WU YANG v. DAYUAN INTERNATIONAL DEVELOPMENT LTD AND OTHERS

HCCW 103/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 103 OF 2015

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DECISION ON COSTS

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1.  This is the petitioner’s application for costs of an urgent ex parte on notice application to be paid by the 1st, 2nd, 3rd, 4th, 5th, 7th and 8th respondents (“the respondents”). The respondents made the application at about 5:30 pm on Friday, 10 April 2015 before me as the duty judge.

Background

2.  The history of the matter started with an ex parte application made by the petitioner before A Chow J on 23 March 2015.  The learned Judge granted various injunctions and orders on the application.  Amongst the injunctions and orders were a preservation order preserving certain dividends declared for the 8th respondent (“the preservation order”) and an injunction restraining the dealing with or disposal of such dividends (“the dividends injunction”).  There was a disclosure order directed to the 4th, 5th, 6th and 8th respondents requiring disclosure on how the dividends had been used (“the disclosure order”).  The disclosure order had to be compiled with within three working days.

3.  On 26 March 2015, the respondents applied ex parte on notice to the petitioner before A Chow J for discharge of the preservation order and dividends injunction.  A Chow J adjourned the application to 2 April 2015 and postponed the running of time for the disclosure order to that day.  Owing to the Easter holidays, the time for compliance with the disclosure order would only expire on Friday 10 April 2015.

4.  The parties appeared before Anthony Chan J on 2 April 2015.  The respondents had not filed evidence yet.  They chose to defer the application to discharge the preservation order and dividends injunction to a future date after they had filed evidence to support the application.

5.  They, however, pursued the application to discharge the disclosure order there and then.  They failed.  Anthony Chan J also refused to grant further extension for compliance.  Hence, this order had to be compiled with on or before Friday, 10 April 2015.

6.  The respondents then applied ex parte on notice in the late afternoon on 10 April 2015.  They asked for:

(1)  extension of time for compliance with the disclosure order until the final determination of the respondents’ substantive discharge application and the petitioner’s application to continue the injunction order;

(2)  alternatively, the respondents do have leave to appeal to the Court of Appeal against the Order by Anthony Chan J made on 2 April 2015 (“Respondents’ appeal application”) insofar as it related to the disclosure order; and

(3)  execution of the disclosure order be stayed until the final determination of respondents’ appeal application or any renewed application to the Court of Appeal for leave to appeal against the 2 April 2015 Order or any further order.

7.  The application was supported by an affirmation the contents of which run to 26 pages and written submissions of over 22 pages.  There were also some 20 box files of documents relevant to the application.

8.  The application came before me as the duty judge at about 5:30 pm on that day.  I adjourned it sine die.  I alsogranted liberties for the parties to enquire with the clerks of Anthony Chan J and A Chow J on Monday 13 April 2015 and see whether either of the learned Judges was in a position to hear the application.  I did not grant any interim extension.  I told Mr Mok, SC, leading counsel for the respondents that if he could get a retrospective extension of time on a future date, that would purge any breach of the disclosure order by the respondents.

9.  The respondents, instead of pursuing the application for extension of time or stay of execution pending appeal, chose to comply with the disclosure order.  They e-mailed the compliance documents to the petitioner’s solicitors at 11:53 pm on 10 April 2015.  Assuming that the compliance documents constituted proper compliance, the respondents had complied with the order.  They did not require any extension of time or stay of execution.

10.  It seems that the petitioner’s solicitors were only aware of the compliance in the following morning.  They sent out an e-mail on Saturday 11 April 2015 at 9:53 am to the solicitors for the 2nd, 3rd and 5th respondents (who appeared to be representing the respondents in complying with the disclosure order).  They said in their e-mail:

“…

In light of your letter and attachments, can you please advise your clients’ position in relation to their summons issued yesterday for time extension/leave for appeal (‘Summons’)? Both ourselves and counsel have been and will continue to prepare on the basis that your clients are pursuing the Summons next Monday. This will obviously incur much more costs than if we are solely dealing with the costs of the Summons (if your clients are no longer pursuing the Summons).

Can you therefore advise your clients’ position as soon as possible? Thank you.”

11.  The solicitors for the 2nd, 3rd and 5th respondents responded by an a-mail also on 11 April at 1:39 pm as follows:

“Thank you for your email. The Summons has not been formally issued. In any event, in the light of the disclosure made yesterday, we have to revisit this matter and will not be seeking to go to court on Monday.”

