SUMMER PIONEER HOLDINGS LTD v. HNA GROUP (INTERNATIONAL) CO LTD

HCA 488/2021

[2022] HKCFI 3728

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 488 OF 2021

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BETWEEN

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(By original action)

AND BETWEEN

(By counterclaim)

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DECISION

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1.  This is an application by the Plaintiff to vary a costs order nisi made by this Court in its decision handed down on 10 June 2022 (“the Decision”) dismissing the Plaintiff’s summons to strike out the Defence and Counterclaim, awarding costs to the Defendant.

2.  The rather complicated background is fully set out in the Decision to which reference should be made.

3.  By its summons dated 23 June 2022, the Plaintiff seeks to vary the costs order nisi made in §114 of the Decision to

“The Defendant do have 50% of its costs of the application with a certificate for counsel, such costs to be summarily assessed and payable forthwith.”

4.  The relief is thus limited to challenging the percentage it ought to pay and nothing else.

5.  However, in its written submissions filed 3 months later and dated 23 September 2022, Plaintiff seeks different relief, that the order should be “Defendant’s costs in the cause”.

6.  The proper course would have been for the Plaintiff to have amended its summons. Not only was that not done, it seems that the Plaintiff also did not consider it necessary to provide an explanation for its change of stance.

7.  At the very least, this shows that the summons was taken out without proper consideration. This cavalier approach is not conduct one would expect of responsible legal professionals and merits disapproval.

8.  In its Reply Submissions dated 11 October 2022, the Plaintiff sought to justify the revamped order on the ground that it is more ‘favourable’ to the Defendant in that if successful at trial, the Defendant will receive 100% of costs. But which outcome is the more favourable is a matter for the Defendant and not for the Plaintiff whose views on the subject are neither here nor there.

Variation of costs orders

9.  As a preliminary matter, it should be noted that in Wing Fai Construction Co Limited v Yip Kwong Robert (No 2) [2012] 15 HKCFAR 454 (at §6), Ribeiro PJ agreed with Lam J (as he then was) who pointed out in Midland Business Management Limited v Lo Man Kui (No. 2) [2011] 2 HKLRD 667 (at §10) that in exercising its discretion as to costs, the court is required to take into account the underlying objectives in in O 1A, rule 1.

10.  He also endorsed (at §5) Lam J’s explanation[1] that under the Civil Justice Reform, the court is encouraged to order immediate payment of costs of interlocutory proceedings and if possible by way of summary assessment of costs. The objective is “to discourage unnecessary and disproportionate interlocutory applications”.

11.  In general, after the Civil Justice Reform, the court is more astute to the impact of costs on legal proceedings: see the Midland Business Management case at §12.

12.  It is also trite that the court has a wide discretion on the question of the appropriate costs order. Pursuant to RHC O 62, rule 3(2A), an order that costs follow the event is one of the available options.

The Plaintiff’s grounds

13.  The basis for the revamped relief that the Plaintiff now seeks is that the Defendant was able to avoid the striking out application by making certain “adjustments” to case made by submissions and by avoiding answering key issues put squarely to the Defendant.

14.  As a preliminary matter, the Plaintiff did not appeal the Decision. Nonetheless, the Court is now invited to revisit its Decision in order to work out the “adjustments” and whether the Defendant had avoided answering key issues by reference to the pleadings, affirmations as well as written submissions. But to what end?

15.  As is apparent from the Decision, 5 issues had to be determined for the Plaintiff’s striking out application. The Plaintiff lost on all 5 and now wants 2 of the issues revisited for the purpose of varying the costs order nisi.

16.  Assuming (for the sake of argument) that the Plaintiff succeeds in showing that there were “adjustments” and that the Defendant had avoided answering key issues, matters that caused the Plaintiff to change its position, it would not have changed the outcome which is the dismissal of the Plaintiff’s striking out application.

17.  If the Plaintiff would have lost its application in any event, the fact that it had changed its position on those 2 aspects is simply irrelevant.

(a) Change of position - discharge by conduct

18.  The Plaintiff’s complaint relates to the issue of “discharge by conduct”. As I understand it, the Defendant (in its reply affirmation) referred to principles “well-established as a matter of law with respect guarantees” and it specifically cited the rule in Holme v Brunskill and the rule in Black v The Ottoman Bank. The Plaintiff assumed that the Defendant was specifically relying on those cases when, as transpired in the course of submissions, the Defendant was not specifically relying on those cases but on a more general equitable principle underlying them.

19.  The Plaintiff considers it ‘unfair’ that it should pay costs per the costs order nisi. But where a party chooses to interpret the defence advanced literally when it is capable of a wider or different interpretation, and its application fell to be dismissed in any event, I do not see any unfairness arising such as would warrant a variation of the costs order made.

(b) Implied term

20.  At the time the Plaintiff made its strike out application, it believed there were at least 2 problems with the implied term. However, only one problem is identified in its written submissions, namely, that the Defendant sought to bind non-parties to the HNA Guarantee.

21.  It would appear that the Plaintiff still does not understand the Defendant’s case despite this court’s refusal to strike out the implied term defence for the reasons set out the Decision. Little can be done about that state of affairs. The Plaintiff could have appealed but it did not.

22.  It is now suggested that had the Defendant put forward some cogent argument as to how the implied term could bind non-parties, the Plaintiff could have then decided whether to proceed.

23.  I am unable to fathom how that would have made a difference if, as appears from its submissions, the Plaintiff is still unable to grasp the Defendant’s case.

24.  The Plaintiff further submitted that as the strikeout application was clearly arguable, it was appropriate for it to have been made. But an application under O 18, rule 19 should only be made in cases where it is plain and obvious that it is impossible for the defence raised to succeed, and not where it is merely arguable.

25.  In my view, a party who tries his luck in launching a striking out application that is unsuccessful must take the consequences.

Conclusion

26.  For the reasons stated above and bearing in mind the general principles governing the exercise of the Court’s discretion, the grounds relied on (even if contrary to my view they are made out) do not warrant any variation of the costs order.

27.  Accordingly, the Plaintiff’s application falls to be dismissed with costs to the Defendant with certificate for counsel, such costs to be dealt with as part of the costs order made in favour of the Defendant. The costs order is made final.