Kwok Cheuk Kin v. Director of Lands and Others v. Heung Yee Kuk (Interested Party)

FAMV Nos. 204, 205 & 206 of 2021

[2021] HKCFA 27

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NOS. 204, 205 & 206 OF 2021 (CIVIL)

(ON APPLICATIONS FOR LEAVE TO APPEAL

FROM CACV NOS. 234, 317 & 319 OF 2019 (HEARD TOGETHER))

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Before: Mr Justice Fok PJ in Chambers

Date of Decision: 23 July 2021

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DECISION

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Mr Justice Fok PJ:

The Applications

1.The Court of Appeal granted the applicant, Mr Kwok Cheuk Kin, conditional leave to appeal to the Court of Final Appeal against its judgment in three appeals heard together (CACV 234/2019, CACV 317/2019 and CACV 319/2019).[1] There were three separate appeals to the Court of Appeal because the judgment of the Court of First Instance in the underlying judicial review proceedings (HCAL 260/2015) was subject to separate appeals by each of the interested party (the Heung Yee Kuk), the respondents (the Government) and the two applicants.[2]

2.The Court of Appeal was satisfied that the proposed appeals involve four questions of great general or public importance which ought to be submitted to the Court of Final Appeal for decision.  They are, without any doubt, significant questions arising from a constitutional challenge to the New Territories Small House Policy, a policy which, it is accepted, is inherently discriminatory on the grounds of social origin or birth or sex[3] but which is argued (and has been held by the Court of Appeal) to fall within the traditional rights and interests of New Territories indigenous inhabitants protected under the Basic Law.[4]  The resolution of those questions by the Court of Final Appeal will bring certainty and finality on issues relating to a long-standing policy implemented in 1972 and affecting a large number of land grants since that time.[5]

3.At the time of the grant of conditional leave to appeal there were two applicants, Mr Kwok and Mr Lui Chi Hang, Hendrick.  Mr Lui, who was legally aided below, has indicated to his solicitors that he wishes to withdraw from the proposed appeals.  Unlike the applicant, Mr Lui did not file notices of application for leave to appeal to the Court of Final Appeal (Form B), following the Court of Appeal’s judgment granting conditional leave to appeal.  He is therefore not a party to these appeals.

4.Subsequent to the Court of Appeal’s grant of leave to appeal, the Appeal Committee made orders in each of the three appeals (FAMV 204/2021, FAMV 205/2021 and FAMV 206/2021) granting leave to appeal to the Court of Final Appeal on the usual conditions set out in the Standard Order set out in Schedule 1 of Practice Direction 2.3.  One of those conditions relates to the provision of security for the costs of each respondent, in these terms:

“Leave to appeal to the Court of Final Appeal be granted to the applicant on condition that the applicant do within 14 days from the date of this Order pay into Court, in respect of each respondent, the sum of HK$400,000.00 (or such alternative sum or form of security provided in such manner as may be agreed by the parties within 7 days from the date of this Order in accordance with paragraph 2 of this Order) as security for the due prosecution of the appeal and payment of all such costs as may become payable to each respondent in the event of the appeal being dismissed for non-prosecution or of the Court ordering the applicant to pay such respondent's costs of the appeal.”

5.The applicant has applied, by summonses in each appeal, to waive the requirement for the provision of security.  These applications are opposed by the respondents and the interested party.  This is the usual method of proceeding where a party wishes to vary the standard condition and the application is dealt with on the papers: see Designing Hong Kong Limited v The Town Planning Board and Anor., FAMV 30/2017, 20 December 2017 at [2].  To vary the standard condition, “good grounds” have to be shown: ibid. at [4].

