IP PUI LAM ARTHUR AND ANOTHER v. ALAN CHUNG WAH TANG AND OTHERS

HCB 3819/2011

[2019] HKCFI 942

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3819 OF 2011

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DECISION ON COSTS

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1.  In my Decision dated 18 January 2019 (“the Decision”), I ordered the respondents to produce the documents set out in paragraph 1 of the Schedule to the applicants’ summons dated 27 April 2018 (“the Summons”) and dismissed the remainder of the Summons. I also made an order nisi that 50% of the applicants’ costs of the Summons be borne by the respondents to be taxed if not agreed.

2.  By a summons dated 29 January 2019 (“the Variation Summons”), the respondents seek to vary my costs order nisi to contend that either (1) 50% of the respondents’ costs of and occasioned by the Summons be borne by the applicants to be taxed if not agreed, or (2) there be no order as to costs of the Summons.  The parties have agreed that the Court should deal with the Variation Summons on paper and written submissions have now been filed by the parties, which have been considered by the Court.  The applicants oppose the Variation Summons and contend that my costs order nisi should be made absolute. 

3.  In determining this application, I have borne in mind the following rules and principles:

 (1) Order 62, rule 3(2) of the Rules of the High Court relevantly provides that “the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.”

 (2) There is a discretion in the court to deprive a successful party of the whole or part of his costs because he had caused significant increase in the length or costs of the proceedings by raising issues on which he did not succeed.  Whether or not it should be done depends on all the circumstances.  This discretion exists for the purpose of avoiding the rigour of too inflexible an application of the rule that costs generally follow the event.  It is to be approached with due circumspection so as not to undermine the utility of that general rule.  Too ready a departure from the general rule encourages unnecessary arguments.  See Commissioner of Inland Revenue v HIT Finance Ltd (No 2) [2014] 4 HKLRD 412 at §7 (Bokhary PJ); Kam Leung Sui Kwan, Personal Representative of the Estate of Kam Kwan Sing, deceased v Kam Kwan Lai (unreported, FACV 4/2015, 3 February 2016) at §8.

 (3) Order 62, rule 5 of the Rules of the High Court provides:

“ (1) The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account—

(aa) the underlying objectives set out in Order 1A, rule 1;

…

(e) the conduct of all the parties;

(f) whether a party has succeeded on part of his case, even if he has not been wholly successful;

…

(2) For the purpose of paragraph (1)(e), the conduct of the parties includes—

(a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b) the manner in which a party has pursued or defended his case or a particular allegation or issue;

(c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and

(d)   conduct before, as well as during, the proceedings.”

 (4) The burden rests with the losing party to demonstrate the circumstances which justify the exceptional course of displacing the general rule that costs should follow the event. See Mariner International Hotels Ltd v Atlas Ltd (No 2) (2007) 10 HKCFAR 246 at §18 (Bokhary PJ).

 (5) Where the successful party raises issues or makes allegations improperly or unnecessarily, the court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful party’s costs.  See Re Elgindata Ltd (No 2) [1992] 1 WLR 1207 at 1214B–C (Nourse LJ), applied with modification by Yuen JA in Wang Din Shin v Nina Kung (unreported, CACV 460/2002, 19 April 2005) at §39.

4.  In this case, the applicants sought from the respondents production of two broad categories of documents as described in the Schedule to the Summons under section 29 of the Bankruptcy Ordinance (Cap 6).  They have successfully obtained a production order in respect of one of the two broad categories of documents, and have therefore been partially successful in their application.  The time taken up by the parties on the issues on which the applicants succeeded on the one hand and the issues on which the applicants failed on the other was about 50:50.  I therefore consider that the applicants should be awarded 50% of their costs to reflect their partial success in the application. 

5.  The respondents’ primary position is that they should be awarded 50% of the costs of the Summons.  They contend that the applicants sought four “remedies” in the application and only succeeded on one, that the respondents are the more successful parties or the “overall winner”, and that the respondents should be awarded 50% of the costs on a broad-brush basis.  I cannot accept these contentions; they ignore the reality that the applicants had to come to court to obtain the production order which I ultimately gave.

6.  The respondents’ fallback position is that there should be no order as to costs because they claim that they are the more successful parties.  I also reject this contention.  It is unrealistic for the respondents to assert that they are relatively more successful than the applicants in the application when they unsuccessfully opposed the production of one of the two broad categories of documents in the applicants’ Summons.

7.  For the reasons given above, I dismiss the Variation Summons with costs to be borne by the respondents, to be taxed if not agreed.  I also make absolute the costs order nisi in the Decision.