KWOK & CHU v. THE HONG KONG HOUSING AUTHORITY

1996 M.P. No. 4346

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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INTRODUCTION

1. This is an application for judicial review. The decisions which are challenged are decisions of the Hong Kong Housing Authority ("the Authority") refusing to include the Applicants, Messrs. Kwok & Chu ("the firm"), on the panel of solicitors eligible to undertake conveyancing under the Authority's Home Ownership Scheme. The reason why the Authority refused to include the firm on the panel was because the firm did not meet the fixed selection criteria for inclusion on the panel which the Authority had imposed.

THE FACTS

2. The facts are not in dispute. Under the Home Ownership Scheme, flats are built by the Authority and sold at discounted prices to persons who are eligible to buy them. In November 1990, it was decided that conveyancing under the Home Ownership Scheme should be undertaken by solicitors in the private sector. An acceptable fee structure was agreed with the Law Society.

3. A large number of firms of solicitors applied to be included on the panel of solicitors eligible to undertake conveyancing under the Home Ownership Scheme. The number of firms which applied exceeded the Authority's requirements. Accordingly, it was decided that firms would have to satisfy certain criteria before they could be included on the panel. Fixed and objective criteria were thought to be necessary for two reasons. First, the Authority had to be satisfied that the firms would be capable of performing the highly responsible work which would be required of them. The criteria would therefore enable the firms with the necessary skills, resources and experience to handle large-scale conveyancing work on behalf of the Authority to be identified. Secondly, fixed and objective criteria would reduce the risk of unscrupulous applicants seeking to influence those officers responsible for reviewing the applications.

4. In February 1993, the firm applied for inclusion on the panel. Its application was refused on the basis that it did not satisfy two of the criteria. It was informed that it was entitled to apply again when it considered that it could meet all the criteria. Later that year, the criteria were redefined. The Law Society had been consulted, and had considered the criteria to be acceptable, as had the Legal Advisory and Conveyancing Office of the Lands Department and the ICAC.

5. In January 1996, the firm again applied for inclusion on the panel. The Authority refused this application. It notified the firm of this refusal by letter dated 2nd April 1996. The reason for the refusal was that the firm did not satisfy one of the selection criteria. In August, the firm requested the Authority to reconsider the matter. By letter dated 26th September 1996, the Authority confirmed that the firm would not be included on the panel.

6. The criterion which the firm did not satisfy was as follows:

"(c) Experience of large development conveyancing. The firm should have dealt with conveyancing of at least two large developments in Hong Kong during the last ten years. A large development is defined as involving more than 100 assignees/purchasers and having assignments executed with[in] a period of two years. Carparking conveyancing is not counted."

The firm had undertaken the conveyancing of only one such development in the previous ten years. However, that development had been a particularly large one. It had been a development under the Private Sector Participation Scheme. Under the Private Sector Participation Scheme, developers in the private sector build blocks of flats on land owned by the Government, but subject to conditions on the number, size and design of the flats, together with a guarantee of the sale price for each flat, and with the requirement that the flats are sold to persons nominated by the Authority. Accordingly, the Private Sector Participation Scheme supplements the Home Ownership Scheme, the only material difference between the two schemes being that under the Home Ownership Scheme the flats are built by the Authority, whereas under the Private Sector Participation Scheme the flats are built by developers in the private sector.

7. The particular development under the Private Sector Participation Scheme whose conveyancing had been handled by the firm was a development of 830 flats in Fanling. The execution of the relevant assignments and mortgage deeds was completed within five working days, and all the title deeds and documents were registered with the appropriate Land Registry, bound and returned to the purchasers or mortgagees (as the case may have been), within four months of their execution. The firm informed the Authority that references relating to its conveyancing on this development could be obtained from a number of reputable banks and other institutions. In addition, the Authority was informed that the firm's conveyancing partner had handled the conveyancing in 1988 and 1989 of a development of 297 flats in Yuen Long when he had been the partner of another firm.

8. The effect of the firm not being included on the Authority's panel is not limited to its eligibility to undertake conveyancing under the Home Ownership Scheme. Since 1995, only solicitors included on the Authority's panel have been eligible to undertake conveyancing under the Private Sector Participation Scheme. Moreover, the practice of the Hong Kong Housing Society is to engage for its conveyancing only those solicitors who are included on the Authority's panel. It is not disputed that the firm's inability to undertake conveyancing under the Home Ownership Scheme or the Private Sector Participation Scheme or for the Hong Kong Housing Society would have an effect on the firm's revenue.

