HOROMETRIE S.A AND ANOTHER v. BONHAMS (HONG KONG) LTD AND ANOTHER

HCA 875/2019

[2021] HKCFI 458

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 875 OF 2019

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DECISION  ON  COSTS

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Introduction

1.  This action concerns a watch known as Richard Mille, A “Prototype” Titanium Semi-Skeletonised Automatic Chronograph Wristwatch with Date, Felipe Massa RM011-03T Prototype PRO3 Felip Massa (the “Prototype Watch”).

2.  The Prototype Watch was consigned by D2 to D1 for sale by way of public auction on 24 November 2018.  It is Ps’ case that the Prototype Watch belonged to P1 and was stolen from its General Manager, P2, in Paris in October 2016.  Ps seek to recover the Prototype Watch by way of the present Action.

3.  In summary, the relevant procedural history of this Action is as follows.

4.  By summons dated 20 May 2019 (“Ps’ Summons”), Ps sought (a) interim delivery-up of the Prototype Watch to Ps’ solicitors for safekeeping (the “Delivery Up Application”) and (b) disclosure by D1 of the details of the consignor who instructed and authorised D1 to sell the watch by auction (the “Norwich Pharmacal Application”).  At the hearing of Ps’ Summons on 24 May 2019, Wilson Chan J made the following orders:

(1)  The Delivery Up Application be adjourned for substantive argument;

(2)  D1 be restrained from dealing with or disposing of the Prototype Watch pending the determination of the Delivery Up Application (the “Injunction”);

(3)  D1 give disclosure of the information sought within 10 days from personal service of the Order;

(4)  Costs of both the Delivery Up Application and Norwich Pharmacal Application be reserved.

5.  By summons dated 14 June 2019, D1 applied for leave that Ps and D2 interplead over the issue of ownership of the Prototype Watch, and D1 be released from involvement in the proceedings until the trial of the interpleader issue (“D1’s Summons”).  At the hearing of D1’s Summons on 27 June 2019, DHCJ Simon Leung gave directions for the trial of the interpleader issue, and directed that the question of interim custody of the Prototype Watch be determined at the substantive hearing of the Delivery Up Application if not resolved by consent.

6.  D2 was formally joined as a co-defendant to this action on 27 June 2019.

7.  Pursuant to a consent summons filed by the parties dated 3 December 2019, Wilson Chan J made the following orders:

(1)  The Injunction do continue against D1 until trial of this Action or further order;

(2)  The Prototype Watch do remain in D1’s custody until the trial of this Action or further order;

(3)  Save as aforesaid, no order be made in relation to the Delivery Up Application.

8.  This is the decision of the Court on the costs of Ps’ Summons.

Norwich Pharmacal Application

9.  It is convenient to deal with the two limbs of P’s Summons separately.  In respect of the Norwich Pharmacal Application, Ps and D1 agreed that the usual costs order should be made as between them, namely that Ps shall pay D1’s costs on an indemnity basis: see, for example, Jofa Ltd v Benherst Finance [2019] Costs LR 441, §31–35.

10.  The only live issue lies in the question of D2’s liability for costs.  Ps submit that their own costs should be in the cause, and the order that they pay D1 costs be made without prejudice to Ps’ right to recover such costs from D2 at the conclusion of the proceedings should they ultimately succeed at the trial of this Action.  D2, on the other hand, submits that no costs order should be made against it on the basis that it was not a party to the Summons.

11.  I consider that Ps’ proposed course of action is the right one to be adopted at this present stage.  I agree with Ps that the fact that D2 was not a party to the Summons is not an objection to the order sought.  The entire point of the Norwich Pharmacal Application was for Ps to identify a previously unidentified wrongdoer, who is ex hypothesi not a party to the application.  It is also necessary for Ps to take out this application to compel D1 to make the relevant disclosure, since D1 is otherwise under no legal obligation to do so.  There can be no serious objection to Ps recovering the costs of such an application from the subsequently identified wrongdoer should they eventually succeed at trial.

