KOMAL PATEL AND OTHERS v. CHRIS AU AND OTHERS

HCA 183/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 183 OF 2014

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COSTS ORDERS

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1.  This decision addresses the question of costs following this Court’s decisions on 28 July 2015 granting an application by the plaintiffs (by original action) for a mandatory injunction against the defendants (by original action) and on 10 November 2015 refusing an application by the 1^st defendant (by original action) for my recusal.

Costs on the mandatory injunction

2.  On 28 July 2015, this Court handed down its decision upon a renewed application made by the plaintiffs (by original action) against the 1^st defendant (by original action) for a mandatory injunction.  The application was granted with the question of costs to be addressed by written submissions from the parties.

3.  The plaintiffs seek an order that their costs of and occasion by the application be paid by the 1^st defendant forthwith and on an indemnity basis, to be summarily assessed; or in the alternative, to be taxed and paid forthwith if not agreed by the parties.  The 1^st defendant opposes the application and requests that the issue of costs be deferred for consideration until the conclusion of the case. 

4.  The plaintiffs argue that they were forced to seek the mandatory injunction because of the obdurate and disobedient behaviour of the 1^st defendant that was contrary to the terms of the previous injunctive order and put at risk the commercial interests the subject of the litigation.  The 1^st defendant argues against the plaintiffs’ application for costs by seeking to question the plaintiffs’ arguments for the injunction which were accepted by the Court in its reasoned decision and complaining about the plaintiffs’ motives and conduct in relation to this action and the impact the proceedings have had on him and his family, both personally and financially. 

5.  Prior to the grant of this application, there had been previous similar applications seeking a variety of prohibitory and mandatory terms to protect the property and commercial interests under dispute by this litigation which I should briefly explain.

6.  On 26 March 2014, this Court granted an injunction to restrain the defendants from doing anything or causing anything to be done which would dispose of or diminish the value of Retribution Limited (Retribution) or Kudeta Limited (Kudeta) without the written consent of the plaintiffs or an order from the Court.  The conditions of the injunction generally imposed obligations on the 1^st and 2^nd defendants as directors of Retribution and Kudeta restraining them from acting in a manner adverse to the interests of the plaintiffs, and further imposing obligations on them by seeking written instructions from the plaintiffs in respect of performing their director’s duties relating to matters that would affect the plaintiffs’ interests in Kudeta.  The plaintiffs also sought a condition which was in the terms of the mandatory injunction that the Court has now granted but it was refused in light of the circumstances that then existed and other conditions that were granted.  On that occasion costs were ordered to be in the cause.

7.  Soon after, there was an application to discharge the injunction on the basis of material nondisclosure which was granted.  At the same time there was an application to regrant the injunction which was also granted.  In the regrant application, the plaintiffs also sought an additional condition which was in the terms of the mandatory injunction that has now granted but it was then refused because the view taken by the Court on the material then before it that the existing conditions would provide sufficient protection of the underlying commercial interests of the plaintiffs.  This was addressed in the Court’s decision on 11 July 2014 which was followed on 6 August 2014 with an order that the costs of the various applications be in the cause.

8.  The plaintiffs revisited the issue of the mandatory injunction which sought the removal of the 1^st defendant as a director of Kudeta and the reinstatement of the 1^st plaintiff thereto; and the appointment of the 1^st and 3^rd plaintiffs as directors of Retribution.  As explained in the decision of the Court granting the application, the injunctive relief in this instance, given the history and circumstances of the case, sought to preserve and maintain the commercial interests at stake which are in deep dispute between the parties by implementing appropriate and necessary temporary measures to meet the justice of the situation. 

9.  Ultimately, the question of costs in respect of the orders for injunctive relief will very much depend upon who is the eventual winner in this litigation, although in this instance the plaintiffs’ submission for costs is largely based on the conduct of the 1^st defendant and the change of circumstances.  These are relevant matters that should be borne in mind when the question of costs eventually arises at the conclusion of the litigation.  I have come to the view that the most appropriate order in relation to this application is that costs be in the cause which is the same order made in the preceding and related applications.

Costs on the recusal application

10.  Both the plaintiffs (by original action) and the 5^th and 6^th defendants (by counterclaim) apply to vary the costs order nisi following the delivery of this Court’s judgment on 10 November 2015, refusing the application by the 1^st defendant (by original action) of my recusal.  The costs order nisi was that the 1^st defendant pays the costs of the other parties, to be taxed if not agreed.

11.  Both parties seek a costs order against the 1^st defendant forthwith and on an indemnity basis, to be summarily assessed or in the alternative, to be taxed if not agreed by the parties.  The grounds upon which the parties seek this variation order are as follows:

(1) The unreasonableness of the 1^st defendant’s pursuit of the grounds in support of his recusal application.  It is argued that the application was unmeritorious and unnecessary.

(2) The application was not made on a timely basis and was made just prior to the trial date without any advance notice and resulting in the proceedings being unnecessarily disrupted. 

12.  The 1^st defendant opposes the application to vary the costs order nisi and requests that the issue of cost be deferred for consideration until the conclusion of the case.  His submissions do not appropriately address the application for costs by the opposing parties as he mainly seeks to reargue or justify the initial application on the basis of bare factual allegations without any supporting evidence and to generally complain about his alleged impecuniosity.

13.  It is complained by the opposing parties that the 1^st defendant’s submissions contained factual allegations which are in the main questions of fact to be determined at trial and wholly irrelevant to the costs application.  They also point out that much of what is submitted by the 1^st defendant are bare assertions from him without any supporting evidence properly before the Court.  I have to agree with these observations by the opposing parties.

