CHOW SAI HUNG RONALD v. AUTHORIZED PERSONS', REGISTERED STRUCTURAL ENGINEERS' AND REGISTERED GEOTECHNICAL ENGINEERS' DISCIPLINARY BOARD Appointed to inquire into the misconduct of the Appellant

HCMP 290/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 290 OF 2010

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BETWEEN

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J U D G M E N T

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I. INTRODUCTION

1.  Mr. Chow is a Registered Architect.

2.  In January 2010 a Disciplinary Board set up pursuant to Buildings Ordinance (Cap.123) (BO) s. 7 found Mr. Chow to have negligently submitted a Certificate to the Food and Environmental Hygiene Department (FEHD) in September 2007.  The Certificate wrongly stated that certain premises were free of unauthorised building works.  In actuality the premises had an unauthorised cockloft. 

3.  The Building Authority (acting through a Government Counsel) served as prosecutor at the hearing before the Disciplinary Board.  Mr. Chow denied liability.  He was represented by counsel and himself gave evidence before the Disciplinary Board.  The hearing before the Disciplinary Board lasted over 4 days (16 November, 5 and 12 December 2009 and 18 January 2010).

4.  The Disciplinary Board held that Mr. Chow ought to have discovered the presence of the cockloft and reported the same to the FEHD.  The Disciplinary Board accordingly reprimanded Mr. Chow.   Although it could have imposed a fine of up to $250,000, it decided to impose no fine.  But it ordered Mr. Chow to bear the Disciplinary Board’s costs of $192,150 and the Building Authority’s costs of $240,000. 

5.  Mr. Chow accepts the Board’s finding of negligence.  He instead brings this appeal under BO s. 7 and Order 55 to challenge the Disciplinary Board’s ruling on costs.  He contends that the costs order imposed (amounting to over $430,000) is excessive and disproportionate.  He says that an order for the payment of no more than $200,000 should be substituted in place of the Disciplinary Board’s costs assessment.

II.  DISCUSSION

6.  The following issues arise:-

(1)    Whether I should interfere with the Disciplinary Board’s discretion in the award of costs.

(2)    Whether the amount assessed as the costs of the Disciplinary Board was excessive.

(3)    Whether the amount assessed as the costs of the Building Authority was excessive.

(4)    Whether the assessed costs should be paid on a party-and-party or indemnity basis.

A.  Issue (1):  Whether to interfere with Disciplinary Board’s discretion on costs

7.  BO s. 7(3) states that:-

“On an inquiry under this section, a disciplinary board may make such order as it thinks fit with regard to the payment of the costs of the inquiry and the costs of the Building Authority or of the authorised person, registered structural engineer or registered geotechnical engineer in respect of whom the inquiry is held.”

8.  The Disciplinary Board’s decision simply makes a costs order.  The decision does not give reasons justifying the sum ordered. 

9.  For instance, at the disciplinary hearing, the Building Authority had submitted a revised costs estimate of $240,000 (down from an initial assessment of about $410,000).  The Disciplinary Board’s costs were estimated at $192,150.  The Disciplinary Board accepted the latter estimates in full and ordered Mr. Chow to pay the same, apparently without considering or explaining why the estimated costs should be paid on a full indemnity basis.

10.  Further, there is no evidence that the Disciplinary Board considered the individual items comprising the estimates placed before it.  The Disciplinary Board’s decision says nothing about whether (much less why) it accepted the individual items to be expenses reasonably incurred in connection with the inquiry. 

11.  In my view there is nothing “obvious, implicit or inferential” about a significant number of individual items making up the estimates accepted by the Disciplinary Board.  I do not think that the basis of Mr. Chow’s liability for a significant number of individual items can be characterised as so obvious as to need no explanation.  One does not expect a detailed explanation.  But some (as opposed to absolutely no) explanation is required.

12.  Finally, the total sum of $430,000 ordered against Mr. Chow is substantially in excess of the maximum fine of $250,000 which the Disciplinary Board could have imposed on Mr. Chow. On its face, the costs order appears to be disproportionate in relation to the maximum fine chargeable.  Although this does not necessarily mean that the costs order was unjustified, one would have expected the Disciplinary Board to give some explanation justifying the disparity between the costs order and the maximum fine.  The decision gives no such explanation.

13.  Ms. Jenny Fung (appearing for the Building Authority) points out that, as a result of Mr. Chow’s arguing every point in the course of his defence, the hearing before the Disciplinary Board was unduly protracted.  Ms. Fung observes that, Mr. Chow having pleaded not guilty, much time was spent on the cross-examination of the Authority’s witnesses and of Mr. Chow.  This (Ms. Fung submits) would account for a substantial part of the excess in costs over the maximum fine.

