LEUNG KWOK HUNG v. PRESIDENT OF THE LEGISLATIVE COUNCIL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION

FACV No. 1 of 2014

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 1 OF 2014 (CIVIL)

(ON APPEAL FROM CACV NO. 123 OF 2012)

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JUDGMENT ON COSTS

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The Court:

1. On 10 September 2014, we dismissed the appellant’s appeal against the Court of Appeal’s judgment[1] dismissing the Judge’s refusal to grant leave to apply for judicial review.[2]  As directed by the Court in paragraph 1 of its Reasons for Judgment dated 29 September 2014 (the Reasons for Judgment), the parties have now filed written submissions on costs.

2. This is the Court’s judgment on the issue of costs.

Procedural history

3. At first instance, having refused to grant leave to apply for judicial review, Lam J[3] ordered the appellant to pay the costs of the putative respondent but made no order as to costs between the appellant and the Secretary for Justice as the putative interested party.[4]

4. In dismissing the appeal against the first instance judgment, the Court of Appeal affirmed Lam J’s order of costs.  It also made, in respect of the costs of the appeal, a costs order nisi that the appellant pay to the putative respondent and to the Secretary for Justice respectively their costs of the appeal including the costs of the appellant’s application to vary the costs order nisi, to be taxed if not agreed, together with a certificate for two counsel.[5]

5. The applicant applied to the Court of Appeal for leave to appeal to this Court against the Court of Appeal’s substantive judgment dismissing its appeal from Lam J’s judgment and also its judgment on costs.  On 18 July 2013, the Court of Appeal dismissed the appellant’s application for leave to appeal to this Court against the substantive judgment, with costs to both the putative respondent and Secretary for Justice.  On 16 December 2013, the Appeal Committee granted leave to appeal to this Court against the Court of Appeal’s judgment and certified two questions of great general or public importance, being the questions set out at paragraph 3 of the Reasons for Judgment.

6. Subsequent to the leave application determined by the Appeal Committee, the appellant sought to withdraw his application for leave to appeal against the Court of Appeal’s Judgment (on Costs).  Notwithstanding this, the Court of Appeal dismissed the appellant’s application for leave to appeal to this Court on the question of costs but reserved the costs of the application itself to this Court.[6]

7. Despite the appellant’s assertion to the contrary, the Appeal Committee did not grant the appellant leave to appeal to this Court against the Court of Appeal’s Judgment (on Costs).  However, the Court having dealt with the substantive appeal from the Court of Appeal’s judgment dismissing the appellant’s appeal against Lam J’s decision refusing leave to apply for judicial review, the appropriate costs orders that this Court should now make remains a live issue.

The parties’ respective positions

8. It is submitted on behalf of the appellant that there should be no order as to costs throughout the proceedings in HCAL 64/2012, CACV 123/2012, FAMV 37/2013 and FACV 1/2014.  This submission is based on two short contentions, namely that (1) costs should not be awarded against an unsuccessful applicant in an ex parte leave application unless it is justified by exceptional circumstances, and (2) these proceedings are public interest litigation.

9. The putative respondent’s stance is that the appellant should pay his costs of the appeal, with a certificate for two counsel, and also the appellant’s abandoned application to the Court of Appeal for leave to appeal to this Court on the issue of costs.  It is also submitted that the costs orders made by Lam J at first instance and the Court of Appeal in respect of the substantive appeal to that court were plainly correct and ought not to be disturbed.

10. The Secretary for Justice, as putative interested party, contends that (1) there is no basis to interfere with the Court of Appeal’s judgment on costs under which the Secretary was awarded costs against the appellant, and (2) the Secretary is entitled to the costs incurred in the appeal to this Court together with the reserved costs of the application to the Court of Appeal for leave to appeal against the Court of Appeal’s Judgment (on Costs).  The Secretary asks for his costs to be taxed if not agreed and a certificate for two counsel.

The relevant principles to be applied

11. Applications for leave to apply for judicial review are made ex parte.[7] Ordinarily, such applications are dealt with on the papers and therefore do not lead to costs being incurred by any party other than the applicant.[8]  Even if the applicant requests an oral hearing in case the judge dealing with the leave application is minded to refuse leave and the judge directs such a hearing, the hearing remains ex parte and no costs will be incurred by any party other than the applicant.  Sometimes, the judge himself may direct an oral hearing on his own motion if he requires further information or submissions from the applicant.  Again, if so, the hearing will normally remain ex parte.

