Re Golden Wall Shirts Factory Ltd
Read the full judgment text of HCMP 999/1980 on BabelCite. This High Court CFI judgment.
1. The applicant is a firm carrying on business as exporters of textiles and garments including to the E.E.C.
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HCMP000999/1980 Import and Export Ordinance, Cap. 60, s.3(1) - Extent and manner of exercise of Director of Trade, Industry and Commerce's power to refuse a trade exporter licences for textiles - surrender of quota - audi alteram partem rule.
----------------- Coram: Full Bench (Zimmern, Barker & Rhind, JJ.) Date of Judgment: 27th January, 1981. ----------------- JUDGMENT ----------------- Zimmern, J.: 1. The applicant is a firm carrying on business as exporters of textiles and garments including to the E.E.C. 2. They have applied to the Court to review the decision of the Director of Trade Industry and Customs (the "Director") in refusing to grant export licences to them for shipments of garments to the E.E.C. save on the terms contained in his letters dated 30th August 1980 and 23rd October 1980 and to declare that his refusal to grant such licences save upon those terms was ultra vires his powers and a wrongful exercise of the discretion given to him by Ordinance. 3. I think it is necessary to set out the correspondence in full. Director's letter of the 30/8/80 :
H.H. Lau & Co.'s letter of 17/9/80:
Director's letter of the 23/10/80:
4. Before dealing with the arguments of counsel it is also necessary to set out the relevant sections and regulations of the Import and Export Ordinance (Cap.60) the preamble of which reads:
Section 3(1) provides:
By section 31 the Governor-in-Council is empowered to make regulations for all or any of the purposes set out therein including:
By section 36 it is provided that any person who in respect of an application for a licence makes any statement which is false in a material particular shall be guilty of an offence and shall be liable on conviction to a fine of $500,000 and to imprisonment for 2 years (prior to 60 of 1980 this was $50,000 and 1 year). Section 37 provides:
5. Regulation 5 of the Import and Export (General) Regulations provides:
6. Mr. Martin Lee argues this matter on two main grounds:-
7. On the first ground he argues that at the time of the Director's letter of the 30th August 1980 any possible criminal prosecution against the applicant under section 36 was not yet time barred by section 37. In any event the Director had been advised by the Attorney General that there was insufficient evidence to prosecute. By the imposition of his administrative sanctions the Director besides the want of power under his discretion given by Ordinance had not only usurped the functions of the Court but had constituted himself prosecutor judge and jury and no court of law would tolerate that. Let me say at once that the words are mine and not Mr. Lee's. He was far more refined but that broadly is the pith of the submissions on this ground. He concedes the Director had not acted mala fides. 8. I now turn to his arguments on the Director's powers under section 3. He concedes that the Director is given a discretion and that an applicant for a licence has no absolute right to a grant but if the Director were to refuse then it must be for cause. His discretion is not unfettered. 9. I do not think there is much difference between the contentions of Mr. Martin Lee and Mr. Barlow as to the width of the Director's discretion. It is the application of that discretion to the subject matter in which they are poles apart. 10. As was said by Lord Reid in Padfield v. Minister of Agriculture Fisheries(1):-
11. It is up to us to determine whether the Director had exercised his discretion for the promotion of the policy and objects of the Ordinance on its true construction. 12. Mr. Martin Lee impugns the Director's exercise of that discretion on four grounds:-
13. I now turn to the extent of the Director's discretion under section 3(1). That he must act bona fide and fairly, and that he must not act capriciously and that in the exercise of that discretion he must not take matters in consideration which he ought not to have taken nor must he fail to take into consideration matters which he ought to have taken are all supported by authorities. He is the man empowered by the Ordinance to administer the policy and objects of the Ordinance the preamble of which I have set out. The discretion given to him on the face of section 3(1) appears unfettered but of course that is not so. The legislature empowered the Governor in Council to make regulations for certain purposes which include the power to restrict the Director's discretion. It has imposed one restriction per Regulation 5 which I have set out. I now come to what is really the pith of the matter - the quota system. That word "quota" is mentioned once in the Ordinance under section 31 where the Governor in Council is empowered to make regulations providing for the imposition and administration of quota controls in respect of the import or export of any article. It has not made any regulations other than regulation 5. What then is this "quota". On the evidence contained in the affidavit filed by the Director and of course it is a subject of notoriety throughout the commercial world, it is as follows. Since 1959 various countries have forced Hong Kong to impose restraints on its export of certain commodities including garments and textiles to them over the years. Hong Kong has concluded various bilateral or multilateral restraint agreements of different durations with various countries including the E.E.C. on such exports from Hong Kong. I do not have to go into the complexities of the negotiations leading to the agreements. It is sufficient to say that by multilateral agreement there is and at all material times there was in existence a restraint on the number of garments of various categories which Hong Kong is permitted to export to the E.E.C. over a stipulated period. Under such agreements, Hong Kong has acquired rights and obligations. One of the rights is of course to export Hong Kong made goods up to the number of units of the various categories agreed upon. One of the obligations is to avoid circumvention of the agreements by transhipment or re-routing and to take administrative action to avoid such circumvention. 