Philip Leigh Tose v. The Official Receiver

HCAL000063/2002

HCAL 63/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST
NO. 63 OF 2002

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HCAL 64/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST
NO. 64 OF 2002

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Coram: Hon Hartmann J in Court

Dates of Hearing: 6 and 16 May 2002

Date of Handing Down Judgment: 25 June 2002

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J U D G M E N T

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Introduction

1.The applicants in these two collateral applications for judicial review seek to quash certain decisions of the respondent, the Official Receiver, made in respect of disqualification proceedings instituted against them under Part IVA of the Companies Ordinance, Cap. 32 ('the Ordinance').

2.The applicants are former directors of what was a publicly listed company called Peregrine Investments Holdings Limited. Peregrine, together with its associated companies, carried on the business of investment banking. Much of the fixed income side of that business was conducted by a wholly-owned subsidiary of Peregrine, a company called Peregrine Fixed Income Limited. The applicants were also directors of this company.

3.In January 1998, as a result of the crisis in the Asian markets, both Peregrine Investments Holdings Limited and Peregrine Fixed Income Limited ('the two companies') were placed into liquidation.

4.Consequent upon those liquidations, in April 1999 the Financial Secretary appointed an inspector, Richard Farrant, to investigate the affairs of the two companies. The appointment was made pursuant to section 143(1)(a) of the Ordinance. In terms of that appointment, inter alia, the inspector was to consider the professional conduct of the directors of the two companies.

5.In February 2000, the inspector submitted his report to the Financial Secretary. In that report, he criticised a number of the directors - including both applicants - and recommended that consideration be given to the institution of disqualification proceedings against them.

6.Part IVA of the Ordinance, which is modelled on the Company Directors Disqualification Act 1986 ('the English Act of 1986'), empowers a court to disqualify a person for a specific period of time from being a director of a company, a receiver or manager of its property or in any way, directly or indirectly, from being concerned in the promotion, formulation or management of a company. In terms of section 168H(1), such an order shall be made if a court is satisfied in respect of a person-

"(a) that he is or has been a director of a company which has at any time become insolvent whether while he was a director or subsequently; and

(b) that his conduct as a director of that company, either taken alone or taken together with his conduct as a director of any other company or companies, makes him unfit to be concerned in the management of a company." [my emphasis]

7.Section 168I(1) gives the power to either the Financial Secretary or the Official Receiver to seek an order of disqualification if it is in the public interest. The section reads :

"(1) If it appears to -

(a) the Financial Secretary; or

(b) the Official Receiver,

that it is in the public interest that a disqualification order under section 168H should be made, an application for the making of such an order may be made by the Financial Secretary or the Official Receiver."

8.In speaking of the purpose of disqualification orders made under the English Act of 1986, Balcombe LJ in Secretary of State for Trade and Industry v Langridge [1991] Ch. 402 said (at 413G) :

"In my judgment the scope and purpose of the Act of 1986 is clear. The ability to trade through a company with the protection of limited liability, and with the use of capital subscribed by third parties, is of great economic advantage, and confers considerable privileges upon persons so enabled. These privileges involve corresponding responsibilities and the public (in the form of creditors, shareholders and employees - the order in which I place them is of no significance) needs to be protected from persons whose conduct has shown that they have abused those privileges. As Dillon LJ said in In re Sevenoaks Stationers (Retail) Ltd. [1991] Ch. 164, 176, in the context of another application under section 6 of the Act of 1986 :

"It is beyond dispute that the purpose of section 6 is to protect the public, and in particular potential creditors of companies, from losing money through companies becoming insolvent when the directors of those companies are people unfit to be concerned in the management of a company."

Accordingly, the purpose of the Act of 1986 is to protect the public and its scope is the prevention of persons who have previously misconducted themselves in relation to companies, or have otherwise shown themselves as unfit to be concerned in the management of a company, from being so concerned."

9.The description of the purpose of the English Act of 1986 given by Balcombe LJ is, in my view, equally apt in describing the purpose of disqualification proceedings under the Ordinance.

10.It is self-evident that orders of disqualification may have the most profound effect on those who are made subject to them. As Mr Harris, counsel for the applicants, expressed it :

"It will be understood that prospects of disqualification proceedings being commenced against the applicants was of great concern to them. ... The suggestion that they were unfit in itself was damaging to their reputation and credibility, defending such proceedings would be even more damaging and, of course, disqualification itself would have very serious ramifications for their ability to work."

11.Having read the inspector's report, the applicants were of the opinion that their condemnation in that report was ill-founded. Learning that the Official Receiver was considering the institution of disqualification proceedings, they therefore sought permission to make representations to him to attempt to dissuade him from that course.