6.Two broad issues are raised.  First, whether there should be a waiver of the requirement for the applicant to provide security for costs.  The narrow focus of this issue is limited to the question of whether the applicant should provide security for costs of the appeal and does not involve the question of whether he should be liable to pay such costs or not, which is a decision that will depend on the disposition of the appeals themselves.  Secondly, if security is not waived, whether the applicant should provide security for costs in each of the three appeals in respect of each respondent, viz. each of the three Government respondents and the Heung Yee Kuk, or just once in respect of each respondent, on the footing that, in reality, there is only one appeal and the existence of three separate appeal numbers (FAMV 204/2021, FAMV 205/2021 and FAMV 206/2021) is simply because of the procedural history of the litigation below.

7.The applicant has filed written submissions in support of the applications.  The Government respondents have filed written submissions in response, as has also the interested party.  The applicant has also filed written reply submissions to those of the respondents and interested party and, in addition, the applicant has applied by summonses in each appeal seeking leave to rely on an affirmation made by him on 14 July 2021 setting out updated information in relation to his application for legal aid and the decision of his co-applicant, Mr Lui, to withdraw from the appeal.  In further response, both the respondents and the interested party have filed submissions on the new evidence, drawing the Court’s attention to a judgment of the Court of First Instance involving the applicant’s unsuccessful attempt to judicially review the Director of Legal Aid’s decision to dismiss his legal aid appeal in respect of the underlying judicial review in HCAL 260/2015.[6]

The Applicant’s contentions

8.The Court of Appeal made no order as to costs as between the applicants and both the Government respondents and the Heung Yee Kuk as interested party in respect of the appeal below by reason of the public interest litigation exception to the usual rule that costs follow the event.[7] The applicant’s primary position is therefore that, in view of the Court of Appeal’s order as to costs below, the standard condition requiring security for costs should not apply at all, or should be dispensed with on the application of the prospective appellant unless the respondent can satisfy the Court of Final Appeal to the contrary.

9.The applicant contends, as a fallback, that since the Court of Appeal has granted leave to appeal and ruled that the public interest litigation exception applies to the proceedings below, the Court of Final Appeal should dispense with the requirement to provide security because that requirement would, in the circumstances, stifle the appeals.  In support of this contention, the application relies on the following factors: (1) the applicant is now bankrupt[8] and the Official Receiver as his trustee in bankruptcy has indicated he does not intend to take up or step into the proceedings; (2) the applicant has exhausted the alternative possibility of legal aid, such application having been refused (although the applicant’s updating affirmation states that a Legal Aid Review is underway in respect of that refusal); (3) the co-applicant, Mr Lui, who was legally aided below, has withdrawn from the appeals.  All the more so would it be the case that the appeals would be stifled, the applicant contends, if security is required in respect of each respondent in each appeal, i.e. for four respondents (three Government respondents and the Heung Yee Kuk) in each of the three appeals (FAMV 204/2021, 205/2021 and 206/2021), potentially a total of HK$4.8 million.

10.Alternatively, the applicant contends that the security for costs should be limited to one set of costs for the three separate appeals. This submission would appear to be made on the basis that, although three separate appeals have been instituted because of the procedural history of the litigation below, the reality is that there is only one appeal and there will be a single hearing before the Court of Final Appeal at which the separate appeals will be heard together.

The respondents’ and interested party’s contentions in opposition

11.As already noted, the respondents and interested party both oppose the application for a waiver of the condition to provide security for costs.

12.The respondents contend that the applicant has failed to show good grounds why the standard condition should be departed from.  The respondents challenge the applicant’s claim that the requirement to provide security will stifle the appeals, pointing to the lack of evidence why alternative funding cannot be obtained and contending that the applicant has failed to discharge the burden that, without a waiver, the appeals would be stifled.  As for the applicant’s reliance on the public interest litigation exception, the respondents say that this should be rejected, as it was in Designing Hong Kong (supra.) at [6(1)] and [6(3)], since applying it would pre-empt the outcome of the final appeal.  The respondents point specifically to the fact that the Court of Appeal held against the applicant on the issue of standing to bring the judicial review challenge and on the ground of delay to support the argument that the litigation cannot be said to have been properly brought and so cannot engage the public interest litigation exception.  Finally, the respondent refers to the status of the applicant as a bankrupt and contends, in the circumstances, that he has no standing to challenge any order for costs in the appeal and that the issue of costs is a matter for his trustee in bankruptcy.

