ORRICO, PHILIPPE AND ANOTHER v. MUNICIPAL SERVICES APPEALS BOARD

HCAL 24/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 24 OF 2014

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D E C I S I O N

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Introduction

1. On 15 August 2014, I granted the application for judicial review by Philippe Orrico and Nomad Restaurant Management Ltd (the applicants) against the decision of the Municipal Services Appeals Board (MSAB) dated 13 February 2014, revoking the liquor licence granted on 29 October 2013 by the Liquor Licensing Board (LLB) to the applicants. I quashed the decision of the MSAB and remitted the applicants’ appeal to a differently constituted MSAB to be heard together with the residents’ appeal against the grant of the liquor licence by the LLB in accordance with the law and made an order nisi that the costs of the application be awarded to the applicants, to be taxed, if not agreed, such order to become absolute in 14 days.

2. The MSAB, who is the respondent, had not appeared before the court at the hearing on 14 August 2014, whereas the LLB, who is the interested party, had appeared and was represented by counsel.  The LLB took a neutral position on the application.  It noted that its decision was at variance with the MSAB’s decision which was binding on it and that it would provide what assistance it could to the court at the hearing.

3. By way of letters dated 28 and 29 August 2014, from the Department of Justice (representing the LLB) and the Secretary to the MSAB respectively, I was asked which party was responsible for paying the costs of the applicants.  By my judgment, the party whose decision had been successfully reviewed was that of the MSAB, with the LLB taking a neutral position on the application, and accordingly on 8 September 2014, I made an order nisi that the MSAB pay the applicants’ costs.  That set in motion an application by the MSAB to vary the order nisi to “no order as to costs”.  The point raised by the MSAB against the costs order is an important one and concerns whether a successful litigant in judicial review proceedings can obtain, and whether the court can grant, a costs order against the respondent inferior court or tribunal.

Background

4. I will set out a brief account of the procedural history that led to these proceedings.  On 29 October 2013, the LLB granted a liquor licence to the applicants with limited duration and four additional conditions.  The applicants appealed the grant of the licence on these terms and conditions to the MSAB.  There was a cross‑appeal from residents against the grant of the licence by the LLB.  On 17 January 2014, the two appeals were heard together by the MSAB which handed down its decision on 13 February 2014, revoking the grant of the liquor licence with immediate effect.  On 7 March 2014, I granted an ex parte application by the applicants for leave to apply for judicial review of the MSAB’s decision and stayed the decision in the meantime.  The applicants proceeded with the substantive application for judicial review by taking out an originating summons, and on 20 March 2014, all relevant papers, including a copy of my decision, were served on the MSAB and the LLB.  The Secretary to the MSAB informed the court by letter dated 21 March 2014 that the MSAB would adopt a neutral stance and would not take active participation in the proceedings or be represented at the hearing, and that the MSAB undertook to abide by the decision of the court.  I should note at this stage that my decision to grant leave to the applicants set out in detail the grounds of review upon which leave was granted which contained serious allegations and issues in relation to the decision-making process and decision of the MSAB.  The MSAB was therefore on notice of the allegations and issues concerning it at the substantive hearing of the judicial review.

5. The substantive application for judicial review proceeded to hearing on 14 August 2014 with the applicants and the LLB both present and represented by counsel.  As already noted, the LLB as an interested party, took a neutral position in the hearing and provided what assistance it could to the court.  The MSAB as the respondent was neither present nor represented.  Throughout the proceedings the MSAB was and remained the only respondent, and it was only its decision that was the subject of judicial review. 

The Court’s decision

6. I concluded that the grounds for review were made out and I granted the applicants the appropriate relief.  I found that the MSAB had failed to properly consider the two appeals before it and to provide adequate reasons for its decision.

7. It may be appropriate to briefly describe the particular findings I made as it will be relevant to the issue of costs that I have to now decide.  I found that the MSAB did not properly describe or address the nature and circumstances of the locality in which the premises were located and that it considered certain matters without assessment or verification as to their relevance to the premises.  I found that it failed to properly address, if at all, the statutory requirements it was obliged to consider under Regulation 17(2) of the Dutiable Commodities (Liquor) Regulations, Cap 109B.  It is a statutory requirement that the MSAB give reasons in writing for its decisions, setting out its findings of fact with appropriate reference to the evidence or other material on which the findings are based.  I found that the reasons given by the MSAB were totally inadequate as represented by a single paragraph in which no reasoning or reasons were provided. 

8. It was clear on my assessment of the MSAB’s decision that it had made a number of fundamental and improper errors or mistakes and as a result the applicants had been unreasonably and unfairly treated.

The MSAB

9. The MSAB is a statutory body established under and governed by the Municipal Services Appeals Board Ordinance, Cap 220.

10. Section 3 provides that the function of the MSAB is to hear and determine any appeal to it from the Licensing Appeals Board or an administrative decision from which on appeal lies to it under any Ordinance, such as an appeal of a decision of the LLB. The MSAB is an appellate body dealing with appeals against certain government decisions, and is administered by the Administration Wing of the Chief Secretary for Administration’s Office of the Government.