THE DECISIONS CHALLENGED

9. The decision nominally being challenged is the decision of the Authority, communicated to the firm by the letter dated 26th September 1996, confirming that the firm would not be included on the panel. However, it is plain that the decision which is actually being challenged is the original decision communicated to the firm by the letter dated 2nd April 1996. The later decision was merely confirmation that the earlier decision would stand. The firm admits that the reason why it purported to challenge the later decision only was to get round the fact that its application for leave to apply for judicial review was filed on 11th December 1996 - much more than three months after it had had notice of the earlier decision. However, the reasons why the earlier decision was not originally challenged by the firm were explained in an affirmation from one of its partners. Accordingly, the firm's time for applying for leave to challenge the earlier decision was extended, and the firm was given leave to apply for judicial review of both decisions.

THE FIRM'S CASE

10. The firm's case can be shortly stated. It is axiomatic that a public body which is entrusted with a discretion must not, by the adoption of an inflexible rule, disable it from exercising its discretion in individual cases. That is not to say that such a body is not entitled to adopt policies which guide the exercise of its discretion. That is permissible, provided that the policies enable it to make exceptions, to respond flexibly to unusual situations, and to act fairly in individual cases. The criticism of the Authority is that it regarded itself as bound to refuse the firm's application for inclusion on the panel simply because the firm was unable to satisfy the criterion calling for experience in at least two large developments.

11. What the Authority should have done, so it is said, was to consider whether the firm had the necessary skills, resources and experience to handle large-scale conveyancing on behalf of the Authority. Mr. G.H. Chua for the firm accepts that in considering that question one of the factors which the Authority would have been entitled to take into account was the firm's inability to satisfy the criterion calling for experience in at least two large developments. But in regarding that factor as decisive, the Authority failed to take into account other material factors, including the large development whose conveyancing had been undertaken by the firm under the Private Sector Participation Scheme, the experience of the firm's conveyancing partner when he had been the partner in another firm, and the effect which non-inclusion on the Authority's panel would have on the firm's ability to undertake other work. Moreover, the Authority's approach of applying the fixed criteria without exception has the effect of discriminating against newly established firms, even if those firms have partners with considerable experience and expertise in large-scale conveyancing.

12. I do not exclude the possibility of there being exceptional cases in which it would be appropriate for a body entrusted with a discretion to adopt inflexible rules as to the way in which that discretion should be exercised. For example, I have already referred to fixed and objective criteria having the advantage of reducing the risk of unscrupulous applicants seeking to influence those officers responsible for exercising what would otherwise be an unfettered discretion. However, the Authority does not seek to justify its stance on that basis, and I therefore say no more on the topic. The Authority's position is that its decision to apply the fixed criteria without exception is not one which is reviewable by the court.

AMENABLE TO REVIEW

13. The Authority is a public body. That is beyond dispute. Accordingly, its decisions are, in principle, capable of being challenged by way of judicial review. However, the High Court's supervisory jurisdiction of judicial review is not engaged in respect of every decision which a public body makes. There has to be some element of public law involved, as to which there is no universal test. But broadly speaking, judicial review is only available to challenge decisions taken by bodies in the course of their public functions. That was emphasised by the Court of Appeal in R. v. Panel on Take-overs and Mergers ex p. Datafin Plc [1987] 2 WLR 699. There have been attempts since then to identify the factors which indicate whether a decision was taken in the course of the decision-maker's public functions. Some of them are set out in de Smith, Woolf & Jowell, "Judicial Review of Administrative Action", 5th. ed., para. 3-027. However, the authors continued in para. 3-028:

"Undue reliance upon any one of the above criteria - while perhaps helpful in promoting certainty in this area of law - should be avoided. The test of public function should be overriding and the qualities enumerated in the criteria should be weighed and balanced in the context of each specific case. This will avoid the formalism that might otherwise develop and that has, in the past, inhibited the proper development of so much of administrative law."

14. There is no doubt that in operating the Home Ownership Scheme the Authority is performing a public function, namely the provision of low-cost housing to lower- and middle-income earners. The question therefore is whether the engagement of solicitors to undertake conveyancing under the Home Ownership Scheme comes within the public functions of the Authority. I do not think that this question is susceptible to detailed analysis. In my view, the engagement of solicitors to undertake conveyancing under the Home Ownership Scheme does not come within the public functions of the Authority. It is merely an administrative step, albeit an important one, in the lengthy and complicated process by which low-cost housing is provided to the public. The conveyancing which has to be performed to achieve that is not the subject of any statutory underpinning greater than that which applies to private sector conveyancing. Nor are there any statutory restrictions on which firms of solicitors the Authority can engage. (Note:Section 4(2)(k) of the Housing Ordinance (Cap. 283) gives the Authority power

"to do all such... acts as are reasonably necessary for the exercise or performance of all or any of the powers or duties of the Authority ... and to perform any other function which is incidental or conducive to or connected with the attainment or furtherance of the purposes of the Authority in accordance with this Ordinance."

