ORRICO, PHILIPPE AND ANOTHER v. MUNICIPAL SERVICES APPEALS BOARD

HCAL 24/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 24 OF 2014

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DECISION FOR LEAVE TO APPEAL
A COSTS ORDER

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1. The Municipal Services Appeals Board (MSAB), the respondent, seeks leave to appeal from my decision dated 1 December 2014 where I made absolute my order nisi that the MSAB pay the costs of the applicants and ordered that the MSAB pay the costs of the application to vary the order nisi.

2. Leave is required from the court to appeal a costs order.  The test to be applied is whether there are grounds of appeal that have reasonable prospects of success or there is some other reason in the interests of justice why the appeal should be heard.  See my comments in Pfeiffer GMBH v Cheung Hay Kit trading as Sun Wai Construction, unreported, HCA 1369 of 2011, 16 December 2013, at paragraphs 4 and 5.

3. The costs order was made in relation to judicial review proceedings where the applicants successfully reviewed the decision of the MSAB to revoke their liquor licence which had been previously granted by the Liquor Licensing Board (LLB).  In the subject proceedings, the MSAB was the respondent and the LLB was an interested party.  The MSAB took what is referred to as the usual practice and it advised the court that it adopted a neutral stance and would not take active participation in the proceedings and would not be represented at the substantive hearing of the application.  The LLB also took a neutral stance as it was its decision that had been overturned by the MSAB’s decision which was the subject of challenge.  Notwithstanding the position taken by the LLB, it participated in the proceedings and was legally represented at the hearing of the application for the purpose of providing whatever assistance it could to the court in relation to the application.  The LLB was not there to defend the decision of the MSAB but purely to provide assistance to the court given the neutral position it had taken on the issue.

4. I made the costs order against the MSAB because the flawed decision that had been successfully reviewed was that of the MSAB.  In such a situation, costs will normally follow the event.  As is apparent from my decision on the costs order, I had to address what was the relevant principle on the question of costs against a tribunal which neither appears nor participates in a successful application for judicial review against its decision.  It required an examination of the relevant English jurisprudence on this issue and its application and/or adoption in Hong Kong.  

5. As Mr Anthony Ismail correctly postulates, my decision raises a number of questions.  What is the relevant principle to be applied on an issue of costs against a tribunal which neither appears nor participates in a successful application for judicial review against its decision?  In other words, what is the test or principle that should be applied on a question of costs against an inferior court or tribunal in these circumstances.  If the test is as stated in the relevant English authority, what is the true and proper meaning of “flagrant instance of improper behaviour”?  On the basis of that test, was the MSAB, whilst not attending or participating in the proceedings, defending its decision or its decision making process and/or was this a case of “flagrant instance of improper behaviour”?

6. The MSAB in its appeal grounds raises further questions as to whether or not I made errors of law and/or wrongly failed to take into account relevant considerations and/or wrongly took into account irrelevant considerations when exercising my discretion. These are legitimate questions which have been particularised in the grounds themselves.

7. It is clear that my decision raises questions of general principle and it is in the interests of justice for an appeal to be heard. I therefore grant the MSAB leave to appeal by decision.  I grant leave to amend the Notice of Appeal to appropriately include the Decision together with the corrigendum.  The costs of this application will be costs in the cause of the appeal. 

HCAL 24/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 24 OF 2014

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D E C I S I O N

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Introduction

1. On 15 August 2014, I granted the application for judicial review by Philippe Orrico and Nomad Restaurant Management Ltd (the applicants) against the decision of the Municipal Services Appeals Board (MSAB) dated 13 February 2014, revoking the liquor licence granted on 29 October 2013 by the Liquor Licensing Board (LLB) to the applicants. I quashed the decision of the MSAB and remitted the applicants’ appeal to a differently constituted MSAB to be heard together with the residents’ appeal against the grant of the liquor licence by the LLB in accordance with the law and made an order nisi that the costs of the application be awarded to the applicants, to be taxed, if not agreed, such order to become absolute in 14 days.

2. The MSAB, who is the respondent, had not appeared before the court at the hearing on 14 August 2014, whereas the LLB, who is the interested party, had appeared and was represented by counsel.  The LLB took a neutral position on the application.  It noted that its decision was at variance with the MSAB’s decision which was binding on it and that it would provide what assistance it could to the court at the hearing.

3. By way of letters dated 28 and 29 August 2014, from the Department of Justice (representing the LLB) and the Secretary to the MSAB respectively, I was asked which party was responsible for paying the costs of the applicants.  By my judgment, the party whose decision had been successfully reviewed was that of the MSAB, with the LLB taking a neutral position on the application, and accordingly on 8 September 2014, I made an order nisi that the MSAB pay the applicants’ costs.  That set in motion an application by the MSAB to vary the order nisi to “no order as to costs”.  The point raised by the MSAB against the costs order is an important one and concerns whether a successful litigant in judicial review proceedings can obtain, and whether the court can grant, a costs order against the respondent inferior court or tribunal.

Background

4. I will set out a brief account of the procedural history that led to these proceedings.  On 29 October 2013, the LLB granted a liquor licence to the applicants with limited duration and four additional conditions.  The applicants appealed the grant of the licence on these terms and conditions to the MSAB.  There was a cross‑appeal from residents against the grant of the licence by the LLB.  On 17 January 2014, the two appeals were heard together by the MSAB which handed down its decision on 13 February 2014, revoking the grant of the liquor licence with immediate effect.  On 7 March 2014, I granted an ex parte application by the applicants for leave to apply for judicial review of the MSAB’s decision and stayed the decision in the meantime.  The applicants proceeded with the substantive application for judicial review by taking out an originating summons, and on 20 March 2014, all relevant papers, including a copy of my decision, were served on the MSAB and the LLB.  The Secretary to the MSAB informed the court by letter dated 21 March 2014 that the MSAB would adopt a neutral stance and would not take active participation in the proceedings or be represented at the hearing, and that the MSAB undertook to abide by the decision of the court.  I should note at this stage that my decision to grant leave to the applicants set out in detail the grounds of review upon which leave was granted which contained serious allegations and issues in relation to the decision-making process and decision of the MSAB.  The MSAB was therefore on notice of the allegations and issues concerning it at the substantive hearing of the judicial review.

5. The substantive application for judicial review proceeded to hearing on 14 August 2014 with the applicants and the LLB both present and represented by counsel.  As already noted, the LLB as an interested party, took a neutral position in the hearing and provided what assistance it could to the court.  The MSAB as the respondent was neither present nor represented.  Throughout the proceedings the MSAB was and remained the only respondent, and it was only its decision that was the subject of judicial review. 

The Court’s decision

6. I concluded that the grounds for review were made out and I granted the applicants the appropriate relief.  I found that the MSAB had failed to properly consider the two appeals before it and to provide adequate reasons for its decision.

7. It may be appropriate to briefly describe the particular findings I made as it will be relevant to the issue of costs that I have to now decide.  I found that the MSAB did not properly describe or address the nature and circumstances of the locality in which the premises were located and that it considered certain matters without assessment or verification as to their relevance to the premises.  I found that it failed to properly address, if at all, the statutory requirements it was obliged to consider under Regulation 17(2) of the Dutiable Commodities (Liquor) Regulations, Cap 109B.  It is a statutory requirement that the MSAB give reasons in writing for its decisions, setting out its findings of fact with appropriate reference to the evidence or other material on which the findings are based.  I found that the reasons given by the MSAB were totally inadequate as represented by a single paragraph in which no reasoning or reasons were provided. 

8. It was clear on my assessment of the MSAB’s decision that it had made a number of fundamental and improper errors or mistakes and as a result the applicants had been unreasonably and unfairly treated.

The MSAB

9. The MSAB is a statutory body established under and governed by the Municipal Services Appeals Board Ordinance, Cap 220.

10. Section 3 provides that the function of the MSAB is to hear and determine any appeal to it from the Licensing Appeals Board or an administrative decision from which on appeal lies to it under any Ordinance, such as an appeal of a decision of the LLB. The MSAB is an appellate body dealing with appeals against certain government decisions, and is administered by the Administration Wing of the Chief Secretary for Administration’s Office of the Government.

11. Section 16 provides that the Chairman, Vice‑chairman and members of the MSAB have in the performance of their duties under the Ordinance the same privileges and immunities as a judge of the Court of First Instance.  This would mean that individual members of the MSAB would be immunized against any costs order but that the MSAB as a body, would not be.

Principles on costs

12. The question of costs is to be decided by the court in the exercise of its discretion, based on principles founded on rules of reason and justice.[1] The power of the court to award costs in judicial review and other proceedings is derived from section 52A of the High Court Ordinance, Cap 4. Under this section the court has a broad jurisdiction in respect of the question of costs but with the specific limitation that an order for costs cannot be made against a person who is not a party to the proceedings.  The Rules of the High Court address further the entitlement to costs under Order 62, rule 3which reads:

“1. Subject to the provisions of this Order, no party shall be entitled to recover any costs of or incidental to any proceedings from any other party to the proceedings except under an order of the court.

2.  If the court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings (other than interlocutory proceedings), the court shall, subject to this Order, order the costs to follow the event, except when it appears to the court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.”

