MAN HING MEDICAL SUPPLIERS (INTERNATIONAL) LTD v. THE DIRECTOR OF HEALTH AND ANOTHER
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HCAL 62/2014
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST
NO 62 OF 2014
_______________
BETWEEN | ||
| MAN HING MEDICAL SUPPLIERS (INTERNATIONAL) LIMITED | Applicant | |
and | ||
| THE DIRECTOR OF HEALTH | 1st Respondent | |
| THE CHINESE MEDICINE COUNCIL OF HONG KONG | 2nd Respondent | |
_______________
| Before: Hon Au J in Court |
| Dates of Hearing: 21 and 22 January 2015 |
| Date of Judgment: 21 May 2015 |
________________________
J U D G M E N T
________________________
A. INTRODUCTION
1. The applicant is a wholesaler of, among others, Chinese medicinal products.
2. In this judicial review, the applicant challenges the various decisions made by the Director of Health (“the Director”) in April 2014 effectively instructing the applicant to recall from the market the products (“the Products”) respectively known as Ryukakusan Direct water free moisturizing throat granular candy (Mint Flavour) and Ryukakusan Direct water free moisturizing throat granular candy (Peach Flavour).
3. The principal challenge raised by the applicant is that the Director does not have any statutory power to issue the recall instructions. This question turns essentially on the proper construction of the relevant statutory provisions under the Chinese Medicine Ordinance (Cap 549) (“the CMO”) and its subsidiary regulations.
4. The Director (the 1st respondent herein) opposes the application and is represented by Mr Raymond Leung SC, leading Mr Jonathan Chang.
5. The 2nd respondent takes a neutral stance and, with the leave of the court, has not taken part in the hearing of the judicial review.
B. BACKGROUND
B1. The CMO
6. As set out in the long title, the CMO is enacted to make provisions for (1) the registration of practitioners in Chinese medicine; (2) the licensing of traders in Chinese medicine; (3) the registration of proprietary Chinese medicine; and (4) other related matters.
B2. The Chinese Medicine Council
7. The Chinese Medicine Council (“the CMC”), the 2nd respondent herein, is a statutory professional regulatory body established under the CMO. It is responsible for the formulation and implementation of the regulatory measures of Chinese medicine. See section 11 of the CMO.
8. The Chinese Medicines Board (“CMB”) is one of the two boards[1] established under the CMC, as the board responsible for regulatory measures regarding proprietary Chinese medicine (“pCm”). The statutory functions of the CMB[2] include the following:
(1) to implement the policy and activity as determined by the CMC, and to provide guidance to the various committees under the CMB;
(2) to approve or reject applications for licences and renewal of licences in respect of Chinese medicine traders, determine licensing requirements, and make exemptions as provided for under the CMO;
(3) to inquire into the conduct of licensed traders of Chinese medicines and to determine the action to be taken against a licensed trader; and
(4) to implement the transitional arrangement for licensing of traders of Chinese medicines and registrations of pCm.
B3. The registration of pCm
9. “pCm” is defined under section 2 of the CMO as any proprietary product:
(1) composed solely of the following active ingredients:
(a) any Chinese herbal medicines; or
(b) any materials of herbal, animal or mineral origin customarily used by the Chinese; or
(c) any medicines and materials referred to in (a) and (b) respectively;
(2) formulated in finished dose form; and
(3) known or claimed to be used for the diagnosis, treatment, prevention or alleviation of any disease, or any symptoms of a disease in human being, or for the regulation of the functional states of the human body.
10. Under section 119 of CMO, all pCms are required to be registered under section 121 before any person can sell, import or possess them. The application for registration shall be made to the CMB. The CMB after taking into account the factors set out under section 122 may approve the registration, with or without conditions. Any persons aggrieved by the CMB’s decision for registration made under section 121 may appeal to the Court of First Instance (see section 141).
11. Further, under section 134, no person shall sell, distribute or possess any pCms as wholesaler unless it has a wholesaler licence in pCm issued by the CMB under section 135. Under section 155, any person who contravenes, among others, sections 119 and 134 commits an offence and is liable to a fine and to imprisonment for two years.
B4. The applicant and the incidents leading to the judicial review
12. The applicant is a wholesaler of Chinese medicinal products. It is also a licensed wholesaler of pCm under the CMO.
13. It is the wholesaler of “Ryukaku San” (龍角散) to be administered with small spoon in the package (“the RS Original”). The RS Original has been registered in Hong Kong as pCm under the CMO by the applicant.
14. From about January 2014, the Products were sold by the applicant in Hong Kong as “candies”.
15. In March 2014, prompted by a complaint made by another trader that the Products had been sold in Hong Kong as unregistered pCm by an on‑line shop, the Department of Health (“the DH”)’s officers carried out investigations with that on‑line shop. During the investigations, the officers were told that the on‑line shop no longer had any of the Products in stock. However, the on‑line shop staff told the officer that the Products were also available in the market elsewhere and were being sold by the applicant in many stores. The DH had obtained samples of the Products from the market to make a preliminary assessment as to whether the Products were pCm. They formed the preliminary view that the Products were.
