Kwok Cheuk Kin and Another v. Director of Lands and Others

CACV 234/2019
CACV 317/2019
CACV 319/2019
(heard together)

[2021] HKCA 915

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NOS 234, 317 & 319 OF 2019

(ON APPEAL FROM HCAL NO 260 OF 2015)

_______________

_______________

(heard together)

______________________________

DECISION ON COSTS

______________________________

The Court:

A.   INTRODUCTION

1.In our judgment handed down on 13 January 2021 (“the CA Judgment”), we dismissed the applicants’ appeal and allowed the cross‑appeals of the respondents and the interested party against the judgment (“the Judgment”) of Chow J (“the Judge”) in HCAL 260/2015 dated 8 April 2019.

2.At the end of the CA Judgment, we indicated that we would determine costs on paper and parties were directed to lodge their submissions on costs in relation to the appeals and the hearing below.  Having read the parties’ submissions, we held a short hearing on 25 May 2021 to hear further submissions only on questions relating to costs between the applicants and the interested party.

3.We have since considered all their submissions, both written and oral, and now give our decision on costs.

4.This decision should be read together with the CA Judgment.  We will adopt the abbreviations used in the CA Judgment unless the context otherwise requires.

5.In the CA Judgment:

(1)   We dismissed the applicants’ appeal, and upheld the Judge’s decision that a small house grant by way of a free building licence is lawful and constitutional by virtue of BL40: CA Judgment, at [94] ‑ [95], [116].

(2)   We allowed the cross-appeals of the respondents and the interested party on the Construction Issue, and overturned the Judge’s decision that a small house grant by way of a private treaty grant or a land exchange is unconstitutional.  In gist, we considered these two aspects of the Small House Policy to fall within the meaning of “lawful traditional rights and interests of [NTIIs]” under BL40, and that they were therefore constitutionally protected: CA Judgment, at [94] ‑ [95], [116].

(3)    In addition, we found in favour of the respondents and the interested party on the Relief Issue.  More specifically, we held (a) that the applicants did not have sufficient standing to bring the judicial review (CA Judgment, at [130] ‑ [133], [135]), and (b) that there was inordinate delay justifying a refusal of relief irrespective of the merits of the applicants’ complaint (CA Judgment, at [134] ‑ [135]).

6.In the parties’ written submissions on costs:

(1)   The respondents ask for costs of the appeal and below to be paid by the applicants, to be taxed if not agreed, and seek certificate for three counsel; and

(2)   The interested party asks for a separate set of costs of the appeals and below to be paid by the applicants, to be taxed if not agreed, and also seek certificate for three counsel.

7.The applicants in response ask for:

(1)   No order as to costs both in the appeal and below, as they say their judicial review application under HCAL 260/2015 in challenging the Small House Policy comes within the public interest litigation (“PIL”) exception.  At the hearing, the applicants confirmed that they sought to invoke the PIL exception against both the respondents and the interested party.

(2)   Alternatively, in the event of a costs order, given that only the 2^nd applicant is legally aided, equal apportionment of costs between the 1^st and 2^nd applicants in the different actions.

8.We now turn to consider the parties’ submissions.

B.      THE POSITION AS BETWEEN THE APPLICANTS AND THE RESPONDENTS

9.So far as the respondents’ costs are concerned, the key issue that calls for determination is whether the PIL exception applies in the present premises.  If it does, no costs order would be made as between the applicants and the respondents.  In that event, the issue of how the respondents’ costs should be apportioned between the 1^st and the 2^nd applicants does not arise.  It is thus logical to consider the applicability of the PIL exception first.

10.There is no disagreement amongst the parties as to the guiding criteria of the PIL exception, which are set out by Lam J (as Lam VP then was) in Chu Hoi Dick v Secretary for Home Affairs (No 2) [2007] 4 HKC 428 at [29].[1]  These criteria may be summarised as follows:

(1)   A litigant has properly brought proceedings to seek guidance from the court on a point of general public importance so that the litigation is for the benefit of the community as a whole to warrant the costs of the litigation to be borne by the public purse as costs incidental to good public administration;

(2)   The judicial decision has contributed to the proper understanding of the law in question; and

(3)   The litigant has no private gain in the outcome.

11.As the respondents correctly pointed out, the fulfilment of these criteria does not mandate the court to make no order as to costs.  The making of costs orders involves an exercise of discretion, and the court must have regard to other relevant factors (such as the conduct of the litigants in the proceedings) in coming to a final decision of what is just in the circumstances: Chu Hoi Dick at [30].

