GENERAL SECURITY (HONG KONG) LTD. v. SECURITY AND GUARDING SERVICES INDUSTRY AUTHORITY

1997 HCAL No. 65

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

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J U D G M E N T

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Introduction

1. Since 1996, companies wishing to provide security and guarding services have had to be licenced to do so. The licensing requirements are laid down by the Security and Guarding Services Ordinance (Cap. 460) ("the Ordinance"), and the body responsible for considering and determining applications for such licences is the Security and Guarding Services Industry Authority ("the Authority"). This application for judicial review raises two short but important points of construction relating to the fees payable for licences under the Ordinance.

The different types of security work

2. Regulations made under the Ordinance contemplate three types of security work, namely

(a) the provision of security services,

(b) the provision of armoured transportation services,

(c) the installation, maintenance or repair of security devices, and the design of security systems incorporating a security device.

For convenience, I shall refer to these three types of security work as Type 1, Type 2 and Type 3 respectively. These three types of security work appear on the back of the form which, according to reg. 1(2) of the Security and Guarding Services (Licencing) Regulation ("the Licencing Regulation"), a licence issued under the Ordinance must take.

3. The fees payable for licences issued under the Ordinance appear in para. 4 of the Schedule to the Security and Guarding Services (Fees) Regulation ("the Fees Regulation"). The language of the types of security work in the Licencing Regulation is not faithfully reproduced in the Fees Regulation, but it is plain that the Fees Regulation relates to the same three types of security work. Thus, para. 4 of the Schedule to the Fees Regulation provides:

"Licence for 5 years ... payable by reference to the type of security work to be provided by the licensee and in respect of licensees of all sizes--

(a) [Type 1]	$78,050	($15,610)
(b) [Type 3]	$79,050	($15,810)
(c) [Type 2]	$180,500	($36,100)
(d) [Type 1 + Type 3]	$106,000	($21,200)
(e) [Type 1 + Type 2]	$207,450	($41,490)
(f) [Type 2 + Type 3]	$208,450	($41,690)
(g) [Type 1 + Type 2 + Type 3]	$235,400	($47,080)"

The figures in brackets have been added by me, and represent the annual fee.

The facts

4. The facts are not in dispute. On 29th March 1996, the Applicant, General Security (Hong Kong) Ltd. ("the Company"), applied for a licence under the Ordinance. It wished to be authorised to perform all three types of security work. The application was heard by the Authority on 13th July 1996. With regard to Type 2 security work, the Authority decided "to adjourn the hearing in respect of [the] application for [such a] licence to allow time for [the Company] to make further improvements so as to comply with the requisite licencing arrangements."

5. However, the Authority decided to issue a five year licence to the Company ("the first licence"), authorising it to perform security work of Type 1 and Type 3, though it imposed a condition which had the effect of preventing the Company from providing alarm monitoring services. It sent a demand note to the Company for $21,200.00, being the annual fee for a licence authorising the licencee to perform security work of Type 1 and Type 3. The fee was paid by the Company, and the licence was duly issued.

6. A further hearing of the Authority took place on 7th November 1996. The Authority decided "to approve [the Company's] application for a type 2 licence", and to remove the condition which it had imposed on the first licence. It sent a demand note to the Company for $36,100.00, being the annual fee for the five year licence which it was willing to issue ("the second licence"), authorising the licencee to perform Type 2 security work. The Company declined to pay this demand. It was in effect being required to pay $57,300.00 a year (i.e. $21,200.00 for being permitted to perform security work of Type 1 and Type 3, and $36,100.00 for being permitted to perform Type 2 security work), when it claimed that it should only be required to pay $47,080.00 a year (being the fee which it claimed was payable for being permitted to perform all three types of security work).

The fees payable

7. Ms. Teresa Cheng for the Company contends that it was entitled to refuse to pay this demand. She argues that, properly construed, para. 4 of the Schedule to the Fees Regulation provides that the fees payable for licences issued under the Ordinance depend entirely on the types of security work which the licencee is authorised to perform. Since the Company was authorised to perform all three types of security work, the annual fee payable was $47,080.00. On the other hand, Ms. Yasmin Mahomed for the Authority contends that, properly construed, para. 4 provides that separate fees are payable for each licence issued under the Ordinance. Thus, if a company is issued a licence which authorises it to perform security work of a particular kind, para. 4 identifies the fee payable for that licence. If a company is issued with a second licence which authorises it to perform security work of another kind, para. 4 identifies the fee payable for that licence. Since the first licence authorised the Company to perform security work of Type 1 and Type 3, the fee for that licence was $21,200.00; and since the second licence authorised the Company to perform Type 2 security work, the fee for that licence was $36,100.00.

