MINMETALS INC v. DRAGON BOOM LTD AND ANOTHER

HCMP 1702/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1702 OF 2013

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DECISION ON COSTS

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1.  The plaintiff (“Minmetals”) applied to continue a mareva injunction obtained ex parte whereas the 2 defendants applied to have it set aside or, if continued, varied. The application by the 1^st defendant (“Dragon Boom”) was heard; and on 12 May 2014, I handed down my decision (“the Decision”). I gave directions for written submissions on costs, adding that I would give my ruling on paper. This I now do.

The summons to continue the injunction and the summons to set aside the injunction

2.  I allowed Dragon Boom’s application and discharged the ex parte injunction (as subsequently varied and continued) on the ground of material non-disclosure.  Yet in the circumstances of the case, I decided to re-grant the injunction on varied terms.

3.  Minmetals argues that it remains the overall successful party as it established to the court’s satisfaction the pre-requisites for the grant of an injunction; and the court re-granted the injunction upon its discharge.  Therefore Dragon Boom should still pay the costs of its application except for the costs of the ex parte hearing.

4.  Dragon Boom argues that upon discharge, there was no injunction to continue. Minmetals’ application failed.  The court re-granted the injunction on its own motion in the absence of such application by summons.  Therefore Dragon Boom should be entitled to the costs of both summonses.  As the two applications were so intertwined that the costs of Minmetals’ summons might be subsumed in the costs of Dragon Boom’s summons.

5.  I have reservations about both sides’ arguments.

6.  Minmetals resisted Dragon Boom’s application throughout.  I shall not repeat the nature of the material non-disclosure on the part of Minmetals as discussed in the Decision[1]. Minmetals’ argument as to costs, if accepted, would fail to reflect the success of Dragon Boom in its application.  This cannot be right.

7.  As to Dragon Boom’s argument, it should be noted that that Minmetals chose to describe the relief as continuation of the injunction does not detract from that it was seeking an injunction in terms of the ex parte injunction (as subsequently varied and continued until the determination of the inter partes summons).

8.  When an injunction obtained ex parte is tainted by material non-disclosure, the injunction ought to be discharged; and, if just in the circumstances, the court may re-grant the injunction inter partes[2]. I am impressed that counsel for Dragon Boom was aware of that, and hence his own submissions, with authorities, that the discretion not to discharge the injunction upon finding of material non-disclosure should be sparingly exercised.

9.  As such, I was not surprised that Minmetals put forward no alternative of re-grant of the injunction in the summons.  I doubt how often one finds the plaintiff would do so in an inter partes summons for an injunction, without somehow acknowledging that the ex parte injunction just obtained may be liable to be set aside.

10.  In any event, counsel for Minmetals in his oral submissions in court indeed mentioned re-grant as fallback.  Clearly both sides were acutely aware of the court’s discretion to re-grant the injunction if the injunction was discharged for material non-disclosure; and whether there should be a re-grant was indeed argued.

11.  I granted the injunction inter partes not by way of continuation of the ex parte injunction but by way of re-grant.  Nevertheless, it was still granted on the basis that I was satisfied by the materials presented by Minmetals in support of its inter partes application.

12.  Against the above background, I proceed to consider the cases involving the discharge of the injunction and re-grant referred to by counsel.

13.  In Pacific Base Services Ltd v Silver Gain Development Ltd [1996] 1 HKC 610, Bokhary JA (as he then was) considered (at 620G; 621C-H) that upon recognition of material non-disclosure, the proper course would not be to nevertheless continue the injunction but to discharge and, if appropriate, to re-grant it. In considering the costs implication of these two courses, his lordship expressed that the defendant, which succeeded in seeking to discharge the injunction for material non-disclosure, should not be exposed to the risk of having to pay the costs before the ex parte judge and the summons judge (which had been reserved).  However, as that was addressed by the plaintiff’s undertaking not to seek such costs against the defendant in any event, the appellate court saw no need to disturb the order below to continue the injunction notwithstanding the material non-disclosure.  In other words, there was no issue of costs of the inter partes application for the injunction or that of re-grant.

14.  In Liu Xian Feng Sam & Anor v Liu Bo & Ors, HCA 5474/2001 (8 March 2005), DHCJ Fung (as he then was) was faced with the 1^st defendant’s summonses to, among other things, set aside or alternatively to vary the Marvea injunction obtained ex parte.  His lordship discharged the injunction for breach of undertaking and material non-disclosure; but in view of the substantial merits and balance of convenience, he decided to re-grant the injunction on terms, ie fortification.

15.  His lordship then made a nisi order that the plaintiffs to pay the costs of the application to set aside the injunction and the re-grant on terms.  As the re-grant was not strenuously argued in opposition and time taken up was insignificant, the costs of the re-grant were to be subsumed in the costs of the discharge.  The subsequent application for variation of the costs order (decided on 1 August 2005) related to whether the costs ordered should be paid forthwith or in any event.  There was no mention of application for the injunction inter partes or the costs of that.

16.  In Liming Capital Limited v Yeung Hei Kwan Jackie, HCA 1818/2008 (31 October 2008), DHCJ Carlson discharged the ex parte injunction for material non-disclosure; but decided in the circumstances of that case to reinstate the injunction on terms.  He made what was said to be the usual order that the defendant had her costs of the application for discharge.  He also ordered a bulk of the costs of the hearing to be to the defendant while the rest of the costs, including the costs of reinstating the injunction, would be in the cause.

