Seridom Servicios Integrados Idom S.A.U. v. Heng Wen Trade Co., Ltd and Others

HCA 1631/2017

[2019] HKCFI 761

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1631 OF 2017

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Before: Hon Marlene Ng J in Chambers

Date of Hearing: 13 March 2019

Date of Handing Down Decision: 22 March 2019

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D E C I S I O N

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I.   INTRODUCTION

1.On 21 January 2019, I handed down decision (“Decision”) dismissing the summons by the 8^th and 10^th defendants (“D8 and D10”) filed on 13 February 2018 (“Summons”). For convenience, I shall adopt the abbreviations in the Decision.

2.By the Summons, D8 and D10 sought orders that (a) the 2^nd Injunction and 2^nd Continuation Orders against D8 and the 3^rd Injunction and 3^rd Continuation Orders against D10 be discharged, and (b) in the event being unsuccessful in relation to (a) above, P do fortify its respective cross-undertaking as to damages under the 2^nd Injunction and 2^nd Continuation Orders with respect to D8 and under the 3^rd Injunction and 3^rd Continuation Orders with respect to D10 by paying HK$500,000.00 into court for each cross-undertaking.

3.On 21 January 2019, I dismissed the Summons, and granted a costs order nisi that D8 and D10 shall pay costs of and occasioned by the Summons (including all costs reserved if any) to be taxed if not agreed (“Costs Order Nisi”). In coming to this view, I said as follows in the Decision:

“137. D8 and D10 suggested costs should be P’s costs in the cause by referring [to] the costs orders made in Pacific Rainbow International Inc and Grupo Arbulu SL. However, in Pacific Rainbow International Inc the court was concerned with the plaintiff’s application for continuation of the ex parte injunction which was opposed, and in Grupo Arbulu SL the court was concerned with the plaintiff’s application to continue the ex parte injunction. Here, the 2^nd and 3^rd Injunction Orders had already been continued by the 2^nd and 3^rd Continuation Orders. Both P and D8/D10 had filed their respective pleadings. It was after close of pleadings that D8 and D10 (who by then well knew P’s case) chose to file the Summons to discharge the injunction orders. I have dismissed their application, and I see no reason why they should not bear costs in the usual way.”

4.On 30 January 2019, P filed a summons to vary the Costs Order Nisi to the effect that D8 and D10 do pay P costs of and occasioned by the Summons (including all costs reserved if any) forthwith and that such costs be assessed summarily (“Costs Summons”). D8 and D10 did not make any application to vary the Costs Order Nisi.

5.In summary, the Costs Summons did not seek to disturb the discretion exercised under the Costs Order Nisi as to the incidence of costs, ie that costs of and occasioned by the Summons (including all costs reserved if any) be paid by D8 and D10 to P, and only sought to vary the discretion exercised under the Costs Order Nisi on how and when to quantify and pay those costs, ie that those costs be (a) summarily assessed rather than taxed and/or (b) paid forthwith rather than in any event.

II.   INCIDENCE ON COSTS

6.Mr Tsui, solicitor for D8 and D10, in his written submissions submitted that an award of costs is discretionary in nature, and went on to discuss various considerations as to the incidence of costs.

7.Mr Tsui referred to Wah Cheong Construction Company Limited v Super Bright Engineering Limited & ors in which the defendant consented to continuation of the ex parte injunction obtained by the plaintiff, and DHCJ To held that the plaintiff shall have costs of both the ex parte and inter partes applications for injunction against the 2^nd, 6^th and 8^th defendants.[1] It was said that if the court considers the successful plaintiff is justified in launching the application for the interlocutory injunction, “it shall balance, on the one hand, the risk of injustice to the defendant in making a final costs order in favour of the plaintiff when upon a mature consideration at the trial it would not have been made against the risk of injustice to the plaintiff, on the other, by delaying its decision until conclusion of the trial which might have practical effect of depriving the plaintiff of some or all of the costs which should in fairness have been awarded. If the balance is in favour of the plaintiff, the plaintiff shall be awarded interlocutory costs. If the consideration is nicely balanced or is against the plaintiff, then costs should be reserved to the trial judge or be in the cause. Such a costs order accords with the principle in TKI Ltd v New Happy Ltd as under such circumstances, the plaintiff would have failed to provide the special reasons required for departure from the usual costs order”.

