CHINA AGRI PRODUCTS EXCHANGE LIMITED v. WANG SIU QUN AND ANOTHER

HCA 1807/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1807 OF 2011

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Introduction

1. On 5 November 2013, I handed down Judgment (“Judgment”) in favour of the plaintiff in respect of their appeal against the order by Master Levy dated 10 May 2013.  For easy reference, I shall adopt the abbreviations used in the Judgment.

2. By the Judgment, I granted the following order: (a) the Ds’ application to set aside the Service Order be dismissed, (b) the Stay Order and the Cost Order be set aside, and (c) the Ds shall file and serve their Defence within 21 days from today.  I also granted a costs order nisi that the Ds do pay the plaintiff’s costs of the Appeal and of the Summons (including all costs reserved, if any) with certificate for two counsel (“Costs”) to be taxed if not agreed (“Order Nisi”).

3. On 19 November 2013, the plaintiff filed a summons for variation of the Order Nisi to an order that the Ds do forthwith pay the Costs to be taxed if not agreed (“Cost Summons”).

4. However, by a letter from the plaintiff’s solicitors to the Ds’ solicitors dated 6 January 2014 and as confirmed by the written skeleton submissions of Mr Ho SC (and with him Ms Cheng), counsel for the plaintiff, the plaintiff asked for summary assessment of the Costs in lieu of taxation, and a statement of costs (“Costs Statement”) was annexed to such written submissions.

5. The Ds opposed the application. Ms Seto, counsel for the Ds, asked the court to uphold the Order Nisi and dismiss the Costs Summons.

Legal principles

6. Order 62 rule 9D (1) of the RHC provides that “subject to paragraphs (2) and (4), the costs of any proceedings shall not be taxed until the conclusion of the action” and rule 9D (2) provides that “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. There is little dispute between counsel as to the well-settled principles relevant to the court’s exercise of its discretion whether to order the costs of an interlocutory application to be paid forthwith.[1]  It is helpful to adopt Mr Ho SC’s summary of the matters which the court takes into account in the exercise of such discretion (but which list is not by any means exhaustive):

(a) whether the proceedings in question are severable and self-contained from the rest of the action;

(b) the justice of making the costs order having regard to the effect on the respective parties’ cash flow, eg the court would have regard to the unfairness of keeping the successful party (in the interlocutory application) out of its money until trial, or alternatively the unfairness of hampering the further conduct of the action by the unsuccessful party or destroying his business;

(c) whether the amount at stake was sufficient to justify the expense of a separate taxation.

8. Further, in Midland Business Management Ltd v Lo Man Kui (No 2),[2] Lam J (as he then was) said as follows:

“9. Under the Civil Justice Reform, the court is encouraged to order immediate payment of costs of interlocutory proceedings and if possible by way of summary assessment of costs. The objective is to discourage unnecessary and disproportionate interlocutory applications. It is recognised that the lack of immediacy of orders to pay costs “in the cause” or “in any event” weakens costs as a sanction against unwarranted applications or resistance”, see paras.529-536 of the Final Report of the Chief Justice’s Working Party on Civil Justice Reform. ……

12. …… after Civil Justice Reform the court is more astute to the impact of costs on legal proceedings and an order for immediate payment of costs will be made more readily as a discipline against unmeritorious interlocutory applications.”[3]

9. Still further, the court is entitled to consider the conduct of the parties, including the manner in which a party has pursued or defended his case or a particular allegation or issue.[4]

10. In the course of her submissions, Ms Seto submits that for the purpose of the Costs Summons the burden rests squarely upon the plaintiff to demonstrate that there are sufficient grounds to justify a departure from the general rule in Order 62 rule 9D (1) of the RHC in all the circumstances of the present action.

Discussion

11. In the present case, the Summons and the Appeal are plainly severable and self-contained from the rest of the action, and there will not be a great deal of difficulty for the taxing master to decide what forms the Costs.  Given their nature, the eventual outcome of the trial of the present action will not have any impact on the costs order made at this stage.

