Linky Chance Ltd v. The Commissioner for Television and Entertainment Licensing

HCA 2127/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2127 OF 2003

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BETWEEN

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Before: Hon Chung J in Court

Dates of Hearing:  20 to 21 and 24 November 2006

Date of Handing Down Judgment:  15 December 2006

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J U D G M E N T

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Introduction

1.The plaintiff commenced this action in June 2003.  The causes of action on which the action is based are:-

(a)     negligence;

(b)    breach of statutory duty.

The amount of damages claimed at the beginning of the trial approaches $190 million.  That amount was adjusted downward by 20% and 50% respectively by a witness called by the plaintiff to give expert opinion on the business loss likely to have been suffered.

2.By virtue of the Amusement Game Centres Ordinance (Cap. 435), the defendant is vested with the power to grant licences for operating amusement game centres (“AGCs” (and “AGC” in singular)).  This action arises from the defendant’s earlier refusal of the plaintiff’s application for an AGC licence.  The plaintiff alleges that the refusal was a result of the defendant’s negligence and/or breach of statutory duty.

Background Facts

3.The background facts are largely undisputed and can be summarized as follows.

4.In March 1999, a Ms Wong (“Wong”) applied on the plaintiff’s behalf to the defendant for an AGC licence.  The proposed location of the AGC was a basement shop in a multi-storey building in Marble Road, North Point (“the proposed AGC”).  There is an exit in the basement level leading to the North Point MTR station.

5.The defendant informed Wong on 1 April 1999 the application was being processed.  The defendant’s letter contained the following statement:-

“由於本處在現階段未能確定你的申請會否獲批准，我們故此鄭重勸喻你，切勿就擬使用的樓宇，作出任何支出或任何形式的財政承擔。”

A similar advice appeared in a number of the defendant’s subsequent correspondence with the plaintiff.

6.The defendant’s inspection staff visited the proposed AGC.  In a report prepared afterwards, 8 education institutions were found to be within the 100-meter radius.

7.On 16 June 1999, the defendant informed Wong, subject to her representation, the AGC application would be refused because of the presence of one education institute within 100 metres of the proposed AGC.  Written representations were made by Wong on 29 June 1999.

8.The defendant informed Wong on 10 August 1999 the application to grant an AGC licence was refused.  The appeal against the refusal was dismissed by the appeal board in February 2000 (written reasons were given in March 2000).

9.Wong sought, and was granted, leave to apply for judicial review in June 2000 (HCAL 775/2000).  In a judgment handed down in November 2000, the decisions of the defendant and the appeal board were quashed.  The court remitted Wong’s application to the defendant for reconsideration in accordance with the court’s findings.

10.On 19 February 2001 the defendant informed Wong its intention to refuse the application subject to her representations.  The reason given by the defendant was:-

“擬使用樓宇在現存壹間教育機構及壹間遊戲機中心的一百米範圍內，故不適宜用作經營遊戲機中心”.

11.After further correspondence, the defendant informed Wong of the following on 24 April 2001:-

“你曾於一九九九年三月二十六日申請遊戲機中心牌照。

根據你提供的資料，本處擬就成人場238部遊戲機發出牌照一事，進一步考慮你的申請。

…

為及早安排有關部門派員視察擬使用樓宇，你必須提早三至四個星期 … 通知本處該單位預計開業的時間 … ”.

The date stated in the letter for fully complying with the requirements was 24 July 2001.

12.The plaintiff did not respond to the above letter; nor did it respond to the subsequent letters from the defendant (which were in the nature of time extensions (or reminders)) for complying with the said requirements.

13.On 27 May 2002, the defendant sought Wong’s representations before refusing the application.  The refusal was contained in the defendant’s letter dated 2 July 2002 (about 14 months after 24 April 2001).  The reason given for the refusal was:-

“本處處長已考慮你 … 的來信內容和你的申請的有關情況，但仍未能信納你擬使用作為遊戲機中心的地方是適宜用作經營遊戲機中心。因此處長現決定根據 … 第5(4)(b)(i) 條，拒絕你的申請”.

14.An appeal was yet again lodged with the appeal board against that refusal.  The appeal was also dismissed in February 2003.

15.As stated above, this action was commenced in June 2003.

Cap. 435, the Guidelines and the Judicial Review Decision

16.S. 5(4), Cap. 435 provides:-

“The Commissioner shall not grant a licence unless he is satisfied in relation to the proposed operation of the amusement game centre, that-

(a)     the person applying for a licence is an individual person who-

(i)      has attained the age of 18 years;

(ii)     is a fit and proper person to operate an amusement game centre;

(iii)     will adequately and personally supervise the operation of the amusement game centre;

(iv)    is not the agent, representative or servant of any person whose licence has been revoked or whose application to renew a licence has been refused under section 9;

(b)     the place of proposed operation is-

(i)      suitable for the operation of an amusement game centre; and

(ii)     located in an area suitable for the operation of an amusement game centre” (emphasis supplied).

The provisions in s. 5(4) most relevant to this action are s. 5(4)(b)(i) and (ii); namely, those provisions regarding the respective suitability of:-

(1)     a place proposed for the operation of an AGC;

(2)     an area in which the proposed operation is located.

17.The statute itself has not defined what place is suitable for the operation of an AGC, nor has it defined what area is suitable for such purpose.  In a “Guidelines for Granting of a Licence” published by the defendant in April 1988 (applicable to the AGC application, the subject-matter of this action), those matters have been set out in more detail (“the Guidelines”).

18.In relation to the suitability of a place for operating an AGC, the Guidelines state:-

“(e)   the proposed premises are located in a building used solely for commercial purposes;

(f)      the proposed premises are not located in a building already accommodating an existing [AGC] or an educational institution … ;

…

(i)      the applicant has complied with all conditions relating to ventilation, fire prevention and health as required by the Urban Services Department/Regional Services Department, Fire Services Department and other departments concerned; and other fitting-out requirements of the Licensing Authority;

(j)      the proposed premises have been installed with machines in strict accordance with the layout plan approved by the Licensing Authority;

(k)     the games/machines to be installed on the proposed premises have been approved by the Licensing Authority” (emphasis supplied).

By 24 April 2001 (see para. 11 above), the Urban Services Department not longer existed.  Its functions have been taken over by the Food and Environmental Hygiene Department.  This fact forms the basis for one of the plaintiff’s arguments.

