CHEN HONGQING v. MI JINGTIAN AND OTHERS

HCMP 962/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 962 OF 2017

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D E C I S I O N

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Background

1.  On 27 June 2017, I made an order on the Re-Amended Originating Summons (“OS”) issued by the Plaintiff on 25 April 2017, granting the Plaintiff’s application for the appointment of receivers in respect of shares in the company known as CSI (“Shares”).  An order nisi was made (“Order Nisi”), for the costs of and occasioned by the application made in the OS to be paid by the Defendants to the Plaintiff (in terms of paragraph 5 of the OS). 

2.  Prior to that, the Plaintiff had applied by his summons issued on 25 April 2017 (and re-amended on 22 May 2017) (“Summons”) for interim injunctions and for the interim appointment of receivers in respect of the Shares, pending the substantive hearing of the OS.  After the hearing of the Summons on 5 May 2017, the contested parts of the application for interim relief were dismissed, with costs reserved.  The Decision was handed down on 9 May 2017.

3.  On 27 April 2017, the Intervener had applied to intervene in the action, to be heard in its opposition to the grant of relief on the Plaintiff’s application by the OS and in opposition to the grant of any interim relief.  Such application was not opposed at the hearing of the Summons on 5 May 2017, and the Intervener was granted leave to intervene on that day.

4.  On 11 July 2017, the Plaintiff applied by summons to vary the Order Nisi (“Variation Summons”), seeking an order that the costs of and occasioned by the OS, and by the Summons, should be paid by the Defendants and the Intervener, jointly and severally (paragraph 1a of the Summons), to be taxed on party and party basis if not agreed.

5.  On 24 July 2017, an order was made by consent that the Plaintiff’s Variation Summons be dealt with by paper submissions.

6.  Incidentally, the Defendants had also applied by summons issued on 22 August 2017 to vary the Order Nisi.  That application was out of time, and made after the period of 14 days specified in O 42 r 5B(6), for the Order Nisi to become absolute.  Notwithstanding that the application was made late, the Defendants did not depose to any explanation for the delay nor the grounds of their application, other than dealing with the merits of the underlying case.  Since I was not satisfied that there was any good reason for the delay in the application, the Defendants’ application for variation was dismissed on 1 September 2017.

Costs of the intervention

7.  The Defendants and the Intervener opposed the Plaintiff’s application for variation.  The Intervener sought to argue that the Plaintiff should pay to the Intervener its costs of the summons to intervene (“Intervene Summons”). However, since there is no summons issued by the Intervener, either for variation of the Order Nisi, or to seek an order for the costs of the Intervene Summons (when none was made on the Intervene Summons on 5 May 2017), such application will not be entertained on the Plaintiff’s Variation Summons (Yifung Developments Limited v Liu Chi Keung Ricky HCA 1341/2014, 24 November 2016; Lin Yanjin v Smart Million Engineering Limited HCPI 739/2009, 10 August 2011).  The directions given by the Court on 24 July 2017 were premised on the variations which the Plaintiff sought, as indicated in the Variation Summons.  The submissions to be filed by the Defendants and the Intervener were directed to be filed in opposition to the variations sought by the Plaintiff relating to the costs of the OS and the Summons, and not the Intervene Summons. The Plaintiff and the Defendants did not have prior notice of the nature of the variation sought by the Intervener, until after the written submissions of the Intervener were served.  This cannot be in accordance with the principles of fairness and the other objectives of the CJR.  The costs orders made on the Intervene Summons, on the Summons and on the OS are separate and distinct orders.

Costs of the Summons for interim injunctions

8.  In opposition to the Plaintiff’s application for variation of the Order Nisi, the Intervener argued that the costs of the Summons should be paid by the Plaintiff to the Intervener, since the application for interim relief pending the determination of the OS was in fact dismissed by the Court on the ground of delay, lack of evidence of irreparable harm, and that the relief exceeded the ambit of preserving the status quo then existing.  Alternatively, the Intervener argued that there should be no order as to the costs of the Summons.

9.  In resisting the Plaintiff’s Variation Summons, the Defendants argued that the costs of the Plaintiff’s Summons were reserved in the decision of the Court handed down on 9 May 2017.  As such, the Defendants argued that in the absence of any other specific order dealing with the costs of the Summons, such costs have been lost and should not be allowed on taxation (para 62/1/3 (5), Lin Yanjin v Smart Million Engineering Limited HCPI 739/2009, 10 August 2011).

