TANG CHIU MAN AND ANOTHER v. SECRETARY FOR JUSTICE for DIRECTOR OF LANDS

HCAL 68/2021

[2021] HKCFI 3518

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 68 OF 2021

________________________

________________________

AND

HCAL 916/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 916 OF 2021

________________________

________________________

(Heard together)

________________________

D E C I S I O N

________________________

A.  Introduction

1.  This Decision relates to applications for leave to apply for judicial review in two sets of proceedings, with the same applicants and the same putative respondent.  By my earlier Decision dated 11 October 2021, [2021] HKCFI 3016, I ordered that the hearing for leave to apply for judicial review in both proceedings be heard together before the same judge on 23 November 2021.

2.  By the Form 86 in HCAL 916/2021 (“JR2”), the Applicants seek leave to apply for judicial review so as to challenge a decision dated 21 May 2021 (“May Decision”)  made by the Director of Lands (“Director”), the putative respondent.  The May Decision was a revision to an earlier February Decision, and it involved the approval of the Applicants’ rebuilding application – of New Territories Exempted Houses (“NTEH”)  on certain Lots in Yuen Long – albeit subject to the imposition of 33 conditions.

3.  Prior to the May Decision, the Applicants had already filed an earlier Form 86 in HCAL 68/2021 (“JR1”), seeking leave to apply for judicial review relating to the (then)  refusal or failure of the Director to have determined the Applicants’ NTEH application.

4.  It is trite that in determining whether to grant leave, the Court only has to consider whether the Applicants’ case is reasonably arguable, being one which enjoys realistic prospects of success.

5.  The Director opposes the grant of leave on the following grounds:

(1)  the subject matter of JR1 and JR2, namely a decision or lack of decision on the Applicants’ NTEH application in relation to the land held under the Block Crown Lease (“BCL”)  is not amenable to judicial review (“Amenability Issue”);

(2)  JR1 is academic because its complaint about lack of decision was superseded by the February Decision and subsequently the May Decision (“Academic Issue”);

(3)  JR1 was issued out of time (“Time Issue”).

6.  Whilst the Director opposed both applications for leave to apply for judicial review, it was nevertheless common ground that if leave were to be granted for both, then there should be a consolidation of JR1 and JR2.

7.  At the hearing, the Applicants were represented by Ms Audrey Eu SC, leading Mr Andrew Tse, and the Director was represented by Mr Lam Chin Ching Gary.

B.  Background

8.  For the purposes of the consideration of the grant of leave to apply for judicial review, disputed factual matters are to be taken in favour of the Applicants (though the Court will, of course, not wholly suspend its critical faculties).  In fact, the affirmations so far filed on behalf of the Director have not sought to contradict the factual circumstances asserted (albeit that I note that Mr Lam emphasises that the Director has good answers to the allegations, which would be deployed if leave to apply for judicial review were to be granted).

9.  The 1^st Applicant is the husband of the 2^nd Applicant, who is the Assistant Director of Lands. Together, they are owners of two Lots in DD 112, Yuen Long, New Territories (“Land”).  The Applicants made the NTEH application – that is, an application to the Lands Department (“LandsD”)  for the rebuilding of 4 NTEHs on the land – on 10 October 2012.  There is no dispute that the NTEH application was an application for approval under lease, being the BCL.  The NTEH application was not an application for modification of lease.

10.  It is also common ground that the BCL is a private contract between the Government as landlord and the Applicants as tenants.  The Applicants have emphasised they are seeking to exercise their contractual rights, vis-a-vis their contracting counterparty the Government.

11.  Applications such as the NTEH application normally comprise two stages:

(1)  the first stage is to apply for approval under the BCL, when the LandsD would consider: (a) whether the Applicants are the owners of the Land; (b) whether the proposed NTEH(s)  is/are within the boundary of the Land; (c) any applicable lease restrictions; and (d) the zoning of the land under the relevant Outline Zoning Plan;

(2)  if satisfied of those matters, the second stage is for the LandsD to consider Certificates of Exemption, exercising powers under the Buildings Ordinance (Application to the New Territories)  Ordinance Cap 121.

