UNI CREATION INVESTMENTS LTD v. SECRETARY FOR JUSTICE

HCMP 2166/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2166 OF 2015

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D E C I S I O N   O N   C O S T S

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Background

1.  The defendant has withdrawn its summons for stay of execution on appeal (“the summons”).  The sole issue is one of costs.

2.  By a judgment dated 28 February 2017 (“the judgment”), Deputy Judge Burrell held that the plaintiff’s use of the land (“the Lots”) as a columbarium did not contravene the terms of the Government Lease (namely the offensive trade clause), upon detailed consideration of a wide range of evidence relating to the locality and surroundings of the Lots.  The defendant was ordered to, amongst others,cancel and vacate the Warning Letters and Instruments of Re-entry registered in the Land Registry in relation to the Lots.  Notwithstanding the clear order of the Court, the defendant did not comply with the judgment and the plaintiff threatened to issue contempt proceedings.

3.  The defendant lodged an appeal to the Court of Appeal. 

4.  It then took out the summons on 25 April 2017.  The original intention was to protect wider interests of the public and consumers who might purchase niches from the plaintiff, pending disposal of the appeal.

5.  That has since been overtaken by the passage of the Private Columbaria Bill (“the Bill”) on 25 May 2017, which would be gazetted on 30 June 2017, the date of this decision.  The Bill effectively precludes private columbaria from selling or newly letting out niches until a licence is granted.

6.  On 5 June 2017, the defendant first indicated that it would withdraw the summons in view of the change of circumstances.  On 9 June, at the latest, the defendant was prepared to vacate the registration of the Warning Letters and Instruments of Re-Entry and the plaintiff would give an undertaking not to sell or newly let out niches before the Ordinance takes effect.

7.  The plaintiff submits that costs should follow the event and be to the plaintiff.  The defendant submits that the costs should be in the cause of the appeal, alternatively to be decided by the Court of Appeal.

Legal principles on costs

8.  The legal principles have been set out succinctly in the skeleton submission of Mr Yu SC, leading Mr Justin Lam.

9.  As a general rule, an applicant or appellant has to pay the other side’s costs if he decides to withdraw an application or appeal: To Wai Chan Henry v Aon Services Hong Kong Ltd [2015] 1 HKLRD 811 at §24, G Lam J; Best Joint Investments Ltd v Kagani Ltd (unrep, HCA 2608/2006, 20 June 2008) at §§8-9, Chung J.

10.  To persuade the court to depart from the general rule, the minimum an applicant has to do is to show that the discontinuance is for reasons other than an acknowledgment of defeat or likely defeat.  The most direct way of proof is to show that the applicant would have succeeded if the application had been proceeded with: see Coqueen Co Ltd v Chui Wai Kwan & ors (unrep, HCMP 438/2010, 8 December 2015) at §40, To J.

11.  Even if the applicant had behaved “reasonably” in making the application, he would still have to pay the costs of such application to the respondent. For example, in Johnson v Thor Building Design Services (1992) 8 Const LJ 204, the plaintiff issued proceedings on the strength of a previous House of Lords case, which was subsequently overruled.  As a result, it was agreed between the plaintiff and the 3^rd defendant that the claim no longer disclosed any cause of action.  The judge considered that, since both parties were “innocent”, he could see no reason why costs should not follow the event and ordered the plaintiff to pay costs of the action to the 3^rd defendant: see §25.

12.  Coqueen and Johnson dealt with costs of withdrawing substantive actions but I see no reason why those principles should not apply to the withdrawal of this summons.

Legal principles on stay of execution pending appeal

13.  The principles are trite.  The starting point is that an appeal shall not operate as a stay of execution and the successful party is not to be deprived of the fruits of his success.  The existence of an arguable appeal (ie one with reasonable prospects of success) is the minimum requirement before a court would even consider granting a stay.  The applicant has to show good reasons for a stay, eg that the absence of a stay would render an appeal nugatory.  The court must not at any stage forget the position of the successful party.  Ultimately the court embarks on a balancing exercise and uses its common sense.  Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84, §9, Ma J (as he then was).

