LEUNG KAM YUNG IVY v. COMMISSIONER FOR TELEVISION AND ENTERTAINMENT LICENSING AND ANOTHER

HCAL 1986/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMINISTRATIVE LAW LIST NO. 1986 OF 2000

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J U D G M E N T

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1. The Applicant seeks judicial review of the decision of the Commissioner for Television and Entertainment Licensing which refused her a licence for a mahjong/tin kau parlour at 430-432 Shanghai Street Kowloon on the 23 December 1999. The reasons given for that refusal were two-fold: that there was no cogent need for the operation of 27 gaming tables in the district; and that the establishment of the proposed premises would create undue concentration of mahjong/tin kau parlours in the district.

2. Madam Leung sought a review of the decision by the Commissioner on the 5 January 2000 but two days later the Commissioner notified her solicitors that his decision would stand. She then appealed to the Administrative Appeals Board on the 19 January 2000. On the 7 July 2000 the Board dismissed her appeal but in so doing upheld the Commissioner's decision only on the original first ground, that of "cogent need".

3. That however is only the bare bones of this situation and it is necessary to set the stage by considering the history of the Applicant in relation to mahjong/tin kau parlours, and whatever merits emerge in the course of that.

The Applicant's History and the Commissioner's Attitude

4. In 1994 the Applicant held a licence in respect of leased premises at 47-57 Temple Street a well known, busy and congested complex of small shops and stalls. It appears that the landlord was not going to renew the lease when it fell in, in February 1995. At one stage the Applicant had been in arrears with the rent but that matter had been resolved. Because of the landlord's decision the Applicant decided to seek an agreement with him whereby she could surrender the tenancy earlier. She duly wrote to the Commissioner on the 16 November 1994 giving him notice that she would suspend her mahjong/tin kau business from the 18 November 1994 giving as reasons:

"1. The rental is too expensive and the company is running at a monthly deficit of more than $200,000 so it cannot be operated any more;

2. The tenancy agreement will expire in 1995. The landlord insists to repossess the premises."

She added -

"Therefore I will look for a new premises soon and apply to your Authority for relocation."

5. And so started a quest for and a series of unsuccessful applications in respect of alternative premises.

6. On 12 December 1994 she surrendered her tenancy at 47-57, Temple Street and made application for a licence at the Ground Floor premises of 109-111 Portland Street. This was refused by the Commissioner on the 15 September 1995 some nine months later. The Commissioner of Police raised no objection to her application. Her reputation was good. The Directors of Lands and of Building both confirmed that the premises were acceptable and/or in compliance. There were however, strong objections from two kindergartens. Following an examination of the proximity of these two institutions the Commissioner refused the application on the basis of these objections.

7. The Applicant nonetheless appealed to the Administrative Appeals Board. She failed. I am not surprised. Her grounds of appeal had no merit in them. She sought judicial review of the decisions of the Commissioner and of the Administrative Appeals Board. Not surprisingly she failed. It is difficult to see how it could have had any reasonable prospect of success. Judgement was given on the 4 July 1996.

8. In May 1997 she applied for a licence in respect of ground and mezzanine floor premises at 407, 409 and 411 Shanghai Street. Nine months later, on 3 March 1998, her application was refused comprehensively on the grounds

i) the premises were structurally unfit for the operation of a mahjong/tin kau parlour (the ground effectively disposed of the application).

ii) there was strong local objection.

iii) there was no cogent need for the operation of 40 gaming tables in the district.

iv) the location was unsuitable because of its proximity to two schools and an existing parlour.

9. As far as I can ascertain this was the first decision communicated to the Applicant in which lack of cogent need is set out as a ground for refusal.

10. There is a number of interesting memoranda passing between the Commissioner of Police and the Commissioner (CTEL) in relation to some of these earlier applications.

11. In a memorandum of 31 March 1995 from the Commissioner of Police to CTEL in the context of the application for a licence following vacating 47-57 Temple Street, it is stated "4. Illegal gambling does exist in the district, however, I do not feel that it is so serious as to warrant prohibiting additional legal gambling outlets."