11. Section 16 provides that the Chairman, Vice‑chairman and members of the MSAB have in the performance of their duties under the Ordinance the same privileges and immunities as a judge of the Court of First Instance.  This would mean that individual members of the MSAB would be immunized against any costs order but that the MSAB as a body, would not be.

Principles on costs

12. The question of costs is to be decided by the court in the exercise of its discretion, based on principles founded on rules of reason and justice.[1] The power of the court to award costs in judicial review and other proceedings is derived from section 52A of the High Court Ordinance, Cap 4. Under this section the court has a broad jurisdiction in respect of the question of costs but with the specific limitation that an order for costs cannot be made against a person who is not a party to the proceedings.  The Rules of the High Court address further the entitlement to costs under Order 62, rule 3which reads:

“1. Subject to the provisions of this Order, no party shall be entitled to recover any costs of or incidental to any proceedings from any other party to the proceedings except under an order of the court.

2.  If the court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings (other than interlocutory proceedings), the court shall, subject to this Order, order the costs to follow the event, except when it appears to the court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.”

13. Order 62 rule 5 sets out special matters that may be taken into account by the court in exercising its discretion as to costs, including the underlying objectives set out in Order 1A, rule 1, the conduct of the parties, and whether a party has been wholly or partly successful.

14. In Pfeiffer GmbH v Cheung Hay Kit trading as Sun Wai Construction,[2] Kwan JA explained that with the advent of the Civil Justice Reform there was a move away from the more restrictive approach on the question of costs that had been adopted in the past.  She went on to explain at paragraph 20 that:

“Although the general rule that costs will follow the event still plays a significant part, it is but a starting point from which the court is more ready to depart, mindful that too robust an application of the general rule encourages litigants to increase the costs of litigation since it discourages them from being selective as to the points they take. And it is no longer necessary for a party to have acted unreasonable or improperly to be deprived of his costs of a particular issue on which he has failed.”

15. As to the conduct of the parties on the question of costs Kwan JA adopted and set out the relevant part of Order 62, rule 5 where she said at paragraph 21:

“Under Order 62 rule 5(1)(e), the court may take into account ‘the conduct of all the parties’. Rule 5(2) provides that ‘conduct’ for this purpose includes ‘(a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; (b) the manner in which a party has pursued or defended his case or a particular allegation or issue; (c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and (d) conduct before, as well as during, the proceedings.’ ”

16. Kwan JA emphasised the fact that the trial judge was in the best position to decide how his or her discretion should be exercised in the light of the evidence adduced at the trial and the litigation conduct of the parties and she reaffirmed the principle that a court should eschew a mechanistic or restrictive approach in exercising its discretion as to costs in view of the amendments to the relevant provisions in the Rules of the High Court.[3]  As mandated by the Civil Justice Reform and the consequential amendments to the Rules of the High Court, a court is obliged to give effect to the underlying objectives in Order 1A which place emphasis on the fair, prompt and efficient handling and disposal of cases before the courts but recognising that the primary aim of the courts in exercising their powers is “to secure the just resolution of disputes in accordance with the substantive rights of the parties”.

17. In Hong Kong Civil Procedure, 2015,[4] it is stated that in England and Wales it will only be in exceptional cases that a party to a judicial review application who neither appears nor contests the application will be required to pay costs[5] and that no order for costs will generally be made against an inferior court or tribunal unless it behaved improperly in a flagrant way or it appeared at the hearing to contest the application being made.  The case of R (Davies) v Birmingham Deputy Coroner[6],(Davies) is cited as authority for this proposition. It is primarily on the basis of this statement of principle that Mr Ismail on behalf of the MSAB submitted that the MSAB is not liable for the applicant’s costs in these proceedings and that the costs order nisi should be varied to “no order as to costs”.

MSAB’s submissions

18. Mr Anthony Ismail argued that there were three reasons for not ordering costs against the MSAB in the exercise of the court’s discretion.  First, the MSAB did not appear and was not represented at the hearing and its errors of law did not constitute “flagrant improper behaviour” as laid down in the test enunciated in R v Liverpool Justices, Ex parte Roberts,[7] (Liverpool Justices).  Secondly, ordering costs against the MSAB would be harsh and/or oppressive and/or unfair because the MSAB followed the usual or normal practice of taking a neutral stance by not actively intervening to defend its decision.  Thirdly, there was no inflexible rule that a successful litigant was entitled to expect to recover his costs from somebody.