12.  The second stage requires the LandsD to consider more technical information before allowing construction to begin, and is in effect an alternative to an application made by submitting plans for formal approval under the Buildings Ordinance, in which case approval would be sought from and granted by the Building Authority.

13.  On 25 July 2014, the Town Planning Board (“TPB”)  approved an application of the Applicants made under section 16 of the Town Planning Ordinance.  Shortly after this public approval process, Ming Pao Daily published a front-page story on 6 August 2014 (“Story”), alleging that the 2^nd Applicant had taken advantage of inside information and made a profit by purchase of the Land.  The 2^nd Applicant has since cleared her name through internal investigations and investigations by the ICAC.

14.  However, it is the Applicants’ case that the resulting publicity has caused the LandsD unreasonably to delay approval of their NTEH application, including by raising various requisitions in a piecemeal manner of a kind not usual for the first stage of such an application.  The Applicants point to:

(1)  asking for land survey submissions on 26 August 2015;

(2)  shifting of position on 26 April 2016 by asking that the proposed NTEHs be re-positioned;

(3)  asking for the locations of the septic tanks on 27 October 2016;

(4)  requesting that a further application be made to the TPB on 18 September 2017;

(5)  asking for a natural terrain hazard study to be done on 27 October 2017;

(6)  requesting revision to the natural terrain hazard study on 24 July 2019;

(7)  asking for the proposed site formation level with spot diagram on 31 January 2019;

(8)  suggesting a revision to the proposed site formation level on 10 July 2019 (which suggestion was subsequently withdrawn after refusal by the Applicants); and

(9)  asking for a geotechnical assessment report on 25 October 2019.

15.  The Applicants say they tried their best to cooperate and comply with the requisitions, yet there remained a failure to approve the NTEH application.  They say – and the 2^nd Applicant might be taken to have some relevant knowledge – that it is unusual for such an application to have taken so many years, and suggest the process should have been completed by around mid-2015.  As Ms Eu points it out, the NTEH application was made in 2012, and more than eight years later was still at the first stage of the process.

16.  Hence, the Applicants issued JR1 on 20 January 2021, essentially seeking an order to compel LandsD to determine the NTEH application, and to seek damages for the delay for the period between 1 July 2016 and the date of approval.  The grounds put forward are allegations of illegality, being that (1) LandsD has been motivated by an ulterior purpose; (2) LandsD has wrongly requested for, and taken into account, irrelevant considerations; and (3) the inordinate delay amounts to an abuse of process.

17.  By letter dated 26 February 2021, LandsD approved the NTEH application, subject to 38 conditions (“February Decision”).  The Applicants say that it cannot be a mere coincidence that the February Decision was made shortly after JR1 was taken out.  The Applicants objected to the 38 conditions, and LandsD subsequently revised the conditions down to 33 (“May Decision”).

18.  JR2 was issued on 25 June 2021, challenging the imposition of the 33 conditions, essentially seeking quashing of the May Decision and a re-determination in accordance with the law, as well as damages for the period from the February Decision until proper approval.  The challenge is mounted on no less than nine grounds, covering various aspects of illegality, unreasonableness/irrationality, ultra vires, legitimate expectation, uncertainty, breach of the Basic Law, and unfairness amounting to abuse of power.

19.  It is important to the consideration of whether or not to grant leave to apply for judicial review that Ms Eu was at pains to point out that the “core allegation” in the case is essentially that of ulterior motive or bad faith.  She submits that the Applicants have been the victims of “reverse discrimination”, giving rise to – or a symptom of – an intention to penalise the 2^nd Applicant for her interactions with other staff in LandsD and/or the additional work and effort caused as a result of the Story.  This being the “core allegation”, Ms Eu submits that all other grounds put forward are symptoms or manifestations of that core allegation.

20.  I keep that submission firmly in mind.  However, it is convenient to deal with the current contest broadly under the headings relating to the three areas of opposition to the grant of leave identified on behalf of the Director.

