LO KA YI v. YAT FUNG PRECIOUS METALS MANUFACTORY CO LTD AND ANOTHER

HCA 1116/2020

[2021] HKCFI 1111

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1116 OF 2020

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C O S T S   D E C I S I O N

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A. Introduction

1.  These proceedings were commenced by writ dated 3 July 2020, in which the plaintiff (“P”) claims to be the victim of a fraud.  Materially for present purposes, P claims that the 1^st defendant (“D1”) holds the sum of HK$6,958,000 (“Sum”) and/or its traceable proceeds on constructive trust for P.  The alleged fraud is that the Sum is the amount that was transferred into the account of the D1 from the account of P held with the 3^rd defendant bank, as a result of a forged remittance application made by the 2^nd defendant (“D2”).

2.  Also on 3 July 2020, on P’s ex parte application, a Mareva injunction (“Injunction Order”) was granted against the D1 and D2, focusing in particular on the Sum in D1’s bank account (“Account”).  The Injunction Order contained a typical ancillary disclosure order, which required D1 to inform P of all its assets of individual value of HK$10,000 or more whether in or outside Hong Kong, and to confirm the information on affidavit.

3.  After some interim events – which it will be necessary to consider – D1 issued a summons dated 2 December 2020 (“Summons”) which sought:

     (1)  a variation of the scope of assets restrained by the Injunction Order;

     (2)  the discharge of the parts of the Injunction Order requiring disclosure of information;

     (3)  fortification of P’s cross-undertaking as to damages; and

     (4)  the costs of the application to be to the D1.

4.  Eventually, except for the question regarding costs, the remainder of the Summons was dealt with by consent between the parties.

5.  It was agreed by the parties, and directed by me, that the question of costs would be dealt with by way of paper disposal. Each of P and D1 seeks an order that the other should pay the costs of and occasioned by the Summons forthwith, such costs to be summarily assessed.  The issue is as to who should pay costs, rather than whether any costs payable should be summarily assessed.

6.  This is my Ruling on Costs.

B.     Further Background

7.  At the return date of the inter partes summons seeking the continuation of the Injunction Order, the Court ordered the inter partes summons to be adjourned to an early date, and for the Injunction Order to be continued until the adjourned hearing or further order.

8.  D1’s case is that it received the Sum in the ordinary course of its business.  Further, notwithstanding that it had already transferred the Sum to another bank account of a related company, the Sum was at the request of the bank transferred back to the Account on 29 June 2020, and has remained there until now.  Therefore, after the return date hearing, and to save time and costs, D1 wrote to P to inform that there was a balance of more than the Sum kept in the Account, and requesting consent to be relieved from compliance with the disclosure order.

9.  Subsequently, to meet the request made by P on 13 July 2020, D1 on 15 July 2020 provided P with particulars of the transactions concerning the Sum, together with supporting bank documents.  P requested D1 then to confirm the particulars in an affidavit.  But D1 suggested offering to pay the Sum into Court as security for P’s claim, with the Injunction Order to be discharged with costs in the action.  P responded to say that she would not accept D1’s proposal unless D1 were to file and serve an affidavit confirming the particulars of the relevant transactions.  On 11 August 2020, D1 met that request and filed and served an affirmation.

10.  On 19 August 2020, D1 wrote to P to propose simply leaving the Sum ‘frozen’ in the Account pending final determination of the action, and to request P’s consent to variation of the Injunction Order to the extent of discharging the disclosure requirement.  D1 also sought information or documents proving fortification of the undertaking as to damages, and notified P that in the absence of any positive reply D1 would apply to the Court for an appropriate order with costs.

11.  On 21 August 2020, P replied to notify her disagreement to any variation of the Injunction Order or discharge of the disclosure requirement.  No information relating to fortification of the undertaking was provided.  On the same day, D1 wrote to explain to P there was no justification for continuing to seek further disclosure for the purpose of tracing the Sum or to withhold consent the variations to the Injunction Order put forward.

12.  On 2 September 2020, D1 filed its Defence.  On 19 September 2020, P amended the claim to delete the previous allegations of dishonesty or fraud against D1.  P further sought to fix a date for the substantive argument in respect of continuation of the Injunction Order.

13.  On 28 September 2020, D1 wrote to P proposing to deal with the Injunction Order by way of consent on terms that (1) the Injunction Order be varied to the effect that D1 be restrained from dealing with the Sum in the Account only, (2) the disclosure requirements be discharged, and (3) P should provide fortification of her undertaking as to damages by payment of HK$350,000 into court within 14 days.

14.  In the absence of any response to that proposal, D1 eventually took out the Summons on 2 December 2020.  As identified above, the Summons sought the same three orders.

15.  On 15 December 2020, P wrote a ‘without prejudice save as to costs’ (“WPSATC”) letter saying that she would agree to paragraphs 1 and 2 of the Summons on the basis that D1 would agree not to proceed with paragraph 3.

16.  On 18 December 2020, D1 wrote a WPSATC letter in reply saying that without provision by P of information or documents proving her ability to satisfy the undertaking, D1 was not in a position to consider the proposed way of dealing with the Summons.

17.  On 22 December 2020, P wrote to D1 and protested the need to do so but provided a deposit confirmation of HK$2 million in P’s name to prove fortification of her undertaking as to damages.  The letter also urged D1 to accept P’s proposals in the letter dated 15 December 2020.

18.  The following day, 23 December 2020, D1 agreed that it would not proceed with paragraph 3 of the Summons, provided that P would agree to an order in terms as to paragraphs 1 and 2, with costs to D1.

