CHAN NOI HEUNG AND OTHERS v. THE CHIEF EXECUTIVE IN COUNCIL

CACV 197/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 197 OF 2007

(ON APPEAL FROM HCAL NO. 126 OF 2006)

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DECISION  ON  COSTS

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Hon Ma CJHC :

1.  The matter for determination is whether an unsuccessful applicant in judicial review proceedings should be ordered to pay costs where it is asserted that a public interest challenge is involved, that is, where there are proceedings that have been brought in the public interest, rather than proceedings merely furthering private interests.

2.  In a judgment handed down on the 8 May 2008, this court dismissed an appeal brought by the 3rd Applicant against the judgment of Hartmann J (handed down on the 16 May 2007) which had dismissed his application for judicial review.  Before Hartmann J, there were three applicants.  Only the 3rd Applicant appealed.  For present purposes, I shall continue to refer to him as the Applicant.

3.  Apart from dismissing the appeal, we also made a costs order nisi that the Applicant should pay the costs of the Respondent in the appeal, such costs to be taxed if not agreed.  By a letter dated 16 May 2008 (from his solicitors), the Applicant indicated his wish to vary this costs order.  Written submissions were subsequently provided by the parties in June.  Since then, the Applicant has applied for leave to appeal to the Court of Final Appeal and this was refused on 5 September 2008.  The only outstanding matter therefore in this litigation is the question of costs.

4.  The letter dated 16 May 2008 did not indicate the order for costs for which the Applicant contended, but in the written submissions (of counsel), this was clarified: the Applicant seeks an order that there be no order as to costs for both the appeal and the proceedings below.

5.  I dispose quickly of the question of the costs below.  As Mr. Alexander Stock (for the Respondent) has pointed out, Hartmann J made an order nisi as to costs that costs should be to the Respondent.  However, an application was made on 16 August 2007 by the Applicant to vary that order.  Hartmann J directed that there be a hearing of the application to vary but, as yet, this has not taken place.  In these rather odd circumstances, this court should not deal with the question of the costs of the proceedings below until Hartmann J has resolved the issue.

6.  I now move on to the question of costs in the appeal proper.  Here, the essence of the Applicant’s submissions is that as the appeal (indeed the whole of the judicial review proceedings) involved matters of public interest, and was necessary to resolve or clarify a number of important legal and factual issues, this was sufficient to enable the court not to make the usual order of costs following the event (see RHC Order 62 rule 3(2)).  In short, the present proceedings involved a public interest challenge which, in many previous cases, had resulted in the court making no order as to the costs.

7.  It was emphasized that the public interest did not lie in the stifling of such proceedings, and in the present case, it was all the more relevant that the Applicant is a well-known member of the Legislative Council who had often in the past made significant challenges in the public (as opposed to his private) interest.  The matter is thus put in the written submissions lodged on his behalf :-

“Chilling Effect and Disparity in Resources

(35)     The Applicant is a person with limited resources.  He is residing in a public housing estate in Kai Yip Estate ….  He is a member of a political society “April Fifth Action” and his funding depends on donations and his limited income as a legislative councillor.  If he is asked to pay for the legal costs of the CEIC, he will be made bankrupt and will not be able to properly perform his public duties as a legislative councillor.”

It is said that if the Applicant had to pay the costs of the appeal, not only would this be against the public interest, he may be deprived of the right of access to justice (see here Article 35 of the Basic Law).

8.  The correct approach as to costs in public law litigation — and this includes of course cases brought in the public interest (a public interest challenge) — has been discussed in a number of cases.  It is not necessary in the present case to embark on an extensive examination of the applicable legal principles.  Among the cases that have considered this facet of costs are the decisions of Lam J in Chu Hoi Dick v Secretary for Home Affairs (No. 2) [2007] 4 HKC 428 and of the High Court Australia in Oshlack v Richmond River Council (1998) 193 CLR 72.  Important statements of principle are contained in these two judgments going to the question of costs in public law litigation and as to when it may be appropriate to depart from the usual order of costs following the event.

