KWOK CHEUK KIN v. SECRETARY FOR TRANSPORT AND HOUSING AND OTHERS

HCAL 136/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 136 OF 2015

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DECISION ON COSTS

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Introduction

1. On 4 January 2016, I handed down judgment dismissing the applicants leave application for judicial review and I now address the question of costs.

2. The timing of the leave application is highly relevant to the question of costs in this case.  In the middle of last year there was wide public concern about contaminated water supplies at public housing estates.  It resulted in the administration announcing the establishment of the Commission of Inquiry to look into the matter.  Just prior to the announcement, the applicant had made his application.  It is clear, however, that sometime thereafter it would have been apparent to the applicant that the application had been overtaken by events in the establishment of a Commission of Inquiry to look into the matter and that his application was unnecessary.  The subject of the application concerned the use of prefabricated elements with preinstalled plumbing in public housing developments in non-compliance with legal requirements in relation to the performance of plumbing works.  

3. The application had a narrow compass because only one public housing estate had used prefabricated elements in its construction and the Housing Authority had publicly stated that it would not use prefabricated elements in any future public housing developments.  The terms and the scope of the Commission of Inquiry were far broader and sought to comprehensively address the problem of water quality in Hong Kong.

Basic principles of costs for an unsuccessful leave application

4. The general rule on the question of costs of opposing parties following an unsuccessful leave hearing for an application to apply for judicial review at which a putative respondent or putative interested party has also been in attendance is that an unsuccessful applicant will not be ordered to pay the costs of a putative respondent or putative interested party unless there are special or unusual circumstances which justify such an award (in other words, good reason) and that the discretion of making such an award should be sparingly exercised.  This was explained in some detail by the Court of Final Appeal in Leung Kwok Hung v President of the Legislative Council (No 2) (2014) 17 HKCFAR 841 which set out the following relevant principles to be applied at §17:

“(1) The basic principle remains that costs lie in the discretion of the court which must retain the flexibility to make or refuse to make an award of costs as the particular circumstances of the case and justice warrant. Notwithstanding the guidance that follows, there may be exceptional cases in which the discretion, which is a broad one, may be properly exercised otherwise than it would in other cases.

(2) Since applications for leave to apply for judicial review are, by the rules themselves, meant to proceed on an ex parte basis, the general rule should be that an unsuccessful applicant will not be ordered to pay the costs of a putative respondent or putative interested party unless there are special or unusual circumstances which justify such an award. The discretion of making an award of such costs should be sparingly exercised. Good reason will therefore be required in order for the court to make an order in relation to these costs against an applicant.

(3) There is no definitive list of reasons that may justify an award of costs against an applicant and in favour of a putative respondent. As already indicated, the discretion as to costs is broad. All facts and circumstances may be relevant and should be taken into account in the exercise of the discretion.

(4) Without limiting what the court will take into account, it will certainly be relevant to focus on the reason that has led the opposing party to attend at the hearing, whether that party’s attendance has been of material benefit to the court in determining the leave application, and the underlying lack of merits of the application, always bearing in mind that the context is the end result that the court has refused to grant leave to apply for judicial review.

(5) By way of example of these particular considerations: if the putative respondent or putative interested party has attended at the invitation of the court, the reason why the court has considered that party’s presence necessary will be relevant; so too, if the opposing party’s presence at the hearing may have been necessary because of an application for interim relief; if an application was thoroughly ill-conceived or unmeritorious, this may be a weighty factor justifying an adverse costs order; similarly, if it was so frivolous or vexatious, or motivated for a tactical purpose indicating bad faith; where, as a result of the attendance of an opposing party, the hearing has proceeded with full argument and documentary evidence so that the applicant has, in effect, had a full substantive hearing of the judicial review challenge, this may be sufficient to persuade the court to make a costs order as if the matter had proceeded at a full inter partes hearing. These considerations may or may not justify a costs order in favour of a putative respondent and it is important to stress that the ultimate decision remains in the discretion of the judge.

(6) If a putative interested party has appeared in addition to a putative respondent, the same principle will apply, namely that no adverse costs order should be made against the applicant in respect of those costs unless there are special or unusual circumstances which justify such an award. Where there is already one opposing party in the person of a putative respondent, whose costs the court is minded to order the applicant to bear, the court will need to be persuaded that some additional justification exists if it is additionally to order the applicant to bear a putative interested party’s costs. The interested party’s circumstances, including its claimed interest in the matter and its reasons for seeking to be heard on the leave application, will be material as will its conduct and any additional benefit its presence will have provided to the court. Such a party will not normally be entitled to an award of costs in his favour “unless he can show that there was likely to be a separate issue on which he was entitled to be heard, that is to say an issue not covered by counsel for the [putative respondent]; or unless he has an interest which requires separate representation”.”

