CHAN MEI YIU, PADDY AND ANOTHER v. SECRETARY FOR JUSTICE AND OTHERS

HCAL 16/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO. 16 OF 2007

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BETWEEN

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(Heard Together)

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DECISION ON COSTS

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The applications

1.  On 30 July 2010, I handed down judgment in HCAL 16-19/2007, (the substantive proceedings), dismissing the application for judicial review.  The question of costs was reserved.  After considering correspondence from the parties I directed the written submissions be filed in respect of costs.  This is my decision in respect of costs.

2.  Throughout the substantive proceedings, in which there have been numerous interlocutory applications in all respects costs have been reserved.  The proceedings in HCMP 1175/2007 related to a discrete issue, the issue of a letter of request.  In those proceedings costs were, as the summons sought, ordered to be in the cause in HCAL 16-19/2007.

The principles to be applied

3.  Mr Grossman, for the Respondents, acknowledges that costs are in the discretion of the court and argues, relying upon the well-known passage from Re Elgindata Ltd (No. 2) [1992] 1 WLR 1207 at 1214A-C, per Nourse LJ, that there is a general rule arising from a matter of accepted practice and case law that costs should follow the event, even if the successful party has raised issues or made allegations on which he fails, (i.e., principle (iii) referred to by Nourse LJ).

4.  Mr Grossman then reminds me that those principles have been adopted by the Hong Kong Court of Appeal in La Chemise Lacoste SA v Crocodile Garments Ltd [2000] 4 HKC 317.  Finally, he acknowledges that the following civil justice reform, the terms of O 62 R 3(2A), are now in permissive rather than mandatory terms, enabling the court in the exercise of its discretion to order costs to follow the event or make such an order as it sees fit.

5.  However, I accept Mr McCoy’s submission that the proper approach to costs, having regard to the changes brought about by civil justice reform, is that the proposition that costs follow the event is not a general rule, but only operates to shift to the unsuccessful party the burden of showing why some different approach should be adopted on the facts of a particular case.  When regard is had to the provisions of O 62 R 5(1):

“The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances take into account –

(aa) the underlying objectives set out in Order 1A, rule 1;

(e) the conduct of all parties;

(f)     whether a party has succeeded on part of his case, even if he has not been wholly successful,”

it becomes abundantly apparent that the dictum of Lord Lloyd of Berwick in Bolton MBC v Enc Sec (Practice Note) [1995] 1 WLR 1176 at 1178 more properly reflects the approach to costs:

“As in all questions to do with costs, the fundamental rule is that there are no rules. Costs are always in the discretion of the court, and a practice, however, widespread and long standing, must never be allowed to harden into a rule.”

6.  The proper context in which Nourse LJ’s statement in Elgindata, should now be viewed, and the effect of the changes consequent upon civil justice reform, is demonstrated by the following passages from the decision of Lord Woolf MR in AEI Ltd v Photographic Performance Ltd [1999] 1 WLR 1507:

“I draw attention to the new Rules because, while they make clear that the general rule remains, that the successful party will normally be entitled to costs, they at the same time indicate the wide range of considerations which will result in the court making different orders as to costs. From 26 April 1999 the ‘follow the event principle’ will still play a significant role, but it will be a starting point from which a court can readily depart. This is also the position prior to the new Rules coming into force. The most significant change of emphasis of the new Rules is to require courts to be more ready to make separate orders which reflect the outcome of different issues. In doing this the new Rules are reflecting a change of practice which has already started. It is now clear that too robust and application of the ‘follow the event principle’ encourages litigants to increase the costs of litigation, since it discourages litigants from being selective as to the points they take. If you recover all your costs as long as you win, you are encouraged to leave no stone unturned in your efforts to do so.” (1522H-1523B)

The ‘well-established practice’ on which Nourse LJ based his third principle is, as I have already indicated, less generally followed than has been in the past and it is no longer necessary for a party to have acted unreasonably or improperly to be deprived of his costs of a particular issue on which it has failed.” (1523H)

7.  Relying upon that decision, and two other decisions, Stoczina Gdanska SA v Latvian Shipping Co, Times Law Reports, 25 May 2001, and Summit Property Ltd v Pitmans [2001] EWCA Civ 2020 at §§ 16-17, Mr McCoy formulates the following propositions:

(1)   It is no longer necessary for a party to have acted unreasonably or improperly before he can be required to pay the costs of the other party on a particular issue on which he (the first party) has failed;

(2)   The Court may make different orders for costs in relation to discrete issues - and, in particular, should consider doing so where a party has been successful on one issue but unsuccessful on another issue and, in that event, may make an order for costs against the party who has been generally successful in the litigation; and

(3)   It may be appropriate, in a suitably exceptional case, to make an order which not only deprives the successful party of his costs of a particular issue but also an order which requires him to pay the otherwise unsuccessful party’s costs of that issue, without it being necessary for the court to decide that allegations have been made improperly or unreasonably; and

(4)   The above propositions give effect to the particular purpose of encouraging litigants to be selective as to the points they took, thus decreasing the costs of litigation.

