CATHAY PACIFIC AIRWAYS FLIGHT ATTENDANTS UNION v. THE DIRECTOR-GENERAL OF CIVIL AVIATION

HCAL 19/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO. 19 OF 2005

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RULING  AS  TO  COSTS

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Introduction

1. On 2 February 2005, judicial review proceedings were instituted by the applicant.  I granted leave.  On or about 24 February 2005, Cathay Pacific joined the proceedings as an interested party.  It did so on the basis that the outcome of the application for judicial review would have a significant impact on its operations.  When the matter came before me for hearing on 28 July 2005, the respondent, the Director-General, and Cathay Pacific, the interested party, were each represented by their own counsel.

2. On 25 August 2005, I handed down judgment.  I dismissed the application.  In respect of costs, I said the following :

“As for costs, I see no reason why costs should not follow the event and the applicant ordered to pay the costs of both the respondent and the interested party.  However, as I have not had the benefit of submissions in this respect, my order will be an order nisi only to be made final 30 days after the handing down of this judgment unless an application is earlier made for a different result.”

3. The applicant has sought to vary my order nisi on terms more favourable to it.  Before looking to the basis upon which it has sought to do so, something must be said of my core reasoning for dismissing the application for judicial review. 

Background

4. In my judgment of 25 August 2005(paras.5-12), I set out what I considered to be the essential nature of the applicant’s challenge :

“5. On 7 December 2004, the Director-General approved a scheme proposed by Cathay Pacific to regulate the rest periods of aircraft crew.  It is known as the Cathay Pacific Airways Flight Time Limitations Scheme.  The scheme – in part – regulated the in-flight rest periods due to cabin crew on ultra long haul operations.  The scheme having been approved, it was incorporated into the operation manuals of Cathay Pacific and became effective from 1 January 2005.

6. It is the decision of the Director-General to approve the scheme which is the subject of this application for judicial review.

7. In his letter of approval dated 7 December 2004, the Director-General said that the scheme was approved ‘in accordance with’ the Air Navigation (Hong Kong) Order 1995, an instrument to which I shall refer later, and a document described in the letter simply as ‘CAD371’.

8. The letters ‘CAD’ stand for the Civil Aviation Department.  CAD371 is entitled : ‘The avoidance of fatigue in aircrews’.  By way of a sub-heading, the following is stated on the cover of the document :

‘This document contains standard provisions on which Hong Kong operators’ Approved Flight Time Limitation Schemes are to be based from 1 March 1999.’  [my emphasis]

9. For reasons to which I shall refer later, I am satisfied that CAD371 is properly described as a policy document.  It advises operators of what – as a matter of policy – the Director-General considers will, in the great majority of cases, be both the essential and the desirable elements of any scheme to be approved.

10. The body applying for review of the Director-General’s decision is the Cathay Pacific Airways Flight Attendants Union which is constituted to represent the rights and interests of flight attendants; that is, cabin crew, employed by Cathay Pacific.

11. It is the applicant’s case that the Director-General, although he purported to approve the scheme ‘in accordance with’ CAD371, either failed to adhere to the provisions contained in that document or wrongly applied them.  Expressed another way – more accurately, I believe – the Director-General either ignored his own policy contained in CAD371 or failed properly to understand it, a failure as profound as ignoring it.

12. The applicant contends that the failure of the Director-General either to adhere to his own policy or to correctly interpret it has resulted in cabin crew assigned to ultra long haul operations being denied a significant amount of in-flight rest, a denial that not only offends CAD371, diminishing the rights of flight attendants in their workplace, but may, it is said, impair their operational efficiency.”

5. As to the issues, I said that they may be reduced to two questions (para.16) :

“(i) What was the policy of the Director-General at the time his decision was made?

(ii) In reaching his decision, did he ignore, misinterpret or in any way wrongly apply that policy?”  [my emphasis]

6. As to the first question, I concluded that, while the policy of the Director-General may originally have been found in the document described as CAD371, he had changed that policy and had done so in clear terms, a fact that appeared not to have been recognised by the applicant.  In this regard, I said (para.67) :

“There was no formal amendment to CAD371 as published.  But, as I have said, CAD371 is not legislation nor a body of legally binding rules flowing from legislation.  CAD371 is a convenient method of stating policy and, in the view of the Director-General, was conveniently changed in the manner he adopted.  The critical questions in my view must be these?  First, was the decision to change the policy conveyed to the affected parties at that time?  The answer to that is yes.  Second, was the change in policy clearly stated?  Again, the answer must be yes.”

7. On the basis of that finding; namely, that the Director-General had already changed his policy at the time he made his decision under challenge, it followed that the interpretation of those portions of CAD371 (in so far as it was in issue) was not a matter of central relevance, indeed it became a matter of peripheral relevance only.

8. As to the second question, I said (para.68) :

“It is clear that the Director-General’s December 2004 approval of the Cathay Pacific scheme accorded with the changed terms.  That being the case, it follows, in my view, that the Director-General, in giving his approval, did not ignore, misinterpret or wrongly apply his policy.”

