HONG KONG CLAYS AND KAOLIN CO. LTD. v. THE DIRECTOR OF LANDS

1996 M.P. No. 3718

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. On 4th November 1996, I granted the Applicant, Hong Kong Clays and Kaolin Co. Ltd. ("the Company"), leave to apply for judicial review of the decision of the Director of Lands not to renew various leases which had been granted to the Company. The Director of Lands now applies for the leave which I granted to be set aside.

2. The grounds on which it is said that the leave should be set aside are unrelated to the merits of the Company's complaints. The main ground is that the issues which are said to exist between the parties are matters of private law, not public law. Accordingly, it is said that they are not amenable to judicial review. The other ground is that although the application for leave was filed within the three months' time period laid down by Ord. 53 r. 4(1), the application was nevertheless not made promptly. In those circumstances, the Company had to show that there were good reasons for extending the period within which the application should have been made. It is said that the Company has not shown that.

3. The threshold for the grant of leave to apply for judicial review is a relatively low one: does the material disclose matters which, on further consideration, might demonstrate an arguable case for the relief claimed? That remains the question to be determined on an application to set aside the leave, though the Court will have had the benefit of any evidence filed on behalf of the Respondent and submissions by counsel for the Respondent. It follows that

"...on an application to set aside the court is constrained by the same need as on the original leave application to try not to defeat the purpose of the Order 53 procedure by going into the case in more depth than is necessary to consider the arguability of the substantive claim for judicial review: "Gordon, Judicial Review: Law and Procedure", 2nd. ed., para. 7-035.

What that means is that I am not today deciding whether the issues which are said to exist between the parties are matters of private law or public law. What I am deciding today is merely whether it is still arguable that the issues which are said to exist between the parties are matters of public law. If I were to decide anything else, I would be converting the hearing of this application to set aside the leave into a substantive hearing of the application for judicial review - at any rate, on the issue as to whether the decisions challenged are amenable to judicial review. Mr. Robert Andrews for the Director of Lands did not suggest otherwise. In the event of the leave not being set aside, and the application proceeding to a substantive hearing, Mr. Andrews reserved his right to argue then that the decision challenged was not amenable to judicial review.

THE RELEVANT FACTS

4. The Company mines kaolin and feldspar on a site in Cha Kwo Ling. It was originally granted a mining lease to extract minerals there in 1961. It has also been granted a lease of the site itself. Those leases are dependent on each other, because the lease for the site provides that the lease would automatically cease if the mining lease was determined. The two leases were due to expire on 31st July 1996. The Company applied for their renewal in January 1996. By letter dated 29th July 1996, the Director of Lands informed the Company's solicitors that the Government had decided not to renew the leases on their expiry. It is that decision which the Company challenges in these proceedings.

5. The notice of application for leave to apply for judicial review puts the Company's case in three ways:

(i) Section 24(2) of the Mining Ordinance (Cap. 285) provides:

"If, during the term originally granted or any renewal thereof -

(a) the lessee has carried on work in a normal and businesslike manner;

(b) the lessee has in all respects performed and observed all the terms and conditions of the lease; and

(c) the lessee has given to the Director of Lands not less than six months' prior notice in writing of his desire to obtain renewal of the lease,

the lessee may be granted...a renewal of the lease..."

The Company contends that, on its proper construction, section 24(2) required the Director of Lands to renew the leases if the three conditions had been satisfied. Since those conditions had been satisfied, the Company was entitled as of right to a renewal of the leases.

(ii) Alternatively, if the Director of Lands had a discretion to grant the renewal of the leases, his refusal to do so is said to have been unlawful, in that it was contrary to the legitimate expectation of the Company that the leases would be renewed if the three conditions were complied with. That expectation was based (a) on section 24(2) itself, (b) on various other provisions in the Mining Ordinance which show the importance placed by the legislature on ensuring that mines are worked by a mining lessee properly selected and committed to working the mine long-term, and (c) on various assurances said to have been given to the Company in 1982 and 1983 that the leases would be renewed.

(iii) Alternatively, the refusal by the Director of Lands to renew the leases is said to have been irrational. Since the three conditions in section 24(2) had been satisfied, there is said to have been no good reason why the leases should not have been renewed.

6. The case for the Director of Lands is that, on its proper construction, section 24(2) did not require him to renew the leases. It is disputed that the Company carried on work in a normal and businesslike manner on the site, or that it had performed and observed all the conditions of the mining lease. But even if the three conditions were satisfied, the Director of Lands contends that he nevertheless retained a discretion to renew the leases. Moreover, no assurances that the leases would be renewed were ever given to the Company, and even if the Company had been expecting the leases to be renewed, that expectation was not a legitimate one in view of the Government's statement in 1987 that leases of the kind which the Company had would not be renewed if "the land is required for a public purpose or is no longer being used for the purpose for which it was originally granted". In that connection, it is said that the land is now required for a public purpose, namely the building of schools on it, that the land is no longer being used for mining because there are no minerals on the site capable of being extracted, and that what the Company really wants to do is to develop the land and build a hotel and residential accommodation on it.