12. The position is less straight forward when a putative respondent or putative interested party appears at a contested leave application.  Nothing in the rules prevents the court from hearing the putative respondent or putative interested party before deciding whether to grant leave.  This may happen either on the application of the party seeking to be heard or at the court’s invitation.  When another party other than the applicant appears and the application for leave is refused, the court may be faced (as the courts below were here) with an application for costs.

13. There are clearly competing considerations and a balance to be struck. On the one hand, applicants seeking leave to apply for judicial review should “on the whole, [be] able to seek relief without fear, if permission was refused, of being saddled with the respondent’s costs at that stage.”[9] Equally, the imposition of a liability to bear a respondent’s costs should not become a deterrent to a litigant’s right to have access to the courts and care must be taken to ensure that costs “are not disproportionately inflated by the involvement of the other parties at the permission stage”.[10]  This Court has also recognised that the character of judicial review proceedings to vindicate the public interest and the public importance of a case may be proper matters to take into account when exercising the discretion as to costs.[11]

14. On the other hand, the principle that a successful party in litigation is entitled to an award of costs in his favour is one grounded in reasons of fairness and policy.  When a party is put to the expense of responding to a claim in a court of law and prevails, it is only fair that he should be compensated for his expenditure.  Equally, compensatory costs orders have long been part of our legal system and they serve to give claimants pause for thought before embarking on ill-conceived or unmeritorious litigation.

15. The relative weight of these considerations will differ as between (i) an application for leave to a first instance judge, (ii) an appeal to the Court of Appeal from the refusal of leave by the judge and (iii) on further, final appeal to this Court.

16. It is apparent that courts in Hong Kong have, for some time, grappled with the competing interests referred to above in the context of the costs of putative respondents and interested parties in relation to unsuccessful applications for leave to apply for judicial review: [12] see, for example, at first instance, Shek Lai San v Securities and Futures Commission & Anor[13] and Re Ho Mei Ling (No.2);[14] and, in the Court of Appeal, Sky Wide Development Ltd v Building Authority.[15]

17. The present case therefore provides a useful opportunity for the Court to state the principles to be applied in relation to the costs of opposing parties in unsuccessful applications for leave to apply for judicial review. 

The basic principle at first instance

(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.[16] The discretion of making an award of such costs should be sparingly exercised.[17]  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”.[18]

Reviewing the judge’s exercise of discretion

(7)   The first instance judge’s decision being an exercise of discretion in relation to costs, it will only be subject to challenge on appeal on the normal limited grounds applicable to an appeal against such an exercise.[19]

The position on intermediate appeal

(8)   The position on appeal to the Court of Appeal is different.  At this stage, although an appeal lies as of right,[20] the applicant will already have had the benefit of a hearing before the judge and the reasons for the judge’s refusal of leave.  He will also have had the protection of the rule that he will only be at risk for an opposing party’s costs where special circumstances are shown.  An appeal against a judge’s refusal of leave, which in practice proceeds on an inter partes basis, should therefore be subject to the usual rules as to costs, namely that the starting point in civil litigation, even that involving the public interest, is that costs should follow the event.[21] 

(9)   The reversion to the normal costs rule as the starting point at this stage of the matter strikes a fair balance between the competing interests referred to above.  The fact there is a right of appeal from a refusal of leave at first instance is not a good reason to depart from that normal rule and the application of the rule is particularly appropriate where the Court of Appeal’s reasons for dismissing the appeal are broadly the same as the first instance judge’s reasons for refusing leave.[22]

(10)  Notwithstanding the applicability of the normal costs rule, the public interest litigation factor recognised in Chu Hoi Dick v Secretary for Home Affairs (No.2)[23] may apply so that the Court of Appeal should not order the applicant to pay an opposing party’s costs.  For that factor to apply, it will be necessary for the applicant to show that he brought proceedings to seek guidance on a point of general public importance for the benefit of the community as a whole and that he stood to obtain no personal private gain from the outcome.[24]  The applicant’s case must also have had a real prospect of success. [25]  Even then, the ultimate order of costs remains in the discretion of the Court of Appeal, which will also need to take into account other relevant factors such as the conduct of the parties.[26]