12.  The petitioner’s solicitors then replied by e-mail also on 11 April at 2:09 pm as follows:

“Thank you for confirming that you will not be seeking to go to Court on Monday and informing that the Summons was never issued.

Even though the Summons was never issued, your clients’ ex-parte application was heard before the Honourable Chan J yesterday with notice to us, and we (including counsel) have been preparing for hearing on Monday.  Substantial costs have been incurred by our side which arose out of your clients’ ex-parte application.  This will need to be dealt with, whether by agreement, or in absence of which, we will need to trouble the Court.  Please confirm that we will be dealing with this issue of costs between ourselves (KWM and Li & Partners) first on Monday.”

13.  The solicitors for the 2nd, 3rd and 5th respondents replied on Monday 13 April and asked for proposal on costs.  This issue was not resolved.  Hence, the petitioner made this application.

The dispute

14.  The petitioner now asks for costs of and occasioned by the ex parte application up to the morning of Monday 13 April 2015 to be paid by the respondents forthwith on an indemnity basis to be summarily assessed with certificate for two counsel.

15.  The respondents agree that they should pay costs for the application to be assessed with certificate for two counsel.  But they disagree that the petitioner should have costs after the compliance by the respondents of the disclosure order at 11:53 pm on 10 April.  In any event, they do not think their liability should continue beyond the confirmation by the e-mail of the solicitors for the 2nd, 3rd and 5th respondents sent out on 11 April at 1:39 pm.  They also say that the party and party taxation should apply.

Cut-off time for costs

16.  Mr Lam, counsel for the petitioner submitted that the respondents only indicated positively in the morning of 13 April that their application for extension of time would not be pursued, hence, they should bear the costs incurred by the petitioner for the application up to that date.

17.  However, I think Mr Lam’s submission is factually incorrect.  The e-mail from the solicitors of the 2nd, 3rd and 5th respondents sent out at 1:39 pm on 11 April already said that the summons for the application had not been issued and in the light of the disclosure made on 10 April, the respondents would not be going to court on Monday, 13 April.  The reply by the petitioner’s solicitors at 2:09 pm on the same day demonstrated an understanding that the application would not be pursued in the meantime as they were then seeking to resolve only the question of costs with the respondents’ solicitors.

18.  Mr Lam also submitted in his reply submissions that there was no clear and unequivocal statement by the respondents that they would not pursue the application.  He further submitted that it was up to the respondents to make their stance clear.  If there was any uncertainty, the petitioner was amply justified to continue to prepare on the basis that the application had not been abandoned and that if it was renewed at any time shortly, the petitioner would have to prepare to meet it.

19.  I must say that such attitude in conducting litigation is too passive and lacks a reasonable sense of co-operation between the legal representatives of the litigants.

20.  If there is anything emanating from the other side that is equivocal or uncertain and the petitioner’s solicitors need an urgent clarification of the same, they should not just send out an enquiry and wait for the clarification.  They should be more proactive.  They should chase for the answer, if need be, by phone.

21.  In this case, when they were aware in the morning of Saturday, 11 April that the respondents’ solicitors had sent over the documents for compliance with the disclosure order in the previous night, their immediate query was whether they should continue with their preparation to oppose the application. They thought that perhaps they only had to deal with the costs of the summons if the respondents were no longer pursuing the summons.  They then sent out their enquiring e-mail at 9:35 am to which they got a reply at 1:39 pm.

22.  The enquiry sent out at 9:53 am obviously needed an urgent answer.  I cannot tell why the respondents should have taken more 3½ hours to answer it.  But I think the petitioner’s solicitors, when sending out the e-mail at 9:53 am, should have at the same time picked up the phone and repeated the enquiry verbally.  If the other side could not give an immediate answer, then the petitioner’s team of lawyers could continue with their preparation.  But if there was an immediate and clear answer that the application would not be pursued anymore, then the preparation should stop there and then save the matter of costs.  If there should be any worry that verbal communication leaves no proof, a confirmation by e-mail could follow immediately afterwards.

23.  Since the petitioner’s solicitors did not seek an urgent verbal answer to their query at 9:53 am on 11 April, I would only allow the petitioner’s costs for preparing the opposition up to 9:53 am on 11 April and I so order.

