FREMERY ENRICH HOLDINGS LTD AND ANOTHER v. CHAN MICHAEL CYRUS (formerly known as CHAN YUN YIN) AND ANOTHER

HCA 347/2024

[2024] HKCFI 2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 347 OF 2024

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BETWEEN

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DECISION

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INTRODUCTION

1.  Before me this morning is the 1^st and 2^nd plaintiffs’ summons for interlocutory injunction dated 27 February 2024 against the 1^st and 2^nd defendants. Today’s hearing is the substantive hearing of that summons.

2.  As between the plaintiffs and the 2^nd defendant, the summons was disposed of by an order made on 5 April 2024 by consent. The parties agreed that the 2^nd defendant would be subject to an injunction until trial or further order of the court. The scope of that injunction is narrower than what was asked for in the summons. The parties also agreed that the costs of and incidental to the summons be in the cause of the action. The 2^nd defendant’s attendance at today’s hearing has therefore been excused.

3.  Today’s hearing only concerns the plaintiffs and the 1^st defendant.

4.  In fact, by his affirmation dated 21 May 2024, which is supposed to be his opposing affirmation, and by letter from his solicitors of the same date, the 1^st defendant stated that he would in principle agree to paras 1 to 4 of the summons. Those paragraphs contain all the substantive interlocutory injunctive reliefs sought by the plaintiffs. The 1^st defendant also said that he would ask for the costs of the summons to be in the cause of the action or be reserved. That agreement was expressly stated to be on a no admission of liability basis.

5.  In his affirmation, the 1^st defendant said that he took that position:

“[s]olely to save time and costs, and without prejudice to my position, contentions or defence in these proceedings and without any admission …”

6.  Up to this moment, the parties have not been able to agree on how to deal with the costs of the summons. Hence, today’s hearing has had to proceed to resolve that dispute, notwithstanding that the substantive issues in the summons have been resolved.

7.  This morning, the 1^st defendant maintains that the costs of the summons should be in the cause of the action. The plaintiffs on the other hand ask for an immediate costs order in their favour and they seek summary assessment today.

RULING

8.  I would order that the costs of the summons as between the plaintiffs and the 1^st defendant be in the cause of the action.

LEGAL PRINCIPLES

9.  It is now well-recognised that when determining costs of an interlocutory injunction application, there is no “starting point”, “prima facie” or “default” position as such. The court has a broad discretion. It would take into account all the relevant circumstances in a particular case.

10.  Common costs orders which may be made upon the disposal of a summons would include an immediate costs order in favour of the successful party, an order that the costs be reserved to the trial, and an order that the costs be in the cause or the successful party’s costs be in the cause.

11.  In the deliberation process, the court may take into account the merits of the injunction application itself. Depending on the circumstances, it may or may not link the incidence of the costs of the injunction application to what may happen at the trial in the future. If it considers that the two sets of costs should be linked, the court may either reserve the costs of the injunction application to a later date or order that the costs of the injunction application to be in the cause of the action.

12.  For the above principles, see the Court of Appeal’s discussion in China Medical Technologies, Inc (In liquidation) v Tsang Tak Yung Samson [2022] 2 HKLRD 517, [2022] HKCA 421 at paras 10 to 12. That decision in turn cites the decision of Au J (as he then was) in Mendlowitz & Associates Inc v Winner International Group Ltd HCA 574/2009, 14 May 2010 and another Court of Appeal’s decision in Chow Steel Industries Public Co Ltd v Ko Sung [2021] HKCA 1642.

DISCUSSION

13.  The issue before me today is what the proper costs order should be for the application for interlocutory injunction in which the plaintiffs have succeeded in getting all the substantive injunctive reliefs by reason of the concession made by the defendant some time before the hearing.

14.  I do not approach the issue with any default position or starting point. I have taken into account the following matters which I consider to be material and relevant.

The first matter – end result of the summons

15.  The first matter that I have taken into account is the end result of the summons. The plaintiffs have now got what they wanted in the summons. The 1^st defendant has agreed to be subject to the interlocutory injunctive reliefs asked for in the summons without any qualification or caveat.

16.  Mr Roger Phang, counsel appearing for the plaintiffs, describes the plaintiffs as the “successful party”. That is a reason, he submits, why the plaintiffs should be awarded costs immediately.

