SECRETARY FOR JUSTICE v. HONG KONG CABLE TELEVISION LTD

cacv 113/2007

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 113 of 2007

(on appeal from HCA NO. 1398 of 2005)

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J U D G M E N T

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Hon Rogers VP:

1.  This was an appeal from a judgment of Saunders J given on 6 February 2007.  The matter before the judge was a claim by the Government for the sum of $1,237,190 together with interest.  The claim was a claim for the balance of what was said to be the royalty due in respect of a subscription licence for television broadcasting.  The judge dismissed the Government’s claim.  At the conclusion of the hearing of this appeal, this court reserved judgment which we now give.

Background

2.  Under the provisions of the Television Ordinance Cap. 52 (“the Television Ordinance”) the defendant had been required to pay a subscription royalty.  Section 41A(1) provided that:

“In addition to any royalty which may be payable under section 41, a subscription television broadcasting licensee and a programme service licensee shall, as regards each of its accounting years, pay to the Government a subscription royalty determined by reference to the subscriptions receivable in respect of that licensee’s television broadcasts, and as regards a particular such year the amount of such subscription royalty shall be determined in accordance with the rate prescribed by regulation made under section 32A.”

3.  There is no dispute in this case that the applicable rate was 7.5% which under section 41A(2) was the maximum rate.  Section 41A(3) provided that section 41(3) to (11) shall apply to the payment of subscription royalty as it applied to the payment of advertising royalty under that section.

4.  The procedure prescribed by section 41(3) was that the royalty should be payable quarterly in respect of the quarters beginning 1 January, 1 April, 1 July and 1 October in any year.  Subsection (5) provided that the amount payable should be remitted to the Director of Accounting Services within 30 days immediately following each quarter in respect of the quarter’s payment.  Subsection (10) dealt with the meaning of accounting year and section 41(10)(c) provided as follows:

“(10)    Each of the following periods shall, for the purposes of this section, be regarded as being an accounting year of a licensee-

……………

(c) in case a licence is surrendered or revoked and the surrender or revocation has effect on a day other than on the first day of an accounting year of the licensee, the period beginning on the commencement of the licensee’s accounting year in which the surrender or revocation, as may be appropriate, has effect and ending immediately before the surrender or revocation, as may be appropriate, has effect.”

5.  The Television Ordinance was repealed by section 44 of the Broadcasting Ordinance Cap. 562 (“the Broadcasting Ordinance”).  Under the provisions of the Broadcasting Ordinance, the system of subscription royalty was abolished.  The transitional provisions were set out in Schedule 8.  For present purposes, the material provision of Schedule 8 was section 8 which reads as follows:

“8. Section 23 of Interpretation and General Clauses Ordinance

(1) Subject to sections 2 to 7 inclusive, section 23 of the Interpretation and General Clauses Ordinance (Cap 1) shall apply to the repeal effected by section 44(1) of this Ordinance.

(2) It is hereby declared that a royalty within the meaning of the repealed Ordinance payable by a licensee (or former licensee) within the meaning of that Ordinance is payable on a pro rata basis in respect of that portion of the licensee’s (or former licensee’s) accounting year which has effluxed before the relevant day, and subsection (1) shall apply accordingly.”

6.  It is thus made explicitly clear that the provisions of section 23 apply.  The relevant part of that section for the purposes of this case is as follows:

“23. The effect of repeal generally

Where an Ordinance repeals in whole or in part any other Ordinance, the repeal shall not-

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(b) affect the previous operation of any Ordinance so repealed or anything duly done or suffered under any Ordinance so repealed;

(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any Ordinance so repealed;

…….”

7.  In summary, this would be a clear indication that the previous provisions which were applicable in respect of subscription royalty would remain applicable.  The relevant day was provided as 7 July 2000.

8.  The dispute in this case turns on the question as to how the subscription royalty should be calculated.  The Government claims that the royalties should be calculated as a percentage of the subscription receivable over the whole of the accounting year of the defendant namely 1 January 2000 to 31 December 2000 reduced in proportion to the period of that year prior to 7 July 2000, namely 188 days to 366.

9.  The defendant, for its part, contends the only relevant period for assessing the subscription royalty was the period up to and including 6 July 2000.  In effect, it contends that the royalty payments for the first 2 quarters of 2000 should be calculated in the usual way and that the period from 1 July to 6 July should be pro rated on the basis of the subscriptions receivable in the third quarter of the year namely the period from 1 July to 31 August.

10.  The judge below considered that the defendant’s contention was correct.  He articulated five reasons.  To a large extent, underlying those reasons was the consideration that if the Government’s argument were accepted the defendant would be paying a subscription royalty based in part on the subscriptions receivable in the period after 6 July 2000 namely at a time when subscription royalty had been abolished.  His reasoning also turned on the way the Television Ordinance and the royalty calculations thereunder had been followed in the past.

11.  On this appeal Mr Ng SC, who appeared for the Government, argued that the reasons articulated by the judge were, in effect, negative reasons.  They did not put forward a positive interpretation of the transitional provisions in the Broadcasting Ordinance, but rather were directed to undermining the Government’s interpretation.  Moreover he criticised paragraph 33 of the judgment which read:

“I am satisfied that the use of the expression “pro rata” in Reg 8(2), is to refer to the time period of days or weeks after an exact quarter, the need for such a provision arising from the fact that the commencement of the BO and the repeal of the TVO took effect on a non-quarter day.”

12.  The point of Mr Ng’s criticism was that whereas section 8 of Schedule 8 refers to an “accounting year”, the interpretation in paragraph 33 of the judgment reduces that to a quarter.

13.  In my view the criticism has force to a point, but the transitional provisions have to be read with their purpose in mind.  The purpose was clearly to keep in force the existing provisions in relation to subscription royalty up until the time when the Television Ordinance was repealed.  Thereafter that royalty would be abolished.  The very purpose of referring to the Interpretation and General Clauses Ordinance was to reinforce that concept.  Although the wording of section 8(2) might have been clearer, it is, in my view, sufficiently clear that the subscription royalty was only payable in respect of that portion of the licensee’s accounting year that had effluxed before 7 July 2000.

14.  The considerations articulated by the judge in the 5 reasons are in my view a useful cross check.  I consider that it is a valid point that the Government’s interpretation would entail that the subscription royalty payable for the period when the Television Ordinance had been in force would be calculated in part on the basis of the period after that Ordinance had been repealed.  That would, indeed, be a strange result.

15.  I do not consider that section 8 of Schedule 8 laid down a new method of calculating the subscription royalty, as was argued.  The purpose of section 8 was to try to maintain the existing status quo for the period prior to the repeal of the Television Ordinance.

16.  I would therefore dismiss this appeal and make an order nisi of costs in favour of the defendant.

Hon Le Pichon JA:

17.  I agree.

Hon Chu J:

18.  I agree.