(11)  There is scope for argument as to whether the real prospect of success test is the same as or higher than the reasonable arguability test applicable for the grant of leave to apply for judicial review.[27] However, in Chan Noi Heung v Chief Executive in Council, the tests were treated as being the same[28] and that approach is appropriate.  There is no good reason to extend the public interest litigation factor to an application for leave to apply for judicial review which does not even pass the reasonable arguability test.  Although the appellant contends that this is an “absurd result”, to extend the factor to the leave stage would necessitate abandoning the threshold test at the substantive judicial review stage and there is no justification for doing so.  It would mean that the grant of leave to apply for judicial review would itself be a reason for departing from the usual rule that costs follow the event after the substantive hearing, and this was an argument rightly rejected by the Court of Appeal in Chan Noi Heung v Chief Executive in Council.[29]

(12)  So far as the costs of a putative interested party are concerned, although the starting point is that costs will follow the event, it will remain necessary for that party to show a separate issue on which he was entitled to be heard or an interest requiring separate representation.

Reviewing the Court of Appeal’s exercise of discretion

(13)  If it refuses leave to appeal to the Court of Final Appeal, the Appeal Committee will normally not review the exercise of discretion by the Court of Appeal on the question of costs unless there are exceptional circumstances.

(14)  The position may be different if the Appeal Committee has granted leave to appeal to the Court of Final Appeal. In that event, even though dismissing the substantive appeal, the Court will have the benefit of hindsight in knowing that the case merited leave to appeal and this factor will justify a review of the Court of Appeal’s exercise of discretion on costs.

Costs of the application for leave where the Appeal Committee refuses leave to appeal

(15)  There being no right of appeal to this Court against the Court of Appeal’s dismissal of an appeal from a judge’s refusal of leave to apply for judicial review, an applicant must obtain leave from the Appeal Committee to appeal to this Court.  Unless subject to the Rule 7 procedure, such an application for leave to appeal to this Court will proceed by way of inter partes hearing.  Costs will be at the discretion of the Appeal Committee but it is to be expected that the usual order on the dismissal of an application for leave to appeal will be that costs follow the event.

The position on final appeal

(16)  On appeal to the Court of Final Appeal the position is again different to that at the intermediate appeal stage.  While it is correct that, at the stage of an appeal to this Court, the unsuccessful applicant will have had both the benefit of the judge’s reasons for the refusal of leave and also the Court of Appeal’s reasons dismissing the appeal from that refusal, it is significant that an appeal to this Court, which will be inter partes, will only proceed because the Appeal Committee has exercised its discretion to grant leave to appeal.

(17)  The grant of leave to appeal by the Appeal Committee will generally mean that a question of great general or public importance is involved in the appeal.[30] It will also mean that the Appeal Committee has determined that the appeal is reasonably arguable or otherwise worthy of being heard by the full Court.  Although the appeal may ultimately fail, the grant of leave to appeal to the full Court is based on there being a sufficient public interest in the appeal being heard and the important point of law in question being resolved.

(18)  This factor is significant and, for that reason, the grant of leave to appeal to the full Court should be treated as a sufficient threshold test on the merits to engage the discretion to apply the public interest litigation factor.  Whether or not the Court will in fact exercise that discretion to make no order as to costs will depend on all the other factors relevant to be taken into account as described in sub-paragraph (10) above.  The only difference in this context is that an applicant will not be required to show a case with a real prospect of success in the sense of passing the reasonable arguability test.

(19)  As in the Court of Appeal, the position of a putative interested party will have to be looked at separately to that of a putative respondent and it will remain necessary to identify a separate issue on which he was entitled to be heard or an interest requiring separate representation.

Applying the relevant principles to the present case

18. With the above considerations in mind, the following issues remain to be determined:

(1)   First, the appropriate order as to the costs of the appeal in FACV 1/2014, including the costs of the application for leave to appeal in FAMV 37/2013;

(2)   Secondly, whether there is any proper basis to interfere with the Court of Appeal’s exercise of discretion as to the costs in CACV 123/2012 and, if so, what order to make as to those costs;

(3)   Thirdly, the appropriate order as to the costs of the withdrawn application for leave to appeal against the Court of Appeal’s Judgment (on Costs); and

(4)   Fourthly, whether there is any proper basis to interfere with Lam J’s exercise of discretion as to the costs in HCAL 64/2012 and, if so, what order to make as to those costs.

19. As to the costs of the appeal to this Court, including the costs of the application for leave to appeal:

(1)   It is submitted by the putative respondent and putative interested party that the appeal was so devoid of merit as to be properly described as “hopeless” so that, for that reason, the public interest litigation factor could not apply.

