NEC TOKIN HONG KONG LTD v. CHEUNG KIN KEUNG AND ANOTHER

HCA1960/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1960 OF 2012

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RULING ON COSTS

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1. On 23 May 2013, judgment was handed down with an order nisi of costs in favour of the plaintiff. The plaintiff and the 2^nd defendant seek to vary the order nisi made.

2. The plaintiff seeks an order that the costs should not be confined to the costs of its summons dated 16 April 2013 but should include the costs of and incidental to its earlier summonses dated 22 October 2012 (issued after obtaining an ex parte injunction on 19 October 2012) and 10 January 2013, to be paid forthwith on an indemnity basis with certificate for 2 counsel.

3. The 2^nd Defendant seeks an order that costs be in the cause; alternatively, that costs be the plaintiff’s costs in the cause; and alternatively, that any costs order made in favour of the plaintiff be ‘in any event’, such costs to be confined to the costs of the summons of 16 April 2013 and taxed on a party to party basis without certificate for 2 counsel.

History of the proceedings

4. Following the grant of an interim injunction by Andrew Chan J on 19 October 2012 restraining each of the defendants from diminishing the value of his Hong Kong assets up to a value of US$6,320,108.94, the plaintiff issued an inter partes summons on 22 October 2012.  That summons came before Poon J on 26 October 2012.  The injunction was varied and adjourned to 11 January 2013.

5. On 10 January 2013 the plaintiff took out a summons to reduce the level of living expenses the 2^nd defendant was allowed.  On 11 January 2013 Poon J ordered that application to be heard together with the 22 October summons which he adjourned for substantive argument with 2 days reserved and continued the injunction.  The hearing of the injunction was scheduled for 14 and 15 May 2013.

6. Meanwhile, the 2^nd defendant took out a summons on 12 April 2013 returnable before Mimmie Chan J on 19 April 2013, effectively volunteering to increase the upper limit of the injunction to US$6,636,239.66, to reduce the level of living expenses sought by the plaintiff in correspondence and to provide the disclosure previously ordered.

7. This prompted the plaintiff to issue a summons on 16 April 2013 seeking an order (1) to increase the upper limit of the injunction (already conceded by the summons of 12 April); (2) to remove the provision for the 2^nd defendant’s living and legal expenses (“the exclusion order”); and (3) disclosure for the purpose of enabling it to trace its misappropriated assets (“the disclosure order”).

The issues

8. As noted in §§2 and 3 of my judgment, only the exclusion order and the disclosure order were live issues at the hearing.  Whether or not the plaintiff had made good its case for an injunction was not in issue.  It was conceded that the plaintiff was entitled not only to have the injunction continued but also to have the upper limit increased.  So the hearing was not a contested injunction hearing of the common garden variety.

9. Rather, the following issues fell to be determined:

a) whether the plaintiff had a proprietary claim against funds that had been wrongfully misappropriated from it; and if so,

b) whether the 2^nd defendant could show that he was a bona fide purchaser for value without notice; and if not,

c) whether there was a legal basis for an exclusion order and if so,

d) whether the discretion should be exercised in favour of the plaintiff; and

e) the scope of the disclosure order.

These were discrete issues.

10. Given the nature of the issues that fell for determination, I do not consider the cases cited regarding the ‘usual order for interlocutory injunctions’ to be strictly applicable.  I derive little assistance from those authorities.

11. I turn now to consider the costs order that would be appropriate.

12. Underpinning an exclusion order is that the plaintiff’s claim is a proprietary claim.  The issue of a proprietary claim was raised in late March 2013, some 5 months after injunction was first obtained and 6 weeks or so before the hearing.  The exclusion order sought was not only raised rather late in the day, it was a novel matter inasmuch as it would appear that there was no Hong Kong precedent for it.  In those circumstances, the 2^nd defendant could not fairly be criticised for opposing it and having the matter decided by the court.  Accordingly, I do not consider that any basis for ordering indemnity costs has been made out.

13. The plaintiff seeks an order that the costs be paid forthwith on the basis that the 2^nd defendant’s opposition of the plaintiff’s application “was unnecessary and unmeritorious and as a result substantial costs have been wasted”.  The plaintiff cited Midland Business Management Ltd v Lo Man Kui (No. 2) [2011] 2 HKLRD 667 where at §§9-10, Lam J opined that the underlying objectives of the Civil Justice Reform should be taken into account in exercising the court’s discretion and stated that “[u]nwarranted interlocutory applications should normally be sanctioned by an immediate costs order”.

14. Given that I am of the view that the 2^nd defendant was entitled to have the exclusion order issue decided by a Hong Kong court, the question of sanction does not arise.

15. However, the hearing effectively only concerned the discrete issues all of which have now been decided.  The plaintiff has succeeded on all of them and has had to incur substantial costs in the process.  It should not have to wait to recover those costs.  In the circumstances of this case, I consider immediate taxation of costs limited to the costs of and incidental to the discrete issues to be appropriate.

16. The factual complexity of the case will have become apparent from my judgment.  In addition, there was no Hong Kong precedent for one of the discrete issues that had to be decided.  I have no doubt that the matter justified the engagement of two counsel.  Accordingly, a certificate for two counsel should be granted.

Accordingly the order nisi is to be varied to read:

“The costs of and incidental to paragraphs 2(b), 3, 4 and 5 of the plaintiff’s summons dated 16 April 2013 be to the plaintiff to be paid forthwith with certificate for two counsel, such costs to be on a party and party basis to be taxed if not agreed. All other costs (if any) be reserved”.