8.Quite plainly, DHCJ To was dealing with the incidence or liability as to costs, ie whether there should be immediate determination as to who should pay costs to whom, and not with the question of whether there should be immediate quantification/payment of costs ordered to be paid to the receiving party. Here, the Costs Order Nisi had already dealt with the incidence of costs, ie D8/D10 were already ordered to pay costs to P (ie costs of and occasioned by the Summons including all costs reserved if any to be paid by D8 and D10 to P). But, as explained above, the Costs Summons did not seek to disturb such incidence of costs under the Costs Order Nisi.

9.Mr Tsui next referred to Hengshi International Investments Limited v Bayspring International Ltd & anor in which inter alia the court continued an injunction against the 2^nd defendant and granted a costs order nisi for costs to be in the cause, and the plaintiff applied to vary such costs order to one of costs to the plaintiff to be borne by the 2^nd defendant.[2] Au-Yeung J at paragraph 38 held that “[in] an interlocutory matter, costs to follow the event is but one option. Where a party has acted improperly or is in some way to be penalized, or the application is totally baseless, the court may consider an immediate order as to costs”.

10.In my view, the aforesaid discussions in Hengshi International Investments Limited were again concerned with the incidence/liability for costs, ie to decide now who should bear the costs of the injunction application or to leave the question of interlocutory costs to the trial judge (see paragraphs 40-43 therein). Such decision was not concerned with the question whether there should be immediate quantification/payment of costs already ordered to be paid, but the learned judge did order summary assessment of costs under the costs order absolute (see paragraph 52 therein). I find myself unable to draw much assistance from this authority since the Costs Summons was not concerned with the incidence of costs.

III.   ORDER 62 OF THE RULES OF HIGH COURT (“RHC”)

11.The RHC provides inter alia that:

“Costs may be dealt with by the Court at any stage of the proceedings or after the conclusion of the proceedings; and any order of the Court for the payment of any costs may, if the Court thinks fit, …… require the costs to be paid forthwith notwithstanding that the proceedings have not been concluded.” (Order 62 rule 4(1))

“Subject to this Order, where by or under these rules or any order or direction of the Court costs are to be paid to any person, that person shall be entitled to his taxed costs.” (Order 62 rule 9(1))

“(1) Where the Court has determined an interlocutory application at any stage of the proceedings and orders a party to pay costs in respect of the interlocutory application to any other party, it may, if it considers it appropriate to do so but subject to rule 9C –

(a) make a summary assessment of the costs by ordering payment of a sum of money to that other party in lieu of taxed costs;

(b) make a summary assessment of the costs by ordering payment of a sum of money to the other party in lieu of taxed costs but subject to the right of either party to have the costs taxed pursuant to paragraph (2); or

(c) order that the costs be taxed in accordance with this Order.

(2) Where the Court has made an order under paragraph (1)(b), either party to the interlocutory application is entitled to have the costs in respect of the interlocutory application taxed in accordance with this Order.” (Order 62 rule 9A)

“No direction or order may be made under rule 9(4)(b) or 9A(1)(a) or (b) for the payment of a sum of money if –

(a) the paying party shows substantial grounds for disputing the sum claimed for costs that cannot be dealt with summarily; ……” (Order 62 rule 9C(1))

“(1) Subject to paragraphs (2) and (4), the costs of any proceedings shall not be taxed until the conclusion of the action.

(2) If it appears to the Court when making a costs order that all or any part of the costs ought to be taxed at an earlier stage it may order accordingly.

……

(4) Where it appears to a taxing master that there is no likelihood of any further order being made in a cause or matter, he may order the person entitled to payment of the costs of any interlocutory proceedings which have taken place to commence taxation proceedings in accordance with rule 21.” (Order 62 rule 9D)

IV.   EFFECT OF COSTS ORDER NISI

12.The Costs Order Nisi plainly provided for taxation instead of summary assessment of P’s costs. As to the time for taxation, since the Costs Order Nisi did not specify the time for taxation or that P should have costs “forthwith”, taxation shall be done upon completion of the present action (see Order 62 rule 9D(1) of the RHC). In Big Boss Investment Ltd v So Lai Kei,[3] Registrar Queeny Au-Yeung (as she then was) said as follow:

“11. …… The “default position” under O.62 rr.9D(1) and 9D(2) is thus to allow taxation only after conclusion of an action unless the costs order specifies taxation to be “forthwith” or at some designated time. The adding of the words ‘to be taxed” without “forthwith” does not entail immediate taxation. This is because “taxation” is a matter of right, whether or not ‘to be taxed” are specified in the costs order: see O.62 rr.9(1), 9A(1)(c) and 9A(2). ……