17.  The view that the plaintiffs are the “successful party” may well reflect their subjective sentiment. But, objectively speaking, the matter must be looked at by also taking into account the 1^st defendant’s express reservation, namely, that his concession was made without prejudice to his position or defences and without admitting any liability.

18.  The reason put forward by the 1^st defendant for that concession was to save costs and time. As a matter of fact, much costs and time have been saved because of the concession. There was no need for the plaintiffs to file reply affirmation. And there was also no need for parties to prepare full-blown skeleton submissions for today’s hearing.

19.  What has been achieved is that once the costs issue is resolved today, the injunction application would be behind the parties and they can now focus on the preparation of the trial of this action.

20.  At today’s hearing, Mr Phang is not saying that I should treat the 1^st defendant’s concession as an admission of defeat in this application. As such, the objective fact is that the merits of the injunction application remain undetermined.

21.  In my view, this fact is a point more in favour of aligning the costs of the summons with the costs of the action, rather than awarding the costs to the plaintiffs now.

The second matter – delay?

22.  The second matter which I have taken into account is the plaintiffs’ submission that there has been delay on the part of the 1^st defendant in coming up with the concession. The complaint or grievance is broadly that the 1^st defendant did not promptly consent to the summons but previously indicated that he would oppose it and he would file evidence in opposition. But then he belatedly changed his stance and consented to the reliefs sought against him. The plaintiffs’ submission is that had the 1^st defendant made the concession earlier, much more costs could have been saved.

23.  To put that submission into context, one needs to go back to the procedural history which is not very long. This action is only just about five months old.

(1) On 27 February 2024, the plaintiffs commenced the action and took out the summons for interlocutory injunction.

(2) 8 March 2024 was the first return date. The hearing was before Au-Yeung J. At that hearing, the 2^nd defendant was present whereas the 1^st defendant was absent but he had written to the court in person saying that he was not in Hong Kong but he had notice of the plaintiffs’ application but he could not attend. At the conclusion of that hearing, the judge granted interim interim relief against both defendants. She gave directions for the filing of evidence similarly vis-à-vis both defendants. Having read the 1^st defendant’s letter, the judge fixed a second return day hearing for him. The date fixed was 5 April 2024. That was also the deadline for the filing of the opposing affirmations.

(3) The hearing on 5 April 2024 was before Deputy High Court Judge H Au-Yeung (as he then was). Among other things, he granted a time extension for the filing of the opposing affirmation to 3 May 2024.

(4) On 17 May 2024, I granted a second time extension on an unless basis. The final deadline was to be 21 May 2024.

(5) Then on that deadline, the 1^st defendant for the first time indicated that he would agree to the substantive reliefs in the summons, both through his own opposing affirmation and also his solicitors’ letter.

24.  Mr Phang now points to the two time extensions to say that there has been delay on the part of the 1^st defendant. He says that the 1^st defendant could have agreed to the reliefs at the April hearing.

25.  In this regard, I note that in effect that was the first hearing which the 1^st defendant attended. We are in fact looking at a time span of about five months from the taking out of the summons to now. About three months after the taking out of the summons, the 1^st defendant made the concession. And that was made about seven weeks before today’s hearing.

26.  Based on this timeline, I fail to see any significant or prejudicial delay on the part of the 1^st defendant. This is definitely not a case where a party only makes the concession on the eve of a hearing. Here, after the 1^st defendant made the offer in May 2024, there was still ample time for the plaintiffs to consider his proposal.

27.  Where delay is established, that may be a factor pointing towards an immediate costs order against the 1^st defendant. But here there is no delay, substantial or prejudicial. And, hence, I do not think that this factor goes to support the plaintiffs’ position today. I should add here that two previous costs orders have in fact been made to deal with the two time extensions applied for by the 1^st defendant.

The third matter – the remaining costs of the summons are insignificant

28.  The third matter which I have taken into account is that as of today, most of the costs of the summons have already been dealt with by express orders of the court. Those orders are as follows.

29.  On 8 March 2024, Au-Yeung J made the following costs order:

“Costs of and incidental to the Summons be in the cause.”

30.  In my view, the “cause” referred to in this order means the cause of the action. I will return to this point shortly later.