10.  Although the Plaintiff’s Variation Summons sought to include the variation of the costs of the Summons, the written submissions filed on behalf of the Plaintiff did not press for such variation.  The terms of the variation sought and set out in paragraph 2 of Counsel’s written submissions do not include the costs of the Summons.  Counsel made it clear in the written submissions (paragraph 3) that the Plaintiff is not seeking the reserved costs.  Instead, Counsel for the Plaintiff used the same arguments advanced for the Defendants in paragraph 9 above to resist the Intervener’s attempts to seek the costs of the Summons against the Plaintiff. 

11.  The Defendants urged the Court to treat the Plaintiff’s application for the costs of the Summons as having been unequivocally abandoned.

12.  By the Plaintiff’s issue of the Variation Summons within the period of 14 days specified in O 42 r 5B (6), the Order Nisi did not become absolute, and the Court retains the power and discretion to consider, after hearing further submissions, the costs order to be made on the application by the OS, as well as the reserved costs of the interlocutory application by the Summons.  Both the orders on the costs of the OS and on the Summons were made the subject of the Variation Summons.

13.  Interim injunctions were granted on 5 May 2017, but the contested parts of the Summons heard on 5 May 2007 were eventually dismissed, on the ground that the Plaintiff had failed to establish on the merits his entitlement to the further interim orders sought. Having regard to the overall outcome of the Summons, the appropriate costs order should be that the costs of the hearing of the Summons on 5 May 2017 should be paid by the Plaintiff.

Costs of the Originating Summons

14.  The Defendants and the Intervener further argued that the costs of the Plaintiff’s application by the OS should be in the cause, claiming that to be the traditional principle applied in the grant of interlocutory applications and costs to be ordered thereunder.

15.  I accept the submissions made on behalf of the Plaintiff, that costs are in the discretion of the Court, and that there is no rule of law that the costs of an interlocutory and interim order should be in the cause.  Particularly after the Civil Justice Reform, the courts are more concerned with the merits of the interlocutory application, and the modern approach is for costs to reflect the merits of the particular application and the conduct of the parties in pursuing or resisting an application to the court.  This approach has been amply explained in cases such as Midland Business Management Limited v Lo Man Kui (also known as Howard Lo) HCA 1599/2010, 4 March 2011, cited with approval in Wing Fai Construction Co Ltd v Yip Kwong Robert (No 2) 15 HKCFAR 454, and in Xcelcom Limited and The Chinese University of Hong Kong v BGI-Hong Kong Co Limited HCA 3089/2015, 9 December 2016.

16.  In this case, the appointment of receivers was ordered as an interim measure granted under s 45 of the Arbitration Ordinance (“Ordinance”), to preserve the status quo and to facilitate the process of the arbitral tribunal.  This was the application made by the OS, which can be described as “the cause” in Hong Kong.  The order made for the appointment of receivers is sufficiently self-contained and severable from the determination of the dispute between the parties in the arbitration, and I concluded on 27 June 2017 that the Plaintiff had established the merits for the grant of the order sought.  Ordering that the costs of the application for the interim measure made under the Ordinance should be paid by the Defendants to the successful Plaintiff is more appropriate than to order that the costs should await the outcome of the arbitration, and the tribunal’s determination on the merits of the dispute referred to arbitration.

17.  Since the Intervener applied to intervene and to oppose the Plaintiff’s application for interim measures, and did at the hearing of the OS argue (unsuccessfully) against the grant of the interim measures sought, it is fair that the costs of the Plaintiff’s application by the OS should be paid by the Intervener, jointly and severally with the Defendants.

The Variation

18.  The Order Nisi will accordingly be varied to provide that:

(1) the costs of and occasioned by the Summons be in the cause of the OS, save that the costs of the hearing of the Summons on 5 May 2017 be paid by the Plaintiff to the 1^st to 4^th Defendants and the Intervener; and

(2) the costs of the application by the OS, including the costs of the application by summons issued on 11 July 2017 for variation of the Order Nisi, are to be paid to the Plaintiff by the 1^st to 4^th Defendants and the Intervener jointly and severally, with certificate for 2 counsel, to be taxed on a party to party basis, if not agreed.