19.In relation to the suitability of an area in which the proposed operation is located, the Guidelines state:-

“(g)   the proposed premises are not within a radius of 100 metres from an existing [AGC] or educational institution;

(h)     the proposed premises are located in an area suitable for the operation of an [AGC]” (emphasis supplied).

20.The defendant’s refusal of the application in August 1999 must have been based on para. (g) of the Guidelines.  As stated above, the judicial review application resulted in the setting aside of the said refusal.  The following parts of the judgment summarized the reasons for the court’s decision:-

“23.   … in R v. Secretary of State for the Home Department, ex parte Lancashire Police Authority [1992] COD 93, it was held that whilst it was not necessary or proper to construe a policy in a way in which an act of parliament or a statutory instrument would be construed, it was necessary to construe it simply in the way in which an educated person acquainted with the factual context would construe it, by giving to it a common sense meaning and without resort to any such legal rule.

…

25.    Mr Dykes' point was a narrow one, but not the less cogent for that. He says that the words mean what they say and cannot reasonably be construed in any other way, namely, that the radius is to be drawn from the educational establishment. …

…

27.    Mr Fitzpatrick for the respondent accepts that the essential issue is whether the Commissioner's interpretation of the policy as stated is one that falls within a permissible range of interpretations of paragraph (g) of the Guidelines. He contends that the policy as stated allows of more than one interpretation …

28.    I have considerable sympathy with Mr Fitzpatrick's submission. … [but] the fact is that the language of the policy could hardly be more clear. Putting aside any question of an exercise in statutory interpretation, the educated person, even acquainted with the factual context, who, looking at the policy, is asked : from where is the radius to be drawn? - is bound to say, is he not :-

‘Well, it says so, right there in paragraph (g), in terms – “from an existing amusement game centre or educational institution”.’ (Emphasis added)

It is a question of plain English. …

…

31.    ... I am driven to the conclusion that the Board has erred in so far as it has held that the Commissioner did not deviate from the promulgated policy. ... The key point is that the policy, according to its plain meaning, has not been applied and, accordingly, the decision of the Board should, subject to the question of this court's discretion to withhold the remedy, be quashed” (emphasis supplied).

21.The reason why the court decided to remit the matter to the defendant for reconsideration was:-

“33.   … It may be - I know not - that the application considered in accordance with the former policy, properly interpreted, will fail again. But I am not in a position to say that that is inevitable. ... I am not in a position to judge the matter. Only the Commissioner is. …

34.    ... It makes little sense for the matter to go back to the Board for reconsideration where the new factors at play will be many. The applicant may well wish to put forward further submissions based upon the new approach that the (former) policy requires. Alternatively, if, despite the new approach, the Commissioner were still minded to refuse the application, he would wish to give the applicant an opportunity to have her say about such objections as he now has, and they will have to be considered. …

35.    For the reasons that I have given, … [the] applicant's application for a licence is remitted to the Commissioner with the direction of this court to reconsider the application in accordance with the findings of this court” (emphasis supplied).

Negligence

(a)     Duty of Care

22.The plaintiff has not made clear in the statement of claim or its opening which of the two causes of action (negligence and breach of statutory duty) forms the primary basis of its claim.  However, this was made clear in its closing submissions: the defendant’s duty of care in common law is wider in scope, and is relied upon as the primary basis of its claim.

23.An examination of the validity of the plaintiff’s argument can start with an excellent discussion of this topic by Lord Browne-Wilkinson in X(minor) v. Bedfordshire County Council [1995] 2 AC 633:-

“Private law claims for damages can be classified into four different categories, viz: (A) actions for breach of statutory duty simpliciter (i.e. irrespective of carelessness); (B) actions based solely on the careless performance of a statutory duty in the absence of any other common law right of action; (C) actions based on a common law duty of care arising either from the imposition of the statutory duty or from the performance of it; (D) misfeasance in public office, i.e. the failure to exercise, or the exercise of, statutory powers either with the intention to injure the plaintiff or in the knowledge that the conduct is unlawful” (pp. 730-1).

I regard this limb of the plaintiff’s claim to fall within Lord Browne-Wilkinson’s category (C) whereas the limb of its claim based on breach of statutory duty should fall within category (B) (which will be discussed under the next heading below).

24.In relation to category (C), Lord Browne-Wilkinson said in Bedfordshire County Council:-

“… the claim alleges either that a statutory duty gives rise to a common law duty of care owed to the plaintiff by the defendant to do or refrain from doing a particular act or (more often) that in the course of carrying out a statutory duty the defendant has brought about such a relationship between himself and the plaintiff as to give rise to a duty of care at common law.  A further variant is a claim … that, whether or not the authority is itself under a duty of care to the plaintiff, its servant in the course of performing the statutory function was under a common law duty of care for breach of which the authority is vicariously liable” (emphasis supplied) (p. 735).

The plaintiff has not expressly so put it but this limb of the plaintiff’s claim must have been premised on Lord Browne-Wilkinson’s proposition quoted above (for which emphasis has been supplied).

25.Lord Browne-Wilkinson observed:-

“[counsel for one of the plaintiffs in the appeals before the House of Lords] … invited your Lordships to lay down the general principles applicable in determining the circumstances in which the law would impose a common law duty of care … I have no doubt that, if possible, this would be most desirable.  But I have found it quite impossible either to detect such principle in the wide range of authorities and academic writings … or to devise any such principle de novo. … statutory duties now exist over such a wide range of diverse activities and take so many different forms that no one principle is capable of being formulated applicable to all cases.  However, in my view it is possible in considering the problems raised by these particular appeals to identify certain points which are of significance” (emphasis supplied)(p. 735).

