ODELON LTD v. ATTORNEY GENERAL

Civil Appeal
No. 64 of 1996

Headnote

Urgent appeal on application for judicial review of decision by the Government to accept lower tender to build port facilities.

No finding that such a decision is open to review - but argument accepted for purposes of the appeal only.

Threshold restated. Low threshold not achieved.

Reasons not necessary but in any event reasons given adequate.

Appeal dismissed.

IN THE COURT OF APPEAL

1996, No. 64
(Civil)

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J U D G M E N T

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Mortimer, J.A. :

This is an appeal by Odelon Limited against the refusal of Sears, J. to grant it leave to apply for judicial review.

The background

2. On 29 December 1995 the Hong Kong Government invited tenders for the construction of the Tuen Mun River Trade Terminal. Although in form it was for tenders by way of premium for the grant of land, there were detailed requirements which the tenders had to address. In the tender document, the Government stated that it did not bind itself to accept the highest or, indeed, any tender. Tenders had to be in on or before 23 February 1996. Two consortia tendered - Odelon Ltd and one other.

3. On 28 March 1996 the Government accepted the tender of the other and notified Odelon that its tender had not been accepted.

4. Odelon's tender was over $2.383b whereas the tender accepted was in the region of $1.142b. Odelon is aggrieved. It applied to Sears J for leave for judicial review of the decision to accept the other tender and to refuse its tender. He heard the application yesterday morning - 9 April. The Government was represented at the application. He refused leave.

5. The tender requires that the contract be signed by the successful party within 14 days of acceptance. The 14 days expire today - 10 April. This Court sat yesterday afternoon and today to hear Odelon's appeal against the refusal of leave.

The judge's reasons

6. The judge gave a short judgment setting out his grounds for refusal which can be summarised as follows:

1. The decision not to accept the tender is not open to judicial review. He cited two cases which made it appear that he regarded the Government as acting in its capacity as landlord selling a Government lease and therefore did not make its decision in a public or governmental capacity. It was simply fulfilling its contractual role as landlord.

2. That the matters advanced by the applicant were insufficient to ground a claim for judicial review.

3. That the reliefs sought were inappropriate.

Is the decision amenable to judicial review?

7. Mr Thomas, Q.C. appears for the applicant. He submits, first, that the judge was wrong to hold that the decision to award the tender to the other party was not amenable to judicial review. He accepts, as he must, that decisions taken by the Government acting as landlord, or indeed in any other 'private' capacity as a contracting party are not decisions taken in a governmental or public capacity amenable to review. Of this, there is abundant authority and, for my part, I would resist strenuously any further extension of public law in this field.

8. He submits that the judge was wrong to hold the decision not amenable to judicial review because the Government was acting as landlord. He submits that in spite of the tendering procedure being in the form of a grant of land for a premium and contractual, in substance, it was the exercise by the Government not of a contractual private law function but a function of a governmental nature with a clear public element so that it was obviously amenable to judicial review.

9. Having followed his persuasive submissions with interest, for reasons which follow, I find it unnecessary to decide that point. But I am prepared to accept it for the purposes of argument. I accept that there is sufficient public element in the decision to be amenable for review for the purposes of this appeal.

The threshold

10. I turn to the grounds which are put forward for leave. But it is well to start by a reiteration of the well-known principle that the threshold to be achieved by an applicant for judicial review is a low one. The point was dealt with by this Court in Ho Ming Sai v. Director of Immigration [1994] 1 HKLR 21. At pp 23 and 24 Kempster, J.A. said about the judge's decision:

"He should have asked himself whether the material before him disclosed matters which, on further consideration, might demonstrate an arguable case for the grant of the relief claimed. Put another way by Lord Donaldson, M.R. in R. v. Civil Service Appeal Board, ex parte Cunningham [1991] 4 All ER 310 at p315:

'... leave will only be granted if the applicant makes out a prima facie case that something has gone wrong of a nature and extent which might call for the exercise of the judicial review jurisdiction.' "

The principle can be put in many ways. But the thrust of it is clear. In Mercury Energy Limited v Electricity Corporation of New Zealand Limited [1994] 1 WLR 521 at 526, Lord Templeman said:

"A litigant may only invoke interference by the court with such a decision if the litigant pleads plausible allegations which, if substantiated at the trial, will demonstrate that the decision was not reached in accordance with law."

The grounds

11. Bearing in mind that test, what are the grounds that are put forward by the applicant? Basically, Mr Thomas submits that here there is an inference of bad faith by the decision-maker, be it either the Central Tender Board or the Government or both, and central to the case is Odelon's contention that there are plausible allegations that the decision-maker failed to properly consider Odelon's tender.

12. Mr Thomas advances four main grounds which appear in the notice of appeal. He describes those as the four main planks of his case. They read:

"(i) that its bid was more than twice as much as the bid that was accepted;

(ii) that no real attempt was ever made to explain to the Applicant why its bid was rejected or unacceptable, even after requests had been made for such an explanation, despite the fact that Government sought to allay public concerns by holding a press conference;

(iii) that Government at no time had stated whether the Central Tender Board had considered the Applicant's bid, and if so, in what way and with what materials before it, and if any and if so what decision had been reached by the Central Tender Board, and whether or not the Government's acceptance of another bid was upon the basis of the decision of the Central Tender Board;

(iv) that no attempt had been made (contrary to the Applicant's legitimate expectations having regard to the fact that its bid was by far the highest) to enter into discussions with the Applicant before rejecting its bid to see if perceived deficiencies or shortcomings in its bid could be resolved in a manner satisfactory to Government."