16. Further prompted by that information obtained from the on‑line shop, on 27 March 2014, the DH’s officers (as inspectors) led by one Mr S Leung (a pharmacist) visited the applicant’s premises to carry out investigation of the Products as authorised by the Director under section 146 of the CMO.
17. At the inspection, the applicant’s director (Mr Chan) confirmed with the inspectors that all the ingredients of the Products were as listed on the Products’ package labels, but Mr Chan also claimed that the Products were not pCm although he was not in a position to produce further evidence on the spot.
18. Mr Leung on the other hand said he noted that the Products’ ingredients as shown on the labels were similar to those of the RS Original, and asked Mr Chan why the applicant did not apply to register the Products also as pCm. Apparently, Mr Chan on the spot could not explain further.
19. Mr Leung then told Mr Chan that, based on the information collected up to that moment, the Products were suspected to be unregistered pCm and proceeded to seize the Products pursuant to section 146(2)(f) of CMO.
20. At the same time, Mr Leung also explained to Mr Chan that the use of unregistered pCm might pose threats to public health as their safety, efficacy, and quality had not been assessed and evaluated. He then told Mr Chan that the applicant was instructed to recall the Products from customers.
21. The inspectors also handed Mr Chan a pro forma form titled “Recall Notice for Chinese Medicine Products” (中藥產品回收通知書). The form was later completed and returned to the DH by the applicant on the same day.
22. Mr Leung further told Mr Chan that the DH needed to issue a public announcement regarding the incident to safeguard public health. Although Mr Chan requested that the publication of the announcement be withheld, Mr Leung refused and explained that it was necessary to do so later on that day as, despite there were no reported cases of adverse reactions from consuming them, the Products might pose health risk as their safety, efficacy, and quality were unproven through the registration process of pCm.
23. The applicant’s legal representative later also arrived at the applicant’s premises and explained to the inspectors that the Products were not pCm. However, he was also not able to produce any evidence on the spot to support that. He also asked the public announcement be withheld but Mr Leung reiterated to him that it was necessary to do so for the above reasons.
24. In the evening on that day, the public announcement was issued via the website of the Government Information Services Department. It was also posted on the websites of the Chinese Medicine Division (“the CMD”) of the DH and the DH. The announcement reads as follows:
“Recall of two unregistered proprietary Chinese medicines
27 March 2014
The Department of Health (DH) today (March 27) instructed a licensed wholesaler of proprietary Chinese medicines (pCms), Man Hing Medical Suppliers (International) Ltd, located at 13/F, So Hong Commercial Building, 41‑47 Jervois Street, Central, Hong Kong, to recall from consumers two suspected unregistered pCms, namely RYUKAKUSANDIRECT Stick Peach Flavor and RYUKAKUSANDIRECT Stick Mint Flavor [ie, the Products].
The appeal followed the DH’s investigation into a complaint related to the above pCms. Preliminary investigation by the DH revealed that both pCms were imported from Japan by Man Hing for sale in Hong Kong and have not been registered with the Chinese Medicine Council of Hong Kong (CMCHK).
‘The use of unregistered pCms may pose threats to public health as their safety, efficacy and quality have not been proven. While the DH’s investigation is ongoing, no related adverse reports have been received so far. Man Hing has set up a hotline at 2544 8005 for related enquiries. The DH will closely monitor the recall.’ a DH spokesman explained.
‘According to Section 119 of the Chinese Medicine Ordinance (Cap 549), no person shall sell, import or possess any pCm unless the pCm is registered. The maximum penalty is $100,000 and two years’ imprisonment. Upon completion of the investigation, the DH will work with the Department of Justice on prosecution matters. The DH will also refer this case to the CMCHK for consideration of possible disciplinary action.’ the spokesman added.
The spokesman urged members of the public who have purchased the unregistered pCms to stop using them immediately and submit the products to the Chinese Medicine Division of the DH on 16/F, AIA Kowloon Tower, Landmark East, 100 How Ming Street, Kwun Tong, during office hours for disposal. They should consult health‑care professionals if they feel unwell.” (emphasis added)
25. Later, the applicant through its solicitors wrote to the DH respectively on 4, 14, and 15 April 2014. In essence, the applicant stated the position that the Products were not pCm but just Japanese herbal candies. It therefore asked the DH to revoke or suspend the instruction to recall and the public announcement and to return the retained Products to the applicant. In support of this, under the letters, the applicant provided supplementary information on the composition of the Products and opinion from two experts saying effectively why the Products were not pCm.
26. After considering this information and the expert opinions from the applicant, the pharmacist (Mr Ng) of the CMD confirmed that the Products fell within the pCm definition. The DH thus found no ground to change its preliminary assessment that the Products were pCm. It therefore informed the applicant by letter on 25 April about the DH’s said position and that there was no basis to revoke or suspend the instruction to recall and the public announcement.