12.In a letter dated 12 June 2001, the applicants were told that the Official Receiver was conducting his own investigations and that no decision to institute proceedings had yet been made. The letter said that 'potential respondents' (which included the applicants) would be given a 'reasonable opportunity' to make representations after receipt of a notice issued pursuant to section 168P of the Ordinance but before the issue of any disqualification proceedings. Section 168P(1) reads :

"A person intending to apply for the making of a disqualification order by the court, other than an application made in the course of a proceeding for the prosecution of an offence, shall give not less than 10 days' notice of his intention to the person against whom the order is sought ..."

13.Some six months later, on 14 December 2001, the Official Receiver issued a formal notice to both applicants stating his intention to commence disqualification proceedings. The notice was issued in terms of section 168P(1) of the Ordinance. The applicants were of the opinion that the statutory minimum of 10 days notice under section 168P(1) did not constitute the 'reasonable opportunity' to make representations that had been promised them.

14.The Official Receiver, however, was in difficulty in agreeing to the extension of time considered reasonable by the applicants. The difficulty was occasioned by the provisions of section 168I(2) which reads :

"Except with the leave of the court, an application for the making under section 168H of a disqualification order against any person shall not be made after the end of the period of 4 years beginning, in the case of a company -

(a) that is would up, with the day on which the winding up of the company, of which that person is or has been a director, is deemed, under section 184, 228A or 230, as the case may be, to have commenced; or

(b) that goes into receivership, with the day on which the receiver vacated his office."

15.The four-year period of prescription under section 168I(2) was to expire on 12 January 2002. As a result, the Official Receiver condescended to an extension of time to 3 January 2002. The applicants did not accept that this extension complied with the Official Receiver's earlier undertaking.

16.In the result, on 7 January 2002 these proceedings for judicial review were instituted. Four days later, on 11 January 2002, the Official Receiver instituted proceedings by way of originating summons against both applications seeking orders of disqualification against them.

17.The applicants now seek to quash the decisions of the Official Receiver to give notice of intended disqualification proceedings without allowing the applicants a reasonable opportunity to make representations as to why those proceedings should not be instituted. The challenge is founded on the basis that, in making his decisions, the Official Receiver acted in breach of 'fairness and natural justice'.

A closer study of the grounds of challenge

18.It is the contention of the applicants that, in making his decisions to institute disqualification proceedings, the Official Receiver has breached his obligation to act fairly in that he -

(a) decided to commence proceedings without giving the applicants an opportunity to be heard;

(b) issued a notice under section 168P of the Ordinance on 14 December 2002 without extending the minimum statutory period of 10 days;

(c) purported to allow the applicants only until 3 January 2002 to make submissions.

19.Although the applicants' challenge is founded on the broad basis of the failure of the Official Receiver in a number of respects to act fairly, it seems to me that the challenge is in substance more restricted. Essentially, what is alleged is that the Official Receiver made a promise which gave rise to a legitimate expectation on the part of the applicants, an expectation which they are entitled to have fulfilled.

20.A public authority, such as the office of the Official Receiver, has a duty to act fairly. That is a fundamental principle of public law. That a person may legitimately expect a public authority to do so is not, however, an aspect of the principle of legitimate expectation. In that sense, the principle of legitimate is superfluous. The duty to act fairly does not require the buttress of legitimate expectation to enable it to stand. Its foundations are already deep enough. However, a public authority, which otherwise is acting in accordance with its statutory obligations and in accordance with the general dictates of fairness, may nevertheless be obliged to follow a particular procedure if it has made a specific promise to do so or has set a plain practice of doing so. The obligation to follow a particular procedure (that is not otherwise required) arises in those limited circumstances because the public authority has created a legitimate expectation that it will abide by its promise or will continue to follow its practice.

21.In the present case, no argument is made to suggest that the Official Receiver has failed to follow the dictates of the scheme laid down in Part IVA of the Ordinance. Nor is any argument advanced to suggest that he has failed in some broad way to act fairly. All the arguments rest on the allegation that, having given an undertaking to allow the applicants a reasonable period of time within which to be heard prior to the institution of disqualification proceedings, and the applicants having relied on that undertaking, the Official Receiver has failed to honour it.

The remedies sought by the applicants

22.It is to be remembered that when the applicants commenced those judicial review proceedings, although the Official Receiver had stated an intention to institute disqualification proceedings, he had not yet done so. The orders sought by the applicants must be viewed accordingly. They are, first, to quash the decisions of the Official Receiver to commence disqualification proceedings and to give only an unreasonably limited period of time within which to receive submissions prior to such institution and, second, to prohibit the institution of any intended proceedings.

