PREDICINE HOLDINGS LTD v. BIANCHI (HONG KONG) LTD AND OTHERS

HCA 1195/2020

[2021] HKCFI 631

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1195 OF 2020

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C O S T S   D E C I S I O N

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A.   Introduction

1.  In my Decision dated 18 January 2021, [2021] HKCFI 123, I dealt with the application by the plaintiff (“P”) for a Mareva injunction and a proprietary injunction against the 3^rd defendant (“D3”), and also an application for certain disclosure.

2.  A Mareva injunction had been granted ex parte, and continued pending the substantive argument, but in my Decision I declined to continue the Mareva injunction.  However, I granted the proprietary injunction in the terms I set out and by reference to the sum of US$1,151,143.  I also granted the order for disclosure in support of the proprietary tracing exercise, limited to the period from 9 July to 8 September 2020 (both dates inclusive).

3.  In light of the somewhat mixed result on the application, I reserved the question of costs to be dealt with by me following written submissions.  The parties (P and D3) have since filed and exchanged written submissions on 25 January and 1 February 2021, that is in accordance with the timetable I set.

4.  Represented again by Mr Felix Ng of Counsel, P asks for an order that 85% of the costs to be paid by D3 on a party and party basis, to be summarily assessed in relation to the costs of and incidental to both the ex parte application before K Yeung J on 25 August 2020 and the continuation summons dated 27 August 2020 (and the two hearings on 4 September 2020 and 14 January 2021).

5.  Represented again by Mr Byron Chiu of Counsel, D3 asks for an order that the costs of and occasioned by P’s application for the Mareva injunction should be to D3, payable forthwith and to be summarily assessed, and that the costs of and occasioned by P’s application for the proprietary injunction (including the order for disclosure in support of the proprietary tracing exercise) be in the cause.

6.  This is my Costs Decision.  In it, I shall adopt the definitions used in my earlier Decision.

B.   Preliminary Point

7.  It is, however, necessary first to deal with a preliminary point which arose after the filing of written submissions.  The point arises because of the matters canvassed by me in my Decision at section B, headed ‘Form of Existing Order’.

8.  As I have indicated, the second round of submissions was filed and exchanged on 1 February 2021.  But, also on the same day, P’s solicitors wrote to the Court a letter marked “urgent”, referring to a CD-ROM only recently obtained from the Court, with the audio recording of the hearing before K Yeung J on 4 September 2020.  P’s solicitors indicated that it had only been possible to listen to the entire transcript after P’s Counsel had filed his reply submissions.

9.  Reference was made to what K Yeung J said at the hearing, which tends to suggest that the Judge thought he was being asked to deal with both an application for a Mareva injunction and one for a proprietary injunction, and that both matters (and the application for discovery) were adjourned by him for substantive argument.

10.  In response, by letter dated 2 February 2021, D3’s solicitors pointed out matters of context relating to the 4 September 2020 hearing.  Those matters include (a) D3’s representatives had only very recently been instructed, (b) no substantive arguments were made or exchanged on any part of P’s application, (c) my Decision made clear that the form of the interim order obtained was only the standard form of a Mareva injunction, and (d) my Decision expressly declined to continue the Mareva injunction, but granted the proprietary injunction.

11.  In my Decision, I proceeded on the basis that it appeared that P thought it was applying for and had obtained both forms of injunction, and that it may well be that the Judge thought he had granted both forms of injunction.  I specifically pointed out that there was no suggestion that the Judge thought he was granting one injunction but refusing the other. Nevertheless, the form of order actually drawn up, which mirrored the order drawn up following the ex parte hearing, was an order only for a Mareva injunction.

12.  Therefore, with respect to both sides, none of the additional points made in the correspondence seem to me to require alteration of the approach to the proper exercise of the discretion on costs.

C.   The Submissions

13.  Mr Ng points to the recognition found at Note 29/1/55 of the Hong Kong Civil Procedure 2021 that the rationale is not clear as to the normal practice for a successful plaintiff granted an interlocutory injunction to be granted his costs in the cause and for a successful defendant to be granted his costs in the cause.  The Note also identifies that courts are showing a greater willingness to depart from that practice.

14.  Mr Ng invites me to depart from the practice on the basis that: (1) P was substantially successful at the hearing on 14 January 2021; (2) the last-minute production of the redacted bank statement by D3 during the hearing was unreasonable conduct within the meaning of RHC Order 65 rule 5(1)(e); and (3) it is fair to make a final costs order for the interlocutory application at this stage, and the Court should look at the merits of the injunction at the time of its application.

15.  As to the first point, Mr Ng submits that identifying the successful party will provide the sufficient answer as to what event a costs order might follow.  Here, the proprietary injunction was intended to keep the injunctive sum of US$1,151,143 intact, pending trial or further order.  That preserves the status quo by ensuring that that sum is ring-fenced and recoverable if judgment is eventually obtained against D3 at trial.