(a)   First reason

19. The first reason advanced by Mr Ismail was that in the circumstances of the present case it is the established practice and principle not to award costs against the MSAB.  Mr Ismail relied on English jurisprudence on the issue as to whether costs can be awarded against an inferior court or tribunal in judicial review proceedings and argued that the English practice had been followed in Hong Kong.  The English practice is that although costs are left to the discretion of the court, no order for costs will generally be made against an inferior court or tribunal which neither appears in nor contests a successful application for judicial review against its decision unless the case is exceptional in the sense that the tribunal behaved improperly and in a flagrant way.  He relied on the comments of Lord Parker CJ in Liverpool Justices and Chadwick J in Providence Capital Trustees Ltd v Ayres and Anor,[8] (Providence Capital Trustees) and to the review of this and other authority by Brooke LJ in Davies.  I will deal with the statements of principle in the English cases but before I do, I will set out Mr Ismail’s argument.  He argued that the English practice has been followed in Hong Kong as seen in In re Lee Shiu‑ting[9] and Lam Ho and Ors v Immigration Tribunal,[10] where Liverpool Justices was applied, and Ming Pao Newspaper Ltd v OAT and TELA,[11] (Ming Pao Newspaper) where Davies was applied.

20. Let me first deal with the English cases and the principles that have been stated and the context in which they were made.

21. In Liverpool Justices, Lord Parker CJ, made this statement of principle as to the award of costs against a tribunal:

“So far as costs against the magistrates are concerned, it has been the practice not to grant costs against magistrates or tribunals merely because they have made a mistake in law but only if they have acted improperly, that is to say, perversely or with some disregard for the elementary principles which every court ought to obey, and even then only if it was a flagrant instance. In the present case the court is satisfied that the denial of justice here was a pure mistake and was not a flagrant instance; indeed, counsel has not asked for costs against the magistrates. He asks for costs only against the prosecution. So far as that is concerned, it is the recollection of all the members of this court that the general practice is not to award costs against a party who does not appear to resist an application of this sort. That is not to say that there may not be cases where the court thinks it right to order that party to pay costs if, for instance, he has materially contributed to the error giving rise to the application. Accordingly, following that usual practice, the court in the present case refuses costs.”

22. Lord Parker CJ’s comments are an encapsulation of past statements of principle dating back to the 1940s.  Brooke LJ in Davies, giving the principal judgment of the court, conducted a survey of the case law which he said revealed that the established practice of the High Court for many years was to make no order for costs against an inferior court or tribunal unless it behaved improperly in a flagrant way or unless it appeared at the hearing as a party to the lis to contest the application being made, or declined unreasonably to sign a draft consent order which might obviate the costs of an unnecessary hearing.[12]

23. Brooke LJ identified four issues for consideration which were:

“(i) What is the established practice of the courts when considering whether to make an order for costs against an inferior court or tribunal which takes no part in the proceedings (except, in the case of justices, to exercise their statutory right to file an affidavit with the court in response to the application)?

(ii) What is the established practice of the courts when considering whether to make an order for costs against (or in favour of) an inferior court or tribunal which resists an application actively by way of argument in the proceedings in such a way that it makes itself an active party to the litigation?

(iii) Did the courts adopt an alternative established practice in those cases in which the inferior court or tribunal appeared in the proceedings in order to assist the court neutrally on questions of jurisdiction and procedure and such like but did not make itself an active party to the litigation?

(iv) Whatever the answers to the first three questions, are there any contemporary considerations (including the coming into force of the Civil Procedure Rules (CPR) which should tend to make the courts exercise their discretion as to costs in these cases in a different way from the way in which it was regularly exercised in the past?”[13]

24. He answered these issues as follows:

“(i) The established practice of the courts was to make no order for costs against an inferior court or tribunal which did not appear before it except when there was a flagrant instance of improper behaviour or when the inferior court or tribunal unreasonably declined or neglected to sign a consent order disposing of the proceedings.

(ii) The established practice of the courts was to treat an inferior court or tribunal which resisted an application actively by way of argument in such a way that it made itself an active party to the litigation, as if it was such a party, so that in the normal course of things costs would follow the event.

(iii) If, however, an inferior court or tribunal appeared in the proceedings in order to assist the court neutrally on questions of jurisdiction, procedure, specialist case law and such like, the established practice of the courts was to treat it as a neutral party, so that it would not make an order for costs in its favour or an order for cost against it whatever the outcome of the application.

(iv) There are, however, a number of important considerations which might tend to make the courts exercise their discretion in a different way today in cases in category (iii), above, so that a successful applicant, like Mr Touche, who has to finance his own litigation without external funding, may be fairly compensated out of a source of public funds and not be put to irrecoverable expense in asserting his rights after a coroner (or other inferior tribunal) has gone wrong in law, and there is no other very obvious candidate available to pay his costs.”[14]

25. He however qualified the above with the following comments:

“I do not regard this outcome as at all satisfactory, but it stems from Parliament’s unwillingness to allow a successful applicant to be reimbursed from central funds for the expense to which he has been put when there is no other potential source of public funds available for this purpose.”[15]

26. From Brooke LJ’s survey of the English case law, it is apparent that the decisions were addressing practice and principle that were addressing the legal and administrative frameworks and the development of the law on costs at the particular time and in the particular circumstances of the cases.  It is important to bear this in mind when applying the practice and principle to the local conditions and circumstances in Hong Kong. 