23.However, Mr Harris, who appeared for the applicants, made it plain that judicial review proceedings had not been instituted by the applicants as a 'tactical manouvre' to permanently prevent any possible institution of disqualification proceedings against them; that is, as some form of collateral attack on the proceedings themselves. Instead, what was sought was the opportunity - promised by the Official Receiver - to make full submissions prior to any decision on the part of the Official Receiver to commence proceedings. As I understood his submissions, Mr Harris said that this status quo ante could best be achieved in the following manner :

(a) the disqualification proceedings instituted by the Official Receiver (including the notice issued pursuant to section 168P of the Ordinance) should be quashed;

(b) thereafter, a reasonable period of time should be given to the applicants to make detailed representations to the Official Receiver in an attempt to demonstrate that the criticisms of them contained in the inspector's report were ill-founded and that it would not be in the public interest to institute disqualification proceedings;

(c) only after the representations had been considered by the Official Receiver (preferably, as I understood it, with the assistance of new advisors) would a decision be made whether or not to institute fresh disqualification proceedings;

(d) if a decision was made to institute fresh proceedings, because of the time bar issue, the consent of the court would have to be obtained. That, of course, would be a matter for the court but the applicants were content for it to be recorded that they would not oppose any such application.

The joining of the application for leave and the substantive hearing

24.Before proceeding further, it should be said that the first day of the hearing of this matter was reserved originally for the hearing only of the application for leave to apply for judicial review in terms of O. 53, r. 3 of the Rules of the High Court. If leave was granted, it was intended that the substantive hearing would take place on a later date. However, both counsel were of the view that to argue the merits of the leave application would, in the particular circumstances of this case, amount to a full dress rehearsal of any substantive hearing, the second being a repeat of the first. They therefore sought leave - in the interests of time and convenience and a saving in costs - to combine the two hearings in this sense; namely, that if I found that the applicant should be granted leave under O. 53, r. 3 then I could proceed to determine the issue substantively without the need for further argument.

25.It was an unusual request, but what was suggested by counsel quite clearly would not act to the prejudice of any party and would result in a material saving in time and costs. It would also avoid a sterile repetition of arguments already fully canvassed. In the circumstances, as all parties were agreed, I acceded to the request.

The relevant history

26.In determining whether the applicants are entitled to the remedies they seek, it must first be determined whether, as they allege, a clear promise or undertaking was made to them; that is, one that was unambiguous and devoid of relevant qualification, and, if so, whether, without good cause, the Official Receiver failed to honour that promise or undertaking.

27.As indicated earlier, it was in April 1999 that the Financial Secretary appointed Richard Farrant as an inspector to investigate the affairs of the two companies. During the course of his investigation, the inspector interviewed both applicants. In addition, an opportunity was given for the applicants to make representations. More particularly, the inspector's provisional findings, in so far as they were critical of the applicants, were put to them for comment. The applicants took advantage of the opportunity given to them and made detailed representations. By way of example, Mr Tose, one of the applicants, submitted representations that were several hundred pages long.

28.The inspector took account of these representations. He made it clear, however, that he did not intend to send any amendments to his report to the applicants for further comment unless they contained new criticisms in respect of which the applicants had not had an opportunity to be heard.

29.In February 2000, the inspector delivered his report to the Financial Secretary. The report, however, was not published until March of the following year. After its publication, in a letter dated, 4 April 2001, the applicants' solicitors wrote to the Financial Services Bureau to the following effect :

"It is plain that a number of our clients' submissions to the Inspector in respect of his draft report have been accepted (at least in part) and the final report has been changed as a consequence. Some of the complaints against our respective clients have likewise changed, however our clients did not receive an opportunity to comment on what are, in effect, new allegations. Our clients believe that they were entitled to be heard in respect of such new allegations, and the Inspector's conduct in denying them such opportunity has unfairly prejudiced them.

It is also material that in respect of two of our clients, Messrs. Philip Tose and Peter Wong, it has been recommended by the Inspector that disqualification proceedings under the Companies Ordinance be considered. Having been denied fair opportunity to be heard in respect of the Inspector's Report, Messrs. Tose and Wong consider that they are entitled to be heard on the issue of disqualification proceedings as they are of the view that there are a number of flaws in the Inspector's Report which comprises its probity."

30.The following month, by letter dated 28 May 2001, the applicants' solicitors wrote direct to the Official Receiver. In that letter the grievance earlier asserted was repeated but of immediate relevance to these proceedings, the solicitors then made the following request of the Official Receiver :

"We now write to request that our clients be permitted to make further representations to you prior to commencement of any disqualification proceedings. We believe such submissions may be material to your consideration of such proceedings, and can be conducted in writing or in meetings."

