Re Porter Martine Joan

HCB 2757/2019 and
HCB 2758/2019
(Heard Together)

[2020] HKCFI 3044

HCB 2757/2019

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 2757 OF 2019

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AND

HCB 2758/2019

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 2758 OF 2019

________________________

________________________
(Heard Together)

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DECISION ON COSTS

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1.I have before this Court three sets of summonses:-

(1)  The Petitioner’s Summonses to amend both Petitions dated 29 October 2020;

(2)  The Debtors’ Summonses for production of two requisitions raised by master on 22 January 2019 and 2 April 2019 (the “Inspection Summonses”); and

(3)  The Debtors’ Summonses for an unless order that the Petitions be struck out unless the Petitioner files the two said requisitions in the Court by 2 December 2019 (the “Unless Order Summonses”).

AMENDMENT SUMMONSES

2.As there are no objections to the Amendment Summonses, I made an order in terms of the same.

INSPECTION SUMMONSES

3.For the Inspection Summonses, as it turns out, the Requisitions have now been provided and filed, hence no order was needed to be made by the Court on the substance of the respective summonses. The only question is one of costs.

4.The Debtors seek for costs on the ground that they are the substantive winners of the Inspection Summonses under O.24, rule 10 of the Rules of High Court, Cap.4A. It is submitted that as the 2^nd Affirmation of Chan Wai Kin filed in each proceedings is stated to be in answer to the Court’s Requisitions dated 22 January 2019 and the 3^rd Affirmation of Chan Wai Kin filed in each proceedings is stated to be in answer to the Court’s Requisitions dated 2 April 2019, the Debtors are entitled under O.24, rule 10 to seek inspection of the same. As such a notice under O.24, rr.10 and 11A (in both proceedings) were issued on 16 September 2019 that the Petitioner do provide copies of the Requisitions. A further request was made on 22 October 2019.

5.On 11 November 2019, the Petitioner’s solicitors addressed the request for the Requisitions by providing a copy of the 2 April Requisitions (that are under paragraph “1(b)” of the Inspection Summonses) and informing the Debtors’ solicitors that they no longer had the “1(a)” Requisitions.

6.On 14 April 2020, the Petitioner’s solicitors stated that it had already filed the Requisitions pursuant to the respective orders and that in doing so they have failed to keep any copies of the Requisitions. In respect of the “1(a)” Requisitions, the Petitioner’s solicitors suggested that they would help the Debtors’ solicitors to conduct the relevant court searches.

7.On 3 July 2020, the Debtors’ solicitors conducted a further search of the Court file but to no avail.

8.On 30 July 2020, the Petitioner’s solicitors agreed to write to the Court to seek the missing Requisitions. They eventually approach the Court on 18 August 2020 and the “1(a)” Requisitions were provided on 23 September 2020.

9.The Petitioner asks for costs for the Inspection Summonses, as the Debtors are not entitled to an order for inspection per se under O.24, rule 13 of the Rules of High Court, Cap.4A on the following grounds:

(1)  The Requisitions are not necessary to the Debtors’ case, as steps taken to serve the statutory demands on the Debtors are fully set out in the three respective affirmations with reference to the Requisitions raised.

(2)  The Debtors’ solicitors was informed as early as 11 November 2019 that the Requisitions not produced were not in the Petitioner’s possession; and

(3)  The Debtors’ solicitors could have obtained the Requisitions by conducting a full and proper court search.

10.Ms Chiang for the Petitioner also submitted that as late as 27 October 2020, the Debtors’ solicitors has actually written to the Registry asking for the Requisitions, and the Registry has refused their request on 17 August 2020 on the following terms:

“Application refused. The requisition sheets only contain information paned between the Court and the Petitioner on the formality of papers. There is nothing pertinent to the merits of the case.”

11.Ms Chiang thus submitted that the Registry confirmed the Petitioner’s view that the Inspection Summonses had no merits. The Debtors should have known at the time, and the Petitioner was not informed of the Registry’s refusal.

12.It is further submitted that in the same letter dated 27 October 2020, the Debtors have also disclosed to the Petitioner that they have, on second attempt on 14 September 2020, been able to get leave to search for the Requisitions. The Petitioner was not informed of the same. As a result time and costs were wasted on the Registry’s and the Petitioner’s part in obtaining the Requisitions for the Debtors.

13.Mr Brown for the Debtors submitted that the Debtors have an unqualified right to obtain copies of the Requisitions under O.24, rule 10 and the Court needs not examine the considerations under O.24, r.13. Ms Chiang submitted otherwise. Mr Brown also submitted that the Petitioner has the burden to provide the documents and the Debtors had no obligations to conduct searches on their own.

14.It was stated by Fok JA (as Fok PJ then was) in Moulin Global Eyecare Holdings Limited (in Liquidation) v. Olivia Lee Sin Mei, HCMP 2192/2012, unreported, 8 May 2013, at §§31-35) that:-

“It is clear from those rules and from the authorities that have considered them (or the precursors to those rules) that there is a distinction between discovery of documents in an action in general and an application for production of documents referred to in pleadings or affidavits…

In the latter situation, where a party has referred to a document in his pleading or affidavit, the opposite party has a prima facie entitlement to see it, “unless good cause to the contrary is shewn” (per Jessel MR in Quilter v Heady at p. 48), or “unless there is some sufficient ground for refusing production” (ibid per Lindley LJ at p. 50), or “unless he can shew good cause why he should not” produce it (ibid per Bowen LJ at p. 51).