13. Order 62 rule 5 sets out special matters that may be taken into account by the court in exercising its discretion as to costs, including the underlying objectives set out in Order 1A, rule 1, the conduct of the parties, and whether a party has been wholly or partly successful.

14. In Pfeiffer GmbH v Cheung Hay Kit trading as Sun WaiConstruction,[2] Kwan JA explained that with the advent of the Civil Justice Reform there was a move away from the more restrictive approach on the question of costs that had been adopted in the past.  She went on to explain at paragraph 20 that:

“Although the general rule that costs will follow the event still plays a significant part, it is but a starting point from which the court is more ready to depart, mindful that too robust an application of the general rule encourages litigants to increase the costs of litigation since it discourages them from being selective as to the points they take. And it is no longer necessary for a party to have acted unreasonable or improperly to be deprived of his costs of a particular issue on which he has failed.”

15. As to the conduct of the parties on the question of costs Kwan JA adopted and set out the relevant part of Order 62, rule 5 where she said at paragraph 21:

“Under Order 62 rule 5(1)(e), the court may take into account ‘the conduct of all the parties’. Rule 5(2) provides that ‘conduct’ for this purpose includes ‘(a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; (b) the manner in which a party has pursued or defended his case or a particular allegation or issue; (c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and (d) conduct before, as well as during, the proceedings.’ ”

16. Kwan JA emphasised the fact that the trial judge was in the best position to decide how his or her discretion should be exercised in the light of the evidence adduced at the trial and the litigation conduct of the parties and she reaffirmed the principle that a court should eschew a mechanistic or restrictive approach in exercising its discretion as to costs in view of the amendments to the relevant provisions in the Rules of the High Court.[3]  As mandated by the Civil Justice Reform and the consequential amendments to the Rules of the High Court, a court is obliged to give effect to the underlying objectives in Order 1A which place emphasis on the fair, prompt and efficient handling and disposal of cases before the courts but recognising that the primary aim of the courts in exercising their powers is “to secure the just resolution of disputes in accordance with the substantive rights of the parties”.

17. In Hong Kong Civil Procedure, 2015,[4] it is stated that in England and Wales it will only be in exceptional cases that a party to a judicial review application who neither appears nor contests the application will be required to pay costs[5] and that no order for costs will generally be made against an inferior court or tribunal unless it behaved improperly in a flagrant way or it appeared at the hearing to contest the application being made.  The case of R (Davies) v Birmingham Deputy Coroner[6],(Davies) is cited as authority for this proposition. It is primarily on the basis of this statement of principle that Mr Ismail on behalf of the MSAB submitted that the MSAB is not liable for the applicant’s costs in these proceedings and that the costs order nisi should be varied to “no order as to costs”.

MSAB’s submissions

18. Mr Anthony Ismail argued that there were three reasons for not ordering costs against the MSAB in the exercise of the court’s discretion.  First, the MSAB did not appear and was not represented at the hearing and its errors of law did not constitute “flagrant improper behaviour” as laid down in the test enunciated in R v Liverpool Justices, Ex parte Roberts,[7] (Liverpool Justices).  Secondly, ordering costs against the MSAB would be harsh and/or oppressive and/or unfair because the MSAB followed the usual or normal practice of taking a neutral stance by not actively intervening to defend its decision.  Thirdly, there was no inflexible rule that a successful litigant was entitled to expect to recover his costs from somebody.

(a)   First reason

19. The first reason advanced by Mr Ismail was that in the circumstances of the present case it is the established practice and principle not to award costs against the MSAB.  Mr Ismail relied on English jurisprudence on the issue as to whether costs can be awarded against an inferior court or tribunal in judicial review proceedings and argued that the English practice had been followed in Hong Kong.  The English practice is that although costs are left to the discretion of the court, no order for costs will generally be made against an inferior court or tribunal which neither appears in nor contests a successful application for judicial review against its decision unless the case is exceptional in the sense that the tribunal behaved improperly and in a flagrant way.  He relied on the comments of Lord Parker CJ in Liverpool Justices and Chadwick J in Providence Capital Trustees Ltd v Ayres and Anor,[8] (Providence Capital Trustees) and to the review of this and other authority by Brooke LJ in Davies.  I will deal with the statements of principle in the English cases but before I do, I will set out Mr Ismail’s argument.  He argued that the English practice has been followed in Hong Kong as seen in Inre Lee Shiu‑ting[9] and Lam Ho and Ors v Immigration Tribunal,[10] where Liverpool Justices was applied, and Ming Pao Newspaper Ltd v OATand TELA,[11] (Ming Pao Newspaper) where Davies was applied.

20. Let me first deal with the English cases and the principles that have been stated and the context in which they were made.

21. In Liverpool Justices, Lord Parker CJ, made this statement of principle as to the award of costs against a tribunal:

“So far as costs against the magistrates are concerned, it has been the practice not to grant costs against magistrates or tribunals merely because they have made a mistake in law but only if they have acted improperly, that is to say, perversely or with some disregard for the elementary principles which every court ought to obey, and even then only if it was a flagrant instance. In the present case the court is satisfied that the denial of justice here was a pure mistake and was not a flagrant instance; indeed, counsel has not asked for costs against the magistrates. He asks for costs only against the prosecution. So far as that is concerned, it is the recollection of all the members of this court that the general practice is not to award costs against a party who does not appear to resist an application of this sort. That is not to say that there may not be cases where the court thinks it right to order that party to pay costs if, for instance, he has materially contributed to the error giving rise to the application. Accordingly, following that usual practice, the court in the present case refuses costs.”

22. Lord Parker CJ’s comments are an encapsulation of past statements of principle dating back to the 1940s.  Brooke LJ in Davies, giving the principal judgment of the court, conducted a survey of the case law which he said revealed that the established practice of the High Court for many years was to make no order for costs against an inferior court or tribunal unless it behaved improperly in a flagrant way or unless it appeared at the hearing as a party to the lis to contest the application being made, or declined unreasonably to sign a draft consent order which might obviate the costs of an unnecessary hearing.[12]

23. Brooke LJ identified four issues for consideration which were:

“(i) What is the established practice of the courts when considering whether to make an order for costs against an inferior court or tribunal which takes no part in the proceedings (except, in the case of justices, to exercise their statutory right to file an affidavit with the court in response to the application)?

(ii) What is the established practice of the courts when considering whether to make an order for costs against (or in favour of) an inferior court or tribunal which resists an application actively by way of argument in the proceedings in such a way that it makes itself an active party to the litigation?

(iii) Did the courts adopt an alternative established practice in those cases in which the inferior court or tribunal appeared in the proceedings in order to assist the court neutrally on questions of jurisdiction and procedure and such like but did not make itself an active party to the litigation?

(iv) Whatever the answers to the first three questions, are there any contemporary considerations (including the coming into force of the Civil Procedure Rules (CPR) which should tend to make the courts exercise their discretion as to costs in these cases in a different way from the way in which it was regularly exercised in the past?”[13]

24. He answered these issues as follows:

“(i) The established practice of the courts was to make no order for costs against an inferior court or tribunal which did not appear before it except when there was a flagrant instance of improper behaviour or when the inferior court or tribunal unreasonably declined or neglected to sign a consent order disposing of the proceedings.

(ii) The established practice of the courts was to treat an inferior court or tribunal which resisted an application actively by way of argument in such a way that it made itself an active party to the litigation, as if it was such a party, so that in the normal course of things costs would follow the event.

(iii) If, however, an inferior court or tribunal appeared in the proceedings in order to assist the court neutrally on questions of jurisdiction, procedure, specialist case law and such like, the established practice of the courts was to treat it as a neutral party, so that it would not make an order for costs in its favour or an order for cost against it whatever the outcome of the application.

(iv) There are, however, a number of important considerations which might tend to make the courts exercise their discretion in a different way today in cases in category (iii), above, so that a successful applicant, like Mr Touche, who has to finance his own litigation without external funding, may be fairly compensated out of a source of public funds and not be put to irrecoverable expense in asserting his rights after a coroner (or other inferior tribunal) has gone wrong in law, and there is no other very obvious candidate available to pay his costs.”[14]

25. He however qualified the above with the following comments:

“I do not regard this outcome as at all satisfactory, but it stems from Parliament’s unwillingness to allow a successful applicant to be reimbursed from central funds for the expense to which he has been put when there is no other potential source of public funds available for this purpose.”[15]

26. From Brooke LJ’s survey of the English case law, it is apparent that the decisions were addressing practice and principle that were addressing the legal and administrative frameworks and the development of the law on costs at the particular time and in the particular circumstances of the cases.  It is important to bear this in mind when applying the practice and principle to the local conditions and circumstances in Hong Kong. 