12.For the following reasons, we agree with the applicants that they could properly rely on the PIL exception and that no order as to costs should be made between them and the respondents.

13.First, we accept that the principal issues arising from the judicial review relate to points of general public importance, the determination of which is for the benefit of the community:

(1)   The Small House Policy involves important decisions of planning and scarce land allocation in Hong Kong: CA Judgment, at [132].  We accept the applicants’ submission that, because of this, the judicial review affects the interests of the entire population of Hong Kong.

(2)   Further, all the parties accept that, contrary to BL25, BL39 and BOR22, the Small House Policy is inherently discriminatory on the grounds of social origin or birth or sex: CA Judgment, at [2].  There can be no question that it is a matter of general public importance as to whether, despite its conflict with BL25, BL39 and BOR22, the Small House Policy is nevertheless lawful and constitutional by virtue of BL40.

(3)   Indeed, in their written submissions, the respondents themselves describe the issues arising from the judicial review as important and complex.  It is also pertinent to note that the respondents make no suggestion that the judicial review does not relate to matters of general public importance.

(4)   In these premises, we have no doubt that the judicial review relates to a matter of general public importance.

14.Secondly, we equally have no doubt that the Judgment and the CA Judgment both contributed to the proper understanding of the law in this jurisdiction.  Specifically:

(1)   The judicial review was the first legal challenge against the lawfulness of the Small House Policy: CA Judgment, at [86].  Accordingly, it raised novel issues that had never been determined by a court in this jurisdiction.  In their written submissions, the respondents themselves fairly described the issues raised in the judicial review as novel.  Plainly, judicial determination of novel legal issues (such as has been done herein) contributes to the proper understanding of our law.

(2)   In connection to this, the Judgment and the CA Judgment are the first set of judicial determinations where the analysis of the constitutionality of the Small House Policy formed the ratio decidendi of a judgment.  The respondents accepted that previous decisions on this issue merely contained obiter remarks: see Footnote 2 of the CA Judgment.  It is obvious that the reasoning in the Judgment and the CA Judgment would provide authoritative clarification of the legal status of the Small House Policy.

(3)   It is of course noted that the scope of BL40 has been previously considered by the Court of First Instance on two occasions in Tse Kwang San v Pat Heung Rural Committee & Anor [1999] 3 HKLRD 267 and Koon Ping Leung v Director of Lands [2012] 2 HKC 329.  However, as we explained in [90] of the CA Judgment, most of the important historical and drafting materials pertaining to the construction of BL40 were not presented before the courts in those two cases.  By contrast, we now had the benefit of not only submissions from leading counsel of all sides, but also a comprehensive set of materials in aid of the construction of BL40.  These have enabled us to have a more comprehensive and in depth analysis in arriving at the proper construction of BL40.

(4)   In the premises, the second criterion in Chu Hoi Dick is clearly satisfied.

15.Thirdly, there can be no suggestion that the applicants have private gain in the outcome of the judicial review application. Indeed, our determination in the CA Judgment (at [134]) that the applicants had insufficient standing to commence the judicial review precludes this suggestion.

16.The respondents however have contended that the applicants’ judicial review application does not satisfy the first criterion for being a PIL.  The reason is that, this Court having found (a) that the applicants did not have sufficient standing to initiate the judicial review and (b) that there was inordinate delay, the judicial review application was not “properly brought” (as required by the first criterion in Chu Hoi Dick).

17.This necessarily requires us to consider what is the meaning of “properly brought” as formulated in Chu Hoi Dick.  In Chu Hoi Dick (at [21]), Lam J (as the learned Vice-President then was) interpreted “properly brought” by reference to [139] of Kirby J’s judgment in Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11.  His Lordship then went on to hold that a litigation would not be “properly brought” if, in light of the proper role of the court, the underlying complaint should have been ventilated elsewhere (at [19] and [24]), or if the complaint itself does not have a real prospect of success (at [23] ‑ [24]).  See also: Designing Hong Kong Ltd [2017] 2 HKLRD 60 (CA) at [32] - [33].  Hence, it is clear that the phrase “properly brought” was not intended in Chu Hoi Dick to refer or relate to the position where the applicant lacks the necessary locus to bring the judicial review or whether he is guilty of delay.  In this connection, the observations on the second criterion in the Corner House guidelines at Designing Hong Kong Ltd, supra, at [69] - [71] are also relevant.

18.However, as this court in Designing Hong Kong has also emphasized at [34], given that costs is ultimately a matter of discretion, even if all these criteria of PIL are satisfied, the court must also have regard to other relevant factors such as the conduct of the litigants in the proceedings in coming to a final decision on what is just in the circumstances. See: Chu Hoi Dick at [30].