13.Two further points are made by the respondents.  First, it is argued that, if there is to be a waiver of the standard condition for security of the respondents’ costs, a condition should be imposed on the applicant that he should only pursue the final appeals on the basis he will not seek costs in this Court or below. Secondly, the respondents’ submissions are made without prejudice to their reliance on the proposition, said to derive from the decision of a New Zealand court in Tamihere v Commissioner of Inland Revenue [2017] NZHC 2949 at [15], that an undischarged bankrupt does not have standing “to bring or continue pursuing unmeritorious judicial review proceedings that may result in an adverse costs award which would be passed on to the trustee in bankruptcy”.[9]

14.The interested party opposes the application for waiver on the basis, first, that the applicant has not discharged his burden to show why security cannot be raised from a third party source.  It is said the applicant’s evidence does not explain what steps have been taken to raise funds from third parties, particularly given his status as a “well-known and resourceful ‘public interest’ litigant”.[10] The interested party relies on the payment of the filing fees for the application for leave to appeal by a friend of the applicant as showing that third parties are willing to fund the applicant.  The interested party also asserts there is a clear alternative source, namely the co-applicant, Mr Lui, to whom legal aid was available.  Finally, the interested party complains that there is a lack of information as to the status of the applicant’s appeal against the refusal to grant legal aid to him.

15.Secondly, the interested party contends that the applicant’s reliance on the public interest litigation exception should be rejected on two bases.  These are that: either, a waiver of the condition to provide security on this basis will pre-empt the outcome of the appeals to the Court of Final Appeal; or, the exception does not apply to protect the applicant from an adverse costs order in favour of the interested party.  The interested party contends it has interests distinct from the Government and should not be made to bear its own costs, even if the judicial review challenge can be said to benefit the community as a whole.  It intends to argue that the Court of Appeal’s Decision on Costs should be reversed and to seek costs in the Court of Final Appeal and below, for which it contends it should have security.

16.In response to the applicant’s further evidence, the respondents and the interested party have drawn the Court’s attention to passages in the judgment in Kwok Cheuk Kin v Registrar of the High Court & Anor. [2019] 1 HKC 551 (esp. at p.560C-H) setting out aspects of the applicant’s conduct leading to the revocation of legal aid in respect of this litigation.  In short, the Director of Legal Aid revoked the applicant’s legal aid because of the applicant’s failure to disclose his financial circumstances, his failure to disclose a material fact concerning his resources, his failure to make true and correct disclosure of his resources and his failure to comply with Regulation 10 of the Legal Aid (Assessment of Resources and Contributions) Regulations (Cap.91B).   These matters are relied upon to support the contention that it is unsafe to take the applicant’s asserted inability to provide security for costs at face value.

17.As to quantum, both the respondents and interested party contend that the complexity of the issues involved mean that likely costs of the appeal will exceed the amount of security, so the standard amount of security on which final leave is conditional in each of the three separate appeals (amounting to HK$3.6 million in favour of the Government respondents and HK$1.2 million in favour of the interested party) are appropriate amounts in the circumstances of the case.

Resolving the competing contentions

18.The applicant’s primary position is rejected.  There is no justification for automatically adopting a rigid practice of dispensing with the standard condition for security for costs on the grant of conditional leave to appeal because the Court of Appeal has, in any particular case, made no order as to costs below by reason of the public interest litigation exception.  In such a case, the application of that exception and the costs order itself will be open to argument on final appeal to this Court and it would be wrong to proceed in all cases from an assumption that the order below will stand, since it may or may not be upheld.  Nor is there any justification to reverse the burden by imposing a default that the condition of security be dispensed with unless the respondent satisfies the Court of Final Appeal to the contrary.  As its description suggests, the standard condition is appropriate in all cases, subject to the applicant for leave to appeal putting forward good grounds to vary the standard term.  The purpose of the condition being “to protect the respondent in an appeal from the injustice of not being able to recover costs from the appellant in the event of an unsuccessful appeal” (see Designing Hong Kong (supra.) at [4]), there is no good reason to dispense with that security automatically or to place the burden on the respondent to justify the provision of security.