27. I now turn to the Hong Kong cases to address the principles that have been applied or stated on this issue.

28. Lord Parker CJ’s statement of principle was adopted by the Full Court of Hong Kong in In re Lee Shiu‑ting.  It provided that costs would not be granted against tribunals merely because they have made a mistake in law but only if they have acted improperly, that is, perversely or with some disregard for the elementary principles which every court ought to obey and only if it was a flagrant case.  It is important to understand the statement of principle or practice that was propounded by Lord Parker CJ. Although it should be noted that it was made in the context of the legislative framework and the state of affairs them prevailing in England and Wales and that the situation in Hong Kong was different then, and different again now. The difference between the two jurisdictions was to some extent acknowledged and appreciated in In re Lee Shiu‑ting.  In that case the Full Court granted an order of certiorari to quash a disqualification order of a magistrate that had not specified the period of disqualification as required by the relevant statutory provision.  The application had not been opposed by the prosecutor.  The applicant applied for costs not against the magistrate but against the prosecutor.  The court stated its understanding on the issue of costs with respect to a tribunal or the prosecutor as follows:

“… As to the tribunal the rule is that if the tribunal appears and disputes the right of the applicant to an order costs may be awarded against them, but that will be done only where the tribunal has done something which calls for an expression of the Court’s disapproval. As to the prosecutor the general rule is that costs will follow the event unless there are special circumstances to justify some different order, and it has been held that special circumstances exist where an error by the inferior court was not contributed to by the party in whose favour the decision was given. It is possible that the distinction between the tribunal and the prosecutor will not always be as important in Hong Kong as it is in England. …”

29. In the case of a tribunal, as I interpret Lord Parker CJ’s comments, he was not stating that costs should not be awarded against a tribunal, but that the awarding of costs against a tribunal was limited to situations where it had obviously acted perversely or with disregard for the elementary principles which every tribunal ought to obey.  

30. The Shorter Oxford English Dictionary gives the meaning of “flagrant”, in respect of an offence or an offender, as “glaring, notorious, scandalous, blatant”.  From my reading of the cases, it appears “flagrant” is used to mean obvious or blatant.  That would make sense given that the conduct in question has to be “improper”, so therefore it would be tautological to treat the meaning of “flagrant” as being notorious or scandalous.  I take the requirement that such act of the tribunal was “flagrant” to mean that the act was obvious and blatant.  I do not attribute to the requirement that the act be “flagrant” anything more than that the tribunal has acted obviously and blatantly contrary to accepted principle or practice that it should have otherwise complied with and adhered to, and which it ought to have known.  As a consequence, a tribunal has acted unreasonably and unfairly in an obvious and blatant way, where an injustice has been caused.  This in my view constitutes what Lord Parker CJ described as a tribunal having “acted improperly” and therefore it would be open to award costs against it.

31. In re Lee Shiu‑ting, The court cited with approval the statement by Lord Parker CJ as being authority for the rule both as to awarding of costs against a tribunal and the prosecutor and made no order as costs.  However, the court made the point that the distinction between the tribunal and the prosecutor may not be an important distinction in Hong Kong and that seems to suggest that the text here is different.

32. It was in CLP W Ltd v Warner Banks Esp Coroner,[16] (CLP) that the Court of Appeal had to consider the question of awarding costs against the coroner.  In the coronial proceedings in question, the jury had returned a verdict of lack of care which on judicial review was quashed and a previous verdict of death by accident was reinstated.  An application for costs against the coroner was returned by the judge who after an extensive review of the law held that it was only in unusual circumstances that costs would be ordered against those holding public offices such as coroners.  The coroner took the matter on appeal and the issue of costs was the subject of a cross‑appeal.  Mortimer JA (as he then was) gave the judgment of the court and addressed the principle that the judge had applied on the question of costs by noting that:

“… He accepted that only in rare cases will a coroner be ordered to pay the costs unless his behaviour called for strong disapproval. See Jervis on Coroners (1993, 11^th Ed) para 19‑16 at p 348.

If the coroner does appear at the hearing, and loses, then the court has a discretion whether to order the coroner to pay the successful applicant’s costs, even though he acted reasonably. But such an order has only rarely be (sic) made; usually no order is made unless the coroner’s behaviour called for strong disapproval.

This principal followed those developed when considering orders for costs against magistrates in England. Its origin, no doubt, was that such people were rendering valuable public service for little or no reward and that costs often in times past would fall to be paid personally by the magistrate or coroner.

Those circumstances do not apply in Hong Kong. Coroners and magistrates are also rendering valuable service but they are fully paid public servants who appear in proceedings represented by the Attorney General and there is no question of them having to pay costs personally.”[17]

33. Mortimer JA went on to point out that:

“When a coroner or a magistrate files an affidavit and does not appear this is one matter relevant for the court’s consideration but here the coroner appeared by counsel and vigorously contested the proceedings below. In these circumstances we see no reason in principle why the court’s discretion to award costs in such cases should be fettered in the way suggested.

Liu J thought himself fettered when he rightly decided that the coroner’s behaviour here did not call for ‘strong disapproval’ (or ‘strong sanction’ as he put it). Clearly had he thought otherwise he could have ordered that costs should follow the event. We think that the judge was wrong to think his discretion was fettered in this way in Hong Kong and for this reason we allowed the cross‑appeal and ordered that CLP should have its costs below.”[18]

34. Mr Ismail relied on the decision of Lam J (as he then was) in Ming Pao Newspaper, where he applied the principles set out in Davies.  However, in the course of his judgment on costs, Lam J found that TELA as the interested party was effectively the respondent in resisting the applications for judicial review.  He said:

“Whilst it may be said that TELA was acting all along in what may quite properly be regarded as the discharge of its public duties in resisting the applications, the same can be said in respect of most respondents to judicial review applications. As far as I am aware, this has never been regarded as a reason for exonerating public authorities from any potential liabilities as to costs when an administrative decision is successfully challenged in judicial review.”[19]

35. He added:

“However, nowadays public authorities should regard it as part of their public duty to participate in judicial review proceedings when an administrative decision is being challenged. If that were so, I see no reason why such duty should not be extended to meet the costs of a successful applicant. After all, judicial review is a manifestation of the rule of law in the context of good public administration.”[20]

36. He noted that the OAT which was the respondent did not appear and indicated that it would abide by the decision of the court, in accordance with the principles set out in Nattrass v The Attorney General[21] and Dato Tan Leong Min v The Insider Dealing Tribunal,[22] (Dato Tan Leong).  He concluded that as TELA discharged its public duty to participate in the judicial review that it should be subject to the potential liability as to costs as it had been the respondent in substance.  The point is what happens when the relevant public authority takes a neutral stance or does not participate in the judicial review because its position is contrary to the position taken by the relevant tribunal and it is the failures or errors of the tribunal that are the subject of the judicial review.  The tribunal, where it is the respondent in substance, takes a neutral stance, knowing that its decision is under serious challenge, must bear the consequences of any costs order.  It is in effect putting it on the applicant to prove its case and for the court to consider and decide the issue.  If the tribunal has committed a serious or gravely wrong why should it not have to pay the price for its conduct?  The awarding of costs against an unsuccessful party is an effective and important means to control and correct the conduct of a litigant both generally and specifically and this is particularly important where the party performs a public or executive function that requires strict adherence to legal principles and practice.  It provides no check mechanism or safeguard for the public when an inferior court or tribunal in the case of having committed a serious or gravely wrong can escape the liability of costs.

37. Mr Ismail in his further submissions addressed the issue by illustrating instances where the courts did not find flagrant improper conduct and did not award costs against the tribunal.  This exercise assumed that in order to award costs against a tribunal that did not participate in the proceedings, the subject of the review involved flagrant improper conduct on the part of the tribunal.

38. The first illustration was the failure to comply or have proper regard to relevant legislation.  He referred to the case of Ming Pao Newspaper to make this point.  However, as pointed out that case involved TELA being the respondent in substance as opposed to the OAT which did not participate in the proceedings.  Costs were nevertheless awarded against TELA.  It was not on the basis as submitted, that Lam J found that the failure by the OAT to comply or have proper regard to relevant legislation, making unsound assumptions and arriving at irrational conclusions were held not to constitute “flagrant improper behaviour”.

39. The second illustration was the failure to give adequate reasons.  He referred to two cases.  One was the English case of R (Viggers) v Pensions Appeal Tribunal,[23] (Viggers) and the other was the Hong Kong case of Law Woon King v Appeal Tribunal (Housing) and The Hong Kong Housing Authority,[24] (Law Woon King).  In Viggers, the court applying the principles in Davies concluded that the case was not one of those exceptional cases where costs should be awarded against the tribunal as it had not attended the hearing and had not sought actively to uphold its decision.  The court found that it was not a flagrant instance of improper behaviour even though involved “a regrettable inadequacy of reasons”.  Costs were nevertheless awarded to the applicants from public funding costs.  In Law Woon King, the court awarded costs against the Housing Authority that had actively opposed the judicial review but not the tribunal that took a neutral stance and had not taken any step in the proceedings.

40. The third illustration was the failure to apply the proper legal test, and to have regard to relevant factors, and the making of an irrational decision.  He referred to the English case of R (Manchester City Council) v Manchester Magistrates’ Court.[25]  The court considered the issue of costs and although did not find that the conduct went as far as being a flagrant instance of improper behaviour, it nevertheless concluded that the conduct was unfortunate, bordering on the discourteous.

41. The fourth illustration was where the behaviour of the tribunal was described as censorious and lamentable and yet it was held not to constitute flagrant improper behaviour.  He relied on the case of R (Broxbourne Borough Council) v North and East Hertfordshire Magistrates Court & Anor.[26]  The court explained that on the question of costs it had wavered and that on a very fine balance concluded that it was not appropriate to award costs against the Justices or the Chairman.