C.  Amenability Issue

21.  On this aspect, the weight of prior authority strongly supports the stance taken by Mr Lam: see Anderson Asphalt Ltd v Secretary for Justice [2009] 3 HKLRD 215 at §57; King Prosper Trading Ltd v Urban Renewal Authority (unreported, HCAL 56/2009, 17 December 2010), at §§26-31; and the cases referred to in those decisions.  Without going into the detail for present purposes, I accept that it is authoritatively settled that a Government lease is a private lease, and ordinarily in relation to steps taken on the lease the Government is acting in a private capacity and thus not subject to judicial review.

22.  Mr Lam also emphasised that the law should be understood in the unique context of Hong Kong.  Hence, it has been held that:

(1)  the Government has a “traditional role of private landlord” in Hong Kong;

(2)  the source of power derived from Crown Leases is a source derived from a private instrument;

(3)  to place the Director’s decisions under the scrutiny of judicial review would be to place the government at a disadvantage over players in the private sector, who are able to react to demands for land with far greater speed and flexibility;

(4)  there is a stress on the desirability of certainty in administrative law, and nothing should be done to undermine the certainty that in the modification of leases, the Government acts in a private capacity and is not subject to judicial review;

(5)  hence, there may be little to be gained by comparison with the position in other jurisdictions.

23.  Mr Lam submits that these judicial sentiments do not apply only to modification of leases, but logically also apply to every act of the Government in the capacity of the “sole ground landlord”. Under the BCL, there is a restrictive covenant prohibiting the lessee from converting land delineated as agricultural or garden ground into use for building purposes without the licence of the Government.  Any grant of licence is purely a private commercial (contractual)  matter between the Government as landlord and the Applicants as tenants.  By approving the Application, the Director as the land agent of the Government granted a licence to the Applicants to build four NTEHs.  In the deliberation to approve and subsequently review the Application, the Director considered how best to arrange the use of the Lots, and what type or form of building or structure to be built.  When the Director rendered the February Decision or the May Decision, the function was to allow the Applicants to use the Lots in a particular way.  Those decisions relate to the interests of the landlord, be it economic or otherwise.

24.  Ms Eu submits that (a) the delay in or failure to have made a decision and (b) the May Decision are amenable to judicial review for five reasons:

(1)  the source of the power to approve the NTEH application being the BCL is not determinative of amenability to judicial review;

(2)  the public law elements in the present case are sufficient to create amenability;

(3)  the Director was exercising a statutory function in the decision-making;

(4)  there was an abuse of power by taking into account political and extraneous considerations in the decision-making; and

(5)  the allegation of ulterior motive or bad faith means the decision of LandsD was not a purely commercial one, rendering it amenable to review.

25.  The first point is a truism, and really leads only to consideration of the second point.  Whilst the nature of the source of power or discretion is by no means irrelevant, it is the nature of the functions that the decision-maker was performing when making the decision under challenge that is of crucial importance: see Anderson Asphalt at §57(ii).

26.  What amounts to a sufficiency of public elements to render the decision-making process amenable to judicial review is a matter of fact and degree, depending very much on individual cases.  Therefore, I accept that the existence of a contractual relationship may not be conclusive. No hard and fast rule can be laid down.  It is, in a borderline case, very much a matter of overall impression and one of degree: see Anderson Asphalt at §57(iii)-(iv).  The features relied upon by the Applicants include: (a) the asserted good reason to believe that the delay and unusual handling of the NTEH application was mainly due to the adverse publicity surrounding the Story, as well as the 2^nd Applicant’s position and her dealings with LandsD; (b) the circumstances are special to this case, because of the role of the Government acting with a view to public opinion; (c) many unusual features showed departure from the normal landlord and tenant concerns; (d) the delay was gross, so that there is every reason to believe that but for JR1 the February Decision would not have been forthcoming; (e) the imposition of the 38 and 33 conditions were not justified by normal landlord and tenant concerns.  However, absent any further feature, I am not sure that those matters of themselves identify a sufficiency of public elements.  The political or extraneous considerations the Director allegedly took into account could not be regarded, without more, as public law elements.

