AK v. MYNT

FCMC16285/2017

[2019]HKFC166

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 16285 OF 2017

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DECISION
APPLICATION FOR INDEMNITY COSTS

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Introduction

1.  This is the hearing of the petitioner wife (‘Wife’)’s following applications for :-

(1)   Costs of the Wife’s summons dated 21 December 2018 on indemnity basis to be assessed summarily;

(2)   Costs of the respondent husband (‘Husband’)’s summons dated 4 January 2019 on indemnity basis to be assessed summarily; and

(3)   The Wife’s summons dated 8 April 2019 for an order that the costs order nisi dated 11 March 2019 be varied to read as costs of the Husband’s summons dated 24 January 2019 be paid by the Husband to the wife forthwith, with certificate for two counsel, to be summarily assessed.

2.  In April 1979, the parties were married.  In December 2017, the Wife issued the petition for divorce on unreasonable behaviour ground.  She also applied for ancillary relief.   

3.  On 25 May 2018, the Wife took out a summons pursuant to s.17 of the Matrimonial Proceedings and Property Ordinance, Cap. 192 (‘MPPO’) for setting aside dispositions by the Husband of assets worth about US$69 million.  The assets are in the form of trusts held by the Husband or his family members. 

4.  On 12 December 2018, the Wife was informed by the Husband that in November 2018, a mortgage was taken out by the Husband unilaterally on what the Wife said to be the matrimonial home of the parties (‘the property’) for the sum of about HK$62 million.  On 21 December 2018, the Wife applied on an ex parte basis for an injunction order restraining the Husband from disposing of the mortgage monies.  On the same day, I granted an interim injunction order. 

5.  On 21 December 2018, the Wife took out the summons for the continuation of the injunction order.  On 4 January 2019, the Husband took out the summons for the discharge of the injunction order dated 21 December 2018.  On 11 January 2019, I gave the direction that these applications were to be heard together on 21 June 2019.

6.  On 24 January 2019, the Husband applied for leave to appeal against the injunction.  On 11 March 2019, I refused the Husband’s application.  In my Judgment dated 11 March 2019, I made the order nisi that the Husband do pay the Wife’s costs of the summons dated 24 January 2019 with certificate for two counsel.  On 23 May 2019, the Court of Appeal refused the Husband’s application for leave to appeal before the Court of Appeal.

7.  Mr. Jeremy Chan counsel appearing for the Husband did not resist order for costs on a standard basis in respect of the Wife’s summons dated 21 December 2018 and the Husband’s summons dated 4 January 2019, but he contended that it was not appropriate to make an order for costs on an indemnity basis.  Mr. Chan’s also maintained that no order for summary assessment of the costs of the Wife’s summons dated 21 December 2018 and the Husband’s summons dated 4 January 2019 should be made, though he accepted that an order could be made for summary assessment of the costs of Husband’s summons dated 24 January 2019. 

8.  There are then two issues to be determined namely (1) Should costs be awarded against the Husband on a standard basis or on an indemnity basis? (2) Should summary assessment be ordered?

Discussion

Indemnity costs

9.  About the Wife’s summons dated 21 December 2018 and the Husband’s summons dated 4 January 2019, Mr. Chan contested that an indemnity costs order was not appropriate because in the 3^rd letter dated 18 June 2019[1] from the Wife’s solicitors, it was already said they were prepared to accept costs to be paid by the Husband and to be taxed if not agreed on a standard basis.  Mr. Richard Todd QC replied that the Wife’s offer actually included two conditions: - (1) her costs to be taxed if not agreed on a standard basis; and (2) summary assessment, and since the Husband refused to accept summary assessment, the offer in a package was fallen through.  After having carefully read the said letter, I agree with Mr. Todd’s reply.

10.  The time for the Wife’s application for variation of the costs order nisi already expired on 25 March 2019 and no application was made, but in spite of that I am satisfied that the court still has jurisdiction to review the order dated 11 March 2019 in view of the fact that up to-date, the said order has not been perfected.  A judge is only functus after the order in question has been perfected, see In re L [2013] 1 WLR 634.