42. All that these cases really illustrate is that the application of whether an inferior court or tribunal has engaged in flagrant improper behaviour is fact and case specific.

43. Upon this analysis, Mr Ismail argued that there was no flagrant improper conduct in the present case.  He submitted that the MSAB’s errors of law, either individually or collectively, fell short of constituting “flagrant improper conduct”.  He stated that the MSAB was aiming to achieve justice and that it tried its best but unfortunately committed errors in its decision making process.  I disagree with this submission.  From my assessment of the overall conduct of the MSAB in the present case and on my understanding of the test, it constituted flagrant improper behaviour.

(b)    Second reason

44. The second reason advanced by Mr Ismail was that the MSAB followed the usual or normal practice endorsed by the Hong Kong Court of Appeal of taking a neutral stance and not actively intervening to defend its decision.  He referred to Dato Tan Leong where Mortimer VP agreed with the judge below that it was the normal practice for tribunals that are subject to judicial review to take a neutral role and although unusual, it was not wrong for a tribunal to appear. 

45. In Wong Sin Hua (aka Felix Wong) v The Insider Dealing Tribunal,[27] (Wong Sin Hua), Keith JA, sitting as an additional judge of the Court of First Instance, noted that the above observations were obiter dicta and went on to explain:

“In my experience of judicial review both in Hong Kong and in England, it is much more usual for statutory tribunals whose decisions are being challenged by way of judicial review not to appear at the hearing of the application. They leave challenges to their decisions to be opposed by the successful parties before them. The occasions on which they have appeared have been so rare that it is not possible to say whether their normal stance when they do appear is (a) to play a neutral role and to provide the court with such assistance or information as the court requires or (b) to seek to defend their decisions.”

46. Keith JA said that the question is not what usually happens, but what should happen in a particular case.  I agree with his comments. In the present case, the only respondent was the MSAB.  Whilst it stated it took a neutral stance, it did so knowing that the LLB also took a neutral stance and would not defend the MSAB’s decision for the LLB’s decision had been overturned by the MSAB.  It was not, in these circumstances, a situation where it was not defending its decision‑making process or decision.  It was, in my view, to the contrary.  It knew that its decision‑making process and decision was under serious challenge and that the case would have to be proved by the applicants to the courts satisfaction.  It was leaving up to the court to decide.

47. Mr Ismail referred to the comments in Hong Kong Civil Procedure, 2015,[28] in relation to uncontested proceedings where reference was made to the comments of A Cheung J (as he then was) in Kwong Ka Yin, Phyllis v The Solicitors Disciplinary Tribunal.[29]  In that case the Law Society and the Solicitors Disciplinary Tribunal were joined as respondents and the Law Society did not participate in the proceedings for reasons of its own and A Cheung J said “one can only infer that it had no intention to defend the findings and orders of the Tribunal”.  He noted that the applicant still had to establish her case to the satisfaction of the Court even though her application was effectively unopposed.  In that case, the Law Society was removed as a respondent and the Tribunal took a neutral stance in the proceedings.  A Cheung J cited Dato Tan Leong for the proposition that the normal practice is for a tribunal to take a neutral role when its decisions‑making process is challenged in judicial review proceedings.  In that case, Mortimer VP accepted that it was not wrong for the Tribunal to appear as a party but it was unusual, and having brought the appeal the Tribunal’s members put themselves personally at risk in costs which was undesirable even if they were indemnified.  The Court of Appeal dismissed the appeal and awarded costs against the Tribunal.  Admittedly, that was an instance where the tribunals had actively participated in the judicial review proceedings.  It does, however beg the question why is there different treatment between a tribunal that actively participates in the judicial review proceedings and one that does not?  In my view, there would be instances, and this is one of them, where the inferior court or tribunal by the nature of the challenge of its decision‑making process, and the stance it has taken, which amounts to standing by its decision and leaving it for the court to decide the matters under challenged. 

48. Mr Ismail argued that it would be harsh and/or oppressive for the courts to tell the MSAB that it should in practice not actively intervene to defend its decision and, at the same time, to order it to pay costs if, without it having had an opportunity of defending its decision, it holds the decision to be bad in law.  He lifted these remarks from the comments of Wilcox J in Our Town FM Pty Ltd v Australian Broadcasting Tribunal (No 3),[30] where he said:

“At one time it was considered to be a proper course for the tribunal actively to participate in the argument upon judicial review of its rulings and decisions. However, in R v Australian Broadcasting Tribunal; Ex parte Hardiman (1980) 144 CLR 13 at 35 6, 29 ALR 289, the High Court of Australia stated, in emphatic terms, that it would not normally be a proper course for the tribunal to enter the lists as a protagonist in defence of a decision which it had made upon a licence application. Since that date, so far as I am aware, the tribunal has consistently followed the practice of confining itself, upon such occasions, to putting such factual material before the court as has been thought necessary to enable the court to understand what had occurred, and to assisting the court by submissions – for example, as to the relevant provisions of the Act – but without taking an adversarial position. In other words, in compliance with the precept laid down in the High Court, the tribunal has desisted from putting active argument to support its decisions under challenge. In some respects the tribunal’s position, when judicial review occurs, is not unlike that of a court whose decision is attacked upon appeal. In such a case, of course, the court takes no part in the appeal, the course of which, in terms of argument, depends upon the participation of the parties who have a personal interest in the result.

Although there is no question that the court has power, notwithstanding the matters to which I have referred, in disposing of an application under the Administrative Decisions (Judicial Review) Act 1977 to order the tribunal to pay costs, I think that the circumscribed role of the tribunal is a matter to be taken into account in exercising the discretion as to costs.  It seems to me somewhat hard for the courts at the one time to tell the tribunal that it should not actively intervene to defend its decisions and, at the same time, to order the tribunal to pay costs if, without its having had an opportunity of defending a decision, the decision is held to be bad in law.  I would not wish to prescribe any categorical rule, but I indicate my opinion that only in an unusual case should the court order that the tribunal pay costs, where there are contending applicants for a licence who have been the parties actively debating the matter before the court.  I say this, of course, notwithstanding the fact that, in the particular case, the court might hold that the tribunal fell into error and thus, like an inferior court whose decision is reversed on appeal, that it was, in one sense, the cause of the litigation occurring.”

49. Wilcox J made it abundantly clear that he was addressing a specific direction from the High Court of Australia but nevertheless made it clear that he did not wish to prescribe any categorical rule and that it would only be in an unusual case that the court would order the tribunal pay costs.  Even in those circumstances, Wilcox J was still allowing for the situation where costs could be awarded against the tribunal, albeit only in an unusual case. 

50. At this juncture it is worthwhile noting, that an inferior court or tribunal’s decision is generally dealt with on appeal or review on the basis of the contents of its decision and the record of proceedings.  It is then a question on appeal or review, to examine the decision or the proceedings to ascertain whether there has been any error in law or in fact or failure to adhere to any relevant legal principles or law, resulting in any miscarriage of justice or unjust or unreasonable treatment. It is for this reason, primarily, as I understand it, that an inferior court or tribunal is not encouraged to actively participate in proceedings where its decision is the subject of challenge.

51. Mr Ismail also argued that it would be harsh and/or oppressive and/or unfair to award costs against the MSAB for the additional reason that it was unable to take any steps to avoid the costs incurred by the applicants.  He submitted that the MSAB followed the usual or normal practice of not taking steps to defend its decision and that it had no choice whether or not to be named as a respondent and no power under its Ordinance once so named, to review and set aside its own decision so as to avoid the need for the judicial review to proceed. 

52. Mr Ismail relied on the statement of Chadwick J (as he then was) in Providence Capitol Trustees, who applying the stated principles said:

“It seems to me that it would be oppressive to make an order for costs against the Pensions Ombudsman in circumstances where his determination has been overturned on appeal but where he has not made himself a party to the lis by appearing at the appeal or taking steps to defend his determination. It would be oppressive because the Ombudsman has no choice whether or not to be named as a respondent and no power, once named as a respondent, to set aside his own order so as to avoid the need for the appeal proceeding. He is necessarily a party and, whether or not on further consideration he comes to the conclusion that his determination was wrong, there is nothing that he can do to prevent the appeal from proceeding. To visit a party with an order for costs in circumstances in which he is unable to take any steps to avoid the costs incurred on the appeal seems to me to be oppressive and unfair.”

53. It seems to me to be equally oppressive and unfair that a successful applicant is denied his costs through no fault of his own.  Simply because the decision‑maker is an inferior court or tribunal that has decided to take a neutral stance and not participate in the proceedings, but leaving it up to the applicant to prove his case and for the court to decide on it.  I see no reason why in those circumstances where the court has concluded that the decision was seriously flawed that costs should not follow the event. 