26.Lord Browne-Wilkinson’s proposition relating to category (C) (quoted at para. 24 above) was stated in different language in Charlesworth & Percy on Negligence (2006) 11^th Ed.:-

“When considering the liability of a public authority in negligence for performance of a statutory function, Dyson L.J. quoted the summary of Hale L.J. in A. v. Essex CC:

‘[…] there are three potential areas of inquiry; first, is whether the matter is justiciable at all or whether the statutory framework is such that Parliament must have intended to leave such decisions to the authorities, subject of course to the public law supervision of the courts; second, whether even if justiciable, it involves the exercise of a statutory discretion which only gives rise to liability in tort if it is so unreasonable that it falls outside the ambit of the discretion; third in any event whether it is fair, just and reasonable in all the circumstances to impose such a duty of care.  The considerations relevant to each of these issues overlap and it is not always possible to draw hard and fast lines between them’ (emphasis supplied) [[2004] FCR 660 at [33]]. …

[Dyson LJ] saw much to be said for the view that there should only be two areas of potential enquiry … The first was whether the decision was justiciable at all.  The second was to apply the classic three stage test from Caparo Industries v. Dickman” (para. 11-09).

The Caparo test has been summarised as (1) foreseeability of loss, (2) proximity and (3) fairness, justice and reasonableness: Stovin v. Wise [1996] AC 923, 931H.

27.Stovin was itself a split decision of the House of Lords; Lord Hoffmann’s decision represented the views of the majority whereas that of Lord Nicholls represented those of the minority.  Lord Hoffmann examined the earlier decisions in the development of the law of an authority’s negligent omission to use statutory powers, including:-

(a)     Sheppard v. Glossop Corporation [1921] 3 KB 132;

(b)    East Suffolk Rivers Catchment Board v. Kent [1941] AC, 74 (especially p. 102);

(c)     the Dorset Yacht case;

(d)    Anns v. Merton London Borough Council [1978] AC 728;

(e)     the Caparo case,

and said:-

“Lord Wilberforce … first stated the well known two-stage test for the existence of a duty of care.  This involves starting with a prima facie assumption that a duty of care exists if it is reasonably foreseeable that carelessness may cause damage and then asking whether there are any considerations which ought to ‘negative, or to reduce or limit the scope of the duty or the class of person to whom it is owed or the damages to which a breach of it may arise.’  Subsequent decisions in this House and the Privy Council have preferred to approach the question the other way round, starting with situations in which a duty has been held to exist and then asking whether there are considerations of analogy, policy, fairness and justice for extending it to cover a new situation … provided that the considerations of policy etc. are properly analysed, it should not matter whether one starts from one end or the other.

On the other hand the assumption from which one starts makes a great deal of difference if the analysis is wrong.  The trend of authorities has been to discourage the assumption that anyone who suffers loss is prima facie entitled to compensation from a person (preferably insured or a public authority) whose act or omission can be said to have caused it.  The default position is that he is not” (emphasis supplied) (p. 949).

The approach which he adopted for determining the existence of a liability under Lord Browne-Wilkinson’s categories (A) and/or (B) appears to be different from that which he adopted for determining the existence of one under category (C):-

“Whether a statutory duty gives rise to a private cause of action is a question of construction … It requires an examination of the policy of the statute to decide whether it was intended to confer a right to compensation for breach.  Whether it can be relied upon to support the existence of a common law duty of care is not exactly a question of construction, because the cause of action does not arise out of the statute itself.  But the policy of the statute is nevertheless a crucial factor in the decision …

The same is true of omission to perform a statutory duty.  If such a duty does not give rise to a private right to sue for breach, it would be unusual if it nevertheless gave rise to a duty of care at common law … ” (emphasis supplied) (p. 952).

28.Lord Hoffmann’s conclusion as regards category (C) is summed up in the following quote:-

“In summary, therefore, I think that the minimum preconditions for basing a duty of care upon the existence of a statutory power, if it can be done at all, are, first, that it would in the circumstances have been irrational not to have exercised the power, so that there was in effect a public law duty to act, and secondly, that there are exceptional grounds for holding that the policy of the statutes requires compensation to be paid to persons who suffer loss because the power was not exercised” (emphasis supplied) (p. 953).

29.Lord Nicholls’ approach in Stovin is in fact not much different from Lord Hoffmann’s.  He started from the position that a coherent, principled control mechanism has to be found for limiting a public authority’s private law liability since the Merton London Borough Council case.  This is because:-

“[the] powers conferred on public authorities permeate so many fields that a private law duty in all cases, sounding in damages, would be no more acceptable than the opposite extreme” (p. 931).

He examined the tripartite formulation of liability in the Caparo case (see para. 26 above) and opined that, although “proximity” is a slippery word, and is nothing more than a convenient shorthand for a relationship between two parties which makes it fair and reasonable one should owe the other a duty of care (p. 932B-C (and also pp. 936H-937C), Stovin), the test still has advantages.  It enables the court to focus on the relationship between the parties.  But, he said:-

“… the test of fairness and reasonableness is more difficult to satisfy with a duty to act.  This is especially so when the subject matter is potential financial loss, rather than physical injury or damage.  The reluctance to impose a duty to act is even greater when the loss threatened is financial” (p. 932).

In relation to the relevance of the statute to the imposition of a common law duty, his approach is the same as Lord Hoffmann’s:-

“Public authorities discharging statutory functions operate within a statutory framework.  Since the will of the legislature is paramount in this field, the common law should not impose a concurrent duty inconsistent with this framework.  A common law duty must not be inconsistent with the performance by the authority of its statutory duties and power in the manner intended by Parliament, or contrary in any other way to the presumed legislative intention” (emphasis supplied) (p. 935) (see also p. 937B-C).

30.What appeared to have divided him and Lord Hoffmann in the outcome of the appeal in Stovin was whether imposing a duty on the highway authority’s part to act (namely, to carry out the actual work of removing a visibility problem from a road junction) was inconsistent with the statutory framework.  Lord Nicholls (and the minority) concluded it was not because the highway authority had in fact decided to act, but merely failed to proceed with reasonable diligence (a duty which the legislature intended to impose); this, coupled with other special features, rendered the authority liable: pp. 936C and 939-41.  On the other hand, Lord Hoffmann (and the majority) concluded that the highway authority has not been irrational in not exercising its discretion to act immediately (timing of the work and budgetary considerations being part of the discretion) (pp. 956); further, the evidence adduced before the court did not establish that the authority has in fact decided to act (p. 956-7).

31.Having considered the legal principles set out above, I do not consider Cap. 435 to intend to give rise to a private cause of action.  As stated above, this part of the plaintiff’s claim is based on the manner in which the defendant exercised its powers conferred by ss. 5(4)(b)(i) and (ii).  For the sake of clarity in discussion, I shall discuss the issues relating to each of those two provisions separately, dealing first with s. 5(4)(b)(ii), then with s. 5(4)(b)(i).