The application for costs by the putative respondents

5. The two putative respondents, the 2^nd and 3^rd putative respondents, who participated in and were legally represented at the leave hearing, seek costs from the unsuccessful applicant on the basis that there were unusual or exceptional circumstances justifying such an award.  They argue that they are entitled to their costs because, as found by the Court, the applicant’s application was misconceived from the start and was based on speculative facts and obscure grounds which they were required to address and correct.  They further argue that the applicant’s application was bound to fail given the clear alternative remedy that was available to address the subject of the application in the form of the Commission of Inquiry proceedings.  They point out that these proceedings had been publicly announced on 17 July 2015 prior to the filing of the Form 86 on 22 July 2015 and had been actively progressing from that time.  They further point out that the applicant had neither a direct personal interest in the subject of the application, nor was there any general public interest to be served by the challenge, given the extant Commission of Inquiry. 

6. The applicant resists the application for costs by the putative respondents on the basis that when the application was made it was to advance a matter of public importance and that it was only after the putative respondents filed evidence that the nature of the subject under challenge became clearer. 

7. The applicant argues that he is not a “meddlesome busybody” and that he initiated the application as it involved a serious matter of public importance and that it was not clear from the Government press release when the Commission of Inquiry would be appointed and what its terms of reference would be. 

8. The applicant further argues that he did not have all the information necessary to enable him to properly assess the merits at the time of initiating the present proceedings.  He relies on Sky Wide Development Ltd v Building Authority [2009] 1 HKC 450 where Lam J (as he then was) at §26 listed factors he took into account when awarding costs to the putative respondent following an unsuccessful leave application. 

9. One of the factors Lam J listed was that the applicants had all the information necessary to enable them to properly assess whether the application was meritorious at the time when the application was filed.  In other words, the applicants should have appreciated from the outset that their application lack merit.  The applicant argues that unlike the case of Sky Wide Development he did not have all the information necessary to enable him to properly assess whether the application was meritorious at the time when the application was filed.  I think this misconstrues the point that Lam J was making at the time, as evidenced by the other listed factors that generally addressed the conduct of the applicants in relation to the subject of the application and the assistance given by the putative respondent to the court in understanding matters relevant to the subject of the application.  

10. Rather than rely on this fact as an argument to resist costs, it seems to me that it may well go against the applicant.  It is incumbent on any person who initiates legal proceedings to do so on a sound and proper basis.  In the case of a judicial review involving a challenge in relation to the proper exercise of a public function, it is all the more important that it is initiated as far as possible on a full and accurate factual foundation, putting forward reasonable and precise grounds for review.  There would have to be good reason or exceptional circumstances for this not to take place. 

11. The applicant also relies on the following passages in Re Leung Kwok Hung, HCAL 83 & 84/2012, 28 September 2012, unreported, where Lam J (as he then was) elaborated on the circumstances which warrant the court to invite the putative respondent at the leave stage:

“35. … an applicant bears a duty of full and frank disclosure in the ex parte application for leave and any breach of such duty may result in leave being set aside. I should add that the duty of full and frank disclosure extends beyond disclosure of material facts, it also extends to disclosure of potential legal answers to the claims of an ex parte applicant. Unfortunately, this duty is not always observed. In my experience as the judge in charge of the Constitutional and Administrative Law List, very often the court is not provided with all relevant information and adequate assistance in the papers filed on behalf of an applicant for the proper performance of its role in the filtering process. Sometimes this may due to the fact that the applicant acts in person. Sometimes it may due to the inadequate instructions given by an applicant to the lawyers. Sometimes it may due to the inadequate investigation of the matter by the lawyers before launching the application. Sometimes it may due to the omissions on the part the lawyers in considering some relevant issues. Sometimes it may due to the insufficient communication between the applicant and the relevant authority resulting in the applicant (and those advising him) not having a full grasp of the reasons for the decision or the decision-making process.

…

37. But the fact remains that in many cases judges reading the papers for leave require further information and assistance before he or she can be satisfied that the case is reasonably arguable. In addition to the situations mentioned above, the following factors also contributed to the need for asking inputs from the putative respondents,

…

(b) There are instances where those acting for applicants only focus on an applicant’s challenge in the material presented to the court without giving serious considerations to the potential answers which a putative respondent may have in respect of the challenge. The court from time to time encounters cases where an advocate, even doing his best in fulfilling his duty in an ex parte application, unwittingly failed to give comprehensive and adequate assistance to the court in terms of the presentation of the potential answers of his opponent;

   …”

12. What is not quoted from the judgment of Lam J are his comments at §34 where he said:

“It has to be stated clearly and firmly that the purpose of the leave requirement is to filter out unmeritorious cases so that public administration would not be disrupted by such litigations. It is not in the public interest to devote disproportionate time and public resources on challenges which have no merit. The purpose of the leave requirement is NOT to enable a litigant (or those advising him) to come to court to get a second opinion from the judge as to the viability of the challenge. In considering how a leave application should be dealt with, the judge is not acting as the legal adviser of an applicant (who must look to his own lawyers for advice on the viability of his intended claim). Therefore, in deciding how a leave application should be processed and whether the putative respondent should be heard, and if so, the extent to which input should be sought from the putative respondent, the primary concern of the judge is to see which, in the circumstances of the case, is best way to achieve the filtering function.”

