NINEYOU INTERNATIONAL LTD AND OTHERS v. MESSRS. TROUTMAN SANDERS (a firm)

HCMP 697/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 697 OF 2009

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BETWEEN

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DETERMINATION

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A. BACKGROUND

1.  This determination arises from the Decision I handed down on 30 July 2009. Unless otherwise stated, I would use the same abbreviations and definitions as those used in the Decision.

2.  Consequent to the costs order nisi I made in the Decision, Troutman asked for a variation of costs order nisi by a letter dated 4 August 2009. In it, Troutman seeks to vary the costs order I made against Troutman as follows:

“10% of the costs of the Originating Summons including the costs reserved be paid by the Plaintiffs to the Defendant.

90% of the costs of the Originating Summons including the costs reserved be costs in the cause of the taxation of the 1^st Invoice.”

3.  Nineyou opposes the variation.

B. PRELIMINARY ISSUE

4.  In the written submission, the same counsel for Nineyou, Mr. Chan, criticizes Troutman for having improperly seeking the variation by letter rather than by properly issuing a summons, which latter form of application, as observed by the Court of Appeal in PCCW-HKT Telephone Limited v Telecommunication Authority1, should be the correct mode.

5.  As Mr. Chan does not challenge the regularity of the application, I will proceed with the application as if it had been regularly made. I also think that it is sensible for Mr. Chan not to mount any procedural challenge as Troutman has in its letter clearly stated the grounds of the application, which, according to PCCW-HKT Telephone Limited, should be the main reason for requiring a summons to be issued so as “to enable the other side and the Court to understand exactly the nature and extent of what is being asked for.” (PCCW-HKT Telephone Limited (op.cit.) per Ma, CJHC, at p.8).

6.  Hence the letter does not contain the very evil that the Court of Appeal wishes to redress by requiring a summons to be issued for this type of application.

C. GROUNDS OF THE APPLICATION

7.  The proposed variation Troutman is now seeking in fact comprises two parts. The 1^st part is about the 2^nd Invoice, in respect of which Troutman argues that it is the successful party and it should have 10% of the entire costs of the Originating Summons. I will refer this argument as the 10% argument.

8.  The second part of the argument concerns with the 1^st Invoice, which is the subject ruling of my Decision. Troutman submits that as section 67(5) of the LPO provides for costs of the taxation be paid according to the event of taxation, mandating the party chargeable to pay the costs if one-sixth or more of the amount of the bill is taxed off, Troutman should not be ordered to pay Nineyou costs of the entire Originating Summons even though I have acceded to Nineyou’s application by directing a taxation. Troutman submits that the remaining 90% of the costs should be in the cause of the taxation of the 1^st Invoice. I shall refer this argument as the 90% argument.

D. DISCUSSION

D1. Principle

9.  Mr. Chan has rightly pointed out in his written submission that costs, as provided in Order 62 rule 3 of the Rules of the High Court, is a matter of discretion, and that the court “shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs”.

10.  In exercising my discretion, I would also have regard to the principles derived from the comprehensive authorities Mr. Chan has cited in his written submission, which I set out below:

(i) costs are in the discretion of the court;

(ii) they should follow the even, except where it appears to the court that in the circumstances of the case some other order should be made.

(iii) The general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or costs of the proceedings he may be deprived of the whole or part of his costs; and

(iv) Where the successful party raises issues or makes allegations “improperly or unnecessarily”, the court may not only deprive him of his costs but may order him to pay the whole or a part of the successful party’s costs.2

D2. 10% Argument

11.  In respect of the 2^nd Invoice, it is true that Troutman is the successful party as I had declined to refer it to taxation at the conclusion of the hearing.

12.  Mr. Chan contends that as the amount of the 2^nd Invoice(US$7,120) is only about 2% of the 1^st Invoice (US$375,000), and that the arguments had substantially been devoted to the 1^st Invoice, Nineyou can still be regarded as a successful party despite it having failed to get the 2^nd Invoice be referred to taxation.

13.  In exercising my discretion on costs, I think the principle of proportionality is equally important. In this regard, I agree with Mr. Chan that the time and effort having been spent on the 2^nd Invoice is indeed very minimal. It would be, in my view, wholly artificial to adopt Troutman’s argument that simply because Nineyou has failed on the 2^nd Invoice, it should be awarded 10% of the costs.

14.  I reject Troutman’s argument.

15.  Having rejected Troutman’s argument however, I also take the view that it would be unfair to Troutman by allowing Nineyou to recover costs in respect of the work done and expenses incurred in relation to the 2^nd Invocie. I would therefore disallow Nineyou the costs occasioned by the 2^nd Invoice.

D3. The 90% argument

16.  The core of this argument is really about whether the costs of the 1^st Invoice should be in the cause of the taxation.

17.  Troutman has placed reliance on section 67(5) of LPO.

18.  As the question of costs is really a matter of discretion, I do not think that the provisions of section 67(5) are of much assistance. Each case is different. If, for example, a defendant does not oppose to an application for referring a bill to taxation, it may be a suitable case for ordering costs of the application to follow the event of taxation. In the present case, however, the most important matter I need to consider is whether Troutman’s vigorous opposition to Nineyou’s application has substantially occasioned more costs, and I am satisfied it has. I do not therefore think it is right to order the additional costs occasioned by the contentious position having been taken by Troutman to follow the outcome of the taxation.

19.  For the reasons above, I reject Troutman’s argument.

E. CONCLUSION

20.  The costs order nisi made on 30 July 2009 be varied to the extent of disallowing the Plaintiffs’ costs of and occasioned by the 2^nd Invoice.

21.   The costs order as varied shall now become absolute.

F. COSTS OF THE VARIATION APPLICATION

22.  As a result of my determination, it can be said that Troutman has failed substantially on both arguments for the variation, and I therefore think it is right that Nineyou should have the costs of the variation.

23.  I note that counsel has been instructed to prepare the written submissions on behalf of Nineyou. In spite of the very able and comprehensive submissions Mr. Chan has prepared, I do not think it is proper and necessary for Nineyou to engage counsel’s assistance. I therefore do not allow Nineyou to recover the costs for the engagement of counsel.

24.  Further, I would also disallow the costs of the Plaintiff’s Reply submissions dated 2 September 2009, which are submitted without leave of the court. For the same reason, I have declined to have any regard to the said submissions.

25.  Since no submissions have been made on costs, the said costs order will be nisi. I hope that good sense will prevail so that there will not be another round of satellite application on the issue of costs.

26.  Similarly, I would again order summary assessment of costs if they were not agreed.

27.  I further give the same directions for assessment of costs as those given in paragraph 46 of the Decision dated 30 July 2009. I further order that should the costs need to be assessed, the two sets of costs (the costs of the Originating Summons and the present costs for variations) are to be assessed at the same hearing.

G. DIRECTION ON TAXATION

28.  I would also seize this opportunity to direct Troutman to file a bill of costs in respect of the 1^st Invoice in accordance with Practice Direction 14.3 within 28 days from the date of this Determination.