27. I now turn to the Hong Kong cases to address the principles that have been applied or stated on this issue.

28. Lord Parker CJ’s statement of principle was adopted by the Full Court of Hong Kong in In re Lee Shiu‑ting.  It provided that costs would not be granted against tribunals merely because they have made a mistake in law but only if they have acted improperly, that is, perversely or with some disregard for the elementary principles which every court ought to obey and only if it was a flagrant case.  It is important to understand the statement of principle or practice that was propounded by Lord Parker CJ. Although it should be noted that it was made in the context of the legislative framework and the state of affairs them prevailing in England and Wales and that the situation in Hong Kong was different then, and different again now. The difference between the two jurisdictions was to some extent acknowledged and appreciated in In re Lee Shiu‑ting.  In that case the Full Court granted an order of certiorari to quash a disqualification order of a magistrate that had not specified the period of disqualification as required by the relevant statutory provision.  The application had not been opposed by the prosecutor.  The applicant applied for costs not against the magistrate but against the prosecutor.  The court stated its understanding on the issue of costs with respect to a tribunal or the prosecutor as follows:

“… As to the tribunal the rule is that if the tribunal appears and disputes the right of the applicant to an order costs may be awarded against them, but that will be done only where the tribunal has done something which calls for an expression of the Court’s disapproval. As to the prosecutor the general rule is that costs will follow the event unless there are special circumstances to justify some different order, and it has been held that special circumstances exist where an error by the inferior court was not contributed to by the party in whose favour the decision was given. It is possible that the distinction between the tribunal and the prosecutor will not always be as important in Hong Kong as it is in England. …”

29. In the case of a tribunal, as I interpret Lord Parker CJ’s comments, he was not stating that costs should not be awarded against a tribunal, but that the awarding of costs against a tribunal was limited to situations where it had obviously acted perversely or with disregard for the elementary principles which every tribunal ought to obey.  

30. The Shorter Oxford English Dictionary gives the meaning of “flagrant”, in respect of an offence or an offender, as “glaring, notorious, scandalous, blatant”.  From my reading of the cases, it appears “flagrant” is used to mean obvious or blatant.  That would make sense given that the conduct in question has to be “improper”, so therefore it would be tautological to treat the meaning of “flagrant” as being notorious or scandalous.  I take the requirement that such act of the tribunal was “flagrant” to mean that the act was obvious and blatant.  I do not attribute to the requirement that the act be “flagrant” anything more than that the tribunal has acted obviously and blatantly contrary to accepted principle or practice that it should have otherwise complied with and adhered to, and which it ought to have known.  As a consequence, a tribunal has acted unreasonably and unfairly in an obvious and blatant way, where an injustice has been caused.  This in my view constitutes what Lord Parker CJ described as a tribunal having “acted improperly” and therefore it would be open to award costs against it.

31. In re Lee Shiu‑ting, The court cited with approval the statement by Lord Parker CJ as being authority for the rule both as to awarding of costs against a tribunal and the prosecutor and made no order as costs.  However, the court made the point that the distinction between the tribunal and the prosecutor may not be an important distinction in Hong Kong and that seems to suggest that the text here is different.

32. It was in CLP W Ltd v Warner Banks Esp Coroner,[16] (CLP) that the Court of Appeal had to consider the question of awarding costs against the coroner.  In the coronial proceedings in question, the jury had returned a verdict of lack of care which on judicial review was quashed and a previous verdict of death by accident was reinstated.  An application for costs against the coroner was returned by the judge who after an extensive review of the law held that it was only in unusual circumstances that costs would be ordered against those holding public offices such as coroners.  The coroner took the matter on appeal and the issue of costs was the subject of a cross‑appeal.  Mortimer JA (as he then was) gave the judgment of the court and addressed the principle that the judge had applied on the question of costs by noting that:

“… He accepted that only in rare cases will a coroner be ordered to pay the costs unless his behaviour called for strong disapproval. See Jervis on Coroners (1993, 11^th Ed) para 19‑16 at p 348.

If the coroner does appear at the hearing, and loses, then the court has a discretion whether to order the coroner to pay the successful applicant’s costs, even though he acted reasonably. But such an order has only rarely be (sic) made; usually no order is made unless the coroner’s behaviour called for strong disapproval.

This principal followed those developed when considering orders for costs against magistrates in England. Its origin, no doubt, was that such people were rendering valuable public service for little or no reward and that costs often in times past would fall to be paid personally by the magistrate or coroner.

Those circumstances do not apply in Hong Kong. Coroners and magistrates are also rendering valuable service but they are fully paid public servants who appear in proceedings represented by the Attorney General and there is no question of them having to pay costs personally.”[17]

33. Mortimer JA went on to point out that:

“When a coroner or a magistrate files an affidavit and does not appear this is one matter relevant for the court’s consideration but here the coroner appeared by counsel and vigorously contested the proceedings below. In these circumstances we see no reason in principle why the court’s discretion to award costs in such cases should be fettered in the way suggested.