14. It is a fact that the Governor has left the administration of these agreements in the hands of Director who consults a Cotton Advisory Board. The number of units available for export to the E.E.C. over a given period are parcelled out to exporters and manufacturers ("traders") of such goods in the form of quota certificates by a system based mainly on past performances. The Director makes an offer in writing to each winning trader of the allocation of quota certificates valid for a fixed period subject to conditions one of which reads:
15. The offeree can only accept in writing subject to such conditions. 16. At material times the applicants were the holders of quota certificates offered and accepted by them subject to those conditions. 17. The quota certificates are valuable choses in action. They can be sold and transferred. Without them no trader can obtain an export licence for the export of restrained goods to the E.E.C. It follows that a trader with quota certificates who circumvents the system by transhipment or otherwise and this can only be done by false declarations for the export licence under section 3 will be a richer man but Hong Kong and its traders will be so much the poorer. The reason is that once a circumvention is discovered by the E.E.C. they will deduct the number wrongfully imported thereto from the next allocation. In the course of the last two or three years there has been a hue and cry in the E.E.C. over such circumventions which is of considerable embarrassment to the administration. 18. The important question is whether the Director can take the quota system into consideration as a policy and object of the Ordinance when exercising his discretion under section 3(1) which he has obviously done or is it extraneous to it and something which the Director ought not to have taken into consideration as asserted by Mr. Martin Lee. 19. Mr. Barlow submits that the Director has a power to formulate a policy as to the future exercise of his discretion if he thinks that good administration requires it. He relies on the judgment of Lord Reid in British Oxygen Co. v. Minister of Technolooy(3) wherein he held that:
20. I accept the submission of Mr. Barlow on this point. The Director is left with a side discretion in the administration of the policy and objects of the Ordinance and I hold he can formulate and enforce his own policy for the good administration of the Ordinance within his powers given by legislature provided in the words of Lord Reid he listens to any applicant who has something new to say. 21. In my view in the exercise of his discretion the Director may take into consideration any policy formulated in the administration of the quota system to the limit of his powers. 22. The next question is whether by the formulation of his policy as expressed in his letters to the applicants he has gone beyond his powers. He has imposed conditions prior to a grant. If those conditions were penal or indeed a form of punishment I would hold that would be beyond his powers, not by reason of section 36 but by reason that it would be ultra vires his powers. Mr. Martin Lee asserts forcefully that the conditions imposed were penal. I do not and cannot accept that. To my mind if the Director imposed even a nominal fine before grant that would be a penalty. But the Director did not do that. He said to the applicants "You have exported so many units to the E.E.C. by circumvention, you will henceforth not get any more export licences for shipments to the E.E.C. until you have surrendered on a permanent basis quota certificates to the amount you have ill-gained by your circumvention." This was no more than an application of the rule formulated under his policy and publicly expressed and which the applicants acknowledged and agreed to when they signed the acceptance of the quota certificates offered. We are a court of review, it is not up to us to say whether he ought or ought not to have so acted on the facts of this case but whether he can or cannot so exercise his discretion. Applying the principles as I understood them, I take the view and hold that he can. 23. The above is sufficient to dispose of the 2nd, 3rd and 4th grounds made by Mr. Martin Lee. 24. This leaves the audi alteram partem rule. This argument for the applicants is that "you the Director have as prosecutor gathered the evidence, as jury found me guilty without even hearing me or indeed without even letting me know of a case against me, as judge passed sentence on me then by letter you ask me what I have to say in mitigation of sentence." This rule is one of the principles of natural justice and it is an injunction meaning that no man should be condemned unheard or without having had an opportunity of being heard. Mr. Barlow submitted that the applicants were given an opportunity but turned it down. He referred us to part of Lord Dennings' judgment in Selvarajan v. Race Relations Board(4) at 19 read:-