14.  I accept that the length of the hearing goes some way towards explaining the disparate amount of the costs order.   But Mr. Chow was entitled to plead not guilty and to require the Authority to prove its case. 

15.  As for cross-examination of the Authority’s witnesses, the Disciplinary Board in fact found some of it to have been effective.  For instance, in para.5.3 of its decision, the Disciplinary Board found that the evidence from 2 of the Authority’s witnesses “must have been confused with what might be their preconceptions of the condition of the Premises ..., as rightly so suggested by Counsel for [Mr. Chow]”. 

16.  Insofar as Mr. Chow’s cross-examination was concerned, it is true that the Disciplinary Board found “dubious shifts in Mr. Chow’s oral evidence and arguments ... which the Board found it impossible to accept”.  But the Authority’s counsel had also spent some time trying to establish that, in a bid to buy time to improve his account of events, Mr. Chow had deliberately and in bad faith stalled in his reply to the Building Department’s queries about the incident.  The Disciplinary Board thought that there was no concrete evidence supporting such allegation by the Authority.

17.  It is therefore unclear, in the absence of any explanation from the Board, why Mr. Chow should bear all the costs of the protracted hearing despite the resulting disparity between the costs order imposed and the maximum fine chargeable.

18.  In all the circumstances, I conclude that the imposition by the Disciplinary Board of its costs order without at least some words of explanation breaches the principle of fairness.  The Disciplinary Board’s costs order is therefore flawed and I am entitled to review that order.

B.  Issue (2):  Whether Disciplinary Board’s costs excessive

19.  The Disciplinary Board’s expenses comprised 3 parts: (a) members’ remuneration ($46,250), (b) legal adviser’s remuneration ($100,000) and (c) court reporter’s fee ($45,900).  I will consider the three parts in reverse order.

20.  It seems to me that item (c) (court reporter’s fee) was effectively a disbursement incurred over the 4 days of hearing.  It was presumably convenient to everyone concerned to have a transcript of what transpired at the hearing.  The fee should therefore be recoverable in full.

21.  I move to item (b) (legal adviser’s remuneration).

22.  In my view, the Disciplinary Board was entitled to engage a legal adviser to assist the Board in the consideration of points of law.  For the hearing, the adviser appears to have charged a brief of $45,000 and a refresher of $15,000.  The brief of $45,000 therefore covers 2 days’ preparation (at $15,000 per day) and the first day’s appearance (at $15,000).  I do not think that 2 days’ preparation is unreasonable.  I believe that a refresher of $15,000 is reasonable.  In that case, a payment of $90,000 to the legal adviser for preparation and appearance at the 4-day hearing is justifiable.  That amount should be recoverable as a disbursement incurred in connection with the inquiry. 

23.  The additional $10,000 sought under item (b) relates to “additional legal advice” apparently given by the legal adviser on the last day of hearing.  Without further evidence as to the nature of the advice given, one would have thought that such further advice was already covered by the refresher for the final day’s hearing.  I therefore do not think that the $10,000 should be allowed under item (b).

24.  I move to item (a) (members’ remuneration).

25.  It seems to me that members (who are volunteers) should be allowed some reasonable remuneration for the time spent at the hearing, away from their ordinary daily work activities.

26.  There were 5 members, one of whom was elected chairman.  For the 4 days of hearing, a total of $37,500 has been claimed as remuneration.  The Disciplinary Board sat for 2 full days (the first and last days of hearing) and 2 half-days (the second and third days of hearing).  A full day’s hearing runs for about 5 hours, although sometimes a day’s hearing went for considerably longer.  The $37,500 therefore breaks down to approximately $250 per member-hour.  That seems to me entirely reasonable.

27.  A further $8,750 is claimed under item (a).  That is supposed to cover a 4 hour hearing to elect the chairman ($5,000) and a 3 hour meeting with the legal adviser ($3,750).  It seems to me that 4 hours to elect a chairman is somewhat long.  I would disallow that item as it should only have taken a matter of minutes to appoint a chairman.  As for the 3 hour meeting with the legal adviser, it would seem reasonable for a tribunal to meet briefly with its legal adviser before a hearing in order that any legal issues may be properly explained.  I do not think the $3,750 charged by the members in that connection can be regarded as unreasonable.