Liu J thought himself fettered when he rightly decided that the coroner’s behaviour here did not call for ‘strong disapproval’ (or ‘strong sanction’ as he put it). Clearly had he thought otherwise he could have ordered that costs should follow the event. We think that the judge was wrong to think his discretion was fettered in this way in Hong Kong and for this reason we allowed the cross‑appeal and ordered that CLP should have its costs below.”[18]

34. Mr Ismail relied on the decision of Lam J (as he then was) in Ming Pao Newspaper, where he applied the principles set out in Davies.  However, in the course of his judgment on costs, Lam J found that TELA as the interested party was effectively the respondent in resisting the applications for judicial review.  He said:

“Whilst it may be said that TELA was acting all along in what may quite properly be regarded as the discharge of its public duties in resisting the applications, the same can be said in respect of most respondents to judicial review applications. As far as I am aware, this has never been regarded as a reason for exonerating public authorities from any potential liabilities as to costs when an administrative decision is successfully challenged in judicial review.”[19]

35. He added:

“However, nowadays public authorities should regard it as part of their public duty to participate in judicial review proceedings when an administrative decision is being challenged. If that were so, I see no reason why such duty should not be extended to meet the costs of a successful applicant. After all, judicial review is a manifestation of the rule of law in the context of good public administration.”[20]

36. He noted that the OAT which was the respondent did not appear and indicated that it would abide by the decision of the court, in accordance with the principles set out in Nattrass v The Attorney General[21] and Dato Tan Leong Min v The Insider Dealing Tribunal,[22] (Dato Tan Leong).  He concluded that as TELA discharged its public duty to participate in the judicial review that it should be subject to the potential liability as to costs as it had been the respondent in substance.  The point is what happens when the relevant public authority takes a neutral stance or does not participate in the judicial review because its position is contrary to the position taken by the relevant tribunal and it is the failures or errors of the tribunal that are the subject of the judicial review.  The tribunal, where it is the respondent in substance, takes a neutral stance, knowing that its decision is under serious challenge, must bear the consequences of any costs order.  It is in effect putting it on the applicant to prove its case and for the court to consider and decide the issue.  If the tribunal has committed a serious or gravely wrong why should it not have to pay the price for its conduct?  The awarding of costs against an unsuccessful party is an effective and important means to control and correct the conduct of a litigant both generally and specifically and this is particularly important where the party performs a public or executive function that requires strict adherence to legal principles and practice.  It provides no check mechanism or safeguard for the public when an inferior court or tribunal in the case of having committed a serious or gravely wrong can escape the liability of costs.

37. Mr Ismail in his further submissions addressed the issue by illustrating instances where the courts did not find flagrant improper conduct and did not award costs against the tribunal.  This exercise assumed that in order to award costs against a tribunal that did not participate in the proceedings, the subject of the review involved flagrant improper conduct on the part of the tribunal.

38. The first illustration was the failure to comply or have proper regard to relevant legislation.  He referred to the case of Ming Pao Newspaper to make this point.  However, as pointed out that case involved TELA being the respondent in substance as opposed to the OAT which did not participate in the proceedings.  Costs were nevertheless awarded against TELA.  It was not on the basis as submitted, that Lam J found that the failure by the OAT to comply or have proper regard to relevant legislation, making unsound assumptions and arriving at irrational conclusions were held not to constitute “flagrant improper behaviour”.

39. The second illustration was the failure to give adequate reasons.  He referred to two cases.  One was the English case of R (Viggers) v Pensions Appeal Tribunal,[23] (Viggers) and the other was the Hong Kong case of Law Woon King v Appeal Tribunal (Housing) and The Hong Kong Housing Authority,[24] (Law Woon King).  In Viggers, the court applying the principles in Davies concluded that the case was not one of those exceptional cases where costs should be awarded against the tribunal as it had not attended the hearing and had not sought actively to uphold its decision.  The court found that it was not a flagrant instance of improper behaviour even though involved “a regrettable inadequacy of reasons”.  Costs were nevertheless awarded to the applicants from public funding costs.  In Law Woon King, the court awarded costs against the Housing Authority that had actively opposed the judicial review but not the tribunal that took a neutral stance and had not taken any step in the proceedings.

40. The third illustration was the failure to apply the proper legal test, and to have regard to relevant factors, and the making of an irrational decision.  He referred to the English case of R (Manchester City Council) v Manchester Magistrates’ Court.[25]  The court considered the issue of costs and although did not find that the conduct went as far as being a flagrant instance of improper behaviour, it nevertheless concluded that the conduct was unfortunate, bordering on the discourteous.

41. The fourth illustration was where the behaviour of the tribunal was described as censorious and lamentable and yet it was held not to constitute flagrant improper behaviour.  He relied on the case of R (Broxbourne Borough Council) v North and East Hertfordshire Magistrates Court & Anor.[26]  The court explained that on the question of costs it had wavered and that on a very fine balance concluded that it was not appropriate to award costs against the Justices or the Chairman.

