DING HUIRONG v. CHINA TIMES SECURITIES LTD AND ANOTHER

HCA 365/2018

[2020] HKCFI 978

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 365 OF 2018

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DECISION ON APPLICATION TO VARY COSTS ORDER NISI

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1.  On 12 March 2020, I handed down my decision[1] in this matter, which are applications by the plaintiff made under Order 14 and Order 14A of the Rules of the High Court[2]. By the Decision, I found, under Order 14A, that the proposition stated by the plaintiff at [1] of the Summons[3] to be correct and adjourn the application for other reliefs pursuant thereto, and dismissed the plaintiff’s Order 14 application.  At [53] of the Decision, I said:

“As for costs, the plaintiff has succeeded on the Order 14A application but not his summary judgment application, which occasioned some submissions on behalf of the 1^st defendant and AIIL. There should therefore be a reduction in the costs to be paid to the plaintiff, and in my view a 5% reduction is fair. Even though the 1^st defendant adopts the submissions of AIIL, it does oppose the application and I see no reason why it should not also be liable for the costs of the plaintiff as well. I therefore make an order nisi that the 1^st defendant and AIIL are to pay 95% of the costs of the plaintiff of and occasioned by the Summons, including the hearing before me, with certificate for two counsel, to be taxed if not agreed”.

2.  Because of the closure of the High Court Registry due to the COVID-19 outbreak, the defendants were unable to file summonses seeking a variation of the costs order nisi within the 14-day limit.  Instead, by letter dated 24 March 2020, solicitors acting for AIIL gave notice that AIIL intended to apply to vary the costs order nisi as soon as the Registry had reopened.  A draft summons was attached stating that the following costs order would be sought in place of the costs order nisi:

“(a) the costs of and occasioned by the Plaintiff’s Summons dated 15 March 2019 and amended on 17 June 2019 (the ‘Summons’) be to the 2^nd Defendant; and

(b) the costs of the hearing of the Summons on 4 November 2019 be reserved, pending the outcome of the trial of this action”.

3.  By letter dated 25 March 2020, solicitors for the 1^st defendant also gave notice of its intention to apply for similar variations in its favour, and attached a draft summons to that effect.

4.  The parties having all agreed to the paper disposal of both applications to vary, I gave directions dispensing with the issue of summonses by the 1^st defendant and AIIL, and for written submissions to be filed.

5.  This is my decision on the applications to vary the costs order nisi by the 1^st defendant and AIIL.  Since what the 1^st defendant is asking for is materially the same as what AIIL is asking for and the former adopts the submissions of the latter, what I say about AIIL’s application applies equally to the 1^st defendant’s.

6.  As can be seen from its draft summons (see [2] above), AIIL seeks to divide up the costs into two parts.  In his submissions, Mr Byron Chiu, for AIIL, clarifies that the “part one costs” (ie costs of and occasioned by the Summons) are intended to cover costs in respect of [3]-[4] of the Summons, ie the Order 14 application (which I dismissed) and an application for a stay pending the final determination of the Order 14 and the Order 14A applications (which I also dismissed since I have decided on both applications). Preparatory work relating to [1] of the Summons, ie the Order 14A application, are to be “captured” in the “part two costs” (ie costs of the hearing) before me on 4 November 2019. 

7.  Therefore, in effect, AIIL seeks to divide up the costs as either being related to the Order 14 application or the Order 14A application.  It says it is entitled to the former as I have dismissed the same, whereas for the latter, costs should be reserved because if the Court eventually decides the primary dispute between the parties, ie whether the plaintiff did enter into the Adam Loan Agreement and the Adam CAA with AIIL, in the plaintiff’s favour, the resolution of the question under Order 14A will turn out to have been unnecessary. 

8.  While the focus at the hearing (for both the skeleton and oral submissions of all parties) was predominantly on the Order 14A application, Mr Chiu submits that

“In essence, most preparatory work for P’s Summons (being mostly affidavits in support, in opposition or in reply) are related to §§3-4 of P’s Summons (ie the summary judgment aspect).

By definition, an O.14A application deals with questions of law and proper construction of documents. It does and should not depend on other factual evidence. Simply put, it would not have been necessary for the parties to file any affidavit evidence in respect of P’s Summons had P not pursued §§3-4 of P’s Summons”.

