MCGETTIGAN, BRIAN KEVIN AND ANOTHER v. MUNICIPAL SERVICES APPEAL BOARD (“MSAB”)

HCAL 168/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 168 OF 2013

___________________

________________________

________________________

Introduction

1.  This is my decision on the question of costs upon the discontinuance of the application for judicial review by the applicants after leave had been granted to them.

Background

2.  On 5 December 2013, I granted the 1^st and 2^nd applicants leave to apply for judicial review of the decision of the Municipal Services Appeals Board (MSAB) dated 7 November 2013, refusing to renew the liquor licence in relation to the premises located at the corner of Hollywood Road and Shelley Street, Central, Hong Kong, where the applicants operated a restaurant and bar under the trade name of “Coast”. The renewal of the liquor licence had been refused by the Liquor Licensing Board (LLB) on 16 July 2013.  I also ordered a stay on the MSAB’s decision to refuse a liquor licence which brought into effect a previous decision of the MSAB giving the applicants an interim licence pending final resolution of the appeal.  This allowed the applicants to continue to operate as before and sell liquor at the premises subject to the licence conditions previously imposed until the substantive hearing of the judicial review.

3.  Notice of the leave application was given to the MSAB and the LLB as the putative respondent and putative interested party respectively, and they were invited to attend the hearing.  The MSAB advised that it would not participate in the proceedings, whilst the LLB attended and opposed the application.  At the conclusion of the hearing on 3 December 2013, and upon receipt of written submissions on 4 December 2013, I granted leave and handed down my reasons on 5 December 2013.  An expedited hearing was ordered, and the judicial review was fixed for 23 January 2014.  On 15 January 2014, the applicants made application to discontinue the proceedings which I granted.

4.  The LLB applied for costs, and in response the applicants opposed the LLB’s application and asked for their costs. 

The applicant’s submissions

5.  The applicants argue that the discontinuance of the proceedings was not due to a re-consideration of the merits of their claim but to the decision of the LLB on 16 July 2013, and as confirmed by the MSAB on 7 November 2013, not to renew the liquor licence which had such a “catastrophic effect” on the business that it has now shut down and ceased to exist.

6.  It is submitted that the issues that would have been argued at the substantive judicial review hearing were substantively argued at the leave application and it was more probable than not that the applicants would have succeeded in their claim.

7.  They ask the court to exercise its discretion either in favour of the applicants or to make no order as to costs.

The LLB’s submissions

8.  The argument for costs on behalf of the LLB is divided into two parts.  The first part concerns the stage when the LLB participated in the leave application as the putative interested party at my direction.  It is argued that the LLB had to attend to assist the court and it was not a situation where the LLB chose to intervene in a hearing it was not supposed to attend.

9.  The second part concerns the stage after leave was granted and it became a formal party to the proceedings with the right to participate in the substantive hearing.  The LLB makes the point it was the only party contesting the applicants’ case but as the applicants have abandoned their claim, it should be awarded its costs.

10.  As to the second part, the LLB argues that the applicants by abandoning their cause of action should pay the LLB’s costs. They submit that costs should follow the event as provided for under Order 62, rule 3 of the Rules of the High Court.  They further submit that there are no exceptional circumstances justifying departure from the general principle.

11.  As to the first part, as I understand the argument on behalf of the LLB, because I ordered that costs of the leave application be “costs in the cause”, these costs should be subsumed into the costs of the entire proceedings.  It is further argued that in view of the dismissal of the application, costs should follow this event.  In the alternative, it is argued that should I revisit the costs order, implying that it is not open to me to do so, costs should be awarded to the LLB or at least there should be no order as to costs.  To my mind, it is not a question of revisiting the issue but a question of addressing the issue of costs at the conclusion of the case taking into account all the relevant facts and circumstances to ultimately do justice between the parties.  The LLB argues that the starting point on the costs of a contested leave application to commence judicial review is that there should be no order as to costs but the court will order costs against an applicant if there are “good reasons” to do so.  It is put forward on behalf of the LLB that there are three “good reasons” why costs should be awarded against the applicants for the first part of the proceedings. First, the application was initiated out of a private commercial interest rather than a wider public interest. Secondly, as the applicants sought interim relief for an interim liquor licence, the LLB had to participate in the leave hearing even though it was unsuccessful.  Thirdly, the court made a mandatory direction that the LLB attend the hearing.[1]

12.  Costs in the cause is not an order which finally disposes of those costs.  Costs in the cause means that the costs of the interlocutory proceedings are subject to the final outcome of the case and to the final discretion of the court.[2] In this case, there was no substantive hearing of the judicial review.  It was abandoned by the applicants.  In such a case, the costs would normally be awarded against the abandonee but there may be circumstances that warrant a departure from what would otherwise be the appropriate costs order. 

