ZIMMER SWEDEN AB v. KPN HONG KONG LTD AND ANOTHER

HCA 2264/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2264 OF 2013

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DECISION

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Introduction

1. By its summons dated 18 December 2015, Zimmer Sweden AB (“Zimmer Sweden”) applies for my determination of four reserved costs in its favour.

2. This court handed a decision dated 2 May 2014 (“the Decision”) whereby the application of Zimmer Sweden for the continuation of two ex parte Mareva injunctions and a gagging order were granted and the application of KPN Hong Kong Limited (“KPN”) and Brand Trading Limited (“BT”) to discharge the said ex-parte orders on the ground of material non-disclosure was rejected.

3. In the Decision, I made a costs order (“the Costs Order”) that KPN and BT do pay Zimmer Sweden its costs to be taxed if not agreed excluding the costs of and occasioned by the application of BT for security for costs. There is no application to vary the Costs Order on whatever basis and it was sealed and perfected on 3 June 2014.

4. This court did not however deal with the four reserved costs orders previously made by other judges at all in the Decision.

5. The four reserved costs orders (“the 4 Reserved Costs Orders”) were made in the following hearings:

a.  the ex parte hearing before DHCJ Leung on 21 November 2013 wherein a Mareva injunction was granted against KPN (“the 1^st Mareva Injunction”);

b.  the ex parte hearing before L Chan J on 23 November 2013 wherein a Mareva injunction was granted against BT (“the 2^nd Mareva Injunction”);

c.  the ex parte hearing before DHCJ Yau on 25 November 2013 wherein the gagging order was made against both KPN and BT (“the Gagging Order”);

d.  the inter-partes hearing before DHCJ B Chu (as she then was) on 29 November 2013 continuing the two Mareva injunctions and the Gagging Order and giving directions for the filing of evidence for the purpose of the applications in respect of the said orders before this court (“the Directions Order”).

The Defendants’ Objection

Functus Officio

6. Mr Chang, for the defendants, raises a legal objection to the plaintiff’s application and submits that this court could and should have determined the 4 Reserved Costs Orders in the Decision even in the absence of the parties’ submissions. Now that the Costs Order has been sealed and perfected, this court is functus officio and has no further jurisdiction in this matter.

7. To reinforce his objection, Mr Chang relies on Lu Jun v Yu Qi and Ors, unreported, HCCW 282/2010, 28.11.2013 where Mr Recorder Patrick Fung SC refused to accede to the application of the petitioner to deal with the reserved costs orders made by other judges in interlocutory applications after the Recorder had already ordered the respondents to pay the petitioner the costs of the proceedings on an indemnity basis after trial. The learned Recorder concluded that the proceedings were already concluded when he made the foregoing disposition in regard to the costs of the proceedings. Hence, the Recorder concluded that he was functus officio and had no jurisdiction to deal with the petitioner’s application.

8. I am not convinced that this court is functus officio in respect of the 4 Reserved Costs Orders. The Costs Order was only made at the interlocutory stage and the plaintiff’s claim is far from its final adjudication. The 4 Reserved Costs Orders remain unresolved and the parties are entitled to have them determined by this court or any other courts before a final costs order of the proceedings is made.

9. I maintain this view notwithstanding the definition of “costs reserved” in Hong Kong Civil Procedure 2015 Volume 1 §62/1/3 at p.1129 referred to me by Mr Chang. The definition there is set out as follows:

““costs reserved” means that the costs will be lost and will not be allowed on taxation unless the court makes a specific order dealing with them at the conclusion of the proceedings (British Natural Premium Provident Association v Bywater [1897] 2 Ch.531, Beckley v Colley (1904) 48 Sol. Jo.261; How v Earl Winterton (No.4) (1904) 91 L.T.763)”

10. Mr Chang argues that in the context of the 4 Reserved Costs Orders, the proceedings must be referred to the inter-partes hearing relating to the ex parte orders. Thus, in accordance with the definition, when at the conclusion of the inter-partes hearing this court did not make a specific order, such reserved costs will be lost.

11. Alternatively, Mr Chang submits that if the proceedings can mean the entire action, this court should only make a specific order dealing with them at the conclusion of the present action and it is now premature to make any determination on the 4 Reserved Costs Orders.

12. I cannot accept his submissions. I do not think that the 4 Reserved Costs Orders had to be determined at the conclusion of the plaintiff’s application to continue the ex parte orders lest the reserved costs should be lost and disallowed on taxation. Whilst I agree that this court is in a good position to make the determination, I maintain the view that so long as the entire proceedings are still on foot and alive and there is no order made in regard to the costs of the entire proceedings, the parties are at liberty to apply to this court or any other courts for a determination of any reserved costs orders.

13. Moreover, all of the three English cases referred to in the foregoing definition concerned applications to deal with reserved costs of interlocutory applications after the entry of final judgments amounting to the conclusion of such proceedings. They are no authorities supportive of Mr Chang’s contention. It should be noted that in the British Natural Premium Provident Association case, Byrne J expressly indicated that he would not allow costs reserved not mentioned at the trial after judgment had been passed and entered except under very special circumstances. It follows that even the entry of final judgment is no absolute bar to the determination of a reserved costs order.

14. Secondly, in my view, the definition merely makes it clear that a specific order dealing with a reserved costs order is required before the conclusion of the proceedings for the purpose of taxation. The definition, when properly interpreted, cannot possibly be meant to preclude the court from dealing with reserved costs orders on any occasions other than at the conclusion of the proceedings.  

15. Having concluded that this court has jurisdiction to deal with the 4 Reserved Costs Orders now, I proceed to consider the reserved costs of the 1^st and 2^nd Mareva Injunctions and the Gagging Order first.