Application of the legal principles

14.  The affirmation in support filed by the defendant made no mention of the merits of the grounds of appeal.  The grounds of appeal show challenges to the learned Deputy Judge’s attachment of weight to some evidence but not others and his findings on the facts. Nowhere is it alleged that the learned Deputy Judge was “plainly wrong” to justify interference by the Court of Appeal: Chow How Yeen Margaret & ors v WEX Pharmaceuticals Inc & anor, HCA 537/2013, 26 May 2017, §5. 

15.  The grounds in support of the stay application were based on the defendant’s duty to protect the public.  It was said that an appeal would be rendered nugatory without a stay.  The timing of the passage of the Bill and the coming into effect of the Ordinance was completely fortuitous which rendered the stay application otiose.  The defendant had suggested that costs be in the cause of the appeal or be reserved to the Court of Appeal to save time and costs.

16.  I do not think an appeal will be rendered nugatory without a stay. The defendant may still get the reliefs he asks for if the appeal is successful. 

17.  It was also not correct to say that passing of the Bill was fortuitous. At the time the summons was filed, the Bill had gone through the second reading already.  It was relatively uncontroversial in LegCo.  The plaintiff has drawn these to the attention of the defendant by letter before the summons was issued. 

18.  The defendant’s real concerns were interests of the customers which, Mr Mok SC submits, turns out to be true.  Whilst I do not doubt the good intention of the defendant, there is no authority to support the proposition that a stay can be granted on the ground of public interest in a dispute involving private law.  The plaintiff would have to compensate the customers should it lose in the appeal.

19.  Even if the court can consider the public interest ground, the court would not ignore the prejudice to the plaintiff.  The stay may extend beyond the date of passing of the Bill.  The continued registration of the Warning Letters and Instruments of Re-entry in the Land Registry might affect the plaintiff’s right to sell or let the niches or apply for a license under the new Ordinance.

20.  Mr Mok SC submits that conditions could have been imposed on the stay so that it may not necessarily last until disposal of the appeal.  With respect, that was never proposed before the defendant indicated that it would withdraw the summons.

21.  The plaintiff has already briefed counsel on 25 May 2017, well before the defendant indicated that it would withdraw the summons.  There is no point in reserving the question of costs to the Court of Appeal (thereby wasting further costs) or dealing it by way of written submission.

22.  Considering all circumstances, whilst the defendant might have some bases for seeking a stay, there is nothing to show that he would succeed.  In my view, there is nothing to justify departure from the general principle that the party withdrawing should bear the costs.

23.  The application for stay involved a new issue as to whether public interest could be taken into account.  The matter was clearly important to the plaintiff having regard to the circumstances stated in paragraph 19 above.  I am of the view that there should be certificates for 2 counsel.

Quantum of costs

24.  I just make a few comments on matters of principle:

(a)  The plaintiff has prepared one affirmation. It was only filed when costs were disputed, thereby causing more costs to be incurred on both sides.  The correspondence have already set out succinctly the parties’ stance which each party could have referred to on the question of costs.  Mr Yu SC submits that without the affirmation he might not have been able to advance some arguments.  Whilst that may be true, it is self-defeating to go back to the merits when only the question of costs is at stake.  A common sense approach must be taken.  I allow the costs of preparation but disallow the costs of filing that affirmation and costs arising thereafter.

(b)  Notwithstanding the new issue in the stay application and the importance of this case to the client, there was no justification for 4 fee earners.

(c)  The hourly rates of the fee earners are grossly excessive for a stay application.  I adopt the usual $4,000 per hour for one solicitor of 10 years’ standing.

25.  I summarily assess the costs and order the defendant to pay the plaintiff $400,000.

26.  I thank counsel for their assistance.