19.The applicant is on firmer ground in advancing his fallback position.  This proceeds from the important starting point that the Court of Appeal has granted leave to appeal to the Court of Final Appeal to argue four questions of great general or public importance.  The grant of such leave is significant.  It has been recognised that it “should be treated as a sufficient threshold test on the merits to engage the discretion to apply the public interest litigation factor”: Leung Kwok Hung v President of the Legislative Council (No.2) (2014) 17 HKCFAR 841 at [19[3]].  The grant of leave to appeal is also a recognition of there being “a sufficient public interest in the appeal being heard and the important point of law in question being resolved”: ibid. at [17(17)].  It is also a significant factor, in favour of the applicant’s position, that the Court of Appeal ordered that there be no costs below as between the applicant and either the respondents or the interested party on the basis of the public interest litigation exception.

20.Furthermore, although there are clearly questions as to his candour in relation to the revocation of his legal aid, it is undeniably the fact that the applicant is now bankrupt (a state of affairs post-dating the revocation of his legal aid). There is therefore a reasonable basis for concluding that he does not have the means by which to satisfy the condition of providing security for costs in a sum of as much as HK$4.8 million or his financial creditworthiness to raise such funds from third parties (as distinct from the HK$4,000 filing fee which was apparently paid on his behalf by a friend).  As such, there is a reasonable prima facie basis for inferring that requiring the applicant to meet the condition to provide security for costs would result in the applicant having to abandon the pursuit of an otherwise arguable appeal, i.e. the appeals would be stifled.  It is recognised that the risk that an appeal might be stifled by the imposition of an order to provide security for costs is a factor that may be taken into account by the Court in the exercise of its discretion, under section 25(2)(a) of the Hong Kong Court of Final Appeal Ordinance (Cap.484),[11] as to the amount of security for costs to be ordered: Tsit Wing (Hong Kong) Co Ltd v TWG Tea Co Pte Ltd (2015) 18 HKCFAR 283 at [11].  As Lord Wilson observed, in Goldrail Travel Ltd (in liquidation) v Onur Air Taşimacilik AŞ [2018] 1 All ER 721 at [12]:

“To stifle an appeal is to prevent an appellant from bringing it or continuing it. If an appellant has permission to bring an appeal, it is wrong to impose a condition which has the effect of preventing him from bringing it or continuing it.”

21.In addition to the fact of his bankruptcy, the applicant does not have legal aid, albeit the circumstances of its revocation, if confirmed, do not tell in his favour. Although Mr Lui was in receipt of legal aid in the courts below, he has chosen not to pursue the appeals to the Court of Final Appeal.  That is a matter for Mr Lui and his withdrawal should not be a factor to be weighed against the applicant on his variation summonses since the applicant’s position is discrete from that of Mr Lui.  The applicant has appealed against the refusal to grant legal aid to him by way of Legal Aid Review pursuant to s.26A of the Legal Aid Ordinance (Cap.91).  This review is underway and is subject to directions dated 12 July 2021 requiring the exchange of submissions by the Director of Legal Aid and the applicant.  A date for the hearing of the review has not yet been fixed but, in light of the directions, that date would be unlikely to be before the latter part of next month (August) at the earliest.  A resolution of the legal aid issue is presently therefore wholly speculative and uncertain.

