CALIFORNIA RED LTD v. NEWAY KARAOKE BOX LTD AND OTHERS

HCA 748/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 748 OF 2008

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J U D G M E N T

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1.  This is an application to vary the costs order nisi that I made when I handed down judgment on 23 July 2008 granting the plaintiff certain interlocutory relief against the 1st defendant. 

2.  I ordered, on a costs order nisi basis, that the costs of the application for injunctions be in the cause.  Shortly thereafter, those acting for the 1st and 3rd defendants sought, by correspondence, to vary the costs order nisi.  Technically, that was not right because anybody wishing to apply to vary a costs order nisi should do so by means of a summons and that technical mistake, unfortunately, has led to some very involved arguments regarding whether the 1st and 3rd defendants are entitled to make their application at all since even though they eventually took out a summons to apply to vary, that summons was taken out of time, strictly speaking.

3.  Given the conclusion that I have reached in relation to the substantive application to vary the costs order nisi, I do not find it necessary to dwell on this highly technical matter as to whether the 1st and 3rd defendants are out of time or not.

4.  Turning immediately to the substantive application to vary, the 1st and 3rd defendants essentially ask the Court to reserve the costs to the trial judge.  I start from the proposition that costs is really a matter of discretion and the further proposition that understandably, in the nature of things, the judge who deals with a particular application should, generally speaking, be in the best position to deal with the costs of that particular application.  But again, fairly understandably, there could be circumstances – and from time to time, one comes across them – where the fair determination of the costs of a particular application would, conceivably, be dependent on something that is presently not known to the judge who has dealt with the application and those costs would be better left to be dealt with by someone else later on, such as the trial judge after the determination of the main issues at trial.

5.  Turning to the present application, it was an application for a number of interlocutory injunctions.  At the end of the day, the plaintiff was only partially successful in obtaining a limited injunction against the 1st defendant.  In relation to the 3rd defendant, who is the controlling director and shareholder of the 1st defendant, the Court, in view of the limited injunction that it was prepared to grant against the 1st defendant, did not see fit to order a separate injunction against the 3rd defendant. 

6.  The Court, in any event, has not been prepared to grant other injunctions that have also been sought and other interlocutory relief such as discovery against the two defendants in question.  One other fact to note is that in granting the limited relief in favour of the plaintiff, the Court placed emphasis on a point that had not really been relied on by the plaintiff in its pleading or skeleton submission, ie, clause 17.4 of the relevant agreement. 

7.  So from more perspectives than one, the plaintiff cannot be said to be wholly successful in the application.  It cannot be said to have been successful on the main grounds that it originally relied on when taking out the application for injunctions. 

8.  I wish to say – and I have made clear to Miss Grace Chow who has done her best in presenting her clients’ case this morning – that in ordering costs to be in the cause on a costs order nisi basis, I have taken those facts fully into account.  As I have also pointed out – and there is no dispute about it – the normal practice, at least in the past, is for a successful plaintiff granted an interlocutory injunction, to be granted his costs in the cause and for a successful defendant to be granted his costs in the cause. 

9.  As Hong Kong Civil Procedure 2008, vol 1, para 29/1/44 correctly points out, that normal practice has been departed from in recent years and, as I said at the outset, after all, costs is a matter of discretion.  In the circumstances of the present case, as I said, I have fully taken into account the two factors that I have outlined, namely, that the plaintiff has not been wholly successful in its application for interlocutory injunctions and the limited injunction that it has managed to obtain is based on an argument that was not previously relied on by the plaintiff when the application was first taken out.

10.  In fact, it is with those matters, amongst others, in mind that I have decided to only order costs in the cause rather than make any other more favourable order to the plaintiff even though the plaintiff has indeed managed to obtain some interlocutory relief out of the application. 

11.  In my view, that takes care of, in its entirety, the first point made by Miss Chow on behalf of her clients in this morning’s application to vary the costs order nisi.

12.  The next substantive point taken by Miss Chow is that since clause 17.4 has not been formally pleaded, there is a chance of the plaintiff not taking clause 17.4 as a point at trial or not succeeding on that point.  In that case, it would be unfair if my costs order nisi were to stand and make the two defendants bear the costs of the interlocutory injunction.

13.  I proceed on the basis that in the circumstances of the present case, there is no realistic possibility of the plaintiff not running clause 17.4 at trial.  After some exchange between the bench and the bar during Miss Chow’s submission, I believe counsel accepts the court’s assessment of the situation. 

14.  The remaining point is, therefore, that the plaintiff may not succeed at trial in relation to clause 17.4 and I can, in fact, add that there is always the possibility of the plaintiff not succeeding at trial at all on any point.  But the difficulty with Miss Chow’s argument is that if this sort of argument is given the weight that Miss Chow is urging this Court to give, it would mean that, at least in most cases where the court grants an interlocutory injunction, costs should be reserved to the trial judge.  To say the least, that has not been the practice.  When pressed, Miss Chow is only able to say that the only difference between the trial judge dealing with the matter after trial and this Court dealing with the question here and now, is that the trial judge, with the benefit of hindsight, might come to a different conclusion on the incidence of costs.  I do not deny that that is a possibility but, in my view, that is not a sufficient reason for reserving the question of costs to the trial judge. 

15.  As I intimated to Miss Chow, if her argument should be given the sort of weight that she has been contending for, it applies not only to the question of costs in an application for interlocutory injunction, it would also apply to the question of costs in all sorts of interlocutory applications.  Of course, that by itself may not be a conclusive reason for rejecting the argument.  But, having looked at the matter in the round and having asked myself why this Court, as compared with the trial judge, cannot and should not deal with the question of costs but instead should burden the trial judge with deciding the question of costs of a matter that the trial judge has not seized of, I cannot find any good answer. 

16.  Having considered the matter in the round, I am of the view that this Court should deal with the question of costs here and now and I am further of the view that the costs order nisi that I made is indeed the fairest order in the circumstances of the case.  As I said, it takes into account the fact that the plaintiff has not been wholly successful in this application.  It also takes into account the fact that clause 17.4 was not a point originally relied on by the plaintiff.  Furthermore, by definition, it takes into account what will happen at trial, ie, the outcome of the trial. 

17.  The court must, in this sort of situation, take a broad-brush approach in deciding the question of costs and, as I said, having borne in mind all the relevant circumstances of the case, I am of the view that the costs order nisi is indeed the right order to make.  So I refuse the 1st and 3rd defendants’ application to vary the costs order nisi and I make it an absolute order.

18.  Subject to further argument, I take the view that today’s argument is really part of the application itself because an application must include, amongst other things, the costs of that particular application and I tend to think that today’s hearing is merely a continuation of the application and that the fairest order for today’s costs is also costs in the cause, ie, today’s costs should form part of the costs of the application and therefore be covered by the order as to costs that I have just made absolute. 

[Submissions on costs]

19.  Today’s application is not really to challenge or to defend the costs order nisi.  I do not see things that way.  I see today’s application as an opportunity for the parties to present oral arguments before the Court on the question of costs and the Court has been greatly assisted by the written as well as oral submissions as to the correct order to make.  The costs order nisi, from one perspective, was merely a provisional indication by the Court as to its then thinking.  So, as I say, I really see today’s hearing as a continuation of the application itself.  I think the fair order to make is that the costs of the application to vary – and for the avoidance of doubt, that includes the costs of the relevant correspondence because I do not want any side argument later on as to whether the earlier letters formed part of the costs of the application – be costs in the cause.