BASE TOP DEVELOPMENT LTD. v. COMMISSIONER OF POLICE

CACV 769/2000 & CACV 104/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEALS NOS. 769 OF 2000 & 104 OF 2001

(ON APPEAL FROM HCAL NOS. 2324 OF 2000 & 2751 OF 2000)

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J U D G M E N T

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Keith JA (giving the first judgment at the invitation of Mayo V-P):

Introduction

1. Massage establishments in Hong Kong are regulated by the Massage Establishments Ordinance (Cap. 266) ("the MEO"). They can only be operated lawfully if a licence for their operation is in force (section 4(1)). Such a licence can only be granted to a natural person (section 6(4)) and lasts for only 12 months (section 6(7)). These appeals concern what happens when the existing licensee dies.

The facts

2. The facts are not in dispute. The Applicant owns and operates a massage establishment at premises in Jordan Road. The manager of the establishment was Tse Hang Pak. He had been the licensee of the establishment since 1996. The licence had been renewed every 12 months, and had last been renewed for a period of 12 months from 27 September 1999.

3. The licensing authority under the MEO is the Commissioner of Police ("the Commissioner"). On 24 July 2000, Mr Tse applied to the Commissioner for the renewal of the licence for a further 12 months from 27 September 2000 when it would otherwise have expired. However, on 22 August 2000, Mr Tse died. By then, his application for the renewal of the licence had not been determined. Accordingly, on 29 August 2000, the Applicant's solicitors wrote to the Commissioner applying for the transfer of the licence to a new licensee, Ma Hoi Ching, who it was proposed would manage the establishment in place of Mr Tse. Although the Applicant's solicitors' letter did not expressly state the section of the MEO on which reliance was being placed, the section of the MEO providing for the transfer of a licence is section 9, which provides:

"(1) Except as provided in this section, a licence shall not be transferable.

(2) The licensing authority may, on sufficient cause being shown to his satisfaction and subject to any conditions as he may think fit to impose, permit the transfer of an existing licence until its expiration to another person and such transfer shall be endorsed on the licence." (Emphasis supplied)

4. The application for the transfer of the licence to Mr Ma was refused by the Commissioner. That refusal was communicated to the Applicant's solicitors by letter dated 27 September 2000. Two reasons for the refusal were given in the letter. First, the licence had ceased to be "valid" when the previous licensee had died. Secondly, only the outgoing licensee could apply for the transfer of the licence. The Commissioner added that if the Applicant wished to operate a massage establishment at the premises, an application for a new licence would have to be made. Until such an application had been granted, no massage services could be provided at the premises.

5. The Applicant applied for leave to apply for judicial review of the decision that the licence could not be transferred to Mr Ma. After a hearing inter partes, Yeung J refused the application for leave: see [2000] 4 HKC 341. The Applicant now appeals to the Court of Appeal. However, on the same day as they filed the Applicant's notice of appeal, the Applicant's solicitors wrote to the Commissioner again. This time, they applied for the licence either to be amended to name Mr Ma as the licensee or to be substituted by another licence in the name of Mr Ma. The provision on which the Applicant relied on this occasion was section 46 of the Interpretation and General Clauses Ordinance (Cap. 1) ("the IGCO"), which provides (so far as is material):

"Where any Ordinance confers power upon any person to ... grant ... any ... licence ..., such power shall include power -

(a) to amend ... such ... licence ...;

(b) to substitute another ... licence ... for one already ... granted ...; ... and

(d) to declare the date of the coming into operation, and the period of operation, of any such ... licence ... "

The Commissioner refused that application as well. That refusal was communicated to the Applicant's solicitors by letter dated 11 November 2000. The Commissioner took the view that section 46 of the IGCO could not "be allowed to contradict the legislative intent" of the MEO. The Applicant applied for leave to apply for judicial review of that decision. Yeung J refused that application - this time without a hearing. The Applicant now appeals against that decision to the Court of Appeal as well.

