FRANCIS CHEUNG AND ANOTEHR v. THE INSIDER DEALING TRIBUNAL

1998 HCAL No. 40

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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J U D G M E N T

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Introduction

1. Judgment on this application for judicial review was handed down on 31st March. The judgment contained an order nisi that there be no order as to the costs of the Financial Secretary or Leung Chee Hon. Mr. Leung now applies, in an application treated as having been made pursuant to Ord. 42 r. 5B(6) of the Rules of the High Court, for an order that the order nisi relating to his costs be varied. The order he seeks is an order that the Applicants should pay to him his costs of the proceedings, to be taxed if not agreed.

The reasons for the orders nisi

2. The circumstances which gave rise to the application for judicial review were set out in my judgment. The application was dismissed. The Respondent to the application, the Insider Dealing Tribunal, had not appeared and had not been represented, and therefore no issue as to its costs arose. It was the costs of the other persons who appeared by counsel at the hearing which had to be decided. They were the Financial Secretary and Mr. Leung.

3. So far as the costs of the Financial Secretary were concerned, the judgment contain the following passage:

"In the normal course of events, costs would follow the event, but I am inclined to think that the unique circumstances of this case justify an exceptional order for costs. I do not wish to penalise the Financial Secretary, who, like the Applicants, was entirely blameless for Mr. Wu's misconduct, and who has successfully resisted this application. On the other hand, although the Applicants' challenge to the findings of the Tribunal has failed, the challenge has revealed conduct on the part of a Tribunal member for which the Applicants had justifiable grounds for concern. I simply do not think at present that it would be fair for the Applicants to be saddled with both [their] own costs and those of the Financial Secretary. Accordingly, the order nisi which I make is that there be no order as to the costs of .... the Financial Secretary."

That reasoning applies equally to the costs of Mr. Leung. For precisely the same reasons, it would not have been fair for the Applicants to be saddled with both their own costs and those of Mr. Leung.

4. However, in relation to the costs of Mr. Leung, there was another reason why I did not think that the Applicants should have to pay his costs. That reason was as follows:

"[Mr. Leung] was one of the six persons whose [share] dealings .... were investigated by the Tribunal. He was found not to have been guilty of insider dealing. However, he was concerned about what would happen if the Applicants' challenge succeeded, and the findings of the Tribunal against them had to be quashed. Would that result in the court quashing the findings in respect of him as well? He therefore appeared by counsel to argue that the quashing of the findings against the Applicants should not result in the quashing of the findings in respect of him - though in addition, his counsel, Mr. Daniel Marash S.C., adopted [the] arguments [of counsel for the Financial Secretary] as to why the Applicants' challenge should fail and added a few of his own.

The order nisi which I propose to make in Mr. Leung's case is that there be no order for his costs. It would have been open to his solicitors simply to write to the court stating Mr. Leung's concern, and asking the court for a separate hearing for that concern to be addressed, in the event of the court quashing the findings against the Applicants. Since I have not quashed the findings against the Applicants, no costs would have been incurred."

The grounds for varying the order nisi relating to Mr. Leung's costs

5. Many of the arguments relied upon by Mr. Marash in support of the current application focus on the fact that Mr. Leung was justified in attending the proceedings by counsel. Thus, when Stone J. granted the Applicants leave to apply for judicial review, he ordered that the proceedings be served on "all implicated persons involved in the Tribunal's inquiries". That included Mr. Leung. He was a person, to use the language of Ord. 53 r. 5(3), who was "directly affected" by the proceedings, and he was therefore a proper person to be heard on the hearing of the motion. However, the fact that a person is a proper person to be heard because he will be directly affected by the proceedings does not necessarily mean that he has to be awarded his costs against an unsuccessful applicant. It will all depend on the circumstances of the case - in particular, whether he has an interest which makes separate representation necessary, and whether that interest can only be properly safeguarded by separate representation at that stage in the proceedings.

(i) The principal issue. I do not think that Mr. Leung needed to be separately represented on the principal issue as to whether the findings of the Tribunal against the Applicants should be quashed. The Financial Secretary was represented by experienced leading and junior counsel, who could be expected to take all the legitimate points open to them to uphold the Tribunal's findings. It is true that Mr. Marash added a few points of his own, but as can be seen from the judgment itself none of Mr. Marash's additional points formed part of the court's reasoning for upholding the Tribunal's findings.