Applicable principles

13.  In my determination on the issue of costs, I have been assisted by the judgment of Lord Neuberger (as he then was) in M v Croydon London Borough Council [2012] 1 WLR 2607.  His Lordship in his judgment was addressing the broader issue as to whether a different approach should be taken on the question of costs in judicial review proceedings where the claim was addressing an issue of public interest or against a public body.  His Lordship specifically considered judicial review proceedings where the parties had reached a settlement and there was no order as to costs, even when one party had conceded the whole, or substantially the whole, of the other side’s case.  In His Lordship’s consideration of the issue, he discussed at length the general principles that apply to awards of costs in general civil litigation and concluded they applied equally to judicial review cases.[3]

14.  His Lordship held that a successful party who obtained all the relief he sought, whether by consent or after a contested hearing, was entitled to be paid his costs by the unsuccessful party unless there was good reason to the contrary. He said this applied across the board of the civil justice system and it made no difference that a defendant was a public body.  He also said that where a claimant obtained only some of the relief he sought, the position on costs would depend on which party was the more successful, although there could be an argument as to the importance of any issue with respect to costs on which he had failed.

15.  His Lordship addressed the relevant principles on costs, both after trial and after settlement before trial, in ordinary civil litigation.  I do not propose to address in detail the principles canvassed by His Lordship.  They are well known and there is no need to repeat them in this decision.  I refer to his discussion in relation to a claim that has been settled.  He identified three different types of cases: “(i) a case where a claimant has been wholly successful whether following a contested hearing or pursuant to a settlement, and (ii) a case where he has only succeeded in part following a contested hearing or pursuant to a settlement, and (iii) a case where there has been some compromise which does not actually reflect the claimant’s claims.”[4]  He stressed in his reasons that in any case the allocation of costs will depend on the specific facts, but some points could be made about these different types of cases. 

16.  I want to focus on case (iii) where he said that in such a case a court is often unable to gauge whether there is a successful party and this may result in no order for costs but he went on to say: “However, in some such cases it may well be sensible to look at the underlying claims and inquire whether it was tolerably clear who would have won if the matter had not settled. If it is, then that may well strongly support the contention that the party who would have won did better out of the settlement, and therefore did win.”

17.  I realize Lord Neuberger is dealing with a situation where the parties have settled the claim.  It seems to me that the issue remains the same even when the parties have not settled the claim, in circumstances that for some reason or another, the case has come to an end without resolution.  It may be, as in the present case that a party has given up even though they have a good arguable claim. Each situation will depend on its own particular set of circumstances. It may be that the fact that a party has abandoned his claim is in itself reason to award costs against him. But there may be circumstances that warrant further consideration of the issue.  In this case, I am in a position to look at the underlying claim, and inquire or assess, whether it was tolerably clear who would have won.

Discussion

18.  I granted leave after a full day hearing which was strongly contested by the LLB.  It has given me an opportunity to examine and assess the merits of the applicants’ claim.  The first ground was that the MSAB took account of past infractions by the licensee with little or no consideration of the operation of the premises by the licensee during the 3 month renewal period which was granted to closely monitor his performance and the operation of the premises.  The second ground was that the MSAB took into account irrelevant considerations by placing emphasis on unsubstantiated complaints.  Under this ground, it was argued that the way the LLB considered and assessed the complaints in relation to the premises was inconsistent and unfair.  It was also argued that the MSAB relied on the views of the LLB and dealt with the complaints in the same way.  I set out more detailed comments about the claim in my decision of 5 December 2013.  On what I had before me, I considered that the applicants had a strong case.

19.  I should set out some relevant background which is necessary to understand the applicants’ claim and why in my view they had a winning case.  The premises of Coast had been the subject of complaints about noise.  It appears this has been an issue not only in relation to these premises but in relation to the locality generally which has become a restaurant and bar district.  The premises were located in a commercial building at the corner of Hollywood Road and Shelly Street.  Running along Shelly Street is the Central/Mid Levels escalator.  There is considerable vehicular and pedestrian traffic in this area during the day and night.

20.  It should be noted that the licence had two conditions imposed on it: that all doors and windows be kept closed after 11 pm; and that no liquor be sold after 2 am.  It should also be noted that no issue was taken as to the suitability of the premises for the purpose of selling liquor.

