FOSHAN NANHAI BRANCH OF INDUSTRIAL AND COMMERCIAL BANK OF CHINA LTD v. FOSHAN RUIFENG PETROLEUM AND CHEMICAL FUEL CO LTD AND OTHERS

HCMP 2378/2014

[2019] HKCFI 1875

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2378 OF 2014

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D E C I S I O N

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1.  On 14 March 2019, this Court handed down its Decision, setting aside registration of a Mainland Judgment.  On 28 March 2019, the Applicant applied by summons to vary the costs order nisi made in the Decision, that it should pay the Respondents’ costs of the application to set aside. 

2.  The Respondents also applied for variation by their summons issued on 28 May 2019, but since this application was made way out of time (involving a delay of 2 months for a prescribed period of 14 days) with no good reason advanced at all, it is dismissed, with costs to the Applicant.

3.  The nomenclature used in the Decision of 14 March 2019 is adopted.

4.  The Respondents succeeded in their application to set aside registration of the Mainland Judgment, the Court finding that the Mainland Judgment is final and conclusive, but is not for the Respondents’ payment of a sum of money to be registrable under the Ordinance, and further, that the order for payment of double interest for delay is a penalty.  In reaching its Decision, the Court had rejected the Respondents’ challenge of the Applicant’s locus to commence and pursue these proceedings.

5.  Having considered the submissions made by the parties, I vary the order nisi made in the Decision, by ordering the Respondents to pay to the Applicant the costs of the challenge of the Applicant’s locus (“Challenge”), which I apportion to be 50% of the costs of these proceedings, including 50% of the costs of the hearing on 15 November 2018 and the preparation therefor.  The costs of the hearing on 12 December 2017 should also be included in the costs of the Challenge, since that hearing was adjourned in view of the last minute application made by the Applicant to adduce a further PRC legal opinion, and necessitated by the need to give time to both parties to file further evidence to deal with the standing and status of the Applicant (paragraphs 2 and 3 of the Order of Deputy High Court Judge R Pang made on 12 December 2017).

6.  The reasons for the variation are briefly as follows.

7.  The principles applicable to costs orders are clear.  They are as set out in Re Elgindata Ltd (No 2) [1993] 1 All ER 232 and Wang Din Shin v Nina Kung, CACV 460/2002 & CACV 67/2003, 19 April 2005 at paragraph 39:

(1)   Costs are in the discretion of the court.

(2)   Costs should follow the event, except where it appears to the court that in the circumstances of the case some other order should be made.

(3)   The general principle that costs follow the event does not cease to apply simply because the successful party raises issues or made allegations that failed, but that he could be deprived of his costs in whole or in part where he had caused a significant increase in the length of the proceedings.

(4)   Where the successful party raised issues or made allegations improperly or unreasonably, the court could not only deprive him of his costs but could also order him to pay the whole or part of the unsuccessful party’s costs.

8.  In Ko Hon Yue v Chiu Pik Yuk HCA 3494/2003, 23 August 2018, the Court of Appeal explained the position post-CJR as follows:

“The Court of Appeal had held that, post-CJR, the approach is not to regard the proposition that costs should follow the event as a general rule, but only to operate in shifting to the unsuccessful party the burden of showing why some different approach should be adopted on the particular facts of the case…

At the same time, post-CJR the Courts are more ready to make costs orders that reflect the outcome of different issues, and it is no longer necessary for the winning party to have acted unreasonably or improperly to be deprived of his costs of a particular issue on which he has failed: Pfeiffer GmbH v Cheung Hay Kit at [20]; and Chan Shun Kei v Hong Kong Construction (Hong Kong) Limited at [25]. The objective, as explained by Lord Woolf MR in AEI Diffusion Music Ltd v Phonographic Performance Ltd [1999] 1 WLR 1507 at 1522-1523, is to require litigants to be selective as to the points to take because ‘if you recover all your costs as long as you win, you are encouraged to leave no stone unturned in your effort to do so.” In this regard, the 3^rd principle in Re Elgindata (No 2) [1922] 1 WLR 1207, 1214A-C should be less generally followed.

Moreover, Order 62 rule 5 (1) (e) and rule 5 (2) (a) and (b) also direct the Courts to have regard to the conduct of the parties, including whether it was reasonable to raise, pursue or contest a particular allegation or issue, and the manner in which an allegation or issue was pursued. Whether a matter is an issue will depend on the circumstances of the case. However, in the light of the underlying objectives in Order 1A rule 1, in construing rule 5 (2), “issue or allegation” should not be narrowly confined: see Wong Kam Tong v Tin Shing Court, Yuen Long (IO) (No 2) at [16]; and Chan Shun Kei v Hong Kong Construction (Hong Kong) Limited at [25].”

9.  I do not regard the judgment of the Court of Final Appeal in Kam Leung Sui Kwan, Personal Representative of the estate of Kam Kwan Sing, Deceased v Kam Kwan Lai and others [2016] HKCFA 4 as setting out any new or different principle.  The Court simply emphasized that the general rule, of costs following the event, may be departed from, although the discretion to depart is exercised with due circumspection.

10.  The Respondents in this case have indeed succeeded on nearly all of the grounds for setting aside registration of the Mainland Judgment.  However, the Respondent did raise the Challenge at an early stage, which not only led to the filing and service of numerous affidavits or affirmations on the point, containing factual as well as expert evidence, the latter of which were all excluded by this Court for the substantive hearing, but was also the main if not the only cause for the adjournment of the initial hearing of 12 December 2017.  Leaving aside the fact that the expert evidence was excluded because of lack of compliance with the requirements of Order 38 rule 37C (and the parties’ own costs of preparation thereof expressly disallowed by the Court in the Decision), it is noteworthy that by the time of the hearing on 15 November 2018 (after a prolonged delay), there was no further issue that under PRC law, the Branch can sue and be sued.

11.  The Challenge raised and pursued by the Respondents caused in my view a significant increase in the length of the hearing of the application to set aside the registration of the Mainland Judgment, in the work required for the preparation of the evidence and arguments to be made at the hearing, and in the costs involved.  It also contributed to the delay in the disposal of the Originating Summons.  The Challenge took up more than 50% of the time of the hearing and the evidence for the hearing.

12.  Applying the principles set out in paragraphs 7 and 8 above, I consider that the significance of the Challenge (which was unsuccessful), the arguments involved, and the conduct of the Respondents in pursuing the Challenge justify a departure from the general rule that they should be awarded the entire costs of the proceedings.  The Applicant’s application to vary the costs order nisi is allowed, in terms of the Summons of 28 March 2019 with the percentage of 50% stated in paragraphs (a) and (b).  The costs of the application for variation including the costs reserved under the Order dated 6 June 2019 are to be paid by the Respondents to the Applicant, with certificate for Counsel.