42. All that these cases really illustrate is that the application of whether an inferior court or tribunal has engaged in flagrant improper behaviour is fact and case specific.

43. Upon this analysis, Mr Ismail argued that there was no flagrant improper conduct in the present case.  He submitted that the MSAB’s errors of law, either individually or collectively, fell short of constituting “flagrant improper conduct”.  He stated that the MSAB was aiming to achieve justice and that it tried its best but unfortunately committed errors in its decision making process.  I disagree with this submission.  From my assessment of the overall conduct of the MSAB in the present case and on my understanding of the test, it constituted flagrant improper behaviour.

(b)    Second reason

44. The second reason advanced by Mr Ismail was that the MSAB followed the usual or normal practice endorsed by the Hong Kong Court of Appeal of taking a neutral stance and not actively intervening to defend its decision.  He referred to Dato Tan Leong where Mortimer VP agreed with the judge below that it was the normal practice for tribunals that are subject to judicial review to take a neutral role and although unusual, it was not wrong for a tribunal to appear. 

45. In Wong Sin Hua (aka Felix Wong) v The Insider Dealing Tribunal,[27] (Wong Sin Hua), Keith JA, sitting as an additional judge of the Court of First Instance, noted that the above observations were obiter dicta and went on to explain:

“In my experience of judicial review both in Hong Kong and in England, it is much more usual for statutory tribunals whose decisions are being challenged by way of judicial review not to appear at the hearing of the application. They leave challenges to their decisions to be opposed by the successful parties before them. The occasions on which they have appeared have been so rare that it is not possible to say whether their normal stance when they do appear is (a) to play a neutral role and to provide the court with such assistance or information as the court requires or (b) to seek to defend their decisions.”

46. Keith JA said that the question is not what usually happens, but what should happen in a particular case.  I agree with his comments. In the present case, the only respondent was the MSAB.  Whilst it stated it took a neutral stance, it did so knowing that the LLB also took a neutral stance and would not defend the MSAB’s decision for the LLB’s decision had been overturned by the MSAB.  It was not, in these circumstances, a situation where it was not defending its decision‑making process or decision.  It was, in my view, to the contrary.  It knew that its decision‑making process and decision was under serious challenge and that the case would have to be proved by the applicants to the courts satisfaction.  It was leaving up to the court to decide.

47. Mr Ismail referred to the comments in Hong Kong Civil Procedure, 2015,[28] in relation to uncontested proceedings where reference was made to the comments of A Cheung J (as he then was) in Kwong Ka Yin, Phyllis v The Solicitors Disciplinary Tribunal.[29]  In that case the Law Society and the Solicitors Disciplinary Tribunal were joined as respondents and the Law Society did not participate in the proceedings for reasons of its own and A Cheung J said “one can only infer that it had no intention to defend the findings and orders of the Tribunal”.  He noted that the applicant still had to establish her case to the satisfaction of the Court even though her application was effectively unopposed.  In that case, the Law Society was removed as a respondent and the Tribunal took a neutral stance in the proceedings.  A Cheung J cited Dato Tan Leong for the proposition that the normal practice is for a tribunal to take a neutral role when its decisions‑making process is challenged in judicial review proceedings.  In that case, Mortimer VP accepted that it was not wrong for the Tribunal to appear as a party but it was unusual, and having brought the appeal the Tribunal’s members put themselves personally at risk in costs which was undesirable even if they were indemnified.  The Court of Appeal dismissed the appeal and awarded costs against the Tribunal.  Admittedly, that was an instance where the tribunals had actively participated in the judicial review proceedings.  It does, however beg the question why is there different treatment between a tribunal that actively participates in the judicial review proceedings and one that does not?  In my view, there would be instances, and this is one of them, where the inferior court or tribunal by the nature of the challenge of its decision‑making process, and the stance it has taken, which amounts to standing by its decision and leaving it for the court to decide the matters under challenged. 

48. Mr Ismail argued that it would be harsh and/or oppressive for the courts to tell the MSAB that it should in practice not actively intervene to defend its decision and, at the same time, to order it to pay costs if, without it having had an opportunity of defending its decision, it holds the decision to be bad in law.  He lifted these remarks from the comments of Wilcox J in Our Town FM Pty Ltd v Australian Broadcasting Tribunal (No 3),[30] where he said:

“At one time it was considered to be a proper course for the tribunal actively to participate in the argument upon judicial review of its rulings and decisions. However, in R v Australian Broadcasting Tribunal; Ex parte Hardiman (1980) 144 CLR 13 at 35 6, 29 ALR 289, the High Court of Australia stated, in emphatic terms, that it would not normally be a proper course for the tribunal to enter the lists as a protagonist in defence of a decision which it had made upon a licence application. Since that date, so far as I am aware, the tribunal has consistently followed the practice of confining itself, upon such occasions, to putting such factual material before the court as has been thought necessary to enable the court to understand what had occurred, and to assisting the court by submissions – for example, as to the relevant provisions of the Act – but without taking an adversarial position. In other words, in compliance with the precept laid down in the High Court, the tribunal has desisted from putting active argument to support its decisions under challenge. In some respects the tribunal’s position, when judicial review occurs, is not unlike that of a court whose decision is attacked upon appeal. In such a case, of course, the court takes no part in the appeal, the course of which, in terms of argument, depends upon the participation of the parties who have a personal interest in the result.

