DESIGNING HONG KONG LTD v. THE TOWN PLANNING BOARD

HCAL 49/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 49 OF 2014

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DECISION ON COSTS
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A. INTRODUCTION

1.  On 30 April 2015, I handed down judgment (“the Judgment”) refusing the applicant’s application for a protective costs order (“PCO”). I also ordered on a nisi basis that costs of the PCO application be to the respondent to be taxed if not agreed, with certificate for two counsel (“the costs order nisi”).

2.  This is now the applicant’s application by summons dated 14 May 2015 seeking to vary the costs order nisi.  In the summons, the applicant now asks to provide that the applicant be protected against the costs of the respondent in its PCO application, or alternatively there be no order as to costs.

3.  The application is opposed by the respondent (the Board).

4.  By consent, this variation application is to be dealt with on papers and by written submissions.  The parties have since provided their respective written submissions.

5.  This decision should be read together with the Judgment, and for convenience, the abbreviations used in the Judgment would be adopted in this decision unless otherwise stated.

B. THIS APPLICATION

B1. The Judgment

6.  In summary, in the Judgment, this court adopted the Corner House principles as the principles (as further explained in the Judgment) applicable to a PCO application in Hong Kong.[1] In applying those principles, I came to the view that, on the totality of the evidence, including the lack of any evidence showing the financial abilities of the shareholders and directors of the applicant corporation, the court was not satisfied that (a) the applicant was genuinely not in a position to bear the costs of the respondent if it fails in the judicial review; and (b) it was reasonable for it to probably withdraw from the judicial review if no PCO is granted.  In the premises, I refused the application as it would not be fair and just in all the circumstances of the case to depart from the general starting position of costs follow the event and grant the PCO.[2]

7.  The applicant has thus lost in his PCO application and hence the costs order nisi.

B2. Costs of a PCO application

8.  As a starting position, there are no reasons in my view why an applicant for a PCO should not in principle be liable for costs if he loses the application, as in any other applications.  The English Court of Appeal in Corner House held similarly the same view.  As observed by Lord Philips MR (as he then was) at paragraphs 78 to 79 in relation to the costs position of PCO applications:

“78 We consider that a PCO should in normal circumstances be sought on the face of the initiating claim form, with the application supported by the requisite evidence, which should include a schedule of the claimant’s future costs of and incidental to the full judicial review application. If the defendant wishes to resist the making of the PCO, or any of the sums set out in the claimant’s schedule, it should set out its reasons in the acknowledgment of service filed pursuant to CPR r 54.8. The claimant will of course be liable for the court fee(s) for pursuing the claim, and it will also be liable for the defendant’s costs incurred in a successful resistance to an application for a PCO: compare R (Mount Cook Land Ltd) v Westminster City Council [2003] EWCA Civ 1346 at [76(1)]. The costs incurred in resisting a PCO should have regard to the overriding objective in the peculiar circumstances of such an application, and recoverability will depend on the normal tests of proportionality and, where appropriate, necessity. We would not normally expect a defendant to be able to demonstrate that proportionate costs exceeded £1,000. These liabilities should provide an appropriate financial disincentive for those who believe that they can apply for a PCO as a matter of course or that contesting a PCO may be a profitable exercise. So long as the initial liability is reasonably foreseeable, we see no reason why the court should handle an application for a PCO at no financial risk to the claimant at all.

79 The judge will then consider whether to make the PCO on the papers and if so, in what terms, and the size of the cap he should place on the claimant’s recoverable costs, when he considers whether to grant permission to proceed. If he refuses to grant the PCO and the claimant requests that his decision is reconsidered at a hearing, the hearing should be limited to an hour and the claimant will face a liability for costs if the PCO is again refused. The considerations as to costs which we have set out in para 78 above will also apply at this stage: we would not expect a respondent to be able to demonstrate that proportionate costs exceeded £2,500. Although CPR r 54.13 does not in terms apply to the making of a PCO, the defendant will have had the opportunity of providing reasoned written argument before the order is made, and by analogy with CPR r 52.9(2) the court should not set a PCO aside unless there is a compelling reason for doing so. The PCO made by the judge on paper will provide its beneficiary with costs protection if any such application is made. An unmeritorious application to set aside a PCO should be met with an order for indemnity costs, to which any cap impose by the PCO should not apply. Once the judge has made an order which includes the caps on costs to which we have referred, this will be an order to which anyone subsequently concerned with the assessment of costs will be bound to give effect: see CPR r 44.5(2).” (emphasis added)