11.  I now turn to the merits of the Wife’s applications.

12.  Costs are in the discretion of the court.  Order 62 r. 5(1) provides for the underlying objectives set out in Order 1A r. 1 to be considered.  Under Order 62 r. 28(3) the court may award costs on an indemnity basis.  Mr. Todd referred me to Choy Yee Chun (The Representative of the state of Chan Pui Yiu) v. Bond Star Development Ltd [1997] H.K.L.R.D. 1327.  The legal principles on indemnity costs as summarised by the case can be seen in the commentary of Hong Kong Civil Procedure 2019, 62/App/12 :

“The Court of Appeal in Choy Yee Chun (The Representative of the state of Chan Pui Yiu) v. Bond Star Development Ltd [1997] H.K.L.R.D. 1327, CA reviewed the cases and summarised the law as follows. A taxation of the successful party’s costs on an indemnity basis could properly be ordered where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner. Any proceedings instituted or prosecuted in such circumstances as to constitute an affront to the court could properly be the subject of a direction for the taxation of the successful party’s cost on the indemnity basis. However, the circumstances in which an indemnity award might properly be madewere not restricted to circumstances beyond the requirement that taxation on an indemnity basis must be “appropriate”. The principle for the award of an order of costs on an indemnity basis applied equally to those who not only instituted proceedings but who defended them. If a plaintiff had been forced to institute proceedings by the defendant whose conduct had been not only hostile in the normal litigious sense, but oppressive and with base ulterior motive, and if the pursuit of a defence constituted conduct which was part of an oppressive game plan, then invocation of the power to award costs on an indemnity basis might well be justified”.

13.  Another leading authority in this subject is the Judgment of the Court of Final Appeal in Town Planning Board v Society for Protection of the Harbour Limited (2004) 7 HKCFAR 114 where the Court of Final Appeal said :-

(1)   The Court had a broad discretion to determine how costs should be paid and whether indemnity costs should be ordered.

(2)   The successful party would usually recover more of his costs under an indemnity award than under a party and party award, and in that sense the former might be perceived as achieving a fairer result for the successful party in circumstances such as the present.  However, the Judge right considered that the existence of such difference between the two types of award was not on its own a sufficient basis for awarding indemnity costs and that the successful should show that the case had special or unusual features for such an order to be made.

(3)   An award of indemnity costs was not confined to cases brought with an ulterior motive, for an improper purpose, or where there was some deception or underhand conduct on the part of the losing party.  It was undesirable to attempt to define the circumstances in which such order would be made, and the discretion was not to be fettered beyond the requirement that indemnity costs much be “appropriate”.

(4)   The attributes of the parties and the character of the proceedings were not irrelevant to the exercise of the discretion to award indemnity costs.  The grounds for making such an order must be connected with the case and might extend to any matter relating to the litigation and the parties’ conduct in it, and also to the circumstances leading to the litigation, but no further.

14.  In addition, I have been referred to the more recent case of Huge Dragon Corp Ltd v Lung Mun Oasis (IO) [2014] 3 HKLRD 286.  In that decision, the Court of Appeal ruled that indemnity costs were warranted in case of withdrawal of unmeritorious application for leave to appeal to Court of Final Appeal :

(1)   The court’s discretion to order indemnity costs should not be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be appropriate.  This was the case here, as D’s application for leave to appeal was entirely devoid of merit and should never have been launched.

(2)   D’s contention that it had to take out the leave application to preserve its rights pending legal advice from senior counsel was not a valid ground to resist an indemnity costs order.  Such advice was unnecessary to illustrate that no point of great or general importance could in this case possibly arise; and that no exceptional circumstances existed which would trigger the “otherwise” ground.

15.  With these legal principles in mind, reference should be made to the Court of Appeal’s Decision dated 23 May 2019 in particular the following:

a)    The secrecy of the Husband’s action and his refusal to accept the Wife’s proposal to restrain the use of the mortgage monies justified an ex-parte application by the Wife.

b)    The mortgage of a matrimonial home clearly affects the interest of the Wife in the eventual distribution of family assets.  The dispute whether the property is a matrimonial home is clearly a triable issue. The mortgage is an encumbrance on the property causing the rights of the Wife to be affected by the interest of a third party, namely, the mortgagee bank. The problem will become acute if the Husband chooses to default on the repayment of the mortgage and the bank seeks to enforce its rights.  The Husband had glossed over the problem when he said that he has a right to choose which of his assets is to be dealt with by him.  The Wife is well justified to apply for an injunction in the circumstances of the case.

c)    There is no reasonably arguable point on material non-disclosure by the Wife in terms of the reason which caused the Husband to take out the mortgage.

d)    There is no absolute requirement that the Wife must provide undertaking as to damages.

16.  In my Judgment dated 11 March 2019, the key considerations that provide support for the grant of the injunction order include : (1) the Wife has a good arguable case; (2) there are assets within the jurisdiction; (3) the balance of convenience is in favour of grant; (4) there is high risk of dissipation; (5) I have rejected the Husband’s allegation of material non-disclosure. 

17.  Mr. Todd submitted that in the present case, the events leading to the injunction were particularly egregious and in what was already fraught litigation, and the Husband’s high handed actions engendered an atmosphere of distrust and a sense that the Husband had tried to make himself judgment-proof.  Mr. Todd contended that following Choy Yee Chun, the circumstances in which indemnity costs might be awarded was not confined to affronts to the court.  The test was solely whether it was appropriate, and the court’s discretion should not be fettered beyond that.

