TANG MAN KIT AND ANOTHER v. HIP HING TIMBER CO LTD

CACV 137/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 137 OF 2002

(ON APPEAL FROM HCA 8000 OF 1990)

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REASONS FOR DECISION

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Hon Cheung JA :

1. These are my reasons for dismissing the defendant’s application to vary a costs order.

Variation of a costs nisi order

2. On 13 May 2005 we delivered judgment in this appeal and allowed the appeal.  We ordered that the plaintiffs were entitled to have the costs of the appeal and below on a nisi basis.  On 11 July 2005 the defendant applied to extend the time for making an application to vary the order nisi and to vary the costs orders.

Order 42, rule 5B(6)

3. Order 42, rule 5B(6) of the Rules of High Court provides that :

‘ Where a written decision is given 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.’

The delay

4. The defendant did not apply to vary the order within 14 days of our order but instead the application was made 59 days later.  The 14-day period ended on 28 May 2005.

Jurisdiction

5. Mr. Koo, counsel for the plaintiffs, argued that this Court has no jurisdiction to hear this application.  In gist he argued that the rule states that unless an application is made within the 14-day period the order will become absolute and in this case this means that since no application has been made within this period, the order has become absolute and the power to vary the order nisi no longer exists. 

Ma Wan Farming Limited

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. Although Mr. Koo did not in his written submission stated that the case was wrongly decided in accordance with the recognized principles, he, however, took this stand on the hearing of the application.  In order not to follow our previous decision, the plaintiffs must demonstrate that that case was decided in ignorance or forgetfulness of an inconsistent statutory provision or where there was a manifest slip or error.  These are strong requirements and in my view they have not been overcome by the plaintiffs. 

8. On the question whether once the order becomes an absolute order it cannot be undone, my view is that, contrary to Mr. Koo’s submission, this Court had in fact considered this point.  It held that,

‘If an extension were granted for making an application under Order 42, rule 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.’

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.  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.

The other requirements

12. In order to succeed on the application the defendant also has to show that there is justifiable reason for not making the application within time and there are merits in changing the order. 

Reason for the delay

13. The defendant did not file any evidence to justify the delay until one day before the hearing.  This is an extremely long time considering that the application was issued on 11 July 2005.  The affirmation was made by the solicitor who handled this case on behalf of the defendant.  He claimed that since early 2005 the managing director of the defendant had been constantly out of Hong Kong on business and personal trips to the Mainland and other places.  His deputies and assistants who used to be involved in assisting him in dealing with these proceedings were not available due to their other commitments.  As a result it had become very difficult for his firm to contact or reach the managing director in order to take instructions from him, some time even for weeks.  It was only in early July 2005 that the solicitor received instructions to vary the costs order.  Upon obtaining his instruction the application was made on 11 July 2005. 

14. While the solicitor’s affirmation revealed that the instruction was given only in July 2005, there was no explanation why the managing director only gave instructions to proceed at that time.  Obviously he was aware of the need to apply to vary the costs order nisi, otherwise he would not have given the instruction to go ahead.  This situation is even more unsatisfactory when the defendant had earlier applied for leave to appeal against our judgment to the Court of Final Appeal.  The application was issued in June 2005.  The defendant has clearly not provided a satisfactory answer for the delay. 

Merits

15. In any event, my view is that there is no justifiable ground to vary the costs order.  The defendant said the Court should only order costs in favour of the plaintiff after 31 August 2000.  The significance is that on that date the Government approved the appointment of the plaintiffs as the manager of the Wah Yan Mo Fan Heung.  In my view, this is not a justifiable basis to vary the order.  It was stated at paragraph 55 of the judgment that irrespective of the question of whether the managers only acquired a legal title to the land upon the registration of the approval by the District Officer, the right of the managers as landlords and as persons entitled to possession to recover the land in question can hardly be challenged.  On this basis, there is nothing to challenge the fundamental principle that costs should follow the event. 

Conclusion

16. Accordingly, the application is dismissed with costs to the plaintiffs.

Hon Yeung JA :

17. I agree.

Hon Chung J :

18. I agree with para. 1 to 9 and 12 to 16 of the judgment of Hon Cheung JA.  I also agree that the decision in Ma Wan Farming Ltd. is binding on this court.

