YANG FOO-OI v. WAI WAI CHEN AND ANOTHER

HCA1739/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1739OF 2010

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RULING ON COSTS

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Introduction

1.  The Intervener (“Angela”) applied by summons dated 19 October 2012 for leave to use the Subject Document for: (i) the California Action (“California Action Application”); and (ii) intended contempt proceedings against D1 (“Vivien”) as a result of her alleged breach of Master Hui’s Order made in HCMP 1478 of 2011 (“Intended Contempt Proceedings Application”).

2.  By a judgment dated 8 March 2013 (“Judgment”), this court allowed Angela’s California Action Application but dismissed Angela’s Intended Contempt Proceedings Application.  Vivien is now appealing against the Judgment.

3.  Insofar as costs were concerned, this court made an order on a nisi basis that Vivien was to pay half of Angela’s costs of her application with certificate for two counsel (“Costs Order Nisi”).  The Costs Order Nisi was made on the basis that Angela succeeded in only part of her application.

4.  Both parties have now applied to vary the Costs Order Nisi. Angela seeks costs of her summons in its entirety.  Vivien’s position is that the appropriate order should be no order as to costs.

Legal Principles

5.  It is well established, following the case of Re Elgindata (No 2), that costs is a matter of discretion and the usual rule is for costs to follow the event, except when it appears to the court hat in the circumstances of the case some other order should be made[1] (Follow the Event Principle).  It has further been stated in Re Elgindata (No 2) that 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 cost of the proceedings he may be deprived of the whole or a part of his costs, and further where the successful party raises issues or makes allegations improperly or unreasonably, the court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful party’s costs.

6.  After the Hong Kong Civil Justice Reform introduced on 2 April 2009 (“CJR”), the Follow the Event Principle has been affirmed in Order 62 r 3(2) of the Rules of the High Court (“RHC”), 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[2].

7.  It has been held in the case of Wong Kam Tong v Tin Shing Court, Yuen Long (IO) (No. 2)[3] that after our CJR, while the Follow the Event Principle will still play a significant role in Hong Kong, it will nonetheless only be a starting point from which the court can depart, the rationale being that a mechanistic adoption of the Follow the Event Principle may result in parties incurring unnecessary costs in civil litigation[4].

8.  The above approach was followed in Hung Fung Enterprises Holdings Ltd v Agricultural Bank of China [5] in which Kwan JA has said that although the principles in the Re Elgindata (No 2)[6] continue to apply after our CJR, the approach these days is to regard the Follow the Event Principle not as a general rule but only operates to shift to the unsuccessful party the burden of showing why some different approach should be adopted on the facts of a particular case.

9.  I now turn to the parties’ respective case in relation to costs.

Angela’s Case

10.  It is Angela’s case that notwithstanding that the court refused to grant the Intended Contempt Proceedings Application, there is no good reason why the general rule should not continue to apply, in that –

(i) much if not all of the evidence was directed towards or at least necessary for the California Action Application;

(ii) Similarly, much if not all of the time spent at the hearing on 4 March 2013 (“the Hearing”) was directed towards the California Action Application;

(iii) There was no significant, or indeed any, increase in the length or cost of the proceedings resulting from the Intended Contempt Proceedings Application;

(iv) Angela’s summons would have been strongly contested by Vivien any way and would inevitably have to be determined by this court.

Vivien’s Case

11.  Vivien’s case is that as Angela is successful in respect of half of her applications, and where each of the two parties is successful in one of the two issues before the court, a fair and appropriate order is no order as to costs.  Further, in light of the decision of the House of Lords in the case of Crest Homes[7], the Intended Contempt Proceedings Application was a nonstarter and should not have been made in the first place.

Discussion and Conclusion

12.  Under Order 62 r 5(1) of RHC, the special matters which this court is to take into account in exercising the discretion as to costs includes the conduct of all the parties[8], and whether a party has succeeded on part of his/her case, even if that party has not been wholly successful[9].

13.  The case of Wong Kam Tong was a case where the applicant was the unsuccessful party although he had succeeded in one of the issues.  The applicant X, an owner of one of the flats of a housing estate was disqualified from standing as a candidate by the 4^th management committee of the incorporated owners.  X applied to the Lands Tribunal for a declaration that the election of the 5^th management committee was invalid.  The Presiding Officer/Judge found that X was wrongly disqualified (the Disqualification Issue) but held that the decision of the owners to reject X’s application to stand as a candidate was correct (Decision Issue).  She dismissed X’s application and made no order as to costs of the proceedings.  The incorporated owners’ application for leave to appeal in respect of the Disqualification Issue and the costs order was refused by Chu JA, and they then sought leave from the Court of Appeal to appeal against the costs order only. This was also dismissed. 

