LC Paper No. CB(1)1152/98-99

Ref: CB1/PL/TP

Paper for the House Committee meeting
on 23 April 1999

Panel on Transport

Report on legal procedures in respect of
the determination of maximum fares for licensed ferry services

Purpose

This paper reports on the deliberations of the Panel on Transport on the legal procedures in respect of the determination of maximum fares for licensed ferry services.

Background

2. At the House Committee meeting on 30 October 1998, members considered a report (LC Paper No. LS 54/98-99) by the Legal Adviser of the Legislative Council Secretariat (LA) on the legal analysis relating to notices issued by the Commissioner for Transport (the Commissioner) under section 33(1) of the Ferry Services Ordinance (Cap. 104) on the maximum fares for licensed ferry services. While the Administration did not regard such notices as subsidiary legislation, the report concluded that such notices should have legislative effect and should therefore be subsidiary legislation within the meaning of section 3 of the Interpretation and General Clauses Ordinance (Cap. 1) and subject to scrutiny by the Legislative Council. LA also pointed out that there were many provisions in the existing laws which contained the reference to "notice in the Gazette", and that the absence of a clear and binding decision on the meaning of "having legislative effect" would create uncertainty as to whether every such notice is "subsidiary legislation". As the subject matter was related to transport, members of the House Committee decided to refer the subject matter to the LegCo Panel on Transport for initial examination.

3. On the other hand, the franchised services of the Hongkong and Yaumati Ferry Company Limited and the "Star" Ferry Company Limited's Central - Hung Hom service have ceased as from 1 April 1999 and have been replaced by licensed services. The implication of the changeover is that, while fare adjustment proposals from franchised ferry operators have all along been subject to negative vetting by the Legislative Council, such fare adjustment proposals will no longer be subject to scrutiny by the Legislative Council upon their replacement by licensed ferry services.

Deliberations of the Panel

4. The Panel has held three meetings with the Administration on the subject in question. The Panel has concentrated its study on the following three areas:

1. definition of "subsidiary legislation";

2. references to "notice in the Gazette" in current legislation; and

3. possible courses of action on instruments not being tabled as subsidiary legislation.

The main deliberations of the Panel are set out in the following paragraphs.

Definition of "subsidiary legislation"

5. Section 3 of Cap. 1 defines "subsidiary legislation" as ".... any proclamation, rule, regulation, order, resolution, notice, rule of court, bylaw or other instrument made under or by virtue of any Ordinance and having legislative effect". To determine whether a notice in the Gazette given by the Commissioner under section 33(1) of Cap. 104 is subsidiary legislation, it is necessary to decide whether such notice has "legislative effect".

The Administration's view

6. The Administration has advised that "legislative effect" is not defined in the laws of Hong Kong, nor is there any local case law on its meaning. However, based on case references in other common law jurisdictions, the following factors are relevant in determining whether an instrument has legislative effect:

1. whether there is an express statutory provision in identifying the instrument as being subsidiary legislation;

2. whether the instrument extends or amends existing legislation;

3. whether the instrument has general application to the public or a class as opposed to individuals;

4. whether the instrument formulates a general rule of conduct without reference to particular cases; and

5. the legislative intent that the instrument is subsidiary legislation.

7. Applying the above criteria to the Gazette notices issued under section 33(1) of Cap. 104, the Administration has concluded that notices of this kind do not have any legislative effect. It is of the view that firstly, there is no express provision in the Ordinance identifying the Commissioner's determinations of maximum fares for licensed services as being subsidiary legislation. Secondly and as a matter of fact and law, the determination does not amend or extend the Ordinance.

8. Thirdly, the notice made by the Commissioner does not have general application to the public or to a sector of the public or a class, nor does it formulate a general rule of conduct. Through notices published in the Gazette in accordance with section 33(1) of Cap. 104, the Commissioner has determined "the maximum fares that may be charged for the carriage of passengers, baggage, goods and vehicles on any licensed service" by the licensee. Section 33(2) of Cap. 104 provides that "a licensee shall not charge a fare exceeding the maximum fare" determined by the Commissioner. A licensee who has demanded a fare in excess of the fare so determined will contravene section 4 of the Ferry Service Regulations (Cap. 104 sub. leg.) and commit an offence under section 30 of the same Regulations. As such, a notice made under section 33(1) of Cap. 104 only applies or extends to, or otherwise binds, the licensee. It does not, and cannot be construed as to apply or extend to or otherwise bind people other than the licensee who has a statutory obligation to abide by the determination made by the Commissioner. The rights and obligations of any person who uses the services provided by the licensee clearly depend on the terms and conditions of the contract between them. Section 33(3) of Cap. 104 expressly provides that nothing in section 33 "shall prevent a licensee from charging a fare lower than the maximum fare" determined by the Commissioner. The user's rights and obligations under the contract have neither been extended nor reduced by the Ordinance. If the licensee demands a fare exceeding the maximum fare determined by the Commissioner, the licensee will have acted in contravention of the Regulations and is liable to be prosecuted. The user, however, has no statutory rights or obligations arising from the Commissioner's determination under section 33(1) and will certainly not commit an offence under the Ordinance by paying to the licensee a fare in excess of the maximum fare determined by the Commissioner.

