UNIVERSAL ENTERTAINMENT CORPORATION TIGER RESORT ASIA LTD v. KAZUO OKADA

HCA 2236/2019

[2021] HKCFI 3432

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2236 OF 2019

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R U L I N G

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A. Introduction

1.  By my Decision dated 17 July 2020 [2020] HKCFI 1406, I dismissed the plaintiffs’ application for a Mareva injunction. I made a costs order nisi that the plaintiffs should pay the defendant’s costs, to be taxed if not agreed (“July Costs Order”). By operation of RHC Order 42 rule 5B(6), the July Costs Order was made absolute on 31 July 2020. The July Costs Order was sealed on 30 July 2020.

2.  By my Decision dated 18 September 2020 [2020] HKCFI 2448, I refused leave to appeal against the earlier Decision. I ordered the plaintiffs to pay the defendant’s costs, to be taxed if not agreed (“September Costs Order”). The September Costs Order bears a seal dated 18 January 2021 (though also a filing date of 30 September 2020).

3.  The July Costs Order and the September Costs Order together will be referred to as “the two Costs Orders”.

4.  The defendant renewed his application for leave to appeal against my earlier Decision by a further application to the Court of Appeal. That application was dismissed on 2 December 2020.

5.  Now, by summons dated 26 March 2021 (“Summons”), the defendant seeks leave to be granted that the two Costs Orders be varied to be payable “forthwith”, and that the costs of the application itself be to the defendant payable forthwith, to be taxed if not agreed.

6.  Though the Summons mentions the two Costs Orders in one breath, it seems to me they must be considered separately, and that the approach to be taken may be affected by the difference in the making of those orders:

(1)  in respect of the July Costs Order, the application in effect seeks (a) an extension of time to vary the nisi order, and (b) a variation of the nisi order by allowing immediate taxation of the defendant’s costs;

(2)  in respect of the September Costs Order, the application merely seeks a variation of it to provide for an immediate taxation.

7.  In the affirmation leading the application, the grounds for the defendant to make the application are described as two-fold: (1) the plaintiffs’ interim injunction applications have now come to an end after the Court of Appeal refused to grant the plaintiffs leave to appeal, and (2) the plaintiffs’ interim injunction applications, although interlocutory in nature, are separable and distinct from the main action (which is still at its preliminary stage) and the plaintiffs are required to pay the defendant those costs in any event, even if the plaintiffs succeed in the main action.

8.  I gave directions for the matter to be dealt with by way of paper submission. Submissions were filed by the parties as follows:

(1)  on 12 October 2021, by solicitors for the defendant;

(2)  on 26 October 2021, by Mr Jose Maurellet SC and Mr Benjamin Lam, Counsel for the plaintiffs; and

(3)  on 2 November 2021, by Mr William Wong SC, Counsel for the defendant.

9.  On 3 November 2021, the plaintiffs’ solicitors referred to the reply submissions filed for the defendant, saying that the application appeared now to be premised on a completely different basis not previously raised in evidence or submissions. The plaintiffs’ solicitors invited me to dismiss the new basis, which would not be addressed by them unless I were to require it.

10.  I require no further written materials. This is my Ruling.

B.      Questions at Issue

11.  On the written submissions, the following four questions seem to arise:

(1)  in respect of the July Costs Order, whether the defendant is obliged to apply for relief from sanction under Order 2 rule 5, and if so whether any relief from sanction should be granted (Issue 1);

(2)  whether time should be extended for varying either (a) the July Costs Order and/or (b) the September Costs Order (Issue 2);

(3)  whether there are merits in varying either (a) the July Costs Order and/or (b) the September Costs Order (Issue 3);

(4)  whether immediate taxation was intended by the Court (Issue 4).

12.  It is convenient to deal with each Issue separately in turn, even if to an extent they overlap.

C.      Issue 1

13.  In respect of the July Costs Order, Mr Maurellet rightly accepts that the Court may grant an application for an extension of time for an application to vary a costs order nisi made after the expiry of the 14-day period prescribed in Order 42 rule 5B(6). Such an application for extension of time is made under Order 3 rule 5. But he argues that the defendant also needs to obtain relief from sanction under Order 2 rule 5.

14.  Mr Maurellet cites Sek Chiu Yue v SJ [2019] 6 HKC 273 at §28, where Lam VP (as he then was) held that the combined effect of Order 42 rule 5B(6) and Order 2 rule 4 means that an applicant needs to obtain relief under Order 2 rule 5 before the effect of the order absolute can be overturned, referencing his own judgment in Poon Ching Man v Lam Hoi Pun [2016] 3 HKLRD 815 at §42(g) – but where I note that Lam VP there expressed a rather more tentative view, obiter, in the absence of argument on the point.

