TRENDS TRADE HONG KONG LTD v. ARTUR SHEVCHENKO

HCMP 194/2019

[2020] HKCFI 345

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 194 OF 2019

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BETWEEN

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COSTS RULING

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Introduction

1.  In my Judgment dated 9 December 2019, [2019] HKCFI 2936, I dismissed the plaintiff’s application for a committal order to be made against the defendant.

2.  As to costs, I made a costs order nisi that there be no order as to costs.  I did so in circumstances that whilst the application had failed, essentially for technical reasons, it might be thought against my findings that the defendant had brought this application on himself.  I expressed my initial view that, whereas it may not be appropriate to award costs in favour of the plaintiff, I would be reluctant to award costs in favour of the defendant.

3.  The costs order nisi was to become absolute after 14 days unless either party were to make application for variation of it.  I directed that any application to vary should be made by letter to the Court (copied to the other party) supported with an explanation of the varied order sought, the other party would then have 14 days to respond to the application, also by letter, and that I would then deal with the matter on the papers.

4.  On 23 December 2019, the defendant made an application for variation of the costs order nisi, and provided written submissions in support of the application.  The plaintiff replied by submissions dated 31 December 2019.  On 8 January 2020, the defendant’s solicitors suggested that they might have leave to file a brief reply, but I have decided that I do not need any such reply.  I think both parties have had a fair opportunity to present their submissions already, in accordance with the directions previously given.

5.  The underlying and background matters can be found set out in the Judgment.  Representation was as on the original application.  Mr James Wood was Counsel for the defendant, and Mr John Brewer was Counsel for the plaintiff.

Variation Sought and Basis

6.  The defendant seeks variation, so that the costs follow the event of the dismissal of the plaintiff’s application, so that the defendant is entitled to his costs from the plaintiff.

7.  For the defendant, Mr Wood submitted that the reasons justifying the variation included the following:

(a) The plaintiff’s application was launched on weak grounds at best, and bound to fail as a matter of law from the outset.  This had been pointed out to the plaintiff in correspondence more than six months before the hearing on 2 December 2019.

(b) Whilst the defendant might have acted unmeritoriously or even foolishly by not delivering up all property by the deadline and/or seeking an extension of time to do so, there was no need for the plaintiff to bring the application for committal, especially when it made no further requests for additional property or allegations of non-compliance with the Order after the plaintiff’s solicitors letter dated 26 October 2019.  There were also other means open to the plaintiff to seek compliance, to the extent compliance had not been given.

(c) The Court should exercise a high degree of caution in arriving at conclusions or views as to the defendant’s conduct, which may have an impact on the issue of costs, especially in circumstances where the defendant chose to exercise his fundamental right to silence, where limited information was before the Court, and where the sole issue to be decided was whether the alleged contempt had been proven.

8.  As to the first point, Mr Wood submitted that it was plain and obvious that the application for committal was bound to fail from the outset.  This was especially so in relation to the period before the endorsement of the penal notice on 23 November 2018, which was the focus of the alleged breaches as set out in the originating summons.  This point had been made plain to the plaintiff’s solicitors in correspondence from the defendant’s solicitors.  The point also seems to have given rise to a query from Wilson Chan J, on the application for leave to apply for committal, albeit that he granted leave.

9.  Mr Wood submitted that the requirement to endorse a penal notice on the Order is not a mere technicality.  Rather, he said, it was a fundamental statutory requirement – a necessary condition for enforcement of an order by way of committal – before any contempt could be found.  He reminded me that this was my own finding at §46 of the Judgment, as well as being evident from the RHC.

10.  If the plaintiff had accepted the defendant’s solicitors offer for the plaintiff to withdraw the application, made in late May 2019, that would have removed any further relevant costs expenditure by the defendant (and, indeed, by the plaintiff).  But, the plaintiff did not withdraw the application, but rather actively pursued it, perhaps on the basis of the line of authority coming from the Croydon case, which I have held is inapplicable to the circumstances of this case.  Even that line of cases did not support the relief sought by the originating summons, namely that the defendant be committed to prison (rather than merely a finding of contempt). Hence, whereas it is settled that applications for committal should not be lightly embarked upon and should not be launched except on solid grounds, Mr Wood submitted that this application was bound to fail, was speculative at best and abusive at worst.

11.  As to the defendant’s own behaviour, Mr Wood accepted that the defendant may have acted unmeritoriously or even foolishly, but still the application for committal did not serve any useful purpose.  This was particularly so where the plaintiff subsequently made a later specific discovery application in which there was at least some overlap with the documents ordered to be produced in the Order.  Where contempt should be pursued only as a matter of last resort, this case identified potential lesser options which might have first been explored.

12.  As to the caution which Mr Wood submitted should be exercised when the Court forms any views about the defendant, Mr Wood acknowledged that the Court might have had legitimate questions regarding the defendant’s conduct.  However, he emphasised the caution to be exercised before departing from the usual rule of costs following the event, especially in circumstances where the defendant chose to exercise his fundamental right to silence in proceedings which put his freedom in question, and where he was not otherwise required to explain his actions to defeat the application for committal.