31.On 12 June 2001, a member of the Official Receiver's staff responded to the request. In that letter it was confirmed that the Official Receiver had not yet made a decision to institute proceedings and was conducting his own investigation :

"The Official Receiver is at present conducting his own investigation into the affairs of the Peregrine group of companies and the directors involved, with a view to considering whether disqualification proceedings should be commenced, and, if so, against whom. The investigation is at a relatively early stage. The investigation is not necessarily confined to the matters set out in the Inspector's Report, although it is forming the initial basis for the investigation at this stage. No decision to commence proceedings has been taken at this stage. The Official Receiver will keep under review the decision to commence proceedings and against whom until such time as the proceedings, if any, are commenced."

The letter continued :

"The Official Receiver is obliged to provide notice to potential respondents of his intention to commence proceedings against them under section 168P Companies Ordinance. It is not anticipated that only 10 days' notice will be given. Potential respondents will be given a reasonable opportunity to make submissions and representations prior to the issue of proceedings." [my emphasis]

At the end of the letter, further reference was made to time being given to potential respondents to make representations after the issue of the section 168P notice but before the institution of proceedings by way of summons :

"As set out above, it is anticipated that the section 168P letters will be sent in good time to allow any potential respondents to make appropriate representations, and for the Official Receiver to consider them." [my emphasis]

32.If these statements constituted a sufficiently unequivocal undertaking upon which to found a legitimate expectation, they did not offer much guidance in defining what in the mind of the Official Receiver would constitute a reasonable opportunity. All that is indicated is that it would be something more than 10 days. That being the case, what did or did not constitute a reasonable opportunity can only be determined by having regard to the relevant circumstances. This in turn means that the letter of 12 June 2001 must be re-visited for what has been cited earlier is not exhaustive of the contents of that letter.

33.Having said that a reasonable opportunity would be given to make representations prior to the institution of any proceedings, the letter continued :

"In the interim, the Official Receiver is in possession of submissions made to the Inspector and will, of course, review them. This will involve making his own assessment of those submissions."

This confirmation that the original submissions made to the inspector would be studied was then qualified in the following terms :

"While oral representations are not considered to be constructive at this stage, the Official Receiver would be prepared to accept preliminary representations from your clients on areas where they consider the Inspector's Report to be inaccurate or unfair. Where these representations have already been made to the Inspector, the representations to the Official Receiver should preferably refer back to those submissions, so as to avoid repetition. The Official Receiver will of course consider those representations, if any, carefully in forming a view whether to institute proceedings against your clients." [my emphasis]

34.Clearly, this paragraph constituted an invitation to the applicants - without having to wait for the issue of a notice pursuant to section 168P(1) - to make 'preliminary representations' to the Official Receiver in respect of matters which they considered had been inaccurately or unfairly dealt with in the inspectors report. Such representations would meet one of the central concerns of the applicants, a concern expressed in the letter of 4 April 2001 written to the Financial Services Bureau (supra) which in part had said (and I repeat) :

"Having been denied fair opportunity to be heard in respect of the Inspector's Report, Messrs Tose and Wong consider that they are entitled to be heard on the issue of disqualification proceedings as they are of the view that there are a number of flaws in the Inspector's Report which comprises its probity." [my emphasis]

35.Rather surprisingly, having regard to the fact that the present judicial review proceedings were launched to ensure that the applicants had an opportunity to fully put their case to the Official Receiver, it does not appear that the applicants chose to take up the opportunity of making early representations. In their reply dated 20 June 2001, the applicants' solicitors wrote simply :

"We note your comments and in particular, that it is anticipated that any potential respondents will be given a reasonable opportunity to make representations prior to the issue of any proceedings. On the basis that your decision to issue any notice under s. 168(P) of the Companies Ordinance does not constitute an irrevocable decision to pursue proceedings, our clients are prepared to withhold further steps at this stage."

36.Thereafter, a period of some six months expired before the Official Receiver issued a notice of intention to institute proceedings. The notice, issued on 14 December 2001, read :

"In accordance with section 168P Companies Ordinance (Cap. 32), I hereby give you notice that it is my intention to apply for an Order under section 168H Companies Ordinance that you shall not, without the leave of the Court, be a director of a company; be a liquidator of a company; be a receiver or manager of a company's property; or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company, for a period not less than 1 year and not exceeding 15 years effective from the beginning of the 21st day after the day on which such an Order is made."

The letter containing this notice ended by saying :

"The Summons and the evidence in support will be served on you after the expiry of 10 days from the date of this letter."