27. As mentioned above, on 6 June 2014, the applicant applied for leave to challenge by way of judicial review the Director’s decisions (“the Decisions”) to (a) issue the instruction to recall on 27 March 2014; (b) issue the public announcement; and (c) refuse to revoke or recall the instruction to recall and to return the retained Products. Leave was granted on papers.
28. In the meantime, the applicant has complied with the instruction to recall and recalled the Products from the market.[3]
C. THIS JUDICIAL REVIEW
C1. Grounds of judicial review
29. In the Form 86, the applicant raises the following grounds of challenge:
(1) The Products are not pCm as defined under the CMO.[4]
(2) Even if the Products are pCm which are unregistered under the CMO:
(a) the Director has no statutory power to issue the instructions to recall;[5] or
(b) the instructions to recall can only be issued if:
(i) the Products are “found to be dangerous, injurious to health, or unfit for human consumption”;[6] or
(ii) there are “existing problems relating to quality, efficacy or safety” of the Product;[7]
and the applicant contended that none of the above conditions was satisfied on the facts of the present case.
(3) In any event, the Decisions are Wednesbury unreasonable in the circumstances of the present case.[8]
30. After leave was granted, the parties have filed substantial evidence, including expert evidence, to prove whether the Products are pCm or not.
31. This led to a hearing on 16 January 2015, where the applicant sought leave (resisted by the Director) to file further expert evidence in response to the Director’s various expert evidence filed. At that hearing, the court raised the question of whether all this evidence was relevant to the judicial review, as firstly this related to evidence not available to the Director at the time of the Decisions, and secondly and in any event, it could not be right that the court was required to decide in a judicial review on conflicting expert evidence as to whether as a matter of fact the Products are pCm. This is particularly so when the Director’s own evidence is that as at 27 March 2014, all she was saying was that, in the DH’s preliminary assessment, there was reasonable basis to suspect that the Products were pCm (see below).
32. As a result, the court decided and directed at that hearing that for this judicial review, the court would not entertain the issue as to whether the Products are in fact pCm, and on that basis, all the expert evidence which came about after the Decisions would not be admitted.
33. In light of the above, in this judicial review, Mr Ho SC (leading Mr Andrew Mak and Ms Prisca Cheung) for the applicant advances essentially two grounds in support of the application.
34. First, leading counsel says the Director’s instruction to recall made on 27 March was unlawful as it was not based on any statutory power conferred on her to do so. As such, the public announcement subsequently made (which was to effectively inform the public that the applicant was instructed by the Director to recall the Products) and the decision made on 25 April to refuse to revoke the instruction are similarly unlawful.
35. Second, even if there was any such power enabling her to issue the instruction, the Decisions are in any event Wednesbury unreasonable in the circumstances of the present context. In gist, it is contended that it was Wednesbury unreasonable for the Director to make the Decisions in light of the facts that, at that time, (a) she had only formed a preliminary view that the Products were suspected to be pCm; and (b) there had not been any adverse reports made on the use of the Products.
36. I will look at these two grounds now.
C2. 1st Ground: Lack of any statutory power for the Director to order recall
37. Mr Ho’s starting position is a simple one: under the CMO, there are no provisions to confer any express power on the Director to issue an instruction to recall against a wholesaler. As such, the Director simply has no statutory power to instruct the applicant to recall the Products from the market. The Decisions are therefore made ultra vires.
38. Mr Leung SC for the Director fairly accepts that there is no express statutory power given to the Director to do so. He however submits that there should be an incidental power implied under section 146(2) and/or section 20(g) (“Regulation 20(g)”) of the Chinese Medicine Regulations (“the Regulations”) for the Director to order recall of products that are reasonably suspected of being a pCm which are unregistered. Moreover, or alternatively, Mr Leung says the Director in any event could, acting on behalf of the CMC or the CMB, instruct the applicant to recall the Products.
C2.1 Applicable principles
39. Before I deal with in detail the parties’ contentions under this ground, it is useful to set out some of the principles governing the implication of statutory power, which are as follows:
(1) The common law permits authorities to undertake tasks that are “reasonably incidental” to the achievement of the purposes of a legislation, provided that they do not contradict any express statutory power: De Smith’s Judicial Review (7th edn), at paragraph 5‑098.
(2) The implications are only legitimate when it is “what is necessarily or properly implied” by the language used in the statue: Chorlton v Lings (1868) LR 4 CP 374, 387, per Willes J.
(3) In this respect:
(a) Whether a particular incidental power is to be implied must be considered in the context of the facts of each case, and that the provisions of the statute which confer and limit functions must be considered and construed: Hazell v Hammersmith Fulham LBC [1992] 2 AC 1, 31D‑E, per Lord Templeman.
(b) A power is not incidental merely because it is convenient or desirable or profitable: Hazell, supra, at 31E.