25. In the matter herein the Director had received complaints from contracting countries of circum ventions, a matter of serious consequences for the trade. He was in duty bound to investigate. Having investigated over a long period he found, for himself any way, convincing evidence against the applicants. The Attorney General advised that the evidence was insufficient to charge the applicants with the offence created under section 36 but that was a matter for the Attorney General and was irrelevant to the Director's enforcement of the rule formulated under his policy. The acts relied on by the Director were fairly presented to the applicants who had every opportunity to disabuse the Director that they had been guilty of such acts. They chose just to deny the acts and challenge the Director on legal grounds. In my views they cannot be heard to complain. 26. I would dismiss the application with costs. Representation: Martin Lee Q.C. & R. Tang (H.H. Lau & Co.) for Applicant B. Barlow & N.F. Miller for Respondent (1) (1968) A.C. at p. 1030 (2) (1958) 1 Q.B. 554 (3) (1971) A.C. 610 (4) (1976) 1 A.E.R. 12
----------------- Coram: Full Bench (Zimmern, Barker and Rhind, JJ.) Date of Judgment: 27th January, 1981. ----------------- JUDGMENT ----------------- Barker, J.: 27. I agree with the judgment of Zimmern, J., and it is only out of deference to Mr. Lee's arguments that I add the following. 28. It was argued that the Director had no power to impose conditions prior to the grant by him of a licence. Quite apart from the considerations set out in this regard by Zimmern, J. with which I agree, in my view he is entitled to impose such conditions by virtue of section 40(2) of the Interpretation and General Clauses Ordinance, Cap. 1, which reads, so far as is relevant:
29. It is true that section 40 must be read subject to section 2(1), which provides:
But in my judgment no intention contrary to the aforesaid section 40(2) (b) appears in the Interpretation Ordinance nor in the Import and Export Ordinance. Moreover, I hold that the conditions imposed by the Director were reasonable. 30. It was argued by Mr. Lee that, in his deliberation as to whether or not to grant a licence, the Director can have regard only to the actual application for a licence and cannot consider anything that occurred prior thereto e.g. that an applicant may have been convicted of an offence under the Import and Export Ordinance, unless such prior matters bear upon the genuineness of the application. In my judgment this is not correct. So to hold would greatly fetter the discretion of the Director to grant licences. That discretion is clearly not absolute, and equally clearly must be exercised according to law. In my view he did exercise his discretion, and did so according to law. 31. It was argued that what the Director has done is to punish the applicant, and that only the Courts can do this consequent upon a successful prosecution. But this is not correct. The Director had various objects in taking the course he did, namely (a) to ensure so far as he could that those manufacturers and traders who had abided by the quota system should not lose by the applicant's failure to do so; (b) to ensure that the applicant did not profit by his wrong doing and (c) to deter the applicant from repeating his misdeeds. His object was not, in my view, to punish. Moreover, although he may have been advised that there might be evidential difficulties in the way of securing a conviction, there was before him ample material from which he could and did conclude that the applicant had deliberately circumvented the scheme on many occasions. It was his conclusion, arrived at bone fide, which matters, not whether this Court would have arrived at a different one, though for my part I agree with it. 32. But, as a last resort, it is said that the Director was in breach of the principle of natural justice loosely embodied in the maxim audi alteram partem. I say loosely, because it has not and could not be contended that in every case a decision maker has actually to give the person likely to be affected by his decision an opportunity to be heard. All that is necessary is that he should be made aware of the case that is being made against him and be given a fair opportunity of answering it. What is said is that by the opening two sentences of his letter of the 30th August 1980 the Director made it clear that he was satisfied of the applicant's guilt, and that he was only inviting the applicant to make representations as to the extent of the sentence. In my judgment that is not so. It is not permissible to construe that letter as if it were a statute. What the Director was in effect saying was "On the basis of my investigations and the evidence at present before me, I am satisfied that you, the applicant, have exported goods without quota from Hong Kong to the Federal Republic of Germany and to Holland, and I propose taking certain steps. But what have you to say about the case made against you?" Having given the applicant considerable details of the case against him, he invited the applicant to give his comments and gave him the opportunity to make such representations as he wished. It was an opportunity which the applicant declined to accept. He cannot now be heard to complain. 33. I would dismiss the application. Representation: Martin Lee, Q.C., and R. Tang (H.H.Lau & Co.) for Applicant. B. Barlow and N.F. Miller for Respondent.