12. Secondly, as evident from (a) the involvement of leading counsel for the Appeal and below and (b) the Costs Statement by which the plaintiff claims $1,779,153 for the Costs, clearly the Costs will be of a significant amount sufficient to justify a separate taxation (let alone any summary assessment which will not incur further costs of a separate taxation hearing).[5]

13. Thirdly, pleadings are not even closed and the trial of the present action will be a considerable time away.  I agree with Mr Ho SC there is no reason why the plaintiff, which has prevailed on all the issues in the Appeal, should be kept out of a substantial sum of money until trial.

14. Fourthly, there is no suggestion that immediate payment of the Costs will have any serious impact on the Ds’ cash flow and/or prejudice their position in the present action in any way.

15. Ms Seto submits there is no suggestion that the Order Nisi, if made absolute, will cause any prejudice to the cash flow of the plaintiff listed company, or that the Ds will be unable to satisfy the Order Nisi, if made absolute, in any event.  It is argued that since the Ds have given the Undertakings not to enforce against the plaintiff payment under the 1^st and 2^nd Instruments (with a total face value of $376 million plus interest at 5% pa), the plaintiff has been afforded with more than sufficient security for their costs, including those awarded under the Order Nisi.

16. But I am unable to see how the Undertakings which relate to substantive disputes in respect of the 1^st and 2^nd Instruments can be viewed as equivalent to security for costs. Balancing the aforesaid considerations, I am of the view that the plaintiff will suffer greater injustice by being kept out of the substantial costs they have incurred until the trial.

17. Mr Ho SC submits that the court should take into account the Ds’ conduct in flouting the well established practice to give notice of their intention to re-open arguments that formed no part of the plaintiff’s Appeal.  As I have found in the Judgment, the Ds were effectively seeking to cross-appeal against the Service Order on juridically distinct grounds outside the realms of the Appeal.  Consequently, the Appeal could not be disposed at the scheduled hearing and had to be adjourned, which resulted in further costs and delay for the plaintiff and which also affected other users of the court.[6] Since the Ds have failed in their “cross-appeal”, Mr Ho SC argues that the order in respect of the Costs should provide for immediate taxation or summary assessment to properly reflect the court’s disapproval of, and serve as a sanction against, the Ds’ unwarranted conduct.

18. Ms Seto reminds that insofar as the plaintiff seeks to argue that the Summons is unmeritorious, one should note the Ds’ application for an interim stay of the present action (albeit dismissed by this court) has found favour with Master Levy.  On such basis, it is said that the Summons is neither “unwarranted” nor a “damaging proliferation of interlocutory or satellite litigation”, and hence distinguishable from Midland Business Management Ltd (involving a claim with no good prospect of success and which needed to be revamped by amendments to pleadings) and The Liquidator of Wing Fai Construction Co Ltd (In Compulsory Liquidation) (involving an application which failed at every stage from first instance to final appeal), which cases warranted an immediate payment of costs.

19. Ms Seto suggests that the Summons was issued with a bona fide view to saving the parties’ time and costs (which resonated with the underlying objectives in Order 1A rule 1 of the RHC) because the Ds then believed that any finding in PRC Action No 1 in their favour might give rise to issue estoppel or res judicata, thus disposing of, or at least reducing the scope of, the issues in dispute between the parties in the present action.  Ms Seto further submits that in paragraph 152 of the Judgment this court acknowledged that even after the plaintiff re-amended the ASoC following the issue of the Summons,[7] a refusal of any stay might still result in some wasted costs.  Thus, although an interim stay of the present action was eventually disallowed, Ms Seto says it does not diminish the fact that the Ds have had proper justification for issuing the Summons and resisting the Appeal in the first place.