28.  I would consequently allow $41,250 under item (a).

29.  The Disciplinary Board’s total costs should therefore be $177,150.  For convenience, I shall round this up to $178,000.  This is about $15,000 less than the total of $192,150 assessed by the Disciplinary Board.

C.  Issue (3):  Whether Building Authority’s costs excessive

30.  There were 4 components to the Building Authority’s costs: (a) the Authority’s costs up to 17 January 2010 ($69,107); (b) the Authority’s costs in relation to the 4 days’ hearing ($41,894); (c) costs incurred by the Department of Justice (DOJ) (as the Authority’s legal advisers) up to 17 January 2010 ($69,633); and (d) the DOJ’s costs in relation to the 4 days’ hearing ($59,800).

31.  Much of component (a) (Authority’s costs up to 17 January 2010) comprises remuneration for the time taken by various officers within the Buildings Department in considering whether or not to bring disciplinary proceedings against Mr. Chow.   That includes time taken to study legal advice given by the DOJ in relation to the taking of disciplinary action. 

32.  Ms. Catherine Wong (appearing for Mr. Chow) argues that the costs sought under component (a) in effect seek to compensate the Authority for carrying out its public duty (that is, the duty to consider whether or not to prosecute a building professional).  It would be wrong in principle (Ms. Wong submits) to allow component (a) as it is not strictly a cost arising out of the disciplinary inquiry.

33.  Ms. Fung, on the other hand, argues that BO s. 7(3) empowers the Disciplinary Board to order Mr. Chow to pay the Authority’s costs.  Those costs (Ms. Fung submits) are not necessarily restricted to costs directly associated with the inquiry, but must also include costs which are indirectly related to the inquiry (such as the costs of deciding whether or not to prosecute and the costs of preparing for an inquiry).

34.  It is true that BO s. 7(3) distinguishes between the costs of an inquiry (for example, the Disciplinary Board’s costs in relation to an inquiry) and the Building Authority’s costs.  BO s. 7(3) does not explicitly restrict the Disciplinary Board’s jurisdiction to awarding the Authority’s costs directly arising out of an inquiry.  The most that BO s. 7(3) does is to say that, “on an inquiry” under BO s. 7, the Disciplinary Board may award the Authority’s costs.

35.  In my view, the width of BO s. 7(3) gives the Disciplinary Board a discretion to award the costs of the Authority directly or indirectly attributable to an inquiry.  Obviously, few would query a decision by the Disciplinary Board to order the Authority’s costs directly arising out of a hearing (for example, costs incurred in relation to the prosecution of the Authority’s case on each day of a disciplinary hearing). 

36.  But where costs indirectly arise out of the hearing of an inquiry, the Disciplinary Board must be satisfied that there are good reasons for ordering a losing party to pay such costs.  Thus, for instance, as Ms. Wong notes, in deciding whether or not to prosecute in any given case, the Authority would simply be performing its statutory duty.  The cost associated with such a decision would not be one directly arising from an inquiry.  The cost claimed would only be preliminary to a inquiry.  The Disciplinary Board may in its discretion order that cost to be paid.  But there must be good reason for the Board to exercise its discretion in such manner and the Board needs to articulate that reason.

37.  In the circumstances of the present case, I see no particularly good reason for imposing on Mr. Chow the costs of deciding whether or not to prosecute him.  As I have already observed, the Board has not specified any reason.  I would therefore disallow component (a), save for a cost of about $15,000 to cover the preparing, photocopying and despatching of the hearing bundle and the preparation of witness statements.  Such items were plainly necessary for the hearing.

38.  I move to component (b) (Authority’s costs in relation to the hearing).

39.  The $41,894 charged for component (b) comprises $29,273 for 23 hours of attendance by a Senior Building Surveyor/Prosecution 2 and $12,621.14 for 14 hours of attendance by a Building Surveyor/Prosecution 2-3 at the disciplinary hearing. 

40.  Mr. Chow is prepared to pay the cost of the Senior Building Surveyor’s attendance.  However, insofar as he appeared as an additional prosecutor, the junior Building Surveyor’s presence seems to me to be an unnecessary duplication.  The Authority is of course entitled to have more than one individual attending a hearing as prosecutor.  But I do not think, in the absence of special circumstances, that it would be justified for a defendant to bear the cost of more than one prosecutor.

41.  Ms. Fung says that the junior Building Surveyor charged for his attendance as a witness, including the giving of expert evidence.  But I am not comfortable with the notion of someone who is effectively in the position of a prosecutor expecting remuneration for giving evidence.  Thus, in the absence of compelling justification, I do not think that I should allow the junior Building Surveyor’s costs.

