EDS WELLNESS HOLDINGS LTD v. SHUM YEUNG

HCA 1775/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1775 OF 2012

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D E C I S I O N
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1.  By summons dated 4 November 2013, the defendant (“Shum”) applied to set aside the summary judgment against him entered after the inter partes hearing. On 12 January 2015, I handed down my decision dismissing the application (“the Decision”). I found that merits aside, the application must be dismissed for the court was functus officio and had no jurisdiction to set to aside the inter partes judgment.

2.  Following that event, I made a nisi order that Shum shall pay the costs of plaintiff (“EDS”) of and occasioned by his application.  I also ordered him to pay EDS’ costs of its summons dated 3 March 2014 for leave to file and rely on its latest affirmation.  All costs shall be taxed, if not agreed, with certificate for 2 counsel.

3.  By summons filed on 26 January 2015, Shum applies to vary the nisi costs order as follows:

(1) Shum do pay EDS’ costs of and incidental to his application incurred after 3 March 2014 with certificate for 1 counsel, to be taxed, if not agreed;

(2) all other costs of his application be reserved until the determination of HCA 200/2015 or further order;

(3) EDS do pay Shum’s costs of and occasioned by its summons dated 3 March 2014.

COSTS OF SHUM’S APPLICATION

4.  Costs is a matter of the discretion of the court.  The starting point is that costs should follow the event.  In Shum’s application, the event was whether the summary judgment should be set aside by this court.  In exercise of my discretion, I made the nisi costs order following that event.

5.  The starting point does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, though, in appropriate cases, he may be deprived of any costs increased significant because of such failing issues: see re Elgindata (No 2) [1992] 1 WLR 1207 at 1214A-C, per Nourse LJ (followed in Wang Din Shin v Nina Kung, CACV 460/2002 & 67/2003 (19 April 2005) at §39, per Yuen JA).

6.  It is for the party seeking to deviate from the starting point to establish the special circumstances justifying that course.  Examples include improperly or unreasonably raised issues or conduct of proceedings occasioning unnecessary litigation or expenses on the part of the successful party: see re Elgindata (No 2) (above); Wang Din Shin (above).

7.  It is notable that what were said in the above-cited cases provided guidance to the judicial exercise of the discretion as to costs which remains consistent after the Civil Justice Reform: see for instance, Tam Lai King v IO of Malahon Apartments & Ors [2011] 1 HKC 104 at §92; FBC Construction Co Ltd v Ben Lee & Ors [2014] 2 HKLRD 1054 at §237, per Chu JA.  Only that now O.62, r.3(2A) of the Rules of the High Court, Cap 4A expressly provides that if the court sees fit to make any order as to the costs of or incidental to any interlocutory proceedings, it may (subject to that Order) order the costs to follow the event or make such other order as it sees fit.  Further the special matters to be taken into account in exercising discretion are now expressly set out in the new O.62, r.5.

8.  Of the rules, Shum relies on the following provisions:

“Special matters to be taken into account in exercising discretion (O.62, r.5)

5. (1) The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account-

……

(e) the conduct of all the parties;

……

  (2) For the purpose of paragraph (1)(e), the conduct of the parties includes-

(b) the manner in which a party has pursued or defended his case or a particular allegation or issue;

……”

“Costs arising from misconduct or neglect (O.62, r.7)

7. (1) Where in any cause or matter anything is done or omission is made improperly or unnecessarily by or on behalf of a party, the Court may direct that any costs to that party in respect of it shall not be allowed to him and that any costs occasioned by it to other parties shall be paid by him to them.

  (2) Without prejudice to the generality of paragraph (1), the Court shall for the purpose of that paragraph have regard in particular to the following matters, that is to say-

(aa) the underlying objectives set out in Order 1A, rule 1;

(a) the omission to do anything the doing of which would have been calculated to save costs;

(b) the doing of anything calculated to occasion, or in a manner or at a time calculated to occasion, unnecessary costs;

(c) any unnecessary delay in the proceedings.

  (3) The Court may, instead of giving a direction under paragraph (1) in relation to anything done or omission made, direct the taxing master to inquire into it and, if it appears to him that such a direction as aforesaid should have been given in relation to it, to act as if the appropriate direction had been given.

  (4) The taxing master shall, in relation to anything done or omission made in the course of taxation, have the same power to disallow or to award costs as the Court has under paragraph (1) to direct that costs shall be disallowed to or paid by any party.”

9.  Shum uses 3 March 2014 as the dividing line for the purpose of costs because that was when the issue of jurisdiction of the court was raised by way of counsel’s written submissions on behalf of EDS.  Ms Wong for him takes particular issue as to EDS’ filing of substantial amount of evidence on the merits of the application, whilst taking him by surprise by the argument as to the jurisdiction point on that day.  As mentioned, I eventually found the jurisdiction point to be fundamental and sufficient for ruling against Shum on his application.

