Re Lee Ming Hao
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[ENGLISH TRANSLATION – 英譯本] CACV 152/2011 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 152 OF 2011 (ON APPEAL FROM HCAL NO. 47 OF 2011) ___________________
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J U D G M E N T Hon Chu JA (giving the judgment of the court): 1.This is an appeal from the refusal of Poon J of the Court of First Instance to grant leave to apply for judicial review. The factual background 2.The Applicant is a director of Jindun Pharma (HK) Ltd, one of the drug suppliers of the Hospital Authority (HA). 3.In 2010, the HA invited tenders for the contract for the supply of two drug items. In response to this invitation to tender under the reference number of HAHO(S)/T/10-D208, Jindun Pharma submitted a tender. 4.On 28 January 2011, the HA informed Jindun Pharma by letter that their tender was unsuccessful but did not mention why. 5.On 1 February 2011, Jindun Pharma faxed a letter to the HA, demanding to know why their tender was unsuccessful. According to what the Applicant said, he had a meeting with the staff of the HA in charge of the procurement of pharmaceuticals on the same day and obtained their promise of a written reply within 7 working days as to why Jindun Pharma’s tender was not selected. However, no replies were received after the lapse of the said period. 6.On 16 February 2011, Jindun Pharma lodged a challenge with the Review Body on Bid Challenges (“the Review Body”). At the request of the Secretariat of the Review Body set out in their letter dated 18 February 2011, Jindun Pharma submitted supplemental documents and an amended complaint form on 9 March 2011 and 10 March 2011 respectively. 7.On the other hand, in a letter faxed to Jindun Pharma on 10 March 2011, the HA gave an explanation as to why the tender submitted by them was unsuccessful, the full text of which is as follows:
8.In brief, the HA was concerned about the results of the financial assessment in respect of Jindun Pharma, pointing out that under paragraph 9(b) in part I of the tender document, the HA enjoys absolute discretion as to whether the financial assessment results are satisfactory. Besides, the HA was also concerned about the way in which the quality problems with the intravenous drugs supplied under a previous tender award were dealt with by Jindun International (HK) Co Ltd, a company connected with Jindun Pharma. 9.In the fax sent to the HA on 11 March 2011, Jindun Pharma indicated that they had had a number of meetings with the HA’s representatives, and that what was said during the meetings was different from what was stated in the letter of 10 March as to why their tender was not selected. Jindun Pharma also demanded an explanation from the HA on several questions, including the question as to what law confers the absolute power as mentioned by the HA. 10.On 21 March 2011, Jindun Pharma provided the letter of 10 March from the HA and the copy of their letter of reply of 11 March to the Review Body. 11.On 30 March 2011, the Review Body informed Jindun Pharma by letter that after having read and considered the documents concerned, the Chairman of the Review Body was of the view that there was no prima facie evidence to support the challenge by reason of the grounds the Chairman gave in the enclosure of the letter. 12.Jindun Pharma wrote to the Review Body on 30 March 2011 and 31 March 2011 respectively for a review of the Chairman’s decision by the Chairman himself. On 11 April 2011, the Review Body informed Jindun Pharma by letter that after having reconsidered the case, the Chairman upheld the original decision. 13.The Applicant made an application on 29 June 2011 for leave of the court to apply for judicial review of the decisions of the Chairman of the Review Body. 14.The application was refused by Poon J on 28 July 2011. 15.The Applicant appealed to the Court of Appeal against the decision of Poon J on 9 August 2011. Jindun Pharma’s challenge 16.The challenge filed by Jindun Pharma with the Review Body alleged that the HA was in breach of some of the provisions of the World Trade Organization Agreement on Government Procurement (WTO GPA), the details of which are as follow:
The decision of the Chairman of the Review Body 17.Rule 13 of the Rules of Operation of the Review Body on Bid Challenges (“Rules of Operation”) made under the WTO GPA provides that the Chairman of the Review Body shall “decide whether a prima facie case is established for the challenge to be accepted for inquiry and a Panel to be appointed to consider the challenge”. Rule 13 also stipulates that the Chairman shall, inter alia, take into consideration the 5 conditions set out in the provisions in respect of the challenge with condition (c) being that the information provided by the complainant discloses a reasonable indication that the procurement has not been carried out by the procuring entity involved in accordance with the provisions of the GPA. 18.The Chairman of the Review Body determined that Jindun Pharma had failed to indicate that the HA’s tendering and procurement had not been carried out in accordance with the provisions of the WTO GPA and there was no prima facie case in the challenge. His determination was based on the following grounds:
The Applicant’s grounds for applying for judicial review 19.The Applicant makes his application for leave to apply for judicial review mainly on three grounds:
20.In the Form 86, the Applicant requests the court to make the following orders:
21.The Applicant also requests declarations to be made in relation to the following issues:
The stance of the Review Body 22.The Applicant made the Chairman of the Review Body the proposed respondent in the Form 86. 23.At the request of the court, the Review Body submitted a written response to the Applicant’s application. It has taken a neutral stance on the Applicant’s intended judicial review and the present appeal, and has only raised a few points of law for the reference of the court as follow:
The setting up of the Review Body and the Rules of Operation 24.Hong Kong is one of the Parties to the WTO GPA, which applies to the departments of the Hong Kong Government as well as some public bodies including the HA. What the GPA requires the Hong Kong Government and the bodies within its scope of application to follow is that in carrying out procurement, the treatment provided to the products, services and suppliers of a foreign origin should be no less favourable than that accorded to local products, services and suppliers (see Article III of the WTO GPA). Besides, Articles VII to XVI of the WTO GPA also impose requirements on procedures for procurement including such matters as the preparation of tender specifications, tender procedures and the selection criteria of the tenderer, etc. Article XX also requires the Parties to provide a bid challenge system and that challenges should be heard by a court or by an impartial and independent review body. 25.Pursuant to the provisions of Article XX, the Hong Kong Government has set up a review body, which is not a statutory body but an independent administrative body whose operation is governed by the “Rules of Operation”. Rules 9 to 39 of the Rules of Operation concern the procedure for dealing with bid challenges. Rule 13 states that:
26.Under Rule 14 of the Rules of Operation, if the Chairman considers that a challenge should be accepted for inquiry, he shall appoint a Review [Panel] to conduct an inquiry into the challenge. Rule 24 also prescribes that the Review Panel may in the conduct of an inquiry convene hearings in respect of a challenge and the procedures and practices in detail for conducting hearings are set out in Appendix III. In addition, Rules 26 and 27 provide that the Review Panel shall determine the validity of a challenge and make recommendations on corrective measures or compensation, as well as such remedy as it considers appropriate, and that it shall make a written report on opinions and recommendations in respect of the challenge as well as a written statement on the relevant grounds. The first ground of application 27.The Applicant’s first ground of application for judicial review stems from Jindun Pharma’s complaint against the HA for not awarding the supply contract to them, indicating a breach of Article XIII(4)(b) and (c) of the WTO GPA. This is because the winning bid is higher than the tender price submitted by Jindun Pharma; Jindun Pharma and Jindun International are two independent corporations; and the dispute between Jindun International and the HA over the quality of a drug is not yet conclusive. Thus the HA, by including the dispute as a factor of consideration, has gone beyond the ambit of the assessment criteria set out in the tender document and in addition, has been unfair. 28.The Chairman of the Review Body considered the challenge to be unsubstantiated. This was partly due to the fact that the HA is entitled to make rules governing tendering and procurement and the tender document gave the HA absolute discretion and provided that it may rely solely on its opinions to act. The Review Body cannot and should not interfere in these rules. On the other hand, having examined the reasons the HA provided for Jindun Pharma’s tender not being selected, the Review Body found that there was no basis for intervention. The Chairman of the Review Body was also of the view that the tender price submitted cannot take precedence over such stipulations as set out in the tender document that the HA enjoys absolute discretion and may rely solely on its opinions to act. 29.The Applicant considers that the Chairman of the Review Body erred in coming to this decision, in that according to the WTO GPA, the selection criterion is public interest and that the GPA does not provide for granting the procuring entity absolute discretion or the power of relying on its opinions to act. 30.Article XIII(4)(b) of the WTO GPA states that unless in the public interest an entity decides not to issue the contract, the entity shall make the award to the tenderer who has been determined to be fully capable of undertaking the contract and whose tender, whether for domestic products or services, or products or services of other Parties, is either the lowest tender or the tender which in terms of the specific evaluation criteria set forth in the notices or tender documentation is determined to be the most advantageous. Article XIII(4)(c) also states that awards shall be made in accordance with the criteria and essential requirements specified in the tender documentation. 31.It can be seen from the above that Article XIII(4)(b) does not provide for public interest to be a tender selection criterion; it only allows a procuring entity to withdraw the contract having regard to public interest by not awarding it to any bidder. Moreover, although the submitted tender price or the lowest tender is one of the evaluation criteria, whether the tenderer is fully capable of undertaking the contract is also an important evaluation criterion. Thirdly, Article XIII(4)(c) expressly states that the award determination shall be made in accordance with the criteria and essential requirements specified in the tender documentation. 32.Under these circumstances, the Chairman of the Review Body is plainly correct in considering that the procuring entity is entitled to make procuring rules by way of the tender document. Moreover, the point made by the Chairman of the Review Body that as a selection criterion, the tender price cannot take precedence over the terms and conditions of the tender document is also correct. 