15.  Mr Wong submits that the two cases should not be followed and/or are distinguishable. Mr Wong submits that relief from sanction is not relevant to any variation of a costs order, and he points to previous conflicting Court of Appeal authorities in Tang Man Kit v Hip Hin Timber Co Ltd (unreported, CACV 137/2002, 8 June 2006) and Ma Wan Farming Ltd v Chief Executive in Council [1998] 2 HKLRD 314 – both recently cited by Lisa Wong J in Balram Chanrai v Kushnir Family (Holdings) Ltd [2021] HKCFI 976.

16.  I note that in the latter case, Lisa Wong J also referred (at §16) to Astro Nusantara International BV v PT Ayunda Prima Mitra (2018) 21 HKCFAR 12, where it was emphasised at §§53 and 90 (albeit in a different context) that the discretion to extend time conferred by Order 3 rule 5 is broad and unrestricted, designed to enable justice to be done between the parties, and that the proper test involves looking at all relevant matters and considering the overall justice of the case.

17.  In Summit Navigation Ltd v Generali Romania Assigurare Reasigurare SA [2014] 1 WLR 3472, at §27, Leggatt J explained that any application to disapply a consequence specified in a court order for failing to do something within a time specified in the order is an application for relief from a “sanction” within the meaning of the (English) rules. Therefore, it might be said that the defendant is now applying to disapply the consequence (that the order became absolute) for failing to apply to vary the nisi order within the implied time specified by the reference to “nisi” in the order. But, I also note that in the Astro Nusuntara case the CFA declined (at §§59-62) to adopt the English approach to the exercise of discretion, referring to the difference in rules.

18.  In any event, such a broad approach as is applicable to any extension of time under Order 3 rule 5 – namely to achieving overall justice in the circumstances of the case – seems to me to be the practical aim of what is required on any application for relief from sanctions under Order 2 rule 5, which rule mandates the Court to consider all the circumstances including a list of features which focus the mind on considerations as to where the overall interests of justice should lie. Further, both rules require some evidence to provide materials on which the Court might exercise its discretion. So I am not sure that there would be any great difference in the approach either way.

D.      Issue 2

19.  In relation to the July Costs Order, it falls to the defendant to show (1) that there is a justifiable reason for not making the application to vary within time and (2) that there are merits in having the costs order varied to allow immediate taxation (as to which see further Issue 3).

20.  The defendant was 8 months late in taking out the Summons insofar as he seeks to vary the July Costs Order, and 6 months late as regards the September Costs Order. The defendant says he did not make an immediate application to vary both Costs Orders because the interim injunction applications were pending appeal. But this is not a justifiable reason:

(1)  First, the defendant’s explanation has little factual basis. The application for leave to appeal (including the draft Notice of Appeal) was issued on the last possible day, 31 July 2020. That is the same day that time expired for any application to vary the costs order nisi. Even if the defendant believed it likely that the plaintiffs would seek leave to appeal, he assumed his own risk in failing to make the application in time to vary the costs order nisi. Anyway, the application for leave to appeal did not act as any stay.

(2)  Second, there was no firm indication that the defendant wished his costs to be payable forthwith until he took out the Summons. It was not until 3 February 2021 that the defendant told the plaintiffs that he “reserves the right” to apply for variation.

(3)  Third, contrary to the intention to have his costs payable forthwith, the defendant first sought the plaintiffs’ agreement on costs;

(4)  Fourth, even on his own explanation for delay, the defendant failed to seek variation relief promptly. The Court of Appeal dismissed the plaintiffs’ application for leave to appeal on 2 December 2020. The defendant only sought the plaintiffs’ agreement on costs on 3 February 2021 (two months later), and then only issued the Summons on 26 March 2021 (almost another two months later). There is no justifiable reason for the two time gaps, and no explanation is really offered.

21.  As to why immediate taxation is apt, the defendant says he requires funds to alleviate his cash flow problem. He complains about the inability to access his bank accounts or assets whilst facing the satellite proceedings initiated by the plaintiffs in multiple jurisdictions. But, this is again not a justifiable reason:

(1)  First, there is no evidence to support the bare assertion of the defendant’s solicitor. There is no evidence illustrating a mounting cash flow problem, nor does the defendant explain the extent to which his financial situation has allegedly been prejudiced by the satellite proceedings.

(2)  Second, it seems the same argument could have been made at any time prior to 26 March 2021, the date of the Summons.

(3)  Third, the alleged financial difficulties are difficult to reconcile with the significant delay, including the delays even after 2 December 2020.

22.  In sum, in relation to the July Costs Order, I am not satisfied that the circumstances are such that I should exercise the discretion significantly to extend time within which to bring the variation application, whether formal relief from sanction is required or not. In this regard, I have also taken into account my view on the merits points below.

23.  In relation to the September Costs Order, the position is straightforward – subject only to the suggestion that the Court may “clarify” that it had intended to order immediate taxation (see Issue 4 below).