(c) The implication thus needs to be “necessary” in that it is “reasonably required” for the effective exercise of the power or jurisdiction expressly conferred upon authority: PCCW – HKT Telephone Ltd v Telecommunications Authority (2005) 8 HKCFAR 337 at paragraph 36, per Bohkary PJ, and paragraph 59, per Ribeiro PJ.
(d) Further, if it is a penal enactment, the penalty will not fall to be imposed unless the implication is clear and obvious, especially considered under the principle against doubtful penalisation: Bennion on Statutory Interpretation, p 749.
(e) It may also be improper to imply a power when it imposes onerous burdens: Bennion, supra, at p 466.
40. Bearing these principles in mind, I should now turn to the Director’s arguments for implied power.
C2.2 Whether there is an implied power to order recall under section 146(2)
41. Section 146(2) of the CMO provides relevantly as follows:
“146. Inspection and enforcement of Ordinance
(1) The Director may authorize in writing any public officer to be an inspector for the purpose of enforcing any provisions under this Ordinance and its regulations made under section 161.
(2) Subject to section 147, an inspector authorized under this section shall, for the purpose of enforcing the provisions under this Ordinance and its regulations, have powers—
(a) at all reasonable times to enter and inspect any premises specified in the licence of a Chinese medicines trader where—
(i) the wholesale or retail of any Chinese herbal medicines; or
(ii) the wholesale or manufacturing of any proprietary Chinese medicines,
is carried on;
(b) upon the production of his authority as an inspector, at any time to enter and search any place and to stop, board and search any vessel, vehicle, train or aircraft (other than a ship of war, military aircraft or military vehicle) in which he has reason to suspect that an offence under this Ordinance is being or has been committed;
(c) in any premises or place entered pursuant to paragraph (a) or (b), to seize, remove and detain any article, document or thing which appears to him to be or to contain evidence of an offence against this Ordinance;
(d) to make such examination and inquiry and to do such other things, including the taking, on payment therefor, of samples as may be necessary for the purposes of the inspection;
(e) to seize, remove and detain any Chinese herbal medicines specified in Schedule 1 or 2 which he has reasonable cause to suspect is in the possession of any person in contravention of section 110 or 111;
(f) to seize, remove and detain any proprietary Chinese medicines which he has reasonable cause to suspect is in the possession of any person in contravention of section 119, 134, 143 or 144.
(3) Any person who willfully delays or obstructs an inspector in the exercise of any powers under this section, or refuses without reasonable excuse to allow any sample to be taken in accordance with this section, or fails without reasonable excuse to give any information which he is duly required under this section to give commits an offence.
…”
42. As mentioned above, Mr Leung’s principal submissions are that there should be an implied incidental power under section 146(2)(c) and/or (f) for the Director to order to recall products that are reasonably suspected of being a pCm which are unregistered. Mr Leung contends this is so because, where there is such a product:
(1) That product would appear to an inspector (someone authorised by the Director under section 146) to be an “article” or “thing” to be evidence of an offence under section 119 (being unregistered pCm) (thus coming within section 146(2)(c)).
(2) The inspector would thus also have reasonable cause to suspect that any person having possession of it is in contravention of sections 119 and 134 of the CMO (thus coming within section 146(2)(f)).
(3) The inspector would then have express power under subsections (c) and (f) to “seize, remove and detain” this product.
(4) In that respect, for the effective exercise of that express power to “seize, remove and detain”, it is necessary to also imply a power for the inspector to instruct the wholesaler to recall that product from the market as an effective (but milder) form of seizure, removal and detention of those products. This is so as it would be impracticable to expect and require the inspector to go to every single premises of the wholesaler as well as all the outlets where the wholesaler has supplied the product to seize, remove and detain the product. This is underlined in particular in the context that the CMO is enacted for the protection of public health and safety, and therefore it would be necessary in appropriate occasions to remove the suspected products from the market speedily and efficiently to prevent endangering the public health and safety.
43. With respect to Mr Leung, I am unable to accept these submissions. My reasons are as follows.
44. First, as mentioned above, whether an incidental power should be inferred must be viewed in the context of the express power conferred by the statute on the authority to see whether it (the implied power) is reasonably required for the effective exercise of that express power. In considering whether to imply a power, the court must therefore first construe the statute in question to ascertain the nature and scope of the express power in question.
45. In this respect, I accept Mr Ho’s submissions that the ordinary meaning of the words of the power to “seize, remove and detain” are different in nature from the meaning of “recall”. The former words are related to an active positive act of taking away or taking hold of something from somewhere or someone’s possession. “Recall” however is to demand or request someone to return something. These are in nature two very different acts.
46. In the premises, I am not satisfied that the power to recall can be regarded as reasonably necessary for the exercise of the express power of seizure and removal, since these powers relate to distinctively different nature of acts.
47. Mr Leung’s submissions that the CMO is generally for the protection of public health and safety do not assist him. It is under these objectives that the legislature has decided to confer those express powers set out under section 146(2) to enforce the provisions under the CMO and the Regulations. Those express powers have thus taken into account the underlying objectives of the CMO. The question now the court has to consider is whether it should further imply the contended incidental power for the effective exercise of those express powers. It must therefore focus on the nature of those express powers to decide whether their effective exercise would reasonably require the incidental power as well.