22.The burden, of course, is on the applicant to demonstrate that the order for security will have the effect of stifling the appeals and, as noted above, he must show “good grounds” for a variation of the standard term: see [5] above.  As summarised above, in the present case, the respondents and interested party both contend that the applicant has failed to discharge the burden of showing good grounds and it is suggested the applicant has not shown that alternative sources of funding are available to him.  In this context, they rely on the comments in Tsit Wing (supra.) at [12] as to the need for “a proper evidential basis” for the assertion that the order to provide security for costs will lead to the stifling of the appeals.

23.Applications of this nature will necessarily turn on their own facts.  However, the applicant in the present case is not in the same position as the appellants in Tsit Wing.  In that case, not only was there a failure to demonstrate that the corporate appellants were unable to raise funds from a third party source, the pleaded facts and submissions advanced by them were wholly at odds with a plea of impecuniosity: ibid. at [13].  In contrast, in the present case, the applicant is now bankrupt and this is a factor supporting the inference, without direct evidence, that he is unable to make payment of the security for costs: ibid. at [12]. 

24.Similarly, the comments of Lord Wilson in Goldrail Travel (supra.) at [24], on which the respondents rely as to the weight which a court might place on a refutation of ability to raise necessary funds to pay security for costs, were made in the context of a corporate litigant and not an individual who has been declared bankrupt (and who therefore is not realistically in a position to obtain third party funding).  As such, those remarks of Lord Wilson in Goldrail Travel are of limited, if any, relevance in the present context.

25.It is clearly relevant, in my judgment, to take into account the fact that the Court of Appeal made no order as to costs below on the basis of the public interest litigation exception since it at least reasonably arguable that the Court of Final Appeal might reach a similar decision in respect of costs.  It is not an answer to say, as the respondents and interested party contend, that, as in Designing Hong Kong, taking this into account would be to pre-empt the outcome of the appeal.  In Designing Hong Kong, the question of whether the appellant was entitled to a protective costs order for the underlying judicial review proceedings was the very issue in the appeal itself.  In those circumstances, waiving the requirement to provide security for costs of the appeal would plainly have pre-empted the outcome of the appeal itself in that case.  That is not the position here where the underlying issues are different.  In any event, the particular issue before me now is the narrow issue of whether the applicant should be required to provide security for costs of the appeal.  A decision as to that does not pre-empt any decision by the Court of Final Appeal as to the costs of the appeal.

26.The respondents are correct in pointing out that the Court of Appeal ruled against the applicant on the issue of standing and delay.  However, notwithstanding its decision, that court granted leave to appeal to the Court of Final Appeal on questions relating to those issues and, despite its substantive ruling on them, concluded that the public interest litigation exception should nevertheless apply.  The substantive decision on standing and delay is distinct from the decision on costs as to whether or not, for the purposes of the public interest litigation exception, the litigation was properly brought.  There is therefore no good reason to disregard the Court of Appeal’s costs decision on these applications.

27.I am not persuaded that the interested party’s contention that the public interest litigation exception does not apply to it or that its interests distinct from those of the Government respondents is a factor of significant weight against these applications to dispense with the condition to provide security.  The interested party, although served with notice of the judicial review proceedings, was not obliged to take part in the proceedings.  Even if it did so, it was not obliged to appear by as large a team of counsel as it did (three leading counsel and one junior counsel both at first instance and on intermediate appeal).  Although its interests might have been different to those of the respondents, the respondents nevertheless consistently opposed the underlying judicial review application in its entirety below.  Since the respondents were opposing the judicial review in any event, there was strictly no necessity for the interested party to incur such substantial costs defending the judicial review.  That it did so was a matter of choice on its part.

28.The respondents submit that the issue of costs is a matter for the trustee in bankruptcy.  The Official Receiver, as the applicant’s trustee in bankruptcy, has stated that he does not intend to take up or step into the proceedings.  However, the Official Receiver has not filed evidence or indicated any stance on these particular applications.  In the absence of this, the effect of the applicant’s bankruptcy is limited at this stage to the fact that, if the appeal were dismissed and an adverse costs order made against him, the respondents and interested party would, very likely, be unable to recover their costs.  This is certainly a factor that is relevant to the applications, since the purpose of the condition to provide security is to protect the respondent in an appeal from the injustice of not being able to recover costs from the appellant in the event of an unsuccessful appeal (see [18] above).