Coram: Full Bench (Zimmern. Barker and Rhind, JJ.) Date of Judgment: 27th January, 1981. ----------------- JUDGMENT ----------------- Rhind, J.: The Application 34. The Applicant is a Hong Kong company engaged in the manufacture and export of textiles. 35. For the period 1st January to 31st December 1980, the Director of Trade, Industry and Customs (hereinafter referred to as "the Director") allocated the Applicant an export quota of 1,227,760 garments for the Federal Republic of Germany and 17,122 for the Benelux countries which include Holland. 36. By letters dated 30th August, 1980 and 23rd October, 1980 the Director informed the Applicant that it was required permanently to surrender 451,816 items of its quotas for the Federal Republic of Germany and Holland, and until it did so, it would be denied export licences to the European Economic Community (EEC) countries. The reason given by the Director for this action was that he was satisfied the Applicant had cheated on its quota for the Federal Republic of Germany and Holland in 1978 by misrepresenting the destination of 458,316 garments it exported in that year. 37. As about 90% in value of the Applicant's export business is with EEC countries, the Director's decision described above has grave financial implications for the Applicant. Since announcing his decision, the Director has carried out his declared intention by in fact rejecting any applications made by the Applicant for export licences to EEC countries, the Applicant being unwilling to surrender its quotas as requested. 38. At present the Applicant has orders worth about $6,000,000 which it cannot fulfill as the result of the Director's refusal to issue licences. 39. Besides seeking orders for certiorari and mandamus, the Applicant seeks declarations that the Director's decision to refuse further licences till the Applicant surrenders quota, and the Director's consequential rejections of applications for export licences, are null and void. As Crown Counsel has undertaken that the Director will give effect to any declarations made by the court, it will be unnecessary to give separate consideration to whether the remedies of mandamus or certiorari might be appropriate. 40. That, in very brief outline, is what this case is about. 41. Before elaborating on the facts, it will be convenient first of all to consider the system which operates in Hong Kong for the control of export of textiles. The Licensing and Quota System 42. It is a fact of economic life that many countries in the world impose restrictions on the import of textiles as a means of protecting their own domestic industries. 43. In recognition of this state of affairs, over fifty countries, including Hong Kong, participate in what is known as the "Arrangement Regarding International Trade In Textiles" (commonly called the "Multi-Fibre Arrangement"), made in Geneva in 1973, under the embrella of the Geneva Agreement On Tariffs and Trades. That arrangement, which superseded earlier arrangements going back to at least 1959, provides a framework within which any participating country seeking to restrict the textile imports it receives can work out a bilateral agreement with any other participating country to limit that other country to a quota of exports. 44. Hong Kong has been required by several participants in the Multi-Fibre Arrangement to enter into bilateral agreements with them, limiting Hong Kong to a quota for its textile exports. Such agreements have their advantages for Hong Kong, for otherwise, obviously Hong Kong would not enter into them. Ideally, Hong Kong would, no doubt, like unlimited access to all overseas markets, but these agreements make the best of a bad job. 45. As there are always forces at work in the world for greater protectionism in trade, Hong Kong seeks to avoid furnishing any excuse for whittling away or abrogating the benefits it enjoys from these agreements. 46. In particular, it can only be to Hong Kong's advantage for it to be seen assiduously to honour the parts of the Multi-Fibre Arrangement designed to prevent exporting countries from cheating on agreed quotas. This topic is dealt with in Article 8 of the Multi-Fibre Arrangement, the relevant part of which reads:-