48. For this reason alone, I do not think a power to order recall is reasonably necessary for the effective exercise of the power to seize, remove and detain under section 146(2)(c) and (f).
49. Second, Mr Leung’s submissions that it would be impracticable and inefficient for the inspectors to seize suspected products from every single outlet and premises and thus it is necessary to imply the power to recall amount to no more than effectively saying that it would more convenient and desirable to have the power to recall. This is particularly so when there is no evidence at all to show why it would be ineffective to exercise the power to seize and remove, if there is no power to order recall as well. However, as said by Lord Templeman in Hazell, as a matter of principle the court should not imply a power for reasons of convenience and desirability (see paragraph 39(3)(b) above). Thus, I am also not satisfied that a power to order recall should be implied on this basis, especially when considered in the context (as I have said above) that the nature of the power to seize and remove is different from the power to order recall.
50. Third, insofar as subsection (f) is concerned, it refers to the power to “seize, remove and detain” any “proprietary Chinese medicines” that the inspector has “reasonable cause to suspect is in the possession of any person in contravention of section 119, 134, 143 or 144”. As expressly stated in it, the power is directed to seize “proprietary Chinese medicines”. Thus, it can only be exercised when the inspector has already come to the view that the subject product is a pCm, but not in circumstances where the inspector has reasonable basis to suspect it being a pCm. In the premises, there cannot be in any event any implied power (which is to facilitate the effective exercise of this express power) to order the recall of any products which are only suspected to be pCm, as contended for by the Director.
51. Finally, section 146(3) provides that any persons delaying or obstructing the exercise of powers under section 146 commits an offence (see also section 155). Thus, if the incidental power to order recall is to be implied under this provision, any persons delaying or obstructing the recall would also be committing an offence. In the premises, the court should only imply such a power when it is clear and obvious. For the same reasons as discussed above, I do not think it is clear and obvious in the present context to imply such a power which entails a penal element.
52. In the premises, I do not accept that a power to order recall as contended for by the Director can be implied into section 146(2)(c) and (f).
C2.3 Is there an implied power under Regulation 20(g) to order recall of products reasonably suspected of being a pCm which are unregistered
53. Regulation 20(g) provides as follows:
“20. General duties of holders of wholesaler licenses in proprietary Chinese medicine
A holder of a wholesaler licence proprietary Chinese medicines shall ensure that -
…
(g) a system of control is set up and maintained, which will enable the rapid and, so far as practicable, complete recall of any proprietary Chinese medicine sold or distributed by him in the event of the medicine being found to be dangerous, injurious to health or unfit for human consumption.” (emphasis added)
54. Mr Leung submits that under Regulation 20(g), an express statutory duty to set up recall system is imposed on the licensed wholesaler of pCm. This provision would be entirely superfluous and of no practical use if there is no corresponding power for the Director to order recall against the wholesalers. It would be absurd also to suggest that the legislature sees fit to impose a statutory duty on wholesalers to set up a recall system, when there is no corresponding power to invoke its operation. The incidental power for the Director to order recall of products reasonably suspected of being an unregistered pCm should thus be implied to render an effective operation of the recall system expressly provided for by the regulation. Mr Leung further says, insofar as necessary, Regulation 20(g) should be read together with section 146(2) for the purpose of considering whether such power to order recall should be implied. In other words, the Director’s submissions as to why the power should be implied under section 146(2)(c) and (f) (as explained above) are (says Mr Leung) fortified in light of this statutory duty to set up a recall system imposed on wholesalers.
55. I am also unable to agree with Mr Leung.
56. First, I do not agree that without an implied power for the Director to order recall, Regulation 20(g) is effectively of no useful purpose. It must be noted, as submitted by Mr Ho, that at least part of the purposes of the Regulations are to govern the duties of Chinese medicine traders (including wholesalers) and to lay down good practices to be adopted by them (see Regulations 20(a) to (f)).[9] In this respect, under the Practising Guidelines for Wholesalers of Proprietary Chinese Medicines (“the Practising Guidelines”) (issued by the CMC), the CMB may order any wholesaler to recall products when necessary (see paragraph 6.2(1)).[10] Moreover, under the Practising Guideline and the Recall Guidelines (also issued by the CMC), the wholesaler also has a responsibility to consider on its own whether to voluntarily recall a deficient Chinese medicine product in appropriate situations, such as when it has received complaints about a particular product’s safety or quality. Similarly, under section 124(5) of the CMO,[11] an applicant who has successfully applied to vary the particulars of a registered pCm has a duty to recall or cause to recall the pCm that has been supplied before the variation takes effect.