9.  In my judgment, it is clear from the cases (not to mention as a matter of plain commonsense) that, however important the subject matter of the relevant litigation or however important any particular legal point may be, it is highly relevant for a court (when considering the incidence of costs) to evaluate the merits of the failed challenge before it.  In other words, the court has to ask itself: how meritorious were the issues raised before it?  If the issues that were raised by the unsuccessful applicant were, upon analysis, really quite hopeless, then it is difficult to conceive of a court making any order other than costs following the event.

10.  Not surprisingly, this is borne out by the cases.  In Chu Hoi Dick, notwithstanding the subject matter of the application for judicial review there being a matter of interest to the public (the designation of Queen’s Pier as a monument under the Antiquities and Monuments Ordinance (Cap. 53)), the usual order for costs was made.  In paragraph (21) of the Judgment , Lam J (referring to Oshlack) mentioned the need to have regard to the merits of the challenge.  He then continued :-

“(23)     In R (Coroner House Research) v Secretary of State for Trade and Industry [2005] 4 All ER 1, the English Court of Appeal gave guidance on the making of pre-emptive costs orders to protect an applicant from exposure of costs in public law cases.  Merits is one of the criteria and the test set by Lord Phillips MR is that the applicant’s case has to have a real prospect of success, viz the case is properly arguable (see para 73).  It is a higher threshold than the grant of leave for judicial review under Ho Ming Sai.  I think this is the minimum that an applicant must satisfy before he can contend that the canvassing of his arguments in court is in furtherance of public interest.  It cannot be in the public interest of the community as a whole to require the use of public fund to pay for the costs of the legal proceedings for resolution of an argument which has no real prospect of success.  In fact it would be against public interest to deploy judicial and public resources in such manner.

(24)     In Oshlack at para 68, McHugh J considered the usual costs order could ‘instill in a party contemplating commencing … litigation a sober realization of the potential financial expense involved’.  Mr Lee submitted that potential liability for costs could have a chilling effect on future applicants pursuing public interest litigation.  I accept that liability for costs can be an inhibitive factor.  However, it would be wrong and disproportionate to over-emphasize that factor such that public fund has to be deployed to underwrite litigations that only have little prospect of success.  It is equally wrong to dictate that the public purse must pay for the court proceedings when the proper venue for the ventilation of the underlying issues should be elsewhere.”

11.  I respectively agree with these observations.  I wish, however, to expand on one facet, that is, the argument (often deployed) that it must be relevant for the court to take into account the fact that leave to commence judicial review proceedings had been granted to the unsuccessful applicant.  Put simply, the argument runs along the following lines: why should an unsuccessful applicant be ordered to pay costs where a public interest challenge is made, particularly when leave to commence review proceedings has been given at an earlier stage?

12.  In my judgment, the position is this :-

(1)  The starting point is of course the general rule that even in public law litigation, costs should follow the event.  This reflects the notion that a successful party should be compensated for the costs incurred in successfully pursuing or defending a claim.  This is of equal application where public funds are involved (as in the present case).

(2)  Where a public interest challenge is made, this can be a powerful factor in displacing the general rule.

(3)  However, in order for the public interest litigation factor to bite, the challenge must be sufficiently meritorious.  As to what is meant by this, I would adopt the test in the passage referred to above in Chu Hoi Dick (which in turn referred to the English Court of Appeal Case of R (Coroner House Research) v. Secretary of State for Trade and Industry), namely, that the Applicant’s case must have had a real prospect of success.  Only then would it be properly arguable.  Clearly, a case that has no real prospects of success or is in reality quite hopeless, will be insufficient.  As Lam J stressed in Chu Hoi Dick, this is the minimum an unsuccessful applicant must satisfy before the usual order for costs is departed from.  It is unnecessary for me in this judgement to deal with any other factors that may be relevant.

(4)  The fact that leave has been granted to bring judicial review proceedings is insufficient to prevent the usual order of costs being made.  It is no real answer for an unsuccessful applicant to pray in aid of this fact.  When granting leave, the court is doing no more than looking at the merits at the most preliminary of stages in the proceedings.  By contrast, in determining the question of costs of an unsuccessful application, the court will obviously be examining the matter at the final stage, after all the arguments have been fully developed, considered and determined.

