SHIH HUA INVESTMENT CO., LTD v. ZHANG AIDONG AND OTHERS

HCA 2682/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2682 OF 2016

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DECISION

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Introduction

1.  This court handed down a decision dated 7 November 2016 (“the Decision”) whereby all of the plaintiff’s applications for an order for payment into court and a disclosure order and the relevant defendants’ application for interim fortification of the undertaking were dismissed. This court also made a costs nisi that there should be no order as to costs.

2.  By summons dated 21 November 2016 (“the Variation Summons”), the relevant defendants apply for a variation of the costs order nisi. By another summons dated 17 February 2017 (“the Amendment Summons”), the relevant defendants apply for leave to amend the Variation Summons. The parties proposed that these applications should be disposed of on paper. This court agreed and has thus received the parties’ respective written submissions.

3.  In this document, I shall adopt the same abbreviations used in the Decision. I should also refer to the Decision for the background facts.

4.  The plaintiff does not oppose the Amendment Summons. The relevant defendants agree to pay the plaintiff its costs of and occasioned by the amendment. However, the parties disagree on the quantum of costs payable to the plaintiff.  I therefore grant leave to the relevant defendants to amend the Variation Summons as per the draft Amended Summons annexed to the amendment summons. I shall resolve their differences on the quantum of costs at the end of this decision.

5.  Now I deal with the Variation Summons with reference to the Amended Summons. By the Amended Summons, the relevant defendants seek a variation of the costs order nisi to the effect that costs be in the cause of the plaintiff’s summons dated 26 October 2016 and paragraph 1 of the relevant defendants’ summons dated 24 November 2016. As regards costs of their variation application, it should be disposed of in the like manner.

6.  Mr Ho, for the relevant defendants, in his written submission, asks for a different variation. He asks for the following two costs orders be granted in lieu of the costs order nisi:

(1)   Costs of the interim fortification application should be 50% of such costs be costs in the cause of the relevant defendants’ Fortification Application.

(2)   Costs of the disclosure and payment into court applications should be such costs be the relevant defendants’ costs in the cause of the Continuing and Discharge Applications.

7.  I should briefly explain the background leading to the making of the costs order nisi. The plaintiff’s applications for an order for payment into court and a disclosure order and the relevant defendants’ application for interim fortification of the undertaking were made on the return day of the plaintiff’s summons after it obtained an ex parte Mareva injunction (“the Injunction”) against the relevant defendants. The plaintiff intends to apply for a continuation of the Injunction (Continuation Application) whereas the relevant defendants intend to discharge the Injunction (Discharge Application) and oppose its continuation. Further the relevant defendants seek fortification of the undertaking given by the plaintiff in respect of the Injunction. The parties agree that they have to file evidence for the purpose of all their applications and there should be a date fixed for the substantive hearing of their applications. Nevertheless, they found it necessary to make those applications to this court for interim relief pending the resolution of their applications.

8.  This court was not impressed with all three applications and dismissed them accordingly. In the Decision, this court gave brief reasons for the costs order nisi in the following terms at §54:

“I am minded to take a broad-brush approach to deal with the costs of these three applications. Since neither parties succeeds in their application(s) and the time spent in the plaintiff’s applications and the relevant defendants’ application was more or less the same, I believe that the fairest order is that there be no order as to costs. I shall make an order nisi to this effect.”

9.  In making the costs nisi, this court in fact took the starting point that costs should follow the event for all these unmeritorious and unnecessary interlocutory applications. There were three events. The plaintiff was defeated in its two applications whereas the relevant defendants were defeated in their application. The plaintiff in principle should pay the relevant defendants their costs of its failed applications and the relevant defendants should pay the plaintiff its costs of their failed application. Then the court proceeded to consider the time spent on each applications and came to the conclusion that they were more or less the same. Based on this conclusion, adopting a broad-brush approach, this court opined that neither party should pay the other side any costs and hence the costs order nisi was made.

10.  The relevant defendants seemingly fail to understand the logic behind the costs order nisi. Their present application is made on an erroneous basis.

11.  Mr Ho first submits that the costs of preparation of the evidence by way of the Affirmation of Zhang Aidong for the purpose of the relevant defendants’ interim fortification application has not been wasted and would be subsequently relied upon in their substantive fortification application. There is every possibility that the relevant defendants may succeed in their substantive fortification application and therefore would be granted a costs order in their favour. In such an eventuality, the relevant defendants should recover the costs of the preparation of the Affirmation of Zhang Aidong. It follows that at least 50% of the costs of the interim fortification application should be made in the cause of their fortification application.

