SHENZHEN HINA NEW ECONOMY EQUITY INVESTMENT FUND PARTNERSHIP (LTD PARTNERSHIP) v. UNIPAX PROPERTIES, LLC

HCMP 298/2021

[2021] HKCFI 3371

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 298 OF 2021

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D E C I S I O N

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1.  On 30 September 2021, this Court handed down its Decision: granting an injunction by way of interim relief in aid of an arbitration; refusing the Defendant’s application to be released from its undertaking to the Court; and ordering fortification of the Plaintiff’s cross-undertaking in damages. On 15 October 2021, the Defendant applied to vary the costs order nisi in the Decision, from costs of the application to be in the cause of the Originating Summons, to costs in the cause of the Arbitration, with certificate for two counsel.

2.  The abbreviations used in the Decision are adopted hereinbelow.

3.  The order nisi was made in the Decision, since the hearing which led to the Decision was of the summons issued by the Plaintiff on 11 March 2021 (“Summons”), which sought injunctive relief “until the determination of the Originating Summons” or further order of the Court. Since it was not indicated by the parties at the hearing that there would be no further hearing or trial of the Originating Summons, the order nisi provided for costs in the cause of the Originating Summons, to be heard. Since the hearing on 16 June 2021, a date has been fixed for the Originating Summons to be heard on 14 December 2021.

4.  In its application for costs to be in the cause of the Arbitration, the Defendant argued that there should be a “general costs order” for interlocutory proceedings, for such costs to follow the main event, which is the Arbitration, since the merits of the underlying claims have not yet been determined and the substance and merits of the parties’ claims will only be determined in the Arbitration.

5.  As the Plaintiff pointed out, there is no usual or “general” costs order for interlocutory applications for injunctions. In Mendlowitz & Associates Inc v Winner International Group Ltd HCA 574/2009, 14 May 2010, the Court pointed out that it is not right to say now that as a matter of principle, the costs of an interlocutory injunction should be in the cause unless there is justification for its departure. The Court is entitled to and should look at the merits of the injunction itself as at the time of the application, to decide what should be the proper costs order for that application in all the circumstances, which do not necessarily depend on the outcome of the trial. This approach has been confirmed by the Court of Appeal as recently as November 2021, in the case of Chow Steel Industries & ors v Ko Sung & ors [2021] HKCA 1642. The Court pointed out that post CJR, courts should be more inclined to making immediate costs orders in interlocutory applications, referring to Midland Business Management Ltd v Lo Man Kui [2011] 2 HKLRD 667, and Wing Fai Construction Co Ltd v Yip Kwong Robert (No 2) (2012) 15 HKCFAR 454.

6.  Adopting such an approach, it is not correct, as the Defendant suggested, that costs should only be decided when the merits of the underlying claims in the Arbitration have been decided. As the authorities have emphasized, the court is more astute after the Civil Justice Reform to the impact of costs on legal proceedings and to making an order for immediate payment of costs as a discipline against unmeritorious interlocutory applications.

7.  In this case, whatever the outcome of the Arbitration, the merits and reasonableness of the Plaintiff’s application for the injunctive relief and interim measure, and the Defendant’s resistance of the same by its application to be released from its undertaking in lieu of the injunction, on the grounds of material non-disclosure, lack of evidence of a risk of dissipation of assets, and the adequacy of damages, have all to be considered in the exercise of the Court’s discretion on costs.

8.  Overall, the Plaintiff has been successful on the issues of whether there was material non-disclosure, the adequacy of damages, and on the balance of convenience. The Defendant has been successful only on the need for the Plaintiff’s cross-undertaking as to damages and the fortification of such undertaking, which are important issues in its favour. After considering the submissions made by the parties, I vary the order nisi to order the Defendant to pay to the Plaintiff 60% of the costs of the application for the interim injunction, made by the Summons.

9.  If the only outstanding matter to be argued at the hearing of the Originating Summons on 14 December 2021 is on the costs of the Originating Summons, the parties may consent to an order for the hearing date to be vacated and for the costs to be as varied above.

10.  The order nisi for certificate for one counsel remains unchanged.

11.  The costs of the application for variation are to be paid by the Defendant to the Plaintiff, with certificate for counsel.