14.  The opposing parties also question the alleged impecuniosity of the 1^st defendant.  They refer to the Case Management Conference on 8 August 2015 where the 1^st defendant appeared in person and made extensive submissions on his impecuniosity and how he had no funds to engage legal advisors or experts.  They point out that without notice and some six days later, the 1^st defendant was able to engage solicitors to take out the recusal application just prior to the commencement of the trial.  They further point out that no formal evidence has been filed by the 1^st defendant demonstrating his alleged impecuniosity, notwithstanding the attachments to his submissions which show no more than that he is in debt.  They add that this provides all the more reason why the costs order nisi should be varied so that payment is made forthwith as there is a real likelihood that at the conclusion of the trial of this action he will be incapable of paying costs to the opposing parties.

15.  The opposing parties argue that the recusal application was without merit and accordingly the 1^st defendant should pay the consequences of having initiated and conducted such an application, and therefore costs should follow the event.

16.  The opposing parties resist the suggestion from the 1^st defendant that deferring the question of costs until the conclusion of the trial would not cause much harm to them.  They point out that they have already incurred costs to deal with an unmeritorious and unnecessary application which they should be compensated for and that there is a real likelihood that he will not meet any costs order against him, if not ordered to pay forthwith.  In consequence, they ask that a costs order in their favour be made forthwith and on an indemnity basis, and summarily assessed. 

17.  Section 52A of the High Court Ordinance, Cap 4, gives the Court a general discretion in relation to the costs of and incidental to all proceedings, and grants to the Court “full power to determine by whom and to what extent the costs are to be paid.”  Further guidance is given to the Court in exercising its discretion as to costs by Order 62 rule 5 of the Rules of the High Court (RHC); Hong Kong Civil Procedure 2016 at §62/5/A. 

18.  Key factors that can be taken into account are the result of the application and the degree of success or failure of a party in his arguments before the Court and the conduct of the party in the proceedings by the arguments that he had raised and the manner in which he had raised them and whether he rightly and properly pursued or contested a particular argument. 

19.  Where a court determines an interlocutory application and orders a party to pay costs in respect of the application to another party, the court may, if it considers appropriate to do so, make a summary assessment of the costs by ordering payment of a sum of money to that other party in lieu of taxed costs.  See Order 62, rule 9A of the RHC.  Whenever appropriate, a court should make a summary assessment of costs especially in response to an unwarranted application or an unwarranted resistance to the application, with a view to saving costs or otherwise.  In any event, in appropriate cases when a court can, it should, make a summary assessment of costs, as it is in the best position to make such an assessment and would provide a significant saving of time and resources in avoiding a taxation of the costs.  See Hong Kong Civil Procedure 2016 at §§62/9/10 and 62/9A/1. 

20.  As a general rule, unwarranted interlocutory applications should normally be sanctioned by an immediate costs order.  See Midland Business Management Ltd & Anor v Lo Man Kui [2011] 2 HKC 577 at §§7 to 12 per Lam J (as he then was). 

21.  In deciding whether the costs should be on an indemnity basis it usually has to be shown that the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner.  In general terms, it boils down to whether the proceedings constituted an abuse of the court processes.  See Hong Kong Civil Procedure 2016 at §§62/28/2 and 62/App/12; Choy Yee Chun v Bond Star Development Ltd [1997] HKLRD 1327 at 1333I to 1336J per Stock J.  However, the court has a wide discretion in deciding whether to award costs on an indemnity basis, taking into account any “special and unusual features” in the case.  See Town Planning Board v Society for Protection of the Harbour (No 2) (2004) 7 HKCFAR 114 at §§16 to 18 and 21 per Li CJ.

22.  I bear in mind that I was the subject of the recusal application and that I have to take a step back and be acutely objective in my assessment on the question of costs. 

23.  The submissions of the opposing parties set out detail particulars in support of the two grounds they have submitted to vary the costs order nisi which I do not need to repeat except to say that they show a sufficient basis for me to be satisfied that the grounds are proven. 

24.  I agree that the costs should be paid forthwith and on an identity basis by the 1^st defendant as submitted by the opposing parties.  My primary reason for coming to this conclusion is because of the special and unusual features in this case broadly exemplified by the timing, manner and substance of the recusal application.  

25.  I agree with the opposing parties’ submissions that the application was unmeritorious, unnecessary and unwarranted with the added feature that it was made on the eve of the trial without any prior notice of it.  It caused serious disruption to the proceedings and clearly in my view had a deleterious effect on the efficient and proper disposal of these proceedings.  I have said enough in my judgment to indicate the unworthiness and inappropriateness of various arguments and matters raised in support of the application by the 1^st defendant. 

26.  It concerned a separate matter from the mainstream claim of the litigation, and as a consequence the winning parties are entitled to have their costs immediately as there is no reason for the question or payment of the costs to await or rely on the outcome of the claim. 

27.  Overall, I consider it appropriate to order that the costs be paid by the 1^st defendant forthwith and on an indemnity basis in order to do justice between the parties. 

28.  As I have already explained, I have come to the view that this was an unwarranted application and therefore summary assessment of the costs is both appropriate and suitable in the circumstances of the case in that the application was separate from the mainstream claim and self-contained where a summary assessment of costs can be readily made.

29.  I have had submitted to me summary assessments of the parties’ costs which I assess to be fair and reasonable.  I note that no issue has been taken by the 1^st defendant of the summary assessments as submitted by the parties.

Conclusion

30.  For the foregoing reasons, I order that in relation to the mandatory injunction application that costs be in the cause and that in relation to the recusal application that the 1^st defendant pays the costs of the other parties forthwith on an indemnity basis as summarily assessed.