32.Whether s. 5(4)(b) has conferred on the defendant a discretionary power was one of the issues raised in Lau Wai Kin, Dandy v. Commissioner for Television and Entertainment Licensing, HCAL 43/2006 (31 August 2006) (see para. 20(2) and 22 to 26 thereof).  In relation to that matter, I said:-

“26.   For present purposes, I consider it nothing more than a semantic difference to speak of s. 5(3) and s. 5(4) as:-

(1)     the former having conferred a discretion whereas the latter having imposed a duty, or

(2)     the latter specifying the limits of the discretion conferred by the former.

If it were necessary to determine this matter, I would conclude that the proper way of looking at those provisions would be that set out in sub-para. (2) above

… ”.

The plaintiff has not raised any argument about this point.  I therefore proceed on the basis that it is accepted s. 5(4) forms part of the defendant’s discretionary power.

33.The plaintiff contends in its written closing submissions the Guidelines never have legal effect.  But if this contention were right, it in fact makes this limb of the plaintiff’s claim unarguable.  This is because one of the main planks of its case is the defendant has failed to interpret, adopt and/or apply the Guidelines correctly (see particulars (b) and (c), para. 24, statement of claim).  The judgment in the judicial review application is relied on as the basis for such case (see particular (f), para. 24, statement of claim).  The defendant is also said to have persisted in such error even after the said judgment (see particulars (e), (g) and (i), para. 24, statement of claim).  As stated above, the reason given in the judicial review application for setting aside the defendant’s decision was that:-

“31.   ... the policy [that is, the Guidelines], according to its plain meaning, has not been appliedand, accordingly, the decision of the Board should … be quashed”.

34.Hence, if (as was argued in the written closing submissions) the Guidelines were of no legal effect, then the defendant can quite legitimately ignore them when exercising the discretion powers conferred by s. 5(4)(b).  Consequently, in the absence of a pleaded basis of irrationality in the defendant’s refusal to grant the application, Lord Hoffmann’s first minimum precondition (see para. 28 above) has not been satisfied.

35.As regards Lord Hoffmann’s second minimum precondition, the legislative intention of Cap. 435 was mentioned in the Lau Wai Kin, Dandy case:-

“30.   The legislative intention of Cap. 435 has been commented upon in Wong Wei Man, albeit in the context of the Guidelines (see para. 18 above).  Further, the long title of Cap. 435 states:-

“[Cap. 435 is an] Ordinance to regulate amusement game centres”.

31.    The need for regulation of AGCs is obvious.  First and foremost, they are places to which children and young people are most likely to be attracted and hence will frequent.  The Hong Kong community, quite justifiably, must see to it that:-

(1)     children and young people are not overly attracted to, or attracted to improper materials available in, these places;

(2)     the AGC operators are not undesirable elements;

(3)     the AGCs are not operated in a way which may create public order concern, noise and/or nuisance and the like to the neighbourhood” (emphasis supplied).

Para. 18 of my judgment quoted para. 11 and 30 of the judgment in the Wong Wei Man case:-

“The rationale for the policy reflected by [the Guidelines] is not difficult to see. It is explained in an affirmation before me on behalf of the Commissioner as aimed at ensuring security, or the concern about security, of residential areas (hence the restriction to commercial buildings), and to minimize the possibility of school children being drawn from schools close at hand to the game centres. The 1988 guidelines were endorsed by the Executive Council” (emphasis supplied) (para. 11);

“And in coming to a conclusion about the plain meaning of the words used, let it not be forgotten that the 1988 document was not some hastily or loosely drawn document. There had, as we have seen, been a policy in 1984 and it was amended, but its amendment was only made after extensive consultation with District Boards, and also with the approval of the Executive Council. I think that one can safely assume, though I have not seen the relevant Executive Council memorandum, that the words of the policy were placed before that body. I do not see why the Commissioner should not be bound by the policy thus expressed” (emphasis supplied) (para. 30).

Thus, as its long title states, Cap. 435 is a statute enacted for the regulation AGCs (which purpose must be for the benefit of the community, especially children and young people).

36.The plaintiff also argues that Cap. 435 was enacted to protect “legitimate operators” of AGCs as well, relying on words to such effect by the (then) Secretary for Home Affairs when moving the second reading of the bill: Hong Kong Hansard, 14 October 1992 (at p. 120).  Assuming in the plaintiff’s favour that the reference to Hong Kong Hansard is permissible for present purposes, two things should be noted:-

(1)     the tenure of the speech was concerned with the need to pass the bill to enable a “more effective and stricter control over [AGCs]” to tackle the increasing “conflicts with the former licence conditions” and the resultant public concern;

(2)     in any event, the plaintiff was never an operator of an AGC and thus never fell within the class referred to in the speech.

37.By reason of the above matters, I do not consider it a policy of Cap. 435 that compensation should be paid to applicants such as the plaintiff when their applications have been refused by the defendant in the circumstances summarized above, being occasions where the defendant was clearly exercising a discretion conferred by Cap. 435.

38.It is strictly unnecessary to mention the point.  But merely because a person falls within the class which can benefit from a statute does not necessarily mean that the statute has conferred upon him a private cause of action: Cutler v. Wandsworth Stadium Ltd. [1949] AC 398 (a claim brought by a bookmaker against the occupier of a licensed dog-racing track for failing to provide a space for carrying on bookmaking, in accordance with s. 11, Betting and Lotteries Act 1934).

39.In the course of its verbal closing submissions, the plaintiff recognised the flaw in its argument about the Guidelines not having any legal effect, and accepted that they can be used by the defendant as a reference.  It is common ground that the defendant has fallen into error when applying para. (g) of the Guidelines before the judicial review application.  But even so, and for the reasons set out in para. 40 to 42 below, I do not consider the error to be such as to render the defendant’s decision to fall outside the ambit of s. 5(4)(b)(ii).