(c)   Third reason

54. The third reason advanced by Mr Ismail was that there is no inflexible rule that a successful litigant is entitled to expect to recover his costs from somebody, even though the applicants “comprise a small enterprise” and “have expended substantial funds to litigate this matter” in these proceedings.  He relied on Lord Bridge’s comments in Steele Ford & Newton (a firm) v Crown Prosecution Service.[31]  He said:

“I share with the Court of Appeal the view, which is no doubt held by every judge brought up in the English system, that it is just for a successful litigant, and perhaps a fortiori a successful appellant, to be able to recover his costs from someone. But unfortunately it is not always so. From 1949 to 1964 unassisted parties who were successful in litigation against assisted parties under the Legal Aid Act 1949 could normally recover little, if any, of their costs from the assisted party and nothing from public funds. This was widely felt to be unjust. But it was not until the Legal Aid Act 1964 that the injustice was partially remedied and even under that Act and its current successor, the Legal Aid Act 1988, the successful unassisted party can rarely recover costs incurred at first instance from public funds and his right to do so in respect of appellate cost is strictly controlled and defined by the statue.

Again, there are regrettably instances which occur through no fault of either party where costs are incurred of an abortive trial leading to an unopposed appeal and an order for a retrial.  Even if the responsibility for these wasted costs is that of the court and no one else, they cannot be recovered from public funds.  To take yet another example, it is relatively commonplace for a party who is the victim of a misjudgement by an inferior court or tribunal to have to seek relief by an application for judicial review in circumstances where the Divisional Court cannot hold either another party or the inferior tribunal itself liable in costs and there is no power to award costs from public funds.”

55. It should be appreciated that in this instance, Lord Bridge was addressing the issue as to the power to award costs from public funds.  He went on to describe his concern on the inability of a successful applicant receiving his costs.  He said:

“… but I hope I said enough to explain why I cannot attribute to the legislature any general willingness to provide the kind of publicly funded safety net which the judiciary would like to see in respect of costs necessarily and properly incurred by a litigant and not otherwise recoverable. It is for this reason that I find it impossible to say that whenever the legislature gives a right of appeal, whether in civil or criminal proceedings, in circumstances where a successful appellant may be unable to recover his costs from any other party, that affords a sufficient ground to imply a term enabling the court to order the costs to be paid out of public funds.”[32]

56. Mr Ismail argued that the present case falls into the classic situation where costs cannot be recovered by an applicant upon a successful review for the reason that the LLB cannot be held liable for costs as it took a neutral stance because its decision was at variance with the MSAB’s decision, and the applicants whilst victims of a misjudgment by MSAB, it was not as a result of “flagrant improper conduct”, and there was no power to award costs for the applicants from public funds.

Discussion

57. Whilst Mr Ismail has very ably argued the case against an order for the MSAB to pay the applicants’ costs, I cannot agree for three main reasons. 

58. First, the justice of the situation warrants that the MSAB pay the applicants’ costs and it would be unjust not to do so.  As I explained earlier, I concluded that the MSAB had made a number of fundamental and improper errors and mistakes and as a result the applicants had been unreasonably and unfairly treated.  And in my view they are clearly entitled to their costs.  The circumstances of this case are unusual in that the LLB took a neutral stance in the judicial review proceedings because its decision had been overturned by the MSAB.  It purely played the role of an interested party and did not seek to defend the decision of the MSAB.  As the MSAB was the respondent and it was its decision that was successfully challenged, it should therefore bear the costs of the applicants. 

59. Secondly, a careful analysis of the past practice and statement of principles, in particular in Hong Kong, do not go as far as suggested and in any event have to be reassessed and formulated in the modern context against the reforms and amendments to the provisions on costs and the relevant principles and law that has developed in relation to judicial review proceedings, with particular reference to the legal and administrative framework of the MSAB and the particular circumstances of this case. 

60. Thirdly, even if the principle as suggested applies, it is not satisfied in the circumstances of this case.  I consider on the material before me, that the MSAB had engaged in flagrant improper conduct during the decision‑making process and by its decision.  It was clear to me having viewed the material as a whole that the MSAB had taken a very superficial approach to the matters under appeal and seriously erred in addressing factual issues and statutory requirements.  The most serious of all was the complete absence of proper and adequate reasoning or reasons for its decision to revoke the liquor licence of the applicants with immediate effect.  I found that the applicants had been unfairly and unreasonably treated by the MSAB.

61. When an inferior court or tribunal takes a neutral stance in the face of a reasonably arguable case challenging its decision‑making process and/or its decision on grounds that constitute a serious error or departure from accepted norms or requirements, and the applicant successfully proves his case to the extent that he has shown he has been treated unreasonably or unfairly, then why should the inferior court or tribunal as the respondent not pay the costs of the applicant?  Why should a party who has incurred legal costs to right a wrong perpetrated by an inferior court or tribunal not be compensated for those costs from the inferior court or tribunal responsible, especially when there is no other party that can be held liable to pay the successful party’s costs?  Is it not harsh and oppressive that a successful party is denied his costs, for the reason it is harsh and oppressive for the inferior court or tribunal to pay those costs?  The logic and reasoning of this proposition completely escapes me.

62. It is important to note that the relevant cases deal with situations that have changed over time.  What seem to be an initial concern that decision‑makers were not constrained or hindered in their decision‑making responsibilities by the possible award of costs against them in a challenge of their decision, had been appropriately dealt with by indemnifying decision‑makers against any costs order.  In the case of MSAB, the members are given the same privileges and immunities as a judge of the Court of First Instance.  That has not been extended to the body itself and is therefore open to an award of costs in the appropriate circumstances. 

Conclusion

63. For the reasons I have given above, I maintain and make absolute my order that the MSAB pay the applicants’ costs in relation to these proceedings, including this costs application.

HCAL 24/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 24 OF 2014

___________________

___________________

___________________

J U D G M E N T

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Introduction

1.  This is a judicial review of a decision revoking the liquor license of a restaurant. I had previously granted the applicants ex parte leave to apply for judicial review of the decision which I stayed in the meantime. I have decided to grant the judicial review and these are my reasons for doing so.

The licensing history

2.  The 1^st applicant operates a fine dining restaurant through the corporate vehicle of the 2^nd applicant at the ground floor at Shops B to D of Elegance Court, 6-14 Upper Station Street, Sheung Wan, Hong Kong (the premises).  On 13 February 2014, the Municipal Services Appeals Board (the MSAB) revoked the liquor licence of the premises which had been granted by the Liquor Licensing Board (the LLB) on 29 October 2013. It is the decision of the MSAB to revoke the liquor licence that is the subject of the judicial review.

3.  On 10 July 2013, the 1^st applicant applied for a General Restaurant Licence for the premises. A provisional licence was granted and issued on 25 October 2013 for the period up to 24 April 2014. 

4.  On 17 July 2013, the 1^st applicant also applied to the LLB for a liquor licence for the premises. On 29 October 2013, the LLB considered the application in an open hearing. There was strong objection from local residents against the granting of the liquor licence whose general grounds of objection were that the surrounding locality of the premises was primarily residential and that the premises were not suitable as a licensed restaurant; that the operation of a licensed restaurant at the premises would generate late night noise and create disturbance to local residents; and that granting the liquor licence would encourage the establishment of similar businesses in the area. At the conclusion of the hearing, the LLB granted the liquor licence for the premises upon being satisfied that the 1^st applicant was a fit and proper person to hold a liquor licence, that the premises were suitable for selling or supplying intoxicating liquor and that in all the circumstances the grant of the liquor licence was not contrary to public interest. The LLB decided to issue a 9 month liquor licence so as to monitor the performance of the licensee and the operation of the restaurant at the premises. The following additional licensing conditions were imposed:

“(a) All doors and windows of the premises shall be kept closed between 6:00 p.m. and 9:00 a.m. the following day;

(b) No liquor shall be sold or supplied for consumption on the premises between 10:00 p.m. and 9:00 a.m. the following day;

(c) No liquor shall be consumed on the premises between 11:00 p.m. and 9:00 a.m. the following day;

(d) No music or other sound amplification device or TV shall be played or used on the premises between 10:00 p.m. and 9:00 a.m. the following day; and

(e) The licensee shall with due diligence ensure that liquor sold or supplied is to be consumed on the premises only.”

5.  On 6 November 2013, the applicants appealed to the MSAB against the LLB’s decision to grant a less than full term licence of 9 months and the imposition of additional licensing conditions (a) to (d). On 31 December 2013, various residents also appealed to the MSAB against the LLB’s decision to grant the licence.

6.  On 17 January 2014, the MSAB heard the two appeals together.

7.  On 13 February 2014, the MSAB handed down its written decision revoking the grant of the liquor licence with immediate effect.  The written decision briefly described the background to the two appeals and then gave the following description of the premises and the locality:

“8. The premises, with the area of about 172 square metres, are located on the ground floor of a commercial cum residential building and provided with a separate access. It is only the ground floor for commercial purpose and the upper floors purely residential. In fact, there is no residential units right above the Premises. Above the Premises is the podium for the enjoyment of residents of the upper floors.

9. Upper Station Street (“the Street”) is a very short and narrow street extending into Tai Ping Shan Street at one end and into Hollywood Road at the other end. It is one way traffic but just wide enough for 2 vehicles to pass through together. Other than the Premises, there is another restaurant holding a liquor licence. That restaurant is right at the end of the Street before joining into Tai Ping Shan Street. The Premises is somewhere in the middle of the Street and next to a sitting out area.