But that general enabling power cannot be construed as constituting any statutory underpinning of the process by which solicitors are engaged.)

It follows that in engaging solicitors to undertake conveyancing under the Home Ownership Scheme the Authority is no different from any other developer which engages solicitors to undertake the conveyancing to which its developments relate. Such developers can choose whichever firms of solicitors they want. It would be illogical if the Authority was in a different position, simply because the provision of low-cost housing was one of its public functions.

¹ footnote:

15. It is the absence of any statutory restrictions on which firms of solicitors the Authority can engage which distinguishes the present case from two recent tendering cases: Mass Energy Ltd. v. Birmingham City Council [1994] Env. L.R. 298 and R. v. Avon County Council ex p. Terry Adams Ltd. [1994] Env. L.R. 442. In those cases, the awards by waste disposal authorities of contracts for the disposal of waste to particular contractors were challenged. In both cases, the Court of Appeal ruled that the awards were amenable to judicial review to the extent that the powers of a waste disposal authority in relation to the acceptance of tenders were governed by statute. Indeed, in the Avon County Council case, the challenge was successful because there had been a breach of an express statutory requirement to frame the terms and conditions of any waste disposal contract so as to avoid undue discrimination in favour of one kind of waste disposal contractor.

16. I believe that the view I have reached in this case is supported by R. v. The Lord Chancellor ex p. Hibbit & Sanders [1993] COD 326. Following a tendering process, the Lord Chancellor decided to award the contract for court reporting for a group of local courts to a particular contractor. The Divisional Court held that the decision was not amenable to judicial review. There is, of course, a difference between an unfair tendering process for court reporters which results in the tenders of some reporters having a better chance of success than others, and the application of unfair criteria for determining which solicitors should undertake public sector conveyancing which results in some firms of solicitors not being eligible to undertake the work at all. But what principally persuaded the court that judicial review was not available was the fact that court reporters who sought work in the private sector would have to pursue such remedies in private law as were available to them, and there was no sufficient basis for putting court reporters who sought work in the public sector in a different position. That reasoning applies equally to solicitors who wish to undertake conveyancing. It may be that solicitors who do not satisfy the criteria laid down by the Authority have no remedies in private law, but that is immaterial to the question of whether a public law remedy exists: see, for example, R. v. Derbyshire County Council ex p. Noble [1990] ICR 808 at p.823G.

17. I have not overlooked the analogy which Mr. Chua drew between solicitors who apply to the Authority for public sector conveyancing and traders who apply for a licence to trade. A refusal of a licence to such a trader is amenable to judicial review. As Scarman L.J. (as he then was) said in R. v. Barnsley Metropolitan Borough Council ex p. Hook [1976] 1 WLR 1052 at pp.1059H-1060A:

"A trader, or a member of the public, can only acquire effectively the opportunity to trade in this market if he can obtain a licence, which no doubt as between him and the corporation is contractual, to use the facilities or equipment for trading that are under the Act provided by the corporation in the market. Although his rights are to that extent contractual, nevertheless in granting or withholding them the local authority has the discretion granted by its private Act of Parliament, and plainly the discretion is a discretion to regulate the exercise of the public's common law right to buy and sell in the market. Although, therefore, there is a contractual element in this case, there is also an element of public law, viz. the enjoyment of rights conferred upon the subject by the common law."

I am not convinced that the analogy between solicitors seeking public sector conveyancing and market traders is entirely apt. But the element of public law in the case of market traders does not apply to solicitors seeking public sector conveyancing. There is no right (whether at common law or otherwise) which is affected by the conditions which the Authority requires firms of solicitors to satisfy. There is, therefore, nothing akin to the public's right to buy and sell in the market which needs to be protected.

18. In the interests of completeness, I should add that Mr. Philip Dykes for the Authority referred me to the observation of Lord Templeman in Mercury Energy Ltd. v. Electricity Corporation of New Zealand Ltd. [1994] 1 WLR 521 at p.529A-B:

"It does not seem likely that a decision by a state enterprise to enter into or determine a commercial contract to supply goods or services will ever be the subject of judicial review in the absence of fraud, corruption or bad faith."

But the waste disposal cases were examples of a statutory body entering into commercial contracts for the supply of services. The decisions to enter them were not alleged to be actuated by fraud, corruption or bad faith. And yet the decisions were still amenable to judicial review. If I had found that the engagement of solicitors to undertake conveyancing under the Home Ownership Scheme came within the public functions of the Authority, I do not think that it would have been right to decline jurisdiction simply because the decisions challenged were not actuated by fraud, corruption or bad faith.

CONCLUSION

19. For these reasons, this application for judicial review must be dismissed. At present, I see no reason why the firm should not pay the Authority's costs. Accordingly, I make an order nisi that the firm pays to the Authority its costs of these proceedings, to be taxed if not agreed.