40.There is nothing inherently undesirable about a public authority laying down policies, or guidelines, when exercising its discretionary powers conferred by statute.  As de Smith, Woolf & Jowell: Judicial Review of Administrative Action (1995) 5^th Ed. points out:-

“A decision-making body exercising public functions which is entrusted with a discretion must not, by the adoption of a fixed rule of policy, disable itself from exercising its discretion in individual cases …

The rule against fettering discretion by no means forbids bodies upon which discretionary power has been conferred to guide the implementation of that discretion by means of a policy or a rule.  It directs attention to the attitude of the decision-maker …

The underlying rationale of the rule … is to ensure that two perfectly legitimate administrative values, those of legal certainty and consistency, may be counteracted by another equally legitimate administrative value, namely, that of responsiveness … ” (emphasis supplied) (para. 11-001, 11-003 and 11-004).

(see also Fordham: Judicial Review Handbook (2001) 3^rd Ed., para. 50.4, pp. 746-750).

41.The purpose of para. (g) of the Guidelines has also been touched upon in the Lau Wai Kin, Dandy case:-

“33.   … it has to be remembered that s. 5(4)(b)(ii) is essentially concerned with the “suitability of an area”, and not simply “an area”.  The purpose of the regulatory regime set up by Cap. 435 has already been set out in para. 18 and 31 above.  With this in mind, matters like the distribution and density of AGCs and their proximity to institutions of concern (such as educational institutions) must be highly relevant to the Commissioner’s decision; hence, para. (g) of the Guidelines” (emphasis supplied).

42.The defendant has failed to measure the distances between the proposed AGC and the existing AGCs and educational institutions strictly in accordance with the letters of the Guidelines.  Nevertheless, the actual measurements must have been undertaken with the purpose of s. 5(4)(b)(ii) in mind.

43.Thus, in short, the defendant’s earlier error in applying para. (g) of the Guidelines does not amount to:-

(a)     a decision so unreasonable that it should fall outside the ambit of the statutory discretion under s. 5(4)(b) (using the words of Lord Browne-Wilkinson in the Bedfordshire County Council case, or Dyson LJ in the Essex CC case (and assuming the error is justiciable));

(b)    no real exercise of the discretion, or an act in abuse or excess of the power conferred (using the words of the court in the Dorset Yacht case);

(c)     so irrational a decision as to not to have exercised the discretion, and hence in breach of the public duty to act (using the words of Lord Hoffmann in the Stovin case).

44.The above reasons can apply with equal force to the plaintiff’s case based on an alleged contravention of s. 5(4)(b)(i).  But there are other reasons why this part of the plaintiff’s case should also fail.

45.First, the plaintiff contends (among other things) that it was improper for the defendant to also consider s. 5(4)(b)(i) after judgment has been pronounced in the judicial review application.  In view of the court’s observations in that judgment (quoted at para. 21 above), there is no substance in this contention.

46.The plaintiff also contends that the defendant has wrongfully sub-delegated the discretion power in the letter dated 24 April 2001 (see also para. 11 above).  The gist of the complaint here is that the letter required the plaintiff to comply with requirements relating to hygiene and ventilation, fire prevention and noise reduction, and left inspection work to the Food and Environmental Hygiene Department as well as the Fire Services Department.  I see no merit in the contention.  Public safety (of visitors and neighbours of AGCs) must have been one of the important matters falling within s. 5(4)(b)(i).  The above requirements are all concerned with public safety.  There is nothing wrong for the defendant take into account the opinions of those two departments as regards whether those requirements have been fulfilled, the defendant herself not having the same expertise to undertake the task.

47.Finally, by failing to respond to the defendant’s letters since 24 April 2001, by 2 July 2002 (see para. 13 above), the defendant was entitled to conclude that the proposed AGC has not met the requirements set out in the letter dated 24 April 2001.  In this connection, the letter dated 24 April 2001 expressly stated:-

“你須於二００一年七月二十四日或之前，填妥表格（附件11）並提交下列資料，以通知本處你已遵循有關規定 …”.

48.Further, in relation to both ss. 5(4)(b)(i) and (ii), the same conclusion (see para. 31 above) can be reached via another route.  One of the reasons given in Yuen Kun Yeu v. Attorney General of Hong Kong [1988] 1 AC 175 for finding that the Commissioner of Deposit-Taking Companies owed no duty of care to the depositors of a deposit-taking company which was liquidated was:-

“[it] must not be overlooked that the power to refuse registration, and to revoke or suspend it, is quasi-judicial in character, as is demonstrated by the right of appeal to the Governor in Council … and the right to be heard by the commissioner … ” (emphasis supplied) (p. 195) (see also the Stovin case, p. 937C).

(For completeness, the court in Yuen Kun Yeu also relied in support of the said finding on grounds such as the commissioner did not have power to control the daily management of such companies, but merely to put them out of business, and there was no supervisory power to prevent fraud of those in charge).

49.Here, the defendant’s power to grant, suspend or revoke AGC licence is also quasi-judicial in character: see, for example, ss. 5, 8, 9, 10 and 11 to 15, Cap. 435.  There are recognised public policy reasons for conferring immunity from suit to quasi-judicial decision makers: see, for example, Olowofoyeku: Suing Judges: A Study of Judicial Immunity (1993), Ch. 3 (especially at pp. 82-5); Russell on Arbitration (2003) 21^st Ed., para. 4-208 (especially text to nn. 50-1).

(b)     Breach of Duty of Care

50.Even if the defendant somehow owed a duty of care to the plaintiff, this part of the plaintiff’s claim should still fail on the ground that no breach of that duty has been established in relation to s. 5(4)(b)(ii), and possibly also in relation to s. 5(4)(b)(i).

51.S. 11, Cap. 435 provides that appeals from the defendant’s decision lies with the appeal board.  The appeal board’s decisions are thus binding on the defendant.

52.The plaintiff has (correctly) not contended the duty owed by the defendant is absolute.  Such being the case, the defendant cannot be regarded as having failed to act reasonably when her decisions in effect followed (or at least accorded with) the decisions of the appeal board.

53.The facts relevant to this aspect are:-

(a)     there is evidence that in September 1995, the appeal board upheld the defendant’s decision to refuse Wong’s earlier application.  The Guidelines were applied in the same erroneous manner by both the defendant and the appeal board at that time;

(b)    the defendant’s refusal of Wong’s application in August 1999, which is the subject-matter of this action, was upheld by the appeal board in February 2000;

(c)     the defendant’s refusal of Wong’s application in July 2002 was upheld by the appeal board in February 2003.