8. I prefer the Authority's construction of para. 4. I do so for two reasons. First, the language of para. 4 suggests that a fee is payable for each licence. It is true that the fee is calculated "by reference to the type of security work to be provided by the licencee", but that is to be construed as referring to the type of security work to be provided under each licence. Secondly, the Authority's construction avoids the difficulties created when licences authorising different types of security work are issued at different times. After all, for the period between July and November 1996, the Company was only authorised to undertake security work of Type 1 and Type 3, and between July and November 2001 the Company is only authorised to undertake Type 2 security work.

The Company's first request

9. Following the Authority's demand for $36,100.00, the Company got in touch with the Authority. In a letter dated 19th November 1996, it requested that it be permitted to pay, not the $36,100.00 demanded, but $25,880.00, being the difference between (a) $47,080.00 being the fee payable when a company is authorised to perform all three types of security work, and (b) the $21,200.00 previously paid. That request was rejected by the Authority. In my view, it was obliged to reject it. So long as the Company had two licences, the Company was required to pay the fees established by the Fees Regulation. What the Company was seeking to do was to be charged a fee as if it had been issued with just one licence, albeit authorising it to perform all three types of security work.

10. The Company made an alternative request in that letter. That request was that both licences be treated as having been granted on 18th July 1996, i.e. the date of the issue of the first licence. The two licences could then be treated as both expiring on 18th July 1997, on which date a new licence could be issued authorising the Company to perform all three types of security work. As for the licence fee for the second licence which would expire on 18th July 1997, a pro rata amount should be charged reflecting the fact that that licence would be held for only 7 months or so. This alternative request was also rejected. In my view, the Authority was obliged to reject this request as well. The Authority was not entitled to back-date the date of issue of the second licence. In any event, if the second licence was to be treated as having been issued on 18th July 1996, there was no basis on which the fee should be based on the fact that it was not actually granted until November 1996.

11. The Authority's response to these requests was contained in a letter from the Authority dated 28th December 1996. The decisions of the Authority contained in this letter are the first of the sets of decisions which are challenged. For the reasons I have given, the challenge to these decisions fails.

The Company's subsequent requests

12. In a letter dated 18th February 1997, the Company's solicitors proposed three other courses for the Authority to consider. First, the date of issue of the first licence could be altered to the date in November 1996 on which the second licence would have been issued. The annual fees thereafter would be the fee payable for a licence under which the licencee was authorised to perform all three types of security work. For the period between the date of the issue of the first licence and the date on which the second licence would have been issued, the Company offered to make a pro rata payment. This request was rejected by the Authority. In my view, it was obliged to do so. This request involved there still being two separate licences in existence. Even if they could be treated as having been issued on the same date (which I doubt, because the Authority was not entitled to post-date the issue of a licence which had already been issued), it would not have altered the fact that there were two separate licences for which separate fees were payable.

13. Secondly, although it had not been authorised to perform Type 2 security work prior to November 1996, the Company was prepared to pay an annual fee of $47,080.00 from July 1996. Since it had already paid $21,200.00 for the first licence, it was offering to pay the balance of $25,880.00. This request was also rejected by the Authority. Again, in my view, it was obliged to do so. The request was the same as the second request contained in the Company's letter of 19th November 1996. The request still involved there being two separate licences in existence. Even if the two licences could be treated as having been issued on the same date (albeit an earlier date than that envisaged in the first of the three courses proposed), which I do not accept, it would not have altered the fact that there were two separate licences for which separate fees were payable.

14. Thirdly, the Company proposed to pay the demand of $36,100.00. Although that payment related to the fee for the second licence up to November 1997, the Company was prepared to forego the benefit of that licence from July 1997. The annual fee for both licences would then be payable on the same date, and for that reason the annual fee for both licences should be $47,080.00. This request was also rejected by the Authority. Again, in my view, it was obliged to do so. The request still involved there being two separate licences in existence. The mere fact that the annual fees payable in respect of them could be treated as payable on the same day would not have altered the fact that there were two separate licences for which two separate fees were payable.

15. The Authority's response to these requests was contained in a letter from the Authority dated 10th April 1997. The decisions of the Authority contained in this letter are the second of the sets of decisions which are challenged. For the reasons I have given, the challenge to these decisions fails.

The Company's alternative argument

16. Ms. Cheng argued that the problem which has arisen in this case stems from the fact that following the hearing of 7th November 1996, the Authority issued the Company with a second licence rather than varying the conditions attached to the first licence. The conditions attached to the first licence included a condition limiting the licencee to security work of Type 1 and Type 3, and what the Authority could have done was to vary that condition so as to permit the Company to perform Type 2 security work.