47. How important its bilateral agreements under the Multi-Fibre Arrangement are to Hong Kong can be gauged from the fact that in 1979 something like 62% by value of its textile exports were covered by such agreements. 48. One such bilateral agreement has been made with the European Common Market which negotiated as a single entity on behalf of all its members. That agreement runs from 1st January, 1977 till 31st December, 1982. That agreement makes provision for, inter alia, a yearly quota of garments which Hong Kong as a whole can export to the Federal German Republic and also a quota for the Benelut countries which include Holland. 49. Entering into textile export agreements with foreign governments is one thing; setting up a legally viable scheme within Hong Kong to control textile exports from here is something quite different. 50. A very simple legal device has been resorted to. By one short subsection of the Import and Fxport Ordinance, Cap. 60, (hereafter referred to as "the Ordinance"), the Director of Trade, Industry and Customs has been empowered to issue export licences. I will set out the particular sub-section:-
51. It is virtually on that unembroidered provision alone that there rests the massive scheme administered by the Director for the control of the export of Hong Kong's textiles. 52. To get the full picture one does need to go to some of the other sections in the Ordinance, but this does not alter the position that s.3(1) is the linchpin. For example, one needs to look at the definition of "prohibited article" in s.2 which is:-
53. From there, one needs to jump to the Import and Export (General) Regulations, made under the Ordinance, Regulation 4 of which provides in effect that no person shall export textiles to any country except under and in accordance with a licence. 54. Various provisions in the Ordinance serve to assist the Director in combatting any attempts to export textiles without a licence. For example s.10 prohibits the owner of any ship or aircraft from accepting textiles for export unless accompanied by a licence, and Part IV requires all cargo from Hong Kong to be manifested. The Director is also given wide investigative powers by Part V of the Ordinance. In case those applying for licences furnish false or misleading information, they can be prosecuted under s.36 of the Ordinance and those who export other than in accordance with a licence can be prosecuted under Regulation 4 of the Import and Fxport (General) Regulations. 55. By s.31 of the Ordinance, the Governor-in-Council is empowered to make regulations for a whole range of purposes including providing for the imposition and administration of quota controls in respect of the import or export of any article, and providing for the sale and transfer of any quota and for the conditions under which any quota may be sold or transferred, but this regulation-making power has been used sparingly, the efficacy of Hong Kong's export control scheme depending not on detailed legislative regulations but on the Director's discretion in granting or withholding licences in accordance with s.3(1) of the Ordinance. 56. An integral part of the export licensing scheme administered by the Director concerns the allocation to Hong Kong companies of the quotas he has negotiated with various countries under the bilateral agreements. 57. In his allocating of quota, the Director is in effect distributing a scarce resource, a type of activity for which the exercise of admininstrative discretion is eminently suited. 58. Mention has already been made of how all exports of textiles from Hong Kong to any country in the world require a licence from the Director. This is so even in the case of any country which imposes no quota on Hong Kong's textiles. An example of such a quota-free country is Singapore. Thus, if a Hong Kong company wishes to export to Singapore, it must still apply for a licence. 59. For any company seeking to apply for a licence to export to a country with a quota restriction, it is a condition precedent that the Applicant must have a quota entitlement at the time he applies. Having a quota entitlement is a necessary but not always a sufficient condition for the grant of a licence, because, as was correctly conceded by the Applicant's counsel, the Director has at least some discretion whether or not to grant a licence under s.3(1) of the Ordinance. The word "may" in that sub-section does not mean "must". The problem in the present case is the limit of his discretion and whether he can be said properly to have exercised it. 60. That quota entitlement is a condition precedent to the issue of an export licence in the circumstances just mentioned is laid down by Regulation 5 of the Import and Export (General Regulations) which provides:-