9. Finally, the Administration is of the view that, taking into account the history leading to the passage of the Ferry Services Bill in 1982, it is clear that the legislative intent of the provision is to empower the Commissioner as the only person to determine the maximum fares for licensed services. Since then, determinations of maximum fares for licensed ferry services have been effected as executive acts and the Administration therefore considers that notices under section 33(1) of Cap. 104 are not subsidiary legislation.

The Legal Adviser's view

10. LA does not accept the Administration's view. On the argument that a notice made under section 33(1) of Cap. 104 only applies to the ferry licensees and does not have general application to the public or a sector of the public or a class, LA has advised that such notice imposes a legal obligation on a licensee not to charge a fare exceeding the maximum fares as determined by the Commissioner. Such notice also confers an enforceable right, or at least a legitimate expectation, on members of the public to use the relevant ferry service at a fare not exceeding the maximum fares determined by the Commissioner. Moreover, LA considers that the relationship between a ferry licensee and the persons who use the ferry service, insofar as the provision of service is regulated by statue, is not purely contractual. If members of the public find that a licensee is charging a fare exceeding the maximum level determined under section 33(1), they can lodge a complaint with the Commissioner, who, as a public officer, is under a duty to take necessary action to protect the public interest. Alternatively, they can report the matter to the appropriate authorities and the licensee is liable to be prosecuted for charging in excess of the limit imposed by the Commissioner.

11. While agreeing that, subject to clear statutory provision, one of the criteria in determining whether an instrument has legislative effect is to see whether the instrument applies to individuals or to the public or a sector of the public, LA has advised that the Administration is adopting a very narrow interpretation of the criterion which might not be accepted by the courts. In the Australian case of Queensland Medical Laboratory and others v Blewett and others (1988) 84 ALR 615 and in the context of deciding whether the rules of natural justice should apply to the exercise of a legislative power, the Court (Gummow J) opined that the interests of all members of the public are affected by a statutory power of a strictly legislative nature. The judge further remarked that in that case, the determination by the Minister for Community Services and Health that new pathology services table used for calculating Medicare benefits be substituted in federal legislation affected the interests of the Australian public at large and certain classes or groups of the public. Although this is not the basis on which the Court made its decision in that case, this opinion of the judge may throw some light on the approach which the courts are likely to adopt in deciding whether an instrument is legislative in nature. Following from the above analysis, LA has advised that a notice under section 33(1) of Cap. 104 affects not only the interests of the licensee but also the interests of all members of the public who use or propose to use the relevant licensed ferry service. As such, it should have legislative effect and be published in the form of subsidiary legislation.

12. On the five criteria cited by the Administration for determining whether an instrument has legislative effect, LA has clarified that these criteria are only drawn up on the basis of judicial decisions and views expressed by writers in some common law jurisdictions, and are not at all binding. Furthermore, LA has pointed out that the Legislative Council has not discussed the criteria in detail nor have Members agreed on such "commonly adopted principle". Apart from the criterion of legislative intent which can be accepted beyond doubt, the remaining four criteria will have to be subject to detailed examination before they can be adopted.

The Panel's view

13. In the light of a difference in legal opinions between the two sides, the Panel cannot reach a common view with the Administration on whether notices made under section 33(1) of Cap. 104 is subsidiary legislation. Some members are of the view that a court decision in this respect will be the last resort. The Panel has examined the procedures for the Legislative Council to file a case for judicial review, and the deliberations in this respect are set out in paragraphs 23 to 25 of this report.

References to "notice in the Gazette" in current legislation

14. The Panel notes that there are many provisions in current legislation which contain reference to "by notice in the Gazette". The general understanding is that such notice is regarded as subsidiary legislation. A number of such provisions exist, for example, in the Road Traffic Ordinance (Cap. 374) and its subsidiary legislation which empower the Commissioner for Transport to issue the following notices:

1. Specification of Safety Glass Notice made under regulation 28 of the Road Traffic (Construction and Maintenance of Vehicles) Regulations (Cap. 374 sub. leg.);

2. Hire Car Permits (Limitation on Numbers) Notice made under regulation 19(1) of the Road Traffic (Public Service Vehicles) Regulations (Cap. 374 sub. leg.); and

3. Specification of Traffic Signs and Road Markings for Private Roads Notice made under regulations 3A and 8A of the Road Traffic (Traffic Control) Regulations (Cap. 374 sub. leg.).