16.  Further, although the Mareva injunction was not continued, one part of the balancing exercise was that the grant of the proprietary injunction would achieve substantially the same effect for achieving justice in the particular interim circumstances.  In any event, P failed only on the point relating to risk of dissipation, but otherwise succeeded on the necessary elements for the grant of a Mareva injunction.  Therefore, there is no reason to depart from costs following the event, simply because P raised an issue on which it failed.

17.  As to the second point, Mr Ng points to the production of evidence (albeit, strictly, not produced as evidence in an affirmation) from the bar table during the hearing, and even then in heavily redacted form.  Mr Ng says the Court can take this kind of “ambushing conduct” into account, and to reflect through the costs order the court’s disapproval of such conduct.

18.  As to the third point, Mr Ng says the court is entitled to look at the merits of the injunction at the time of its application, and take account of the fact that the failure to make a final costs order may have the practical effect of depriving the successful party of some or all of his costs.  Further, he says that an application for interlocutory injunction has “a life of its own”, and there is a clear distinction between entitlement to interlocutory relief and final judgment, where final judgment provides no hindsight.  In this case, the relief sought ex parte and by the continuation summons was wholly interlocutory in nature, and both hearings were part of a self-contained exercise, not amalgamated into any of the final relief sought by the amended statement of claim.

19.  Mr Chiu submits that there is no reason to depart from the general position that costs should follow the event, where the application for continuation of the ex parte Mareva injunction was refused. Because of the form of the ex parte order, and its interim continuation pending substantive argument, and the form of the continuation summons (which referred only to the Mareva injunction), Mr Chiu submits that the bulk of the preparation was in respect of the Mareva injunction, which the court declined to continue.

20.  Mr Chiu acknowledges that the written and oral arguments addressed both forms of injunction and that the hearing dealt with them both, but submits that D3 presented arguments on the proprietary injunction out of prudence only.

21.  As to the costs of and occasioned by the proprietary injunction, Mr Chiu says the costs should be in the cause because that would reflect the (in his submission, very real) possibility that P might at trial be proven wrong in seeking the proprietary injunction presently obtained.  Further, the authorities on applications for continuation of proprietary and Mareva injunctions usually provide for the plaintiff’s costs in the cause.

22.  Additionally, in this case, Mr Chiu submits that there was effectively a ‘fresh’ application for proprietary injunction, which has been granted to preserve the proprietary interest alleged by P but denied by D3, pending that contest being resolved at trial.  If D3 is shown to have the superior proprietary right to the D3 Sum, there is no reason why D3 should not be able to recover its own costs in defending the (wrongly obtained) proprietary injunction.

23.  In his reply, Mr Ng says Mr Chiu has ignored the fact that P was the overall successful party at the hearing, and the fragmentation of the two injunctions into two discrete issues ignores the overall justice achieved by the outcome of the Decision.  Mr Ng also submits that there is no reason to take an “issue-based” approach to costs, where the application for the two different forms of injunction required the parties to present the same materials on the merits of their respective cases, the same legal arguments on the substantive law in relation to the causes of action and defences, and the same legal arguments on the need for relevant disclosure orders.  Mr Ng further submits that there is an inconsistency in the approach put forward by Mr Chiu, when D3 seeks a final costs order relating to the Mareva injunction payable forthwith, but deferring the determination of costs of the proprietary injunction until trial.  Lastly, Mr Ng points out that the proprietary injunction was in effect continued, not granted afresh, in the circumstances that I stated in the Decision that no one could have misunderstood that it was always P’s intention to have applied for both a Mareva injunction and a proprietary injunction.

24.  In his reply, Mr Chiu says Mr Ng’s submissions have disregarded the refusal to continue the Mareva injunction, and repeats that the usual costs order on interlocutory injunctions is that the successful party would have his costs in the cause.  As has been explained in previous cases, the rationale is because the merits of the case are yet to be investigated and determined.  Mr Chiu says that Mr Ng is attempting to re-run an argument he has run before, but which has been rejected by DHCJ Sakhrani, who preferred to follow the approach set down by the Court of Appeal in King Fung Vacuum Ltd v Toto Toys Ltd [2006] 2 HKLRD 785 at § 27.  As to the late production of the redacted bank statement, Mr Chiu says it was to prove the very point already sworn on oath, namely that the amount in the bank account remained above the amount sought to be frozen by the injunction order.  Lastly, he says that Mr Ng has misread part of the Decision, so that if P is ultimately successful in its trust claim an “in the cause” costs order would not deprive it of its costs (even if it does not achieve the remedy of proprietary tracing).

D.   Ruling

25.  As I recorded in my Decision, and as I have touched on above, it was plainly P’s intention throughout to have applied for both a Mareva injunction and a proprietary injunction.  The skeleton arguments specifically traversed all relevant ground for both forms of injunction.  The Judge dealing with the matter both at the ex parte hearing and the return date hearing appears to have been alive to the fact that there was an application for both forms of injunction, or at least he made no distinction so as to grant one and refuse the other.

