HONG JING CO LTD v. ZHUHAI KWOK YUEN INVESTMENT CO LTD

HCA 156/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 156 OF 2006

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REASONS FOR DECISION

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1.  On 26 October 2006, I heard arguments in relation to cross-summonses on costs, following an order nisi as to costs.  On that day I made orders on the summonses, and now give my reasons for those orders.

Background:

2.  On 21 January 2006 Hong Jing obtained an order, ex parte, giving leave to serve the writ in these proceedings out of the jurisdiction.  On 25 April 2006, I heard an application by Zhuhai Kwok Yuen for an order pursuant to O 12 R 8(1)(c), for the discharge of order giving leave to serve the writ out of the jurisdiction.  I refused that application in a reserved judgement delivered on 28 April 2006.  On 14 September 2006, following a hearing on 31 August 2006, I dismissed Zhuhai Kwok Yuen’s application for reconsideration of the order made on 28 April 2006.  I made an order nisi that Zhuhai Kwok Yuen must pay Hong Jing’s costs on the reconsideration application. 

3.  Hong Jing now seek to vary the order for costs, first seeking a certificate for two Counsel, and second seeking that the costs should be taxed on a common fund basis, and paid by Zhuhai Kwok Yuen to Hong Jing “forthwith”.  Zhuhai Kwok Yuen counters with an application that the costs should be paid “in any event”.

Two Counsel:

4.  The parties are agreed that there should be a certificate for two Counsel.  I so order.

Party and party or common fund costs:

5.  The general basis of taxation is that comprised in O 62 R 28(2), namely on a party and party basis.  By O 62 R 28(3), the court has a discretion to direct that costs shall be taxed on a common fund basis or on an indemnity basis.

6.  Unless there is some special or unusual feature of the case there should be no departure from the general rule in O 62 R 28(2).  The power to award costs to be taxed on a common fund or indemnity basis cannot be exercised arbitrarily or whimsically.  These principles flow from Preston v Preston [1982] Fam 17 at 38 per Brandon J, applied in Hong Kong in Kung Kwok Wai David v Citibank NA [1989] 2 HKC 48, CA.  These are the principles I now apply.

7.  Hong Jing relies upon two matters to support its claim for common fund costs.  First, Hong Jing says that Zhuhai Kwok Yuen has not given any explanation as to why the non-disclosure point was not taken at the first hearing on 25 April 2006.  Second, Hong Jing says that the application to reconsider the order granting leave to serve out of the jurisdiction was an abuse of process.

The point not taken argument:

8.  At the hearing on 31 August 2006, leading counsel for Zhuhai Kwok Yuen submitted that the focus of the 25 April 2006, hearing was a jurisdictional focus, the question being whether Hong Jing’s claim fell within O 11 R 1, and that at that stage Zhuhai Kwok Yuen had not considered any defences to the claim.  After the decision on 28 April 2006, it is said that Zhuhai Kwok Yuen, then knowing that the writ would be served out of the jurisdiction, considered defences that may be raised to the claim.  It is said that Zhuhai Kwok Yuen only then became aware of the existence of the undertaking signed by Madam Chu on behalf of Hong Jing, a document that was not disclosed, and which formed the basis of the reconsideration application.

9.  In the course of the application by Zhuhai Kwok Yuen for reconsideration leading Counsel for Hong Jing drew my attention to the fact that an unsigned copy of the undertaking was contained within the signed documents exhibited by Hong Jing at the ex parte hearing.  An affidavit was filed for Hong Jing set out circumstances from which it was plainly arguable that the fact that the undertaking had been signed had, in the absence of a signed copy in the possession of Hong Jing, simply been overlooked.

10.  However, it was not necessary for me to make any finding on the point, because I determined that, on the merits, Hong Jing was entitled to leave to serve out of the jurisdiction.  I accept the argument made now by Mr Liu that to deal with the matter now would involve revisiting the substantive decision, a course that may not be taken in the consideration of costs: see Yacov Ozer v Kwan Siu Man (No 2) [1998] 2 HKLRD 1001 CA.

The abuse of process argument:

11.  Mr Chong sensibly accepted that the argument that the application is an abuse of process is simply a repetition of the “point not taken” argument and adds nothing to Hong Jing’s position.

Conclusion as to the level of costs:

12.  While it is right that the point could have, and should have been taken earlier, at the end of the day it made no difference.  Other arguments were made by Zhuhai Kwok Yuen on the reconsideration summons.  In making the costs order I was fully aware of, and had due regard to, the fact that a signed copy of the undertaking had not been disclosed by Hong Jing, and that the point had not been earlier taken.

13.  I am satisfied that there is no special feature about the case justifying departure from the general basis of taxation.  The costs are to be on a party and party basis.

Costs to be paid in any event or forthwith:

14.  Hong Jing seek an order that the costs be paid “forthwith”.  The normal rule is that costs of interlocutory proceedings are to be paid “in any event” which means that such costs are to be taxed after the conclusion of the trial: see ADS v Wheelock Marden & Co Ltd [1994] 1 HKC 607.  If the circumstances justify immediate payment of the costs, that may be achieved by the addition of the word “forthwith”, or by not adding the words “in any event”.  The onus falls upon Hong Jing to justify immediate payment.

15.  The application by Zhuhai Kwok Yuen was upon a point which could have been taken at the earlier hearing.  While it is right that Hong Jing did not disclose the signed undertaking, on the factual circumstances, Hong Jing, not holding a copy of the signed undertaking, the nondisclosure of the fact of signature, that being overlooked, was entirely understandable.  The same cannot be said in respect of Zhuhai Kwok Yuen who held the signed document and, at the earlier hearing knew precisely what documents had been put before the court on the ex parte application.  Zhuhai Kwok Yuen must be deemed to have known of the distinction between the document they held and that exhibited.  Although ultimately held to be immaterial, it was open to Zhuhai Kwok Yuen to take the point at the earlier hearing.

16.  It is not necessary to find that Zhuhai Kwok Yuen were guilty of an abuse of process to justify the payment of costs “forthwith”.  It is sufficient if the application was unjustified.  The application, based on a point that could have been taken earlier, failed completely.  The fact that the application failed does not mean that it was wholly unmeritorious. 

17.  But in my view that is not the basis upon which the question of costs in any event or forthwith should be determined. The court should show its disapproval of unnecessary interlocutory proceedings, in order to encourage the parties to look to the merits of the dispute and not to try and achieve a technical knockout on a procedural basis.  If a party tries to achieve such a technical knockout, as has been the case here, then they do so at the risk of immediate costs.  Zhuhai Kwok Yuen would be well advised to look to the merits of the action.  If they choose to skirmish around the boundaries by way of interlocutory proceedings, thereby delaying the proper consideration of the substantive merits of the action, they do so at the risk of having to pay costs forthwith if they lose an interlocutory application.

18.  I am satisfied that the costs must be paid forthwith.

Costs on this application:

19.  I have heard counsel on the costs of this application.  The usual rule is that the costs on the costs argument follows the primary result.  The situation is different here because there are cross applications.

20.  Hong Jing has not succeeded in its own application for costs at a higher level, however it has succeeded in the application for costs forthwith.  Hong Jing has successfully resisted Zhuhai Kwok Yuen’s counter application that costs should be “in any event”.  Each side has had a success, each side has failed.  In all circumstances I am satisfied that the proper order for costs on both applications now before me is plaintiff's costs in the cause.