DUNAVANT ASIA LTD v. COTTON & JUTE CORP. OF THE 7TH AGRICULTURAL DIVISION OF PRODUCTION & CONSTRUCTION CORPS OF XINJIANG CHINA

HCCL 47/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.47 OF 2004

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JUDGMENT ON COSTS

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The application

1. By summons dated 8 February 2005 the plaintiff herein applies for an order for variation of the costs order nisi made by this court in its judgment dated 28 January 2005.

2. In this judgment, issued consequent upon the defendant’s summons dated 17 September 2004, as amended on 3 December 2004, this court had ordered that there be an interim stay of the proceedings herein pending clarification in terms of further applications mounted by the plaintiff in Chinese proceedings in Urumqi between the same parties to the present action.

3. That judgment had noted (at paragraph 37) that the defendant’s application for an interim stay had succeeded in face of determined resistance by the plaintiff, and in the circumstances an order nisi was made that costs should follow the event.

4. It is this order nisi that now is sought to be varied, the summons so to vary applying for an order that the costs of and occasioned by the defendant’s application be reserved.

The argument

5. On behalf of the plaintiff, Mr Lamplough submitted that the costs order nisi as then made did not accurately reflect the way in which the defendant’s application had been brought before the court.

6. Mr Lamplough took the opportunity to review the procedural history of this application.

7. He observed that on the basis of the defendant’s summons dated 17 September 2004, the relief sought was that the Writ and Statement of Claim be struck out as frivolous, vexatious and/or an abuse of process, and that the plaintiff’s claim in this action be dismissed.

8. It was also on this basis, he said, that the plaintiff had requested, and the court had given leave to the parties to serve, expert evidence of PRC law upon the issue of the final and conclusive nature, or otherwise, of the Urumqi judgment; such evidence had been exchanged on 3 December 2004.

9. The hearing of the application as then presaged by the defendant’s summons had been fixed for 14 December 2004.  However, on 1 December the defendant had taken out an application seeking leave to amend the original summons to seek, in the alternative, an order that “this application be stayed on the principles of forum non conveniens and lis alibi pendens”; this amendment was allowed by consent.

10. In this connection Mr Lamplough correctly observed that the strike out application no longer had been pursued by the defendant, and that it was only in counsel’s skeleton argument at the hearing of the amended application that any mention had been made of an interim stay pending the outcome of the mainland proceedings.  As this skeleton argument had recognised, he said, it was only after resolution of the litigation as it currently existed in China that a decision could be made upon either of the defendant’s applications appearing on the face of the amended summons, that is, either a strike out or the grant of a permanent stay.

11. In the circumstances, Mr Lamlough submitted, the situation is that no order in fact was made upon the specific applications which had been sought by the defendant, even on the basis of the amended summons, and thus it followed that not only should the defendant not have the costs of those applications, but that the plaintiff should have the costs of the application to strike out, or, in the alternative, that such costs should be reserved to the hearing at which an order actually is made upon the defendant’s applications.

12. For the defendant, Ms Lin took issue with this approach.

13. The basic thrust of her submission, as I followed it, was that this was a case in which costs should follow the event; for her part she perceived little difference, in terms of the expenditure of costs and time, between argument on a strike out and that on a stay of proceedings.

14. Accordingly, Ms Lin maintained that the costs of this application should, in effect, be subsumed within whichever head of relief ultimately had found favour with the court, although she did accept that, as a matter of fact, the issue of an interim stay had not been canvassed prior to the argument of counsel during the hearing of the defendant’s application.  She further appeared to concede, albeit belatedly, that if the court were to be against her in terms of her primary submission, then the existing order nisi could be varied to accord recognition to the abandonment of the strike out application.

Decision

15. Mr Lamplough’s catchy approach of ‘played three, won two, lost one’ possessed a certain forensic allure, but at the end of the day I am unpersuaded, in terms of a variation to the costs order, that I should go as far as he submitted should be the case.

16. Although initially I had been attracted by the approach of an order as to costs which made specific reference to the particular issues of the applications for a strike out, for a permanent stay and for an interim stay — after the hearing of this application I have been informed that negotiations took place between the parties on this basis — on reflection I have decided that, at this stage, an order wherein costs to-date thus are crystallised may possibly prove unfair to one or other of the parties.

17. I have come to this view because the present action is subject to an interim stay only, this relief being put into place pending resolution of outstanding applications by the plaintiff to the Urumqi Higher People’s Court and the Urumqi Higher Procuratorate.  Once these matters have been concluded the plaintiff’s situation in the proceedings in China will be clarified and, in consequence, the plaintiff may wish to proceed further in Hong Kong and to apply to lift the interim stay now in place, or alternatively, the defendant may wish to apply to restore its application for a permanent stay/strike out of these Hong Kong proceedings.

18. I recognize that it is only at the stage of final resolution of these applications that the court can deal with costs — in particular in terms of the costs of evidential preparation — with any degree of certainty.

19. Accordingly, upon reflection I have been persuaded, contrary to my initial view expressed at the hearing, that the appropriate course is to reserve all costs incurred to-date.  Arguments as to costs which are valid will not cease to be so if thus deferred; moreover, had I dealt with costs at this juncture I should not have made an order permitting immediate taxation.  By reserving at this stage the court will have the advantage of hindsight when it comes to address the costs involved in the interlocutory applications as mounted by the defendant, and which, as matters presently stand, remain unresolved.

20. Accordingly, the plaintiff has succeeded in its application to vary the existing costs order nisi.  Such variation is reflected in terms of the order set out hereunder.

Order

21. The costs to-date of the defendant’s application by summons dated 17 September 2004 (as amended by consent on 3 December 2004), and the costs of the plaintiff’s application by summons dated 8 February 2005 to vary the costs order nisi made on 28 January 2005, are reserved to this court to be decided upon resolution of the defendant’s substantive application, by its summons dated 17 September 2004 (as thereafter amended), to strike out/stay the proceedings herein.