12. In another memorandum, 7 September 1999 (Commissioner of Police to CTEL), there is a conflicting statement to the effect that a serious level of gambling would justify an increase in lawful i.e. licensed, gambling outlets.

The Policy Statement of 18 April 1990

13. This is in the form of a memorandum by the then Secretary for Home Affairs to the Commissioner (CTEL). It is agreed on behalf of the Respondents that this is the governing statement and that there is no subsequent document modifying or clarifying it as the guidance for processing applications for mahjong/tin kau licences.

14. The pertinent contents are as follows:

a) "There should be no departure from the decision ... that existing mahjong houses should be allowed to continue possibly with an occasional increase in the number of licences ...."

b) Consultation with the Police, Buildings and Lands Department and the District Officer ... should continue. Account should be taken of the need for lawful gambling outlet in the area, the suitability of the applicant and the proposed premises, the characteristics of the area including the existence of other licensed mahjong establishments, and the likely public reaction to the application [My underlining].

c) ... A balanced view will therefore have to be taken on the degree of public reaction to an application and the general environment of the vicinity of the proposed premises.

e) ... if a licensee has to relocate his premises at no fault of his own (e.g. demolition) the application could be considered with some degree of sympathy particularly if the new premises is within the immediate neighbourhood and if the new application does not lead to an increase in the number of gaming tables.

15. My attention was also directed to a transcript of a luncheon speech by the Secretary for Home Affairs, Mr David Lan on the 25 March 1999. In a reference to the Government's policy not to encourage gambling but to allow gambling outlets to exists - including licensed mahjong parlours - he underlined the desire to balance the needs of the gambling public against the views of those who opposed gambling. This was policy which had been in force for a long time and was widely accepted by the community.

The grounds for refusal

16. This is the only ground to be considered although there are other aspects of the policy which fall to be considered within the decision. It is important to review the short correspondence which passed between the Commissioner and the Home Affairs Department.

17. The memorandum from the Commissioner to the Secretary for Home Affairs dated 5 August 1999 shows that he was minded to grant approval in principle to Madam Leung's application despite the objection of the Commissioner of Police. The objection of the Director of Buildings was to be met by rectification of the irregularities.

18. The relevant part comes under the sub-heading of "(d) cogent need". This has been considered in the context of an increase in the number of gaming tables from 20 to 33. At that time there were 13 mahjong parlours with a total of 348 tables in Yaumatei which was described as the same district as the Applicant's former premises. The District Office (Yau Tsim Mong) advised that he was not aware of any illegal gambling activities in the district. If this was a general reference to illegal gambling activities in Yaumatei it was clearly wrong. In this context it is to be noted from the memorandum of the 7 September 1999 that the number of successful gambling raids on non-mahjong premises were 15 in 1996, 9 in 1997, 13 in 1998 and 11 in 1999. It is not clear entirely whether the 1999 figure included the 3 raids on mahjong parlour. There had been no raids on mahjong parlours between 1994 and 1999. As I referred to before, the same memorandum went on to say that there was no indication that the setting up of the proposed parlour would help reduce or prevent unlawful gambling activities. In fact unlawful mahjong activity had surfaced for the first time for five years so there is a lack of logic in this approach.

19. Very fairly the memorandum went on to be somewhat dismissive of the Commissioner of Police's objection which was based on undue concentration of mahjong parlours in the district. It rightly drew attention to the lack of consistency in the Police view since on earlier occasions that objection had not been raised in like or similar circumstances. It concluded "it may be difficult to justify our decision to refuse this application on the basis of an increase in gaming tables."

20. The final factor is the remaining one I have to consider. The memorandum said:

"Even [if] this application does lead to 'an increase in the number of gaming tables' and the application is not necessitated by external factors beyond the applicant's control, I consider that the present application should be considered with some degree of sympathy because the proposed premises is at the same district of the former mahjong/tin kau parlour."

