case.  

32.     In the present case, a suspension of 6 months was imposed.  The Respondent informed that the Commissioner had regarded the Applicant’s breach in the present case as one for the second time and therefore imposed a suspension of 6 months.  The Commissioner had taken into account a record of breach of the Applicant in the case of Inquiry No. 1 of 2003 (Transport Tribunal Case No. 16 of 2004 in which the Applicant was found in breach of the former version of Condition 1 (the present version of Condition 1 came into effect on 1 November 2005) and was imposed a suspension of PSL for 2 months.  However, it should be noted that the Applicant held 2 PSLs (nos. 9396A and 3658A) and the PSL involved in the previous case was PSL no. 3658A whereas the PSL involved in the present case was PSL no. 9396A.  

...      

35.     The Tribunal accepted the Respondent’s submissions.  The Tribunal considered that, as the Applicant held the 2 PSLs, applied and renewed the 2 PSLs at the same time and its management managed and operated bus services by using buses registered under the 2 PSLs, the Applicant must have knowledge that the bus service involved in the present case would be in breach of the conditions of its PSL because it had been found in breach of a similar (though not exactly the same) condition in the previous case.  The only difference was that the buses involved in 2 cases were registered under 2 PSLs with 2 different registration numbers.  The Tribunal also noted, as informed by the Applicant, the Applicant had applied for the Commissioner’s approval of the bus service in the present case but was rejected.  Therefore, the Applicant must have knowledge that prior approval of the bus service was required and such approval had not been granted.  In such circumstances, the Tribunal did not consider that the Applicant could be regarded as a first time offender which had been found involved in breach of license condition for the very first time and be treated as such. 

36.     However, the Tribunal also noted that it was possible for the Applicant to hold the belief that, since the previous breach of license conditions involved another PSL with a different registration number, the breach in the present case should still be regarded as breach for the first time.  The Tribunal considered that there was a doubt as to whether the Applicant would have held such a belief arising from the unclear position as to whether its breach would be considered as one of first time or second time.  Moreover, it appeared to the Tribunal that, if the Applicant used 2 different companies to hold 2 different PSLs, both the previous breach and the present breach would be regarded by the Commissioner as a breach of each PSL for the first time because 2 different companies/PSL holders were 2 separate legal entities.  In that event, the sanction which would be imposed by the Commissioner would be a suspension for 3 months.  Giving the benefit of doubt to the Applicant, the Tribunal considered that it was appropriate to impose a sanction which was more lenient than that imposed in a case in which the same PSL holder was found in breach of the conditions of the same PSL by using buses registered under the same PSL for the second time. 

37.     In determining the appropriate sanction, the Tribunal also took into account the following : The bus service provided by the Applicant in the present case was free-of-charge shuttle bus which did not involve the charging of separate fare and was different from the so-called ‘Mun Mo’ bus service, it was a breach of Condition 1 of its PSL by operating bus service plying the same origin and destination for more than 2 days within a period of 30 days without prior approval and it was established by the evidence that such bus service was operated by the Applicant for 3 days only when the surveys were conducted by TD’s Transport Inspectors.  Having considered all the circumstances of the case and all the above, the Tribunal took the view that a suspension for a period of 4 months was the appropriate sanction to be imposed.

…”

In the end, the Tribunal varied the sanction and suspended PSL9396A in respect of HV6656 for 4 months. 

Grounds of challenge

10. The applicant raised three grounds of challenge :

(1)     the decision of the Commissioner and the decision of the Tribunal confirming that the Subject Service was not otherwise than for the purpose of the service authorized or permitted by the PSL9396A are illegal and/or unreasonable (“Ground 1”);

(2)     the Tribunal erred in law or was unreasonable in saying that it would not make any material difference if only one allegation against the applicant under section 30(1)(a) of RTO was established rather than if both allegations under both sections 30(1)(a) and (b) of RTO were established (“Ground 2”); and

(3)     it is erroneous in law or unreasonable for the Tribunal to take into account the applicant’s previous conviction in relation to PSL3658A in determining the 4 months’ suspension sanction against the applicant (“Ground 3”). 

11. Grounds 1 and 2 are premised on the principal argument advanced by Mr Li for the applicant that the Subject Service was not unauthorized.  To that argument I now turn. 

Unauthorised service

12. As noted, the applicant had undisputedly acted in breach of Condition 1 by providing the Subject Service.  Mr Li, for the applicant, argued that the breach did not necessarily render the Subject Service an unauthorized one.  Mr Li referred to section 30(1) of RTO, which provides :

“(1)    If the Commissioner has reason to believe in respect of any vehicle in respect of which a passenger service licence is in force that :-

(a)   the vehicle has been or is being used otherwise than for the purpose of the service authorized by the licence; or

(b)   any condition of the licence or any provision of this Ordinance has not been or is not being complied with,

he may appoint a public officer to hold an inquiry.”