Although there is no question that the court has power, notwithstanding the matters to which I have referred, in disposing of an application under the Administrative Decisions (Judicial Review) Act 1977 to order the tribunal to pay costs, I think that the circumscribed role of the tribunal is a matter to be taken into account in exercising the discretion as to costs.  It seems to me somewhat hard for the courts at the one time to tell the tribunal that it should not actively intervene to defend its decisions and, at the same time, to order the tribunal to pay costs if, without its having had an opportunity of defending a decision, the decision is held to be bad in law.  I would not wish to prescribe any categorical rule, but I indicate my opinion that only in an unusual case should the court order that the tribunal pay costs, where there are contending applicants for a licence who have been the parties actively debating the matter before the court.  I say this, of course, notwithstanding the fact that, in the particular case, the court might hold that the tribunal fell into error and thus, like an inferior court whose decision is reversed on appeal, that it was, in one sense, the cause of the litigation occurring.”

49. Wilcox J made it abundantly clear that he was addressing a specific direction from the High Court of Australia but nevertheless made it clear that he did not wish to prescribe any categorical rule and that it would only be in an unusual case that the court would order the tribunal pay costs.  Even in those circumstances, Wilcox J was still allowing for the situation where costs could be awarded against the tribunal, albeit only in an unusual case. 

50. At this juncture it is worthwhile noting, that an inferior court or tribunal’s decision is generally dealt with on appeal or review on the basis of the contents of its decision and the record of proceedings.  It is then a question on appeal or review, to examine the decision or the proceedings to ascertain whether there has been any error in law or in fact or failure to adhere to any relevant legal principles or law, resulting in any miscarriage of justice or unjust or unreasonable treatment. It is for this reason, primarily, as I understand it, that an inferior court or tribunal is not encouraged to actively participate in proceedings where its decision is the subject of challenge.

51. Mr Ismail also argued that it would be harsh and/or oppressive and/or unfair to award costs against the MSAB for the additional reason that it was unable to take any steps to avoid the costs incurred by the applicants.  He submitted that the MSAB followed the usual or normal practice of not taking steps to defend its decision and that it had no choice whether or not to be named as a respondent and no power under its Ordinance once so named, to review and set aside its own decision so as to avoid the need for the judicial review to proceed. 

52. Mr Ismail relied on the statement of Chadwick J (as he then was) in Providence Capitol Trustees, who applying the stated principles said:

“It seems to me that it would be oppressive to make an order for costs against the Pensions Ombudsman in circumstances where his determination has been overturned on appeal but where he has not made himself a party to the lis by appearing at the appeal or taking steps to defend his determination. It would be oppressive because the Ombudsman has no choice whether or not to be named as a respondent and no power, once named as a respondent, to set aside his own order so as to avoid the need for the appeal proceeding. He is necessarily a party and, whether or not on further consideration he comes to the conclusion that his determination was wrong, there is nothing that he can do to prevent the appeal from proceeding. To visit a party with an order for costs in circumstances in which he is unable to take any steps to avoid the costs incurred on the appeal seems to me to be oppressive and unfair.”

53. It seems to me to be equally oppressive and unfair that a successful applicant is denied his costs through no fault of his own.  Simply because the decision‑maker is an inferior court or tribunal that has decided to take a neutral stance and not participate in the proceedings, but leaving it up to the applicant to prove his case and for the court to decide on it.  I see no reason why in those circumstances where the court has concluded that the decision was seriously flawed that costs should not follow the event. 

(c)   Third reason

54. The third reason advanced by Mr Ismail was that there is no inflexible rule that a successful litigant is entitled to expect to recover his costs from somebody, even though the applicants “comprise a small enterprise” and “have expended substantial funds to litigate this matter” in these proceedings.  He relied on Lord Bridge’s comments in Steele Ford & Newton (a firm) v Crown Prosecution Service.[31]  He said:

“I share with the Court of Appeal the view, which is no doubt held by every judge brought up in the English system, that it is just for a successful litigant, and perhaps a fortiori a successful appellant, to be able to recover his costs from someone. But unfortunately it is not always so. From 1949 to 1964 unassisted parties who were successful in litigation against assisted parties under the Legal Aid Act 1949 could normally recover little, if any, of their costs from the assisted party and nothing from public funds. This was widely felt to be unjust. But it was not until the Legal Aid Act 1964 that the injustice was partially remedied and even under that Act and its current successor, the Legal Aid Act 1988, the successful unassisted party can rarely recover costs incurred at first instance from public funds and his right to do so in respect of appellate cost is strictly controlled and defined by the statue.