18.  I take notice that there is no ruling of actual dissipation of family assets on the part of the Husband, or that the Husband is guilty of egregious conducts.  At the same time, I take the view that the Husband’s appeal leave application dated 24 January 2019 cannot be said to be totally devoid of merits.  In the present case, broadly speaking, it seems to me that this is a situation where the parties each had a genuine case and each simply fought their corner hard.  I also do not lose sight of that not long after the Court of Appeal’s decision on the Husband’s application for leave to appeal before the Court of Appeal was handed down, the Husband chose to concede to an order that his summons dated 4 January 2019 be withdrawn and the injunction be continued until further order of the court with costs be paid by the Husband to the Wife.  Looking at the matter in the round, I do not regard that an order for indemnity costs of the Wife’s summons dated 21 December 2018 or the Husband’s summons dated 4 January 2019 is appropriate, nor should the costs order nisi dated 11 March 2019 be varied to read as costs of the Husband’s summons dated 24 January 2019 be paid on an indemnity basis.

19.  It may be pertinent to mention that Mr. Chan also took issue with the Wife’s summons dated 8 April 2019 that: - (1) It was late; (2) No time extension was applied for, nor did the Wife ask for leave to file the said summons out of time; and (3) It did not ask for indemnity costs, nor was there any application for amendment of the said summons to add the request for indemnity costs.  Mr. Chan emphatically contended that the Wife should not be allowed to make a request through the ‘backdoor’.  Mr. Todd disagreed that the said summons was defective, and he further relied on that in any event, under Order 3 r. 5 the court may give an order for time extension and under Order 2 r. 1, the court may waive irregularity.  Order 2 r. 5 provides for the circumstance to be considered on an application for relief from any sanction imposed for a failure to comply with any rule.  It is however unnecessary for me to deal with the parties’ disputes in this regard, taking into consideration my decision in the above paragraphs. 

Summary assessment

20.  The Wife’s application for an order such that the Wife’s costs of the said summonses shall be summarily assessed and to be paid forthwith is within the court’s purview under O.62 r. 3 (2A) and Order 62 r. 9A of the Rule of the High Court, applicable by virtue of r. 3 of the Matrimonial Causes Rules, Cap. 179A.  I take notice that the commentary of Hong Kong Civil Procedure 2019, 62/9A/1 provides as follows:

“… Recommendation 88 of the Working Party on Civil Justice Reforms states:

The court should, whenever appropriate (whether as a response to an unwarranted application or unwarranted resistance to an application, with a view to saving costs or otherwise), make a summary assessment of costs when disposing of interlocutory applications.”.

21.  I have carefully considered Mr. Chan’s arguments as set out in the paragraphs 6 to 9 of his Skeleton Submissions.  I take the view that the costs of the said summonses are in no way substantial or complex and that having an assessment of the sum of costs payable in a summary and broad-brush way, rather than through the process of taxation, is an efficient, expeditious and costs effective way for the fair disposal of the matter.  In the circumstance, I find that summary assessment is appropriate for the present cases.

In Conclusion 

22.  It is ordered that :-

(1)   Save for the respective provisions in the paragraph 7 of the order 11 January 2019 that was amended by the order dated 30 January 2019 and below, the Wife’s summons for injunction granted on 21 December 2018 and ordered to continue on 11 January 2019 be continued until further order of the court;

(2)   The Husband’s summons dated 4 January 2019 be withdrawn;

(3)   Subject to the costs order nisi in the paragraph (23) below, costs of the Wife’s summons dated 21 December 2018 and the Husband’s summons dated 4 January 2019 be paid by the Husband to the Wife, with certified for counsel, to be summarily assessed;

(4)   The Wife’s costs granted as an order nisi on 11 March 2019 for opposing the Husband’s appeal leave application dated 24 January 2019 with certificate for two counsel to be summarily assessed;

(5)   The Wife do file and serve her Statement of Costs within 14 days from the date of the order to be made;

(6)   The Husband do file and serve his list of objections to the Statement of Costs within 14 days thereafter;

23.  The Wife fails in her application for indemnity costs and the Husband fails in his resistance to summary assessment of the costs of the Wife’s summons dated 21 December 2018 and his summons dated 4 January 2019.  Taking a broad brush approach, I make the costs order nisi that there be no order as to costs of: - (1) today’s hearing; and (2) the Wife’s summons dated 8 April 2019 for the variation of the costs order nisi.  The costs order nisi becomes absolute 14 days after the order is made unless a party has applied to the court for varying the order.

24.  I take this opportunity to express my gratitude for Mr. Todd and Mr. Chan’s assistance to the court throughout these proceedings.