10. Shops or offices in the Street trade in ivory items, cosmetic, sausage making, art and design.  These trading activities stop at night, hence the Street would be very quiet at night time.  Across the Tai Ping Shan Street, there is only a take away shop.  At the other end of the Street and across the Hollywood Road there is a food and beverage outlet at No.223-209 of Hollywood Road, but there is no shop opening at night time at the stretch of the road right opposite to the Street.”

8.  At the conclusion of this description, the MSAB stated that it accepted that the street would be very quiet at night time with no commercial activity except for the premises.

9.  The MSAB then disposed of the two appeals by the following single paragraph:

“12. These 2 appeals raise the difficult question of balancing competing interests of residents and businessman. The Appeals Board has given the matter very serious consideration and at the end of the day has come to the conclusion that the Premises is not suitable for selling intoxicating liquor having regard to its location and it is contrary to the public interest to grant liquor licence. In the circumstances, not only the appeal by Mr ORRICO is dismissed, but also the appeal by the residents of Elegance Court and its vicinity is allowed. The liquor licence granted by the LLB is hereby revoked with immediate effect from the date of this decision.”

10.  Accompanying the written decision of the MSAB were notes of hearing which provided a brief overview of the persons in attendance, the appeals and the grounds, the background to the appeals and a brief description of the events at the hearing.

11.  Because the premises had been granted a provisional General Restaurant Licence until 24 April 2014, the liquor licence was also issued until that date. On 30 June 2014, a full General Restaurant Licence was issued for the premises. As a result, a fresh liquor licence was issued from the date of issue of the full licence to 28 July 2014, being the date of expiry of the 9 months licence period granted by the LLB. In the intervening period on 8 July 2014, the applicants, at the instigation of the LLB, applied for a renewal of the licence which is pending the outcome of these judicial review proceedings. By this Court’s order of 7 March 2014, the MSAB’s decision was stayed and this kept in effect the conditional liquor licence granted by the LLB on 29 October 2013.

12.  As I have just explained the original liquor licence expired on 28 July 2014 but the applicants’ appeal disputing the licence’s 9 months duration and the 4 additional conditions remain unresolved. Even after this hearing, the matter will be referred back to the MSAB to decide on the two appeals in relation to the original grant of the licence. It will be some time before the dispute over this licence is finally resolved. Clearly events have overtaken the applicants’ dispute with the original licence without resolution. I am informed by an officer of the secretariat of the LLB in an affirmation filed with the Court that the renewal of the applicants’ licence is likely to meet objection and a tentative date has been fixed for an open hearing on 16 September 2014. In other words, the process in relation to this liquor licence is likely to start all over again. I will say more about this matter later on in my judgment.

13.  I was also informed by the officer that: "By letter dated 9 July 2014, the LLB informed the 1^st Applicant that the Police has recommended that additional licensing condition (d) be amended to "No sound amplification device or TV shall be switched on and no music shall be played on the premises between 10.00 p.m. and 9.00 a.m. the following day. " and that if he does not accept the additional licensing conditions, the LLB would conduct an open hearing to hear his application." By letter dated 18 July 2014, the 1^st applicant accepted the additional licensing condition.

14.  Two observations I should make about what has taken place. First, the LLB is an independent and impartial licensing body that should make up its own mind as to whether or not licence conditions should be imposed. The licence condition is a recommendation from the Police and should be treated as such. Here the LLB has put an ultimatum to the 1^st applicant that if he does not accept a condition recommended by the Police the renewal application will be dealt with in an open hearing. Secondly, the new condition is basically the same as the previous condition but slightly reworded. I fail to see the purpose of the amendment and what it seeks to achieve. The imposition of conditions on a licence requires full and proper consideration. They should be imposed for a purpose and for good reason, and only after appropriate consideration of the issues and circumstances. They should never be imposed for the sake of it.

The licensing system

15.  The sale and consumption of liquor on premises is regulated through a licensing system administered by the LLB under the Dutiable Commodities (Liquor) Regulations, Cap 109B. See Sabinano II Marcel R v MSAB [2014] HKCU 538. A person seeking a new liquor licence, or an amendment to or renewal of a current liquor licence is required to make application to the LLB. In the case of an application for a new licence, the LLB may refuse it, or grant it without conditions or with such conditions as it thinks fit. Once granted a licence is normally valid for a period of one year. The LLB’s discretion to grant a liquor licence is subject to the limitations under regulation 17(2) which provides that it cannot grant a licence unless it is satisfied that the applicant is a fit and proper person to hold the licence; that the premises are suitable for selling or supplying intoxicating liquor, having regard to the location and structure of the premises and the fire safety and hygienic conditions in the premises; and that in all the circumstances the grant of the licence is not contrary to the public interest.

16.  The statutory requirements provide an important guide to the LLB in the discharge of its responsibilities under the Regulations in the processing of a new or current liquor licence. The LLB is obliged in every case, at least two weeks prior to considering an application, to cause it to be advertised in such manner as it may decide appropriate. The purpose of the advertisement is to give notice of the application to the public at large and for any affected or interested party to make representations in relation to it. The public interest and the views of the public play an important role in the consideration of an application for a liquor licence. In processing an application for a liquor licence, the LLB also seeks the views of relevant bodies or authorities, such as the Police and the relevant District Office.

17.  The discretionary power of the LLB must be exercised in accordance with the objects and the policy of the Regulations, and whilst the discretion to grant a licence is wide it is limited by the provision that the licence cannot be granted unless the LLB is satisfied of the statutory requirements under regulation 17(2). When the LLB makes a decision in relation to an application, it must provide written reasons for it to the applicant and to any person or body that has expressed an interest in the application. Under regulation 17(5) there is a right to appeal the LLB's decision within 28 days after the date formal notice of the LLB's decision has been given which can only be exercised by the applicant or 20 or more persons residing within a radius of 400 metres from the premises. It is important to note that the only third-party right of appeal is given to 20 or more local residents.

18.  An appeal of a decision by the LLB is made to the MSAB and is by way of rehearing. Hence the MSAB is required to conduct an independent and impartial determination and to consider the issues afresh. In determining an appeal, the MSAB may affirm, vary or set aside the LLB's decision and in the latter case it may substitute its own decision. The MSAB must give reasons in writing for its decisions, including its findings on material questions of fact and by reference to evidence or other material on which the findings were based.

Some comments about the licensing system

19.  At this juncture, it is appropriate that I make some comments about the licensing system for licensed premises. When one stands back and looks at the system in place, it is understandable why it has been criticised by both applicants and objectors alike. If a commercial operator wishes to establish a licensed restaurant or bar he needs to apply for a restaurant licence which in most circumstances will be for a General Restaurant Licence or a Light Refreshment Restaurant Licence. The application is made to the Food and Environmental Hygiene Department (the FEHD). A procedure has been laid down for the processing of restaurant licences. It involves initial screening and vetting of the application after which a Letter of Requirements is issued. This normally sets out a range of works and matters that have to be attended to before a licence is issued. In the guidance notes issued by the FEHD it is suggested, amongst other things, that an applicant should choose premises which are suitable for operating a restaurant business under the Occupation Permit, the Government lease conditions and the relevant statutory plan. A key requirement for a restaurant licence is that under the planning code a restaurant is a permitted use of the premises. This is probably where the first problem arises.

20.  A planning code is formulated setting out a range of permissible and non-permissible uses for an area with varying requirements that have to be satisfied for a particular use to be permitted. To a large extent the objective of a planning code is to reflect the current and future character of an area by providing guidance for the use and development of land within it. It is an important document and there is a legal obligation on public officers and bodies to use approved plans as standards for guidance in the exercise of any powers vested in them. See section 13 of the Town Planning Ordinance, Cap 383.

21.  There will always be underlying tension between the various interests affected by a planning code. This is inevitable and makes decision-making in relation to planning matters an extremely difficult task. The tension that is mainly seen in cases of this type is between commercial and residential uses and this occurs with inner city development where areas are sometimes transformed from predominantly residential to commercial or residential/commercial. A problem may arise when a commercial operator seeks to establish a business in premises which are zoned commercial use but are viewed to be in conflict with the existing residential amenity. To some extent the argument may be more with the planning code rather than with the commercial operator. Thus the first problem is with the planning code and highlights the importance of public consultation and participation in the formulation of the planning and zoning codes. But once formulated and approved, a planning code is intended to provide guidance and direction for the future character and development of an area.

22.  As I previously noted, an application for a restaurant licence is made to the FEHD and is regulated by the Director of the FEHD under the Public Health and Municipal Services Ordinance, Cap 132. The Director operates a provisional licensing system where a provisional licence is issued to premises, which is valid for six months, in order to satisfy a list of requirements under the Letter of Requirements, including all essential health, building and fire safety requirements for a full licence. In satisfying the requirements, a commercial operator would most likely have to expend substantial funds in property holding charges and refurbishment costs for the establishment of a restaurant. The obtaining of a liquor licence is by way of a separate application from the LLB.

23.  It seems to be the practice that once the requirements have been satisfied, the FEHD will grant a full restaurant licence with no restriction on operating hours. At this stage, there appears to be little if any public consultation or participation in the decision-making process to grant the restaurant licence. The commercial operator has committed himself to the establishment of a licensed restaurant by expending substantial funds to satisfy the requirements for the restaurant licence while at the same time making a separate application for a liquor licence. The second problem is with the separate restaurant licence process where the commercial operator has expended substantial funds to satisfy the licensing requirements with little or no objection to the grant of the restaurant licence.

