BALRAM CHAINRAI v. KUSHNIR FAMILY (HOLDINGS) LTD AND OTHERS

HCA 1462/2014

[2021] HKCFI 976

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1462 OF 2014

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D E C I S I O N

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Application before the court and relevant procedural background

1.  By an earlier decision dated 4 January 2018[1] (“Decision”), I dismissed the applications by the 3^rd defendant Mr Israel Sorin Shochat (“Shochat”) by summonses dated 3 May 2016 and 5 October 2016 respectively to strike out this action against him (“Striking Out Application”) and to adduce additional evidence in the form of the transcript (“Transcript”) of the testimony of the plaintiff Mr Balram Chainrai (“Chainrai”) on 29 August 2012 at the hearing of the arbitration proceedings in Israel between Chainrai and Shochat in support of the Striking Out Application (“Additional Evidence Application”). 

2.  I also made an order nisi that Shochat should pay Chainrai’s costs of and occasioned by the Striking Out Application and the Additional Evidence Application (“Applications” collectively), to be taxed on a party and party basis if not agreed, with certificate for two counsel for the hearings on 12 September 2016 and 22 February 2017 (“Costs Order”).  Pursuant to Order 62, rule 9D(1)[2], unless varied, Chainrai’s costs under the Costs Order would have to be taxed at the conclusion of this action.  See Big Boss Investment Limited v So Lai Kei [2010] HKLRD 793 at [11] per Madam Registrar Au-Yeung (as Au-Yeung J then was); and Dyson Technology Limited v German Pool Group Company Limited, HCA 838/2011, unreported, 19 September 2014, at [23] and [24], per To J.

3.  There was no application by either party to vary the Costs Order, which should in the absence of an extension of time become absolute 14 days after the pronouncement of the Decision, i.e. on 18 January 2018.  See Order 42, rule 5B(6) of the Rules of the High Court (Cap 4A) which stipulates, “Where a written judgment is handed down pursuant to this rule the Court may make therein an order nisi as to costs and, unless an application has been made to vary that order, that order shall become absolute 14 days after the decision is pronounced.”

4.  The Costs Order was drawn up by Chainrai’s solicitors WMC Partners (“WMC”) and was sealed on 18 January 2018.  However, the perfected order is defective in that it fails to reflect the provisional nature of the Costs Order.

5.  Now before the court is Chainrai’s application by summons dated 18 April 2019 (“Summons”) for leave to tax the costs awarded to him under the Costs Order forthwith and for the costs of and incidental to this application to be in the cause of the taxation of Chainrai’s bill of costs under the Costs Order.

Chainrai’s grounds in support of the Summons

6.  Mr Henry Wong of WMC contends on behalf of Chainrai that the Summons is not for a variation or amendment of the Costs Order as suggested by Shochat but is a fresh application for an order properly framed under Order 62, rule 9D(2) which provides: “If it appears to the Court when making a costs order that all or any part of the costs ought to be taxed at an earlier stage it may order accordingly.”

7.  The advanced taxation of Chainrai’s costs under the Costs Order is necessitated by the serious delay of the proceedings caused by Shochat’s repeated unmeritorious interlocutory applications.  More particularly:

(1)     The statement of claim was filed on 11 February 2016.  Instead of filing and serving his defence and (if any) counterclaim on or before 10 March 2016, Shochat took out the Striking Out Application on 3 May 2016.

(2)     After the conclusion of the hearing of the Striking Out Application on 12 September 2016, by a letter dated 15 September 2016, Shochat’s solicitors Hoosenally & Neo wrote to the court enclosing, and seeking leave to rely on, pages 292 to 297 of the Transcript in support of the Striking Out Application. 

(3)     On 23 September 2016, this court directed Shochat to issue a summons, and file and serve a supporting affidavit, for leave to adduce the Transcript.  By a summons dated 5 October 2016, Shochat formally made the Additional Evidence Application, which was heard on 22 February 2017. 

(4)     Both the Applications were dismissed by the Decision with costs against Shochat on 4 January 2018.