He submitted that section 30(1) draws a distinction between (a) unauthorized service and (b) breach of licence conditions.  He argued that in the present case, Condition 1 of PSL9396A did not define A08 Service.  It just regulated the mode of its performance in that approval would be required under defined circumstances.  The Subject Service remained A08 Service although the mode of providing the service was unauthorized by Condition 1.  Accordingly, the Commissioner had erred in determining that the Subject Service was unauthorized.  And the Tribunal had erred in failing to draw the distinction between unauthorized service under section 30(1)(a) and breach of licence conditions under section 30(1)(b) when confirming the Commissioner’s determination.  With respect, I disagree. 

13. In Hong Kong, public bus service falls broadly into two categories : (a) franchised and (b) non-franchised.  For franchised service, the operator must obtain a franchise granted under section 5 of PBSO or any other enactment : see section 4(1) of PBSO.  For non-franchised service, the operator must obtain a passenger service licence : see section 27 of RTO. 

14. The non-franchised service is specified in section 27(4) of RTO.  It means a public bus service which :

“(a)    is for the carriage of passengers by public bus; and

(b)     is of a type specified in section 4(3) of [PBSO] or of any other type approved by the Commissioner; and

(c)     if not required to be operated under a franchise granted under [PBSO].” (Emphasis supplied)

Thus the non-franchised service in turn falls into two categories :

(1)     the types of service as specified in section 4(3) of PBSO, which are (a) a tour service; (b) an international passenger service; (c) a hotel service; (d) a student service; (e) an employees’ service; (f) a residents’ service; and (g) a multiple transport service; and

(2)     any other type of service approved by the Commissioner. 

15. The types of service specified in section 4(3) of PBSO are respectively referred to as A-01 Service to A-07 Service in the explanatory notes attached to PSL9396A.  The explanatory notes also refer to A-08 Service, which is described as “Contract Hire Service” for “carriage of passengers other at separate fares”.  A-08 Service is further described as “non-scheduled service” in the body of PSL9396A. 

16. The policy behind the issuance of a passenger service licence for A-08 Service is explained in the affirmation of Mr Kwan Kwok Yan, Senior Transport Officer/Non-franchised Bus of the Bus and Railway Branch of the Transport Department, dated 21 December 2009 as follows :

“… This form of licence allows flexibility and is for catering to ad hoc demands for services that could not be met by the other seven types of service, e.g. wedding, funeral and open day of institutions.  … In line with the intention that A08 service is for meeting short-term service needs, PSL conditions are imposed, inter alia, to regulate the provision of such service.  … In sum, it is not to enable licence holders to operate services which are akin to scheduled or franchised buses, whereby services are provided along routes with the same origin and destination areas at frequent intervals.”

17. The principal condition imposed to regulate the provision of A-08 Service is Condition 1, which limits the provision of the ad hoc service serving the same or similar origin and destination to no more than 2 days in a month.  Whether a breach of Condition 1 will render the service provided an unauthorized one is a matter of interpretation.  When properly read with the underlying policy in mind, the purpose of Condition 1 is patently clear.  It seeks to prevent possible abuse which may turn the ad hoc service into some form of regular service in reality without prior approval of the Commissioner.  Properly interpreted, Condition 1 not only regulates performance.  More importantly it also defines the scope of A-08 Service as authorized under the licence.  Thus when the service actually provided exceeds the authorized scope as defined by Condition 1, it is not just a breach.  It is also an unauthorized service. 

18. Mr Li relied on a flowchart prepared by the Transport Department which sets out the arrangement for applying for approval of A-08 Service.  There it is stipulated that the arrangement is only applicable to a licensee authorized to provide A-08 Service.  I do not think anything useful can be derived from the flowchart for the interpretation of Condition 1.  It just sets out the necessary arrangement if the licensee wishes to apply for approval to run the different types of service described in the flowchart. 

19. Mr Li next relied on a report entitled “The Report of Transport Advisory Committee Working Group — Review of Regulation of Non-Franchised Bus Operation” dated July 2004.  Again, I fail to see how the report would assist in interpreting Condition 1.  The report gave various examples of breach of licence conditions and unauthorized service but they were not meant to be exhaustive.  They do not provide any guidance as to how Condition 1 should be interpreted. 

20. The applicant conceded that the Subject Service was in breach of Condition 1.  It does not now lie in its mouth to say that it was not an unauthorized service. 

21. I now look at the grounds of challenge in turn. 

Ground 1

22. For the reasons above, both the Commissioner and the Tribunal were correct in deciding that the Subject Service was not otherwise than for the purpose of the service authorized or permitted by PSL9396A.  Ground 1 fails. 