57. In the premises, a mandatory recall system set up by a wholesaler under Regulation 20(g) would provide the necessary machinery to facilitate an effective recall which has been decided to be carried out voluntarily by the wholesaler, or as ordered by the CMB, or as required under section 124(5). To have a recall system already in place to facilitate any such recall is particularly necessary as it is expressly set out in these Guidelines that the CMB or the wholesaler should consider whether to carry out a recall in the context of, among others, protecting the public health.[12]
58. Thus, given the CMB’s power to order a recall, and the wholesaler’s own professional responsibility to voluntarily carry out a recall in the circumstances raising concern of product safety and quality, as well as the duty to recall under section 124(5), the mandatory recall system imposed under Regulation 20(g) cannot be said to be of effectively no use if there is no implied power for the Director to order recall.
59. Second, even if (which I do not agree for the above reasons) a power to order recall is to be implied under or in the context of Regulation 20(g), it can only be exercised in circumstances consistent with those expressively provided therein. In this respect, the system of recall to be imposed is expressly provided to be for the situation where (a) there is any pCm sold or distributed by the wholesaler and (b) where the pCm is found to be dangerous, injurious to health or unfit for human consumption. In the premises, the power of recall (if implied) should only be one which is exercisable in similar situation where (a) there is a pCm and (b) which is found to be dangerous, injurious to health or unfit for human consumption. There cannot be, as submitted by Mr Leung, a power to order recall in circumstances where a product is only suspected to be a pCm and where there is no finding that it is dangerous, injurious to health or unfit for human consumption.
60. In the circumstances, even if there was to be implied to Regulation 20(g) a power to order recall, that would not assist the Director in the present challenge. It is the Director’s own evidence that on 27 March 2014 when the instruction to recall was directed to the applicant and when the public announcement was issued, she only had a reasonable basis to suspect that the Products were pCm. It is not her position that she had concluded by that time that the Products were pCm. The Director’s relevant evidence is set out at paragraphs 6 ‑ 8, 12 and 14 of the 1st Affirmation of Stephen Yung as follows:
“II. Basis of suspecting the Products as pCm
6. On 25 March 2014, CMD obtained samples of the Products from the market to investigate the complaints. We made a preliminary assessment on whether the Products were pCm based on section 2 of the Chinese Medicine Ordinance (cap. 549) (“CMO”) which states that:-
…
7. It was our preliminary assessment that the Products were pCm:-
(a) Some of the ingredients of the Products as shown on their labels, e.g. Ginseng, were known to be used for treatment, prevention or alleviation of the functional states of human bodies.
(b) The Products were in a finished dose form ready for consumption.
8. Based on the above and the fact that there was no record of registration of the Products, we have reasonable cause to suspect that the Products were unregistered pCm and were put on sale by the Applicant.
III. Seizure of the Products on 27 March 2014
…
12. Based on the ingredients of the Products as listed out on their labels, Mr. Chan’s confirmation that all the ingredients of the Products were as listed on the labels, and the available evidence in paragraph 7 above, Mr. S Leung told Mr. Chan that the Products were suspected to be unregistered pCm and would be seized for further investigation.
…
14. Mr S Leung explained to Mr Chan that based on information collected up to that moment, the Products fell within the definition of pCm under the CMO. There were reasonable grounds to suspect that the Products were pCm, and the Applicant was in possession of unregistered pCm contrary to section 119 of the CMO. Our inspectors proceeded to seize the Products under section 146(2) of the CMO.” (emphasis added)
61. In the premises, the Director still could not exercise such an implied power to order recall.[13]
62. For these reasons, I am not satisfied that a power to order recall for the Director when a product is reasonably suspected to be a pCm and which is unregistered can be implied under Regulation 20(g) (whether on its own or read together with section 146(2)). Alternatively, even if a power to order recall can be implied, it can only be one which is exercisable when a product is identified by the Director to be a pCm and found to be dangerous or injurious to health or unfit for human consumption.
C2.4 The Director ordering recall on behalf of CMC or CMB
63. Mr Leung also submits that the Director in any event has a power to order the applicant as a wholesaler to recall the Products on behalf of the CMC or the CMB as their administrative arm. The arguments essentially run as follows:
(1) Pursuant to its functions set out under section 11 of the CMO to ensure adequate standards of practice and conduct in the trade of Chinese medicines and promote and ensure the safety, quality and efficacy of pCms, the CMC has set out, among others, the practice and standards of wholesalers by issuing the Practising Guidelines and the Recall Guidelines.
(2) As mentioned above, under these two guidelines, (a) the wholesalers have the responsibility to recall products suspected of having safety or quality concerns, and (b) the CMB has the power to order the wholesaler to recall such products too.
(3) The CMB has disciplinary power against a wholesaler, such as the applicant, on the recommendation of the Regulatory Committee of Chinese Medicines Traders, if it is satisfied that the wholesale has failed to comply with any prescribed condition and duties in respect of the practice of his trade (see section 139(2)(ii)(B) of the CMO).
(4) In the premises, in the present case, the requirement of a recall prescribed by paragraph 6.2 of the Practising Guidelines, backed by disciplinary power under section 139 of the CMO, is necessary to deal with the danger to public health and safety arising from the use of the Products.