37.In response, in a letter dated 18 December 2001, the applicants' solicitors complained that the Official Receiver had reneged on the promise given in the letter of 12 June 2001 :

"You are well aware from our previous correspondence of our clients' dissatisfaction with the conduct of the Peregrine Inspector who they consider failed to allow them a proper opportunity to comment on the findings set out in his report. Our clients would have addressed you on the inaccuracies and deficiencies contained on the inspector's report but for your letter dated 12th June 2001. Your two letters :-

(1) Purport to allow our clients only 10 days notice in the period leading up to the Christmas holidays, in circumstances where one of our clients resides overseas and the other will be overseas during the Christmas holidays (which period only includes 6 working days, less taking into account when the letters were actually received), prior to the issuance of proceedings;

(2) Do not indicate that our clients can make submissions within that period or that any submissions made within that period will be considered ..." [my emphasis]

38.The following day (19 December 2001), the Official Receiver replied :

"Your clients are now allowed to make such representations as they consider appropriate, which the Official Receiver will of course carefully consider. Limitation period for commencement of disqualification proceedings if any will expire on 12 January 2002 (s. 168I(2) Companies Ordinance). I am prepared to allow your clients up to the 3 January 2002 to make representations. This is a reasonable opportunity to make representations in the circumstances."

39.This extension of time was considered by the applicants to be 'unacceptable' per their letter of 19 December 2001. On 7 January 2002 judicial review proceedings were commenced.

The Official Receiver's continuing obligation to consider whether proceedings are in the public interest

40.Despite the commencement of judicial review proceedings challenging the lawfulness of the Official Receiver's actions, on 24 January 2002 the Official Receiver sent a letter of some significance to the applicants' solicitors. More particularly, it was confirmed that -

"(1) The Official Receiver is under an ongoing obligation to consider whether it appears to him that it is, or remains, in the public interest to bring or continue disqualification proceedings. In this respect, I would refer you to the English authority Re Catercraft Construction Co Limited [1994] 1 WLR 172 (at 180H-181A).

(2) The Official Receiver is at any time prepared to receive any reasonable submissions or representations that your clients wish to make to him. These will be carefully considered in the light of the Official Receiver's ongoing obligation of review, referred to above. You may wish to tailor any such submissions to the content of the evidence now served upon you."

41.In the authority to which reference is made in that letter (Re Catercraft Construction Co. Limited), Ferris J, in looking to almost identical provisions in the English Act of 1986, said that :

"An important safeguard is provided for those against whom a disqualification order is sought under section 6 by the requirement, arising from the wording of section 7(1), that an application is only to be made where it appears to the Secretary of State that "it is expedient in the public interest" that a disqualification order should be made."

From that he drew the conclusion that :

"... the Secretary of State can and should cause an application for a disqualification order under section 6 or section 8 to be abandoned if it ceases to appear to him that the making of a disqualification order against the respondent to that application is expedient in the public interest."

He then commented :

"I was told that the Secretary of State does in fact act upon this principle and I have no doubt that this is so."

42.That the Secretary of State has a continuing obligation to determine whether disqualification proceedings are or remain 'expedient in the public interest' was confirmed by the Court of Appeal in Re Blackspur Group Plc and Others [1998] 1 WLR 422 when Lord Woolf MR said (at 426) :

"Parliament has designated the Secretary of State as the proper public officer to discharge the function of making applications to the court for disqualification orders. There is a wide discretion to do so in cases where it appears, in the prescribed circumstances, that "it is expedient in the public interest that a disqualification order should be made". In any particular case it may be decided that the public interest is best served by making and continuing an application to trial; or by not making an application at all; or by not continuing a pending application to trial; or by not contesting at trial points raised by way of defence or mitigation. All these litigation decisions are made by the Secretary of State according to what is considered by her to be "expedient in the public interest." They are not made by the court or by other parties to the proceedings." [my emphasis]

43.Section 7(1) of the English Act of 1986 reads :

"(1) If it appears to the Secretary of State that it is expedient in the public interest that a disqualification order under section 6 should be made against any person, an application for the making of such an order against that person may be made -

(a) by the Secretary of State, or

(b) if the Secretary of State so directs in the case of a person who is or has been a director of a company which is being would up by the court in England and Wales, by the Official Receiver." [my emphasis]

44.Section 168I(1) of the Ordinance (supra : see paragraph 7) is almost identical in its wording, saying that -

"If it appears to -

(a) the Financial Secretary; or

(b) the Official Receiver,

that it is in the public interest that a disqualification order under section 168H should be made, ... [my emphasis]

45.I do not see that the omission of the word 'expedient' from our Ordinance in any way changes the essential responsibility resting on the Official Receiver from that resting on the Secretary of State. That being the case, I am satisfied that the English authorities should apply to the provisions of section 168I(1) of the Ordinance. In his letter of 24 January 2002 the Official Receiver accepted that he had such a continuing responsibility and there can be no suggestion that he would not, with an open mind, act in accordance with that responsibility.