12.  In response, D2 says that it should not be regarded as a “wrongdoer”, since it was not a party to the alleged theft and instead merely acquired the Prototype Watch in good faith.  As a result, it is unfair for D2 as an innocent party to bear Ps’ and D1’s costs of the Norwich Pharmacal Application.

13.  I am unable to accept this submission. Ps’ claim against D2 is one of conversion, which, as is well known, is a tort of strict liability.  The critical issue is whether Ps have title in respect of the Prototype Watch—whether D2 acted innocently in coming to possess it is strictly irrelevant.  And if Ps succeed against D2, D2 would straightforwardly be a wrongdoer in having committed the tort.

14.  For these reasons, I order that Ps’ costs of the Norwich Pharmacal Application be in the cause, and Ps pay D1’s costs of the Application on an indemnity basis, without prejudice to Ps’ right to recover such costs from D2 should they ultimately succeed at the trial.

Delivery Up Application

15.  Ps submit that a fair costs order in respect of the Delivery Up Application is for Ps’ costs to be in the cause, on the basis that their application was wholly necessitated by D1’s unreasonable refusal to provide an undertaking to preserve the Prototype Watch despite Ps’ repeated requests in the 6 months prior to the commencement of proceedings.  It was only after Ps commenced proceedings and took out its Summons that D1’s solicitors verbally agreed to provide the undertakings sought.

16.  On the other hand, D1 submits that it should be entitled to the costs of and occasioned by the Delivery Up Application in any event.  It says that Ps effectively abandoned their application by agreeing that the Prototype Watch could remain in D1’s custody until trial.  In any event, the application was bound to fail given that that the courts’ established approach in interpleader cases such as these that a neutral party should retain the subject property pending trial.

17.  D2 further objects to Ps’ proposed costs order on the basis that the Delivery Up Application was an inter partes dispute between Ps and D1, necessitated by D1’s refusal to provide the undertakings sought.

18.  In my view, Ps are right when they say that the Delivery Up Application was necessitated by D1’s failure to provide an undertaking to preserve the Prototype Watch.  This is clear when one considers the communications exchanged between Ps and D1 in the period leading up to these proceedings.

(1)  By letter dated 9 November 2018, Ps wrote to D1 informing D1 that “it has come to our attention that [D1] has listed [the Prototype Watch] for auction” and, inter alia, asked that D1 provide details of the consignor within 3 working days and give an undertaking:

(i)  Not to place the Prototype Watch for any other auctions;

(ii)  Hold the watch on Prototype Watch on trust if it is still in its possession, custody or power, and provide it to the authorities to assist in investigations if necessary;

(iii)  Not to sell or return the Prototype Watch to the person/entity who sold it to D1; and

(iv)  Forthwith arrange with Ps the process by which D1 will return the Prototype Watch to P2.

(2)  After D1 failed to reply to the letter, Ps’ solicitors wrote again to D1 on 15 November 2018, noting that D1 had been directed by the Hong Kong Police not to conduct any dealings in respect of the watch, and repeated their request for the undertaking set out above.

(3)  By email to Ps’ solicitors on the same date, D1 confirmed that “the watch has been withdrawn, pending Police enquiries” and “we will of course fully cooperate with the Police”.

(4)  By letter dated 16 November 2018, Ps’ solicitors reiterated their request that D1 provide the identity of the consignor and the undertakings sought.

(5)  By email on the same date, D1 stated that “We can obviously not supply details of the consignor to you, because of data protection regulations. However, as already stated we will co-operate fully with the Police”.  As for the undertakings, D1 stated that “we have to see what the Police investigation leads to, prior to giving any assurances to you.  As you know, the [Prototype Watch] has been withdrawn from sale and will be made available to the Police for inspection”.

(6)  By letter dated 15 February 2019, Ps’ solicitors put on record D1’s failure to accede to their requests and requested that D1 confirm that the Prototype Watch is still in their possession and allow Ps to collect the Prototype Watch from D1’s offices on or before Wednesday 20 February 2019.