27.  As to the third point, Ms Eu places heavy reliance on R (Molinari)  v Kensington and Chelsea Royal LBC [2001] EWHC Admin 896 at §§58-72, a case in which it was held that a decision under a lease to refuse to consent to change of user was amenable to judicial review because the authorities were exercising a statutory function by giving effect to planning policy through the contract.

28.  In this case, Ms Eu submits, LandsD are also exercising a statutory function by giving effect to planning policy, and by dealing with the NTEH application as though it were an application for Certificates of Exemption, thus creating amenability to judicial review.

29.  A similar submission was considered in Anderson Asphalt, where it was held at §§62, 76-78 that this point again leads back to the second point about the sufficiency of the public element:

62.  As I have analysed, the mere presence of an element of planning control in the decision-making process is not in itself sufficient to turn a decision on lease modification into a public law one, amenable to judicial review, according to the authorities discussed above – many of which are directly binding on this Court.  And as has been pointed out in most if not all of these lease modification cases, the user restriction in question must have been inserted into the relevant title document not only for a commercial or economic interest, but also for planning considerations. Hartmann J expressly recognised this self-evident reality in Rank Profit, supra, at p 187 (para 75).

…

76.  Molinaro has been specifically distinguished by the Court of Appeal in Rank Profit, which is of course binding on this Court.  In any event, it is not an authority for saying that whenever a decision is motivated by some planning considerations, it must be a public law decision amenable to judicial review.  That sort of proposition has no currency in Hong Kong based on the authorities already described.

77.  Molinaro was distinguished by Tang VP in Rank Profit on the ground that what was involved in the English case was the exercise of statutory powers to perform statutory functions, whereas in a typical lease modification case, no statutory power would be involved.  Mr Litton has criticised the distinction drawn by the learned judge as unsustainable.  However, it should be noted that in Molinaro itself (in paras 74 and 75), Elias J himself distinguished an earlier English case, R v The Lord Chancellor, ex parte Hibbit and Saunders [1993] COD 326 (concerning an unsuccessful complaint against a Government tendering process)  by pointing out that the power to contract there was not conferred by statute and the Lord Chancellor’s Department was exercising a common law power.  The judge observed that the courts had traditionally shown greater caution towards reviewing the common law powers of the Crown compared with statutory powers.

78.  Free from authority, again, the fallacy of the argument lies in assuming that whenever some element of public interest or benefit or some published public policy is involved, the decision in question must be a public law one.  No, the true question is whether some public element(s)  of sufficient weight is/are present in a particular case so as to render the function performed a public one, and the decision made a public law decision amenable to judicial review.

30.  Mr Lam submits that – even if it is assumed that a fear of adverse publicity was the true reason for LandsD’s actions – a consideration of public opinion does not make its decision-making judicially reviewable.  Mr Lam also relies on Anderson Asphalt at §55, where it was held that Molinaro is not analogous with the situation of the Director’s decision to grant short-term waivers, and that even if the Director’s functions were defined by statute, it would still be necessary to consider whether the source and nature of his power were statutory, and in the case of Government leases in Hong Kong “they clearly are not”.

31.  The fourth point, of alleged abuse of power, and the fifth point, about an allegation of ulterior motive or bad faith, can be taken together.  Again some reliance was placed on the Molinaro case, at §§67, 69 and 72, where it was stated:

67.  But public bodies are different to private bodies in a major respect.  Their powers are given to them to be exercised in the public interest, and the public has an interest in ensuring that the powers are not abused.  I see no reason in logic or principle why the power to contract should be treated differently to any other power.  It is one that increasingly enables a public body very significantly to affect the lives of individuals, commercial organisations and their employees.

…

69.  In my opinion, the important question in these cases is the nature of the alleged complaint.  If the allegation is of abuse of power the court should, in general, here the complaint.  Public law bodies should not be free to abuse their power by invoking the principle that private individuals can act unfairly or abusively without legal redress.  But sometimes the application of public law principles will cut across the private law relationship and, in the circumstances, the court may hold that the public law complaint cannot be advanced because it would undermine the applicable private law principles.