26.  The problem which arose was that the form of order drawn up and sealed was only a Mareva injunction, and did not actually include any properly drawn proprietary injunction.  The error was compounded by the continuation summons making reference only to the Mareva injunction.  But the substantive argument was always going to address – and did address – both forms of injunction, as the skeleton arguments filed by the parties show.

27.  I am not, therefore, convinced that D3 only addressed the proprietary injunction point as a matter of prudence.  It is correct that the form of the interim order gave rise to the points I dealt with in the Decision, and meant that the first ‘true’ grant of any proprietary injunction properly drawn up was by the Decision.  But, I do not think that is a very weighty factor in the overall assessment of the appropriate costs order.

28.  In any event, I agree with Mr Ng that most of the materials, both evidential and submission, related to matters relevant to both forms of potential injunction.  In so far as there was any separate identification of principle about the different forms of injunction, those principles are well-settled.  There was really only one application, albeit seeking two forms of interlocutory injunctive relief.

29.  Of course, the appropriate costs order must reflect the fact that I declined to continue the Mareva injunction, although I granted the proprietary injunction (even if it might be said that the same practical effect was thereby achieved, of preserving the status quo pending the resolution of all causes of action, in the slightly reduced amount from the Mareva ceiling figure to the D3 Sum).  But, P was the substantial ‘winner’ of the application.

30.  The appropriate costs order might also reflect the fact that the failure on the Mareva injunction was (only) on the requirement to show a real risk of dissipation.  That, to an extent, turned on the proof provided by the redacted bank statement handed up only at the hearing, though that statement also gave rise to a number of potential questions which may require exploration at some future point of time.

31.  It also seems to me that, at least since CJR, the courts are more ready to deal with costs of interlocutory applications by making final orders, rather than putting them off to await the final outcome of proceedings.  It might also be noted that the King Fung Vacuum case was decided before CJR (and the consequent amendment of the RHC), and I do not think there have to be “very special circumstances” before a court might consider the particular circumstances of a case as justifying giving the successful party his costs in any event or an immediate order as to costs.

32.  The words “very special circumstances” are not to be found in (the new) Order 62 rule 5, and those words appear to fetter the otherwise broad discretion. Instead, the rule identifies what the court shall take into account, to such extent if any as may be appropriate in the circumstances.  Amongst the matters that the court should take into account, perhaps being appropriate in every set of circumstances, are the underlying objectives set out in Order 1A rule 1.  Those objectives include increasing the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the court, and promoting a sense of reasonable proportion and procedural economy in the conduct of proceedings, as well as ensuring fairness between the parties and facilitating settlement of disputes.  One way of achieving those objectives is, when appropriate, making immediate costs orders relating to interlocutory applications (and making summary assessments), so that the parties know where they are on costs as the proceedings progress, rather than leaving matters ‘hanging over’ to the end, with the degree of uncertainty that entails.

33.  Further, it is recognised that the lack of immediacy of orders to pay costs “in the cause” or “in any event” weakens costs as a sanction against unwarranted applications or resistance.  If further authority is needed for such an approach, see for example Wing Fai Construction Co Ltd v Yip Kwong Robert (No 2) (2012) 15 HKCFAR 454 at §5, approving the approach adopted in Midland Business Management Ltd v Lo Man Kui (No 2) [2011] 2 HKLRD 667 at §9.

34.  The court shall, to the extent appropriate, also take into account the conduct of the parties, including whether it was reasonable for a party to raise or pursue or contest a particular allegation or issue, and the manner in which the party has done so.  In this case, it seems to me to have been entirely reasonable for P to have sought both forms of injunction as were sought. 

35.  Further, though I place no particular weight on the production at the hearing of the redacted bank statement as an element of conduct, I have made comments about the state of the evidence overall – which, as I indicated in the Decision, encompasses both what it did show as well as what it did not, and what I might have expected to have seen but was not shown. I have taken account of all the arguments I have rehearsed above, and given them such weight overall as seems to me to be apt.

36.  Each case must be dealt with on its own particular circumstances, but the court has a very broad discretion (of course, to be exercised judicially) as to the appropriate costs order to make on those particular circumstances.

37.  In the particular circumstances of this case, and in the exercise of my discretion, I think the appropriate order is that (a) there be no order as to the costs of the ex parte application (limited to the costs immediately referable to the ex parte hearing, as opposed to the evidence which was also used later), and (b) D3 shall, within 14 days of the summary assessment, pay 70% of P’s costs of the continuation summons (including the costs of both hearings on 4 September 2020 and 14 January 2021).

38.  For the avoidance of doubt, I make no order as to the costs of the costs argument.

39.  As to the assessment of costs, P has provided a Statement of Costs for Summary Assessment, claiming the total sum of $660,518. That figure includes the costs of the ex parte application, which must be stripped out.  Further, Mr Chiu has asked that if I make any order of costs in favour of P immediately or in any event, for D3 to have 7 days to comment on that Statement and make any objections to it.  I direct that D3 must provide any comments/objections by 5pm on 19 March 2021.  I will then deal with the summary assessment on the papers, and identify the 70% element which D3 is to pay.