HO KWOK MING v. WONG HUNG HO AND OTHERS

DCCJ 5031/2021

[2022] HKDC 614

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5031 OF 2021

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DECISION

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A.      BACKGROUND

1.  By a Decision dated 27 April 2022 (“Decision”), this Court granted an interim injunction against the 1^st defendant and made a costs order nisi that the 1^st defendant shall bear the plaintiff’s costs of and incidental to the Summons filed on 29 October 2021 (“the Summons”) (including counsel’s fees incurred for the Summons with all costs reserved), to be taxed if not agreed, with legal aid taxation.

2.  Pursuant to the directions given in paragraph 121 of the Decision, the 1^st defendant applied to vary the said costs order nisi.  It was submitted that the costs of the Summons should be in the cause of the action.  Alternatively, it was contended that an order for “the plaintiff’s costs of the Summons be in the cause” should be made.

B.      LEGAL PRINCIPLES

3.  It is trite that costs is in the wide discretion of the Court by taking into account all the circumstances of the case.  There is no invariable principle against the making of an immediate order as to costs in respect of an application for interlocutory injunction.  Nor is there any “default rule” or “starting point” that the costs of such an application should normally be in the cause of the action: Chow Steel Industries Public Company Limited & Others v Ko Sung & Others [2021] HKCA 1642 at paragraph 21.

4.  In China Medical Technologies, Inc. (in liquidation) & Others v. Samson Tsang Tak Yung & Others [2022] HKCA 42, Chow JA had the following to say:

“8. […] recent authorities after the CJR suggest that the courts are now more ready in interlocutory applications to make an immediate order as to costs, instead of costs in the cause, or plaintiff/defendant’s costs in the cause: see Midland Business Management Ltd v Lo Man Kui (No 2) [2011] 2 HKLRD 667, at §§9-12; Wing Fai Construction Co Ltd v Yip Kwong Robert (No 2) (2012) 13 HKCFAR 454, at §7; Predicine Holdings Ltd v Bianchi (Hong Kong) Ltd [2021] 2 HKLRD 216, at §31; and Chow Steel Industries Public Company Ltd v Ko Sung [2021] HKCA 1642, at §§22-27.

9.      [...]

10. In the context of interlocutory injunctions (including Mareva injunctions), Au J (as he then was) in Mendlowitz & Associates Inc v Winner International Group Ltd, HCA 574/2009 (14 May 2010), said the following:

“[28] I do not think it is now right to say 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.

[29] In Bushbury Land Rover Ltd v Bushbury Ltd [1997] FSR 709, the first instance judge refused to grant an interlocutory injunction against the respondent in relation to passing off on the balance of convenience and further ordered the applicant to pay the respondent’s costs. The applicant sought leave to appeal against that costs order, contending that it should be the respondent’s costs in the cause, which was the normal costs order for interlocutory injunction, and that there was nothing to justify a departure from it in that case. A single Lord Justice dismissed the application for leave, and the applicant renewed its application before two members of the Court of Appeal. In dismissing the renewed application for leave and in dealing with the applicant’s said submissions, Auld LJ said as follows at 712:

‘In my judgment, that argument [that the normal costs order for interlocutory injunction should be the respondent’s costs in the cause unless there was anything to justify a departure] … ignores the clear distinction between entitlement to interlocutory relief and final judgment which underlines Lord Diplock’s identification in American Cyanamid Co v Ethicon Ltd [1975] AC 396 of the criteria on which the court should exercise its discretion whether to grant the former. The fact that a plaintiff may succeed ultimately does not demonstrate that he should have been granted interlocutory relief when the merits of the matter were still unresolved and the court was balancing convenience. Final judgment provides no hindsight, tipping the earlier balance one way or the other.’

…

[30]     There is thus nothing wrong in principle for this Court, in the exercise of its discretion, to look at the merits of the application for the Injunction on its own to decide what proper costs order should be made in all the circumstances, without ‘linking’ it to what may happen at the end of trial or to the action itself.”

11.     In Chow Steel Industries Public Company Ltd, Kwan VP (giving the judgment of the Court of Appeal) quoted with approval §28 of the judgment of Au J above and continued as follows:

“[24] Likewise in England, it is not the law or practice that the costs of interlocutory injunctions should normally be in the cause of the underlying action …

[25] In Albon v Naza Motor Trading Sdn Bhd [2008] 1 Lloyd’s Rep 1, the applicant obtained an interlocutory anti-arbitration injunction on the ground that his signature on the joint venture agreement that contained the arbitration clause was forged. The respondent (Naza) sought inter alia permission to appeal against the judge’s decision to award to the claimant the costs of the application. In refusing to grant permission to appeal, Longmore LJ said at §21:

‘21. The argument for Naza on this issue is that costs are not usually ordered on applications for interim injunctions since it is not until trial that it can be known whether the claimant has the right which he asserts he has. … This is not, however, an invariable rule. The narrow issue in the present case is what is to happen while the forgery issue is being determined; that does not depend on the claimant being right on the forgery issue. Granted that the forgery issue is to be determined in England, Naza was perfectly able to form a view as to the likelihood of their persuading the court that that the arbitration should continue meanwhile. The judge was entitled to conclude that they miscalculated and should suffer the consequences. This is very much a matter for the judge’s discretion and I would refuse permission to appeal on this question.’