The basis of the applicant’s submissions

9. The applicant has sought to vary my order nisi on two bases which may be summarised as follows :

(i) That most of the two-day hearing was taken up with submissions as to the true meaning of CAD371.  This was clearly considered to be an issue of importance by all the parties at the time.  As to the true meaning of CAD371, I ruled that, while it was an ambiguous and often circuitous document, its plain and ordinary meaning, insofar as it could be ascertained, had to be the meaning given to it by the applicant and not the meaning proposed by the Director-General and Cathay Pacific.  That being the case, it would be wrong in principle for the applicant to have to pay all of the costs of the Director-General.  The applicant should be ordered to pay only one third of the Director-General’s costs or such other reduced portion as I considered appropriate.

(ii) That, as a starting point, it was wrong in principle that the applicant should have to pay more than one set of costs.  It was therefore wrong in principle that it should have to pay the costs of Cathay Pacific, the interested party, unless Cathay Pacific could show that there was a separate issue on which it was entitled to be heard; indeed, should be heard, or that it had a special interest which in the circumstances, to be adequately protected, demanded separate representation.  Neither instance was applicable in the present case.  Accordingly, there should be no order as to costs in favour of Cathay Pacific.

Applicable principles

10. As Lord Lloyd said in Bolton Metropolitan District Council & Ors v. Secretary of State for the Environment [1995] 1 WLR 1176 (at 1178), ‘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 longstanding, must never be allowed to harden into a rule’.

11. That being said, the fundamental guidelines (in respect of civil proceedings) have been stated in In re Elgindata Ltd (No.2) [1992] 1 WLR 1207.  They may, insofar as they are relevant here, be summarised as follows :

(i) While costs are always in the discretion of the court, they should follow the event except when it appears to the court that in the circumstances of the case some other order should be made.

(ii) The guideline that costs follow the event does not cease to apply simply because the successful party makes allegations or argues points in respect of which he fails.  However, where that has caused a significant increase in the length or costs of the proceedings he may be deprived of the whole or a portion of his costs.

(iii) Where the successful party makes allegations or argues points improperly or unreasonably, the court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful party’s costs.

12. In respect of the often more difficult question of the costs of an interested party, in Bolton Metropolitan District Council & Ors v. Secretary of State for the Environment (cited in para.10 above), Lord Lloyd said that an interested party would not normally be entitled to his costs unless he could demonstrate that there was likely to be a separate issue on which he was entitled to be heard or unless he had an interest which required separate representation.  Lord Lloyd pointed out that this principle was likely to be more rigorously applied on appeal when the issues were more crystallised than at first instance.

13. In the recent judgment of the Court of Appeal in Shiu Wing Steel Limited v. Director of Environmental Protection and Airport Authority of Hong Kong, CACV 350/2003, the court laid down the following guidelines :

“(1) The mere fact that a person has the necessary locus standi to appear does not by itself entitle that person to an order for costs should the outcome be successful : - see R v. Registrar of Companies, Ex parte Central Bank of India [1986] QB 1114, at 1162F.

(2) Where several parties appear having the same interest in proceedings, the starting point is that the unsuccessful party should not have to pay more than one set of costs : - R v. Industrial Disputes Tribunal, Ex parte American Express Co. Inc. [1954] 1 WLR 1118; Ex parte Central Bank of India at 1162F-G.  The rationale here is simply that an unsuccessful party should not have to pay for costs which are unnecessarily incurred.  Either the different parties with the same interest engage the same solicitors and counsel or they adopt the position of one of the other parties.

(3) Where, however, the party can show that there is a separate issue on which he was entitled to be heard, being an issue not covered by the other party or parties in the proceedings, he would be entitled to his costs …”

The Director-General’s costs

14. The true construction of CAD371 was central to the applicant’s case.  The applicant therefore chose the topography of CAD371 upon which to fight its case.  It follows that, to a greater or lesser degree, the Director-General was forced to occupy the same topography, certainly if, even if only out of caution, it was going to attempt to directly answer the applicant’s submissions on the issue of the interpretation of CAD371.

15. I concluded, however, that the true interpretation of the contested portions of CAD371 was not of central relevance to the determination of the case itself.  I came to this view because I was satisfied that the Director-General’s policy contained in CAD371 was changed before the decision under challenge was made.  That being the case, the central issue, in my view, was whether the decision under challenge was made in accordance with the changed policy, not the policy as earlier stated in CAD371.  While therefore, having chosen to ague the true interpretation of CAD371, the applicant was successful in that respect, it meant only that it was successful in an issue which I considered to be of peripheral relevance.

16. More important to the question of costs, in my view, was the fact that the Director-General had at all times contended that the policy contained in CAD371, insofar as it was in issue, had been changed before the decision under challenge had been made and that the decision under challenge had been made in accordance with the changed policy.  That was a crucial part of the Director-General’s case and was the essential basis upon which I found for him.  In respect of that issue, of course, it follows that I found against the applicant. 