12. Notwithstanding this major change to the time for taxation [since the adding of rule 9D to Order 62 of the RHC upon coming into effect of the Civil Justice Reform (“CJR”) on 2 April 2009], no injustice will be created to the party who has a costs order in his favour. As provided for under O.62 rr.9 and 9A, it is always open to a party to seek summary assessment of costs. This is in fact encouraged for interlocutory applications: see para.6 of PD14.3, especially for interlocutory applications. If, for some reason, summary assessment cannot be done, a party can always ask for taxation forthwith to safeguard his position. Otherwise, taxation can only proceed upon completion of an action. This will lead to one taxation per party per action. In the course of the action, where different parties obtain costs orders, there may be discussion on the amount and set-off so that taxation may be dispensed with at the end of a case.”

13.The above principles were correctly summarised in paragraph 62/9D/1 at page 1286 of Volume 1 of Hong Kong Civil Procedure 2019, but paragraph 62/4/1 at page 1249 incorrectly stated that where the court ordered one party to pay costs that receiving party was entitled to have such costs taxed and paid at once, which in my view was the pre-CJR position (see also Big Boss Investment Ltd at pages 795-797). DHCJ Kenneth Kwok SC in Xcelom Ltd v BGI-Hongkong Co Ltd (No 2) cited the latter passage found also in Hong Kong Civil Procedure 2017 and concluded that the defendants were entitled to immediate taxation and payment of their costs under the costs nisi made in that action even though it neither said “forthwith” nor “in any event” nor “in the cause” nor “in the defendants’ cause”.[4] I respectfully decline to follow such conclusion by the learned deputy judge.

V.   TIME FOR QUANTIFYING/PAYING COSTS

14.Given the aforesaid effect as to time for taxation under the Costs Order Nisi, P must apply to vary the Costs Order Nisi for summary assessment “forthwith” in order to seek immediate quantification/payment of its costs, which P did by way of the Costs Summons.

15.Whether or not to order immediate quantification/payment of costs in an interlocutory application is quintessentially a matter within the court’s discretion. Lam J (as he then was) in Midland Business Management Ltd v Lo Man Hui (No 2) explained as follow:[5]

“9. Under Civil Justice Reform, the court is encouraged to order immediate payment of costs of interlocutory proceedings and if possible by way of summary assessment of costs. The objective is to discourage unnecessary and disproportionate interlocutory applications. It is recognised that the lack of immediacy of orders to pays costs “in the cause” or “in any event” weakens costs as a sanction against unwarranted applications or resistance, see paras.529-536 of the Final Report of the Chief Justice’s Working Party on Civil Justice Reform.

10. By reason of O.62 r.5(1)(aa), the court should take into account of the underlying objectives in O.1A r.1 in the exercise of its discretion. The objectives in r.1(a), 1(c) and 1(d) are particularly relevant in the present context. In my view, the approach recommended by the Working Party should be adopted in furtherance of these objectives. Unwarranted interlocutory applications should normally be sanctioned by an immediate costs order.

11. In so saying, I must not be taken as saying that an immediate costs order should be made against every unsuccessful party in interlocutory application. I can readily see that there are cases where such party may have a proper justification for making an interlocutory application even though he fails at the end of the day. There could also be cases where the court considers that it would be more appropriate to make an order “in any event” or “in the cause” or to reserve costs.

12. However, what I do say is that after the Civil Justice Reform the court is more astute to the impact of costs on legal proceedings and order for immediate payment of costs will be made more readily as a discipline against unmeritorious interlocutory applications.”

16.Such approach was endorsed by the Court of Final Appeal in Wing Fai Construction Co Ltd v Yip Kwong Robert (No 2) in which the liquidators sought an order that the defendants were to pay outstanding costs forthwith upon dismissal of their application to strike out the liquidators’ claim at all levels of court.[6] Ribeiro PJ referred to the approach in Midland Business Management Ltd with approval, and added as follow:

“7. …… The former practice was generally to order interlocutory costs to be “in the cause’, to be settled up at the end of the proceedings where orders which may have been made in favour of the respective parties might be set-off against one another and when the overall result of the proceedings can be taken into account. However, it is now generally recognized that such an approach may lead to procedural laxity and a damaging proliferation of interlocutory or satellite litigation. The first four of the underlying objectives are relevant to redressing such tendency by emphasising the need:

…(a) to increase the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the Court; (b) to ensure that a case is dealt with as expeditiously as is reasonably practicable; (c) to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings; (d) to sure fairness between the parties…

8. In pursuing the underlying objectives, it is of course necessary to factor in any possible unfairness or prejudice which the party against whom an order for immediate payment of costs is sought may suffer in consequence of such an order.”