42.  Ms. Wong queries the hourly rate of $1,272.74 used as the basis for calculating the Senior Building Surveyor’s cost.  That rate is based on what an equivalent qualified surveyor in the private sector would charge.  Ms. Wong proposes taking a Senior Building Surveyor’s monthly salary (which she assumes to be $100,000) as a starting point for calculating the appropriate rate.  That comes to $625 per hour. 

43.  In the calculation of costs in normal civil litigation, the long-standing practice has been notionally to equate a Government lawyer’s rate with that of a private sector lawyer of equivalent experience.  This has been done as a rough-and-ready practical measure.  I do not think that it would be appropriate for me to deviate from that practice here.  Of course, a notional calculation is not the end of the exercise.  At the end of the day, the Court or any tribunal must still step back and consider whether the resultant figure from a notional calculation makes sense or is proportionate in all the circumstances.

44.  I would therefore accept the Senior Building Surveyor’s claimed cost of $29,273.02 under component (a).  The actual 4 day hearing lasted for 23 hours so that the 23 hour multiplier is justifiable.

45.  I move to component (c).

46.  The first part of this component involves preparation for the hearing (including taking advice from the Authority).   This is charged at $69,633 based on the notional rate which a lawyer in the private sector having the experience of a Senior Government Counsel would charge ($2,600 per hour).

47.  The second part of the component is a charge (exclusive of preparation) for attendance at the hearing.  That amounts to $59,800.

48.  Again Ms. Wong questions the appropriateness of using a notional rate (instead of the monthly salary) of a Senior Government Counsel for the purposes of calculating cost.  But such being the long-standing practice in the civil courts, I think that it would be wrong in principle for me to depart from such practice.

49.  I therefore accept component (c) (totalling $129,433).  It seems to me that the cost is directly attributable to the inquiry.

50.  The Authority’s costs therefore come to $173,706.02 (that is, (a) $15,000 + (b) $29,273.02 + (c) $129,433).  For convenience, I shall round this to $174,000.  This is substantially less than the $240,344 awarded by the Disciplinary Board.

D.  Issue (4): Whether indemnity or party-and-party basis

51.  Insofar as the Disciplinary Board’s costs are concerned, I believe that those reflect as closely as possible the actual cost of the inquiry to the Disciplinary Board.  I do not think that such cost should be deflated to a party-and-party basis as the Disciplinary Board was the tribunal itself and not a party to the proceeding. The cost is more akin to a disbursement, that is, the cost to society at large of the inquiry. 

52.  I would therefore award the $178,000 assessed on an indemnity basis.  An indemnity basis is not a complete recovery, but usually includes a discount of about 10%.  I think that discount would be appropriate here, thereby producing an assessment of $160,000 for the Disciplinary Board.

53.  The Authority’s costs, however, are more akin to those incurred by a winning party to civil litigation.  In the absence of special reason, such costs are normally awarded on a party-and-party basis.  I propose to follow that practice here.  I see no justification for imposing indemnity costs. 

54.  Accordingly, the $174,000 assessed should be deflated by about a third to reflect a party-and-party basis.  Thus, taking off about a third from $174,000 would leave approximately $115,000.

55.  Total costs awarded against Mr. Chow would then amount to $275,000 (that is, $160,000 + $115,000).

56.  That figure of $275,000 is 10% more than the maximum fine of $250,000.  As I final step, I should therefore consider whether $275,000 is disproportionate.

57.  However one looks at the matter, one cannot get around the fact that the hearing lasted for 4 days (23 hours).  That is a long time and seems to me (as Ms. Fung has pointed out) the main reason why costs incurred are large. 

58.  In the absence of any special reason, I think that the usual rule should be followed, namely, that costs should follow the event.  I do not see any particular reason to divide the costs of the hearing in accordance with the time spent on any given issues.  The Disciplinary Board made no such direction and no division of costs according to the time taken on specific issues has been seriously suggested before me.  Thus, at the end of the day, although relatively large, I think that Mr. Chow will have to bear the final costs figure which I have reached.

III.  CONCLUSION

59.  Costs are re-assessed as follows.  The Disciplinary Board’s costs are assessed at $160,000. The Authority’s costs (including the costs of its legal advisers) are assessed at $115,000.

60.  I shall now hear the parties on the costs of the application before me.

[After hearing counsel on costs]

61.  No party having completely won or lost, there will be no order as to the costs of the application before me.