Breach of Statutory Duty

54.Some of the paragraphs above are applicable to this limb of the plaintiff’s claim and will not be repeated: see, in particular, para. 4 to 14 and 16 to 21 above in relation to facts, para. 23, 25, 27 and 29 to 30 above in relation to law, and para. 31 to 49 in relation to Cap. 435.

55.Apart from the passages in the various judgments quoted above, for completeness, I also set out Lord Browne-Wilkinson’s remarks in Bedfordshire County Council regarding the test he proposed for determining if a private cause of action arises from a breach of statutory duty:-

“[most] statutes [imposing] a statutory duty on … authorities confer on the authority a discretion as to the extent to which, and the methods by which, such statutory duty is to be performed” (emphasis supplied) (p. 736).

He continued:-

“It is clear both in principle and from the decided cases that the … authority cannot be liable in damages for doing that which Parliament has authorised.  Therefore if the decisions complained of fall within the ambit of such statutory discretion they cannot be actionable in common law.  However if the decision complained of is so unreasonable that it falls outside the ambit of the discretion conferred upon the … authority, there is no a priori reason for excluding all common law liability” (emphasis supplied) (p. 736).

56.In relation to the last-quoted sentence, he quoted in support the following passages in the judgment of Dorset Yacht Co. Ltd. v. Home Office [1970] AC 1004, 1031:-

“Where Parliament confers a discretion the position is not the same.  Then there may, and almost certainly will, be errors of the judgment in exercising such a discretion and Parliament cannot have intended that members of the public should be entitled to sue in respect of such errors.  But there must come a stage when the discretion is exercised so carelessly or unreasonably that there has been no real exercise of the discretion … The person purporting to exercise his discretion has acted in abuse or excess of his power.  Parliament cannot be supposed to have granted immunity to persons who do that”.

57.By reason of the above matters, I agree with the plaintiff that, as a matter of construction (see Lord Hoffmann’s approach set out in para. 27 above), the policy of Cap. 435 does not show an intention to confer a right of compensation in circumstances such as the present:-

(1)     the discretion conferred by ss. 5(3) and (4) is quasi-judicial in character;

(2)     Cap. 435 is intended to protect a class of the public (which does not include someone in the plaintiff’s position) and to regulate AGCs;

(3)     a private cause of action founded upon the manner in which the discretion is exercised may inhibit the proper and expeditious exercise of that power;

(4)     applicants for an AGC licence have been given rights to appeal to the appeal board, or to apply for judicial review of the defendant’s decisions.

58.Insofar as it may be necessary to do so, I also agree with the defendant’s submission that there has not been any breach of statutory duty.  The reasons for so concluding are as follows.

59.The discretion conferred by s. 5(4) (read together with s. 5(3)) is a power on the defendant’s part to grant or refuse applications for an AGC licence.  S. 5(4)(b)(i) requires the defendant to consider the suitability of a place proposed for operating an AGC whereas s. 5(4)(b)(ii) requires the defendant to consider the suitability of an area in which the proposed operation is located.  The defendant has acted pursuant to those provisions.

60.Because the Guidelines are not regulations made pursuant to s. 18, Cap. 435, there is no basis for arguing there was a separate statutory duty on the defendant’s part to act in accordance with the Guidelines.  The judgment handed down in the judicial review has made no finding on this.

61.The manner in which the defendant arrived at the decisions that the applications ought to be refused, though not in accordance with the letters of the Guidelines, was not so irrational as to take those decisions outside the ambit of s. 5(4).

Conclusion on Liability

62.The plaintiff has failed to establish the defendant’s liability under both limbs of its claim.

Loss and Damages

63.For completeness, I shall also deal with the issues relating to quantum.

64.Both parties called witnesses to give their respective opinion on the business loss likely to have been suffered for the period from 1999 to 2006 (a period of about 8 years).

65.The tenancy relating to the proposed AGC (dated 1 September 1999) contained a lease term of 3 years commencing in August 1999 and ending in August 2002.  There was also a schedule conferring an option on the plaintiff’s part to renew the tenancy for 3 years (taking the lease to August 2005) and another option to renew it yet again for 2 years (taking the lease to August 2007).

66.As stated above, the plaintiff’s witness opines that the amount of loss should be almost $190 million.  On the other hand, the defendant’s witness opines that no loss would be suffered because the proposed AGC is unlikely to be profitable.

Evidence of Loss

67.Before discussing the “expert” evidence adduced by the parties, a few words should be spent on whether “likely business loss” is in fact a subject on which expert evidence should be admitted.

68.A claim for likely business loss is inherently one based on probabilities.  Matters of general probability are an area over which the courts have resisted the introduction of expert evidence.  As has been stated in Phipson on Evidence (2005) 16^th Ed. said:-

“In addition to the prohibition on experts giving evidence about matters of general probability, the advent of expertise dependent on statistical probabilities throws up problems of its own.  So far the courts have set their face against expert evidence on probability theory … ” (emphasis supplied) (para. 33-68).

69.The court of appeal has rejected the use of actuarial evidence for assessing future loss of earnings in Leung On and Another v. Chan Pui Ki [1996] 2 HKC565, 591-2:-

“… recently practitioners have been at a loss as to the right approach in cases involving future loss of earnings and have increasingly relied on 'experts' for assistance in advancing their respective cases. This is a trend which must stop, for it proceeds upon a fundamental misconception.

Experts, be they economists, accountants or other professional persons, can of course testify in a court of law as to past events, and their views and opinions can sometimes be helpful in assisting the court in interpreting data. Thus, it was perfectly proper for the judge to receive evidence from Mr Wyatt with regard to Hong Kong's economic development over the past decade or so, and to allow into evidence what has been called the MIP (the Wyatt measurement of investment performance) as a rough and ready guide to investment returns for the past 12 years or so. The object of such evidence - the only legitimate object - was to test the validity of the basic Cookson v. Knowles assumption in the Hong Kong context. If necessary both facts and opinions on such matters could have been challenged; these were therefore justifiable issues. But the opinion evidence in the court below was allowed to stray far beyond proper realms …

…

As a test case it was legitimate to put expert evidence before the judge in order to probe the validity of the Cookson v. Knowles assumption in Hong Kong: and evidence indicating for instance the general rise in the standard of living over the past ten years or so - including the fact that payroll rise has exceeded inflation consistently - has been helpful: it justified the court in revising the awards of damages for non-pecuniary loss upwards. But this is as far as the expert evidence could have properly gone. Now that the issue has been resolved by our judgment, there should be few occasions in the future when such expert evidence would still be necessary … ” (emphasis supplied).