29.Notwithstanding the risk that the respondents and interested party may be unprotected as to their costs if successful in the appeal and in receipt of a costs order in their favour, taking all the above factors into account, I am satisfied that it is appropriate to exercise the Court’s discretion to waive the requirement for the applicant to provide security for costs in these appeals.  This may be regarded as something of an exceptional case because of the great general or public importance of the questions of law involved.  Although there is some lack of clarity as regards the applicant’s finances in the past, the fact remains that he is undeniably now bankrupt.  If the requirement to provide security is not waived, there is a real likelihood that the appeals will not proceed to a full hearing before the Court of Final Appeal.  This is not in the public interest.  Whilst not every public law case will engage this consideration to the same extent, in the present case there is a clear public interest in the Court of Final Appeal finally resolving the issues raised and providing clarity on these important questions for all parties concerned.  It is also at least reasonably arguable that the Court of Appeal’s decision that the public interest litigation exception applies will be upheld on final appeal to this Court.  If so, there will be no order as to costs in any event and so no necessity to secure any costs.

30.I reject the respondents’ further submission that, as a condition of any waiver of the requirement to provide security, a condition should be imposed on the applicant that he can only pursue the appeals on the basis that he is not seeking costs either in this Court or below.  Such a condition is inappropriate and would pre-empt the Court’s decision on the substantive costs of the appeals.  As already noted above, the narrow focus of this application concerns only whether the applicant should provide security for the costs of the appeal and does not concern the ultimate question as to what costs orders will follow the disposition of the appeals.

Disposition

31.For the reasons set out above, I grant leave to the applicant to file and rely on his affirmation dated 14 July 2021 and I make an order on the applicants’ summonses that the requirement that he provide security for costs of the respondents and interested party in respect of each of the three appeals be waived.  Having so decided, it is unnecessary to deal with the subsidiary question of whether the applicant should have been required to provide four sets of security in respect of each of the three separate appeals or some lesser amount.

32.The costs of the applicants’ summonses will be costs in the cause of the appeals.

Written Submissions by Mr Martin Lee SC, Mr Jeffrey Tam and Ms Isabel Tam, instructed by Ho Tse Wai & Partners, for the 1^st Applicant (Applicant)

Written Submissions by Mr Benjamin Yu SC, Mr Mok Yeuk-Chi and Mr Anthony Chan, instructed by the Department of Justice, for the 1^st to 3^rd Respondents

Written Submissions by Mr Jat Sew-Tong SC, Mr Jin Pao SC and Mr Danny Tang, instructed by TK Tsui & Co, for the Interested Party

[1] [2021] HKCA 590 (Judgment dated 29 April 2021), granting leave to appeal from [2021] HKCA 54 (Judgment dated 13 January 2021).

[2] [2021] HKCA 54 at [25] and FN 38.

[3] Contrary to articles 25 and 39 of the Basic Law and article 22 of the Hong Kong Bill of Rights.

[4] Article 40.

[5] [2019] HKCFI 867 at [4] and [10].

[6] Kwok Cheuk Kin v Registrar of the High Court & Anor. [2019] 1 HKC 551.

[7] [2021] HKCA 915 (Decision on Costs dated 25 June 2021).

[8] The evidence discloses he has been bankrupt since 8 July 2020.

[9] Respondents’ Skeleton Submissions at [21].

[10] Submissions for the Interested Party at [7].

[11] This provides that the Court may order as a condition for the grant of leave to appeal: “… that the appellant shall enter into good and sufficient security, for the due prosecution of the appeal, and the payment of all such costs as may become payable to the respondent in the event of the appeal being dismissed for non-prosecution, or of the Court ordering the appellant to pay the respondent’s costs of the appeal”.