61. That Regulation, while recognizing the existence of the quota allocation scheme, does nothing to constitute or define such scheme. See Wong Man-shun v. R.(1) 62. How the Director allocates a quota within Hong Kong is described in a pamphlet entitled "The Modified Textiles Export Control System" which was exhibited to an affidavit made by the Director. Generally speaking, in deciding a company's allocation for a forthcoming year, the Director looks at its performance in the immediate past year, and provided it utilised substantially all its allocation for that past year, it will get at least the same allocation for the forthcoming year, plus an element for growth. 63. What the Director does is to offer a company an allocation of quota subject to the acceptance by the company of conditions laid down in the offer. A specimen offer form embodying those conditions accompanied the Director's affidavit as Exh. WD3. 64. One of the conditions a company has to accept if it wants to receive a quota is the following:-
65. Another is in the following terms:-
66. A company is explicitly required to confirm in writing whether it accepts the allocation under the conditions and warning just referred to. 67. Clearly an allocation of quota is a valuable privilege for a trader, for it can create the opportunity for access to markets which would otherwise be denied to him. Moreover, under the Hong Kong export control scheme, this privilege is given an enhanced value because a quota, once allocated, is in certain circumstances transferable. The circumstances in which such transfer is permitted are described in the pamphlet already referred to. Specimen transfer forms are annexed to the pamphlet as Appendix V and VI. 68. The holder of a quota has to apply to the Director to make a transfer, and the Director reserves the right to refuse any application to transfer without assigning any reason. (See the conditions on the back of the transfer forms). 69. That allocations of quota have a value quantifiable in monetary terms can be discerned from the fact that a market is made in transfers. The current rate for permanently transferring quota is about $120 per dozen items, according to the uncontradicted statement made in an affidavit filed on behalf of the Appellant. 70. On that basis, the quota which the Director wants the Applicant to surrender would have a transfer value in excess of $4.5 million. 71. Whether an allocation of quota could ever be regarded as amounting to some species of property, and if so, what, does not call for any definitive answer for the purposes of the present case. Suffice it to say that such a quota, possessing as it does material value to the company to whom it has been allocated, can only realistically be viewed as in the nature of an asset of that company. 72. The significance of this is that it could bring into play the natural justice principles that the law has evolved for safeguarding individuals from arbitrary interference with rights or expectations which are proprietary in their nature. (See, e.g. R. v. Liverpool Corporation).(2) Even if it is within the Director's power to require the Applicant to surrender part of its quota - or another way of looking at it which produces the same result: even if it is within the Director's power to refuse to issue further export licences against part of the Applicant's quota - he should only consider doing so after giving the Applicant a fair chance of making representations as to why he should not do so. In other words, the audi alteram partem rule will apply. 73. Having explained in outline the Hong Kong export licensing scheme and the system of allocating quotas which works in tandem with it, a fundamental question needs to be asked: Is the whole scheme unlawful because it is not spelt out in detail in Regulations or some other legislative form. The answer to that in my opinion is an unequivocal "No". The Court of Appeal reached a similar conclusion, albeit obiter, in Wong Man-shun v. R.(1) 74. What the Director has done has been to erect a policy on the foundation of the licensing power conferred on him by s.3(1) of the Ordinance. For the Director to have structured his discretion in the way he has by setting up the scheme described in the pamphlet "The Modified Textiles Export Control System" impresses me as both lawful and reasonable. 75. Observations made by Lord Reid in British Oxygen Co., v. Minister of Technology(3) can, to my mind, be applied to describe the position of the Director:-
76. The objects of the Ordinance can be gathered from its preamble:
The scheme operated by the Director on the strength of the power conferred on him by s.3(1) is wholly within these objects. The Allegations Against The Applicant 77. These can be gathered from the text of a letter sent on behalf of the Director to the Applicant on 30th August, 1980. As it is an important document for the purposes of the present case I will set it out in full:-