33.Under clause 9(b) in Part I of the tender document, the HA will need to be satisfied that a tenderer has sufficient financial capability to undertake and fulfil the obligations imposed under the contract before considering awarding the contract to the tenderer. If the HA is not satisfied with the results of the financial vetting of the tenderer, then it may disregard the tender submission of the tenderer. The HA also has absolute discretion in deciding whether it is satisfied with the results of the financial vetting. As mentioned in the HA’s letter dated 30 March 2011, the reason that Jindun Pharma’s tender was not selected was because the results of financial assessment in respect of them raised concerns of the HA. The letter also indicates that according to what is provided in the tender document, the HA has absolute discretion in deciding whether or not it is satisfied with the results of the financial vetting of the tenderer. Given that the reason for not selecting the tenderer met the requirements of the standards for selection and vetting, the Chairman of the Review Body considered that there was no basis for interfering in the HA’s decision of not awarding the contract to Jindun Pharma. His decision could not be faulted. 34.The Applicant also pointed out that the WTO GPA grants no absolute discretion to procuring entities or the power that they can rely on their opinions to act. Thus, what is provided in the tender document in this regard is in breach of the WTO GPA. In our view, the crux of the matter does not lie in whether or not these two powers are granted to procuring entities by the GPA but in whether or not the GPA disallows procuring entities to have such powers so that they may not exercise such powers even if there are such stipulations in the tender documentation. There are no provisions in the WTO GPA prohibiting or limiting procuring entities from having absolute discretion or taking action by relying on their opinions during tender evaluation. On the other hand, Article XIII(4)(c) states that awards shall be made in accordance with the criteria specified in the tender documentation. It can therefore be seen that except as otherwise expressly provided in the WTO GPA, the terms and conditions of the tender documentation are binding on procuring entities and tenderers; so are those terms and conditions relating to absolute discretion and reliance on the opinions of procuring entities. The Applicant’s assertions that the stipulations of the tender document in this respect violate or override the WTO GPA and that the decision of the Chairman of the Review Body in respect of this challenge is illegal and unreasonable are not valid. The second ground of application 35.The Applicant’s second ground of application for judicial review stems from Jindun Pharma’s complaint against the HA for failing to make a formal or written reply as to why Jindun Pharma’s tender was not selected. By way of a letter dated 30 March 2011, the HA responded to Jindun Pharma’s demand for reasons to be provided as to why their tender was not selected after Jindun Pharma had lodged a challenge to the Review Body. The Chairman of the Review Body was of the view that this was a challenge related to procedure. More importantly, he considered that if the procuring entity has provided the required information, then it is not necessary for the Review Body to take action. The Applicant disagrees with the decision of the Chairman and seeks an order requiring the Review Body to make a determination on the challenge regarding the HA’s violation of Article XVIII(2) of the WTO GPA. 36.Under Article XVIII(2), a procuring entity should, on request from a supplier, promptly provide such information as set out in that provision, including the reasons why the tender was not selected. It is important to note that the provision does not require such reasons to be given in writing. According to the substance of Jindun Pharma’s challenge and the grounds of application of the Applicant, the Applicant had, on the day Jindun Pharma demanded to know why their tender was not selected and thereafter, met the HA’s representatives on several occasions when the representatives did mention the reasons for not selecting Jindun Pharma’s tender. However, the Applicant does not subscribe to them and demands written reasons to be provided by the HA. 37.Under Rule 27 of the Rules of Operation, where the Review Panel finds that there is a breach of the GPA, it may recommend such remedy as it considers appropriate. Rule 28 states that the procuring entity shall use reasonable endeavours to implement the recommendations of the Review Panel. 38.If the Chairman of the Review Body accepts this challenge lodged by Jindun Pharma and appoints a Review Panel, which in turn finds that the HA has violated Article XVIII(2), then the reasonable remedy the Penal may recommend will certainly be to require the HA to provide to Jindun Pharma the reasons why their tender was not selected. Now that the HA had, on their own initiative, responded to Jindun Pharma’s demand subsequently by issuing the letter of 30 March 2011, the core issue of Jindun Pharma’s challenge has been dealt with. Thus, the Chairman of the Review Body took the view that there was no need to take any action and decided not to accept this challenge. He was not in breach of the Rules of Operation by so doing. Nor could he be regarded as refusing to perform his duties. The third ground of application 39.The Applicant’s third ground of application for judicial review is directed to Rule 13 of the Rules of Operation. He pointed out that making it the sole decision of the Chairman of the Review Body as to whether a prima facie case is established for a challenge constitutes a breach of Article XX(6) the WTO GPA. 40.Article XX(6) provides that challenges should be heard by a court or by an impartial and independent review body with no interest in the outcome of the procurement and the members of which should be secure from external influence during the term of appointment. Article XX(6) also provides that a review body which is not a court should either be subject to judicial review or its procedures for examination shall comply with the requirements as set out in (a) to (g) of the provision. 