17. In the circumstances, while I agree that a considerable amount of time was spent considering the true interpretation of CAD371, in my judgment it would be wrong to penalize the Director-General because his interpretation of CAD371 was not, in my opinion, the correct interpretation.  As I have said earlier, a party is not to be denied costs by the fact alone that he has argued certain issues unsuccessfully.

18. It is always, of course, a question of degree, matters being considered in context. 

19. In my judgment, looking at matters in the round, it would be wrong to deny the Director-General all of his party and party costs when he has been successful in the action, having identified and relied upon issues which I considered to be determinative.  It would be wrong, I believe, to deny him his costs simply because he was not successful in respect of a single issue which, although it took up a great deal of time, was an issue advanced by the applicant as a central issue although I found it not to be so. 

The costs of the interested party

20. There can be no doubt that the outcome of the application for judicial review would have had a far-reaching impact on the operations of the interested party, Cathay Pacific.  It was submitted to me that, had the applicant been successful, it would have been impossible for Cathay Pacific – at least for a period of time – to continue operating many of its European and North-American routes.  It was further submitted that enormous costs would have been incurred in refurbishing aircraft and in employing more cabin crew.  It was even suggested that, in practical terms, Cathay Pacific was the real ‘respondent’.  It is understandable, therefore, and entirely legitimate, that Cathay Pacific wished to ensure that submissions were advocated which best represented its own interests. 

21. But while the practical immediacy of the outcome of judicial review proceedings to an interested party must, in my opinion, be a relevant factor to take into account when considering the question of costs, it cannot be the decisive factor.  As Lord Lloyd said in Bolton Metropolitan District Council & Ors v. Secretary of State for the Environment (cited in para.10), the real issue is whether an interested party has an interest which requires separate representation. 

22. While I accept that the submissions of Mr John Bleach, SC, counsel for Cathay Pacific, were of considerable assistance, it must be accepted, I think, that those submissions were in large part complementary to the submissions of Mr Nicholas Cooney, counsel for the Director-General, or, to turn the coin, the submissions of Mr Cooney were complementary to those of Mr Bleach.  The degree to which their respective submissions were clearly distinct from each other was limited.  This is not surprising.  The interests of the Director-General and of Cathay Pacific ran together in this case and their submissions therefore were to a large degree either essentially the same or complementary. 

23. The fundamental guideline, as I have said, is that an unsuccessful party should not have to pay more than one set of costs.  On this basis, approaching the matter simplistically, it would follow that Cathay Pacific, as the interested party, should be denied its costs even though it has been successful. 

24. But that raises the difficult and practical question of what is to be done if an interested party will be materially affected by the outcome of an application for judicial review and, to protect its own legitimate interests, wishes to be heard.  The interested party cannot be denied that right, indeed is entitled to that right.  But if the interested party is entitled to that right and wishes to secure legal representation of its choice, thereby acting independently of the respondent (or respondents) and if the interested party is successful, it may be argued that an unsuccessful applicant must then be responsible for more than one set of costs even though distinct defences were not advanced.  In Shiu Wing Steel Limited v. Director of Environmental Protection and Airport Authority of Hong Kong (cited in para.13), the Court of Appeal indicated that in many cases, in order to avoid this difficulty, it may be necessary for an interested party, looking to preservation of its own costs, to ally its litigation to that of the respondent (or respondents) by engaging the same solicitors and/or counsel.

25. On the basis of that guideline, it seems to me in the present case that it would have been open to Cathay Pacific to avoid a duplication of costs by joining its interests with those of the Director-General, seeking, if possible, to reduce costs by utilising one firm of solicitors for the hearing and one counsel or one set of counsel. 

26. In the circumstances, in my discretion, I am of the view that it would be wrong to make a final order in terms of which the applicant in this case is forced to meet all of the costs of both the Director-General and Cathay Pacific.  

27. However, I note that the Court of Appeal judgment in Shiu Wing Steel was handed down on 18 March 2005, approximately a month after Cathay Pacific had joined these proceedings as an interested party. 

28. In addition, having regard to the circumstances of this particular case, it seems to me that Cathay Pacific was so vitally interested in the outcome of the proceedings – a fact of which the applicant must have been aware – that it would be wrong in principle to say that at the outset at least they were not entitled to consult with their own solicitors and for those solicitors to attempt, if possible, to agree to a form of ‘joined’ litigation with the Director-General.  That would have involved reasonably substantial costs being incurred by Cathay Pacific itself.  I am therefore of the view that it would be wrong to deny Cathay Pacific all of its costs.  I do not think it is possible now, absent a most complicated accounting review, to say exactly how much could have been saved by Cathay Pacific if it had joined its litigation with that of the Director-General.  However, doing the best I can, and viewing matters in the round, I am of the view that Cathay Pacific should be entitled to 30% only of its costs.  I will make a final order to that effect.

Conclusion

29. My final order in respect of costs is therefore as follows :

(1) That the respondent, the Director-General, is entitled to all of his costs (including those costs incurred in respect of the costs issue);

(2) That the interested party, Cathay Pacific, is entitled only to 30% of its costs excluding any costs incurred in respect of the costs issue, it having no entitlement to costs in respect of this latter issue.