HONG KONG FAR INFRARED RAYS ASSOCIATION LTD v. LAM HONG NAM AND ANOTHER

HCA 1963/2014

[2022] HKCFI 1565

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1963 OF 2014

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BETWEEN

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DECISION

(On variation of costs order nisi)

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Introduction

1.  This Court handed down a judgment on 29 December 2021 dismissing P’s claims against Ds (“Judgment”). I made a costs order nisi for P to pay 80% of Ds’ costs (“Order Nisi”). Unless otherwise indicated in this decision, I shall follow the abbreviations in the Judgment.

2.  On 17 January 2022 and 18 January 2022, D1 and D2 respectively took out a summons for variation of the Order Nisi and seeking an order that P to pay 100% of their costs (respectively “D1’s Summons” and “D2’s Summons”).

3.  On 27 January 2022, P issued a summons for leave to vary the Order Nisi out of time (“P’s Summons”), seeking (i) extension of time for variation of the Order Nisi; (ii) the Order Nisi be varied to P do pay 50% of Ds’ costs up to 15 April 2021; (iii) there be no order as to costs thereafter.

P’s Summons

4.  P’s submission is that the time for making an application to vary a costs order nisi may be extended and that because of D1’s Summons and D2’s Summons, the Order Nisi has not become absolute pending the determination of the same, and alternatively, time ought to be extended where in light of Ds’ respective summonses, the costs issue will have to be canvassed in any event, and that the court will still need to consider all the circumstances of the case.

5.  D does not dispute that the Court has power to allow extension of time for a party to apply for variation of a costs order nisi, under Order 3 rule 5 of the Rules of the High Court (RHC). However, Mr Chung has referred this Court to what was stated by Cheung JA in paragraph 12 of his decision in Tang Man Kit v Hip Hing Timber Company Limited, CACV 137/2002, 08.06.06:

“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.”

6.  Both D1’s written submissions lodged on 28 February 2022 and D2’s reply written submissions lodged on 9 March 2022 have pointed out the defect in P’s application, namely that there had not been any affidavit filed on behalf of P to give any reason for not making the application within time. Yet, P’s Reply Submissions on 11 March 2022 was only in reply to Ds’ respective submissions on D1’s and D2’s Summons. There were no further reply submissions in respect of P’s Summons.

7.  Whether the Order Nisi has become final or not, this Court has set a deadline for variation of the Order Nisi. In my view, as P has not complied with the deadline, he ought to have supported his summons with an affidavit to explain his reasons for delay, and cannot simply rely on the fact that the Order Nisi has not become final.

8.  In light of this, I dismiss P’s Summons with costs to Ds, to be taxed if not agreed, on party and party basis, with certificate for one counsel.

9.  Even though I have dismissed P’s Summons, it is proper for P to have brought to the Court’s attention 5 letters, 2 marked “without prejudice save as to costs” (“Calderbank Letters”) addressed to D1’s solicitors, D1 being the only defendant at that time, and 3 open letters, one directly to each of Ds and one to Ds’ respective solicitors (“Open Letters”). This is because in exercising this Court’s discretion in relation to costs, I have to consider all the circumstances of this case.

Ds’ Summonses

10.  It is submitted by Counsel respectively on behalf of Ds that when considering their conduct, no or little criticism can be levied against their pursuit of the defence of fair comment during the proceedings in the pre-trial stages, such defence being in essence part and parcel of the main defences of justification and qualified privilege and there was much commonality of issues in regard to the three defences.

11.  In so far as D1 is concerned, it is submitted on behalf of D1 amongst other things, that there is nothing in D1’s conduct of the litigation which would sufficiently warrant the Court in exercising its discretion to reduce D1’s entitlement to costs on the ground of conduct. The Court should consider the factors of the reasonableness and the manner in which D1 conducted his defence of the whole case and in particular the defence of fair comment. It is argued that D1 had very sensibly decided not to pursue this defence as the other defences were sufficient to resist P’s claim. Also, there were no observations made by the Court as to any unreasonable and/or abusive acts on D1’s part, and that by deciding not to pursue this defence, D1 was saving the Court’s and the parties’ time by not pursuing an unnecessary ground.

12.  As for D2, it is submitted amongst other things that the non-pursuance of the fair comment defence in the Closing Submissions should not be equated with partial success which consequently warrants a costs deduction.