(2)   It is true that three of the four contentions advanced in argument by the appellant were emphatically rejected by the Court: thus, as to the argument that Article 73(1) of the Basic Law gave rise to a right to participate in the legislative process, the Court noted the consequences of the appellant’s interpretation in effect demanded its rejection (paragraph 23); as to the argument that rule 92 of the Rules of Procedure did not confer power on the President to close the debate was described as “elusive, to say the least of it” (paragraph 44) and “remarkable” as tending to suggest the dispute was “academic” (paragraph 45) and was shortly rejected; and, as to the attempt, as a new point in this Court, to pray in aid the Israeli jurisprudence, the Court was employing hyperbole in describing this as “less than compelling” and flatly declined to adopt that jurisprudence (paragraphs 51-52).

(3)   However, in granting leave to appeal in the present case, the Appeal Committee was satisfied that the appeal raised questions of great general or public importance and that the appeal was reasonably arguable or otherwise worthy of being heard by the full Court.  As we have concluded above, the grant of leave to appeal to the full Court should be treated as a sufficient threshold test on the merits to engage the discretion to apply the public interest litigation factor.  It therefore falls to determine if that factor should be applied with the result that the appellant should not be made liable for the costs of the putative respondent or the putative interested party.

(4)   The appeal raised two questions of constitutional law described in paragraph 2 of the Court’s Reasons for Judgment as being of “fundamental importance” relating to the doctrine of the separation of powers under the Basic Law.  It follows that the appeal is properly to be characterised as having been brought with a view to obtaining guidance on a point of general public importance for the benefit of the community as a whole.

(5)   In addressing the appellant’s argument that Article 73(1) made compliance with the Rules of Procedure essential to the validity of the enactment of a law by the Legislative Council, the Court acknowledged that the failure of Article 73(1) to address the question whether non-compliance with “legal procedures” would result in invalidity was a problem (paragraph 37) and that its terms were ultimately “ambiguous” (paragraph 38).  Moreover, although holding that Article 73(1) did not displace the non-intervention principle, the Court went on to conclude that the approach of the High Court of Australia in Egan v Willis was to be adopted (paragraph 42) and held (paragraph 43):

“…although art 73(1) does not make compliance with the Rules essential to the validity of the enactment of a law by LegCo and that it is for LegCo itself to determine its own procedures and how they will be applied, the courts will exercise jurisdiction to determine the existence of a power, privilege or immunity of LegCo. We also arrived at the conclusion that the courts will exercise jurisdiction to determine the existence of a power, privilege or immunity of the President of LegCo. We arrived at this conclusion in the light, not only of art 73(1), but also of the provisions of art 72 of the BL and the important powers and functions which it confers on the President, particularly the power to ‘preside over meetings’. The courts, however, will not exercise jurisdiction to determine the occasion or the manner of exercise of any such powers, privileges or immunities either by LegCo or the President.”

(Emphasis added)

(6)   The proposition stated in this paragraph is a critical part of the ratio of the Court’s judgment and provides clarification of the fundamental question of the amenability of the processes of the Legislative Council, in particular decisions made by its President in the course of the legislative process, to review by the courts of Hong Kong.  The appeal has therefore resulted in guidance being given by this Court, as the final appellate court in this jurisdiction, on a point of general public importance.

(7)   It is also clear that the appellant stood to obtain no personal private gain from the outcome.  Furthermore, there is nothing in the conduct of the appellant in prosecuting the appeal to this Court to suggest a proper basis for disapplying the public interest litigation factor in the present case.

(8)   Although in the event the Court did not feel it necessary to call on the putative respondent or putative interested party at the end of the appellant’s argument (paragraph 1), the Court had the benefit of evidence filed by the putative respondent and very full written submissions on behalf of both the putative respondent and putative interested party, which enabled the Court to reach its ultimate view on the outcome of the appeal without the necessity of further oral submissions on their part.  The appeal to this Court proceeded, as it did in the Court of Appeal, as if it were a full inter partes hearing of the judicial review of the validity of the Ordinance.  It was, for all intents and purposes, a full inter partes rolled-up hearing of (i) the application for leave to apply for judicial review and (ii) the underlying judicial review itself as if leave to apply for judicial review had in fact been given.