19.Hence, as observed in Chu Hoi Dick at [24] and [25], notwithstanding the potential “chilling effect” of an adverse costs order, it would be wrong and disproportionate to over-emphasize this factor to require the ultimate winning side to underwrite the litigations that only have little prospect of success.  In particular, it is noted that there is still a need to have a discipline on the part of litigants in PIL and the court in considering costs should have regard to that too, including how meritorious the issues were raised before the court.  See also: Chan Noi Heung v Chief Executive in Council [2009] 3 HKLRD 362 (CA) at [9] and [12] per Ma CJHC (as he then was).

20.In other words, there will be cases where, even if the relevant judicial review proceedings may be regarded as a PIL in satisfying all the three criteria, the applicant would still be visited by costs order in the court’s exercise of wide discretion if having regard to all the circumstances of that case, it would still be fair and just to order costs against the unsuccessful applicant.  For example, as observed by Kirby J at in [139] of Oshlack and noted at [15] of Chu Hoi Dick, where the litigant has “wasted the court’s time”, a costs order should generally be made against it even if the application falls within a PIL.

21.That is of course not the only occasion where the court would decline to make a no‑costs order based on the PIL ground.  It is neither appropriate nor possible for us to list out exhaustively all the occasions, as each case must depend on its own facts.  In our view, they would include cases such as whether the subject issues raised are plainly unmeritorious[2], or where it is so plain and obvious that the litigant has no discernible locus or is guilty of inordinate delay in commencing the application.

22.Bearing these in mind, we are not satisfied that, on the special facts of this case, it can be said that, despite the present judicial review being a PIL, it is just and fair to order the applicants to pay the respondents’ costs by reason of their lack of standing and/or delay:

(1)   Although we have decided against the applicants on the Relief Issue, the answer is not obvious.  As noted, not only is that leave to apply for judicial review was granted to the applicants, the Judge indeed ruled in favour of the applicants on the Relief Issue after reviewing all the evidence and hearing full submissions on merits: the Judgment, at [137] ‑ [144].  Indeed, we have also granted the applicants leave to appeal to the CFA on the Relief Issue: [2021] HKCA 590, [4] - [5].

(2)   In the premises, we consider that, at the time of commencement of the judicial review herein, it was not plain or obvious that the Relief Issue should be resolved in favour of the applicants.

(3)   When this is further viewed against the obvious general importance and complexity of the issues raised in this judicial review, notwithstanding our conclusion in the CA Judgment on the Relief Issue, we think it is still just and fair to depart from the usual costs order and make no order as to costs as between the applicants and the respondents.

23.For these reasons, there should be no order as between the applicants and the respondents.

24.However, as we have emphasized above, in an appropriate case where it can be shown that the litigant plainly has no proper locus to bring the application in question or where he is plainly guilty of inordinate delay, and considered in the context of other relevant factors in the case, he may not be able to avail himself of the protection of PIL exception in costs.

C.     THE POSITION AS BETWEEN THE APPLICANTS AND THE INTERESTED PARTY

25.In relation to the interested party, we would first consider the issue of whether it is entitled to its own set of costs.  If the answer is “no”, issues concerning the PIL exception simply would not arise.

26.It is well-established that, in judicial review proceedings, an unsuccessful applicant will normally not be required to pay more than one set of costs where there are two or more respondents appearing.  This general rule logically extends to proceedings where (as here) there is a respondent and an interested party.

27.Nevertheless, the court has a flexible discretion to order an unsuccessful applicant to pay more than one set of costs.  The touchstone is whether there are good reasons to depart from the general rule, and a key question is whether the separately represented party raises any separate or distinct material issue for adjudication (and, if so, to what extent).

28.For the following reasons, we accept the interested party’s submissions that subject to PIL considerations (as discussed below) it is entitled to a separate set of costs:

(1)   First, the interested party has a significant interest in these proceedings justifying their participation herein.  The interested party is representative of the informed and responsible opinion in the New Territories: Heung Yee Kuk Ordinance (Cap 1097), Preamble (b).  The present proceedings, placing the constitutionality of the Small House Policy under judicial scrutiny, have an immense and direct impact on the interests of the interested party’s constituents.  This justifies their participation in the present proceedings.

(2)   Secondly, the interest of the interested party could not be represented by the respondents’ legal team.  The interested party is representative of the informed and responsible opinion in the New Territories, whereas the respondents are representative of the interest of the entire Hong Kong population.  Thus, their positions may not be aligned (see Judgment, at [11]), and the interested party cannot be represented by the respondents’ team of lawyers for the proper presentation of its interest.