Legitimate expectation

46.A legitimate expectation, if it can be shown to exist, while it will not provide an enforceable right in private law, will nevertheless afford a protection in public law. As was said by Lord Fraser in Attorney-General of Hong Kong v Ng Yuen Shiu [1983] 2 AC 629 (at 638), the justification for that public law protection is primarily -

"... that, when a public authority has promised to follow a certain procedure, it is in the interest of good administration that it should act fairly and should implement its promise, so long as implementation does not interfere with its statutory duty."

47.When a legitimate expectation - as is contended in the present case - gives rise to an expectation that, before a decision is made by it, an administrative body will first provide an opportunity for representations to be made to it by interested parties then the court will require the administrative body to provide that opportunity. This requirement will only be set aside if the undertaking given by the administrative body conflicts with its statutory duty or the court is satisfied that an overriding reason exists to warrant the administrative body from resiling from the undertaking. In the present case, no argument has been made that the undertakings made by the Official Receiver breached his statutory duties. Nor has any argument been advanced as to an overriding reason justifying non-compliance with any such undertaking.

48.But was a legitimate expectation created in the Official Receiver's letter of 12 June 2001? In my view, one was created and it was to this effect : that after the issue of the notice pursuant to section 168P, the applicants (as potential respondents) would be given a reasonable opportunity to make representations to the Official Receiver to attempt to dissuade him from instituting proceedings and that the Official Receiver would give consideration to such representations before deciding whether, in the public interest, he should still institute proceedings.

49.I accept that the letter of 12 June 2001 uses phrases such as 'it is anticipated' but, in my judgment, such phrases do not change what is on its face a clear and unambiguous undertaking and convert it into something akin to no more than an offer of a measure of comfort which would of course offer no protection in public law.

50.I further accept that in the letter an invitation was given to make 'preliminary representations' on matters of central concern to the applicants before the issue of notices under section 168P. But this was an invitation only not a condition of the undertaking and in any event invited only preliminary representations, by definition an acceptance that an opportunity would still be given for substantive representations after the issue of the section 168P notices. While that invitation, of course, is a relevant factor, I do not therefore consider it decisive.

Was a reasonable opportunity, in fact, given to the applicants to make representations?

51.Mr Yu, who appeared on behalf of the Official Receiver, has contended that the applicants have no ground for complaint. Primarily, he has said this is so because it has not been demonstrated that they were, in fact, denied the reasonable opportunity to make representations promised to them.

52.The Official Receiver did not of course promise any specific period of time that would be allowed in addition to the statutory 10 days pursuant to section 168P of the Ordinance. That being the case, as I have said earlier, it is necessary to look to the factual circumstances in order to make an objective determination of whether or not a reasonable opportunity was given.

53.For the applicant, it has been contended that a period of 20 days from 15 December 2001 to 3 January 2002, including the Christmas and New Year holidays, cannot constitute a reasonable opportunity to make submissions and that it would be fallacious to suggest otherwise, especially having regard to the complex factual issues involved. But is that the case? If the Official Receiver's issue of a section 168P notice constituted the very first foray by a statutory body into the conduct of the applicants I would agree with that contention. But, of course, it was not the first foray and therefore not the first opportunity that the applicants had had to make detailed representations concerning their conduct as directors of the two companies. As Mr Yu, for the applicants, pointed out :

(a) When Richard Farrant, the inspector, was in the process of compiling his report, he not only interviewed the applicants but gave them an opportunity to make representations. In addition, his draft report was given to them for comment. On both occasions, representations were made.

(b) The Official Receiver was in possession of those submissions of the applicants and confirmed in correspondence that he would take them into account in coming to a provisional decision whether or not to institute proceedings.

(c) The Official Receiver further invited the applicants to make preliminary representations in respect of matters which they considered to have been unfairly or inaccurately recorded in the inspector's report : an invitation which was declined.

(d) In light of the recommendations made by Richard Farrant in his inspector's report, the applicants must have anticipated the likelihood of the Official Receiver deciding to proceed and would not therefore have been taken by surprise.

54.Nor, as Mr Yu emphasised, were materially new or novel matters alleged by the Official Receiver such as to require materially new areas of investigation or research by the applicants. In this regard, Ms Lee Kwan Wai, an acting assistant principal solicitor in the office of the Official Receiver, has said the following in an affirmation dated 30 April 2002 :

"By way of the section 168P notice dated 14 December 2002, the Applicant was notified of the allegations made against him by the Official Receiver which formed the prima facie views that disqualification proceedings should be issued against the Applicant on public interest grounds. The allegations made against the Applicant were predominantly and substantially derived from the matters covered in the Inspector's Report." [my emphasis]

55.Taking these matters into account, while it cannot be said that the time allowed by the Official Receiver was generous - indeed, because of time constraints, it may be criticized for being niggardly - I am nevertheless satisfied that sufficient time was allowed, albeit perhaps with a little burning of the midnight oil, to add to and supplement the already substantial representations made by the applicants or to so direct those representations in order to counter specific allegations made by the Official Receiver. I have come to this view despite the intervention of the Christmas and New Year holidays, an occurrence which, while clearly relevant to whether a reasonable opportunity was or was not given, must often - as with all holidays - be coped with when important legal submissions are to be compiled.