78. I do not need to show all the details of shipments listed in the Appendix to that letter: a specimen will suffice.
This letter would by no means have come as a bolt from the blue to the Applicant, for it must already have been aware for some time that it was being investigated by the Department in respect of the matters to which the letter related. This can be gathered from a report exhibited to an affidavit made by Mr. P.Y.F. Lo, an Assistant Commissioner of Trade. From paragraphs 2, 3 and 25 of that report, it is clear that the Applicant's attitude was throughout one of non-cooperation with the Department in the investigation. The Director's Powers Subject only to a requirement that he must act fairly, I am of the opinion that it is a proper exercise of the Director's powers under s.3(1) of the Ordinance to refuse export licences to those whose conduct he has good reason to believe is responsible for damaging Hong Kong's reputation among the international trade community. I do not think there could be a more valid reason for him to exercise his undoubted power of refusing to accord export privileges. I find myself in respectful disagreement with the views expressed by Liu, J. in Miscellaneous Proceedings 369 of 1980 on the powers which the Director enjoys. There could be many situations where the Director might feel compelled to curtail a trader's export activities in the interests of preserving Hong Kong's fair name overseas. If, for example, the Director had good reason to believe that a trader was damaging Hong Kong's reputation by exporting shoddy goods, I do not consider the Director would be acting outside his powers in withholding further export licences. Likewise, I fail to see why the Director should not withhold export facilities to a company when he is satisfied with good cause that its activities in cheating on quotas are getting Hong Kong a bad name with its trading partners. That, to my mind, would be a perfectly legitimate consideration for the Director to take into account when deciding whether to grant a licence. Obviously, there must be limits to the Director's powers. Much emphasis was placed by the Applicant's counsel on the point that doling out punishment cannot be part of the Director's licensing function. With that I would agree, for punishment is the exclusive province of the courts, and the imposition of punishment cannot be regarded as incidental to the objects for which the Ordinance conferred licensing powers on the Director. Authority for the proposition that anyone exercising a discretion under legislation must do so for the purpose of promoting the objects and policy of the legislation is to be found in Padfield v. Minister of Agriculture and Fisheries(4). However, I see nothing objectionable in the Director using his licensing powers for purpose which are essentially compensatory in their nature. For example, I would regard it as in order for the Director to refuse to grant further export licences to a company which failed to compensate an oversees customer for a delivery of inferior goods. Such use of his licensing powers would be a legitimate way for the Director to promote Hong Kong's export trade. In similar vein, I would regard the Director as using his powers for legitimate compensatory, rather than improper punitive purposes, where he required a company which was responsible for Hong Kong as a whole losing part of its quota to give up an equivalent part of its own quota. Making those responsible for the loss, sustain the loss, is pure compensation, to my mind. How The Director Exercised His Powers Against The Applicant Mr. Lee for the Applicant makes two complaints against the Director's letter of 30th August, 1980. Firstly, he disputes that the Director has the power to do what he is threatening to do in withholding licences until the Applicant surrenders quota, and, secondly, he contends that if the Director does possess such a power, he has exercised it unfairly by already making up his mind that the Applicant is responsible for the conduct alleged without giving the Applicant a fair opportunity of being heard in its defence. On the first point I hold against Mr. Lee. I am satisfied that in principle the Director is entitled to withdraw licensing facilities from a company where he has good cause to believe it has cheated on its quota. The background to why the Director found it necessary to withhold from certain companies including the Applicant an amount of quota equivalent to that in respect of which he had good cause to believe they had cheated is fully explained in the affidavit he filed. In effect, Hong Kong's trading partners required Hong Kong as a whole to surrender any quota on which there had been cheating, and it is the Director's policy within Hong Kong to impose any such loss on any company actually occasioning the loss. Nothing could be fairer so long as there is good cause to believe the Director has correctly identified a culprit. This leads into Mr. Lee's second point, the fairness with which the Director reached his conclusion that the Applicant had cheated