(5)     Pursuant to an earlier court order dated 20 May 2016, leave had been granted to Shochat to file and serve his defence and counterclaim on or before 1 February 2018.  However, Shochat did not comply with such order.  Instead, he took out a summons on 31 January 2018 to challenge the jurisdiction of the court (“Jurisdiction Application”).  Master Eliza Chang, after hearing the Jurisdiction Application on 13 September 2018, dismissed it on 8 February 2019.

(6)     Up to the date of the hearing of the Summons on 6 May 2019, which was more than 3 years since the filing of the statement of claim by Chainrai, Shochat had still not filed his defence and counterclaim.[3]

8.  Mr Wong further informed this court that Shochat had consented to having the costs order in favour of Chainrai made by Master Eliza Chang on 8 February 2019 in dismissing the Jurisdiction Application to be taxed forthwith.   In the circumstances, it is submitted that it would be highly unfair and inequitable to Chainrai if he has to wait for his costs under the Costs Order to be taxed only after the conclusion of the action, which has been substantially delayed by the Shochat’s series of unmeritorious interlocutory applications.

Grounds of Opposition by Shochat

9.  Mr Albert Chan, counsel for Shochat, opposes the Summons on the ground that this court has become functus officio such that it has no further jurisdiction over this matter once the Costs Order had become absolute and been perfected.  The proper course for Chainrai is to seek leave to appeal against the Costs Order out of time pursuant to s 14(3)(e) of the High Court Ordinance (Cap 4) and Order 59, rule 2B(1)(c). The present application tries to circumvent the procedural requirements of the court under these provisions.

True nature of the application by the Summons

10.  I do not think Chainrai can circumvent Order 42, rule 5B(6) (already set out in [3] above) by framing the present applicant under Order 62, rule 9D(2) (already set out in [6] above).

11.  Order 62, rule 9D(2) gives the court a discretion to direct immediate taxation in making an order relating to the costs of an interlocutory application.  It does not provide the jurisdictional basis for a judge of the Court of First Instance to make a different costs order after he/she has made an order dealing with the costs of an interlocutory application.  This can only be done under Order 42, rule 5B(6) upon an application to vary made within 14 days or such extended time if the interlocutory costs order has been made on a nisi basis.

12.  Calling a spade a spade, the Summons in effect seeks, and I shall dispose of it as an application for, (1) an extension of time to vary the Costs Order and (2) a variation of the Costs Order by allowing immediate taxation of Chainrai’s costs. 

13.  The discretion to extend time is conferred by Order 3, rule 5(1) and (2) which provides as follows:

“(1) The Court may, on such terms as it thinks just, by order extend or abridge the period within which a person is required or authorized by these Rules, or by any judgment, order or direction, to do any act in any proceedings. (emphasis added)

(2)     The Court may extend any such period as is referred to in paragraph (1) although the application for extension is not made until after the expiration of that period.”

14.  That the court may grant an application for an extension of time for an application to vary a costs order nisi made after the expiry of the 14 day period prescribed in Order 42, rule 5B(6) is made clear by Ma Wan Farming Ltd v Chief Executive in Council [1998] 2 HKLRD 314 (CA).  In that case, the appellant was late in applying to vary the order nisi as to costs made by the Court of Appeal and applied, after the 14 day period under Order 42, rule 5B(6) had expired, for an extension of time, which it contended that the court had a discretion to grant under, inter alia, Order 3, rule 5.  Liu JA said at 317F-I:

“… A judgment clearly takes effect from the date of its pronouncement but when a handed down judgment contains a provisional costs order, the provisional costs order would nevertheless remain tentative, albeit made in a final judgment and the tentative costs order is liable to be re-ventilated as provided for in O.42 r.5B(6) … If an extension were granted for making an application under O.42 r.5B(6), the order nisi would not become absolute because it shall become absolute ‘unless an application has been made to vary’ it within the time prescribed or extended. The order nisi may be made absolute if the application is dismissed or otherwise made final subject to some variation if the application succeeds. The order nisi may be altogether replaced. Time for appeal against costs would run from a final costs order and the procedural predicament postulated by [counsel for the respondent][4] would not arise. In my view, this court has jurisdiction to extend time to the appellant for making an application to vary the order nisi. …” (emphasis and footnote added)