70.Similar comments can be found in relation to accountancy evidence in Hodgkinson: Expert Evidence: Law and Practice (1990):-

“The expert evidence of accountants is employed across a broad spectrum of legal issues, and questions of complex financial calculation may be raised … [One of the] general categories of evidence can be identified as constituting fields in which accountancy techniques may play a significant part … [is] … the quantum of damages in any case which calls for complicated calculations with which the court needs assistance, or cases in which some degree of speculation is required, such as future loss claims in personal injury cases.  Where such evidence tends towards the actuarial, however, care must be taken as to admissibility … ” (emphasis supplied) (p. 286).

71.The comments in Hodgkinson have been repeated in Freckelton & Selby: Expert Evidence, Vol. 2, para. 16C.90.  The main reason underlying the court’s rejection of such evidence is perhaps summed up in the words of Anderson J in Jongen v. CSR Ltd. [1992] Aust Torts Reports 61,706:-

“It is, I think, well recognised that the task of assessing damages in personal injuries cases should be kept as simple as possible.  It would not be conducive to the efficient disposition of such cases as this that there should be a sophisticated, elaborate and expensive actuarial inquiry into the value of superannuation benefits lost … Policy considerations are against encouraging that kind of approach … ” (at 61, 713) (quoted in Freckelton & Selby, para. 16C.210).

72.That the opinions of the witnesses called by both parties were based on probabilities is shown by the need in their reports to make various fundamental assumptions (for example, no changes to the political, legal and economic conditions, or to the demographic structure and composition, or to the market condition, or to the stability of expenses, and that the proposed AGC will be managed and operated competently): see the heading “Assumptions” in the report of Wong Yung-sing (for the plaintiff) (“YS Wong”) and, similarly, the heading “Valuation Assumptions” in the report of Li Wing-kang Brian (for the defendant) (“Brian Li”).

73.The nature of the business involved in this action makes the situation even worse than other kinds of business.  It is undisputed that AGCs generally attract business from young people.  Popularity of games available in AGCs themselves changes frequently.  But, as has been pointed out by Brian Li, the popularity of AGCs suffered with the advent of home video game consoles, followed by the introduction of personal computer video games and the Internet video games; the two last-mentioned types of games probably resulted in the appearance of Internet cafes.  These developments make the business of AGCs very volatile.

74.By reason of the above matters, and the simple fact that the proposed AGC has never been in operation, I conclude that the likely business loss is merely a matter of general probability.  It is thus not a subject where expert evidence should be admitted.

75.Despite the above, I shall discuss further the evidence adduced by the parties purportedly as expert evidence.

76.The duty of expert witnesses at common law has been summarised in Phipson (adopting the judgment of Cresswell J in The Ikarian Reefer [1993] 2 Ll Rep. 68, 81-2):-

“1.     Expert evidence presented to the Court should be, and should be seen to be, the independent product of the expert uninfluenced as to form or content by the exigencies of litigation.

2.      An expert witness should provide independent assistance to the Court by way of objective unbiased opinion in relation to matters within his expertise.  An expert witness in the High Court should never assume the role of an advocate.

3.      An expert witness should state the facts or assumptions upon which his opinion is based. He should not omit to consider material facts which could detract from his concluded opinion.

4.      An expert witness should make it clear when a particular question or issue falls outside his expertise.

5.      If an expert’s opinion is not properly researched because he considers that insufficient data is available, then this must be stated with an indication that the opinion is no more than a provisional one.  In cases where an expert witness who has prepared a report could not assert that the report contained the truth, the whole truth and nothing but the truth without some qualification, that qualification should be stated in the report.

6.      …

7.      Where expert evidence refers to photographs, plans, calculations, analyses, measurements, survey reports or other similar documents, these must be provided to the opposite party at the same time as the exchange of reports” (emphasis supplied) (para. 33-41).

(See also Hong Kong Civil Procedure 2006, Vol. 2, para. L1/58/7). The courts have in effect warned that the first proposition cannot be read too literally: Whitehouse v. Jordan [1981] 1 All ER 267, 276, 284.

77.The methodology adopted by both witnesses for assessing likely business loss is the “discounted cash flow” method (which Freckelton & Selby states was considered by the Australian Securities and Investment Commission to be an appropriate method to be considered by an expert: para. 16C.160).  This has been defined in Brian Li’s report as:-

“… the value [was determined] by firstly discounting [the proposed AGC’s] future expected cash flows back to the date of commencing the operation … had [the plaintiff] been issued with an AGC licence.  The future expected cash flows were determined from the net operating profit plus non-cash expenses such as depreciation and amortilization expenses and less non-cash income, capital expenditure and change in working capital in the forecast period” (para. 23);

“The discount rate takes into account two different types of risks … systematic risks and non-systematic risks … ” (para. 24).

The two types of risks were further defined in his report and will not be repeated here.

78.As stated above, the plaintiff’s witness opines that the likely loss is in the region of $190 million whereas defence witness opines no loss at all.  At the risk of over-simplification, the main reason for the vast difference is in short they differ immensely in the likely amount of income of the proposed AGC.

79.The number of selling units in the proposed AGC was stated in the application form to be 292.  YS Wong used 348 units as the basis of calculation, explaining that there were rooms for expansion in the proposed AGC.  His calculations were based on a 100% occupancy rate; in other words, all the selling units were regarded as being rented full time (16 hours per day) for 8 years.  On the other hand, Brian Li’s basis of calculation was based on a 46.9% occupancy rate (and based on a daily operation of 15 hours).  There are also differences between them regarding the average charge per game ($5 for YS Wong and $1.5 for Brian Li) and average rounds of game per hour (8 for YS Wong and 6.2 for Brian Li).

80.For the reasons set out below, I prefer the evidence of Brian Li to that of YS Wong.