I am satisfied that the authorities, and the new Rules justify those propositions, which I apply.

8.  Mr McCoy goes on to remind me that in respect of judicial review proceedings involving the public interest the Government, when successful, does not always apply for an order for costs in its favour.  The seminal case of Liversidge v Anderson [1942] AC 206 is cited as a good example of that practice.

9.  In R (Davey) v Aylesbury Vale DC [2008] 1 WLR 878 at § 21, Sedly LJ (with the concurrence of Lloyd LJ and Sir Anthony Clark MR, now a justice of the United Kingdom Supreme Court) laid down the following guidelines for costs in public law litigation:

“(1) On the conclusion of full judicial review proceedings in a defendant’s favour, the nature and purpose of the particular claim is relevant to the exercise of the judge’s discretion as to costs. In contrast to a judicial review claim brought wholly or mainly for commercial or proprietary reasons, a claim brought partly or wholly in the public interest, albeit unsuccessful, may properly result in a restricted or no order for costs.

(2) If awarding costs against the claimant, the judge should consider whether they are to include preparation costs in addition to acknowledgement costs.  It will be for the defendant to justify these.  There may be no sufficient reason why such costs, if incurred, should be recoverable.”

10.  These are principles to which the court will invariably have regard in judicial review proceedings, for on very many occasions judicial review proceedings involve fundamental human rights and the liberty of the subject thereby involving issues of public interest which go beyond those of the individual parties.  As Hale LJ (as she then was) said in R (Munjaz) v Mersey Care NHS Trust [2004] QB 395, in such circumstances:

“It would be wrong to discourage any party from raising any proper and reasonable argument even if it ultimately failed.”

11.  In the light of these principles is necessary to consider each of the individual orders for costs reserved.  I propose to deal first with the incidence of the costs to be awarded, and second with the amount of those costs.

Costs reserved on 22 March 2007 in HCAL 16-19/2007

12.  Hartmann J (as he then was) required submissions from counsel for both the Applicants and the Respondents in determining whether or not leave should be granted to apply for judicial review.  The Applicants were successful in obtaining that leave. 

13.  Mr McCoy says that nothing has been said by Mr Grossman as to why the Respondents should have costs in that respect.  The usual practice is that an application for leave to issue judicial review proceedings is heard on an ex parte basis, unless the judge requires assistance from counsel for the proposed Respondent.  In my view it is sufficient that the Respondents were required by the judge to appear, and no further justification is required.

14.  The Respondents will have their costs on that appearance.

Costs reserved on 28 June 2007 in HCAL 16-19/2007

15.  This relates to an application for discovery by the Applicants, of the Italian letter of request for mutual legal assistance dated 10 July 2006.  The Respondents were successful in resisting discovery on the basis of confidentiality, although the letter of request was voluntarily disclosed subsequently by the Respondents, ten days prior to the commencement of trial.

16.  It is right that the Court derived assistance from the terms of the letter of request in reaching its final factual conclusions, but it does not follow from that that the Respondents should not have their costs on their successful resistance to the order for discovery. The cost reserved are to go to the Respondents.

Cost reserved on 23 July 2007 in HCMP 1157/2007

17.  The 1st and 2nd Applicants in HCAL 16/2007, and the 1st, 2nd and 3rd Applicants  in HCAL 19/2007, as plaintiffs, by originating summons brought against the 1st Respondent as defendant, sought a Letter of Request to take evidence from witnesses in Italy.  The 1st respondent challenged the jurisdiction of the court to issue a Literate Request in judicial review proceedings.  That challenge failed.  The Letter of Request was issued.

18.  Mr McCoy argues that the 1st respondent should bear the plaintiff Applicants’ costs in respect of the unsuccessful challenge to the jurisdiction to issue the letter of request. 

19.  Unfortunately, the submission does not have regard to the fact that, when ultimately exercising the discretion in the court to issue the Letter of Request, an order was made, as had been sought on the summons, is that the costs of the proceedings be in the cause, a reference to the cause of HCAL 16-19/2007.  No application was made to vary the order which consequently became an order absolute: see Hong Kong Civil Procedure, 2011, §42/5B/1.

20.  That order plainly deals with any costs reserved in HCMP 1157/2007, and I may make no further order in that respect now.  The situation illustrates the problems that may occur in relation to costs when premature costs orders are made in satellite litigation.