17.  In Lucky Sun Development Limited & Anor v Gainsmate International Limited & Ors, HCCT 12/2007 (2 October 2007), DHCJ L Chan (as he then was) heard the defendants’ application to discharge the ex parte injunction.  His lordship discharged the injunction for material non-disclosure with costs of the discharge application to the defendants.  His lordship considered the plaintiffs’ application (without referring to any summons) and re-granted a small part of the injunction.  His lordship was silent as to the costs of the re-grant.

18.  The plaintiffs applied for variation of the costs order (decision handed down on 24 January 2008).  The part that is relevant for the present purpose was the costs of the days of substantive argument for discharge before his lordship.  Part of those days was spent on arguing the re-grant.  His lordship first affirmed his decision that the plaintiffs, having lost the opposition to the discharge application, should pay the costs for it.  Then account was taken of the time spent on arguing the re-grant.  Since the re-grant took very little time, his lordship ordered the plaintiffs to pay the defendants’ costs of the application for discharge and of the application for re-grant to the extent of 85%.

19.  Back to the present case, before me was indeed Minmetals’ application for the inter partes injunction. I allowed Dragon Boom’s application for discharge of the ex parte injunction.  I decided to grant the injunction inter partes by way of re-grant upon satisfaction with the materials presented by Minmetals in support of its application.  Whether Dragon Boom should be subject to such injunction at all, be it granted or re-granted after discharge of the ex parte injunction, remains to be decided at the end of the day.  Here it depends on the outcome of the New Jersey proceedings[3], which is the cause.

20.  In the circumstances, I am inclined that Dragon Boom should be entitled to its costs of the application to set aside the ex parte injunction while the costs of Minmetals’ application and the re-grant should be in the cause.

The summons for variation

21.  The relevant parts of the ex parte injunction first granted allowed each of the defendants a sum of HK$2,000 per week toward ordinary and proper business expenses; and a total sum of HK$500,000 on legal advice and representation.  An undertaking to provide bank guarantee of HK$500,000 in favour of each of the defendants was given.  Upon the parties’ applications, the above have since been varied and continued until the determination of Minmetals’ application.

22.  Dragon Boom then took out its summons for variation of the injunction.  The request for stay of the disclosure order under the injunction was dealt with by way of consent prior to the hearing.  As to the rest, I re-granted the injunction in terms as varied below:

(1)   the sum of US$364,124 be released for the legal expenses due and payable by Dragon Boom in respect of the CIETAC arbitration;

(2)   a monthly sum of US$25,000 be released to Dragon Boom for future legal expenses in respect of the New Jersey proceedings (subject to rider); and

(3)   fortification of Minmetals’ undertaking as to damages in the additional sum of HK$500,000.

23.  Dragon Boom argues that Minmetals has been unreasonable in ignoring its written request for the variation and in opposing its application for the variation.  It should therefore be entitled to its costs of the application for variation. Minmetals argues that Dragon Boom only succeeded partially and should be entitled to no order as to costs.  Both parties propose as the alternative of costs to Dragon Boom proportionate to its success.

24.  Dragon Boom succeeded in obtaining the release of funds for its legal expenses incurred in respect of the CIETAC arbitration as requested.  Such request was first made by letter but ignored by Minmetals.  Hence Dragon Boom’s application.

25.  Dragon Boom also succeeded in obtaining release of funds for its future monthly legal expenses in the New Jersey proceedings.  The sum is less than the amount requested (by letter and the application) but materially more than the amount proposed by Minmetals’ counsel during the hearing.

26.  The additional fortification fell far short of the amount sought in the application.  Whilst the additional fortification ordered fell in line with that proposed by Minmetals, there was no offer of such or any additional fortification for the continuation of the injunction sought prior to the hearing.  It was only at the hearing on 10 October 2013 (not even the first hearing on 29 August 2013) that Minmetals’ counsel proposed such amount as a fallback in case its primary stance of opposing the additional fortification was not accepted.

27.  In the circumstances, Dragon Boom is still the overall successful party in this application; and therefore should have its costs.

Costs of the hearingS

28.  The costs of the ex parte hearing have been reserved.  Following the conclusion of this court and the above discussion, Minmetals must bear its own costs of that hearing.

29.  At the hearing, counsel for Dragon Boom focused his submissions on material non-disclosure.  Not surprisingly, counsel for Minmetals focused his submissions on the merits of the claim and the other pre-requisites for the grant of the injunction.  Short of precision, I say roughly equal amount of time that day was spent on arguments in respect of these respective applications of the parties.

30.  Negligible time[4] was spent during the hearing on arguing Dragon Boom’s application for variation.

ORDER

31.  Considering everything, I order that:

(1)   Dragon Boom shall have the costs of its application for setting aside and its application for variation, including any costs reserved and half of its costs of the hearing on 10 October 2013;

(2)   Costs of Minmetals’ application, subject to (1) above and excluding the costs of the ex parte hearing on 12 July 2013, be in the cause;

(3)   Costs shall be taxed, if not agreed, with certificate for counsel; and (1) paid forthwith.