56.In the circumstances of this case, I am satisfied that the Official Receiver, in undertaking to give a reasonable opportunity to make representations, intended to give - and did give - not as much time as the applicants wished but sufficient time. That was all that was required of him.

Lack of prejudice - the continuing obligation to review

57.But even if I am wrong as to the reasonableness of the opportunity given; that is, the sufficiency of time allowed to the applicants, I fail to see how any inadequacy of time can be said to have materially prejudiced the applicants. To express it another way, I fail to see how the applicants have been dealt with unfairly. I say this because, despite the institution of disqualification proceedings, the Official Receiver has remained at all times under a continuing obligation to consider whether in the public interest those proceedings should be continued or abandoned. In the result, therefore, whenever the applicants chose to put in their representations, they had to be considered with an open mind by the Official Receiver.

58.Of course, when relief is sought based on the existence of a legitimate expectation, it is not demanded in all cases that an applicant must prove that he has been prejudiced by the failure on the part of a public authority to honour that legitimate expectation. As Simon Brown LJ said in Jaramillo-Silva v Secretary of State for the Home Department [1994] Imm AR 352 (at 357) :

"I accept [counsel's] submissions that reliance and detriment as such are not necessarily required in every legitimate expectation case."

But while it does not have to be demonstrated that an applicant has been prejudiced, a lack of prejudice may well, in my view, be relevant in deciding whether or not it would be fair and/or in the interests of justice to grant the relief sought. In this regard, it is to be remembered that in cases of this kind 'the question is not whether the authority is bound to honour the expectation it induced, but only whether the promisee should be entitled to argue for its fulfilment' : see Judicial Review of Administrative Action by de Smith, Woolf and Jowell (5th ed.) page 427.

59.The question to be asked is : what is to gained if orders of certiorari are granted? In answer, it seems to me that the applicants will gain no more than they already have; namely, the right to have their representations considered by the Official Receiver. As such, in these proceedings they are in substance seeking some sort of advantage from what is a technical breach of the rules of fairness.

60.As was said by Kerr J in Lake District Special Planning Board v Secretary of State for the environment (1975, unreported), dicta cited with approval by Lord Denning in George v Secretary of State for the Environment [1979] LGR 689 (at 695) :

"... there can be no such thing as a 'technical' breach of the rules of natural justice, since the concept of natural justice is not concerned with the observance of technicalities but with matters of substance."

61.The point was made with force by Slade LJ in R v Chief Constable of the Thames Valley Police ex parte Cotton [1990] 1 RLR 344 (at 350) :

"... the occurrence or otherwise of a relevant procedural impropriety does not, in my judgment, fall to be determined in any given case merely by reference to abstract rules. An applicant seeking judicial review on these grounds must, in my judgment, show that on the particular facts he has not been given 'fair play'. In my judgment, this has not been established in the present case. From the decision of this Court, I would like to see a message to potential litigants emerging, once again, loudly and clearly - namely that 'natural justice is not concerned with the observance of technicalities but with matters of substance'."

62.More recently, in the Court of Appeal judgment in Leung Fuk Wah Oil v Commissioner of Police (CACV 2744 of 2001), while recognising that prejudice is not an element that must be proved in all cases to establish a ground of review, Cheung JA said :

"Judicial review is a discretionary remedy. If the breach of the principle of fairness does not produce a substantial prejudice to the applicant, the court is bound to take this into account in deciding whether relief should be given."

63.In my view, of particular relevance is the House of Lords judgment in R v Secretary of State for the Home Department ex parte Pierson [1998] AC 539 (at 593) :

"The principal question which has been raised in this case is one of substance, not one of procedure. Mr Fizgerald renewed before your Lordships his argument to the Court of Appeal that the Home Secretary had dealt with the applicant's case in a manner which was procedurally unfair, in that his failure to notify him of his intention to treat his predecessor's tariff as inadequate had deprived him of an opportunity to make effective representations before the decision was made. But the Court of Appeal held that it did not appear that in practical terms there had been any significant unfairness in this case and that, as it was not disputed that the Home Secretary was willing to consider any further representations made on the applicant's behalf, no useful purpose would be served by making an order by way of judicial review on this ground. I am in full agreement with the decision of the Court of Appeal on this point, so I would reject the argument based on procedural unfairness." [my emphasis]

In this regard, the Court of Appeal earlier had said :

"The applicant does not challenge the assertion made on oath on behalf of the Home Secretary that he remains willing to consider any further representations made by or on behalf of the applicant, and no challenge is made to the Home Secretary's good faith. We must accept that any further representations will be considered fairly, objectively and without a preconceived intention to reject them. We attach very great importance to that safeguard, which is in truth all that the applicant could hope for even if an order of certiorari were made. ..."