21. The conclusion is a balanced and fair statement of the position:

"The view that the application would create undue concentration of parlours/gaming tables in the district is unfounded."

And more pertinently:

"As no one factor could be regarded as over-riding and all relevant factors should be given the same weight and considered simultaneously, I intend to grant approval-in-principle...."

22. In my view that was a succinct reflection of the "balanced view" expressed in the 1990 Policy memorandum and the 1999 speech of the Secretary of Home Affairs. Why then did it not prevail in the Applicant's favour?

23. The reply on behalf of the Secretary for Home Affairs was largely concerned with the Commissioner of Police's objection on the ground of undue concentration of mahjong parlours. It is not necessary to consider it. The Administrative Appeals Board rejected this as a valid ground for refusal.

24. As to cogent need, the reasoning for rejection was a simple unexamined acceptance of the Commissioner's statement that the illegal gambling activities in the area are not serious and an additional outlet is not warranted.

25. It rejected too the element of sympathetic consideration for relocation on two grounds. One was that the relocation could not be considered to be 'at no fault' of the applicant; the second was that five years had elapsed since the closure of her parlour and in that circumstance it could not be considered as a relocation.

26. The Commissioner (CTEL) duly communicated his rejection by adopting the two reasons given by the Secretary for Home Affairs which he, in turn, had adopted from the Commissioner of Police's objections.

27. The last sentence of the memorandum from the Secretary for Home Affairs to the Commissioner CTEL has to be borne in mind - "The overriding consideration is Government's policy of restricting gambling opportunities." It patently was not. Such a statement involved a misreading of the policy or, at the very least, a restricted and unbalanced gloss on the Policy. That, as I will also set out, was not the only error in relation to a reading and application of the policy.

'Cogent' need

28. The word "cogent" appears nowhere in the Policy memorandum or in the speech in 1999. The word imports in its ordinary natural meaning "convincing" or "compelling". I think in that ordinary meaning it adds nothing to the noun "need". It there is need it is "convincing" or "compelling" otherwise it is not a "need". The word therefore is tautologous when so used, in contrast for example, when it is used to qualify such a word as "argument", to elevate it.

29. Why then should the term appear in this context? In timing it appears for the first time, on the documents available in the case S545 when it was used as the basis for refusal.

30. It is extremely important not to import words, emphasis or other than natural meaning to terms used in Policy statements and guidance, and of course, Statutes or Ordinances. I have come to the clear conclusion that the word 'cogent' has been added to 'need' to elevate the criterion by a degree or more. The phrase "cogent need" denotes by its use, by the simple juxtaposition of the words, a higher level of need. If it is not intended to lend some form of emphasis to the single word why is it used? That is a tendency beloved of politicians when they feel the single simple word does not quite convey the status they seek to ascribe to it. It is a misleading and potentially flawing practice.

31. It is regrettable that the memorandum from the Department of Home Affairs adopted the term instead of adhering to the well-thought out terminology of its own Policy document.

32. As a consequence a more stringent approach to need has been adopted and that stringency is consistent with the erroneous statement of Government policy in the Department's memorandum identified earlier.

33. If one were to stand back from the Commissioner of Police's assessments, and from the memoranda between the Commissioner (CTEL) and the Department, and look at the use of the term "cogent need" when set against the policy, and the misconstruing of the Applicant's problem with her landlord and the economic factors causing her to surrender the lease (as being her 'fault'), it is easy to see the manifest unfairness and clear misdirection in the process.

Judicial Review and domestic adminstrative decisions

34. Although in this hearing we have traversed many decisions of consequence in this field, in effect tracing the development of the court's power "to redress unfairness" (see Scarman L.J. in HTV Ltd v. Price Commission 1976 I.C.R. 170 at page 189) it is not necessary for the purposes of this case to consider such authorities in detail, helpful though that jurisprudential journey has been. In Reg. v. N. and E. Devon Health Authority, ex parte Coughlan 2000 2 W.L.R. p. 622 at page 645, Lord Woolf said:

"In what is still a developing field of law, attention will have to be given to what..... limits the applicant's legitimate expectation (in Lord Scarman's words In Re Findlay 1985 HC 318) to an expectation that whatever policy is in force at the time will be applied to him."