PUBLIC LAW

7. I have no doubt that it is at least arguable that the Company's rights which are alleged to have been infringed are rights in public law. Those rights do not arise from the terms of the mining lease. They arise as a result of section 24(2). The Company's right to have the mining lease renewed, and its expectation that the lease would be renewed, derive from section 24(2). I appreciate that since R. v. Panel on Take-overs & Mergers ex p. Datafin Plc [1987] 2 WLR 699, the demarcation line between public and private law has focused on whether the decision-making body took the decision challenged in the course of its public functions, rather than on the nature of the source of the power to make the decision challenged. In my view, it is at least arguable that when the Director of Lands decides whether to renew a mining lease, he is exercising a public function. That is particularly so if, as the Director of Lands himself contends, he has an unfettered discretion in the matter. In those circumstances, he has to balance the interests of the lessee in having his lease renewed against the interests of the public which may be affected by long-term mining continuing at the site.

8. That is sufficient to dispose of the question which I have to decide today, but in deference to Mr. Andrews' wide-ranging arguments, I ought to add that Mr. Andrews accepted that some of the Company's rights which are alleged to have been infringed are rights in public law. What he argued was that the issues between the parties raise matters of both public and private law, and in such cases the Court has a discretion whether to permit the proceedings to continue as if begun by writ. The difficulty is in identifying the source of that discretion. Mr. Andrews argued that the discretion is expressly conferred on the Court by Ord. 53 r. 9(5). That argument does not lie easily with the relief sought in the summons before me. If the leave to apply for judicial review is set aside, the proceedings will no longer be in existence. There will simply not be any proceedings which could have been ordered to continue as if they had been begun by writ.

9. In any event, there is, I think, a more fundamental objection to the use of Ord. 53 r. 9(5) in this case. The Court's power to order the proceedings to continue as if begun by writ arises where "the relief sought is a declaration, an injunction or damages and the court considers that it should not be granted on an application for judicial review but might have been granted if it had been sought in an action begun by writ by the applicant at the time of making his application." The reference to an injunction does not include an interim injunction, because Ord. 53 r. 9(5) relates only to the relief to be granted at the substantive hearing. Neither a final injunction nor damages are sought by the Company. It seeks orders of certiorari and mandamus. I accept that the application of Ord. 53 r. 9(5) is potentially triggered by the fact that the Company also seeks a declaration that it is entitled to the renewal of the leases, or at least to the reasons (if there are any) for the refusal to renew. However, I could only "Consider" that such a declaration should not be granted on an application for judicial review if I had come to the conclusion that the issues between the parties raise matters of private law only. I have not come to that conclusion. It would be premature for me to do so. I can only come to that conclusion at the substantive hearing. That, no doubt, is why Ord. 53 r. 9(5) is included in Ord. 53 r. 9, the heading of which reads : "Hearing of application for judicial review".

10. If the source of the discretion on which Mr. Andrews relies is not Ord. 53 r. 9(5), where does it come from? Mr. Andrews took me on a survey of a number of cases including Pyx Granite Co. Ltd. v. Ministry of Housing and Local Government [1960] AC 260, An Bord Bainne Co-operative Ltd. v. The Milk Marketing Board [1984] 1 CMLR 519 ("the Irish Dairy Board case"), R. v. East Berkshire Health Authority ex p. Walsh [1985] 1 QB 152, and Roy v. Kensington and Chelsea and Westminster Family Practioner Committee [1992] 1 AC 624. I have not been able to extract from any of those cases a clear enunciation of the proposition which Mr. Andrews asserts. The closest are some observations made by Sir John Donaldson M.R. in the Irish Dairy Board case at pp.588-589, though I think that there is real force in the point made by Sir John Swaine Q.C. for the Company that the proposition to be derived from the Irish Dairy Board case is not one of discretion at all, but that where a party has both private and public law claims, the Court will only prevent that party from proceeding in the forum of his choice if the use of that forum constitutes a misuse of procedure. But assuming that the observations of Sir John Donaldson amount to authority which support the proposition which Mr. Andrews advanced, it is arguable that the proposition has no application here. That is because it is arguable that this is not a case in which the issues between the parties raise matters of both public and private law. It is arguable that this is a case in which the issues between the parties raise matters of either public or private law. That is because all the Company's rights which are said to have been infringed derive from section 24(2), and the true question is whether in exercising his power under section 24(2) the Director of Lands is exercising a public function.