13.  Mr Wood asked that the Court not lose sight of the fact that the plaintiff and defendant are involved in hostile litigation, where it may not be necessary to traverse all of various assertions for the purposes of the committal application, but where there may clearly be another side to the story.  Indeed, Mr Wood suggested caution should be deployed, for example, in relation to any apparent “mismatch” in explanations regarding certain equipment as discussed in §29 of the Judgment.

Plaintiff’s Response

14.  On behalf of the plaintiff, Mr Brewer submitted that the circumstances of the case identified that no order as to costs is the appropriate order.

15.  He relied on the settled principles that the Court’s discretion as to costs is broad, but not unfettered, and that it must be exercised judicially according to rules of reason and justice, as well as in accordance with the RHC.  Those rules provide specific guidance as to the incidence of costs, including specific matters to be taken into account, such as the conduct of the parties: see RHC Order 62 rule 5.

16.  Mr Brewer submitted that it was appropriate to pay attention to the parties’ conduct, as the Court apparently did in making the costs order nisi.  He referred to various findings as to the defendant’s conduct apparently made in the Judgment, including that the defendant had apparently stripped bare the plaintiff’s office of the very property with which the plaintiff carried on its business, and that the defendant would have had no difficulty in understanding that such property fell within the terms of the Order.  On the basis that that property had not been delivered up by the 3 October 2019 deadline, Mr Brewer submitted that it followed as a matter of simple logic alone that there had not been compliance with the terms of the Order.

17.  In any analysis of the plaintiff’s conduct, Mr Brewer submitted that that should be undertaken through the prism of the public interest, where the plaintiff did not rush to commence contempt proceedings as a first resort.  The first resort was to endorse the penal notice on the Order, and it was only when there was dissatisfaction with the extent of the defendant’s responses that further steps were taken.

18.  That some items falling within the Order have also been pursued much later by specific discovery application is, said Mr Brewer, indicative that there was wrongful removal of property which was not returned despite the Order.  Also, he said, the making of that later application should take into account the fact of the defendant’s “catch me if you can” approach to compliance with the Order.

19.  Mr Brewer suggests that the argument that the application was bound to fail sits uncomfortably against the grant of leave for the application to be pursued.  The purpose of the leave requirement is to filter out obviously unfounded or oppressive applications, or where some other obviously acceptable method of enforcement remains available.  Mr Brewer asserted that the application did serve a useful purpose.

20.  As to the views to be formed on the defendant’s behaviour or credibility, Mr Brewer emphasised the Court’s power to take into account conduct in the context of the exercise of discretion on costs.  He said that whilst the defendant exercised his right to silence by choosing not to file his own evidence, the Court was nevertheless entitled to consider and give appropriate weight to the correspondence written on his instructions. That correspondence, said Mr Brewer, reflected that the original statement made by the defendant’s solicitors on 5 October 2018 that all remaining items had been returned was simply untrue, and remained so until at least 5 November 2018.  The correspondence also gave rise to the inconsistencies to which the Court has already made reference.

Analysis

21.  First, I should point out that I have paid no heed to what either of the parties has told me about other aspects of the litigation between the plaintiff and the defendant, and in particular about other sets of proceedings.  I have instead focused on the materials which were before me when I determined the committal application, and my dealing with those materials in the Judgment.

22.  Secondly, I am persuaded that my initial view that there should be no order as to costs was not correct.

23.  On reflection, I think such an order fails properly to give weight to the fact that the result of the application, namely its dismissal, was on the basis that there was a fundamental problem arising from the lack of a penal notice before 23 November 2018.  I therefore accept that it would not be appropriate in the circumstances of this case for the defendant to be deprived of all of his costs, as that would not be just.

24.  Nevertheless, and even exercising some caution in relation to the expression of views about the defendant’s conduct in circumstances where he was entitled to exercise his right to silence, I do think I was entitled to take into account the materials already provided, and in particular correspondence which must have been written on the defendant’s instructions.  I acknowledge that the defendant has not admitted any contempt of court, but (as I previously considered) there remains the flavour that the defendant took a misguided or foolish, if not deliberately obstructive, approach to what was required by the Order.  I accept that there may be another side to the overall story, but I was dealing with the particular aspects of the story related to the committal application, which aspects were dealt with in the evidence the parties chose to file for the committal application.

25.  That there was no penal notice to the Order when originally made, and that there was no revised timetable for compliance once the penal notice was endorsed, does not mean that the Order was not required to have been complied with.  On the view I have reached and expressed in the Judgment, there is some sense that the defendant has brought the proceedings on himself.

26.  That is not to say that the plaintiff is entitled to any costs.  Rather, it points to the just and reasonable costs order being one where the defendant is entitled to some, but not all, of his costs.  To put it another way, the circumstances of the case do seem to me, in the broad but judicially approached exercise of my discretion, to identify that some other order should be made than simply costs following the event.

27.  Weighing the various factors as seems to me to be appropriate, I make an order that the defendant is entitled to 60% of his costs relating to this application, to be taxed if not agreed.  On my decision, the defendant is also entitled to the costs of the variation application itself, to be taxed at the same time if not agreed.