12.  The costs order nisi certainly does not debar the relevant defendants from their recovery of the costs of the Affirmation of Zhang Aidong in such an event at all. This court was fully aware that all the evidence before the court would be used in the substantive hearing. The costs order nisi was made having in mind the time spent on the oral arguments of the applications at the hearing on the return day only and hence the legal costs incurred as a result.

13.  As regards the costs of the disclosure and payment into court applications, Mr Ho submits that in the likely event that the relevant defendants succeed in the Continuation and Discharge Applications, they should be entitled to costs of these applications as well. Since the disclosure and payment into court applications of the plaintiff are patently ancillary to and prompted by the Injunction, the relevant defendants should also recover costs of these applications. However, even if the relevant defendants failed to discharge the Injunction and to oppose its continuation, the plaintiff may still not be entitled to costs of the disclosure and payment into court applications.

14.  In the circumstances, Mr Ho submits that costs of the disclosure and payment into court applications should be the relevant defendants’ costs in the cause of the Continuing and Discharge Applications.

15.  I am unable to accept his submissions. In the Decision, I explained that I found both the disclosure and payment into court applications to be unnecessary to afford interim protection to the plaintiff given the Injunction. I accepted as the starting point of consideration that the plaintiff should bear the costs of its failed applications. Such a costs liability has nothing to do with the actual merit of the Continuation and Discharge Applications and the costs order nisi was made regardless of their outcome.

16.  The plaintiff did argue that the disclosure and payment into court orders sought were ancillary to the Injunction. However, this does not mean that the costs of such applications should not warrant separate considerations. In terms of costs, these applications were distinct from the Continuation and Discharge Applications. Even if the latter are granted at the end, it does not necessarily follow that these applications should be made.

17.  In the normal course of event, even if the plaintiff succeeds in its two Applications after the substantive hearing, it still has to pay the relevant defendants’ costs of its failed applications. Under the costs order nisi, the plaintiff is spared from is liability to pay such costs merely because the relevant defendants are at the same time spared from their liability to pay the plaintiff’s costs of their failed interim fortification application.   

18.  I am not convinced that the costs orders proposed by Mr Ho is appropriate in the circumstances. I can see no sufficient reason to vary the costs order nisi.

19.  This Variation Summons is devoid of merit and must be dismissed accordingly. The fact that it was only served on the plaintiff some six weeks after it had been taken out and the repeated changes of their position cry out for an explanation. Costs must follow the event and the relevant defendants must pay the plaintiff its costs of and occasioned by this application.

20.  The plaintiff has lodged with this court two statements of costs. One relates to the Amendment Summons and the other one relates to the Variation Summons. The parties agree that summary assessment is appropriate.

21.  By the former statement of costs, the plaintiff seeks to recover HK$13,450 from the relevant defendants as costs of and occasioned by the Amendment Summons.  Such costs include, to my surprise, a counsel brief in the amount of HK$2,000.

22.  I fail to see any substantive work done on the part of the plaintiff in respect of the Variation Summons prior to the Amendment Summons. The Variation Summons has not been supported by any affirmation evidence. The consistent stance of the plaintiff is that the costs order nisi should not be varied anyway. It is unreasonable to claim any substantive legal costs in respect of the Amendment Summons.   The claim for the costs incurred by the plaintiff’s solicitors for their 30-minute legal research is embarrassing. The counsel brief, however modest the sum involved may seem, is not justifiable.

23.  Adopting a broad-brush approach, I can only allow the legal costs of the handling partner for 1 hour in the sum of HK$4,000 in respect of the Amendment Summons.

24.  By the latter statement of costs, the plaintiff claims the sum of HK$37,250. It includes the preparation of the 2^nd Affidavit of Liu Kwok Alvan, the handling partner of the plaintiff in the sum of about HK$10,000 and counsel brief of HK$4,000.  

25.  This is a very simple application clearly in lack of merit. It is astonishing that the plaintiff found it necessary to file an affidavit in opposition even in the absence of any supporting evidence filed by the relevant defendants. I have perused the affidavit not without reluctance. With respect, it is of no assistance and it merely shows poor judgment on the part of the plaintiff’s legal advisors.

26.  The counsel brief is really modest. It was at the outset agreed that there should be paper disposal of the Variation Summons. Mr Ng’s written submissions are capable of dealing with all the arguments advanced on behalf of the relevant defendants. The supporting work to be undertaken by the plaintiff’s solicitors should be minimal. I believe 1.5 professional hours of the handling solicitor and the like professional hours of his assistant solicitor would suffice. Accordingly, I only allow a total sum of HK$13,750 (HK$4,000 + 6,000 + 3,750).

27.  In conclusion, the Variation Summons of the relevant defendants is dismissed and the relevant defendants should forthwith pay the plaintiff its costs summarily assessed at HK$17,750.