The consequences of the Commissioner's decisions

6. Mr Johnny Mok for the Applicant has painted a vivid picture of the financial hardship which the Applicant would suffer if the licence could not have been transferred to Mr Ma, or amended to name him as the licensee, or substituted by another licence in his name. The Applicant would have to apply for a new licence, a process which Mr Mok described as "long, tortuous and uncertain". Each of the notices of application for leave to apply for judicial review (which the Applicant's solicitors purported to verify on affirmation) contained the following passage:

"The Applicant would have to re-submit all the design plans of the Premises for vetting by the Buildings Department and the Fire Services Department on building structural safety, fire safety and other related matters. The Police Licensing Office [would] then aggregate the comments from these Department[s] and conduct their own inspection for compliance with their detailed guidelines, before a determination on a fresh application for a licence may be made. If modifications to the Premises are required, there would be a further substantial delay during which construction works would have to be carried on before there can be any final determination."

I would add that enquiries would also have to be made by the police to determine whether the proposed licensee was a fit and proper person to hold the licence. While these steps were being taken, the establishment would obviously have to close. That would result in (a) the dismissal of the staff employed at the establishment, (b) a significant loss of revenue during the period of closure, and (c) the possibility that when the establishment re-opened at least some of its regular customers would not return. In the meantime, the rent for the premises and other expenses would continue to have to be paid.

7. Speaking for myself, I suspect that the Applicant's plight might not be quite as bad as it sounds. For example, it may be that a streamlined procedure exists for considering new applications in respect of premises at which a licenced massage establishment has been operated in the past. However, at this stage in the proceedings, no evidence has been filed on behalf of the Commissioner, and in the Applicant's favour it must be assumed that the consequences of having to apply for a new licence are those for which the Applicant contends.

The transfer of the licence

8. It is argued on the Applicant's behalf that where the licensee dies, the licence which was in his name can nevertheless be transferred to a new licensee. In my view, that is not the state of the law. Section 9(2) of the MEO, which sets out the only circumstances in which a licence can be transferred, limits the Commissioner's power to transfer a licence to existing licenses. I agree with Yeung J that a massage establishment licence cannot survive the death of the licensee. The whole of the statutory scheme is based on the premises that a massage establishment cannot be operated unless there is an individual who has assumed personal responsibility for ensuring that the establishment is operated in accordance with the conditions of the licence. Thus, the Commissioner is prohibited from granting a licence unless he is satisfied that the licensee will "adequately and personally supervise the massage establishment": see section 6(3)(b). There would be a break in the continuity of that personal supervision if the licence survived the death of the licensee. Between his death and the transfer of the licence to a new licensee, the personal supervision of the establishment would be no one's responsibility. That is not to say that there is no room in the statutory scheme for the transfer of a massage establishment licence. The critical point is that until the transfer takes place, the outgoing licensee is responsible for the supervision of the establishment. In the event of his death, there will inevitably be a break in that continuity. Thus, if the licence lapses on the death of the licensee, the licence cannot be said to be an "existing" licence thereafter.

9. In reaching this conclusion, I have not overlooked Mr Mok's point that there are bound to be times when the licensee cannot personally supervise the operation of the establishment - for example, when he is ill or away for a short time. It is not suggested that the licence would lapse when that occurs. So if there are times when personal supervision by the licensee is not possible and yet the licence does not lapse, why should the death of the licensee (which is just another example of the circumstances in which personal supervision by the licensee is impossible) automatically result in the lapsing of the licence? Again, I am not persuaded by that argument. A temporary inability of the licensee to supervise the establishment personally during illness or absence from Hong Kong is very different from his permanent inability to do so as a result of his death. His temporary absence from the premises can be met by the person named in the application form as assisting in the management of the establishment managing the premises for the time being.