13. Also not quoted were Lam J’s comments preceding and following §37(b) where he said:

“(a) Constitutional challenges in judicial review are becoming more prevalent. In most of such challenges, an applicant would only set out his grounds of challenge without putting forward any potential justification for a policy or legislation. Even if some potential justifications were put forward, it would not be comprehensive. As the putative respondent generally carries the burden of establishing the justifications, the court must have inputs from the putative respondent before it can properly perform its role in the filtering process;

…

(c) … there are judicial review applications where the mere granting of leave would have serious implications for the community and the public purse. It is only right that the court will, in those cases, scrutinize the application more intensely in performing its filtering function. The test for granting leave remains the same, whether the challenge is reasonably arguable. But the court should ensure that it has got before it adequate information with regard to the potential answers to the challenge before it decides whether the threshold has been satisfied. As Chief Justice Li observed in Po Fun Chan v Winnie Cheung [2008] 1 HKLRD 319 at para 8, arguability has to be judged with reference to the nature and gravity of the issue to be argued. The more serious the allegation or more serious the consequences, the stronger must be the evidence before a court. In my experience, nowadays, in those cases the putative respondent invariably wrote to the court asking for leave to be heard on the question of leave. Invariably, at the hearing the court received valuable assistance from those representing such putative respondent, drawing attention to matters not adequately canvassed in the applicant’s papers. In that regard, the hearing for leave is better regarded as a compressed ex parte application for leave plus an inter partes application to set aside leave in the spirit of fair, efficient and expeditious disposal of matter in line with Order 1A under the Civil Justice Reform;

…”

14. After carefully considering the submissions from the parties, I have come to the view that the applicant initiated this action without a clear understanding of the nature of the application or sufficient information to properly invoke the judicial review jurisdiction.  I am prepared to accept that the narrow issue the applicant sought to pursue was part of a broader issue of public concern but the proceedings were clearly unnecessary once the Commission of Inquiry had got underway.  In these unusual circumstances, it appears that the applicant should pay some or all of the costs of the 2^nd and 3^rd putative respondents as the proceedings were inappropriately and unnecessarily pursued, involving time and effort on their part to respond to the changing nature of the applicant’s application.

15. The issue of costs in this case is however not that straightforward.  As a general rule, where an application for judicial review is dismissed, the unsuccessful applicant will not be required to pay more than one set of costs if there were two or more respondents appearing.  This rule was acknowledged in Hong Kong Civil Procedure, 2016, at para 53/14/59, citing as authority R v Industrial Disputes Tribunal, ex. p. American Express Co. Inc [1954] 1 WLR 118.  It is also noted on the authority of R v Registrar of Companies, ex. p. Central Bank of India [1986] QB 1114 that special circumstances may sometimes warrant the court ordering the unsuccessful applicant to pay two sets of costs.  The application of these principles will obviously depend upon the particular facts and circumstances of the case at hand.

16. Even though the 2^nd and 3^rd putative respondents are public bodies, they had in the course of these proceedings separate legal representation.  The 3^rd putative respondent had private representation as is its usual practice.  This is relevant because as a matter of practical reality they could not have the same legal representation, although they could have come to an arrangement between them that one would argue the case in opposition to the leave application.  Other matters of relevance that should be noted are that the 3^rd putative respondent was brought into these proceedings at a later stage by the applicant and the 2^nd and 3^rd putative respondents presented very similar arguments in opposition to the leave application.  

17. It seems to me that in the circumstances the applicant should only pay one set of costs given that the arguments presented by the 2^nd and 3^rd putative respondents were practically the same, even though each did make a significant contribution in assisting the court in relation to the leave application.  The fact is that both parties are on the same side of the fence, basically representing the same interests and presenting the same arguments.  I will take into account that the 3^rd putative respondent was brought into these proceedings at a stage when it would have been clear to the applicant that the Commission of Inquiry would be addressing the subject of the application.  I will also take into account that the applicant, when he initiated these proceedings was seeking to address, albeit on an inappropriate basis, a matter of public concern.  As I have said, it should have dawned on the applicant soon after he initiated these proceedings that there was an alternative remedy to the subject of this application.

18. Taking all these matters into account, I consider it appropriate that the applicant pay 75% of one set of costs, which I will apportion by making an order that the applicant pay 25% of the costs of the 2^nd putative respondent and 50% of the costs of the 3^rd putative respondent.