GOOD MARK INDUSTRIAL LTD v. COMMISSIONER OF INLAND REVENUE

HCAL 88/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 88 OF 2012

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D E C I S I O N   O N   C O S T S

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Introduction

1.  This application for judicial review was refused by a judgment handed down on 28 March 2014.

2.  The parties earlier disagreed as to which of them should be liable for costs.  Directions were subsequently given for the purpose of determining that aspect.  Written submissions were lodged with court later pursuant to such directions.

3.  This decision on costs is made after having considered those submissions (the parties having agreed that no hearing is required).

Costs of the judicial review based on the amended Form 86

4.  The judicial review was determined on the basis of the grounds put forth in the amended Form 86 (“the amended application”) (leave to so apply was given on 16 July 2013).  By 30 May 2014 (the date of the last written submission (lodged with court by the applicant)), liability for costs in relation to the amended application was (correctly) no longer resisted by the applicant.  In view of the usual rule that costs should follow the event, and that there is no exceptional circumstance which justifies a departure from that rule, costs of the judicial review based on the amended application are to be paid by the applicant to the respondent to be taxed if not agreed.

Costs of the original Form 86

5.  The original Form 86 was dated 11 July 2012 (“the original application”).  The application for leave to apply for judicial review (“the leave application”) came on for hearing on 23 January and 22 May 2013.  By the May 2013 hearing, it became apparent a substantial part of the grounds put forth in (and relief sought by) the original application were overtaken by events, and there was no useful purpose to pursue them further (see para 6 below).

6.  The “abandoned” part concerned the respondent’s alleged earlier failure to make a determination pursuant to s 64(2), Inland Revenue Ordinance (Cap 112).  About 3 months after the original application was made, the respondent made his determination on 15 October 2012 (“the s 64(2) determination”).  Details concerning the original application and the history leading to the s 64(2) determination have been set out in the decision handed down on 31 May 2013 (“the leave decision”).  The amended application was filed pursuant to the leave decision (as stated in para 1 and 4 above, the judicial review based on it was finally refused in March 2014).

7.  The parties’ contentions as to who should be liable for this part of the costs are premised on who was at fault in relation to the original application and/or the reasonableness of commencing the original application.  The applicant contends that fault lied entirely with the respondent, and that it acted reasonably in commencing the original application; the respondent, on the other hand, denies that contention.  Although the respondent has not expressly so stated, his stance can only be consistent with the contention that fault cannot be attributed to him alone.

8.  Based on their respective case (above), the applicant seeks the costs from 11 July 2012 (date of the original application) to 15 October 2012 (date of the s 64(2) determination) while the respondent seeks no order as to those costs.

9.  The respondent’s tax requisition (which ultimately resulted in the original application) was raised in January 2008 (concerning the applicant’s tax returns for 2002/03 to 2007/08).  It was not responded to by the applicant until April 2010 (admittedly due to mal-management) (a delay of more than 2 years).  Correspondence concerning the applicant’s additional tax liabilities passed between the parties during the following period of more than one year: the respondent sought various documents and information from the applicant, and the applicant replied accordingly.

10.  In late-April 2012, the applicant lodged an official complaint to the respondent; in a letter to the respondent, the applicant complained that, contrary to s 64(2), Cap 112, the respondent’s staff failed to submit the case for determination.  A few days later, the respondent informed the applicant (among other things):

“… I agree with you that there is room for improvement on the part of the Assessor in the course of dealing with those matters … ”.

The respondent also informed the applicant:

“I have therefore instructed the Assessor to proceed to refer the case to Appeals Section with a view to placing it before the Commissioner for an early determination … ”.

In context, the reference to “determination” must have been a reference to a determination pursuant to s 64(2), Cap 112.

11.  The earlier reply letter was followed by another dated 4 June 2012 where the respondent repeated that the case was dealt with by the Appeals Section.  By then, the dispute has been outstanding for about 4-½ years (January 2008 to June 2012). 

12.  As stated above, the s 64(2) determination was made on 15 October 2012 (about 6 months after the applicant’s formal complaint).  In the meantime, though, the applicant commenced the original application (in mid-July 2012, less than 3 months from the applicant’s formal complaint (and about one month after the 4 June 2012 letter)).

13.  In approaching this matter, I have borne in mind the following provisions introduced by the Civil Justice Reform (implemented since 2009).

14.  RHC Ord 62 r 3(2) in effect provides that the usual order should be costs are to follow the event.  But Ord 62 r 5(1) requires the court to take into account (among other things):

(a) the underlying objectives set out in Ord 1A r 1;

(b) the conduct of all the parties.

In relation to sub-para (b) above, Ord 62 r 5(2) defines “conduct” as including:

(1) the manner in which a party has pursued his case;

(2) conduct before, as well as during, the proceedings.

15.  For ease of reference the underlying objectives set out in Ord 1A r 1 are inter alia to facilitate settlement (Ord 1A r 4(2)(e) and (f) further provides that parties are encouraged to use the alternative dispute resolution procedure, and the court is to help the parties to settle the case).

16.  With the above in mind, I agree with the respondent that:

(a) both parties were responsible for having delayed the making of the original application (if fault in this regard has to be specifically apportioned, the applicant should be responsible for the delay from 2008 to at least April 2010 (para 9 above); both parties should be responsible for the prolonged correspondence from April 2010 to at least July 2011 (when the applicant first intimated dissatisfaction with the case handling), perhaps even to April 2012 (para 10 above));

(b) having delayed the matter for years, the time for making the original application was inapt in that the applicant was already told shortly beforehand the respondent had referred its case to the Appeals Section for determination.

17.  In relation to para 16(a) above, the court is entitled to consider the parties’ conduct in relation to matters which gave rise to the litigation: Hong Kong Civil Procedure 2014, Vol 1, para 62/5/6 citing Donald Campbell & Co Ltd v Pollak [1927] AC 732 (see also para 14(2) above).

18.  In relation to para 16(b) above, it is to be noted that an unreasonable refusal to use the alternative dispute resolution procedure may result in a party being deprived of its costs (Hong Kong Civil Procedure 2014, Vol 1, para 62/5/6 citing Dunnett v Railtrack Plc [2002] 1 WLR 2434) (see also para 14 to 15 above).

19.  In the course of the original application, when specifically asked, the applicant did not explain why no deadline was given to the respondent before making the original application except stating that appropriate legal proceedings (such as a judicial review application) could be resorted to.  While the statement is strictly correct, in the light of the events referred to in para 16 above, such an attitude is inconsistent with the spirit of the Civil Justice Reform (see also para 13 to 15 and 17 to 18 above).

20.  In this connection, it is also noted that after the original application has been made in July 2012, and having been directed to fix a hearing on 31 July 2012, the applicant only fixed a hearing after a peremptory order was made on 5 November 2012 compelling it to do so. 

21.  To conclude, I agree with the respondent that there should be no order as to the costs of the original application.

Other matters

22.  The parties’ written submissions also mentioned various other points.  These have not been expressly set out or dealt with above.  This is so only because of the need to balance between the length of the decision on costs and its comprehension.  It does not mean those other points are thought to be irrelevant (or have been overlooked).  To avoid doubt, those other points have also been considered.