CHEN LIP KEONG v. EVOLUTION MASTER FUND LTD SPC, SEGREGATED PORTFOLIO M

HCA575/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 575 OF 2010

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BETWEEN

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RULING ON COSTS

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1.  The plaintiff’s application for summary judgment against the defendant was dismissed in a written Decision given by me on 6 December 2010.

2.  In that same written decision I had requested the parties to lodge written submissions on the costs order to be made.

3.  Written submissions having been lodged by the parties as requested, I now give my Ruling on costs in the matter.

4.  The defendant, in its written submission ask for costs of the application for summary judgment to be paid forthwith on indemnity basis with certificate for two counsel.

5.  The grounds upon which that costs order was sought by the defendant was that the application for summary judgment having been dismissed, that application came within Order 14 rule 7 of the RHC in that the plaintiff knew that the defendant relied on a defence which would entitle the defendant to unconditional leave to defend.

6.  In so saying, the defendant relies primarily on the the contents of their solicitor’s letter of 23 April 2010 to say that the plaintiff knew of the defence relied on by the defendant when the application for summary judgment was issued on 1 June 2010 by the plaintiff.

7.  The defendant also relies on the Defence and Counterclaim which was filed and served on 21 June 2010 as well as the affirmation of Richard Chisholm filed on 20 July 2010 (although sworn on 28 June 2010) to say that after those two documents, the plaintiff ought to have withdrawn his application for summary judgment but had instead persisted with it.

8.  The plaintiff on the other hand submit that the proper costs order to be made should be costs in the cause.  That is on the basis that in paragraphs 106 and 107 of my written Decision, I had indicated that I would have granted unconditional leave to defendant had it not been for the fact that the Defence and Counterclaim of the defendant had already been filed (and indeed pleadings have already closed) when my written Decision was given therefore it was futile for me to order unconditional leave to defend.

9.  The plaintiff goes on to submit that this case does not fall within Order 14 rule 7 of the RHC.

10.  Firstly, there is no suggestion that the application for summary judgment is outside the ambit of Order 14.

11.  Secondly, the plaintiff relies on marginal note 14/7/3 of the RHC to say that the material time for saying that the plaintiff knows that the defendant is relying upon a contention which would entitle him to unconditional leave to defend is before the issue of the summons.

12.  In this respect, the plaintiff submits that it is only the letter from Messrs Simmons and Simmons dated 23 April 2010 which precedes the issue of the summons by the plaintiff and that both the Defence and Counterclaim as well as the affirmation of Richard Chisholm had not been filed when the summons was issued.

13.  In so far as the letter dated 23 April 2010 from the defendant’s solicitor is concerned, the plaintiff submits that the description and terms of the put option was scanty to the extreme and the explanation given in that letter differed significantly from what was stated in the affirmations of Richard Chisholm and Frank Dominick which came later.  Also the calculations for the default interest in the letter differed greatly from what was later relied on by the plaintiff at the hearing.  Finally, there was no explanation given in that letter as to why there was not included the default interest when the defendant confirmed the amount outstanding in the February and March 2010 emails.  Such explanation only came in the affirmation of Richard Chisholm.

Decision

14.  It cannot be disputed that the usual costs order where unconditional leave to defend is given is costs in the cause.  However, the court is empowered to order costs against the plaintiff if the case falls within Order 14 rule 7 and because of that the application for summary judgment is dismissed.

15.  The defendant’s submission on costs is premised upon this case coming within Order 14 rule 7 and that the plaintiff’s application was dismissed.

16.  The reason for dismissal of the application for summary judgment ought to have been made quite clear when I stated in my written Decision given on 6 December 2010 that :

“106. Normally, I would have granted unconditional leave to defend to the defendant. However since the Defence and Counterclaim has already been filed, it would be futile for me to make that order.

107.     Accordingly, the plaintiff’s summons is hereby dismissed.”

17.  That therefore was the only reason for which the application for summary judgment was dismissed.

18.  The defendant relies on :

(a)   the letter from Messrs Simmons & Simmons dated 23 April 2010;

(b)   the Defence and Counterclaim filed herein on 21 June 2010; and

(c)   the affirmation of Richard Chisholm dated 28 June 2010

in support of its contention that the plaintiff ought to have known of the defence being run by the defendant which would have entitled them to unconditional leave to defend.

19.  However, as pointed out by counsel for the plaintiff, the material time of such knowledge would be at the outset before the application for summary judgment was taken out.

20.  In this respect, Hong Kong Civil Procedure 2011, Vol. 1 marginal note 14/7/3states :

“If before the issues of the summons the plaintiff knows that the defendant is relying upon a contention which would entitle him to unconditional leave to defend, he cannot properly invoke the jurisdiction of the court under O. 14 to give him summary judgment.”

21.  The summons for summary judgment was taken out by the plaintiff on 1 June 2010. Therefore it was only the letter from Messrs Simmons & Simmons dated 23 April 2010 which had preceded the summons being issued.

22.  I accept the submission of the plaintiff that the letter from Messrs Simmons & Simmons was scanty in several important areas.  Firstly, the calculations for default interests and the number of days of delay significantly differed from those figures ultimately relied on by the defendant at the hearing.  Secondly, there was no explanation for why the February and March 2010 emails from Richard Chisholm confirmed the amount outstanding which did not include default interests.  Thirdly, no details were given relating to the “costs and expenses” incurred resulting from the Event of Default.  Fourthly, in so far as the allegation of a Put Option is concerned, the details alleged in the letter of 23 April 2010 differed significantly from what was stated in the later affidavits relied on by the defendant.

23.  Indeed some of the shortcomings in that letter of 23 April 2010 had already been alluded to in paragraphs 64(c) and 73(d) of my written Decision given on 6 December 2010.

24.  On the basis therefore that the defence put forward at the hearing was far more developed and had changed in some important details than what was contained in the letter from Messrs Simmons & Simmons dated 23 April 2010, I am of the view that that letter from Messrs Simmons & Simmons does not adequately show that the plaintiff knew at the outset before issuing the summons for summary judgment that the defendant was relying on a contention which would entitle them to unconditional leave to defend.

25.  Accordingly, there will be a cost order that the costs of and occasioned by the application for summary judgment taken out by the plaintiff by summons dated 1 June 2010 be costs in the cause with certificate for two counsel.