(ii) The secondary issue. I entirely understand why Mr. Leung needed to be separately represented on the secondary issue, namely, if the findings of the Tribunal against the Applicants were quashed, should that result in the Court quashing the findings in Mr. Leung's favour? That issue was of particular relevance to him. Since Stone J., on the application for leave, had himself raised the issue as to whether some but not all of the findings of the Tribunal could be quashed, it was apparent that that issue would have to be addressed. In that connection, it would have been argued on behalf of the Financial Secretary that if the Tribunal's findings against the Applicants had to be quashed on the ground of bias, the court would also have to quash the findings which the Tribunal made in favour of Mr. Leung. It is true that it would have been argued on behalf of the Applicants that the court would not have had to quash the findings which the Tribunal made in favour of Mr. Leung, but that would have been argued only to counter any reluctance on the part of the court to quash the Tribunal's findings against the Applicants on the basis that that would result in unfairness to Mr. Leung.

6. The critical question is whether Mr. Leung's legitimate and understandable wish to be separately represented to argue the secondary issue made it necessary for Mr. Leung to be represented at the hearing. On that question, Mr. Marash has reminded me that the secondary issue was indeed discussed at the hearing. Counsel for the Financial Secretary outlined the submissions he would be making on the issue because, unlike counsel for the Applicants, his outline submissions had not identified where he stood on the issue. Mr. Marash did not develop his submissions on the issue, but only because of a suggestion by the court (as a time-saving measure since the hearing was over-running) that further consideration of the secondary issue be deferred to a separate hearing, which would in the event be unnecessary if the court upheld the Tribunal's findings against the Applicants. Mr. Marash's point was that Mr. Leung needed to be represented at the hearing so long as the secondary issue was to be considered at the hearing. It is said to be unfair to deny Mr. Leung his costs when he had had no prior indication from the court that it may be appropriate for consideration of the secondary issue to be deferred until after the principal issue had been decided.

7. In my view, that argument does not meet the point made in the judgment. It goes without saying that Mr. Leung needed to be represented at the hearing if the secondary issue was going to be canvassed at the hearing. However, the secondary issue would only have had to be addressed if the Applicants succeeded in having the findings which the Tribunal made against the Applicants quashed. In the circumstances, Mr. Leung's solicitors could have avoided incurring the costs of representation at the hearing by requesting the court before the hearing to direct that the secondary issue be not addressed at the hearing, but that if the court quashed the Tribunal's findings against the Applicants, a further hearing be convened at which the secondary issue would be addressed. Mr. Marash frankly conceded that the possibility of making a request of that kind was not something which had occurred to Mr. Leung's advisers. Of course, those costs would only have been avoided if the court had acceded to such a request had it been made. I do not know what stance the Applicants or the Financial Secretary would have taken on that request. My strong inclination would have been to go along with such a request had it been made, whatever the stance of the Applicants and the Financial Secretary.

Conclusion

8. A number of other arguments were deployed by Mr. Marash in a letter to my clerk which contained an outline of his submissions. They have been elaborated upon today. Properly analysed, all but one come down to the same arguments which I have addressed. Mr. Marash's additional argument is that the court's decision on the secondary issue may have affected its view on the principal issue. I cannot go along with that argument. Mr. Marash did not rely on such an argument at the hearing, and if there had been anything in it, he would not have agreed so readily to the consideration of the secondary issue being deferred until after the principal issue had been decided. For these reasons, this application to vary the order nisi which I made relating to Mr. Leung's costs must be dismissed, and that order will now take effect according to its terms.

(After further submissions)

9. At first blush, there is no reason why the costs of today's application should not follow the event. In the normal course of events, therefore, I would have ordered Mr. Leung to pay the Applicants' costs of this application, to be taxed if not agreed. However, this application could have been disposed of without a hearing. Indeed, in correspondence with the parties, my clerk had made it clear on my instructions that I was content to decide the application on written submissions without a hearing if the parties were agreeable to that. Mr. Leung's solicitors had been content for me to do that. Indeed, it was they who had suggested it. It was the Applicants' solicitors who were not content with that course, and that is why a hearing has had to take place.

I remain of the view that written submissions would have been sufficient and that a hearing was unnecessary. If Mr. Leung had had to pay the Applicants' costs of the hearing, I would have ordered that the costs of engaging counsel to represent the Applicants at the hearing and the costs of the Applicants' solicitors attending the hearing be disallowed on taxation. However, that would not have met the justice of the case, because Mr. Leung would still have had to pay for representation by Mr. Marash at the hearing. Broad justice, I believe, would be met by my ordering that there be no order as to the costs of this application.