in the manner alleged. As I indicated earlier, the amount of quota which the Director was proposing to take away from the Applicant had a market value to the Applicant in excess of $4.5 million. No one should be required to suffer adverse financial consequences of that magnitude without first of all being given a fair opportunity of making representations. Where, to my mind, the Director can be said to have fallen short in observing the requirements of procedural fairness is that the Director's letter of 30th August, 1980 conveys the impression that he had already made up his mind that the Applicant had committed the misconduct alleged, so that in effect the area on which the Applicant was confined to make representations was that of the adverse consequences it should sustain as the result of that supposed misconduct. Justice is not seen to be done if the Director gives the impression he has already made up his mind about the Applicant's involvement. Merely because the Applicant had failed to cooperate with the investigation undertaken by the Department did not in my opinion justify the course the Director adopted here. In refusing to cooperate with the Director's investigation, which was directed towards whether the Applicant should be prosecuted, the Applicant was doing no more than exercise its right not to incriminate itself. A company should not have to face the dilemma of either having to give up its right not to incriminate itself, or otherwise having to suffer severe financial loss as the result of administrative action, without being given the further opportunity of explaining it has done nothing wrong. When, as here, the Director was no longer considering a prosecution but merely the taking of administrative action, the Applicant should have been afforded a fresh opportunity of explaining whether it was responsible for the conduct alleged before the Director took his proposed administrative action. On 17th September, 1980, the Applicant's solicitors replied to the Director's letter of 30th August, 1980. Through its solicitors, the Applicant denied responsibility for what the Director was alleging. Instead of making a detailed refutation of the Director's allegations, the Applicant just made a simple denial. It was not unreasonable for the Applicant to adopt an attitude at that stage that there was really not much point in going into the details of its denial as the Director appeared already to have made up his mind. After making this simple denial, the Applicant's solicitor made the observation,
79. My view is that the Applicant should be given the opportunity of refuting the correctness of the Director's allegations. Nothing in the way of a formal hearing needs to be conducted. We are here dealing with an administrative procedure so that as long as the Applicant is given any sort of fair opportunity to present its side of the story that will suffice. How flexible the procedure of administrative bodies can be is illustrated by Selvarajan v. Race Relations Board(5). 80. Following on the Applicant's solicitors' letter of 17th September, 1980, the Director sent his reply of 23rd October, 1980, confirming his earlier proposal that until the specified amount of quota was surrendered, no further licences would be forthcoming in respect of exports by the Applicant to the EEC. Moreover, the Director has kept to his word by in fact rejecting such licences as the Applicant has applied for. Conclusions 81. The conclusion I have reached is that the decision conveyed by the Director's letters of 30th August, and 23rd October, 1980 that the Applicant should be denied export licences until he surrendered the quota specified was a nullity because it was reached without proper observance of the audi alteram partem rule. Likewise, his consequential decisions since then in rejecting applications for licences have been invalid. 82. As I find myself in a minority among my brethren in reaching this conclusion, the orders I would have made are of no practical consequence, but I will, nonetheless, state them. 83. Fortunately, at no stage has the good faith of the Director been impugned. Accordingly, I would have been happy to order the Director to re-consider the question whether he had good cause to believe the Applicant had perpetrated the misconduct complained of, this time, of course, giving the Applicant a fair opportunity to refute the allegations. If, after thus reconsidering the matter, and taking into account what the Applicant has to say, the Director were to find there was good cause to believe that the Applicant has committed this misconduct, then the Director would be fully justified in requiring the Applicant to surrender quota, and refusing export licences as a means of enforcing such surrender of quota. 84. In the light of the foregoing, I would make the declarations which the Applicant seeks.
Representation: Martin Lee, Q.C. & Mr. R. Tang (H.H. Lau & Co.,) for B. Barlow & N.F. Miller for Respondent (1) Criminal Appeal No. 968 of 1979 (2) [1972] 2 Q.B. 299 (3) (1971) A.C. 610 (4) 1968 A.C. 997 (5) (1976) 1 All E.R. 12 |