24.  A person seeking a new liquor licence, or an amendment to or renewal of a current liquor licence is required to make application to the LLB. In the case of a new licence, the LLB may refuse, or grant it without conditions or with such conditions as it thinks fit. A licence is valid for a period of one year, although the LLB may issue it for a lesser period. The LLB cannot grant a liquor licence unless it is satisfied that the applicant is a fit and proper person to hold the licence; that the premises are suitable for selling or supplying intoxicating liquor, having regard to the location and structure of the premises and the fire safety and hygienic conditions in the premises; and that in all the circumstances the grant of the licence is not contrary to the public interest. Some of these requirements would have been satisfied in order to obtain the restaurant licence. However, by this stage, the issues tend to be whether the premises are suitable for the selling of intoxicating liquor and whether it is contrary to the public interest to grant the licence.

25.  The application for a liquor licence is a public exercise and understandably so. The LLB is obliged in every case to ensure that the application is advertised for the purpose of giving notice of it to any affected or interested person that may want to express an interest in the application. The LLB would also request a report from the Police and the District Office on the suitability of the application. It is at this stage that third-party objection is usually made against the licensed restaurant and invariably by local residents. This brings about the third problem. The commercial operator has by this stage committed himself to the establishment of a licensed restaurant at the premises without knowing or appreciating the likelihood and nature of any objection to it. It then becomes a costly and protracted exercise to be eventually resolved through the processes established to deal with the licence application.

26.  There are three observations I would make about the processes that are in place. First, a liquor licence is required to be renewed every year and could involve the applicant in litigation on each occasion. Secondly, the appeal processes take too long to resolve disputes over the grant of and conditions to a liquor licence. Sometimes decisions on appeal are not followed by the licensing body. There have been occasions when conditions have been removed on appeal and then reinstated on the renewal of the licence. See McGettigan and Anor v MSAB and Anor, HCAL 168/2013, 5 December 2013, unreported.  Thirdly, the MSAB is not a permanent appellant body made up of permanent judicial officers. Administrative appeals in other established common law jurisdictions are handled by an independent and permanent appellant body with permanent judicial officers establishing a body of relevant law and legal principles. Compare with the Administrative Appeals Board Ordinance, Cap 442.

27.  Overall the system in place would benefit from reform by providing greater certainty and finality as to the appropriateness and viability of a licensed establishment at particular premises.

The grounds of judicial review

28.  There are five grounds of review relied upon to quash the MSAB’s decision.

Ground 1

29.  In the first ground of review it is complained that the MSAB took into account irrelevant considerations by the excessive use of unsupported and unsubstantiated objections, in that (i) it received and accepted comments or objections from persons who had not established that they were, or representatives of, nearby residents of the premises; and (ii) it incorrectly perceived and recorded the commercial activities in the locality, and failed to appreciate in particular that there were other licensed premises in the same street.  

26.       It is submitted by the applicants that the MSAB was required to make its decision addressing each of the criteria under regulation 17(2) based on relevant and accurate factual circumstances. It is complained that the MSAB wrongly took into account two matters that appeared to play a significant part in arriving at its decision.

30.  The first matter relates to the residents’ objections. The applicants argued that the MSAB wrongly took into account, or wrongly gave weight to, evidence from persons who had not established that they were local residents, being residents who live within 400 metres of the premises, or that they would be affected by the operation of a licensed restaurant at the premises. The applicants also argued that the MSAB wrongly considered submissions from persons who purportedly represented local residents without establishing that they were authorised to do so. It is submitted that such representatives were heard in error by the MSAB.

31.  The selling and consumption of intoxicating liquor on premises is a matter of public concern and clearly an application for a liquor licence may involve or concern a variety of interests. This will no doubt include the residents and other persons in proximity to the proposed licensed premises. It is enough for a person to show an interest in the application to take part in the process as to whether or not a liquor licence should be granted. It is fundamental that any tribunal of fact is obliged to properly consider and evaluate the information and material submitted to it, and to act only on information and material that is relevant and reliable.

32.  The right of appeal is restricted. As I have already mentioned, under regulation 17(5), the only persons that can appeal the decisionof the LLB to the MSAB are the applicant or "20 or more persons residing within a radius of 400 metres of the premises." Accordingly, the MSAB should ensure that an appeal has been properly brought as required by law. It is not certain whether or not the MSAB had done so. It should have satisfied itself that the resident appellant had met this requirement and that any representative was properly authorised by the appellant, being 20 or more local residents. Each person had to be residing within a radius of 400 metres of the premises.  This is a limitation that has been imposed by the legislature.

33.  It is also submitted by the applicants that the MSAB did not properly evaluate or scrutinise the representations made which they claimed were bare assertions without any credible supporting evidence.

34.  The applicants made the point that the restaurant had been selling liquor under the current licence for a period of three months with no complaints or adverse comments having been made about its operation to the relevant authorities. Another point that was made was that the premises had been granted a General Restaurant Licence with no conditions or a limitation to its operating hours. If not for the obtaining of a liquor licence, there were no restrictions on its operating hours as a restaurant. This highlights the problem I mentioned before about the two separate licence applications.

35.  Mr Halkes for the applicants argued that the objections from the residents were in some instances couched in extreme and general language.  In the notes of hearing a summary of the objections was listed which included complaints about “…potential environmental hygiene problem that food wastes, vomits, cigarette ends and broken glasses could be seen everywhere; public order problem that drunkards or patrons might disturb residents and women; vehicle-pedestrian conflicts that many cars parked along the street; street obstruction caused by drunkards and impact on the students going to the schools in the vicinity”.  He submitted these were unsubstantiated complaints and referred to the fact that no complaints or objections concerning the restaurant were received by the relevant authorities during the 3 months prior to the hearing when the restaurant was selling liquor on the premises. This was confirmed in the appeal hearing before the MSAB. 

36.  The second matter relates to the MSAB’s finding that the street in which the restaurant is located "would be very quiet at night time with no commercial activity, but for the premises." The applicants took issue with this description which they said was factually inaccurate and listed various commercial outlets located in the street, including other licensed premises. They also made the point that the MSAB by focusing on the state and manner of the street did not address the statutory criteria as to whether the premises were suitable for the selling of liquor and whether in all the circumstances the grant of the licence was not contrary to the public interest. It also emerged during the hearing of the judicial review that the MSAB was wrong about the location of the restaurant in the street. It was not in the middle of the street but at the bottom end, near the junction with Hollywood Road. This was significant because the location of the premises was close to a busy street and not further up the street which were suggested to be the quiet end.

37.  I find that the MSAB did not properly describe or address the nature and circumstances of the locality in which the premises are located and failed to properly address, if at all, the statutory requirements it was obliged to consider under regulation 17(2).  The latter aspect is apparent throughout my discussion of the grounds of review.

Ground 2

38.  In the second ground of review it is complained that the MSAB failed to give adequate reasons for its decision.  It is provided under section 15 of the Municipal Services Appeals Board Ordinance, Cap 220, that the MSAB “shall give reasons in writing for its decisions, and those reasons shall include its findings on material questions of fact and a reference to the evidence or other material on which those findings were based.”

39.  It is obligatory for the MSAB to give reasons in writing for its decisions, setting out its findings of fact with appropriate reference to the evidence or other material on which the findings are based.

40.  The applicants argued that the MSAB’s decision was materially deficient. They referred to the MSAB’s stated task of addressing the difficult question of "balancing competing interests of residents and businessman" without providing any analysis or explanation as to how or if it struck a balance between these competing interests. The applicants argued that the statutory criteria that had to be addressed were wider than striking a balance between the competing interests of "the residents" on the one hand and "the businessman" on the other. It was, however in my view, a critical issue that had to be addressed and resolved although with other interests and factors that had to be taken into account when addressing the statutory criteria. The main complaint of the applicants is that the MSAB to state that the matter was given "very serious consideration" with nothing further was unsatisfactory. They complained, and rightly in my view, that there was no adequate or discernible reasoning for its decision. The applicants argued that it appeared that the MSAB took a one-sided view of the matter without considering the other interests involved, consisting of the interests of the applicants, the commercial interests and purposes of the locality and the wider interests of the dining public of Hong Kong. The MSAB in addressing the statutory criteria was obliged to explain why the premises were not suitable for the selling of intoxicating liquor as a result of the location and why it was contrary to the public interest to grant the licence. It did not do so.

41.  In Oriental Daily Publisher Ltd v Commissioner for TELA (1997‑1998) 1 HKCFAR 279, the Court of Final Appeal held that a duty to give reasons had to be discharged by giving adequate reasons and what was adequate depended on the context in which the decision maker was operating and the circumstances of the case in question. The Court observed in that case that the reasons should show that the tribunal had addressed the substantial issues before it and why it had come to its decision; that merely reciting statutory guidelines, asserting conclusions and not revealing why the tribunal had come to such conclusions would normally be inadequate; and that reasons might not require great elaboration and might be brief. As the Court observed, the benefits of a tribunal giving reasons were that they imposed an intellectual discipline on the decision maker to appropriately concentrate on the relevant issues and ensure that decisions were made on proper grounds and that they also provided the parties and the wider community a basis for understanding the decision and a reference for future guidance and consistency in decision-making as well as engendering public confidence by demonstrating that the tribunal was functioning properly.

