ALEKSANDR NARIMANOVICH KUSHAEV v. GREENLY HOLDINGS LTD (in liquidation) AND OTHERS

HCA 1022/2019

[2019] HKCFI 3015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1022 OF 2019

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DECISION ON COSTS

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1.  On 6 November 2019 I handed down judgment ([2019] HKCFI 2745) in relation to the application to discharge the Mareva injunction (“the Injunction”) which the plaintiff had obtained against the 2^nd and 3^rd defendants (“Elias” and “Jad” respectively). In that judgment I discharged, but re-granted on slightly different terms, the Injunction against Elias, and discharged the Injunction against Jad. I made a costs order nisi as follows:

(1)  the plaintiff is to pay Jad’s costs of the Injunction and the application to discharge to be taxed if not agreed; and

(2)  the plaintiff’s costs against Elias to be costs in the cause.

2.  By letter dated 11 November 2019 Elias sought to vary the costs order nisi, seeking an order that the costs of the application to discharge the ex parte injunction be paid by the plaintiff and the costs of re-granting be paid by Elias.  By letter dated 12 November 2019 Jad sought to vary the costs order nisi such that the plaintiff should pay Jad’s costs on an indemnity basis, to be paid forthwith.  By letter dated 15 November 2019 the plaintiff responded to the applications, resisting them and contending that the costs order nisi should be maintained.  Each of Elias and Jad responded to the plaintiff’s position by letters dated 15 November 2019.

A. COSTS IN RESPECT OF ELIAS

3.  Elias contends that where an ex parte injunction is discharged for material non-disclosure the usual order for costs is that the plaintiff should pay the costs of the defendant.  He also relies upon Liu Xian Feng Sam v Liu Bo (unreported, 1 August 2005, HCA 5474/2001) in which the plaintiff was ordered to pay the defendants costs of an application to set aside a Mareva injunction, when that injunction was set aside but subsequently re-granted.

4.  The plaintiff contends that both the plaintiff and Elias succeeded to some extent at the hearing, but that the plaintiff was the overall winner because there continues to be a Mareva injunction order against Elias.  He points to the fact that the court accepted that the non-disclosure was inadvertent and suggests that in all the circumstances the cost order nisi is sensible and should be made absolute.

5.  There is no doubt that the court has a wide discretion in respect of costs.  The court must take into account all of the relevant circumstances and reach a view as to what is appropriate having regard to all of those circumstances.  One such circumstance is the way in which courts often deal with the costs of injunction applications, but the court is not bound as a matter of principle to follow decisions of other courts in this respect.

6.  I am very conscious that it has become a frequent occurrence that a successful plaintiff granted an interlocutory injunction is granted his costs in the cause.  It is also entirely understandable that when a defendant applies for the discharge of an interlocutory injunction and obtains a discharge on grounds of material non-disclosure a frequent, if not the normal, order for costs is that the defendant should be entitled to his costs.  In many ways those orders reflect the general proposition that the person who wins an interlocutory application is generally able to recover his costs.

7.  The position is inevitably more nuanced when an injunction is discharged for material non-disclosure, but immediately re-granted on the basis that such a re-grant is the appropriate step.  In such circumstances the defendant has secured a purely technical victory in the sense that, whatever the merits of the material non-disclosure proposition, he has ultimately been unsuccessful in obtaining a complete discharge of the injunction. 

8.  In Liu Xian Feng Sam v Liu Bo the court decided to require the plaintiff to pay the defendant’s costs in such circumstances.  Unfortunately the facts which gave rise to that decision are not set out in the decision itself and thus it is impossible to understand the rationale of the court from the decision which has been provided to me.  In any event, for the reasons I have set out above, I do not consider this decision to be binding as a matter of principle.  Therefore when considering the question of costs it seems to me that I should address the matter from first principles.

9.  The court must discourage any plaintiff from material non-disclosure.  Such discouragement is generally policed through the sanction of discharge of a Mareva injunction obtained by virtue of material non-disclosure.  In the event of an absolute discharge it is almost inevitable that a defendant will recover his costs.  Hence any material non-disclosure does give rise to a real risk of a plaintiff paying the costs of the injunction.