35. The Policy statement undoubtedly indicated that a discretion was to be exercised in considering applications. Indeed it contained a number of factors which must be weighed in the balancing process. In my view, as stated earlier, the statement on behalf of the Secretary for Home Affairs that "the overriding consideration is Government's policy of restricting gambling opportunities" fetters the discretionary application of the policy. It is also in conflict with the preamble to the Policy statement and in particular paragraphs (a) and (c). This lends weight to the impression given by the addition of the word "cogent" to the simple and free-standing word "need", that the criterion has been elevated. The brief manner in which the Secretary's memorandum dealt with the Commissioner of Police's argument on "cogent need" by confirming it in one sentence undoubtedly indicated an absence of balance in the overall consideration. Whilst paragraph (b) of the Policy memorandum referred to "consultation with the Police" the "balanced view" of paragraph (c) had gone out of the window. I feel bound to say that the Commissioner's memorandum to the Secretary was a far more balanced approach and, but for the use of "cogent need", was a fair reflection of the principles implicit and explicit in the Policy statement.

36. Stock J, as he then was, had cause to consider the misinterpretation or misapplication of policy in Wong Wei Man v. The Commissioner for Television and Entertainment Licensing HKAL 775 of 2000 (2 November 2000). Such error "may render the decision just as flawed as if the policy had been overlooked and altogether ignored." He referred to E.C. Gransden and Co. Ltd v. Secretary of State for the Environment [1986] JPL 519. Woolf J (as he then was) said:

".... It [is] essential that the policy is properly understood by the determining body. If the body making the decision [fails] properly to understand the policy then the decision would be as defective as it would be if no regard had been paid to the policy.'

37. In R v. Secretary of State for the Home Department, ex parte Urmaza (11 July 1996) Sedley J, as he then was, said:

"There is a coherent line of authority to the broad effect that a policy means what it says, and that its meaning can ordinarily be established by the court and the decision-maker be held to it."

And later:

"... The meaning of the policy cannot be a matter for the Secretary of State to decide subject only to the broad limits of rationality. If, as is nowadays almost always the case, it is couched in ordinary English, it is not open to the Secretary of State to give it other than its plain and ordinary meaning ..."

38. At this stage it is worth commenting that the Policy Statement is in good plain ordinary English; why then should the word "cogent" be added? That is the answer (in the interrogative) to the argument that the word does not affect "need" as expressed in the Policy, and therefore the decision cannot be impugned as a misinterpretation or misapplication of, or a departure from the Policy. I have come to the firm conclusion that the addition of that word has distorted the criterion and the policy. As Auld L.J. said in R v. Ministry of Defence ex parte Walker [1999] 1 W.L.R. 1209, at p. 1216:

"Misinterpretation by the ministry of its own policy may render its decision defective in the same way as would ignoring it."

39. There has been some argument on both sides as to how the number of Police raids on unlawful gambling premises over the period 1994 to 1999 should be interpreted. I do not think any significant conclusion can be drawn other than that, with the exception of one year, the picture is fairly consistent. In any event from those bare statistics it would be highly speculative to indulge in such an exercise.

40. Similarly I find it impossible to derive any clear assistance from the reduction in the number of mahjong tables in the district - and in the reduction of licensed parlours. This may well be explained quite simply by the number of refused applications. Between 1995 and 1999 the only approved cases were relocations (six in number). There were 9 refused cases (three of which were relocations and included at least two of this applicant's attempts to relocate). All the refusals from 1998 (7 out of the 9) included "no cogent need" as a ground.

41. The effect of these would certainly be a discouragement. Although the Applicant was refused in 1999 (this application) someone, on a 'relocation' application, was granted his or her application. In the previous year all four applications were refused on multiple grounds. It would need a substantial investigation of all applications to see if any pattern emerged. That would be time consuming and in any event unwarranted.