13. It is clear to my mind that the difference in amount of the two bids is the basic plank of Odelon's case. It is said, in other words, that the difference is so great that it gives one reason to think that Odelon's bid was not considered, or not considered properly. Alternatively, if it was considered and rejected, then the acceptance of the lower offer was so unreasonable that it was incumbent upon the decision-maker to give reasons. Then, it is said, the Government never gave reasons to Odelon save in a press conference until after these proceedings were begun. Finally, if those reasons are examined, they are inadequate.

The difference between the bids

14. So I turn to the first question - is it plausible or reasonable to think that because the lower bid was accepted, further investigation may show that Odelon's tender was not, or not properly, considered? To my mind, the answer to this question can be found in the tender document itself. This was not - as in a simple purchase -a situation where the size of the bid was the only - or even necessarily the most important - factor in the large range of matters which the decision-maker had to consider. This was a premium not only for the grant of land but for the provision of a river terminal. The factors to be taken into account in the tender are set out in the Tender Notice. I turn to some of them. The Tender Notice had to be accompanied by:

(i) a statement giving evidence of the tenderer's financial ability that had to include particulars of parent or associated companies. The tender had to include business activities of those companies and details of their participation, if any, in cargo handling, in particular river trade cargo handling, transportation, shipping and port related developments or business;

(ii) a schedule detailing the number, type of vehicle and/or vessel and their respective cargo and/or container holding capacities that the tenderer estimates would be involved in his operation and use of the lot;

(iii) an environmental impact assessment report;

(iv) a traffic impact assessment report

(v) a concept layout plan, and

amid a number of other matters, the tenderer had to take into account the development objectives of certain Government departments. Those include the Marine Department, the Transport Department and the Environmental Protection Department.

15. If all those matters were considered, as they ought have been, it is easy to see that a tenderer's monetary offer may not be the main factor in reaching the decision. Indeed, it is possible to envisage that a tenderer may never reach the situation where his monetary offer is considered. He may have fallen down on the other factors long before. Not only that, a tenderer may demonstrate that he is not suitable. This may prevent his tender being accepted, or lead to another being preferred.

16. So, for my part, the acceptance of a dramatically lower bid in this tender raises no sensible or reasonable suggestion that on further investigation, impropriety may be shown in the decision making.

Were reasons required?

17. In these circumstances there was nothing so unreasonable about the decision which "cried out for explanation" so that reasons for the decision became necessary. Quite different considerations arose in the cases which were cited to support the point that reasons were necessary. I refer to Padfield v. Minister for Agriculture, Fisheries and Food [1968] AC 997; R. v. Civil Service Appeal Board, ex parte Cunningham [1991]4 All ER 310; and R. v. Secretary of State for the Home Department ex parte Doody [1994] 1 AC 531.

18. I would hold, therefore, that in this decision, no reasons were required of the Government.

Were the reasons given flawed?

19. However, they did give reasons albeit late. These reasons fall to be considered. Were they such as to raise a question as to their adequacy?

20. By a letter from the applicant's solicitors to the Director of Lands Department, the applicant asked for reasons. Paragraphs 3 reads:

"We write to require by return a written explanation of the reasons why our client's tender offer was rejected identifying:

(i) which aspects of our client's offer were considered inferior to that of the successful tenderer and which if any did not conform to the requirements of the Tender Notice;

(ii) what steps were taken by those considering our client's offer to satisfy themselves that those aspects of our client's offer could not be improved bearing in mind the significantly greater offer made by our client."

21. The Director of Lands answered on 3 April:

"Regarding para 3(I) of your ... letter ... your client's submission failed to satisfy the Government in the following areas: ..."

These were the areas to which the letter referred:

"3(d)(i) a Statement ... giving evidence of the tenderer's financial ability to carry into effect and discharge all the obligations of the Purchaser under the Conditions of Sale including but not limited to particulars of any parent or associated company or companies (if any) of the tenderer including the business activities of the said company or companies including details of their participation (if any) in cargo handling (in particular river trade cargo handling), transportation, shipping and port related developments or business;

(ii) a Schedule detailing the number, type of vehicle and/or vessel and their respective cargo and/or container ... holding capacities that the tenderer estimates would be involved in his operation and the use of the lot ...

(iv) a Traffic Impact Assessment Report ... and

(viii) information as to the tenderer's proposed hours of operation,..."

The letter continues,

"Further, it failed to meet the objectives set out in sub-clauses 4(a)(i)(1) and 4(a)(ii)".

22. Those refer to the tenderer failing to take into account development objectives of relevant Government departments:

"4(a)(i)(1) Marine Department

Marine traffic through Ma Wan channel shall be kept to a minimum.

...

(ii) Transport Department

The marine mode shall be adopted as the predominant mode of transport for the external link of the lot and land transport shall play a minimal role."

23. The answers were general but indicate quite sufficiently, in my view, in what respects Odelon had not satisfied the decision-makers. They were matters properly considered and the weight to be given to them was for the Government and the Board only.

Was there any obligation to consult Odelon further on their tender?

24. Further, in reply to paragraph 3(2) of Odelon's solicitors' letter, there was no obligation upon the Government to enter into any further negotiation or to make further inquiry once the tender had been received although they had the right to do so under clause 7 of the tender if they so chose. But they chose not to do so.

Conclusion

25. For these reasons, I am firmly of the view that the applicant has not reached the necessary threshold for leave for judicial review. I do not find it necessary to consider the other matters that have been raised in Mr Thomas' full and persuasive argument. For my part, I agree with the conclusion of the judge and I would dismiss this appeal.

Ching, J.A.:

26. I agree with the reasons and the conclusion pronounced by my Lord, Mortimer, J.A.

Power, V.-P.:

27. I also concur with what has fallen from my brother Mortimer, J.A. and I have nothing to add. The appeal must be dismissed.