[26] Albon was affirmed in Koza Ltd & Anr v Koza Altin Isletmeleri AS [2020] Costs LR 1479, in which Popplewell LJ emphasised at §4 that there is no ‘general rule applicable in all cases’ and ‘no invariable practice’ that where an applicant obtains an interlocutory judgment on the balance of convenience, the court should reserve costs. In that case, the injunction was not of a ‘holding the ring’ type, and the issues which were ventilated upon the application would not be revisited as part of the substantive dispute.

[27]     What is important to note from these decisions is that the court’s hands are not tied.  If factors are present that warrant an immediate order as to costs, the court may exercise in the exercise of its discretion make such an order.”

12.      In our view, it is neither necessary, nor appropriate, to put cases of interlocutory injunctions (including Mareva injunctions) into any special category insofar as costs are concerned.  In all cases, the court has a broad discretion to exercise as to whether to make an immediate costs order in favour of the plaintiff/defendant, or reserve the issue of costs to the trial, or order that costs, or plaintiff/defendant’s costs, be in the cause.  In some cases, it may be appropriate to order that costs, or plaintiff/defendant’s costs, be in the cause as suggested by Mr Alder. However, it is not correct to treat such order as being the default, or prima facie, position.  Each case must be looked at having regard to all relevant circumstances.

13.     In the present case, at the hearing before the judge, the 2^nd Defendant left the issue of good arguable case ‘in the Court’s hand’ (for the purpose of the application in question), but pursued the issues of substantial delay / risk of dissipation, whether the Plaintiffs should have applied ex parte without notice, and material non-disclosure / misstatement.  Save in relation to the issue of material non-disclosure / misstatement (which we will further discuss below), this court has found against him on all other issues, and accordingly held that the Injunction (save §4(2)(a) to (c) and (f) thereof) ought to be continued against him.  The application before the Judge was hotly contested, and substantial costs would plainly have been incurred by both sides.  In our view, this is a case where ‘the merits of the injunction itself as at the time of the application’ would fully justify ordering the 2^nd Defendant to pay the Plaintiffs’ costs of and occasioned by the Continuation Summonses and Discharge Summons.  We do not accept Mr Alder’s submission that the court should adopt the ‘traditional’ or ‘hindsight’ approach in determining the interlocutory costs before the Judge in this case.”

5.  As far as the legal principles are concerned, while Mr Fan and Ms Szeto for the 1^st defendant did not take issue on the propositions set out in the above authorities, they had referred this Court to two authorities of the English Court, namely, Desquenne et Giral U.K. Ltd v Richardson [2001] FSR. 1 and Picnic at Ascot v Kalus Derigs [2001] FSR 2, and submitted that these cases provide useful guidance as to the exercise of the Court’s broad discretion.  It suffices for me to point out that:

(1)     In Desquenne et Giral U.K. Ltd, the arguments raised from both sides were finely balanced, and the reason for the court granting the injunction was to preserve the position, pending the speedy trial, on the basis of “balance of convenience”.  The court also took the view that neither party could be regarded as successful or unsuccessful in that case.  As I will explain further below, the situation herein is quite different;

(2)     In Picnic at Ascot, Neuberger J (as he then was) had made it clear that it would be wrong to treat Desquenne et Giral U.K. Ltd as authority which ties the court’s hands.

C.      DISCUSSION

6.  The 1^st defendant had made a number of points in support of his application.

7.  Firstly, Mr Fan and Ms Szeto reminded this Court that, at the call-over hearing held on 5 November 2021, the plaintiff had initially made an application for an interim-interim injunction.  They alleged that such an application was subsequently “orally conceded and withdrawn” by the plaintiff upon this Court’s indication that it was not minded to grant any interim-interim injunction.  It was therefore submitted that the costs order herein should reflect the plaintiff’s concession and withdrawal of the said application.