Legitimate expectation

42. This is largely based on a statement made by counsel on behalf of the Commissioner (CTEL) at the hearing before the Appeals Board on 24 January 1996, in answer to a question from a member of the Board, which appeared to indicate that providing there were no local objections or irregularities as far as the Directors of Lands and Buildings were concerned, then the Applicant's subsequent application would be favourably considered. Given the overall context of this exchange I do not consider that it could be regarded as a form of 'estoppel' overriding any legitimate objection born out of future circumstances.

Relocation and sympathetic consideration

43. The remaining ground has some force. It is clearly provided for in the Policy Statement. It was regarded as a factor in the Applicant's favour in the Commissioner's (CTEL) memorandum to the Secretary for Home Affairs (5 August 1999) even though repossession of her former premises was wrongly stated to be as a result of non-payment of rent.

44. The reply of the Secretary repeated the factual error and relied on this and the elapsing of five years since, as depriving her of "sympathetic consideration".

45. I have little difficulty in concluding that there was a material misdirection on the factual basis. It was accepted hitherto that there was no fault on the part of the Applicant in respect of the surrender of the premises. This acceptance proceeded from the memorandum of 19 January 1995 (Commissioner CTEL to District Officer - Yau Tsim Mong). It was accepted to be the position at the Appeal hearing in January 1996. At the Appeals Board hearing on the 7 July 2000 the decision recorded:

"She surrendered the lease of the premises and the licence due to poor business in November 1994."

46. Nonetheless it went on to regard her decision as being a voluntary and conscious business decision, which it obviously was, but which imported fault on her part, a deduction with which I respectfully disagree. I do not think the phrase "fault of her own" can be stretched to include a decision to close a business brought about by adverse economic influences including a landlord's decision nor to renew the lease.

47. As far as the effluxion of time is concerned it must be a factor in deciding for how long an application can be regarded as a relocation for the purposes of sympathetic consideration. But account must be taken of the time and expense involved in finding suitable premises and having them assessed by the various authorities. If there is a substantial delay between making applications so as to suggest a lack of serious endeavour, that would be a weighty favour in deciding for how long the element of "relocation" could hold good. This applicant has made three applications. I find it difficult to conclude that she has not persisted energetically and with reasonable promptness to find alternative premises on each occasion and it would be harsh to say that such "sympathetic consideration" should evaporate in these circumstances. It is not without significance that the Commissioner (CTEL) in his memorandum to the Secretary for Home Affairs thought that she was still entitled to it.

Conclusion

48. Cogent need is not part of the Policy document. There has been misinterpretation and misapplication of the Policy. The decision lacked a proper consideration of the Policy. It certainly lacked the balance which the Policy sought to strike. The Policy was misleadingly re-stated. There was a misdirection - and initially a misstatement of fact - which led to the Secretary's view that this application should not attract sympathetic consideration as a 'relocation' application. I consider the Appeals Board misdirected itself on both issues as a consequence, when it reviewed the Commissioner's decision, and was, in my view misled by the superimposition of "cogent need" upon the Policy.

49. The irony of the situation is that in the Commissioner's initial evaluation, he or she, had proper regard for the factors and demonstrated a balanced approach consistent with the Policy - save in respect of the intrusion of the word "cogent" and the factual basis of the Applicant's need to relocate.

50. The decision of the Commissioner and of the Appeal Board shall be quashed although in practical terms it is the Commissioner's decision which falls to be quashed, the Appeal Board having confirmed it on Appeal. I direct that the Application be remitted to the Commissioner for reconsideration in accordance with my findings. Although it is a matter for the Commissioner himself or herself, the principle of fairness should reflect his initial assessment when he wrote his memorandum with the word "cogent" expunged from this (and any other consideration) and the factual basis for the Applicant's need to relocate being corrected.

51. The Applicant is entitled to her costs of and occasioned of this Application to be taxed if not agreed (with the exclusion of the cost of the second Affirmation).