19. If there had not been any binding authority, however, I would have come to a different conclusion as regards whether the time to apply to vary a costs order nisi prescribed by Ord. 42 r. 5B(6) can be extended.  Because my conclusion differs from that reached by judges of this court of vast experience and legal knowledge, I will set out the reasons for so concluding.

20. The basis of the court’s decision in Ma Wan Farming Ltd. to the effect that the prescribed time can be extended can be summarized in the following quote in that decision:-

“[Order 42] Rule 5B(6) would implicitly authorise a party to apply to vary an order nisi as to costs within 14 days after a written judgment is handed down.  Clearly, the period of 14 days is a time prescribed by RHC for the doing of an act in any proceedings.  Order 3 rule 5 and inherent jurisdiction penned in by Order 59 rule 10 would allow such a time to be extended” (emphasis supplied) (para. 4).

21. Hence, the court there concluded that, as a matter of construction, Ord. 42 r. 5B(6) “implicitly” authorizes the act to apply to vary the order nisi.

22. The object of construction of a legislation (or subsidiary legislation, as Ord. 42 r. 5B(6) no doubt is) is to ascertain the legislative intention of the enactment: Maxwell on The Interpretation of Statutes (1976) 12^th Ed., p. 1, text to n. 3; Craies on Legislation (2004)8^th Ed., para. 16.1.1.  It has been pointed out in Bennion: Statutory Interpretation (2002) 4^th Ed.:-

“Parliament is presumed to intend that in construing [a statute] the court, by advancing the remedy which is indicated by the words of [the statute] being dealt with, and the implications arising from those words, should aim to further every aspect of the legislative purpose.  A construction which promotes the remedy Parliament has provided to cure a particular mischief is now known as a purposive construction” (Section 303)

and:-

“A purposive construction of an enactment is one which gives effect to the legislative purpose by ─

(a) following the literal meaning of the enactment where that meaning is in accordance with the legislative purpose (in this Code called a purposive-and-literal construction, or

(b) applying a strained meaning where the literal meaning is not in accordance with the legislative purpose (in the Code called a purposive-and-strained construction)” (Section 304).

Hence, two matters are of particular importance when the court construes a statute:-

(a) the actual language used;

(b) the purpose of the enactment (put in another way, the mischief against which the enactment is intended to remedy).

23. The actual words used in Ord. 42 r. 5B(6) are:-

“Where a written decision is given 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”.

24. As regards the language used, I observed in Syed Haider Yahya Hussain and Another v. Registrar of Births and Deaths, HCAL 73/1999 (12 July 2005):-

“The language chosen by Ord. 42 r. 5B(6) also supports the conclusion that the rule does not intend the time of application can be extended.  The rule provides that a costs order nisi should become absolute 14 days after the decision is pronounced.  Thus, the time period expressly prescribed is concerned with a change in the nature of the costs order (namely, a change from an order nisi to an order absolute), not an act to be done in any proceedings” (emphasis supplied) (para. 11).

That line of reasoning was in effect also adopted by counsel in Ma Wan Farming Ltd.:-

“… the order nisi as to costs was part of the judgment delivered by [the] court on 26 March 1998.  It took effect on that day.  See Order 42 rule 3(1).  It is appealable from that date, and Order 3 rule 5 and inherent jurisdiction should not be called in aid to vary an order as to costs which is part of the final judgment.  After all, so counsel submits, it has now become absolute … ” (para. 5).

Once an order nisi has become an order absolute, the court cannot “unwind” the change in its nature merely by extending the prescribed time.

25. To ascertain the mischief against which Ord. 42 r. 5B(6) is intended to direct, one would have to examine the context in which it was enacted.

26. The rules governing court procedure in civil litigation in England are now the Civil Procedure Rules but before then, the civil litigation regime was regulated by the Rules of the Supreme Court (“the RSC”).  Hong Kong’s Rules of the High Court are largely based on the RSC in England.  However, Ord. 42 r. 5B(6) did not appear in the RSC; it is a rule unique to Hong Kong.