10.  EDS argues that that the court is functus officio and thus lacking the jurisdiction to set aside the inter partes judgment is a matter of legal submission.  I agree.  That the legal representatives of EDS would make legal submissions on whether it was open to Shum to seek to set aside the judgment after the conclusion of the proceedings in the action is said to have been hinted in the affirmation filed.  I could also see that.  But the relevant part of the affirmation referred to was perhaps too vague in indicating that the legal submissions would be those as to jurisdiction of the court in entertaining Shum’s application.

11.  Having said that, I do not think all that matter for the purpose of deciding costs of the application.

12.  To begin with, EDS was at the receiving end of the application by Shum.  Not only was EDS entitled to file evidence for the purpose of opposing the application, it was also reasonably expected to do no less than that in order to address the issues raised by Shum.  EDS is now criticised on the basis that had it intended to argue on the jurisdiction of the court, it did not have to and ought not to have filed such amount of evidence on the merits.  I find the criticism to be unwarranted.  The merits of Shum’s contentions remained part and parcel of his application, which had to be heard.  They were indeed argued.  That the court did not have to draw a definite conclusion on the merits because of the jurisdiction point, which trumped, did not change that.

13.  Ms Wong then argues that had the argument as to jurisdiction been made known sufficiently in advance, he and his legal representatives might have reassessed the position and reconsidered his application.  She argues that his client was effectively deprived of a reasonably opportunity of considering whether to lodge an appeal against the judgment or to commence a separate action for the purpose of setting aside the judgment instead of pressing ahead with the application.  I am curious as to how EDS could be exposed to such blame.  The fact was that far from conceding, Shum continued to argue on both the jurisdiction point and the merits of his application during the substantive hearing.

14.  The situation is also not that but for the jurisdiction point, EDS would have been doomed to fail on the merits.  My observations about the merits on the basis of the materials before me were set out in the Decision, which I do not intend to repeat here.

15.  I note that Shum is not seeking an order that EDS shall be deprived of its costs, according to his formulation, up to 3 March 2014.  Shum is seeking to have such costs reserved until the determination of HCA 200/2015 (or further order).  That is actually his action commenced as a result of and subsequent to the Decision for the purpose of setting aside the judgment.  The basis for the requested variation is that the merit of his case for setting aside the judgment remains live issue; and it is only fair that he should not be made to bear any part of the costs of his application on the merits until the same is determined in his action commenced for such purpose.

16.  I reject this argument.  To me, this is another way of seeking to single out the merits of his application as if the same did not form part of his application. Further, when the order as to costs was made, Shum’s position in respect of the outcome by the Decision, let alone any intention to commence the separate action, was unknown.  The action, now commenced, is a separate action entailing its separate event.  It is wrong in principle in the circumstances to reserve the costs of Shum’s application (or the part as formulated by Shum) in this action to be determined pending the event of that action.

17.  As far as Shum is seeking to justify deviation from the starting point that costs of his application should follow the event because of the special circumstances set out in O.62, r.5 (and r.7), he does not come close to achieving that.

TWO COUNSEL

18.  Ms Wong argues that the jurisdiction point is not complex; and 2 counsel on behalf of EDS were not warranted.  Yet ironically, it was Shum who tried to convince the court during the substantive hearing that the jurisdiction point, as argued on behalf of EDS, is not a straightforward one so that his application should be allowed.  The argument now advanced also impresses me that Shum is asking me to artificially ignore that the parties, and thus their counsel, were expected to be equipped to argue both the merits and the jurisdiction point in his application.  As mentioned, they did argue both.

19.  In view of the matters that were expected to be argued, and indeed argued, the counsel involved on both sides and their assistance rendered to the court, I maintain the certification of the 2 counsel.

EDS’ SUMMONS DATED 3 MARCH 2014

20.  As mentioned, by its summons dated 3 March 2014, EDS sought leave to file and to rely on its last minute affirmation.  Ms Wong argues that EDS sought indulgence of the court and should bear the costs.  I shall not repeat my explanation in the Decision of how the last-minute affirmation came about and why it was allowed, albeit apparently late.  On second thought, I would have ordered the costs of that to be in the cause of Shum’s application.  For all that matter, I am prepared to vary the nisi order to that extent as a matter of principle. But following the event of Shum’s application, the end result would be the same.

ORDER

21.  The costs order dated 12 January 2015 is varied to the effect that the costs of EDS’ summons dated 3 March 2014 shall be in the cause of Shum’s application.  Subject to such variation, the nisi costs order is made absolute.

22.  Notwithstanding the aforesaid variation, the end result, as mentioned, remains the same.  The present application in essence fails.  Following this event, I order that costs of and occasioned by this application be to EDS in any event, to be taxed, if not agreed, with certificate for counsel.  This costs order is nisi, and shall become absolute in the absence of application in 14 days to vary.

23.  I thank counsel for their assistance.