(3)   Thirdly, the respective positions of the interested party and the respondents on the Construction Issue are different.  The primary position of the interested party is that the construction of Article 40 does not require a historical tracing exercise, whereas that of the respondents is that it does.  Thus, it cannot be said that the interested party’s position can be properly represented by the respondents’ legal team.

(4)   At the hearing, Mr Lee SC for the applicants submitted that, because, on the Construction Issue, the respondents’ fall-back position aligned with the interested party’s primary position, the interested party should have been content with legal representation through the respondents’ lawyers.  We respectfully disagree.  It is unrealistic to suggest that the primary line of arguments advanced by the interested party would be pursued with the same degree of rigour and fervour by the respondents, who simply considered that to be a fall‑back.

29.The next question which then arises is whether the PIL exception applies as against the interested party.  This raises a novel point in Hong Kong about the scope of the PIL exception.  In particular, does the exception apply to a government body only; or does it extend to a non‑government body such as the interested party?

C1.    Rationale of the PIL Exception

30.In this jurisdiction, the usual costs order is that costs should follow the event: Order 62, rule 3(2) of the Rules of the High Court (Cap 4A) (“the RHC”).  It applies to both private and public law proceedings, and reflects a basic principle of justice, namely that the successful party should be compensated by the unsuccessful party for the expense to which it has been put by the litigation.

31.Against this is the principle that the court has a discretion to depart from the usual costs order where the circumstances so require to achieve just and fairness: Order 62, rule 3(2) of the RHC.  These are typically circumstances where the injustice of shifting the costs to the unsuccessful party is considered to outweigh the injustice of having the successful party pay its costs out of pocket.

32.A class of cases warranting a departure from the usual costs order is where the benefits of the litigation itself, irrespective of its outcome, are sufficiently weighty to justify the successful party paying its own costs.  This sort of case rests on the premise that, if the usual costs order is made, future litigants would be inhibited or discouraged from bringing proceedings of the same kind, thereby preventing the said benefits to accrue.  A departure from the usual costs order is thus a way to mitigate such “chilling effects”.

33.A classic example is proceedings involving child welfare.  The general practice is that no order is made as to costs in such proceedings: see Supperstone, Goudie QC and Walker, Judicial Review, (6^th edn), §20.105.  The rationale is that proceedings involving a determination of where the best interests of a child lies could only benefit the child, which benefits are highly cherished in this jurisdiction; and that those who are interested in the child’s upbringing should not be discouraged by costs from “participating in the debate”: London Borough of Sutton v Davis (Costs) (No 2) [1994] 2 FLR 569, 570-571 (Wilson J).

34.The same rationale leads to the recognition of the PIL exception.  A helpful starting point is Oshlack (supra).  Although that case is, on its face, about a special domestic regime of environmental litigation, the reasoning has been extrapolated in this jurisdiction to apply generally to public law litigation:^[3]

(1)   The substantive dispute in Oshlack concerned a consent granted by the Richmond River Council (the 1^st respondent) to a developer (the 2^nd respondent) for development of certain land whose use was regulated by a local environmental plan.  By proceedings in the Land and Environment Court, the applicant complained that the 1^st respondent committed various public law errors, and effectively sought to put a halt to the proposed development.

(2)   The applicant’s substantive claim failed at 1^st instance (before Stein J), and the respondents applied for a costs order against the applicant.  Stein J decided to make no order as to costs in respect of both respondents in light of the public interest element of the litigation.  The 2^nd respondent (ie, the developer) did not lodge any appeal.  The 1^st respondent (ie, the Council) successfully appealed to the Court of Appeal, and the applicant appealed to the High Court of Australia.

(3)   By a 3-2 majority (Brenan CJ and McHugh J dissenting), the High Court of Australia restored Stein J’s decision to make no order as to costs in respect of the 1^st respondent. For present purposes, Kirby J’s judgment is particularly illuminating:

(a)    Having examined the context and purpose of the relevant legislation, Kirby J observed that parliament deliberately removed any standing requirement for individuals and groups to resolve environmental disputes before the Land and Environment Court.  His Honour considered that, in doing so, parliament concluded that it was in the public interest that such individuals and groups, despite having no selfish interest in the matter, should be able to engage the jurisdiction of the Land and Environment Court: at [114].