8.  I have listened to the audio recording of the hearing held on 5 November 2021 and confirm that what I indicated to the parties in that hearing was that I was unable to give a decision on the plaintiff’s application for interim-interim injunction there and then as it would take time for me to read all the materials placed before the Court.  In the light of those circumstances, in order to save costs and time, I enquired whether I should give directions to the parties for the filing of evidence for the Summons, and for paper disposal thereof.  I told parties that, in such a way, the matter would probably be resolved sooner than having the parties to come back and fix another date for argument of the Summons in consultation with counsel’s diaries.  It was only in such circumstances that the plaintiff decided not to press ahead with the application for interim-interim injunction.  In other words, the plaintiff did not really make any “concession” as alleged. 

9.  The 1^st defendant’s counsel further reiterated that:

(1)     The call-over hearing could have been dealt with on papers but for the plaintiff’s initial application for interim-interim injunction;

(2)     Lengthy skeleton submissions had been lodged for the purpose of the application for interim-interim injunction.

10.  First of all, for the purpose of this variation of costs order nisi application, the 1^st defendant’s counsel have not referred this court to any correspondence between the parties before the hearing by which the 1^st defendant proposed to the plaintiff that the call-over hearing could be vacated.

11.  In any event, the call-over hearing was useful from a case management point of view in that directions were given therein for the plaintiff’s Summons to be dealt with on papers.  This purpose could not be achieved without the call-over hearing on 5 November 2021.

12.  While lengthy skeleton submissions had been lodged by both parties for the interim-interim injunction application, a large proportion thereof was adopted for the purpose of the plaintiff’s Summons at the end of the day.

13.  Having taken all the above matters into account, I do not agree that the plaintiff’s withdrawal of his application for interim interim injunction should have any impact on the costs order of the Summons.

14.  Secondly, it was said that the nature of this injunction was to hold the ring until the dispute between the parties could be properly decided at the trial, and that it would still be open to the trial Judge to hold that the plaintiff should not be entitled to any right of way over the Lot 965 Path.  It was therefore submitted by the 1^st defendant that:

“As there is yet to be a full trial to hear the full evidence and oral testimonies of the parties’ respective witnesses and they are yet to be cross-examined, there would in any event be a risk of injustice to D1 in making a final costs order in favour of P when upon a mature consideration at the trial it may not be made. If D1 is now ordered to pay P’s costs of the Summons, it would be wholly difficult if not impossible for D1 to recover those costs so ordered from P’s undertaking as to damages even if D1 turns out to be the winner at trial. On the contrary, P will not suffer any prejudice in terms of costs if the Court now makes an order that costs be in the cause or P’s costs be in the cause. It is expected that the contents of the affidavits filed for P will be substantially the same, if not the same, as those of P’s witness statements (and hence the evidence to be adduced at the trial). In the circumstances, there will not be a substantial duplication of those costs on P’s part in this regard if the case is to proceed to trial. After all, while the interlocutory injunctive relief sought by P is required to hold the ring, the ring should equally be held for the costs.”[1]

15.  In their reply submissions, Mr Fan and Ms Szeto clarified what they meant by “injustice” referred to above.  It was stated that they fully understood that the costs order nisi did not require the 1^st defendant to pay costs forthwith.  However, they alleged that because the evidence to be adduced by the plaintiff at the trial would be more or less the same as those produced for the purpose of the Summons, in the event the 1^st defendant succeeds at the trial, it would be unfair to him for he would still have to pay for, for example, the costs of the plaintiff’s affirmations filed for the purpose of the Summons (which would be re-used at the trial) anyway.

16.  These arguments are rejected:

(1)     I do not agree that the injunction order granted was just to hold the ring as alleged – The plaintiff had successfully obtained a mandatory injunction pursuant to which the 1^st defendant was ordered to reopen the Lot 965 Path.  That would involve the removal of part of the erected fences;

(2)     While it is open to the trial Judge to hold after trial that the plaintiff should not be entitled to any right of way, it should be borne in mind that this Court had found that the plaintiff has a high degree of assurance that he would succeed at the trial.  There was no appeal against the Decision;

(3)     I do not agree that there is any injustice for the 1^st defendant to be ordered to bear the costs of the affirmations adduced by the plaintiff for the purpose of the Summons even if the plaintiff’s claim in this action is dismissed after trial.  The 1^st defendant has to bear the consequence of failing to resist the plaintiff’s Summons.

17.  Thirdly, while the 1^st defendant recognised the finding that the plaintiff has a high degree of assurance that he will succeed at the trial, it was submitted, in reliance of Desquenne et Giral U.K. Ltd, that the costs of the Summons should be in the cause because “the Court has also granted the injunction on the basis of the balance of convenience”[2].