11. There are two other points I want to make. First, the Company's arguments that its legitimate expectation was thwarted and that the decision challenged was irrational can only be deployed in proceedings in public law. They are, therefore, only available on judicial review. If the proceedings were ordered to continue as if they had been begun by writ, those arguments would no longer be available to the Company. It may be that that is why the Director of Lands does not wish these proceedings to continue as they are currently constituted. In that connection, it is to be noted that when proceedings were brought by the Company in 1991 by originating summons to challenge the legality of the Director of Lands' refusal to renew the leases in 1990, the Director of Lands issued a summons (which was never adjudicated upon because the proceedings were compromised) seeking to strike out the originating summons as amounting to an abuse of process in that the proceedings should have been begun by way of judicial review. I accept that some of the declarations sought in the originating summons may have been more appropriate to relief available on judicial review, but it is ironic that the Director of Lands is now seeking to deny the Company the only forum in which the Company's present complaints of legitimate expectation and irrationality can be ventilated, when that was the forum in which the Director of Lands in 1991 wanted the issues then between the parties to be decided.

12. Having said that, though, it is important not to over-emphasize the relevance of the fact that the Company's arguments on legitimate expectation and irrationality can only be deployed in proceedings in public law. That would not be a reason for saying that the issues between the parties raise matters of public law. It works the other way round. It is only if the issues between the parties raise matters of public law that the Company's arguments on legitimate expectation and irrationality are capable of being deployed.

13. Secondly, even if this was a case in which the issues between the parties raised matters of both public and private law, and even if in those circumstances the Court had a discretion whether to permit the proceedings to be continued as if begun by writ, I rather doubt whether I would have exercised my discretion in the way for which Mr. Andrews contended. I accept that there are a number of issues of fact which the dispute between the parties raises, and that they would more conveniently be resolved in an action begun by writ . However, discovery and inspection of documents, and cross-examination of deponents on their affidavits or affirmations, are possible in proceedings for judicial review. Moreover, I doubt whether I would have exercised my discretion in such a way as to prevent the Company from running the arguments on legitimate expectation and irrationality. In that connection, I do not overlook Mr. Andrews' point that findings of fact in favour of the Director of Lands on the issues which would be raised on an action begun by writ would effectively dispose of the Company's arguments on legitimate expectation and irrationality. I am not convinced that that is correct, but even it was, I suspect that I would have taken the view that, all things considered, the flexible nature of modern judicial review would have made it a more appropriate forum for the resolution of the dispute between the parties.

DELAY

14. I can deal with the issue of delay shortly. It must be remembered that the Director of Lands himself delayed notifying the Company of his decision not to renew the leases until only a day or two before they were due to expire. In those circumstances, it is a little rich for the Director of Lands to be complaining that the Company failed to act promptly in bringing these proceedings .

15. The notice of application for leave to apply for judicial review was filed on 28th October 1996. That was just before the three months' time limit ran out. The reason for that was because the Director of Lands was requested to give the reasons for his decision not to grant a renewal of the leases. He declined to do so. It was believed that the only reason why reasons were being sought by the Company was to bolster the proceedings which the Company was going to commence. That may well be right, but it does not mean that the Company was not justified in waiting to see whether reasons were forthcoming. Such reasons as the Director of Lands gave may have given the Company other grounds on which to attack his decision.

16. Mr. Andrews took the point that the Company had decided years ago that if the leases were not renewed, it would issue legal proceedings. Accordingly, it should have been ready to commence those proceedings, say, a month after being notified of the decision. The fact that the Company chose to wait for reasons did not mean that the Company was not guilty of delay. I note those points, but it must be remembered that legal proceedings should not be embarked upon lightly. Whether proceedings should be issued, and what arguments should be run, require careful and mature consideration. In the circumstances of this case, I cannot criticise the Company for wanting to see what the Director of Lands' reasons were before committing its arguments to paper. It was only on 12th October that the Director of Lands finally informed the Company's solicitors that reasons would not be given. To commence the proceedings within three weeks of that was, in my view, sufficiently prompt action for the purposes of Ord. 53 r. 4(1).

CONCLUSION

17. For these reasons, this application to set aside the leave to apply for judicial review must be dismissed. However, before I conclude, I wish to add one thing. Two days were set aside for the hearing of this application. I fear that that was too long. I appreciate that the hearing has gone into a second day, but that may have been a consequence of Parkinson's Law that work expands in direct proportion to the time allotted to it. I have already referred to the fact that, on an application to set aside leave, it is inappropriate to go into the case in greater detail than is necessary to determine the arguability of the substantive claim for judicial review. I do not wish to discourage full argument when that is necessary: after all, arguability can embrace quite complicated considerations. But there is no difference in principle between an application to set aside leave, and an inter partes hearing for the grant of leave. On the latter, the following observation in The Supreme Court Practice 1997, Vol. 1, para. 53/1-14/34 is instructive:

"The test to be applied by the Judge at that inter partes leave hearing should be analogous to the approach adopted in deciding whether to grant leave to appeal against an arbitrator's award...namely: if, taking account of a brief argument on either side, the Judge is satisfied that there is a case fit for further consideration, then he should grant leave."