21.  It may be argued by the LLB that each renewal of licence permitted the LLB to impose whatever conditions it thinks fit.  There are two points I make at this stage.  The renewal period was being progressively shortened, maybe for what was considered to be a good reason, but it did undermine the appeal process that the applicants had a right to exercise.  The LLB reinstated a condition that on appeal had been removed, and by so doing had disregarded the decision of the MSAB.  This is an issue that needs to be addressed.

22.  The applicants have been back and forth before the LLB and MSAB in relation to the liquor licence conditions and, I must say, in circumstances that, in my view, have acted unfairly and unreasonably on the applicants.

23.  On 7 May 2013, the LLB had granted the applicants a 3 month renewal of licence (until 9 August 2013) and reinstated a condition prohibiting the playing of music after 11 pm. This was done even though the condition had been removed on appeal to the MSAB on 8 March 2013 with reasons for the decision handed down on 20 May 2013.  Another condition which had been previously imposed on the applicants about the consumption of liquor on the premises had been removed by the MSAB on appeal on 21 August 2012, yet reinstated on 6 November 2012 when the licence was renewed for 6 months. The renewal of a liquor licence was normally for a period of 12 months. It appears the progressive reduction of the licence period from 12 months to 6 months to 3 months was due to the issue of noise.

24.  Coast is now closed down.  It may be due to bad management or poor sales, and there may be matters that reflect poorly on the licensee or the way the premises were operated, but I am concerned about how in the exercise of their powers the relevant authorities have treated the applicants.  If they have done so in an unfair and unreasonable manner, the courts must address the issue in resolving the claim or the question of costs.  

25.  The court within its discretion can make a different order when it would be unjust to apply the general rule.[5]  In making an award for costs, a court will, within the terms of the relevant statutory provisions and rules of court, consider the justice of the situation and examine all the factors and circumstances.[6] Any question relating to costs, is both highly fact-sensitive and very much a matter of discretion of the court.  Each case will turn on its own facts so that a case might have an unusual feature or circumstance which could justify departing the standard approach.  The decision of how to allocate liability for costs normally arises following a contested hearing or pursuant to a settlement.  In this case, the claim has been abandoned without resolution.  But before the judicial review claim could be formally made, leave of the court was required.  It gave the court an opportunity to examine, admittedly for the purposes of leave, the unresolved substantive issues.  I granted leave to the applicants on the basis they had a reasonably arguable claim which enjoyed realistic prospects of success.  I considered that the applicants had a compelling case to judicially review the decision of the MSAB on 7 November 2013.  I also granted interim relief by staying the MSAB’s decision for the applicants to have an interim liquor licence in the meantime, and ordering an expedited hearing of the substantive hearing, in order to protect the position of the applicants who had or may have been unreasonably or unfairly treated.  

26.  The LLB attended the leave hearing and strongly opposed the application.  On behalf of the LLB, lengthy written submissions were filed in opposition to the application.  The hearing took a full day.  Whilst I directed that the LLB should attend the leave hearing, it chose to strongly oppose the application in the face of what I concluded to be a compelling case.

27.  It has been said that there are situations when there is no real winner or no real loser and the standoff results in no order as to costs.  But there may be a situation like the present, when someone has given up when they had a good arguable claim, even one that was likely to win. The question is what does justice demand in such a situation?

Conclusion

28.  I have decided to I exercise my discretion in favour of the applicants on the basis that it was tolerably clear to me that the applicants would have won their claim.  Accordingly, I order that the LLB pay the costs of the applicants, to be taxed if not agreed. 

[1] See Sky Wide Development [2011] 5 HKLRD 202; Re Leung Kwok Hung and Ho Chun Yan Albert HCAL 83&84/2012, unreported, 28 September 2012.

[2] See Hong Kong Civil Procedure 2014, Vol 1, para 62/1/3.

[3] At 2621F-2623B.

[4] At 2622B-D.

[5] See Commissioner of Inland Revenue v HIT Finance Ltd, FACV Nos 8 and 16 of 2007, 26 June 2008 at paragraphs 6 and 7.

[6] Section 52A of the High Court Ordinance, Cap 4 provides that subject to the rules of court, the question of costs is a matter within the discretion of the court which has full power to determine by whom and to what extent the costs are to be paid. The court can award costs against a person, who is not a party to the proceedings where it is in the interests of justice to do so and can also disallow or order a legal representative of a party to meet the whole or part of any wasted costs. See RHC O62 r5. See also Re Eglindata (No 2) [1992] 1 WLR 1207 at 1214A-C.