64.In the present case, it seems that the applicants complain not that they have been denied the opportunity to make representations but that, contrary to what was promised, they have been denied the opportunity to do so before institution of proceedings. But if, despite the institution of proceedings, the Official Receiver remains under a continuing obligation to consider, in the light of new evidence or fresh representations, whether to continue proceedings or abandon them, how are the applicants materially prejudicial in a manner that is capable of being rectified by an order of this Court?

65.Mr Harris, on behalf of the applicants, has complained that, having made a decision to institute proceedings, it is that much more difficult for the Official Receiver now to resile from his decision. That is why Mr Harris has argued for a return to the status quo ante with the Official Receiver's decisions set aside and the parties able to 'begin again'. But there has never been any suggestion on the part of the Official Receiver that, he has, in instituting proceedings, somehow burnt his bridges behind him leaving no room for retreat no matter how persuasive the arguments that he should abandon the proceedings. To the contrary, the Official Receiver has stated in correspondence that he keeps an open mind on matter.

66.That, being the case - if the applicants' representations, whenever they are made, will be considered 'fairly, objectively and without a preconceived intention to reject them' - I do not see the purpose of quashing the decisions of the Official Receiver. As was said by the Court of Appeal in R v Secretary of State for the Home Department ex parte Pierson (supra) even if orders of certiorari are made, the applicants can expect no more than the Official Receiver has at all times been willing to give.

The present proceedings amount to a collateral attack on the disqualification proceedings

67.In the course of argument, Mr Yu, for the Official Receiver, said that disqualification proceedings had now been instituted and are on-going in the Court of First Instance. That being so, these judicial review proceedings are an inappropriate collateral attack on those on-going proceedings. If there are grounds for complaint, said Mr Yu, they should be aired in the disqualification proceedings not before this Court. As was said by Button LJ in R v Secretary of State for Trade and Industry ex parte Eastaway (unreported 15 March 2000) :

"Secondly, the effect of this argument, even though not its substance, is to challenge the prosecution of the proceedings in the Companies Court because they are brought on a defective basis and without authority on the part of the Secretary of State. Such collateral challenges are not the business - I put it quite bluntly - of this Court (meaning by 'this Court' the Crown Office of the Queen's Bench Division) in which, in some way created by Ord 59, r 14(3), I am at present sitting. They are not the business of this Court because it is not appropriate for one court to review the operations of another. In the present case it is particularly inappropriate to suggest that a judge of the Queen's Bench Division should be asked to review matters taking place in the Companies Court."

68.In the present case, however, the applicants did not start judicial review proceedings in order to challenge the lawfulness of on-going disqualification proceedings before the Court of First Instance. They commenced the proceedings to prevent the Official Receiver himself instituting his disqualification proceedings until the question of whether they had been denied a right to attempt to dissuade him from that course had been resolved. It was the Official Receiver who, in the face of that challenge from the applicants, decided nevertheless to institute disqualification proceedings. Accordingly, in the factual circumstances, I have difficulty in see how the applicants can be criticised for launching an inappropriate collateral attack.

Conclusion

69.For the reasons given in the body of this judgement, I have determined matters as follows :

(a) That the Official Receiver by his letter of 12 June 2001 did create a legitimate expectation that after the issue of a notice pursuant to section 168P of the Ordinance, but before the institution of disqualification proceedings, the applicants would be given a reasonable opportunity to make representations.

(b) That when the section 168P notice was issued, while not in any way generous in the time allowed to the applicants, a sufficient opportunity was given to them to make representations, that sufficiency amounting to a reasonable opportunity.

(c) Alternatively, even if a reasonable opportunity was not given, the applicants have not been prejudiced or dealt with unfairly. The Official Receiver remains under a statutory obligation to consider their representations fairly, objectively and without a preconceived intention to reject them and, if he holds it to be in the public interest, to abandon those proceedings.

70.It follows from these conclusions that the applications for judicial review must be dismissed.

Costs

71.I have not heard from the parties on costs. There will therefore be an order nisi awarding costs to the respondent, that order to be made final if the matter is not set down for argument within 30 days of the date of handing down of this judgment.

Representation:

Mr Jonathan Harris, instructed by Messrs Richards Butler, for Applicants in both actions

Mr Benjamin Yu, SC, instructed by Department of Justice, for Respondent