(5) The DH as an administrative arm of the CMC and CMB could exercise that the power on behalf of CMC and CMB to order a recall against the applicant.
64. In my view, Leading counsel’s submissions are met with the following fundamental difficulties.
65. First, in the present case, there is simply no evidence that the CMB had ever decided to exercise its said power[14] to order the applicant to recall the Products. The evidence is in fact to the contrary. The CMC has filed evidence to say that as a matter of fact it did not take part in any of the process of the making of the Decisions at all material times and did not give any related instructions or authorisation to the Director prior to and after the Decisions were made.[15] As pointed out by Mr Ho, this is entirely consistent with the letter dated 24 September 2014 written by the CMC’s solicitors to the applicant’s solicitors after the CMC was served with this judicial review, where it was expressly stated that the CMC was not consulted and did not take part in the process of making the Decisions at all. In other words, the evidence shows that it was not the decision or instruction of the CMC or the CMB to order the subject recall and to have it to be implemented through the Director.
66. Further, there is also no evidence to say that the CMB has
ever delegated[16] the power to decide whether to order a recall generally to the Director.
67. In the circumstances, there is no question that, in the present case, the Director in ordering the recall was exercising a power on behalf of the CMB. Mr Leung’s submissions must therefore be rejected on this basis.
68. Second, under the Practising Guidelines, the meaning of “Recall” is defined as “the remedial measures undertaken by a wholesaler of [pCms] when the [pCms] supplied by him are identified to have quality or safety problems, with a view to preventing such [pCm] that are found to be dangerous, injurious to health, or unfit for human consumption, from further sale or use” (emphasis added). Under the Recall Guidelines, the meaning of “recall” is defined as “the taking of action to resolve existing problems relating to the quality, efficacy or safety of Chinese medicine product” (emphasis added), and for the purpose of this Guidelines and “in relation to a wholesaler of [pCm]”, “Chinese medicine product” is defined as “a [pCm] sold or distributed by the wholesaler”.
69. In the premises, the power to order recall by the CMB should only be exercised when (a) there is a pCm, and (b) which is found to be dangerous, injurious to health or unfit for human consumption, or having existing problem relating to its quality, efficacy or safety. As in the case discussed above in relation to Regulation 20(g), in the present case, neither requirements are met: the Products at the relevant time were only suspected to be a pCm and could not be said to have been found to be injurious to health or unfit for human consumption, or having any existing problems relating to quality, efficacy or safety. The Director hence was not in a position to lawfully exercise that power even if she could exercise that on behalf of the CMB. Mr Leung’s arguments in support of the Director having exercised a relevant power on behalf of the CMB to order the recall against the applicant on 27 March 2014 therefore must be rejected also on this basis.
70. For all the above reasons, I also reject the Director’s contentions that she had exercised a lawful power on behalf of the CMB or pursuant to the CMB’s said power to instruct the applicant to recall the Products.
C2.5 Conclusion under the 1st Ground
71. I accept the applicant’s submissions that the Director had no lawful power to instruct the applicant to recall the Products on 27 March 2014. Similarly, the decision to issue the public announcement insofar as to stating that the applicant was ordered by the Director to recall the Products were also unlawful.
72. The decision made on 25 April not to revoke or suspend the instruction to recall is in effect a decision to maintain or continue the recall instruction. It is therefore also made without lawful power.
C3. 2nd Ground: Wednesbury unreasonableness
73. Under this ground, the applicant contends that if the Director did have power to issue the instruction to recall, the Decisions are Wednesbury unreasonable, as effectively at the time of the Decisions, the Director had only materials to suspect that the Products were pCm and there was no evidence to show positively that they were hazardous to human health.
74. Given my above conclusion on the lack of lawful power for the Director to instruct the recall, it is unnecessary and inappropriate for me to determine this ground. This is so as it is the Director’s contentions that she had power to do so when products are reasonably suspected to be pCm. As I do not accept there is such a power, it would be wholly artificial and unrealistic to consider if based on what had been before the Director at the material time, whether the Decisions made pursuant to such a power (if there is one) were Wednesbury unreasonable.
D. CONCLUSION
75. For the above reasons, I conclude that the Decisions are made without lawful power and thus ultra vires. They should thus be quashed. The applicant has also asked for an order of Mandamus (a) to require the Director to revoke his instructions to the applicant to recall the Products from the customers and to publish a statement of revocation, and (b) to direct the Director to return to the applicant all the products that were seized, with damages for detinue and conversion be assessed.
76. However, Mr Leung has asked this court to further hear the parties as to the form and terms of relief before making the final order in case the court is to rule against the Director on the authority to issue recall instructions. Counsel has also indicated that the Director may in those circumstances also consider asking a stay of the order to be made by this court. This is so as (Mr Leung says) this matter may have a general impact on the question of the protection of public health and safety.
