DESIGNING HONG KONG LTD v. THE TOWN PLANNING BOARD, SECRETARY FOR JUSTICE

FAMV No. 30 of 2017

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 30 OF 2017 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL FROM

CACV NO. 184 OF 2015)

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DECISION

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Chief Justice Ma :

1.  On 30 October 2017, the Appeal Committee[1] granted leave to the applicant to appeal to the Court of Final Appeal on a number of questions of great general and public importance as set out in the Determination of that date.  The appeal is fixed for hearing on 19 April 2018.  The appeal, broadly speaking, deals with various aspects of the making of what is known as a protective costs order (“PCO”) in public law proceedings in which a party (usually an applicant) seeks an order protecting or limiting its liability to bear costs in such proceedings.

2.  In all appeals to the Court of Final Appeal, upon the granting of leave, Practice Direction 2.3 (“PD 2.3”)[2] takes effect and this has the effect of imposing a standard condition on the leave granted that an appellant will have to pay the sum of $400,000 in relation to each respondent as security for the costs of the appeal.[3]  The parties are at liberty to try to reach agreement on alternative arrangements for security if this is desired by any party, but if no agreement is forthcoming, an application for variation of the standard condition can be made to the Court, and this is then dealt with on the papers.[4]  This is what has transpired in the present appeal.

3.  Immediately following the granting of leave, the applicant sought the agreement of the respondent that the standard order be varied to the effect that no security for costs should be provided by the applicant in any amount.[5]  This was declined on the basis that insufficient grounds had been shown.  On 8 November 2017, the applicant applied by summons to a permanent judge of the court for an order that no security for costs should be provided.  The application was supported by an affirmation deposing to the current financial position of the applicant.[6]

4.  As a starting point, it is to be remembered that an order for security for costs in the maximum amount of $400,000 for each respondent in an appeal is a standard term in appeals to the Court of Final Appeal.  The purpose of such a condition is clear : to protect the respondent in an appeal from the injustice of not being able to recover costs from the appellant in the event of an unsuccessful appeal.  This starting point is reflected in the practice direction to which reference has already been made and in the case law of this Court.[7] If it is sought to vary this standard term, good grounds have to be shown.

5.  In the present case, the applicant seeks a variation of the standard order so that no security for costs should be ordered against it.  It does so on the following grounds :-

(1) The present judicial review proceedings involve what is termed public interest litigation in which the proceedings are brought to raise matters of public importance and in which the applicant stands to make no private gain.  In this type of proceedings, persons in the position of the applicant ought to be protected from an adverse order as to costs.  This, it is submitted, ought to apply equally to an order for security for costs at this stage; reliance is placed on R (Plantagenet Alliance Ltd) v Secretary of State for Justice[8].

(2) Should an order for security for costs be made, this would stifle the appeal because the applicant (a company limited by guarantee) is unable to raise the necessary funds.  The affirmation of Mr Zimmerman, which exhibits the audited Reports and Financial Statements for the year ended 31 December 2016, provides the latest financial information of the company.  The potential stifling of an appeal can in certain circumstances be a good ground not to insist on security for costs being provided.

(3) It is likely, given that public interest litigation is involved, that at the conclusion of the appeal, the applicant is unlikely to be ordered to pay costs to the respondent in any event.

(4) No prejudice is occasion to the respondent as it is publicly funded.

6.  In my view, these grounds are insufficient to justify an order varying the usual order for security for costs to be made.  I can deal briefly with each of the grounds relied on :-

(1) The question of whether in the circumstances of the present case this type of public interest litigation should give rise to a PCO is the very issue that will be determined by the Court of Final Appeal next April.  The order for variation sought by the applicant in a way pre‑empts the outcome of that appeal.  Reliance on the case of R (Plantagenet Alliance Ltd) v Secretary of State for Justice is misplaced.  In that case, the English High Court[9] declined to make an order for security for costs after it had already determined that it was appropriate to make a PCO.  By contrast, in the present case, whether or not a PCO should be made is yet to be finally determined by the Court of Final Appeal.  The Court of First Instance[10] and the Court of Appeal[11] have already declined to make such an order.

(2) Of superficially more substance is the contention that by reason of its financial state, the applicant will be unable to continue with the appeal should security for costs be ordered.  It is asserted the appeal (which is at least arguable given that leave to appeal was given) will therefore be stifled.  As I have indicated, an affirmation was provided in support.  I am, however, not persuaded that this factor should carry much weight in this case.  First, while it can be accepted that the applicant is a non‑profit organisation with limited financial means and is mainly reliant on donations, it does have the means of being financed and historically, has been financed where necessary.  The respondent points to the fact that in the past, adverse costs orders have been met as well.  One obvious source of financing has been the directors of the company.  It is clear from Mr Zimmerman’s affirmation[12] that it is not said that the directors are unable to provide the necessary funds to meet any order for security, only that they are unwilling to do so and effectively choose not to do so.  This is not sufficiently compelling to make this factor (the asserted stifling of an appeal) a significant one in this case.  It is in a way self‑induced.  If the appeal is indeed stifled, it is because the directors choose for it to be so.  Secondly, Mr Zimmerman deposes to the fact that the current bank balance of the applicant is $308,136.46, although it is said “those monies remain already committed to the ongoing public interest projects to which I have earlier deposed.”  No details are vouchsafed as to the extent to which such sum is committed.  Certainly, as the respondent points out, this is not reflected in the audited accounts.

(3) As to the submission that it is likely that the court will not order the applicant to pay costs in any event, this is a variation of the earlier point that public interest litigation is involved in the present case.  This too can be rejected. It is an argument that simply seeks to pre‑empt the outcome of the appeal.

(4) On the point that little or no prejudice will be occasioned to the respondent if no security were to be ordered, the fact that the respondent is funded out of the public purse does not eliminate the prejudice of being at risk as to its costs not being paid by the applicant in case it is decided that a costs order in the respondent’s favour should be made at the conclusion of the appeal.  A well off or well funded litigant suffers this type of prejudice as any other litigant in the same position would.  There may in different contexts be more or less hardship, but in the present case, it is not of sufficient weight to displace the standard term of security for costs being ordered.

7.  For the above reasons, the applicant’s application is dismissed.  The applicant is ordered within 14 days of the date of this Decision to provide security in the sum of $400,000 as security for the due prosecution of the appeal and payment for all costs as may become payable to the respondent in the event of the appeal being dismissed for non‑prosecution or of the court ordering the applicant to pay the respondent’s costs of the appeal.  As for the costs of this application, it is ordered that the costs be reserved.