16. Ms Fewins points out that as with the Costs Order, these reserved costs should be granted in favour of the plaintiff, following the event. Mr Chang submits that the defendants did not take any part in those ex parte hearing and should not be made liable for any costs reserved therein.

17. Mr Chang further draws my attention to the following dictum of Rogers VP (with whom Le Pichon JA agreed) in King Fung Vacuum Ltd & Ors v Toto Toys Ltd & Ors [2006] 2 HKLRD 785 at §27:

“The tradition order on interlocutory injunctions has been that the successful party in any application for an interlocutory injunction would have his costs in the cause. Following the American Cynamid decision, the practice has frequently been to make both parties’ costs, costs in the cause. There is no justification if one applies American Cynamid principles for giving the successful party his costs in any event, or worse still an immediate order as to costs, unless of course that party has acted improperly or is in some way to be penalized. It could be, for example, that if a plaintiff seeks an interlocutory injunction and the application is totally baseless and does not even establish, for example, that there is a matter fit to be tried, that the Court would then consider that such an order might be made. But those would be very special circumstances. Normally an order of either costs in the cause, or perhaps the successful party’s costs in the cause would be appropriate.”

18. This general approach was adopted by DHCJ H. Wong SC in Guccio Gucci S.P.A. v Cosimo Ludolf Gucci and Ors., unreported, HCA1582/2008, 5.9.2009. At §31, the deputy judge observed that in an interlocutory application such as that case, where the court was not concerned with making final determination of the merits of the case, an apportionment of costs based on the court’s provisional view on the merits of the various issues involved is particularly inappropriate. The deputy judge went on to point out that good reasons must be shown before the court would depart from the usual course of ordering costs in the cause.

19. On these authorities, Mr Chang submits that the reserved costs in respect of the 1^st and 2^nd Mareva Injunctions and the Gagging Order should be made costs in the cause.

20. I agree with the general principles expounded in the foregoing authorities and indeed they are well established. The Costs Order, though at one stage the defendants wrote to this court to ask for a variation, is not the subject matter of this application and I need not explain it in detail. Suffice it to say that when I made the Costs Order I had other different considerations. I had particular regard to the fact that the only live issue was whether the plaintiff had shown a serious question to be tried on the evidence with respect to its proprietary claim on the monies sitting in the respective accounts of the 1^st and 2^nd defendants. The defendants all along did not argue about the balance of convenience. They, in my judgment, particularly after the Civil Justice Reform, should have taken a realistic approach to decide on their position and the inter-partes contest could well have been avoided.  

21. However, for its ex parte hearings, they were plainly indispensable and without them the plaintiff could not have obtained the interlocutory protections it presently enjoys. These applications were allowed on untested evidence only and there is no reason why the general principle explained above should not be applicable. I conclude that such reserved costs should be made costs in the cause accordingly.

22. I would approach the reserved costs under the Directions Order in a different manner.  

23. Mr Chang agrees that the Costs Order can still be varied under the slip rule pursuant to Order 20 r.11, Rules of the High Court after being sealed and perfected: Wong Hung Kar Kee Mimi v Severn Villa Ltd [2014] 1 HKLRD 1088. There, Au-Yueng J pointed out that the slip rule had been applied to correct orders where there was omission of counsel to seek costs and/or interest.

24. The Direction Order was made in the course of the call-over hearing of the inter-partes applications and the hearing was an essential part of those applications. There is nothing to suggest that it could have been dispensed with. My manifest intention of my making of the Costs Order was to allow the plaintiff’s to recover its costs from the defendants in respect of those applications having found their opposition to be unmeritorious. There is no reason why I should disallow the plaintiff’s costs of the call-over hearing at all given the Costs Order. It was merely an omission on my part to expressly state that the Costs Order should also include the reserved costs under the Directions Order.

25. In the premises, I think it is an appropriate case that this court should exercise its discretion and invoke the slip rule to amend the Costs Order to make it clear that the costs of the plaintiff of such applications under the Costs Order should also include the reserved costs under the Directions Order. I opine that it is right for me to do so though Ms Fewins does not expressly suggest this course. I should also make it clear that I am not convinced that the defence would suffer any prejudice as a result in the absence of cogent evidence.

26. For completeness, there was a debate between Ms Fewins and Mr Chang as to whether the Costs Order was an order nisi subject to variation. In light of my clear indications both at the end of the hearing and in my written reply to the defendants’ solicitors directing the defendants to make a proper application to vary the costs order nisi by summons if so advised, it should be abundantly clear to the parties that it was indeed meant to be an order nisi. The parties could have applied to this court to rectify the omission to include the express reference in the Costs Order. In any event, I see no reason why the plaintiff cannot now ask this court to apply the slip rule and include in the Costs Order a reference to the reserved costs of the call-over hearing.

Conclusion and Orders

27. For the reasons given above, I accede to the application of the plaintiff to deal with the 4 Reserved Costs Orders despite the objection of the defendants. For the reserved costs under the Directions Order, I would order that the defendants do pay the plaintiff such costs forthwith to be taxed if not agreed. I would also order that the Costs Order be amended accordingly to reflect this disposition.

28. As regards all other reserved costs under the 1^st and 2^nd Mareva Injunctions and the Gagging Order, they should be made costs in the cause.

29. This application is necessary to dispose of the 4 Reserved Costs Orders. Each party has its role to play in necessitating the present application. I believe that the fairest costs order in respect of the plaintiff’s summons should be costs in the cause. I so order on a nisi basis.

30. Lastly, I thank Ms Fewins and Mr Chang for their helpful assistance.