81.YS Wong’s basis of 100% occupancy rate (and his other bases) is unjustified except by his assertions that it accorded with the plaintiff’s instructions and was supported by authoritative textbooks.  Brian Li’s basis has the support of surveys, including those conducted in AGCs near the proposed AGC.  In so concluding, I have taken into account the differences between those AGCs and the proposed AGC, with regard to locations, types of games available and scales of operation.  I have also taken into account the plaintiff’s attack on the survey method (which I find to have no substance).

82.YS Wong is prompt to making sweeping statements, some probably without basis.  One such statement is his opinion that the whole legal profession is so lacking in business valuation knowledge that he has considered donating some textbooks on the subject to the High Court library.

83.He also appears not to possess the objectivity required of an expert witness.  Apart from the matters set out in para. 81 above, when cross-examined, he admitted he was disciplined by his professional body, the Hong Kong Institute of Surveyors, in November 2005.  According to that body’s publication (supplied by YS Wong (exhibit “D2”)), he was reprimanded for plagiarism of an article and was found guilty of conduct unbefitting that of a professional surveyor.

84.For present purposes, the importance of the disciplinary conviction lies in how he looked at it (as shown by his cross-examination).  First, he testified that he wanted to meet the president of the professional body in connection with the then pending disciplinary proceedings.  But that request was declined by the president (correctly so in my view).

85.Secondly, he refuted the disciplinary conviction, attributing the cause to mere attacks by business competitors and claimed that (a) any mistake was his staff’s, and (b) it was not a matter suitable to be dealt with by the disciplinary board.

86.Finally, YS Wong’s formal training and major area of professional work has been in surveying and not financial analysis.

Causation

87.I also agree with the defence that it can be inferred the plaintiff has abandoned the proposed AGC.  There is no causal link between the business loss which the plaintiff may suffer and the defendant’s refusal of the application.

88.As stated above, the tenancy agreement was entered into in September 1999.  In an action commenced by the landlord in March 2000 (HCA 2185/2000), the plaintiff herein raised the defence to the effect the landlord promised to waive its claims for rent and other charges until the application for AGC licence had been approved.

89.Hence, according to the plaintiff, payments under the tenancy agreement were made as a result of the landlord’s promises.

90.I infer the plaintiff has abandoned the proposed AGC from the complete lack of response to the defendant’s correspondence since 24 April 2001.  The allegation of the plaintiff’s witness to the effect that the plaintiff did not know the letter dated 24 April 2001 was an approval-in-principle is unbelievable.  It does not stand with the testimony of defence witness that such kind of letter was well known to people in the AGC business.  The matter was further put beyond doubt by the defendant’s letter dated 8 January 2001.  It was addressed to the plaintiff’s solicitors, who earlier asked (among other things) for information about the procedure for granting licences.  The defendant’s letter stated:-

“… if [the defendant] forms the preliminary view that the application meets the requirements laid down in section 5(4) … , he will issue a letter of further consideration to [the plaintiff].  The letter of further consideration is an indication of approval in principle to [the plaintiff].  [The plaintiff] will then be allowed a specified period within which to fit out [the proposed AGC] and to report compliance … The application will continue to be processed pending the compliance of the requirements set out in the letter of further consideration” (emphasis supplied).

Credibility of Witnesses

91.As stated above, there is little factual dispute.  The main area of dispute being whether the plaintiff has abandoned the proposed AGC.  I disbelieve the plaintiff’s witness regarding this matter and infer that the plaintiff has done so (see para. 90 above).

92.I accept the testimony of defence witness to the effect that, after the pronouncement of the judgment of Stock J, the application for AGC licence has been reconsidered by the defendant in accordance with the court’s findings.  This testimony is supported by the internal minutes of Ms. Maggie Lam dated 5 February 2001 (especially para. 5(b) and 15 thereof).

Other Matters

93.For the avoidance of doubt, I have considered all the points raised by the parties in their closing submissions even though some of them have not been expressly stated above.

94.It should be recorded that the plaintiff indicated verbally the following matters raised in the plaintiff’s written closing submissions need not be considered:-

(a)     the defendant has failed to make decision in her letter dated 24 April 2001 (para. 24 thereof);

(b)    the letters of 8 January 2001 and 24 April 2001 were inconsistent (para. 27 and 28 thereof);

(c)     para. 29 to 32 thereof;

(d)    the defendant’s alleged improper sub-delegation of powers to the Director of Fire Services and the Director of Food and Environmental Hygiene (para. 40 to 44 thereof);

(e)     legitimate expectation on the plaintiff’s part (para. 46 to 47 thereof);

(f)     the defendant allegedly misled the appeal board and the court and provided inaccurate survey map to them (para. 58 thereof).

In any event, they would have been unmeritorious matters even if relied upon in this action.

95.Some of the points raised in the plaintiff’s written closing submissions are so devoid of merit that I just set them out to dispose of them:-

(1)     the defendant’s letter dated 24 April 2001 is void ab initio (para. 38 to 39 thereof);

(2)     the plaintiff could not comply with one of the requirements set out in the said letter because, by the time of that letter, the name of the Urban Services Department has been changed to the Food and Environmental Hygiene Department (para. 20 thereof);

(3)     the defendant was under a duty to explain to the plaintiff why she withdrew the ground for refusing the application pursuant to s. 5(4)(b)(ii) (para. 45 thereof);

(4)     the defendant’s refusal of the application also amounted to an unlawful restriction of land use (para. 54 to 56 thereof).

96.On the other hand, the defendant also indicates that she no longer pursues the defence that Wong’s application for AGC licence was not made for the plaintiff, nor does she rely on the defence of res judicata.

Conclusion

97.The plaintiff’s claim is dismissed.

Costs Order

98.There is no apparent reason to depart from the usual rule that costs should follow the event.  There will accordingly be a costs order that the costs of this action be paid by the plaintiff to the defendant to be taxed if not agreed.

99.The plaintiff argues that the costs relating to quantum should not be awarded to the defendant.  The argument is unsound for the following reasons.

100.The plaintiff’s earlier application for quantum of damages to be tried separately was dismissed.  Secondly, parts of the evidence are relevant to both liability and quantum; for example, evidence relating to the tenancy agreement and the plaintiff’s failure to respond to the defendant’s letter dated 24 April 2001.

Mr Yip King Sum and Mr Tam Kin Yip, instructed by Messrs K M Cheung & Co., for the Plaintiff

Mr Andrew Mak, instructed by Secretary for Justice, for the Defendant