17.Thus, the considerations relevant to deciding whether or not to make an order for immediate quantification/payment of costs in interlocutory applications included (a) the extent to which the proceedings on taxation (or assessment) were severable and self-contained from the rest of the action, (b) the justice of making such an order having regard to the effect on the respective parties’ cash flow, (c) whether the amount at stake was sufficient to justify the expense of a separate taxation (or assessment) for it rather than bringing it on the final taxation, and (d) the possibility that there might be no trial.

18.Here, the Summons was severable and self-contained from the rest of the action. Mr Tsui submitted that P had not shown D8 and D10 had acted improperly or were in some way to be penalised or their Summons was totally baseless to justify an immediate order for costs. It was said that (a) P did not show that D8 and D10 acted in bad faith, and (b) the matters they raised ought to be investigated at trial when they might well produce more supporting documents. Such submissions envisaged a trial taking place in due course, and did not contemplate the possibility that there might be no trial. Mr Tsui argued there would be risk of injustice to D8 and D10 if this court were to make an immediate order for costs in P’s favour when upon a more mature consideration at trial P’s case does not make out.

19.In my view, such submissions would not aid D8 and D10 because they addressed the separate issue of incidence of costs. Here, this court had already made an immediate order for costs (ie D8/D10 shall pay P costs of and occasioned by the Summons including all costs reserved if any) as opposed to “costs in the cause” or “P’s costs in the cause”, and there was no application by D8 and D10 to vary this aspect of the Costs Order Nisi. In the circumstances, the outcome of the trial (even if D8 and D10 were to succeed in their defence) would not affect the incidence of costs in relation to the Summons.

20.In my view, even though some of the materials deployed for the purpose of the Summons may be referred to again at the trial (eg the parties’ pleadings), (a) it did not follow the Summons was not severable and self-contained from the rest of the present action for the purpose of costs, and (b) the outcome of P’s claims against D8 and D10 at the trial would not have any impact on the cost order made in respect of the Summons. In light of the quantum of costs claimed in P’s statement of costs dated 11 March 2019 for summary assessment (“P’s 1^st Cost Statement”) lodged for the purpose of the Costs Summons, the costs involved were of a sufficiently significant amount to justify the expense of a separate taxation (or assessment).

21.As a matter of fairness between the parties, there was no doubt that P was a substantial company with handsome assets, and it enjoyed the support of its group of companies. Mr Tsui suggested P was more resourceful than D8 and D10 in terms of cash flow, and D8 and D10 only had limited funds within the jurisdiction (see footnote 45 of the Decision) so immediate quantification/payment of costs would cause financial strain for them. This did not sit well with D8’s and D10’s case that their customers in Mainland China preferred to pay them in RMB such that they would have surplus of RMB in Mainland China (see paragraph 92 of the Decision) that enabled them to make RMB reimbursement to others in Mainland China for cross-border US/RMB exchange transactions (see paragraphs 95 and 97 of the Decision). Further, D8’s and D10’s reticence in adducing documentary evidence of their alleged ongoing/active business and, more importantly, their financial position (see paragraphs 104-105 of the Decision) detracted from the assertion that D8 and D10 would be under financial strain if immediate quantification/payment of costs were ordered. In the circumstances, I do not think too much weight could be placed upon such alleged concern. But on the other hand, if there were no order for immediate quantification/payment of its costs, P would be out of pocket for a substantial sum in the meantime. Even though P might be able to afford it in terms of cash flow, it was still a prejudice to P. Underlying objectives in Order 1A rule 1(c)-(d) of the RHC militated in favour of ordering immediate quantification/payment of the cost order in respect of the Summons. In my view, the discretionary considerations were substantially in favour of such an order.

22.Mr Tsui next argued (a) P had already indicated its position on cost in the event it successfully resisted the Summons in its letter to the court on 30 August 2018 (“Costs Letter”), ie costs of such application be to P forthwith to be taxed if not agreed, and (b) since this court had taken into account the parties’ submissions on costs in making the Costs Order Nisi, P’s application for variation thereof was not justified as there were no new developments since making such order.

23.I cannot see how this argument would aid D8 and D10 since P in asking for “forthwith” taxation in the Costs Letter was essentially urging for immediate quantification/payment of costs awarded in its favour. There was no change of stance in this respect, and I will deal with the issue of the manner to achieve such immediate quantification/payment below.