Scale of taxation

24.  Mr Lam submitted for the petitioner that there are some special or unusual features in this application that warrant taxation on the indemnity scale.  The first feature is that the application is an abuse of the process of the court.  The second is a self-engineered urgency.

25.  I have been referred to Hong Kong Civil Procedure 2015, vol. 1 §62/App/12; Choy Yee Chun (the representative of Chan Pui Yiu) v Bond Star Development Ltd [1997] HKLRD 1327; Chu Hung Ching v Chan Kam Ming [2001] 1 HKC 396; KJ V KMLM (unreported HCMC 4/2010, 21 May 2014) §§ 21-23 and Cheung Wei Man Vivien v Centaline Property (unreported HCA 286/2000, 15 December 2006) § 6.

26.  For abuse of process, Mr Lam submitted that this application was the respondents’ second bite of the cherry having failed in their first bite before Anthony Chan J on 2 April.  The fact that there was evidence from the respondents in support of the 2nd application on 10 April but none in the first application on 2 April is a matter of choice by the respondents.  The respondents had chosen to argue the first application without affirmation evidence and on legal arguments only.  Having lost the first application, they could not put in affirmation evidence and apply again on the pretext that there was a material change in circumstances on the ground of availability of affirmation evidence.  This is particularly so when the evidence was known to the respondents all along.

27.  For the second feature, Mr Lam submitted that the respondents all along since 2 April knew that the time for compliance with the disclosure order would expire on 10 April.  But they gave no indication that they would be making a further application for extension of time.

28.  Since the respondents were able to produce a lengthy supporting affirmation, they must have decided to make the application well before 10 April.  In fact, I had on 10 April pointed out that the respondents could have issued a summons for extension of time two days before 10 April and given the petitioner’s solicitors some indication on the evidence or points intended to be relied on. Mr Lam repeated this in support of his application.  I would also observe that the lengthy written submissions of counsel would also have taken some time to prepare.

29.  However, the respondents gave no hint of the application until they suddenly sprang it on the petitioner in the afternoon of Friday, 10 April. Hence, the petitioner submitted that the urgency rendering the application ex parte was self-engineered.

30.  Mr Liu and Mr Yu, counsel for the respondents however submitted that there was nothing unusual or special in this application.  They said that the respondents were unable to seek extension of time on an earlier date because they needed time to take instructions, collate the information and draft the supporting affirmation.  They needed the affirmation to support their case that the petitioner was guilty of material non-disclosure when he appeared ex parte by counsel before A Chow J on 23 March.  The intervening Easter holidays prolonged the time for the work.  Had the respondents been able to rely on these materials on 2 April, they would have done so. 

31.  Counsel also submitted that unless they obtained an extension of time to comply with the disclosure order, their summons to discharge the dividends injunction and preservation order would be rendered nugatory.  But I note that this argument had been raised and rejected previously.

32.  Counsel also submitted that the application, though not pursued afterwards, was not utterly devoid of merit or doomed to fail from the start and should never have been made.  I however do not think the respondents can now rely on the merit of the application now that they have abandoned it and agreed to pay costs of it to the petitioner. In any case, I do not think merit of this application has anything to do with how the application was made.

33.  Having considered the submissions on both sides, I am not satisfied that the mere fact that this application is the second bite of the cherry would justify indemnity costs.  I am however of the view that the respondents have not answered the point that they should have made the application by summons issued in good time and provided the petitioner with some indications on the evidence or points that they intended to rely on within a reasonable time before 10 April. This is something that they should have done. 

34.  To spring on the petitioner the application, which is a second bite of the cherry, on the last day for compliance together with a lengthy affirmation that the respondents had taken days to prepare and lengthy counsel’s submissions, all without the slightest hint beforehand when prior notification to the petitioner could and should have been given is to conduct the application in an oppressive manner.  In these circumstances, indemnity costs should be ordered.

Order

35.  In the premises, I order that:

(1)  the respondents do pay the petitioner the costs of the ex parte application (including the costs of the hearing) up to 9:53 am on 11 April 2015 to be assessed on an indemnity basis, with certificate for two counsel;

(2)  such costs be summarily assessed and paid forthwith;

(3)  the petitioner shall lodge his statement of costs with breakdown for different days for summary assessment under O 62 r 9A within 7 days from this order; and

(4)  the respondents shall file and serve their grounds in opposition within 7 days thereafter.

36.  Since both the petitioner and the respondents have succeeded to some extent in this application, I make no order as to costs on this application.