20. I am not persuaded that the above arguments carry the Ds’ position any further.  As Mr Ho SC clarifies in his submissions, the plaintiff does not premise the Costs Summons on any lack of bona fides on the part of the Ds in issuing the Summons, resisting the Appeal and pursuing their “cross-appeal”. Quite simply, the Ds’ contentions have been rejected by this court, and in doing so this court has held that their approach to the “cross-appeal” flouted well-established practice.  But as Hoffmann J said in Kickers International SA v Paul Kettle Agencies Limited & anor, “I therefore do not think that it would be right to reserve an order for immediate taxation only for cases in which the court wishes to show disapproval of the way in which the proceedings have been conducted”.[8]

21. In all the circumstances, justice requires the Order Nisito be varied to allow immediate payment. The next question is whether there should be taxation or summary assessment of the Costs.

22. In her written submissions, Ms Seto took an initial procedural point by complaining against the plaintiff’s late announcement of their intention to seek summary assessment of the Costs[9] without formal application to amend the Costs Summons to such effect, and further suggested that such late change in stance should not be lightly condoned.

23. I agree it is preferable for the plaintiff to state clearly in the Costs Summons their primary wish for summary assessment of the Costs, but once the court comes to a view that immediate payment of costs is appropriate, it is quintessentially a matter within the court’s discretion to direct either formal taxation or summary assessment of costs.

24. Bearing in mind the following considerations, I am persuaded that the Costs should be taxed if not agreed rather than summarily assessed:

(a) the Costs at stake in the sum of $1,779,153 as claimed by the plaintiff in the Costs Statement are sufficiently substantial to proportionally justify the costs and efforts of a separate taxation;

(b) leading counsel was involved at the Appeal and below;

(c) the Costs are substantial and complex, eg the Costs Statement refers to 71 hours of attendance by the plaintiff’s solicitors on the plaintiff’s PRC legal representatives ZL under item C1.

25. In respect of (c) above, it will be noted that whilst the court is generally experienced in assessing the value of work done by local practitioners for various applications/hearings before it, there is less experience in assessing the necessary or proper efforts required in communicating with PRC lawyers over an extended period for obtaining both PRC legal opinion and factual legal reporting in respect of the PRC Actions Nos 1 and 2.

Conclusion

26. In the circumstances, at the hearing of the Costs Summons, I ordered that paragraph 3 of my order dated 5 November 2013 be varied as follows: “Costs of (1) the plaintiff’s appeal against the Stay Order and the Cost Order, and (b) the Summons (including all costs reserved, if any) shall be paid forthwith by the defendants to the plaintiff, with certificate for two counsel, to be taxed if not agreed”.

27. There is no reason why the plaintiff should not be entitled to costs of the Costs Summons even though I do not agree with summary assessment of the Costs. After all, they have succeeded in having immediate payment of the Costs. Further, even though this court is grateful for Mr Ho SC’s helpful assistance, the dispute under the Costs Summons falls within a small compass and is plainly within the competence of his learned junior. I do not consider a certificate for two counsel is appropriate.

28. The plaintiff also concedes they will not ask for costs of and occasioned by their ex parte application to the court by letter dated 15 November 2013 for variation of the Order Nisi.  Such approach is inappropriate in view of the guidance in Schindler Lifts (Hong Kong) Limited v Ocean Joy Investments Limited[10] and PCCW-HKT Telephone Limited v Telecommunications Authority.[11]

29. The plaintiff asks for summary assessment of the costs of the Costs Summons. Subject to paragraph 27 above, the Ds have no objection to the plaintiff’s statement of costs submitted for such purpose.

30. For the above reasons, I also granted the following order at the hearing of the Costs Summons:

(a) there be no order as to costs of and occasioned by the letter from the plaintiff’s solicitors to court dated 15 November 2013;

(b) save as aforesaid, costs of the Costs Summons be paid by the Ds to the plaintiff summarily assessed at $37,926 to be paid forthwith;

(c) for the avoidance of doubt, there is no certificate for two counsel in respect of the Costs Summons.