14.  It was held in Wong Kam Tong that although X was the unsuccessful party, he had succeeded on the Disqualification Issue which was the issue that caused him to bring the proceedings.  It was argued by the incorporated owners’ Counsel that there were 5 issues before the Judge and X only succeeded on one of them, and on that basis  the incorporated owners should get at least 80% of the costs.  Although the Judge identified 5 issues, the Court of Appeal was of the view that the broad categorisation of 2 issues by the Judge could not be faulted, and in practical terms X had succeeded in one issue but failed in another.

15.  It was further said in the Wong Kam Tong case that the Judge could well have ordered X to have the costs on the Disqualification Issue on which he succeeded, and the incorporated owners to have the costs on the Decision issue on which it succeeded[10], which the Judge did not.  The Court of Appeal however declined to disturb the Judge’s costs order as they were of the view that in making no order as to costs, the Judge was in the best position to assess the proportion of costs incurred relevant to each issue.

16.  Angela’s summons was for 2 applications, one she succeeded and one she failed.  The 2 applications were based on the same legal principles and I accept that most of the authorities were relevant to both applications.  Out of the authorities, two were in particular relevant to the Intended Contempt Proceedings Application, namely Crest Homes, and Cobra Golfing and Anr v Rata and Others[11].

17.  Angela’s counsel Mr Sussex SC in his skeleton submissions for Angela for the Hearing accepted the comment made by Lord Oliver in the case of Crest Homes, namely that if what was in issue was the revelation of a civil contempt in some wholly unrelated proceedings, Lord Oliver had said he would not for his part consider that the importance of ensuring obedience to the court’s orders outweighed that of ensuring the continued observance of an undertaking given to the court by the party obtaining discovery[12]. Mr Sussex sought to distinguish the facts of the present case from those of Crest Homes.  Mr Ho SC, for Vivien, apart from relying on Lord Oliver’s passage in Crest Homes, referred the court to a further case Cobra Golfing and Anr v Rata and Others [13] where Lord Oliver’s passage in relation to use in contempt proceedings in Crest Homes was referred to and relied on.

18.  At the commencement of the Hearing, there was no indication on the part of Angela to withdraw her Intended Contempt Proceedings Application.  Mr Sussex SC, after making his opening submissions on the general legal principles and on the California Action Application, only towards the end, briefly submitted that there was the additional use of the Subject Document for the Intended Contempt Proceedings.  He conceded that if the Subject Document was sought solely for this use, then he faced an uphill battle, and further made it clear that the two applications in Angela’s summons were capable of severance.  As mentioned earlier, apart from Lord Oliver’s passage in Crest Homes, Mr Ho referred to the case of Cobra Golfing in his submissions in relation to the Intended Contempt Proceedings Application.  In his reply submissions at the Hearing, Mr Sussex maintained there were two purposes for the use of the Subject Document, and sought to distinguish the  present case from Crest Homes and Cobra Golfing.

19.  Mr Dawes in his reply submissions on costs disagreed that much of the time spent at the Hearing was devoted to the California Action Application, and said there was no noticeable difference between the time spent on the 2 applications.  The Hearing lasted about 2 hours 20 minutes, and much of the time was spent on the general legal principles, and the California Action Application.  According to my rough estimate, the combined time on the submissions from both sides with specific reference to the Intended Contempt Proceedings Application should not be more than 30 minutes.

20.  Although the submissions from Mr Sussex with specific reference to the Intended Contempt Proceedings Application were relatively brief, he did persist with this application which was in the end unsuccessful, I am therefore of the view that Angela should not be entitled to the entire costs of her summons, but only to her successful application.  On the other hand, in my view, making no order is not appropriate either, as I accept that the California Action Application was the main focus of Angela’s application and the time spent on the submissions with specific reference to the California Action Application at the Hearing was longer than that on the Intended Contempt Proceedings Application.

21.  Having considered all the circumstances, I am prepared to vary the Costs Order Nisi.  I am of the view that a fair and appropriate order is as follows:

(i) Costs of the California Action Application be to Angela’s in any event;

(ii) Costs of the Intended Contempt Proceedings Application be to Vivien’s in any event.

(iii) There be certificate for two Counsel.