VI.   TAXATION OR SUMMARY ASSESSMENT OF COSTS

24.Mr Robinson, solicitor for P, submitted that the modern approach was to quantify costs by summary assessment to avoid the time, effort and cost of a separate taxation. Mr Tsui submitted that item-by-item taxation would be preferable as it would give D8 and D10 the opportunity to carefully scrutinise P’s itemised bill of costs to raise objections. It was said that taxation process before the taxing master would be fairer as it would give D8 and D10 full opportunity to make representations on P’s costs claim.

25.Practice Direction 14.3 provides as follow:

“6. Upon the disposal of any application, cause or matter, the Court may make one of the following orders in respect of the costs of and incidental thereto:

(1) summary assessment of such costs, in which event Part C(1) below applies;

(2) provisional summary assessment of such costs; or

(3) taxation of such costs in which event Part C(2) below applies.

The Court will give preference to the first two options where an interlocutory application is concerned, unless there is good reason not to do so, e.g. where the paying party shows substantial grounds for disputing the sum claimed for costs that cannot be dealt with summarily.”[7](my emphasis)

26.Following CJR, immediate payment of costs of interlocutory proceedings by way of summary assessment is to be encouraged (see Midland Business Management Ltd at p 672 and Lau Wing Yan v The Owners and/or demise charterers of the ship or vessel “BBG Glory”[8]).

27.Under Order 62 rule 9C(1)(a) of the RHC, summary assessment of costs is not to be allowed where “the paying party shows substantial grounds for disputing the sum claimed for costs that cannot be dealt with summarily”. By the time of the hearing of the Costs Summons, P had provided D8 and D10 with P’s 1^st Costs Statement, which appeared to be have been prepared in accordance with Practice Direction 14.3. but Mr Tsui did not identify any particular items where “substantial grounds of dispute” might arise.

28.As DHCJ Winnie Tam SC in Jackson Xu Zhao Ze & anor v Tsai Tim Yuen & anor put it, it was for the paying party “to identify the items which may by disputed and the grounds for dispute so as to enable me to judge whether the grounds for dispute are substantial. The fact that the sums involved are substantial or that there are multiple items do not, without more, make gross-sum assessment unsuitable. It all depends on the substance and the extent of the dispute. Further, if I were to order gross-sum assessment, [the paying party] will be given a reasonable opportunity to scrutinize the [receiving party’s] items of costs and to state their objections in writing”.[9]

29.In my view, Mr Tsui’s submissions were nothing more than potential arguments as to quantum rather than disputes over points of principle that underlied the amount of costs claimed.[10] As Au-Yeung J said in K&L Gates (a firm) v Ding Yu & anor, “I see no justification for taxation just on questions of quantum”.[11]

30.Further, although P by the Costs Letter proposed for forthwith taxation of its entitlement to costs in respect of the Summons, I find that on mature reflection, it would not be in the interest of either P or D8 and D10 for yet further costs to be incurred in separate taxation of such costs. Still further, the parties and this court having argued and heard the Summons substantively would be well placed to assess the relevant costs in their proper context. In the absence of any substantial grounds of dispute advanced by D8 and D10, I take the view that summary assessment would be suitable.

VII.   CONCLUSION

31.Accordingly, the Costs Summons is allowed, and I vary the Costs Order Nisi to the effect that D8 and D10 do forthwith pay P’s costs of and occasioned by the Summons (including all costs reserved if any) to be summarily assessed (“Costs Order Absolute”).

32.As regards costs of the Costs Summons, Mr Robinson and Mr Tsui agreed that costs should follow event. In the circumstances, I grant an order that D8 and D10 shall forthwith pay P’s costs of and occasioned by the Costs Summons to be summarily assessed (“Costs Summons Costs Order”), which is an order absolute.

33.I also give consequential directions for the summary assessment of costs as follows:

(a)  P do within 7 days from the date hereof lodge and serve statement of costs under the Costs Summons Costs Order not exceeding 1 page pursuant to Practice Direction 14.3 (“P’s 2^nd Costs Statement”);

(b)  D8 and D10 do within 14 days thereafter lodge and serve succinct summary of objections of not more than 3 pages in respect of P’s 1^st and 2^nd Costs Statements;

(c)  the summary assessment of costs will be by paper disposal (unless otherwise directed).

Mr Andrew Robinson, of Bird & Bird, for the plaintiff

Mr Sam Tsui, of Tsui & Co, for the 8^th and 10^th defendants