(9)   In the circumstances, we conclude that it is appropriate to make no order as to the costs of this appeal.

(10)  As to the costs of the application for leave to appeal to this Court, such costs lie within the discretion of the Appeal Committee.[31] Where no order is made at the time of the grant of leave, the normal rule is that such costs will form part of the costs of the appeal and there is no reason to depart from that rule in the present case.

20. As to the costs of the appeal to the Court of Appeal:

(1)   In relation to the costs of the substantive appeal, the Court of Appeal applied the starting point that costs should follow the event and looked to see if there was any reason why that should not be the case.[32] Indeed, on the application to vary the costs order nisi, the appellant accepted this was the starting point.[33]

(2)   The Court of Appeal went on to consider whether the public interest litigation factor should apply to justify no order as to costs of the appeal but decided that it did not.[34] As regards a second set of costs, the Court of Appeal also considered whether, and concluded that, the Secretary for Justice did have a separate interest with separate arguments that had to be promoted.[35]

(3)   Had the matter stopped there in the Court of Appeal, or had the Appeal Committee refused leave to appeal to this Court, the Court of Appeal would have applied the correct principles in exercising its discretion as to costs and there would be no proper basis for interfering with that exercise of discretion.

(4)   However, the Appeal Committee’s grant of leave to appeal to this Court significantly changed the landscape of the litigation.  As observed above, it meant that a question of great general or public importance was involved in the appeal and that the appeal was reasonably arguable or otherwise worthy of being heard by the full Court.  With this hindsight, it is apparent that there was a sufficient threshold for the application of the public interest litigation factor to apply in respect of the costs of the appeal to the Court of Appeal. Since the Court of Appeal understandably did not have the benefit of that hindsight and therefore declined to exercise its discretion to apply the public interest litigation factor on what turned out to be a faulty premise, it falls to this Court to exercise the discretion afresh.

(5)   Exercising that discretion afresh, we consider that, for the same reasons it applies in this Court, the public interest litigation factor applies to the costs of the appeal and it is appropriate to make no order as to those costs.

21. In light of the above conclusions, the costs of the withdrawn application for leave to appeal against the Court of Appeal’s Judgment (on Costs), which were reserved to this Court, should be treated as part and parcel of the costs of the appeal to this Court and so no order is made in respect of those costs.

22. As to the costs at first instance:

(1)   Lam J approached the matter on the basis that costs in an unsuccessful leave application for judicial review should only be awarded in favour of the putative respondent or putative interested party in exceptional cases, applying Sky Wide Development Ltd v Building Authority and Re Ho Mei Ling (No.2).[36]

(2)   Lam J considered and rejected the appellant’s arguments based on his lack of resources, the lack of any private personal interest and the public interest litigation factor.[37] As to the latter consideration, he agreed with counsel for the putative respondent and putative interested party that “given the hopelessness of the application and the well-established principle on parliamentary privilege the Applicant cannot satisfy the test laid down in Chu Hoi Dick … and Chan Noi Heung”.

(3)   However, again with the hindsight provided by the subsequent procedural history, the Appeal Committee’s grant of leave to appeal to this Court demonstrates that there was a sufficient threshold for the application of the public interest litigation factor to apply in respect of the costs before Lam J.  Since Lam J understandably did not have the benefit of that hindsight and therefore declined to exercise his discretion to apply the public interest litigation factor on what turned out to be a faulty premise, it falls to this Court to exercise the discretion afresh.

(4)   Exercising that discretion afresh, we consider that, for the same reasons leading to the fresh exercise of discretion in respect of the costs in the Court of Appeal and in light of the fact the hearing before Lam J on 18 May 2012 was “in substance a rolled-up hearing”[38], it is appropriate to make no order as to the putative respondent’s costs before him.

Conclusion

23. In the circumstances, we make the following orders as to costs:

(1)   There be no order as to the costs of the appeal in FACV 1/2014, including the costs of the application for leave to appeal in FAMV 37/2013;

(2)   The order of the Court of Appeal dated 18 April 2013 as to the costs of the appeal in CACV 123/2012 is set aside and in its place there be no order as to those costs;

(3)   There be no order as to the costs of the withdrawn application in CACV 123/2012 for leave to appeal against the Court of Appeal’s Judgment (on Costs); and

(4)   The order of Lam J dated 18 July 2012 as to the costs of the application in HCAL 64/2012 is set aside and in its place there be no order as to those costs.