9.  I do not agree that had the plaintiff only made an application under Order 14A, there would not have been any affidavit evidence.  The plaintiff would still need to set out by affidavit evidence the factual context and basis for the application under Order 14A[4].  It is of course up to the 1^st defendant and AIIL whether to reply to the same.  However, as one can see from my discussion below, they did reply on the “Unlawful Clog Question” which is the issue under the Order 14A application. Even though that question is also the main issue under the Order 14 application, the affidavits/affirmations on that question cannot therefore be said to be unnecessary had only an Order 14A application been made.    

10.  I have re-read the affidavits/affirmations filed by all parties for the Summons. 

11.  The fourth affirmation of the plaintiff is made in support of both applications and in my judgment very few parts thereof are devoted solely to the Order 14 application, as his claimed equity of redemption, which gives rise to the Unlawful Clog Question, forms the plank of both applications.

12.  For the 1^st defendant, Mr Frank Yu, a director thereof, files his third affirmation, wherein he refers to the background facts with a section (“Section E”) on “The Summary Judgment Application”. In my judgment, the rest of his affirmation is relevant to the Order 14A application.  Further, apart from taking the point that the Order 14 application is improper because of the fraud allegations, in Section E, Mr Yu says that

“[the plaintiff’s] application for summary judgment would rise or fall within the determination of the Unlawful Clog Question [ie the issue under Order 14A]”.

Mr Yu then proceeds to refer to various clauses in the Adam Loan Agreement, the event and notice of default, and their legal effects.  In my judgment, as Mr Yu himself readily concedes, these are all relevant to the Order 14A application as well.

13.  For AIIL, Mr Velibor Colovic, its sole director, files an affidavit.  In it, Mr Colovic also suggests that the Order 14 and the Order 14A applications both raise the Unlawful Clog Question and require its determination in the plaintiff’s favour.  While Mr Colovic refers to the factual dispute of whether the plaintiff was a party to the Adam Loan Agreement (and thus making both applications inappropriate), the rest of his affidavit is devoted to various clauses in the Adam Loan Agreement, the event and notice of default, and their legal effects, which are relevant to the Order 14A application as well.

14.  In my judgment, therefore, the 5% reduction in the costs order nisi, which applies to all costs or and occasioned by the Summons, including the costs incurred by the 1^st defendant and AIIL in preparing their evidence, is fair and adequate to take into account the dismissal of the Order 14 application.

15.  Regarding the costs for the Order 14A application, AIIL is in effect submitting that if it loses on the primary factual dispute at the trial, ie if it turns out that the trial judge does find that the plaintiff did not contract with AIIL on the Adam Loan Agreement and the Adam CAA, as asserted by AIIL, then the issue I decided on Order 14A would have been academic and the costs would have been wasted.  That is, AIIL will be seeking to take advantage of its factual case being rejected, and being found to be relying on a document purporting to have been signed by the plaintiff but is found to be not so (and thus the signature thereon purporting to be the plaintiff’s is most probably forged).  I simply do not see how AIIL should be allowed to do that.

16.  Nor do I see that the determination of the Order 14A application by me would be a waste if the matter does proceed to trial and the plaintiff succeeds on the primary factual issue.  The primary case is being run by the plaintiff but the alternative is that if the plaintiff was indeed a party to the Adam Loan Agreement and the Adam CAA he would still be entitled to redeem the Shares on full repayment of the loan advanced with interest.  These alternative cases would be raised, argued and dealt with together at the trial in one go, in which case the preparation for and the making of the submissions on the issue which I decided under Order 14A application would have to be made at the trial in the alternative, irrespective of how the trial judge would, eventually, decide on the primary factual issue.  There is no suggestion that the alternative case would be “hived off”.

17.  I reject AIIL’s submissions (adopted by the 1^st defendant) on the costs of the Order 14A application.

18.  I dismiss the applications of the 1^st defendant and AIIL to vary the costs order nisi, which is hereby made absolute. The 1^st defendant and AIIL are to pay the costs of the applications to vary to the plaintiff, with certificate for counsel.

19.  I direct that the costs of the Summons and of these applications be summarily assessed by me.  The plaintiff is to file and serve his bill of costs within 14 days and the 1^st defendant and AIIL are to file and serve their comments thereon within 14 days thereafter. The plaintiff has liberty to reply thereto within 7 days therafter.