…

72.  In this case I would in principle have given relief in respect to the legitimate expectation claim had I found it to be sustained.  The allegation is that delay in making a decision, against the background of continuing discussions, gave rise to a legitimate expectation that the decision would be exercised in a particular manner.  If there had been conspicuous unfairness of the kind alleged, in my judgment the court should not stand idly by and tell the claimant that because a private individual could exercise his contractual discretion is arbitrarily, or unfairly, the public body could do likewise.

32.  I would not accept a sweeping submission that once there is an allegation of abuse of power then that will necessarily render amenable a decision-making process not otherwise amenable to review.  To be fair, Ms Eu revised her submission to accept that the mere allegation of abuse or bad faith will not of itself render a decision amenable to review, but the facts of a particular case might indicate abuse of the sort which is or should be reviewable.

33.  Reference was also made to an obiter comment made by Lord Templeman in the Mercury Ltd v Electricity Corp of New Zealand Ltd [1994] 1 WLR 521 at 529B, which might suggest that fraud, corruption or bad faith might render a commercial contractual decision amenable to judicial review.  He said:

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.

34.  More directly, Ms Eu referred to R (Trafford)  v Blackpool Borough Council [2014] PTSR 989, where in reaching conclusions in relation to amenability it was held, at §§55 and 59-60:

55.  Having considered these authorities my conclusions are:

(1)  In a case such as the present, involving a challenge to a decision of a public body in relation to a contract, it is necessary to consider: (a) by reference to the contract in question, to the relevant statutory power, to the statutory framework (if relevant), and to all other relevant matters, whether or not, and if so to what extent, the defendant is exercising a public function in making the decision complained of; (b) whether, and if so to what extent, the grounds of challenge involve genuine and substantial public law challenges to the decision complained of, or whether, and if so to what extent, they are in reality private law challenges to decisions made under and by reference to the terms of the relevant contract.

(2)  In a case involving a challenge to a decision of a public body acting under a statutory power but in relation to a contract and in the absence of a substantial public function element, a claimant will none the less normally be entitled to raise genuine and substantial challenges based on fraud, corruption, bad faith, and improper motive (in the sense identified by de Smith of the knowing pursuit of an improper purpose).

(3)  The extent to which a claimant will be entitled to raise genuine and substantial public law challenges beyond those limited classes will depend on a careful analysis of all of the relevant circumstances so as to see whether or not there is a relevant and sufficient nexus between the decision in relation to the contract which is challenged and the grounds complained of.

…

59.  In that context, the claimant is contending that the decision is vitiated: (1) because it was taken for an improper or an unauthorised purpose, namely “that of penalising and victimising the claimant precisely and solely because some of her clients have sued the defendant”; (2) because it was irrational, in that if taken on financial grounds, it “does not achieve any reduction of such claims” and, as per the claimant’s skeleton argument, it is capricious, vindictive and seeks to punish or cause detriment to someone who has acted lawfully; (3) because it was procedurally unfair, in that where the defendant was considering deciding that any request for a new tenancy should be determined other than  by reference to its published tenant selection criteria, and instead solely by reference to its assessment of the claimant’s alleged activities, the claimant was entitled to be afforded the opportunity to make representations before that decision was made.

60.  In my judgment all of these challenges are genuine and substantial.  There is in my judgment a sufficient public law element or connection to render the decision amenable to judicial review on all such grounds.  At the very least there is a sufficient public law element or connection to render the decision amenable to judicial review on the ground of abuse of power, whether categorised as improper or unauthorised power.