19.  On 28 December 2020, P suggested that there should be no order as to the costs of the Summons.  Though there is no written reply, telephone contact from D1 suggested that proposal was not acceptable to D1.  Therefore, later the same day, P suggested to pay the sum of HK$5,000 as D1’s costs of the Summons.

20.  Whilst waiting for D1 to deliberate on the question of costs on 31 December 2020, P filed her affirmation in reply to the Summons.  It confirmed that she agreed with the application on varying the scope of assets being restrained and the discharge of the disclosure requirement, and provided evidence of assets relating to fortification.  The affirmation was served on D1 on 4 January 2021.

21.  On 5 January 2021, D1 wrote a WPSATC letter to P to say that the proposed HK$5,000 sum was not acceptable, but did not suggest any counter offer.  Nevertheless, by a WPSATC letter dated 9 January 2021, P made a new offer of HK$10,000 as the amount of costs to be agreed.

22.  On 13 January 2021, D1 wrote a WPSATC letter stating that the offer to pay HK$10,000 was unacceptable, but again failed to make any counter offer.  This was not productive.  In effect, D1 invited P to continue to ‘bid against herself’.

23.  On 15 January 2021, and after further consideration, P offered HK$15,000 for the costs in lieu of taxation.

24.  On 20 January 2021, D1 wrote an open letter to state that in view of the disclosure of P’s bank documents, D1 would not proceed with the application to request a payment into court in fortification of the undertaking as to damages under paragraph 3 of the Summons.  It had taken almost a month to do this.

25.  On the same day, D1 wrote a WPSATC letter rejecting the offer of HK$15,000 for costs, but again without making any counter offer.  Instead, what was proposed was that the costs of the Summons should be taxed and that the hearing of the Summons fixed for 22 March 2020 should proceed as scheduled for resolving the issue on the costs of the Summons.

26.  On 27 January 2021, P wrote to the Court to point out that P had agreed to an order in terms of paragraphs 1 and 2 of the Summons, whilst D1 had decided not to proceed with paragraph 3.  P suggested the only remaining issue of costs was not complicated and should be dealt with by way of paper disposal.

27.  On 28 January 2021, I gave directions for the issue of costs to be dealt with on paper submissions, in accordance with a timetable which I set.

C.     Applicable Principles

28.  The legal principles applicable in relation to questions of costs cannot be in dispute.  Costs are in the discretion of the court, such discretion to be exercised judicially.

29.  Since CJR, costs of interlocutory proceedings are to be dealt with under RHC Order 62 rule 3(2A), which empowers the court to make an order that costs should follow the event or such other order as it sees fit.  This identifies that the court has a wide discretion, and is entitled to take into account all the circumstances of the case, including those set out in Order 62 rule 5.  Amongst those matters are the underlying objectives set out in Order 1A rule 1, the conduct of the parties, and whether a party has succeeded on part of his case, even if not wholly successful.  The court can also take into account whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue, and the manner in which a party has pursued or defended his case or a particular allegation or issue.

D.     The Submissions

30.  The submissions made by the parties can be briefly summarised as follows.

31.  D1 submits that before D1 issued the Summons, P had been given numerous opportunities to consent and/or respond to D1’s requests.  But despite repeated requests and explanations, P unreasonably refused to give consent and even failed to respond to some requests.  On the other hand, D1 submits that it acted reasonably all along, particularly in seeking to resolve matters without having to issue the Summons so as to save time and costs.  D1 submits that all of the costs of and occasioned by the Summons were caused by and/or incurred as a result of P’s unreasonable conduct or unwarranted resistance to D1’s requests to resolve the matter amicably.

32.  P submits that D1’s submissions are based on an incomplete presentation of the background; for example, nothing was mentioned about P’s attempts to settle the dispute on costs.  P further submits that this hearing (by paper disposal) could have been vacated if D1 had acted reasonably, whereas D1 appears to have played tactics to increase P’s costs without actually seeking to resolve the matter.  This is also demonstrated by instructing Counsel of 29 years’ experience to argue these costs matters, where no complex legal issues arise, and the issues are on facts which are not difficult to grasp or present.  In summary, P submits that D1 has acted all along unreasonably after taking out the Summons application, purposely refusing the reasonable attempts to vacate the hearing.

E.     Disposal

33.  There is some force in D1’s submissions that the need to take out the Summons could have been avoided had P taken a more reasonable stance at an earlier stage.  The avoidable costs were incurred in the Summons itself and the short affirmation material filed in support.  Those costs would not have been very high (at least not on any taxation or assessment basis).

34.  On the other hand, there is also force in P’s submissions that once it became clear – as it did rather early on – that the substantive parts of the Summons could be dealt with consensually (and to an extent by way of compromise), any further costs could have been avoided had D1 taken a more reasonable stance.  On the rather straightforward question as to costs as arose, it was unsatisfactory for D1 simply to reject P’s proposals and offers as to resolution of the costs issue without making any counter-proposal or counter-offer.  The stance taken by D1 necessarily increased costs, and ultimately made more likely the incurring of further costs in the argument about costs.  I also accept that instructing such senior (by years of call) Counsel to argue these costs matters would unlikely have justified whatever fees he has charged.

35.  Therefore, neither party can claim all of the moral high ground.

36.  In the circumstances, it seems to me that the appropriate orders to make are that there should be (1) no order as to the costs of the Summons, and (2) no order as to the costs of the argument about costs.  Though this is to take a reasonably broad brush approach, it seems to me in the exercise of my discretion properly to take account of the relevant conduct of the parties as against the level of expenditure and the relevant issues in contention.  Any question of a summary assessment falls away.

37.  I so order.