42.  The reasons given by the MSAB were totally inadequate in that none were given. The single paragraph which set out the MSAB’s decision did not contain reasons and can barely be said to have contained conclusions. On this ground alone I would grant the judicial review. A commercial enterprise that had hitherto been allowed to operate was brought to a complete and immediate standstill by a few general and sweeping statements that provided no reasoning or analysis of the issues. It resulted in extreme unfairness to the applicant, but it also resulted in unfairness to all the parties involved in the matter, for they are left with a result, but without an understanding of the issues and arguments from both sides and how they were addressed which would have given them a better understanding and appreciation of their respective cases and maybe brought them closer together in seeking a solution to this dispute. It leaves the distinct impression that the matter was not properly considered.

Ground 3

43.  In the third ground of review it is complained that the MSAB’s decision was inherently inconsistent and irrational in that its concluding description of the locality was incorrect and inconsistent with the description given in its decision.

44.  In one part of its decision it acknowledged that there was another licensed premises in the street but in its concluding remarks stated that there would be no commercial activity in the street other than the premises. It is also complained that its description of the location was based on a misdescription of the street and a lack of regard to the surrounding locality.  I have already addressed this matter and have found that there was a misdescription of the street and the locality.

45.  The fact is that a restaurant operated from the premises and it was a question of whether or not to permit the operators to sell liquor on the premises for consumption. There appears to have been no consideration given to the existing use of the premises or to the suitability of the premises for the sale and consumption of liquor. The applicants complained that the MSAB’s blanket conclusion that the location was very quiet at night and that the premises were not suitable for selling intoxicating liquor having regard to its location evidenced a failure to consider relevant matters and to properly consider the relevant issues, in particular that no complaints had been received by the relevant authorities during its previous three-month operation.

46.  The applicants also make the point that the reference to “night time” was vague and general. It is complained with justification in my view that the MSAB stated that the street was very quiet at night time without identifying when during the night. The applicants queried what was actually meant by this description and whether it included early evening. In any event, the applicants argued that there was a restaurant and cafe that operated a little further up the street which had a liquor licence with operating hours from 9 am to 9 pm. Furthermore they argued that the restaurant operated at lunchtime but no consideration was given to that fact.

Ground 4

47.  In the fourth ground of review it is complained that the MSAB failed to consider and analyse submissions on behalf of the applicants.

48.  There is no discussion in the MSAB’s decision addressing the submissions of the applicants. The only reference to the premises is in a descriptive narrative of the location. The obligation on the MSAB was to give a sufficient analysis and an explanation for its decision to show that it was properly considered and reasoned.

49.  The MSAB heard two appeals. The residents’ appeal sought the revocation of the licence, whereas the applicants’ appeal sought to remove restrictions placed on the licence that had been granted. I can understand the MSAB having decided to allow the residents’ appeal not to go on to address the applicants’ appeal. Once the MSAB had decided to grant the residents appeal by revoking the licence, it was unnecessary in those circumstances to address the applicants’ appeal. However, it was necessary for the MSAB to address the applicants’ arguments against revocation of the licence and to set out its reasons for its decision to revoke the licence.

50.  It is important to bear in mind that the LLB is required to provide to the MSAB a statement together with relevant documents relating to its decision. See section 9(1) (a) and (b) of the Municipal Services Appeals Board Ordinance, Cap 220. It appears it was not considered by the MSAB, or at least there was no indication it was in its decision. The LLB considered that the premises were suitable for the selling and consumption of intoxicating liquor. It placed what it considered appropriate in the circumstances, restrictions on the licence to address any adverse impact on the existing residential amenity.

Ground 5

51.  In the fifth ground of review it is complained that the MSAB failed to act reasonably by the brief and inadequate basis of its decision to revoke the applicants’ licence “having regard to its location”.

52.  The obvious criticism is that this conclusive remark was inadequate as reasons for its decision but the applicants also argued that it was based on a misdescription of the location by the MSAB and that it was unreasonable to limit the decision to location as it did. It is the latter complaint that is highlighted under this ground of review.

53.  It was submitted by Mr Halkes that there had been many instances where liquor licences had been granted by the LLB, albeit with conditions, in relation to premises that were in close proximity to residential buildings and which had been routinely upheld by the MSAB. This may be so, but decisions of this type will be case specific and fact sensitive. The better point that can be made in the circumstances of this case is that no consideration seems to have been given by the MSAB to the imposition of conditions to address any tension between the commercial and residential uses and instead took all or nothing approach based on location without any explanation as to why.

54.  I have already mentioned the importance of the statutory requirements under regulation 17(2). It is provided that the LLB should not grant a liquor licence unless it is satisfied of these requirements. For the purpose of addressing this ground of review it is necessary to set out the relevant wording of the requirements:

“(a) that the applicant is a fit and proper person to hold the licence;

(b) that the premises to which the application relates are suitable for selling or supplying intoxicating liquor, having regard to-

(i) the location and structure of the premises; and

(ii) the fire safety and hygienic conditions in the premises;

 (c) that in all the circumstances the grant of the licence is not contrary to the public interest.”

55.  Mr Halkes argued that location as mentioned under regulation 17(b)(i) is a reference to where the premises are specifically located as opposed to the general location of the premises. He also argued that the issue of the general location of the premises was a matter that was caught by the public interest requirement under regulation 17(c). I disagree. In my view the issue of location is an important consideration as to whether or not a liquor licence should be granted for the premises and that is why it is specifically referred to under regulation 17(b)(i). It was not meant to be given the narrow scope as Mr Halkes would seek to impose. The word location in the context of the statutory requirement is meant to cover the general location of the premises, in particular the site, position and place of the premises.

56.  In any event, I have found that the MSAB had incorrectly described the location and had not adequately reasoned on what basis the location warranted the revocation of the licence.

Findings

57.  I find that the MSAB failed to properly consider the two appeals in this matter and to provide adequate reasons for its decision. In particular, I find that the MSAB:

(i) did not take into account relevant considerations in relation to the premises, such as, the nature and layout of the restaurant, it being a fine dining establishment, its operating hours, its situation and position within the building and the street - above the premises was a podium and on one side were commercial premises and on the other side an open space area;

(ii) took into account irrelevant considerations in that certain matters raised by way of objection appeared to be considered without assessment or verification as to their relevance to the premises, incorrectly described the locality and the location of the premises - the premises were located at the bottom end of the street close to Hollywood Road and there was another licensed premises further up the street which had a liquor licence with operating hours from 9am to 9pm;

(iii) failed to address the statutory requirements under regulation 17(2); and

(iv) failed to provide adequate reasons and based its decision on location and the public interest without any explanation or reasoning.

Conclusion

58.  For the reasons given, I quash the MSAB’s decision to revoke the applicants’ liquor licence and remit the applicants’ appeal to a differently constituted MSAB to hear it together with the residents’ appeal in accordance with the law.

59.  As I previously mentioned there is an issue as to the current status of the applicants’ liquor licence. By my decision in this judgment I have found that the MSAB misdirected itself on the law by not addressing statutory requirements, made material errors of fact and gave inadequate reasons for its decision. I have accordingly quashed the decision of the MSAB and the applicants’ appeal together with the residents’ appeal will now be heard again before a differently constituted MSAB. It is within the power of the MSAB to extend a liquor licence beyond its expiry date or grant an interim liquor licence pending determination of the appeal.  The principles laid down in PCCW-HKT Telephone Ltd v Telecommunication Authority (2005) 8 HKCFAR 337 provide that a power will be implied where it can be shown that it is necessary in the sense of being “reasonably required” for the effective exercise of the statutory jurisdiction expressly conferred on the inferior court or tribunal concerned and the enabling statute does not expressly prohibit such a power.  It is my view that a discretionary power to grant an extension of the liquor licence or an interim liquor licence pending final determination of an appeal is reasonably required for the MSAB’s effective exercise of its power to determine an appeal.  See McGettigan and Anor v MSAB and Anor, HCAL 168/2013, 5 December 2013, unreported, paras 28‑38: Sabinano II Marcel R v MSAB and Anor, HCAL 170/2013, 20 December 2013, unreported, paras 21‑40; Siano, Clare Podsok v LLB, [2012] HKEC 1176; HCAL 97/2012, 20 August 2012, unreported, paras 10-38. 

60.  Part of the court’s supervisory jurisdiction over bodies performing a public function is to take appropriate measures to protect the position of an applicant who has been unfairly treated. This is such a case and the relief sought includes any other order the court thinks fit. Accordingly, I make an order directing the MSAB to either extend the current liquor licence or grant an interim liquor licence in the same terms and conditions as granted to the 1^st applicant by the LLB on 29 October 2013 pending final determination of the applicants’ appeal by the MSAB.

61.  I make an order nisi that the costs of the application be awarded to the applicants, to be taxed if not agreed. The order nisi will become absolute in 14 days.