SCHUTZ, GILLES YVES RENE v. HAI CLOUD EXCHANGE (HK) LTD

HCMP 2258/2020

[2023] HKCFI 1684

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2258 OF 2020

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D E C I S I O N

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A. INTRODUCTION

1.  By a summons of 1st March 2023 (“the Variation Summons”), the Plaintiff seeks to vary the costs order nisi made in my decision of 15th February 2023 (“the Decision”), such that there be no order as to the costs of the Summons[1] (of 24th May 2022), in particular in respect of Au-Yeung J’s direction of 13th September 2022 to adjourn the Summons (“the Adjournment”).

2.  The Defendant does not oppose the proposed variation insofar as the costs of the Adjournment are concerned.  The Defendant says that such costs are de minimis, as the matter had been fully prepared by the time of the direction for the Adjournment (the parties’ skeleton arguments having already been filed by that time), and no substantial further work was required by either side prior to the adjourned hearing of 18th January 2023.  The Plaintiff does not disagree with this assessment.

3.  The Defendant says that there is no justification for otherwise depriving it of the costs of the Summons when it was the successful party.

4.  The Plaintiff says that there should be no order as to costs, or that the Defendant’s entitlement to costs should at least be reduced, as the Defendant succeeded in resisting the Summons only on grounds raised by the court.

B.     THE APPLICABLE PRINCIPLES

5.  There is no dispute as the principles which the parties cited.

6.  Costs are a matter of wide discretion for the court.  That discretion is to be exercised in a principled way with a view to reality and justice.  See Mimi Kar Kee Wong Hung v Raymond Kin Sang Hung, unreported, FACV 10 & 11/2014, 7th July 2015, at [7] (Ma CJ).

7.  Some of the relevant considerations going to the exercise of the court’s discretion as to costs were summarised in YBL v LWC (No.2) [2017] 2 HKLRD 783 at [10] (Lam VP, as he then was).

7.1  The proposition that costs follow the event is no longer a general rule but a starting point.

7.2  There has to be some justification for depriving a successful party of his costs.

7.3  In measuring who is the successful party and the extent of his success, the court must examine the reality and justice of the case.

7.4  Under O.62 r.5, the court will take into account the matters set out in r.5(1) as may be appropriate in the circumstances.

8.  The aim always is to make an order that reflects the overall justice of the case.  The question of who is the successful party for the purpose of the general rule (that costs follow the event) must be determined by reference to the litigation as a whole, and is a matter for the exercise of common sense.  Success is not a technical term, but a result in real life.  The matter must be looked at in a realistic and commercially sensible way.  See HLB Kidsons (a firm) v Lloyds Underwriters [2008] 3 Costs LR 427 at [10] (Gloster J).

9.  A successful party may nevertheless be deprived of some or all of its costs where it raises unsuccessful points or issues which cause a significant increase in the length or costs of the proceedings, that is one that is more than a trifling proportion of the total costs.  Since CJR, the court has been more ready to take an issue-based approach.  See KJ v KMLM, unreported, HCMC 4/2010, 21st May 2014, at [17] (To J).

10.  It is not necessary to establish that a successful party has acted unreasonably or improperly in raising an issue for it to be deprived of the whole or part of its costs; the court may deprive a successful party of such costs if he caused a significant increase in the length or costs of the proceedings by raising issues on which he did not succeed.  On the other hand, an “issue-based” costs order must not be so readily made as to undermine the utility of the general rule that costs follow the event and to lead to the proliferation of unwarranted costs disputes.  See Momin Lok v Hospital Authority [2021] HKCA 1319 at [9] to [10] (G Lam JA).

11.  Where a party’s success is based on points raised by the court rather than its own arguments, it may be appropriate to reduce the costs to which the party is entitled, or indeed to make no order as to costs.  Cf. Secretary for Justice v Hui Yat Fai & ors [2005] 2 HKC 438 at [4] (A Cheung J, as he then was); Lam Chi Tat, Anthony v Kam Yee Wai, Andrew [2013] 1 HKLRD 1206 at [5] (Lam JA, as he then was); Ge Qingfu and others v L & A International Holdings Ltd and others [2020] HKCA 779 at [13].

C.     WHETHER DEFENDANT SHOULD BE DEPRIVED OF SOME PART OF ITS COSTS

12.  The Plaintiff says the Defendant failed on the two grounds relied on to resist the Summons, namely, that the Summons was an abuse of process and that the intended action in the French courts for which the Documents would be used was bound to fail.

13.  It is true that these grounds were not accepted as the grounds for dismissing the Summons.  Nevertheless, I consider that the Defendant, as the successful party in resisting the Summons, should not be deprived of its costs, for the following reasons.

13.1  As regards abuse of process, it could not be said that the Defendant caused a significant increase in the length or costs of the proceedings by raising this issue.

13.1.1  The evidence relating to abuse of process was essentially also the material against which the assessment of whether the Plaintiff had adequately explained why he had not used the Documents for the original purpose stated, which was an important reason for the refusal to grant the Plaintiff a release from his undertaking not to use the Documents for a collateral purpose, was made.

13.1.2  The arguments relating to abuse of process could not be said to be entirely distinct from a consideration of whether the Plaintiff had adequately explained why he had not used the Documents for the original purpose stated.

13.2  As regards the Plaintiff’s intended action in the French courts, similarly, it could not be said that the Defendant caused a significant increase in the length or costs of the proceedings by raising this issue.

13.2.1  It was the Plaintiff who raised the issue in the first place, saying that he had a feasible cause of action in the French courts, for which he should be allowed to use the Documents.

13.2.2  As the Plaintiff had adduced an opinion of French law in support of this argument, it could not be said to be unreasonable for the Defendant to have adduced an opinion of French law in response.  Insofar as the Plaintiff argues that the Defendant’s submissions focussed on the Plaintiff’s legal opinion and made little reference to the Defendant’s (so that even if it was not unreasonable for the Defendant to adduce the opinion, it unjustifiably increased costs), the Plaintiff does not go so far as to say that the Defendant should not have adduced an opinion at all.

13.2.3  The Plaintiff says that the Defendant failed in its argument that the intended action in the French courts was bound to fail.  But equally, the Plaintiff failed in his argument that the intended action amounted to a cogent and persuasive reason for the grant of leave to use the Documents in such an action: see Decision paragraphs 51, 52.  The Defendant’s arguments on French law and the Defendant’s French law opinion could not be said to be irrelevant to this determination.

13.3  It also follows from the above points that the evidence and arguments regarding abuse of process and the merits of the Plaintiff’s intended action in the French courts were not so discrete as to make it appropriate for them to be considered separately from the rest of the parties’ evidence and arguments for costs purposes.

D.     DISPOSITION

14.  The costs order nisi is varied to the extent that there is to be no order as to the costs of the Adjournment, so that, save as to the costs of the Adjournment, the Plaintiff is to pay the costs of and occasioned by the Summons to the Defendant, to be taxed if not agreed.

15.  I further make an order nisi that the costs of and occasioned by the Variation Summons are to be paid by the Plaintiff to the Defendant, to be taxed if not agreed.  Whilst the costs order nisi has been varied, the effect of this is de minimis, and the Plaintiff has failed substantially on his application, which was to seek an order that there be no order as to the costs of the Summons or that the Defendant’s entitlement to costs of the Summons be reduced.  In other words, as a matter of reality, it is the Defendant who has prevailed on this application.