31.  Then, on 5 April 2024, Deputy High Court Judge H Au-Yeung made the following order:

“Costs of the 1^st Defendant be in the cause of the Summons.”

32.  Finally, on 17 May 2024, I made the following order:

“The costs of this application summarily assessed at HK$1,040 be paid by the 1^st Defendant to the 1^st and 2^nd Plaintiffs forthwith”

33.  In light of the above court orders, as far as the costs of the summons are concerned, most of them have already been provided for. What is left basically comprise the costs of the 1^st defendant’s opposing affirmation, which is just two pages long, and some correspondence which I understand include a dozen of letters which are not very lengthy.

34.  I believe it is common ground between parties that the remaining costs of the summons which have not been previously dealt with are insignificant or minimal in amount. In view of that, the court would expect parties to resolve their differences in a pragmatic manner rather than coming to the court to have that point resolved in a hearing.

35.  In view of the expectedly small amount of the remaining costs of the summons, a sensible and reasonable option for the parties to take is to agree to have such costs to follow the costs of the action. In my view, there is no strong reason for the plaintiffs to insist that the 1^st defendant should immediately pay those costs which are minimal.

The costs order of the March hearing

36.  I now go back to the reasons for my interpretation of the costs order made in the March hearing (see para 29 above).

37.  Mr Phang’s submission is that the “cause” referred to in that paragraph is the cause of the summons rather than the cause of the action. I do not agree with that interpretation.

38.  The starting point of the construction exercise is that in a “costs in the cause” order, the “cause” referred to is the cause of the action. Mr Thomas Wong, counsel appearing for the 1^st defendant, refers me to the following commentary in the White Book at para 62/1/3:

““Costs in the cause” means that the costs of those proceedings are to be awarded according to final award of costs in the action …”

39.  Mr Phang accepts that that is the proper starting point of the construction exercise. But he argues or highlights that the March order was an order made at the first return day hearing. He submits that there is no reason why the court would want to decide at that early stage that costs of the summons, which would include costs of preparing the summons and also the supporting affirmation, should follow the costs of the action. That decision should properly be made at a later stage.

40.  With that in mind, Mr Phang submits that the March costs order should be interpreted to mean “costs of the summons be in the cause of the summons”.

41.  I do not agree with that interpretation for the following reasons:

(1) This is a departure from our general understanding of a common costs order.

(2) Costs in the cause of the action is one of the commonly granted orders in the context of interlocutory injunctions: see para 12 of China Medical. There is nothing strange or improper or unreasonable for an order to be made to that effect even at an early stage of the interlocutory injunction application.

(3) One must go back to the plaintiffs’ own summons. In that summons, in para 5, they asked for the following orders:

“Costs of and incidental to this application be in the cause.”

(4) In the context of the summons, the “cause” referred to must mean the cause of the action, not the cause of the summons.

(5) I consider that the summons and the costs order sought in the summons provide an important context to the interpretation of the March order. In the summons, the plaintiffs ask for costs be in the cause of the action and in the March order, it makes sense for the court to make a similar order.

(6) The March costs order together with the other parts of the order made on that day were based on a draft produced jointly by the parties and submitted to Au-Yeung J for approval. The plaintiffs at that hearing were represented by senior counsel. On the face of the costs order, there is nothing equivocal and should therefore generally be understood in the normal way.

42.  For the above reasons, I consider that the correct interpretation of the March costs order should be costs be in the cause of the action.

CONCLUSION

43.  Having taken into account the above matters, I consider that the proper costs order for the summons would be costs be in the cause of the action save for costs of today’s hearing. I also make an order in terms of paras 1 to 4 of the draft attached to the 1^st defendant’s skeleton submissions. I should now hear submissions on costs of today’s hearing.

(Submissions re costs)

44.  Costs of today’s hearing be to the 1^st defendant, summarily assessed at $115,000, payable by the plaintiffs on or before 25 July 2024.

45.  My reasons are as follows. Back in May 2024, the 1^st defendant already proposed to settle the matter with a costs order which is in the form that I made today just now. The plaintiffs ought to have accepted the offer. Then if that is the case, today’s hearing could have been avoided. Also the plaintiffs have come to court today with an incorrect interpretation of the previous costs order.

46.  For all these reasons, I see no reason why the 1^st defendant should not have costs of today’s hearing.