18.  With greatest respect, this argument is misconceived:

(1)     As mentioned above, it should not be treated as if Desquenne et Giral U.K. Ltd had laid down any hard and fast rule as such;

(2)     The Court has to consider balance of convenience in all applications for interlocutory injunction.  Therefore, it cannot be right for the 1^st defendant to say that the appropriate costs order would be “costs reserved” whenever the Court grants an injunction on the basis of balance of convenience.  In my view, the 1^st defendant’s counsel have lost sight on the fact that what was said in Desquenne et Giral U.K. Ltd was said in the situation where the arguments made by both sides were similarly strong;

(3)     The facts in Desquenne et Giral U.K. Ltd are clearly distinguishable because the plaintiff herein has a much stronger case.

19.  Fourthly, it was submitted on the 1^st defendant’s behalf that he had not acted improperly in resisting the injunction application, and that it was reasonable for him to oppose the plaintiff’s application because of the plaintiff’s unexplained delay.

20.  While “conduct of the parties” and “reasonableness of resisting the application” are factors which the Court could take into account when deciding on costs, these are not the only relevant factors.  Put it in another way, even if it is reasonable for a defendant to oppose an application made by the other side, it does not mean that he is immune from an immediate costs order. 

21.  In the present case, even though there had been unexplained delay on the part of the plaintiff to take out the application, the 1^st defendant, who had all along been legally represented, should know well that delay is not an absolute bar to the grant of an injunction and that the ultimate question is still whether it is just to do so.  He would have to consider whether he should or should not resist the application and assess his chance of success in the process.  However, in the event he miscalculated (as in the present case), he would have to bear the consequence.  There is nothing unfair about that.

22.  Fifthly, Mr Fan and Ms Szeto submitted that:

“Given there was no reasonable or satisfactory explanation as to why P had delayed in their injunction application, the Court should give a costs order to reflect that there has been unreasonable delay: Picnic at Ascot (supra) at §20.”

23.  With respect, counsel had misunderstood paragraph 20 of Picnic at Ascot.  Neuberger J was in fact considering the explanation of delay on the part of the defendant rather than that of the claimant therein.  This was what his Lordship said:

“In the present case I have not been given any reasonable or satisfactory explanation as to why it took the defendants and their advisers between November 15, 1999, when they received the claimants’ not very voluminous evidence in reply to their evidence, and February 2, 2000 before accepting that the injunction should be granted […] the defendant waits till very shortly before trial before acceding to the application, then he must give the court a satisfactory explanation for that delay if he is to be at all confident of avoiding an adverse order for costs, reflecting the fact that he has delayed unreasonably […] I am satisfied on all that I have read and heard that it would be wrong merely to reserve all the costs without compensating the claimants for the loss in costs they have suffered due to the unreasonable delay in the defendants agreeing to the order that is now agreed today.”

24.  As explained in paragraph 120 of the Decision, when I made the costs order nisi, I took the preliminary view that the merits of the injunction application itself as at the time of the application would fully justify ordering the 1^st defendant to pay the plaintiff’s costs of and incidental to the Summons.  Having considered parties’ submissions, I still consider that this is the appropriate approach to be adopted in the present case, because the 1^st defendant had opposed the plaintiff’s application strenuously.  As far as the Summons is concerned, it was argued on the 1^st defendant’s behalf, among other things, that:

(1)     The plaintiff does not have a strong case on right of way;

(2)     The grant of the interlocutory injunction would have the effect of disposing of the entire action;

(3)     There were alternative routes which the plaintiff could use in gaining access to his property;

(4)     Ambulances had never been able to enter Lot 960 via the Lot 965 Path;

(5)     There had been unexplained delay in the plaintiff’s application;

(6)     It is unjust for the Court to grant the interlocutory injunction in the light of such delay.

25.  This Court has found against the 1^st defendant in all the above arguments, except in relation to the point on “unexplained delay”.

26.  In my view, the merits of the injunction itself as at the time of the application would fully justify ordering the 1^st defendant to pay the plaintiff’s costs of and occasioned by the application, and it would only be just if the costs order to be made can reflect the fact that the plaintiff was the successful party in that he had obtained an order of mandatory injunction against the 1^st defendant.

D.      CONCLUSION

27.  For the above reasons, the costs order nisi made in the Decision is hereby made absolute.

E.      COSTS

28.  Costs should follow the event.  I therefore make a costs order nisi that the 1^st defendant shall bear the plaintiff’s costs of and incidental to the variation of costs order nisi application in any event, to be taxed if not agreed.  The plaintiff’s own costs shall be taxed in accordance with the Legal Aid Regulations.

29.  If any party wishes to vary the costs order nisi:

(1)    Such a party shall lodge and serve written submissions within 14 days hereof;

(2)     The other party shall lodge and serve written submissions within 14 days thereafter;

(3)     The applying party shall lodge and serve written submissions in reply within 7 days thereafter;

(4)     The application shall then be disposed of on papers.

30.  The above order nisi shall become absolute in the absence of application to vary within the first 14-day period mentioned above.