17. Indeed, that is what the Company would have expected the Authority to have done. It had made a single application for a licence. When the Authority heard that application on 13th July 1996, it did not regard itself as having disposed of that application when it granted the first licence authorising the Company to perform security work of Type 1 and Type 3, but not authorising the Company to perform Type 2 security work. Instead, it "adjourned" the hearing. Thus, when it convened the adjourned hearing to decide whether to authorise the Company to perform Type 2 security work, that adjourned hearing was in reality the hearing of an application by the Company under section 24(1) of the Ordinance for a variation of the conditions of the first licence, rather than the hearing of an application by the Company under section 19(1) of the Ordinance for the issue of a new licence. The error into which the Authority is said to have fallen was in treating the hearing as an application for the latter rather than the former.

18. If the Authority had treated the hearing as an application for a variation of the conditions of the first licence, it would have granted that variation. That would have meant that the Company would from then on have been charged the annual fee appropriate to that licence, i.e. $47,080.00, rather than the annual fees appropriate to the first and second licences, i.e. $57,300.00.

19. This is an attractive and compelling argument. The trouble is that technically it may not be open to Ms. Cheng to rely on it. That is because the decision of the Authority on 7th November 1996 to treat the hearing as an application for a new licence is not one of the decisions challenged in the Company's Notice of Application. However, the argument was foreshadowed in para. 7 of the Statement setting out the grounds of the application, which read:

"The relief sought is a declaration that the ... Authority ... erred in law in that it treated the [the Company's] application of ... 29th March 1996 as two separate applications when deciding ... what fees are payable in respect of the licences issued. A combined licence was applied for and by 7th November 1996, all three parts [had] been approved."

20. Ms. Mahomed does not rely on a technical objection to the Company's reliance on this argument. Instead, she attacks the argument on its merits. She contends that the type of security work which a licencee can be authorised to perform is not a "condition" of the licence which can be the subject of an application to vary under section 24(1). The relevant provisions in the Ordinance are sections 21(2) and 21(5), which provide, so far as is material:

"(2) ... the Authority may issue a licence to an applicant and may impose such conditions as the Authority may specify.

(5) Without prejudice to the generality of subsection (2), the conditions that the Authority may impose include conditions - ... (c) limiting the type of security work in respect of which the licensee may supply individuals."

Ms. Mahomed argues that authorising the licencee to perform security work of any of the three types referred to in the Licencing Regulation and the Fees Regulation is not a condition of the licence. That authorisation merely identifies the nature of the licence to be granted. The effect of section 21(5)(c) is simply to limit further the type of security work which a licencee can perform. For example, if a licence authorises a company to perform Type 2 security work, section 21(5)(c) merely empowers the Authority to impose a condition limiting the particular type of armoured transportation services for which the licencee can provide personnel.

21. I prefer the Authority's construction of section 21(5)(c). The Company's construction of it involves reading it as if it read "limiting the type of security work which the licencee may perform." Moreover, the form which, according to reg. 1(2) of the Licencing Regulation, a licence must take assumes that the three types of security work which may be performed are not conditions of the licence. On the front of the form, the licence identifies the type of security work which the licencee is authorised to perform, and then states that the licence is subject to the "conditions specified overleaf". On the back of the form, the licence lists the three types of security work which a licencee may be authorised to perform, and then lists any conditions to which the licence is to be subject.

22. It follows that the Authority did not err when it treated the hearing on 7th November 1996 as an application by the Company for a new licence. The Authority did not have the power to vary the first licence by adding to that licence authority to perform Type 2 security work. That authority could only be conferred on the Company by the grant of a new licence.

Conclusion

23. For these reasons, this well-argued application for judicial review must be dismissed. At present, I see no reason why costs should not follow the event, and I make an order nisi that the Company pays to the Authority its costs of the application, to be taxed if not agreed.

24. In conclusion, I should add two things. First, at one stage the Company was arguing that the Authority erred in law in failing to authorise the Company to perform Type 2 security work at the same time as the Company was authorised to perform security work of Type 1 and Type 3. That argument was abandoned by Ms. Cheng. Secondly, there is nothing in the Ordinance which prevents a licencee from surrendering its licence, and from being relieved of further instalments of licence fees. Indeed, Ms. Mahomed told me that the Authority permits licencees to surrender their licences. Accordingly, there would be nothing to prevent the Company from

(a) notifying the Authority that it proposes to surrender its two licences on 17th July 1999,

(b) applying for a licence now, to be issued on 18th July 1999, authorising it to perform all three types of security work.

In that way, the Company will, in the future at any rate, have to pay a licence fee of only $47,080.00 or what the fee for a "combined" licence then is.