Section 39F(1) of Cap. 374 also provides that the Commissioner of Police may by notice in the Gazette approve types of instruments as approved breath analyzing instruments, etc. All these notices have been treated and published as subsidiary legislation.

15. There is, however, inconsistency in the treatment of "notice in the Gazette" in Cap. 374 and its subsidiary legislation. Notices designating areas as prohibited zones and restricted zones made by the Commissioner under regulation 14(1) of the Road Traffic (Traffic Control) Regulations (Cap. 374 sub. leg.) have, for example, been published in the form of general notices in the Gazette. However, when this regulation, as modified by the Airport Authority Bylaw (Cap. 483 sub. leg.), is applied to the airport area, the notice designating the prohibited and restricted zones in the airport area made by the Airport Authority with the approval of the Commissioner has been published in the form of a legal notice in the Gazette.

16. The Panel has also noted that in the Road Traffic (Construction and Maintenance of Vehicles) (Amendment) Regulation 1999 (L.N. 14 of 1999) published in the Gazette on 15 January 1999, the Administration seeks to amend the Road Traffic (Construction and Maintenance of Vehicles) Regulations (Cap. 374 sub. leg.) to enable the Commissioner to specify models of smoke measuring apparatus by notice in the Gazette. The Amendment Regulation provides that, for the avoidance of doubt, such a notice is not subsidiary legislation.

17. Against the above background, LA has advised that:

1. there has not been consistency in the treatment of "notice in the Gazette";

2. through the proposed introduction of the "for the avoidance of doubt" provision in L.N. 14 of 1999, the Administration appears to acknowledge that "notice in the Gazette" may literally be construed as subsidiary legislation when there is no express provision to the contrary; and

3. in the absence of the "for the avoidance of doubt" provision, it is more arguable that a "notice in the Gazette" should be treated and published as subsidiary legislation.

18. LA has suggested to the Administration the addition of an express provision in Cap. 104 to identify clearly the nature of notices made under section 33(1). However, the Administration does not deem this necessary. They have pointed out that "a notice in the Gazette" which is subsidiary legislation in one situation may not be subsidiary legislation in another context. It all depends on whether such notice has "legislative effect". The fact that some Gazette notices have been treated as subsidiary legislation in some Ordinances does not necessarily mean that such notices must be similarly treated elsewhere; it depends on the "legislative effect" of the instrument. This explains why some Gazette notices cited by LA having been published as subsidiary legislation. The Administration advises that should there be genuine doubt about an instrument not having been properly treated, it may cause a review to be made of that instrument and take corrective action. Whilst a "for the avoidance of doubt" provision may remove any doubt, the clause is not absolutely necessary if the nature of an instrument is already clear.

The Panel's view

19. Notwithstanding the Administration's position, the Panel sees a need for a clear distinction to be made in relevant legislation between instruments of a legislative character and instruments of an administrative character, and for there to be consistency in drafting. The Administration has taken note of the Panel's view and advised that the subject matter is under examination by the Department of Justice. While one possible option is to include an express provision in new legislation to specify that a particular notice is not subsidiary legislation, the Administration has advised that it will still need to apply the criteria as highlighted above to determine the status of notice issued under existing legislation.

Possible courses of action on instruments not having been tabled as subsidiary legislation

20. Regarding the possible courses of action on an instrument not having been tabled as subsidiary legislation, the Panel has taken note of the LA's advice that under section 34(1) of Cap. 1, all subsidiary legislation shall be laid on the table of the Legislative Council at the next sitting thereof after the publication in the Gazette of that subsidiary legislation. Although section 34(1) does not specify the person responsible for tabling the subsidiary legislation, it must have been intended by the said provision that the public officer or another authorized person who makes the relevant subsidiary legislation shall be responsible for its tabling. The legislature therefore may not, out of its own initiative, table any instrument which it considers as having legislative effect.

21. As to the validity of an instrument which has not been published and laid before the Legislative Council for whatever reasons, or which has been published but not laid before the Council, LA has advised that the issue has been examined in depth by the Subcommittee on the Ozone Layer Protection (Controlled Refrigerants) Regulation (Commencement) Notice 1998, and the consensus is that such an instrument will still have legislative effect. He has further advised that in accordance with Article 64 of the Basic Law, the Government of the Hong Kong Special Administrative Region owes a duty to the Legislative Council to account for its own actions. In case the omission is due to an interpretation of the legislative provisions different from the original legislative intent, one possible remedy will be for the Administration to introduce amendments to the relevant legislation by including an express provision to identify clearly the nature of such instrument.