9.  There is therefore no question that a PCO applicant should normally be exempted from costs liability.  Quite to the contrary, an applicant, including the present one, should reasonably expect that there would be the usual costs liability if he or she fails in a contested application.

10.  The caveat in Lord Philips MR’s observations is that the amount of costs recoverable should be subject to the normal test tobe proportionate to the circumstances (including the procedures adopted) of that case.  This is similar to the requirement now provided under Order 62, rule 5(1)(aa) of the Rules of High Court that the court should in the taxation exercise in Hong Kong take into account the underlying objectives set out in Order 1A, rule 1.[3] Insofar as to the actual amount of costs that was usually expected to be incurred in resisting a PCO application as mentioned in these passages, when making these comments, the learned Master of Rolls obviously had in his mind the general fees level in England as at that time, which is likely to be different from that in Hong Kong.  One cannot simply import these figures directly to Hong Kong.  These observations by Lord Philips MR even taken together cannot be regarded as a proposition that the costs recoverable in an unsuccessful PCO application should generally be limited and to those figures.

11.  Bearing these observations in mind, I now look at the present application to vary the costs order nisi.

12.  I can dispose quickly of the applicant’s first contention that there should effectively be a PCO to protect its costs position (either completely or with limit) in the PCO application.

13.  Given that I have dismissed its application for PCO for the substantive judicial review for the reasons set out in the Judgment (and summarised above), I see no reason or logic as a matter of principle as to why the applicant should however be entitled to a PCO for the PCO application itself.  As mentioned above, and as observed by Lord Philips MR, it is expected that an applicant is to bear the cost of an unsuccessful PCO application.

14.  In relation to the quantum of costs, the applicant says the amount of costs incurred by the Board in opposing the PCO application is likely to be significant (given the involvement of leading and junior counsel and the complexity of the submissions).  Mr Kat SC (leading Mr Marwah) for the applicant submits that the applicant’s liability in costs should however be significantly limited.  In support of this submission, leading counsel seeks to lay blame on both the court’s directions and the respondent’s position to deal with its PCO application by way of a full oral hearing, together with the participation of the amici.  Leading counsel said they had in the beginning invited the court to deal with it on papers (purportedly in line with the now established practice in the English courts).  Had the court adopted their invitation (submitted Mr Kat), the PCO application could have been dealt with more economically and the applicant’s exposure to costs would have been much limited.

15.  With respect, I cannot accept the applicant’s submissions. Given that this was the first PCO application that required the Court of First Instance in Hong Kong to fully and properly consider the principles applicable, and that it was to be opposed by the Board, it was eminently justified for the court to direct a full oral hearing with the participation of the amici to assist it in dealing with the application.  The applicant’s submissions that the PCO application proper should well be disposed of on papers also flies in its face when it was its own submissions in seeking leave to appeal the Judgment that the PCO application required a full consideration by the Court of Appeal given that it was the first time such an application was fully considered by the courts in Hong Kong (see the court’s decision dated 28 July 2015 granting leave to appeal, at paragraphs 12 - 13).  There are no merits in these submissions.