21.  The evidence to be obtained by the Letters of Request related to a vital matter in the proceedings, namely the evidence of the very persons whose conduct was called into question.  That evidence was not ultimately obtained as a result of an ex parte intervention in the proceedings in Italy by the prosecuting authorities in Italy (see Reasons for Judgment, 30 July 2010, §§11-25).  Had the evidence been obtained and used in the proceedings, plainly, the Applicants, even if ultimately unsuccessful, should have been entitled to their costs in obtaining a letter of request.

22.  Notwithstanding that the plaintiff Applicants may feel a real sense of injustice in the particular circumstances, a matter to which I will refer later, there is no jurisdiction existing now by which any other costs order may be made in respect of the Letter of Request proceedings.

Costs Reserved on 3 August 2007 in HCAL16-19/2007:

23.  On 1 August 2007, I heard an application by the Applicants to amend the grounds upon which the application for judicial review was sought.  That application was opposed by the Respondents.  Although resisted by the Respondents, the application was successful.

24.  In the course of the hearing became apparent that the fact of shredding of notes and copies of seized documents by the 2^nd Respondent had been concealed from the Applicants by the 1^st and 2^nd Respondents for a period of nearly 6 months.  An order in the nature of an injunction was made in order to preserve seized documents.  No application has been made by the Respondents to discharge or vary that order.

25.  Applying the principles I have outlined above, and having regard to the fact that the Applicants were successful on the application to amend the grounds, the Applicants will have their costs of and incidental to the orders made on 3 August 2007.

Other Reserved Costs in Interlocutory Steps in HCAL 16-19/2007

26.  In respect of any other reserved costs in interlocutory matters the parties are in agreement that the Court may make such order as will achieve overall justice in the case.

27.  I am satisfied that the overall justice of the case, in so far as the incidence of such costs are concerned, is such that it is appropriate that the Respondents should have any such other costs.

The amount of the costs awarded

28.  In determining the amount of the costs to be awarded I have taken the following factors into account:

(i)     while the immediate issue stimulating the proceedings was the Applicants’ personal interest in protecting those ultimately holding the various companies from criminal proceedings, there was a strong element of public interest in the proceedings;

(ii)    insofar as the proceedings involved potential criminal action against those ultimately holding the various companies, the proceedings related directly to issues of fundamental human rights and the liberty of the subject, particularly in determining the scope of search powers;

(iii)   the Respondents’ evidence on the involvement of the Italian offices during the searches at Ms Hsu’s home and the premises at Prince’s Building was rejected;

(iv)   a finding was made that the investigating police officers and the Department of Justice had, for a period of time, concealed critical information from the Applicants that certain important evidence should not have been destroyed by the police;

(v)    a concession was made by the Respondents that it was wrong for the police to permit the Italian officers to take notes and make copies of seized documents.  It follows from that concession that those actions were unlawful;

(vi)   an argument on the part of the Respondents’ pressed extensively in cross-examination of the Applicants’ witnesses that they had consented to the searches, was rejected.

29.  The Applicants will undoubtedly harbour a deep sense of grievance over the way in which the Letter of Request to Italy was dealt with in Italy.  Shortly before the evidence was to be taken, on an ex parte basis, undoubtedly upon the stimulation of the principal witnesses to be examined in Italy, the orders by the Italian courts enabling the Letter of Request to be exercised were set aside.  No explanation has ever been offered by the Respondents of this action.  It is extraordinary that the Letter of Request should have been dealt with in this manner.

30.  Had the parties been aware of the possibility of such a course of action I have no doubt at all that the costs order in HCMP 1157/2007 would have been reconsidered.  As it stands, because of the order, (sought in the summons), that the costs in those proceedings should be “in the cause” in the substantive proceedings, the Applicants will have to pay the Respondents’ costs of the Applicants’ own entirely successful, but unfortunately abortive through no fault of the Applicants, effort in obtaining highly relevant evidence in the proceedings.

31.  In fixing the amount of the costs, in order to do substantial justice to the parties, I also take these circumstances into account.

32.  Finally, I recognise that the proceedings have clarified a number of matters of law, including the exercise of the court’s jurisdiction to order discovery in cross-examination judicial review proceedings, the jurisdiction of the court to issue letters of request in Mutual Legal Assistance cases, the exercise of such jurisdiction, the operation of the MLAO, and in particular the meaning of the phrase “such assistance.... as is necessary and reasonable” in the MLAO.

33.  Weighing all those matters into account I am satisfied that the order for costs in favour of the Respondents should be an order that the Applicants must pay 60% of the Respondents’ costs to be taxed on the party and party basis.

34.  In respect of the cost reserved on 30 August 2007, payable by the Respondents to the Applicants, the Respondents must pay 100% of the Applicants costs so awarded, on a party and party basis.