22. As for the legal remedy arising from the non-tabling of subsidiary legislation, LA has advised that the requirement for the tabling of subsidiary legislation as stipulated in section 34 of Cap. 1 provides an unique and necessary mechanism for the Legislative Council to scrutinize subsidiary legislation made pursuant to delegated authority conferred in primary legislation. Although the power of interpretation of legislation does not rest with the legislature, the legislature can, in the course of enactment, include express provisions to reflect clearly the intent of the legislative proposal. Once a legislative proposal is passed into law, it is the responsibility of the Administration to implement laws passed by the Council. Decisions made by the Administration when exercising its power may be subject to challenge. In the case of disputes over the interpretation of legislation, as opposed to the original legislative intent, which may lead to one's beneficial interest being affected, the matter will be for adjudication by the court. As the Administration should be accountable to the Legislative Council and implement laws passed by the Council, LA has advised members to request the Administration to provide detailed justifications to account for its acts and to amend the fare adjustment mechanism where necessary through the established mechanism.

Judicial review

23. The Panel has also examined the case for a judicial review on whether notices made under section 33(1) are subsidiary legislation.

24. At some members' request, LA has conducted researches on whether there are any precedent cases in which legislatures in major Commonwealth jurisdictions have filed cases for judicial review out of their own initiative. While the findings have confirmed that there is no such precedent case, LA has advised that this does not rule out the possibility of the Legislative Council of the Hong Kong Special Administrative Region taking such a course of action. However, he has drawn members' attention to the consideration that it may be difficult for the Council as a whole to come up with an unanimous view on the matter. Furthermore, any action will be done on a test basis, without the benefit of precedent cases. LA has further advised that the subject matter hinges on a number of fundamental issues including both technical and constitutional, and will not be confined simply to whether a particular provision is subsidiary legislation. These considerations will require further deliberation by the Council.

25. The Panel has also examined whether parties other than the Legislative Council, for example, the Panel, an individual Council Member or a member of the public, has the right to file a case for judicial review in this respect. LA has advised that any individual who has a sufficient interest in a matter and has been affected by an act or decision of the Administration in that matter can file a case in the court for judicial review.

The Panel's view

26. The Panel has completed initial examination of the case for the Legislative Council to file a case for judicial review, and has taken note of the channels available and the difficulties involved.

Motion moved by Hon LAU Chin-shek

27. As a related issue, members may wish to take note of a motion moved by Hon LAU Chin-shek. Arising from concerns that the replacement of franchised ferry services by licensed ferry services would deprive the right of the Legislative Council in scrutinizing proposals for fare adjustment, Mr LAU has moved the following motion at the Panel meeting on 26 March 1999:

"That this Panel urges the Administration to follow the procedure of subsidiary legislation and table all future notices on the determination and adjustment of fares of licensed ferry services, including new licensed ferry services to be launched on 1 April 1999, for the scrutiny of the Legislative Council in the form of subsidiary legislation".

28. Panel members have divided views on the motion. Some members share Mr LAU's view that the Administration is deliberately depriving the Council of its inherent power to monitor ferry fares. They pointed out with the replacement of franchised ferry services by licensed ferry services on 1 April 1999, fares for ordinary class for conventional ferries operating between Central and outlying islands such as Cheung Chau, Mui Wo, Peng Chau and Yung Shue Wan would be revised upward from $9.2/$9.7 to $10 while the monthly ticket price for Yung Shue Wan's service will increase from $400 to $450. In the absence of an independent body to monitor the fares of public transport services, and as the majority of licensed ferry services are free from any direct competition from other ferry service providers, these members consider that the Legislative Council should retain some form of control over these services.

29. Other members do not subscribe to such a view. These members point out that while Members of the Legislative Council shall make every effort to monitor fares of public transport services on behalf of the public, it will not be appropriate for Members of the Council, being representatives of the general public, to determine such fares as any fare increase proposals may be against the public interest in one sense or another even if they are fully justified. Having regard to the facts that the current licensing system for ferry operation has been in existence for a long time and has served the market well under the influence of market forces, that ferry services are operating under a difficult market environment, and that there involves substantial investment and a long return period for the provision of ferry services, these members consider that any additional constraints on the fare determination mechanism would deter operators from entering or investing into the ferry services market, and affect the certainty and future quality of provision of ferry services. Furthermore, it would not be practical for Members of the Legislative Council to examine fare adjustment proposals from all licensed ferry services which, as advised by the Administration, number in the region of about 100. These members consider it more appropriate for the Commissioner to approve fare revisions from licensed ferry operators having regard to all relevant factors. The Commissioner, in turn, will be held accountable to the legislature for his actions.

30. At the time when voting on the motion took place, the majority of members present did not support the motion and the motion was negatived.

Advice sought

31. Members are invited to take note of the deliberations of the Panel on the subject matter as set out above.

Legislative Council Secretariat
22 April 1999