16.  I would therefore not make any PCO in relation to the costs of the PCO application itself.

17.  This takes me to the applicant’s alternative position that there should be no order as to costs.

18.  The principal bases of the submissions are that the PCO application itself helps to clarify the law in relation to that (and thus serves the public interest) and that the applicant itself has no personal gain from it.  This is particularly so as PCO itself is a subject matter of public interest.  It would therefore be just not to require the applicant to bear the costs of the respondent, which comes out from the public purse in any event.  In support, the applicant borrows the observations made by Lam J (as the learned VP then was) in Chu Hoi Dick v Secretary for Home Affairs (No 2) [2007] 4 HKC 428[4] that the court would make no order as to costs in an unsuccessful judicial review if the action is a public interest litigation and that the applicant has no personal benefit in pursuing it.

19.  I am unable to accept these submissions too.  The PCO application itself is obviously to benefit the applicant itself financially. The fact that the judicial review itself does not benefit the applicant personally (as accepted by this court in the Judgment) does not mean that the PCO application itself similarly does not benefit the applicant.  The PCO application is seeking in advance to relieve the applicant itself from personally liable for costs of the judicial review even if it fails, which costs in the usual course of events would have to be borne by the applicant.  This is for the personal benefit of the applicant.

20.  For the same reason, the subject matter under the PCO application per se is not a matter of public interest.  The subject matter is only whether to relieve in advance the applicant itself from costs liability.  Put it in another other way, even without a PCO application, the applicant could well have pursued the judicial review (which this court has accepted it to be a public interest litigation and for no personal benefit of the applicant), and then seeks no order as to costs if it fails in the judicial review under the principles laid down in Chu Hoi Dick.  The PCO application is thus advanced and made solely for the benefit the applicant itself.  The fact that incidentally this application is the first time where the court in Hong Kong has to consider the principles comprehensively does not then render the subject matter under the PCO application a matter advanced for public interest.  Quite to the contrary, as I mentioned above, to facilitate this variation application, it is now the applicant’s submissions that the PCO application should have been dealt with simply on papers and should not have called for the assistance of an amicus.  One cannot see how these submissions of the applicant sit consistently with the contention that the PCO application itself was advanced in public interest to clarify the law relevant to PCO determination.

21.  I am of course conscious of this court’s own decision to grant leave to appeal on the basis of interests of justice by reference to the fact that the appeal would raise questions of law relating to PCO applications for the first time which is in the public interest to be tested at the earliest occasion by the court of appeal.  That however is in the context of whether leave to appeal should be granted.  That involves a different consideration from that for the purpose of costs as to whether it is primarily for the personal benefit of the applicant to pursue the PCO application.

22.  Finally, the applicant submits that even if it has to bear the costs of the PCO application, the quantum of costs should be significantly limited as it has effectively won most of the issues raised in contention but lost the application only on the point of financial position of its directors and shareholders.

23.  I am equally not convinced by these submissions.  The ultimate question in the PCO application is whether the applicant can satisfy the court on the evidence that in all the circumstances of the present case, the court should depart from the general costs position and grant the PCO.  The burden is on the applicant to so satisfy the court.  Whether it has failed on one or a number of the bases to convince the court to exercise the discretion in its favour, it has failed in substance in its application.

24.  The court should generally not decide costs in accordance to a score sheet on how many issues had gone one way or the other.  This is of course subject to the consideration where the winning party has improperly or unreasonably raised arguments or issues which have unreasonably and significantly wasted the court’s time and costs.  In which case, the court can exercise its discretion to disallow those costs or even order the winning party to bear those parts of the costs to achieve a just and fair costs position in all the circumstances (see: Hong Kong White Book 2015, paragraph 62/3/3).

25.  This is however not the present case.  In my view, there are no contested issues in which the Board has lost in arguments that could be regarded as points that had been improperly raised or taken.

26.  In the premises, I think it is only fair and just in all the circumstances to order that the applicant shall bear the costs of the PCO application, to be taxed if not agreed.  As I said above, the taxation exercise should of course take into account, among others, the underlying objectives provided under Order 1A, rule 1.

C. CONCLUSION

27.  For the above reasons, I reject the applicant’s costs variation application.  The costs order nisi is hereby made absolute.

28.  The applicant shall also bear the costs of this application to be taxed if not agreed, with no order as to costs.