15.  Ma Wan Farming Ltd was followed by the Court of Appeal in Tang Man Kit v Hip Hing Timber Company Limited,CACV 137/2002, unreported, 8 June 2006, in which Cheung JA (with whom Yeung JA agreed)[5] analysed:

“6. In Ma Wan Farming Limited v. the Chief Executive in Council and another (No.2) [1998] 2 HKLRD 314, this Court (Nazareth VP, Liu and Mayo JJA) was of the view that the court has jurisdiction under Order 3, Rule 5 and Order 59, Rule 10 to allow time to be extended for a variation of the costs nisi.

7. …

8. …

9. I am further of the view that Ma Wan Farming Limited was correctly decided. Liu JA held that Rule 5B(6) implicitly authorizes a party to apply to vary an order nisi within 14 days. As the 14 days is a time prescribed by the Rules for the doing of an act in any proceedings, Order 3, Rule 5 and Order 59, Rule 10 (inherent jurisdiction), would allow such a time to be extended.

10. I think the reasoning is sound and supported by the wording of Order 3, Rule 5(1) which provides that

‘5(1) The Court may, on such terms as it thinks just, by order extend or abridge the period within which a person is required or authorized by these rules, or by any judgment, order or direction, to do any act in any proceedings.’ (emphasis added)

As Rule 5B(6) provides for 14 days for a party to vary the order nisi, Order 3 Rule 5(1) is engaged. Once there is jurisdiction to extend time, the application to extend time can be made either before or after the time prescribed by the rules. This is also clear from Order 3, Rule 5(2) which provides that

‘(2) The Court may extend any such period as is referred to in paragraph (1) although the application for extension is not made until after the expiration of that period.’

11.     This reasoning is supported by authorities such as Manley Estates Ltd. v. Benedek [1941] 1 All ER 248 and Regina v. Bloomsbury & Marylebone County Court ex parte Villerwest Ltd [1976] 1 WLR 362.  The fact that Rule 5B(6) provides for an eventual event, namely, the order becoming absolute is not a basis for excluding the jurisdiction[6].  In terms of logic, it is no different from, for example, an order giving judgment or dismissing an action unless a party perform certain acts within a specified period.  In such a case, the court still has jurisdiction to extend time for the act to be done after the period has expired.  While I appreciate the requirement of finality of a decision, the rationale for making a provisional order on costs is that arguments have not been heard and hence the parties are given time to vary the order.  This being the case it is inconceivable that the jurisdiction to vary the costs order can only be exercised if an application is made within the 14-day period but not otherwise.  This being the case, Ma Wan Farming Limited is binding on this Court and hence the Court retains jurisdiction to extend time.”

16.  Lastly, I note that, in a different context, the Court of Final Appeal eschewed a rigid mechanistic approach in Astro Nusantara International BV v PT Ayunda Prima Mitra[7](2018) 21 HKCFAR 12 and emphasised, at [53] and [90], that the discretion to extend time conferred by Order 3, rule 5 is broad and unrestricted, designed to enable justice to be done between the parties, and that the proper test involves looking at all relevant matters and considering the overall justice of the case.  See also Hong Kong Civil Procedure 2021, Volume 1, at §3/5/2.

Whether this court is functus officio

17.  In Lilik Andayani v Chan Oi Ling [2000] 4 HKC 233, relied upon by Shochat, Keith JA said at 237C-G:

“There must, of course, come a time in any proceedings when the court must be regarded as having completed its task. When that time is reached, the court is said to be functus officio. Once that stage has arrived, the court has no further jurisdiction over the case. But when does that stage arrive? The answer given by the common law is when the judge’s order has been drawn up, entered or otherwise perfected. As Slesser LJ said in Millensted v. Grosvenor House (Park Lane) Ltd. [1937] 1 KB 717 at p. 722:

‘It was not sought to be disputed…that it is within the power of a judge at any time before judgment is entered and perfected to alter its terms.  This is the effect of two judgments, the case of In re St. Nazaire Company (1879) 12 Ch D 88, which case it was held, following In re Australian Direct Stream Navigation Co., Millers’ case (1876) 3 Ch D 661, that a judge can always reconsider his decision until the order has been drawn up, and the case of In re Suffield & Watts ex parte Brown (1888) 20 QBD 693, to the effect that ‘so long as the order has not been perfected the judge has a power of reconsidering the matter, but, when once the order has been completed, the jurisdiction of the judge over it has come to an end’…”

18.  I am of the view that this court has not become functus officio insofar as the Costs Order is concerned. 

19.  In so ruling, I respectfully depart from Mr Justice Anthony Chan’s decision in RTX Products Hong Kong Limited v Li Yiu Fai, HCA 1777/2009, unreported, 12 November 2014, also relied upon by Shochat.  In that case, by a judgment dated 6 September 2011, Anthony Chan J upheld the plaintiff’s claim after trial and made an order nisi that the defendant should bear the costs of the action.  In the absence of any application to vary, the costs order nisi became absolute on 20 September 2011.  The judgment, including the costs order nisi, was sealed on 18 October 2011.  The defendant appealed against the judgment, but not the costs order nisi.  The appeal was dismissed on 8 July 2013 with costs to the plaintiff.  The defendant did out take a summons to vary the costs order of 6 September 2011.  The only explanation for the 3-year delay was that the defendant had recently received pro bono legal advice concerning a sanctioned offer made by his solicitors before the trial in September 2009.  In dismissing the application, Anthony Chan J agreed with the plaintiff’s submission that the court had become functus officio such that it had no further jurisdiction over the case upon the perfection of the judgment on 18 October 2011 and any disagreement would then have to be pursued on appeal.

20.  As observed by Liu JA in Ma Wan Farming Ltd at 317B-C, a party is implicitly authorised by Order 42, rule 5B(6) to apply to have an order nisi as to costs varied within 14 days after the written judgment containing such an order is handed down.  And Ma Wan Farming Ltd and Tang Man Kit are binding authorities that the 14-day period mandated by rule 5B(6) can be extended under, inter alia, Order 3, rule 5.  Let us consider the case where a judgment incorporating an order nisi as to costs is sealed before the expiry of the 14-day period for the making of an application to vary the order, which is certainly possible.  In such a situation, would the early perfection of the order nisi extinguish a party’s built-in right under Order 42, rule 5B(6) to apply to vary the order nisi?  The answer is clearly negative.  And given that the time for an application to vary a costs order nisi can (in an appropriate case) be extended, I fail to see how the timing of the perfection of such an order can take away the court’s jurisdiction, where proper, to extend time under Order 3, rule 5 and to vary the order under Order 42, rule 5B(6).

21.  In this regard, I also find what the Court of Appeal said in Tang Man Kit, supra, at [11] (quoted in [15] above) instructive.

Whether time should be extended

22.  In order to succeed on the Summons, Chainrai has to show that there is justifiable reason for not making the application to vary within time and there are merits in having the Costs Order varied to allow immediate taxation: see Tang Man Kit, supra, at [12] per Cheung JA. 

23.  In my opinion, the Summons should be dismissed for lack of a reasonable explanation for the delay. 

24.  As summarised in [7] above, the Summons was prompted by Chainrai’s concern about the delay in the progress of this action resulting from Shochat’s repeated unmeritorious interlocutory applications. 

25.  I am not persuaded by such justification.  By the time of the Decision, almost 23 months had already lapsed since the filing and service of the statement of claim.  While the making of the failed Jurisdiction Application and the appeal therefrom can be said to strengthen the point, the argument in support of the present application could well have been credibly made within the 14 days permitted under Order 42, rule 5B(6).  Further, it is worthy of note that Chainrai issued the writ of summons in this action on 31July 2014 but did not file the statement of claim until 11 February 2016.  Any delay in the progress and conclusion of these proceedings is certainly partly contributed to by Chainrai himself.

26.  It is unnecessary to consider the merits of immediate taxation under the Costs Order.

Disposition

27.  For the aforesaid reasons, I dismissed the Summons.  I also make a costs order nisi that Chainrai should pay Shochat’s costs of and incidental to the Summons, to be taxed on a party and party basis if not agreed with certificate for counsel.