(b)   Crucially, Kirby J considered that the removal of standing barriers would amount to an “empty gesture” if the public character of the litigation is disregarded at the costs stage: at [114].  It would be an “empty gesture” because:

“The fear, if unsuccessful, of having to pay the costs of the other side (often a government instrumentality or wealthy private corporation), with devastating consequences to the individual or environmental group bringing the action, must inhibit the taking of cases to court. In any event, it will be a factor that looms large in any consideration to initiate litigation”.

(Oshlack v Richmond River Council (1994) 82 LGERA 236, at 238 and 244, Stein J, referring to Toohey J’s extra-judicial remarks.)

(c)    For these reasons, Kirby J held (at [136]) that “a discrete approach has been taken to costs in circumstances where courts have concluded that a litigant has properly brought proceedings to advance a legitimate public interest, has contributed to the proper understanding of the law in question and has involved no private gain”.  This would subsequently inspire the formulation of the PIL exception in this jurisdiction: Chu Hoi Dick, [14] and [29].

(4)   Adopting the similar approach and analysis, we think it is obvious that the PIL exception as observed by Kirby J (and as adopted by our courts) is designed to mitigate the chilling effect of adverse costs orders which may inhibit the pursuit of PILs for the benefit of the whole community.  This is the core rationale of the PIL exception.

(5)   Of course, secondary issues may arise from the operation of the PIL exception.  For example, an overly generous PIL exception may open up a floodgate of patently unmeritorious claims.  These secondary issues are and can be, however, addressed with by various control mechanisms (such as the “properly brought” element and the “wasted court’s time” element as discussed above[4].  They do not affect the core rationale of the PIL exception as expounded above.

35.In this light, for the following reasons, we consider that in principle, the PIL exception may in the right case be relied upon by an unsuccessful applicant against a successful non-government entity:

(1)   In a judicial review application, the chilling effect of adverse costs orders does not disappear simply because, in addition to the government, there is an additional private party (whether as a respondent or an interested party).

(2)   Equally, the nature and character of a litigation is not affected by the identity of the opposing parties.  If a set of proceedings is able to satisfy the substantive public interest requirements in Chu Hoi Dick, it remains so whether or not only the government participates as an opposing party.

(3)   In the premises, the core rationale of the PIL exception generally should also entail a successful non-government body (such as the interested party herein) bearing its own costs, as the public benefits of the litigation (and future litigations of the same kind) outweigh the injustice of having the successful party pay for its own legal costs.

(4)   In this respect, it is pertinent to observe that, in Australia, the PIL exception has been applied by the courts to disentitle a non‑government body from costs (or part thereof): see Darlinghurst Residents’ Association v Elarosa Investments Ptd Ltd & Anor (No 3) [1992] 75 LGRA 214 (a land developer; at 216-7, Stein J); Oshlack v Richmond River Council (1994) 82 LGERA 236 (a land developer; at 243-246, Stein J; not challenged on appeal); Blue Wedges Inc v Minister for the Environment, Heritage and the Arts (2008) 100 ALD 83 (a port developer; at [73] - [75], Heerey J); Lansen and Ors v Minister for Environment and Heritage and Anor (No 3) [2008] FCA 258 (a mining company; at [34], Mansfield J).

(5)   We also note that the leading texts in this area do not appear to draw a distinction between non-government and government entities when discussing the PIL exception: Auburn, Moffett and Sharland, Judicial Review: Principles and Procedure (2013), [28.30]; Supperstone, et al, Judicial Review, supra, [20.105].

(6)   We acknowledge that, in Chu Hoi Dick, there were statements that suggested the PIL exception was only applicable vis-à-vis the government.  For example, it was said that “the question is whether the applicants or the general public should bear the costs consequences for their action” (at [11]), and that the relevant litigation should “warrant the costs of the litigation to be borne by the public purse as costs incidental to good public administration” (at [29]).  However, these statements were made in a context when the opposing party was indeed a government instrumentality.  Thus, the applicability of the PIL exception to a non-government body was not a live issue in Chu Hoi Dick.  It follows that those statements should not be treated as dispositive of that issue.

(7)   However, as emphasized above, given that costs is a matter of discretion, there may well be cases where having regards to all the circumstance, the PIL exception should not be invoked against a successful non‑governmental party.

36.With this principle we mind, we are not satisfied that in the present case there are circumstances which would persuade us not to apply the PIL exception vis-à-vis the interested party.

37.Accordingly, we would also make no order as to costs as between the applicants and the interested party.

D.     DISPOSITION

38.For the above reasons, we make the following orders as to costs:

(1)   There will be no order as to costs of the appeal and below as between the applicants and the respondents.

(2)   There will be no order as to costs of the appeal and below as between the applicants and the interested party.

39.Lastly, we thank counsel for their assistance.