(7)  By email dated 18 February 2019, D1 stated that “As I understand it the Police have decided to take no further action”, and that “we are asking the consignor and his lawyers to contact you directly, so that you can achieve a resolution between you”.

(8)  It was only on 22 May 2019 at around 17:50, less than 2 days before the return date of Ps’ Summons, that D1’s solicitors verbally agreed to provide the undertakings sought.

19.  D1, in response, says that it should be clear from the fact that it withdrew the Prototype Watch from auction (as it made clear in its 15 November email) that it would not deal with the Prototype Watch pending resolution of the ownership dispute.  However, I fail to see how the latter is necessarily implied by the former.  Furthermore, even if one can derive such an implied undertaking to this effect from its statement that “we will of course fully cooperate with the Police” (as D1 contends), such an undertaking would have lapsed when the Police decided to end their investigation in February 2019.

20.  In any event, this argument is entirely contradicted by D1’s own submissions in its skeleton argument that:

“Unless and until the Police has found the Prototype Watch did belong to the Plaintiffs and/or formal legal proceedings were issued by the Plaintiffs, and the Plaintiffs have filed evidence on affirmation, it is not fair to expect the 1^st Defendant to provide undertakings that it will not return the Prototype Watch to the 2^nd Defendant and/or that it will return the Prototype Watch to the Plaintiffs, as requested by the plaintiffs. By way of analogy, a bank which is caught up in a dispute between two parties cannot be expected to give any undertakings to part with a party’s assets or to freeze such assets unless and until a Court Order is granted. Instead of complaining that the 1^st Defendant had refused to give undertakings for over 6 months prior to commencement of proceedings, the Plaintiffs could have issued proceedings earlier to resolve the matter.” (Emphasis added).

21.  This paragraph makes clear D1’s position that, in the absence of legal proceedings it was unwilling to grant an undertaking to preserve the Prototype Watch.  In light of these matters, I consider that the Delivery Up Application was necessitated by D1’s refusal to undertake to preserve the Prototype Watch.

22.  I further consider that having obtained the Injunction restraining D1 from dealing with or disposing with the Prototype Watch, Ps obtained a result substantially identical to that which they sought by way of its application, namely that the Prototype Watch be preserved pending trial.  It will be borne in mind that all that Ps ever sought by way of the Delivery Up Application was for the Prototype Watch to be delivered to Ps’ solicitors for safekeeping. As a result, the fact that physical custody of the Prototype Watch still remains with D1 is of little weight when evaluating the relative success of the parties in this application. Ps cannot be said to have “withdrawn” or “abandoned” its application when it agreed to the consent summons dated 3 December 2019.

23.  I also do not think D1 is right when it says that Ps’ application was bound to fail.  It is true that, had the Delivery Up Application proceeded to substantive argument, the Court would likely have directed that the Prototype Watch be held by a neutral party pending determination of the interpleader issue.  However, that was precisely what Ps sought: that it be held by Ps’ solicitors for safekeeping until trial.  In circumstances where Ps obtained an effective equivalent, I am satisfied that its discontinuance of the Delivery Up Application was “for reasons other than an acknowledgement of defeat or likely defeat”: Uni-Creation Investments Ltd v Secretary for Justice HCMP2166/2015 (unrep, 30 Jun 2017) at §10.

24.  In light of the above, I reject D1’s submission that it be entitled to its costs of the Delivery Up Application.

25.  However, I see the force in D2’s submission that it should not be made to bear the costs of an application which was entirely between Ps and D1 and which, as I have found, was entirely necessitated by D1’s conduct.  All in all, I consider the fair costs order is for D1 to pay P’s costs of the Delivery Up Application.

Conclusion

26.  In conclusion, I make an order that:

(1)  Ps pay D1’s costs of the Norwich Pharmacal Application on an indemnity basis, to be taxed if not agreed, without prejudice to Ps’ right to recover such costs from D2.

(2)  Ps’ costs of the Norwich Pharmacal Application be in the cause.

(3)  D1 pay Ps’ costs of the Delivery Up Application, on a party and party basis, to be taxed if not agreed.