SECRETARY FOR JUSTICE v. HONG KONG CABLE TELEVISION LTD

HCA 2561/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 2561 OF 2009

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D E C I S I O N

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1.  The plaintiff sues on behalf of the Government for variable licence fees payable by the defendant (“HKCTV”) in respect of its Internet Protocol Television (“IPTV”) service for 2007, 2008 and 2009. HKCTV disputes liability on the ground that the service falls with the statutory exception so that no variable licence fee is payable. It also disputes the calculation of the variable licence fees, if they are found to be payable.

2.  On 5 May 2015, I handed down judgment in favour of the Government and gave judgment in the sum of HK$2,151,936 being the variable licence fees payable for 2007 and 2008 with interest.  As to costs, I made a nisi order that HKCTV shall pay the Government’s costs of this action, including any costs reserved, to be taxed, if not agreed; such costs order shall become absolute in the absence of application in 14 days to vary.

3.  On 18 May 2015, HKCTV applies to vary the nisi costs order to become that it shall pay only half of the Government’s costs of this action, including any costs reserved, to be taxed, if not agreed.  The Government opposes.

4.  By consent of the parties, directions were made and the application is now disposed of on paper.  The same defined terms and expressions in the judgment are adopted here.

DISCUSSION

5.  Costs is a matter of the discretion of the court.  The starting point is that costs should follow the event.  The starting point does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, though, in appropriate cases, he may be deprived of any costs increased significantly because of such failing issues: see re Elgindata (No 2) [1992] 1 WLR 1207 at 1214A-C, per Nourse LJ (followed in Wang Din Shin v Nina Kung, CACV 460/2002 & 67/2003 (19 April 2005) at §39, per Yuen JA; Hong Kong Kam Lan Kook Ltd v Realray Investment Ltd (No 4) [2005] 4 HKC 162 at §§10-11).

6.  It is the burden of the losing party to show there is good reason to depart from the general rule and to deprive a successful party of costs of his failure on a discrete issue which has significantly increased the costs.  For this purpose, an issue is discrete if it is so distinct and separate in itself that the decision of it constitutes as event: see Hong Kong Kam Lan Koon Ltd at §13 (citing Seepersad v Persad [2004] UKPC 19 (at §24)[1]).  This remains a matter of discretion, which the court will exercise to achieve a just result having regard to the circumstances of the case: see Hong Kong Kam Lan Koon Ltd at §14.

7.  What were said in the above cases provide guidance to the judicial exercise of the discretion as to costs, which remain consistent after the Civil Justice Reform. Only that now O.62, r.3(2) of the Rules of the High Court, Cap 4A expressly provides that the court shall (subject to the rules) order costs to follow event, except when it appears to the court that in the circumstances of the case, some other order should be made as to the whole or part of the costs.

8.  The special matters to be taken into account in exercising discretion are now expressly set out in the new O.62, r.5.  HKCTV specifically relies on r.5(1)(f), which says:

“5. (1) The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account-

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(f) whether a party has succeeded on part of his case, even if he has not been wholly successful;

……”

9.  The two major questions for trial were (A) whether HKCTV’s IPTV service fell within the Internet Exception, and therefore variable licence fees are not payable; (B) if it was not so excepted, and HKCTV is liable to pay variable licence fees in respect of such service, who and how many the subscribers were, and hence the amount of the fees payable.

10.  In respect of question (A), there were the following issues:

(1) Whether the IPTV service contracted from HKCTV covered the transmission of signals up to and ending at the set top box provided to the management office or the incorporated owners and installed at the common area of the building or housing estate, which was IP-based, for the purpose of the Internet Exception.

(2) If the contracted IPTV service covered the transmission all the way to the television sets of the household units, whether the fact that the segment of the transmission between the set top box to the household television sets was not IP-based took the service out of the Internet Exception.

(3) Whether the transmission did not involve the use of globally unique IP addresses as a necessary ingredient of the Internet for the purpose of the Internet Exception.

11.  I found for the Government on issue (1).  This provided the premise for issue (2), but I went on to find that that the transmission between the set top box to the household television sets was not IP-based per se would not take the service out of the Internet Exception.  I found for the Government on issue (3) above, which, in the circumstances, led to the conclusion on question (A).

12.  In respect of question (B), the dispute was whether the variable licence fees payable should be calculated, as HKCTV contended, on the basis of the number of contracting management offices/companies and the incorporated owners of the buildings or housing estates, or, as the Government contended, the number of units of the building or housing estate which had the actual enjoyment of the right to view the licensed television programme service.  I found for the Government on this question.

13.  Hence the judgment on the recoverable variable licence fees.

14.  HKCTV argues[2] that the Government was not entirely successful in that it failed on issue (2) above, which constitutes good reason for at least depriving it of part of its costs.  It argues that issue (2) has significantly prolonged the trial or increased the costs.

15.  HKCTV is not arguing that issue (2), on which the Government failed, was unreasonably raised and argued.  Further, in the first place, it was HKCTV which pleaded the reference to the IPTV service of HKBN and the BA’s ruling dated 28 April 2006 that such service fell within the Internet Exception[3].  That brought about the comparison of the IPTV services provided by HKBN and HKCTV. 

16.  The configurations of the 2 service providers and their comparison formed one of the 3 major topics that the experts were engaged to give opinion on[4].  As I mentioned[5], such evidence were considered not for deciding whether the BA’s ruling in respect of HKBN’s IPTV service is right or wrong.  I felt assisted by the evidence in understanding the transmission pathways, before I considered the ultimate question of what the Internet Exception covers as a matter of statutory interpretation[6].

17.  There is argument as to whether issue (2) was a discrete issue, and the conclusion on this issue constituted a separate and distinct event for the purpose of costs. But HKCTV argues that one needs to consider the impact of the outcome of this issue on the claim.  Due to the conclusion on this issue, it was established that HKCTV’s IPTV service was not subject to the payment of variable licence fees, insofar as and since the time when it also adopted a globally unique IP addresses for its transmission.  Hence failure of the claim for the fees for 2009.  Argued this way, the costs order should reflect a proper measure of success of HKCTV in the outcome of the claim.  I see the force of such argument.

18.  The Government argues that it was an exercise of a public function to bring these proceedings for public interest, and therefore should not be made subject to an adverse costs order in the absence of good reason.  It refers to what are said in Hong Kong Civil Procedure 2015 at §62/5/9.  But I would be slow to apply in the present case what were held in the cases cited in that paragraph, which were in the specific context of proceedings involving professional regulatory bodies and members of the relevant profession.  The present action was commenced by the Government for what was deemed to be a recoverable civil debt[7], as in any other civil litigation.  I do not see sufficient justification for what the Government contends to be taken as a special consideration affecting the exercise of discretion as to the incidence of costs liability in view of the outcome of the present case.  HKCTV also does not seek costs against the Government.

19.  Considering all the arguments, I agree to vary the nisi costs order so that HKCTV shall pay 70% (not half) of the Government’s costs of this action, including any costs reserved, to be taxed, if not agreed.

ORDER

20.  Order as set out above.  Succeeding in the present application, HKCTV shall have its costs of and occasioned by this application, to be taxed, if not agreed.  This costs order is nisi, and will become absolute in the absence of application in 14 days to vary.