Discussion

13.  The starting point is that costs are in the discretion of the Court.

14.  Order 62, rule 5(1)(aa), (e) of the RHC provides that:

“5. Special matters to be taken into account in exercising discretion (O 62, r 5)

(1) The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account –

(aa) the underlying objectives set out in Order 1A, rule 1;

(a) any such offer of contribution as is mentioned in Order 16, rule 10, which is brought to its attention in pursuance of a reserved right to do so;

(b) any payment of money into court and the amount of such payment;

(c) any written offer made under Order 33, rule 4A(2);

(d) any written offer which is expressed to be “without prejudice save as to costs” and which relates to any issue in the proceedings, but the Court may not take the offer into account if, at the time it is made, the party making it could have protected his position as to costs by means of a sanctioned payment or a sanctioned offer under Order 22;

(e) the conduct of all the parties;

(f) whether a party has succeeded on part of his case, even if he has not been wholly successful; and

(g) any admissible offer to settle made by a party, which is drawn to the Court’s attention.

(2) For the purpose of paragraph (1)(e), the conduct of the parties includes—

(a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b) the manner in which a party has pursued or defended his case or a particular allegation or issue;

(c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and

(d) conduct before, as well as during, the proceedings.”

15.  Order 1A, rule 1 states the underlying objectives:-

“(a) to increase the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the Court;

(b) to ensure that a case is dealt with as expeditiously as is reasonably practicable;

(c) to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings;

(d) to ensure fairness between the parties;

(e) to facilitate the settlement of disputes; and

(f) to ensure that the resources of the Court are distributed fairly.”

16.  Hong Kong Civil Procedure 2022 at 62/5/6 says that:-

“… Litigant need to be encouraged to be selective as to the points they take and the extent of costs recovery is an incentive for responsible behavior. …”

17.  Hong Kong Civil Procedure 2022 at 62/5/7 further states that:-

“Although the normal rule is that the unsuccessful party should be ordered to pay the successful party’s costs, the court has a discretion to make a different order where it would be unjust to follow the normal rule. Where the successful party had fought a case on a number of distinct bases on which he had lost, including an improper allegation of fraud, it was appropriate to make an issue-based split costs order requiring each party to pay 50 per cent of the other party’s costs. The Court of Appeal would have been surprised if the judge had not found it appropriate to make an issue-based order …”

18.  Mr Cheung has submitted that in the present case, Ds had been adopting an approach of “leaving no stone unturned ”, only to accept that the defence of fair comment had no merits as late as the stage of closing submissions.

19.  It is further pointed out by Mr Cheung in his Reply Submissions that Ds had relied on the defence of fair comment in their respective Amended Defence and this had caused P to incur extra costs to deal with this issue in the pleading stage, opening submissions and during trial and that due to their abandonment, those costs were unnecessarily wasted. Further, it is submitted that Ds should have anticipated that their defence of fair comment was ill-founded, and it was unreasonable for Ds to have pursued the defence of fair comment whatsoever in the present case.

20.  As seen from P’s authorities, this Court is entitled to deprive a successful party of the whole or part of his costs because he had caused a significant increase in the length or costs of the proceedings by raising issues on which he did not succeed. That can be done even if it was not unreasonable to have raised those issues. In my view, by relying on the defence of fair comment and later abandoning this defence at a late stage, Ds did cause an increase in extra costs which were wasted. There is no reason why they should not be deprived of part of their costs.

21.  Further, as seen in paragraph 129 of the Judgment, it was not Ds’ case that the Statements were not defamatory at all, but only not defamatory in the sense of P’s Pleaded Meanings, and defamatory in the sense of the meanings as pleaded by D1 and D2. What P had proposed in the Calderbank Letters was only to ask for a written promise/undertaking that D1 was to refrain from any future acts of defamation against P and that P would apply to withdraw all its claims and there be no order as to costs. Further in the Open Letters from P directly to Ds, it was pointed out by P that since the issue of the writ, D had no longer made any further defamatory statements, and that all P asked was a promise from them not to do it in future, upon which P would be willing to withdraw all its claims. A similar proposal was again repeated in the Open Letter from P’s solicitors to Ds’ respective solicitors of 15 April 20216, which was about 3 months prior to the trial.

22.  Insofar as this Court is aware, there had been no response or any counter proposal at all from Ds. This was not in the spirit of the underlying objectives in Order 1A rule 1 one of which is to facilitate settlement of disputes and their inflexible attitude in not responding and not making any effort to try and settle is conduct this Court should also take into account and this would further support this Court’s decision in depriving Ds of part of their costs.

Conclusion

23.  Having considered Mr Cheung’s submissions, the Calderbank Letters and the Open Letters, in view of the underlying objectives in Order 1A rule 1 and Ds’ conduct, I decline to vary the Order Nisi.

24.  I dismiss D1’s Summons with costs to P. I also dismiss D2’s Summons with costs to P. Such costs to be taxed, if not agreed, on party and party basis with certificate for one Counsel.