Again, there are regrettably instances which occur through no fault of either party where costs are incurred of an abortive trial leading to an unopposed appeal and an order for a retrial.  Even if the responsibility for these wasted costs is that of the court and no one else, they cannot be recovered from public funds.  To take yet another example, it is relatively commonplace for a party who is the victim of a misjudgement by an inferior court or tribunal to have to seek relief by an application for judicial review in circumstances where the Divisional Court cannot hold either another party or the inferior tribunal itself liable in costs and there is no power to award costs from public funds.”

55. It should be appreciated that in this instance, Lord Bridge was addressing the issue as to the power to award costs from public funds.  He went on to describe his concern on the inability of a successful applicant receiving his costs.  He said:

“… but I hope I said enough to explain why I cannot attribute to the legislature any general willingness to provide the kind of publicly funded safety net which the judiciary would like to see in respect of costs necessarily and properly incurred by a litigant and not otherwise recoverable. It is for this reason that I find it impossible to say that whenever the legislature gives a right of appeal, whether in civil or criminal proceedings, in circumstances where a successful appellant may be unable to recover his costs from any other party, that affords a sufficient ground to imply a term enabling the court to order the costs to be paid out of public funds.”[32]

56. Mr Ismail argued that the present case falls into the classic situation where costs cannot be recovered by an applicant upon a successful review for the reason that the LLB cannot be held liable for costs as it took a neutral stance because its decision was at variance with the MSAB’s decision, and the applicants whilst victims of a misjudgment by MSAB, it was not as a result of “flagrant improper conduct”, and there was no power to award costs for the applicants from public funds.

Discussion

57. Whilst Mr Ismail has very ably argued the case against an order for the MSAB to pay the applicants’ costs, I cannot agree for three main reasons. 

58. First, the justice of the situation warrants that the MSAB pay the applicants’ costs and it would be unjust not to do so.  As I explained earlier, I concluded that the MSAB had made a number of fundamental and improper errors and mistakes and as a result the applicants had been unreasonably and unfairly treated.  And in my view they are clearly entitled to their costs.  The circumstances of this case are unusual in that the LLB took a neutral stance in the judicial review proceedings because its decision had been overturned by the MSAB.  It purely played the role of an interested party and did not seek to defend the decision of the MSAB.  As the MSAB was the respondent and it was its decision that was successfully challenged, it should therefore bear the costs of the applicants. 

59. Secondly, a careful analysis of the past practice and statement of principles, in particular in Hong Kong, do not go as far as suggested and in any event have to be reassessed and formulated in the modern context against the reforms and amendments to the provisions on costs and the relevant principles and law that has developed in relation to judicial review proceedings, with particular reference to the legal and administrative framework of the MSAB and the particular circumstances of this case. 

60. Thirdly, even if the principle as suggested applies, it is not satisfied in the circumstances of this case.  I consider on the material before me, that the MSAB had engaged in flagrant improper conduct during the decision‑making process and by its decision.  It was clear to me having viewed the material as a whole that the MSAB had taken a very superficial approach to the matters under appeal and seriously erred in addressing factual issues and statutory requirements.  The most serious of all was the complete absence of proper and adequate reasoning or reasons for its decision to revoke the liquor licence of the applicants with immediate effect.  I found that the applicants had been unfairly and unreasonably treated by the MSAB.

61. When an inferior court or tribunal takes a neutral stance in the face of a reasonably arguable case challenging its decision‑making process and/or its decision on grounds that constitute a serious error or departure from accepted norms or requirements, and the applicant successfully proves his case to the extent that he has shown he has been treated unreasonably or unfairly, then why should the inferior court or tribunal as the respondent not pay the costs of the applicant?  Why should a party who has incurred legal costs to right a wrong perpetrated by an inferior court or tribunal not be compensated for those costs from the inferior court or tribunal responsible, especially when there is no other party that can be held liable to pay the successful party’s costs?  Is it not harsh and oppressive that a successful party is denied his costs, for the reason it is harsh and oppressive for the inferior court or tribunal to pay those costs?  The logic and reasoning of this proposition completely escapes me.

62. It is important to note that the relevant cases deal with situations that have changed over time.  What seem to be an initial concern that decision‑makers were not constrained or hindered in their decision‑making responsibilities by the possible award of costs against them in a challenge of their decision, had been appropriately dealt with by indemnifying decision‑makers against any costs order.  In the case of MSAB, the members are given the same privileges and immunities as a judge of the Court of First Instance.  That has not been extended to the body itself and is therefore open to an award of costs in the appropriate circumstances. 

Conclusion

63. For the reasons I have given above, I maintain and make absolute my order that the MSAB pay the applicants’ costs in relation to these proceedings, including this costs application.