Lam Yee Tung, Mona v. A House Design Ltd and Another
Read the full judgment text of HCMP 2768/2017 on BabelCite. This High Court CFI judgment was delivered on 31 January 2019.
1. The Applicant took out the originating summons (“ the OS ”) in this case to seek leave to commence a derivative action against the 2 nd Respondent in the name of the 1 st Respondent.
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HCMP 2768/2017 [2019] HKCFI 287 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO 2768 OF 2017 ____________
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___________________________ DECISION ON COSTS ___________________________ Introduction 1.The Applicant took out the originating summons (“the OS”) in this case to seek leave to commence a derivative action against the 2nd Respondent in the name of the 1st Respondent. 2.The Applicant and the 2nd Respondent have come to terms on the disposal of the OS whereby leave was granted. 3.Both parties agreed that costs of the application should be in the cause of the derivative action. This would cover costs for issue of the OS, the supporting affirmation and the consent summons dated 28 September 2018 granting leave to institute the derivative action. 4.The only issue is whether or not “additional costs” of and occasioned by the 2nd Respondent’s opposition to the application, including counsel’s fees, should be to the Applicant (Applicant’s case) or should be in the cause of the derivative action (the 2nd Respondent’s case). The Applicant’s case 5.The Applicant accepts that obtaining leave under section 733 of Cap 622 was a necessary pre-condition for instituting a derivative action. Accordingly, she has agreed to costs in the cause as per paragraph 3 above. 6.Before taking out the OS on 15 December 2017, the Applicant had provided a copy of the draft statement of claim to the 2nd Respondent’s solicitors. The Applicant invited the 2nd Respondent to consent to the grant of leave under s.733 of Cap 622 to save costs and time. 7.Since the 2nd Respondent’s consent was not forthcoming, the Applicant filed the OS on 28 December 2017. The first call over was to be on 21 March 2018, as stated in the OS itself. 8.On 31 January 2018, the 2nd Respondent responded. She denied the allegations in the draft statement of claim and asserted that she had a good defence to the intended claim. She had not responded to the request for leave under the OS. 9.On 13 March 2018, the 2nd Respondent filed an acknowledgement of service indicating her intention to contest the OS. 10.Two days later, the 2nd Respondent’s solicitors indicated that they would consent to directions for filing of evidence and vacating the call over hearing. The Applicant’s solicitors agreed to that by letter dated 16 March “to save parties from incurring unnecessary costs”. A consent summons was entered into on 19 March 2018. A Chan J gave directions on the following day accordingly for substantive arguments, with costs reserved. 11.On 12 April 2018, the 2nd Respondent indicated that she would not contest the application. The parties signed a consent summons on 28 September 2018. 12.The Applicant seeks additional costs incurred between 31 January 2018 and 12 April 2018 as a result of the 2nd Respondent’s unreasonable opposition and wholly unnecessary action that has delayed the commencement of the derivative action. The Applicant relies on paragraphs 8 and 9 above. According to Mr Chong, counsel for the Applicant, the call over hearing was wholly unnecessary as was demonstrated by the subsequent fact of the parties signing a consent summons granting the leave sought. Analyses 13.The threshold for the court’s grant of leave under s.733 is low. The court does not go into the merits of the proposed claim and would only consider the draft statement of claim to see if there is a serious question to be tried and whether it appears to be in the interest of the company to grant leave: Re Primlaks (HK) Ltd [2016] 2 HKLRD 31, §§7-9, Ng J. 14.There had been 3 months before the filing of the acknowledgement of service for the 2nd Respondent to consider the draft statement of claim. She eventually conceded to the grant of leave without ever contending that the draft statement of claim did not disclose a serious question to be tried or that there was a serious flaw in the derivative action. 15.Consistent with the court’s approach to encourage parties to discuss and cooperate out of court, the Applicant has taken all reasonable steps to inform the 2nd Respondent of her intended application before filing the OS, with a view to saving costs and speeding up the process of litigation. 16.The good gestures were not well received by the 2nd Respondent and she sought directions for substantive hearing of the OS. It took her another month to agree to the grant of leave. Four months’ delay since the Applicant first sought the 2nd Respondent’s consent was attributable to the 2nd Respondent. 17.Although a hearing was saved, the 2nd Respondent has not acted promptly or reasonably in opposing the OS. In my view, the costs reserved under the order of A Chan J and additional costs of and occasioned by the 2nd Respondent’s opposition should be in favour of the Applicant. Quantum of costs 18.Despite Practice Direction 14.3, paragraphs 7 and 8 and the direction of the court on 9 and 21 November 2018, the Applicant has not filed any costs statement with the written submission. 19.Between 31 January and 12 April 2018, at best only the cost of preparing A Chan J’s order, the perusal cost of the letter dated 12 April 2018 and costs of informing the Applicant would have been incurred. 20.In the premises, I make a nominal order of $3,000 for costs in favour of the Applicant for the additional costs, including the costs reserved under A Chan J’s order. Costs of this application 21.Again, there is no costs statement for me to assess the costs. The issue at stake was narrow. In the directions letter dated 9 November 2018, this court stated that “any arguments should be focused so as not to generate more costs to argue on costs. If the court finds the costs incurred to argue on costs to be disproportionately incurred, it may penalize an applicant on costs.” 22.The court’s time has been sorely wasted on an issue that involved only limited costs. The Applicant would probably have been better off conceding the additional costs to be in the cause. 23.The issue was well within the competence of a solicitor and yet both parties saw fit to engage counsel. (The 2nd Respondent’s costs statement involved a senior partner charging $5,800 per hour plus counsel’s fees, totalling $88,925!) The court rebukes incurring of such disproportionate costs in a procedural matter involving no difficult issue of fact or law, did not cause the substantive dispute to be resolved in any single aspect and did not advance the substantive case a step forward. 24.To mark the disapproval of the court and for lack of a costs statement from the Applicant, I make no order as to costs of this application. 25.In conclusion, there will be an order in terms of paragraphs 1 and 2 of the consent summons filed on 28 September 2018 with costs in the cause as per paragraph 3 above. There will be additional costs to the Applicant for this application in the sum of $3,000 to be paid by the 2nd Respondent. 26.I take this opportunity to remind practitioners that the court has no duty to remind a party to submit a costs statement.
Written Submission by Mr K M Chong, instructed by C.H. Chan & Co, for the applicant Written Submission by Ms Theresa Chow, instructed by Winnie Mak, Chan & Yeung, for the 2nd respondent | |||||||||||||||||||||||||||||||
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