10.  But in this case, I have found that the material non-disclosure was inadvertent and, having regard to the nature of the non-disclosure and the facts of the case as they seem to me from the evidence before me, the default of the plaintiff is not such as to justify the full force of the court’s sanctions against material non-disclosure.  I decided to re-grant the Injunction.  The question is whether the costs incurred ought to follow individually each of the two events (namely the discharge and the re-grant) or whether I should take an overall view, and recognise that the plaintiff is the ultimately successful party, in that he has ultimately maintained the Injunction.

11.  In my view, having regard to the facts of the case, and the inadvertent nature of the non-disclosure, I think that it is appropriate to take an overall view.  As is clear from the judgment I gave, Elias took a much broader opposition to the Injunction than merely non-disclosure.  The non-disclosure allegation which was upheld was only a small part of that multifaceted opposition.  Given that ultimately it made no difference to the end result I do not consider it to be appropriate that Elias should be awarded his costs for the discharge purely because of an inadvertent failure to disclose material which I considered to be relevant.  To look at the matter from a different perspective, I have no doubt that all of the costs, and the overall position of Elias, would have been the same irrespective of whether or not there had been material non-disclosure.  Therefore the non-disclosure has not caused any additional costs and has made no difference to the result.

12.  In those circumstances I am satisfied that the costs order nisi that I made should be made absolute.

B. COSTS IN RESPECT OF JAD

13.  Jad requests the court to order that his costs should be paid on an indemnity basis and forthwith. 

14.  He contends that, upon the authority of Choy Yee Chun (the Representative of the estate of Chan Pui Yiu v Bond star Development Ltd [1997] HKLRD 1327, taxation should be on an indemnity basis where the proceedings were scandalous or vexatious or had been initiated or prosecuted maliciously or for an alternative motive or in an oppressive manner.  He suggests that my judgment demonstrates that there was a complete lack of evidential basis to seek the Injunction against Jad and that the only purpose of applying for the Injunction against him was to gain litigation advantage by putting pressure on Elias through his elder brother Jad. 

15.  Insofar as the application for the costs to be paid forthwith is concerned he says that the Injunction and discharge application is a distinct and separable part of the action, unrelated to the final outcome and that it would therefore be appropriate to tax the costs forthwith failing agreement.

16.  The plaintiff resists the application.  He stresses that an order for costs on a full indemnity basis is an unusual order and should only be made in very rare and exceptional circumstances (per Yeung J in Choy Yee Chun (the Representative of the estate of Chan Pui Yiu) v Bond star Development Ltd).  He suggests that the case against Jad is not so devoid of merit as to be scandalous or vexatious and it may yet prove to be a good case once discovery and evidence have been obtained.  He says that the suggestion that Jad’s inclusion in the action was simply to gain litigation advantage as against Elias is nothing more than speculative, and is in any event denied.

17.  I am not satisfied that this case is one which should trigger an obligation to pay costs on an indemnity basis.  I do not take the view that the case against Jad is scandalous or vexatious and I cannot see any basis to support the proposition that it has been initiated simply so as to put pressure on Elias.  The proposition of Jad is, in reality no more than that because the plaintiff has failed to establish a good arguable case he should pay costs on an indemnity basis.  I do not believe that that is the principle upon which the courts generally grant indemnity costs.  As identified in the Choy Yee Chun case, indemnity costs is a rare order and should not be made in anything other than unusual circumstances.  I do not consider these to be sufficiently unusual to justify exercising the discretion in the manner that Jad suggests.

18.  Neither do I consider it appropriate to order the costs to be paid forthwith.  I accept that an injunction application is separable from the main action but it is inevitably tied into the overall merits and I accept that it remains possible that the plaintiff will ultimately be successful as against Jad.  If it were to be successful, given the nature of the allegations it would, in my opinion, be entirely inappropriate for the plaintiff to have been required to pay costs to Jad in respect of this injunction application.  Therefore I remain of the view that the costs order nisi is appropriate in respect of Jad.  Consequently I now make it absolute.

C. DISPOSITION

19.  I therefore make the following costs orders absolute:

(1)  The plaintiff is to pay Jad’s costs of the Injunction and the application to discharge to be taxed if not agreed.

(2)  The plaintiff’s costs against Elias to be costs in the cause.

(3)  There shall be no further order for costs in respect of the application to vary the costs order nisi.