Ground 2

23. Ground 2 merits a closer look of the matter. 

24. Section 30 of RTO provides :

“(1)    If the Commissioner has reason to believe in respect of any vehicle in respect of which a passenger service licence is in force that-

(a)   the vehicle has been or is being used otherwise than for the purpose of the service authorized by the licence; or

(b)   any condition of the licence or any provision of this Ordinance has not been or is not being complied with,

he may appoint a public officer to hold an inquiry.

…”

25. Under section 31 of RTO, if after considering the report of the officer who conducted the inquiry, the Commissioner is satisfied as to the matters set out in section 30(1)(a) (the unauthorized service limb) or section 30(1)(b) (the breach of condition limb), he may, inter alia, suspend the passenger service licence. 

26. Here, the Commissioner was satisfied that the applicant was guilty of providing unauthorized service in breach of, inter alia, Condition 1 : see the second paragraph of the letter sent to the applicant dated 24 January 2008.  Since the Subject Service was both unauthorized and a breach of Condition 1, the Commissioner was entirely correct in coming to such a view as he did. 

27. At the review before the Tribunal, the applicant argued that the Subject Service was not unauthorized although it was a breach of the licence conditions.  In addressing the applicant’s submission, the Tribunal made the remarks as it did in paragraphs 29 and 30 of its reasoning[3].  Properly understood, what the Tribunal said is that in the circumstances of the present case, it did not matter whether the Commissioner proceeded under section 30(1)(a) or section 30(1)(b) because the sanction to be imposed would just be the same. 

28. Mr Li attacked the Tribunal’s reasoning by first submitting that the Subject Service was not unauthorized and the Tribunal erred in proceeding with sanction on the basis that it was.  This submission cannot possibly stand in light of my earlier finding that the Subject Service was indeed unauthorized. 

29. Mr Li next argued that Tribunal erred because there are different statutory bases for different convictions under sections 30(1)(a) and (b).  In failing to distinguish the two, the Tribunal’s decision was unsafe and unreasonable.  For present purposes, I will assume (without deciding) that there is a difference in approach under sections 30(1)(a) and (b) as contended by Mr Li.  But I do not think it will take the applicant’s case any further.  

30. For my part, it would be more preferable for the Tribunal to tackle the applicant’s submission and come to a definite view if the Subject Service was unauthorized or just a breach of Condition 1 and then deal with the sanction accordingly.  But I think the pragmatic approach adopted by the Tribunal as set out in paragraphs 29 and 30 of its reasoning, though imperfect, is quite understandable.  The Subject Service was not a technical breach of Condition 1.  It constituted an unauthorized service as well.  So the sanction that the Subject Service would attract, be it under section 30(1)(a) (the unauthorized limb) or section 30(1)(b) (the breach of condition limb) would just be the same.  It cannot be seriously suggested that had the sanction been meted out on section 30(1)(b) alone, it would be materially different or more lenient. 

31. In my view, although the way the Tribunal dealt with the matter left room for improvement, it does not warrant any intervention from this court in the exercise of its supervisory jurisdiction. 

32. Ground 2 also fails. 

Ground 3

33. Ground 3 deals with the sanction imposed by the Tribunal. 

34. Mr Li contended that the Tribunal erred in failing to treat the applicant as a first offender.  He argued that section 31 of RTO, which deals with sanction, is directed against the licence only and not its holder.  Thus the Tribunal should not have taken into account the applicant’s previous conviction under PSL3658A.  I disagree. 

35. The Commissioner must impose an appropriate sanction that is commensurate with the gravity of the offence and the circumstances of the case before him.  He must take into account all the relevant factors, both mitigating and aggravating.  So must the Tribunal when it reviews the sanction imposed by the Commissioner.  Although the sanction imposed under section 31 is directed against the licence, the Commissioner and the Tribunal are entitled to indeed should take into account the licensee’s conduct.  As part of his conduct, a previous conviction under the same or other public service licence held by the same offender is plainly a relevant aggravating factor that both the Commissioner and the Tribunal should have regard to in considering what the appropriate sanction should be. 

36. Mr Li further argued that the Tribunal erred in treating the applicant as a repeated offender by taking into account its knowledge that the Subject Service would constitute a breach : see paragraph 35 of its reasoning[4].  I think what the Tribunal had said must be understood in context.  When properly read in the entire context of paragraph 35, what the Tribunal said is that because of its previous breach under PSL3658A, the applicant must know that the Subject Service would constitute a breach of PSL9396A.  I do not see anything objectionable there. 

37. For these reasons, Ground 3 also fails. 

Conclusion

38. This application for judicial review therefore failed.  Costs should follow the event.  I hence made the order as I did. 

[1]   Dealing with unauthorized service.  

[2]   Dealing with breach of licence conditions. 

[3]   Quoted in paragraph 8 above.

[4] Quoted in paragraph 9 above.