41.As pointed out by the Review Body, a screening mechanism which discriminates between challenges with and without prima facie evidence has been set up under Rule 13 of the Rules of Operation so that challenges without prima facie evidence are screened out, leaving only those having a prima facie case to be heard by an appointed panel. 42.Article XX(2) of the WTO GPA provides that Parties to it shall provide non-discriminatory, timely, transparent and effective challenge procedures[5]. In our opinion, the screening mechanism under Rule 13 of the Rules of Operation is not inconsistent with the requirements of Article XX(2). The mechanism is conducive to ensuring that procuring entities are not confronted by unmeritorious complaints and that third parties are not troubled by questions over the validity of the decision. In addition, screening out complaints without prima facie evidence facilitates meritorious ones requiring speedy action to be heard in a timely manner. 43.We also consider that there is no violation of Article XX(6) in relation to the fact that the duty of examining complaints and making decisions as to whether a complaint has a prima facie case is performed by the Chairman of the Review Body. With the Review Body being an organization, challenges must necessarily be heard by it through its members. As a member of the Review Body, the Chairman is exercising the powers that the Review Body has as well as those granted to him under the Rules of Operation. When the Chairman exercises the powers of his office and makes decisions, he acts on behalf of the Review Body. The test to be satisfied in respect of an application for leave to apply for judicial review 44.For leave to apply for judicial to be granted, the Applicant must show that the intended application for judicial review is reasonably arguable with realistic prospects of success (see the ruling of the Court of Final Appeal in Po Fun Chan v Winnie Cheung [2007] 10 HKCFAR 676). 45.Based on the above analyses, the Applicant’s grounds of application for judicial review are not reasonably arguable. His intended application does not enjoy realistic prospects of success. Poon J was correct to refuse to grant leave to apply for judicial review. Other matters 46.Apart from this, there are other problems with the Applicant’s intended application for judicial review. First of all, it was Jindun Pharma which lodged a challenge with the Review Body instead of the Applicant. Moreover, although the Applicant is a director, he is not a tenderer in the procurement process. Given that the Applicant and Jindun Pharma are two independent legal entities, it is questionable whether the Applicant has locus standi to apply for judicial review against the decision of the Chairman of the Review Body. 47.Secondly, the Applicant has made the Chairman of the Review Body the proposed respondent and claims compensation from him. However, Rule 38 of the Rules of Operation states that:
The Applicant’s grounds of application have not shown any basis in fact or in law for him to claim compensation from the Chairman of the Review Body. 48.In its response, the Review Body questions whether the Applicant can apply for judicial review of the determination that the challenge has no prima facie evidence. Although we agree that the Review Body is an administrative organization, and that the challenge was lodged by the tenderer on the basis of the terms and conditions of the tender document (i.e. by way of a business contract or agreement) rather than on legal provisions, we consider that there is still room for argument as to whether it is true that decisions made by the Review Body invariably carry no public elements and cannot become the subject matter of a judicial review. However, as we find that the Applicant’s grounds of application do not meet the requirements for leave to be granted, it is not necessary for us to make a determination on this issue. Summary 49.For reasons stated above, we dismiss the appeal.
The Applicant (Appellant), Lee Ming Hao, in person, present Translated by the Judgment Translation Unit of the Judiciary and vetted by Mr. P. Y. Lo, Barrister-at-law. [1] “Each entity shall, on request from a supplier of a Party, promptly provide:
[2] “(b) Unless in the public interest an entity decides not to issue the contract, the entity shall make the award to the tenderer who has been determined to be fully capable of undertaking the contract and whose tender, whether for domestic products or services, or products or services of other Parties, is either the lowest tender or the tender which in terms of the specific evaluation criteria set forth in the notices or tender documentation is determined to be the most advantageous.
[3] “Each Party shall ensure that the tendering procedures of its entities are applied in a non-discriminatory manner and are consistent with the provisions contained in Articles VII through XVI.” [4] “Challenges shall be heard by a court or by an impartial and independent review body with no interest in the outcome of the procurement and the members of which are secure from external influence during the term of appointment. A review body which is not a court shall either be subject to judicial review or shall have procedures which provide that:
[5] “Each Party shall provide non-discriminatory, timely, transparent and effective procedures enabling suppliers to challenge alleged breaches of the Agreement arising in the context of procurements in which they have, or have had, and interest.” |
Cases cited in this judgment
Further hearings and rulings under CACV 152/2011