77. In light of Mr Leung’s request, I would not make any formal order at this stage and further direct that there shall be a hearing (with two hours reserved) on the proper terms and scope of the reliefs, costs (including reserved costs of the interim relief application) and any application for a stay of the order to be made. The parties (including the 2nd respondent, as the court understands that it would like to make submissions in relation to costs) shall write to the court within five days of this judgment to provide their counsel’s diary for the purpose of fixing the hearing. The court would then give further directions in relation to that hearing.
78. Lastly, I thank counsel for their assistance in this matter.
| (Thomas Au) | |
| Judge of the Court of First Instance | |
| High Court |
Mr Ambrose Ho SC, leading Mr Andrew Mak and Ms Prisca Cheung, instructed by Edmund Cheung & Co, for the applicant
Mr Raymond Leung SC, leading Mr Jonathan Chang, instructed by the Department of Justice, for the 1st respondent
The 2nd respondent, absent with leave of court
[1] The other board is the Chinese Medicine Practitioners Board.
[2] See Schedule 3 of the CMO.
[3] The applicant had applied for an interlocutory relief to stay the operation of the instructions to recall. This was dismissed by this Court on 6 November 2014. See the Reasons for Decision handed down on 7 January 2015 for details of the interim relief application.
[4] Form 86, paragraphs 48-75.
[5] Form 86, paragraphs 25-44.
[6] Form 86, paragraph 29.
[7] Form 86, paragraph 37.
[8] Form 86, paragraphs 77-81.
[9] See also Legislative Council Panel on Health Services meeting on 25 October 2002, Paper No CB(2)/1/02-03(01) at paragraphs 6 and 6(c), which stated these: “[6] The Chinese Medicine Regulation sets out the licensing requirements and practising conditions of all Chinese medicines traders as well as the registration and labeling requirements for proprietary Chinese medicines… [6(c)] Duties of licensed manufacturers of proprietary Chinese medicines – In addition to the licensing requirements, manufacturers of proprietary Chinese medicines have to observe the following duties – … (iii) He should put in place a system of control for the complete recall for all intermediate products generated or proprietary Chinese medicine manufactured in the course of manufacture sold or distributed by him should it be considered necessary.”
[10] Which provides “The wholesalers of proprietary Chinese medicines should set up a proper recall system to ensure that they can rapidly recall any proprietary Chinese medicine identified to have quality or safety problems. In addition, the Medicines Board under the Council may order any wholesaler of proprietary Chinese medicines to carry out recall when necessary…”
[11] Which provides: “(5) Where by virtue of subsection (4) a proprietary Chinese medicine ceases to be a proprietary Chinese medicine registered under section 121, the relevant applicant shall before the relevant variation takes effect, recall or cause to recall, to the extent reasonably possible, the proprietary Chinese medicine already supplied.”
[12] See: paragraphs 1, 2 (definition of “recall”), 6 and 6.2(1) of the Practising Guidelines and paragraphs 1.1, 2 (definition of “recall”) and the examples set out under Appendix 1 of the Recall Guidelines.
[13] Under this scenario, Mr Leung has also submitted that the Products can be said to have been “found” to be dangerous, injurious to health or unfit for human consumption, as they have not gone through the elaborate registration process provided under section 121 of the CMO, where the CMB would have to take into account the safety, quality and efficacy of the product before approving any registration. Thus, says Mr Leung, if the Products have not gone through the registration having those factors assessed, one cannot “assume” that they are safe and of satisfactory quality, and that they are not injurious to health or fit for human consumption. In other words, Mr Leung further says, they can be taken to be unsafe and unfit for human consumption. Leaving aside whether one can make those assumptions and, if even so, whether the assumptions can fall within the meaning of “found to be” under Regulation 20(g), Mr Leung’s submissions must premised principally on the fact that the concerned product is in fact a pCm. This is so as it is only a pCm that requires registration. For the present purpose, this does not assist the Director as at the relevant time, the evidence is that the Products were only suspected to be a pCm.
[14] The court notes Mr Ho’s argument that the “power” provided to the CMB under the Practising Guidelines or the Recall Guidelines are not statutory power, as these guidelines do not have any statutory underpinning. In my view, it is at least debatable that the CMB has a statutory power to issue practicing guidelines under the various statutory functions entrusted to it under section 11(1) and (2). However, I do not think I need to determine this question as I am for the purposes of dealing with Mr Leung’s submissions under this issue prepared to assume (without deciding it) that the CMB does have a power to do so.
[15] See the Affidavit of Wun Yuen Ming at paragraphs 5 and 6, filed for the purpose of the interlocutory relief application.
[16] Mr Ho has also contended that there is nothing to support that the CMB could delegate its power to the Director. There is again force in this submission as under section 157 and Schedule 5 of the CMO, the statute has provided expressly what functions of the CMB can be delegated to the relevant committees, which apparently do not include the power to order recall or a delegation being made to the Director. However, again, for the purpose of dealing with Mr Leung’s submissions, I am prepared to assume (without deciding) that the power is delegable to the Director.