(5)  The threshold test in the granting of leave is now definitively stated in the decision of the Court of Final Appeal in Po Fun Chan v Winnie Chung [2008] 1 HKLRD 319: the judicial review challenge must be reasonably arguable, meaning that it must enjoy a realistic prospect of success (see paragraph 15).  This test appears to be the same as the test referred to earlier in sub-paragraph (3) above (the case must have been properly arguable, having a real prospect of success).  Indeed it is, but as I have emphasized, the determination by the court of, on the one hand, whether or not leave to commence judicial review proceedings should be granted and, on the other, where the incidence of costs should lie arises at two quite different stages.

(6)  Lastly, I ought to in this context just make reference to Practice Direction SL3 (which applies to all proceedings in the Constitutional and Administrative Law List).  Paragraph 1.8 of that Practice Direction, headed “Review of merits”, states :-

“Counsel and solicitors instructed by the applicant should give further careful consideration to the merits of the application once they have received the respondent’s evidence, even though leave to apply for judicial review has been obtained.  CALL—1 reminds the applicant’s advisors of this obligation.”

In my view, this reinforces the point that the granting of leave cannot be taken as a weighty factor at all in determining whether or not at the conclusion of the relevant proceedings, costs should follow the event.

13.  With these principles in mind, I now consider the question of costs in the present appeal.

14.  In my judgment, the Applicant ought to bear the costs of the unsuccessful appeal.

15.  For present purposes, I accept that the Applicant brought proceedings without any private gain in mind and that (to quote what was asserted in the written submissions of Mr Philip Dykes SC) he did so “out of his concern about the very real — and present — plight of cleaners and security guards, and protect the dignity of the labourer”.  I also accept that the whole issue of whether minimum wages should be imposed in Hong Kong is a matter of public interest.

16.  Notwithstanding this, the one factor that leads me to the conclusion that the Applicant ought to bear the costs of the appeal is that the appeal simply did not have the requisite (or indeed any) merits.

17.  Our judgment dated 8 May 2008 identified the two real issues in the appeal, namely :-

(1)  Was the Respondent entitled to refuse to apply under any circumstances the provisions of the Trade Boards Ordinance, Cap.63, in another words, effectively to renounce its existence?

(2)  If not, did the evidence show that this was in fact the view taken by the Respondent?

18.  On the first issue, it was, with respect, never contended by the Respondent that he was entitled to renounce the existence of the Trade Boards Ordinance.  No appeal, therefore, needed to be brought for the purpose of obtaining a declaration to this effect.

19.  As for the second issue, the facts relied on by the Applicant fell very far short of supporting the argument made.  Our earlier judgment stated (at paragraph 27) that the “evidence really goes nowhere near the requisite threshold to found a case along the lines run by Applicant”.

20.  I recognize that on 5 December 2006, the Applicant did obtain leave from Hartmann J to commence judicial review proceedings.  However, this fact, for the reasons already gone into, is insufficient to disturb what otherwise is the appropriate order for costs.  I also note that at the time leave was granted, the court applied the previous (now inapplicable) test of potential arguability (see Ho Ming Sai v Director of Immigration [1994] 1 HKLR 21).  That test, I would just observe, underlines even more just how preliminary the consideration is by the court of the merits at the leave stage.

21.  Finally, in respect of the submission (referred to paragraph 7 above) that the Applicant is a person of limited means and that if an order for costs were made against him, this would bankrupt him and prevent him from properly performing his public duties, assuming all this to be true (as to which in fact there is really very little evidence), I would only say this.  These points may be relevant in determining the question of costs where a meritorious public interest challenge is made.  They carry, in my view, little or no weight when there are insufficient merits.  Where there are simply insufficient merits, there is no question of the right of access to justice being in any way undermined either.

22.  For the above reasons, I would dismiss the application to vary the costs order nisi.  Accordingly, I would make the order that the Applicant do pay the costs of the Respondent in this appeal, such costs to be taxed not agreed, absolute.

Hon Tang VP :

23.  I agree.  I say nothing about the costs before Hartmann JA.  We are concerned with the costs of the appeal.  The appeal was wholly unmeritorious and should not have been pursued.

Hon Lam J :

24.  I agree and have nothing to add.