35.  Mr Lam submits that at most Trafford draws a necessary distinction between an improper purpose and an irrelevant purpose.  He says that the complaint in this case is the grievance about an irrelevant purpose, which is not an exception to the general rule relating to the exercise of private contractual powers – where Mr Lam submits that exercising rights squarely under a lease are “even more private”.  He also drew attention to a passage from Lee Shing Yue Construction Co Ltd v Director of Architectural Services [2001] 1 HKLRD 715 at 730E-I where Hartman J stated:

In his recent decision in Ngo Kee Construction Co Ltd v Hong Kong Housing Authority (unrep., HCAL No 1927 of 2000, [2001] HKEC 16), Cheung J, in considering the same issue of amenability to judicial review, sort guidelines from a comprehensive review of the authorities.  In so doing, he identified three instances in which the decisions of a public authority are not amenable to judicial review; namely, in instances where:

(1)  The decision is commercial in nature, such as the purchase of goods or services or a tendering process, so the public body is acting like a private body.

(2)  There is no statutory underpinning of the decision and the public body is left to decide on the substance and procedure of the decision-making process.

(3)  There is no allegation of fraud, corruption or bad faith.

As to the third instance identified by Cheung J, when there are allegations of fraud, corruption or bad faith made against a public authority, what is being suggested is that the decision of the authority is not a “purely commercial” one founded on bona fide commercial considerations but goes beyond that into matters indicating ulterior motives, abuse of power and the like.

36.  That quoted passage continues by going on to refer to a textbook in which it was stated that the court is entitled to examine the motives of a public body.  But, Mr Lam submits that where a contractual power allows it to be exercised in a certain way, there is no reason for public law to ‘cut across’ it.  Further, there is no need for a public law remedy where there would be a remedy under the contract (and the existence of an alternative remedy is appointed against amenability of review).

37.  So, Mr Lam submits that there is no exception for fraud or bad faith applicable to actions taken under Government leases in Hong Kong, and any fraud exception would utmost be applicable where the power has statutory underpinning.

38.  Having carefully considered the arguments, it seems to me that this particular case with its unusual set of facts (as asserted by the Applicants, and for present purposes assumed in their favour)  reaches the arguability threshold for the grant of leave to apply for judicial review.  The fact sensitive matters may themselves be relevant to an ultimate resolution of the question of amenability, as well as to other questions as would arise on the substantive application for judicial review.  Further, the degree or extent of the impact that allegations or findings of ulterior motive or bad faith might have on amenability seems to me to be a potentially important point worthy of full exploration at a substantive hearing.

39.  Where emphasis has been placed upon the “core allegation” said to run through all of the public law criticisms, I do not think this aspect is relevant only to the specific fifth ground of challenge in JR2 about unfairness amounting to abuse of power or a breach of contract.

40.  I would not refuse leave on the Amenability Issue.

D.  Academic Issue

41.  Nor do I think that JR1 is necessarily academic, following the February Decision and the May Decision and the commencement of JR2.

42.  First, I see the point that if damages might be available as one substantive form of relief if the grounds of judicial review are made out, JR1 and JR2 can arguably be said to claim different aspects of damages for different periods on different bases.  JR1 makes a claim in respect of the delay and damages for the delay, whereas JR2 makes a claim in respect of the unreasonableness of the conditions and damages for the time lost as a result.

43.  Secondly, where it can be argued that the duties of a public body fall to be exercised on a continuing basis, and the underlying aspects of challenge in JR1 relate to that kind of point (which is different from the underlying aspects of challenge in JR2), I do not think that JR1 is necessarily academic.  Further, there is an overlap between the various issues, and the factual matters underpinning them, which seem to me to point in favour of hearing both JR1 and JR2, rather than just the later one of them.

E.  Time Issue

44.  Though I do not think for present purposes I need to go into the details for saying so, I consider that it is reasonably arguable that JR1 was commenced in time, and/or that there is a reasonable argument for the court to extend time if time had expired.

F.  Result

45.  I grant leave to apply for judicial review in both JR1 and JR2.

46.  JR1 and JR2 will be consolidated.  This is not controversial, but in any event as a matter of case management I agree it is the appropriate direction to make.

47.  The parties should liaise for the purpose of proposing further court management directions in accordance with §§8-13 of Practice Direction 26.1.  Proposed directions (whether agreed or not)  should be provided to the Court within 14 days.  I will then give further case management directions as I see fit.

48.  Costs reserved.