24.  Once an order has been perfected by being sealed by the Court, there is no jurisdiction for a change of mind thereafter, unless the Court has an express power to vary its own previous order. The proper route to seek to vary a sealed order is by way of appeal. The September Costs order was sealed and perfected on 18 January 2020, and it contains no express power for future variation.

25.  The Court is functus officio. By the current application, the defendant is really seeking leave to appeal against the September Costs Order out of time.

E.      Issue 3

26.  The relevant principles as to immediate taxation of costs orders can be found in Wing Fai Construction Co Ltd v Yip Kwong Robert (2012) 15 HKCFAR 454, at §§4-8:

(1)  Whether or not the immediate payment of costs should be ordered is quintessentially a matter within the court’s discretion.

(2)  The matters which the court ought to take into consideration include:

(a)  the extent to which the proceedings are from a taxation point of view separable and self-contained;

(b)  the justice of making such an order having regard to the effect on the cash flow on the respective parties;

(c)  whether the amount at stake on the taxation were sufficient to justify putting the parties to the expense of having a separate taxation; and

(d)  the underlying objectives in Order 1A rule 1.

(3)  Under the Civil Justice Reform, the Court is encouraged to order immediate payment of costs of interlocutory proceedings and if possible by way of summary assessment of costs.

(4)  In pursuing the Order 1A rule 1 objectives, it is necessary to factor in any possible unfairness or prejudice which the party against whom an order for immediate payment of costs is sought may suffer in consequence of such an order.

27.  I accept that the plaintiffs’ Mareva injunction application can be said to be separable and self-contained from a taxation point of view. I also accept that the amount at stake might be sufficient to warrant a separate taxation, where the solicitors of the defendant claim that the provisional costs incurred, on a party-to-party basis, are HK$3,639,000.

28.  On the other hand, the issue of delay militates against ordering an immediate taxation. The defendant was simply dilatory in taking out the Summons. Even on his own reasoning for not applying earlier, he was rather sluggish to act when he might have done so. Further, in the circumstances, it lies ill in the defendant’s mouth to emphasise some aspects of the underlying objectives when his own behaviour falls significantly foul of other such objectives.

29.  The defendant’s tardiness does not readily fit with the suggestion of financial difficulties. I have already referred to the absence of evidence to persuade this Court that justice requires the two Costs Orders to be varied to alleviate the defendant’s alleged financial hardship. There is no sufficient evidence to make good the submissions that the defendant’s ability to participate meaningfully in the action is “hugely” prejudiced. I take the point that the two Costs Orders will ultimately have to be taxed (and paid) “sooner or later” – as Mr Wong submits – and the only question is when. But, that simply identifies the usual discretionary exercise of deciding whether costs are to be payable in any event, or forthwith; it does not provide the answer to that discretionary exercise.

F.      Issue 4

30.  In his reply submissions, Mr Wong makes reference to Order 20 rule 11 and the inherent jurisdiction of the Court to vary its own orders to carry out its own meaning and make its meaning plain. This is the new point, to which the solicitors for the plaintiffs understandably object.

31.  In any event, without needing to traverse the reasonably well-settled principles as to the circumstances when a Court may revisit its own orders, I did not intend for there to be an immediate taxation of the costs in either of the July Costs Order or the September Costs Order. This was not least in the circumstances that no application was made for the costs to be ordered to be payable forthwith.

32.  Though this comment might overlap with the other issues, the July Costs Order was originally made on a nisi basis, and the obvious time to have sought an immediate taxation was to have made the application for variation before the order became absolute. The explanation offered for having made no variation application has already been rejected by me as without merit. It is trite that the plaintiffs’ application for leave to appeal neither (a) acted as a stay of execution of the order the subject of the intended appeal, nor (b) extended or suspended the time within which the nisi order would become absolute.

33.  The September Costs Order was not a provisional order. But though pronounced in my Decision dated 18 September 2020, it was not sealed until at least 30 September 2020 (though the seal on the copy order itself seems to be dated as late as 18 January 2021). Had it been considered that there was a failure to have made clear the intention to be reflected in the order, there was plenty of time to have made an application before it was sealed and perfected.

34.  I also note that, throughout the relevant period, the defendant was represented by leading Counsel, junior Counsel and solicitors.  Though I of course do not know whether advice was sought from Counsel on these points, it might have been; but, in any event, there were solicitors involved.

35.  There is no merit to the “clarification ground” now put forward in support of the Summons.

G.      Result

36.  Even leaving aside the irony of asking for a forthwith order many months after it was made, the Summons falls to be dismissed.

37.  I so order.

H.      Costs

38.  I see no reason why the costs of the Summons should not follow the event and therefore why they should not be borne by the defendant. Therefore, I order the defendant to bear the plaintiffs’ costs of the Summons, to be taxed if not agreed.  The parties will note that, despite obviously being alive to the possibility, I have not used the word “forthwith”.