10. Nor have I overlooked the provision relating to the renewal of a licence upon which reliance was placed before Yeung J. Section 7 of the MEO deals with the renewal of a licence, and section 7(5) provides:

"Any licence in respect of which an application for renewal is made under and in accordance with this section and which expires prior to the determination of such application shall, unless such application is withdrawn, or the licence is revoked or suspended under section 8, be deemed to continue in force until the determination by the licensing authority of such application."

It was argued that since an application for the renewal of the licence had been made prior to Mr Tse's death, the licence continued to exist until the application for the renewal had been determined. In my opinion, the judge rightly rejected that argument. Section 7(5) is a provision which preserves the status quo until the application for the renewal of the licence has been determined. As Mayo V-P said in the course of argument, it is a transitional provision. It provides that, despite the expiration of the licence by effluxion of time, the licence continues to exist. If circumstances other than the expiration of the licence by effluxion of time occur which prevent the licence from continuing to exist (such as the death of the licensee), the application for its renewal will lapse, and section 7(5) will no longer be in play.

11. Finally, I should add that I am not persuaded that the Commissioner was right to conclude that only the outgoing licensee could apply for the transfer of the licence. I accept that the language of section 6 of the MEO and the form prescribed by the Massage Establishments Regulations show that an application for a new licence has to be made by the proposed licensee. But I have not discerned any reason why an application for the transfer of the licence has to be made by the outgoing licensee. I see no reason why it cannot be made by the proposed licensee or by the owner of the establishment with the proposed licensee's consent. Otherwise, the owner of the establishment would be at the mercy of the disgruntled licensee who was no longer willing to supervise the operation of the establishment personally but who nevertheless refused to agree to the transfer of the licence. Until the transfer is effected, the licensee would admittedly be in breach of any condition of the licence requiring him to supervise the operation of the establishment personally, but the licence would nevertheless still be in existence. That is very different from the case of the licensee who dies.

Amendment and substitution

12. The Applicant's alternative case is that the Commissioner has the power under section 46 of the IGCO to amend the licence to name Mr Ma as the licensee or to substitute a licence in the name of Mr Ma for the licence in the name of Mr Tse. If the Commissioner was saying that this argument was inconsistent with section 9(1) of the MEO, I would not have agreed with him. The fact that a licence can only be transferred pursuant to section 9(2) did not affect his powers of amendment or substitution under section 46. As it is, I do not think that the Commissioner was saying that. I think that what he was saying when he said that section 46 should not "be allowed to contradict the legislative intent" of the MEO was that if a licence did not survive the licensee's death, his powers of amendment and substitution under section 46 should not be construed in a manner which is incompatible with that.

13. I agree with the Commissioner. I acknowledge that the language of section 46 is different from the language of section 9(2). Section 46(b) refers to the licence in the name of the previous licensee as "one already ... granted", whereas section 9(2) refers to an "existing" licence. However, I do not regard the difference in language as significant. The difference in language may simply be because section 46 refers to licences which can be granted under any ordinance, whereas section 9(2) is dealing only with a licence granted under the MEO. The real problem with the reliance placed on section 46, in my view, is simply that once the licence granted under the MEO has lapsed because of the death of the licensee, there is no licence which is capable of being amended under section 46(a) and no licence which is capable of being substituted under section 46(b) (the amendment of a licence or the substitution of one licence for another pre-supposing that the old licence was in existence immediately before that amendment or substitution). In my judgment, there is no answer to that point.

Conclusion

14. For these reasons, and despite the obvious hardship which the Applicant has suffered, I have concluded that Yeung J was right to decide that Mr Tse's licence did not survive his death, and for that reason it could not be transferred to Mr Ma, nor could it be amended to name Mr Ma as the licensee, nor could it be substituted by a new licence in Mr Ma's name. Accordingly, I would dismiss these appeals.

Mayo V-P:

15. I agree with the judgment of Keith JA save that I would prefer not to express any view upon whether anyone other than a licensee is able to apply for the transfer of a licence in the circumstances outlined by Keith JA.

16. Both these appeals are dismissed.