27. Ord. 42 r. 5B(6) must have been enacted to save costs and time.  Without it, the parties concerned would invariably have to appear in court again before any decision on costs can be pronounced (after the court has given its written decision).  In many instances, such appearance may not be necessary.  After all, the usual rule relating to costs (Ord. 62 r. 3(2)) is:-

“If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings, 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” (emphasis supplied).

28. I also observed in the Hussain decision:-

“It is trite law that, at least in its civil jurisdiction, the [court] is functus officio after its decision has been pronounced and perfected: Hong Kong Civil Procedure 2004, para. 20/11/1 and 20/11/6.  The rationale behind this rule is that it is desirable that there be finality of litigation”. (para. 8)

If the true meaning of Ord. 42 r. 5B(6) is that the prescribed time to vary the costs order can be extended, it would mean that costs orders nisi are theoretically always open to variation.

29. In fact, in the Hussain decision, the costs order nisi was made in January 2000.  The substantive litigation was dealt with by the Court of Final Appeal in December 2001.  But the application to vary the costs order was brought in March 2005, more than 5 years after the costs order nisi was made (and after those costs have been taxed (in January 2004)).

30. Is there any good reason why the time prescribed to vary a costs can be extended even after its expiration?  The main reason would appear to be, if the time prescribed by Ord. 42 r. 5B(6) cannot be extended, it can result in injustice because the paying party has effectively been prevented by a mere non-compliance with time from exercising its right to be heard.

31. However, such disadvantage will have to be looked at in its proper context.  First, costs in civil litigation have been viewed differently from the substantive aspects of such litigation: prolonged dispute regarding costs is discouraged.  That underlying legal policy is evidenced by the following:-

(1) the usual rule relating to costs set out in Ord. 62 r. 3(2) has the effect of simplifying many of the disputes relating to costs;

(2) costs in the High Court are treated as a matter of discretion from which appeals are famously difficult: s. 52A(1), High Court Ordinance (Cap. 4);

 leave to appeal against costs orders is needed: s. 14(3)(e), Cap. 4.

32. Secondly, any potential injustice of depriving a litigant will have to be premised on the court (which gives the written decision) wrongly:-

(a) exercising its power to make a costs order nisi; and

(b) exercising its discretion power relating to costs.

But even in such instances, the appeal avenue would still be open to the aggrieved party.

33. The circumstances involved in Manley Estates Ltd. and ex parte Villerwest Ltd. were different.  In both instances, the dispute was whether time could be extended to parties who have earlier failed to act in accordance with court orders and the consequences of not extending the prescribed time would in essence be to put an end to the whole litigation purely because of procedural fault.  There will be no appeal from such automatic result (unless one appeals the earlier orders imposing the prescribed time periods).

34. Further, the following observations in those two decisions should be noted:-

“R.S.C., Ord 64, r. 7, provides as follows :

A court … has power to enlarge any time fixed by these rules, although the application for the same is not made until after the expiration of the time appointed or allowed.

I think that one would be deleting those words ‘although the application for the same is not made until after the expiration of the time’ from the rule altogether if this suggested point [that the court had no jurisdiction] were a good one. …  Here, the action has not disappeared.  It is in existence … I think that, within the words of that rule, there was jurisdiction in the master to enlarge the time” (emphasis supplied) (Manley Estates Ltd., p. 251);

“… Whistler v. Hancock (1878) 3 Q.B.D. 83.  It seems there to be suggested that if a condition is not fulfilled the action ceases to exist … I do not agree with that line of reasoning.  Even though the action may be said to cease to exist, the courts has always power to bring it to life again, by extending the time” (per Lord Denning, ex parte Villerwest, p. 366);

“If one rejects that submission [about the lack of jurisdiction after the prescribed time has expired] it is difficult to see in logic why the position shall be different according to whether the application is made before the time runs out or after …, unless a different answer is compelled by the language of the relevant rules” (emphasis supplied) (per Roskill, LJ, ex parte Villerwest, p. 366).

35. In my view, in relation to Ord. 42 r. 5B(6), both the language and the context compel the conclusion I reached above.