Nevertheless, it is clear from the rules that any order for production for inspection under 0.24 r.11 is expressly “subject to rule 13(1)” and that latter rule plainly places, on an applicant for an order for production, a burden to demonstrate to the court that “the order is necessary either for disposing fairly of the cause or matter or for saving costs”.

…

There are thus two separate stages to be considered, although in practice these will usually be examined together. First, the party who has referred to the document in a pleading or affidavit bears the burden of showing good cause why an order for production should not be made. As a matter of practicality, at that stage, the fact of reference to a document in a pleading or affidavit will make it difficult for the referring party to contend that the document does not exist and it may also make it difficult for him to contend that it is not relevant. However, that is not the end of the inquiry as there is not then a presumptive rule in favour of an order for production and the referring party may be able to show, for example, that the document is privileged from production. In any event, under 0.24 r.13 there remains, secondly, and independent of the first stage, a burden on the applicant for an order for production to show the court that the order is necessary either for disposing fairly of the cause or matter or for saving costs.” (Emphasis added.)

15.Hence, as a matter of law, I am of the view that Ms Chiang is right.

16.However, that is not the end of the analysis. In the present case, for one reason or another, the Petitioner did produce the Requisitions to the Debtors albeit that it now submits that the Requisitions are not relevant to the merits and rightly so. The Petitioner could take the stance that the Requisitions could not pass the test under O.24, r.13 and refuse to disclose the same. However, given that the Petitioner has provided copies of the same, the issue is what should be correct costs order.

17.It appears to me that the Debtors are entitled to costs if they are the effective winner. That the effective winner is entitled to his costs is well-established:-

(1)   In Perrine Chamonix Ltd v Star League Ltd, HCA 1139/2017, unreported, 13 September 2017), the plaintiff discontinued its action after the alleged nuisance or breach of DMC ceased, and was awarded costs.  The court held that “when a party has achieved substantially what he or she sought in the action or application, costs should be awarded to him or her.  It is an application of the principle that normally costs should follow the event” (at §24). 

(2)  In Re Lucky Ford Industrial Ltd [2013] 3 HKLRD 550, Harris J applied this approach and observed that it is neither necessary nor appropriate for the court to consider the merits of the underlying claim (at §14):-

“In my view having regard to O1A r1 the correct approach to determining costs in cases which do not involve the court granting substantive relief is for the Court first to consider the terms of settlement and assess whether the petitioner has obtained substantially what he sought in his petition. If he did it will not be necessary or appropriate for the Court to consider evidence and arguments directed to the merits of the case and whether or not the petitioner would have been successful if the petition had gone to trial. The petitioner will be treated as having been successful and entitled to his costs.”

(3)  As Rogers J (as he then was) said in Re Chinese United Establishment Ltd HCCW 391/1994, unreported, 5 October 1995 at §8:-

“In my view, I consider that the Petitioners are entitled to their costs on the very simple footing that they have, in effect, gained by these proceedings that which they had to come to court to get. If this open offer had been made earlier, perhaps when the petition were presented, or in lieu of evidence being filed by the Respondents, or at any other time, then of course the Petitioners would not have had to proceed with their petition, or if they had done so, would have done so at their own peril as to costs.”

(4)  This approach was also upheld by the Court of Appeal in Re Chinese United Establishment Ltd, CACV 214/1995, unreported, 24 April 1996 at §§13, 15:-

“The way that the judge approached the problem was to consider what had been achieved by the petitioners. It had been as a consequence of the filing of the petition that the respondents had made the offer they had. It could be said that the action taken by the petitioners had achieved this.

…

Mr Tang submitted that there had been no determination of the issues between the parties.  This is not really germane to the present case.  The fact of the matter here is that the petitioner did substantially obtain the relief sought.”

(5)  This principle has also been applied in the non-company context, such as in Pang Chun Kwong v Pang Hang Lau, HCMP 2352/2012, unreported, 13 December 2013, an administration of estate case, where the Court ordered costs in favour of the withdrawing Plaintiff when he “has obtained substantially what he sought” (at §§23-24).

18.In Bank of East Asia Ltd v Labour Buildings Ltd, HCMP 769/2002, unreported, 18 September 2007, where the plaintiff, in response to a discovery application, voluntarily disclosed the documents sought to avoid the impression that it had something to hide, despite its stance that the application was unmeritorious.  The plaintiff argued that the issue of costs should be reserved, or alternatively that it should be entitled to costs in relation to the disputed documents.  The court however held that the plaintiff should be liable for the defendant’s costs, on the simple basis that the defendant was the winner (at §§9-10):-

“In the end, the defence has succeeded with its application. A consideration of the reasons by which the plaintiff chose to accede to the application and make discovery is not, I think, a matter that I should pay heed to. There are, I am sure, numerous reasons as to why one side or the other should, in effect, consent to or offer no opposition to an interlocutory application. I think it would be wrong for a court, in considering how to exercise its discretion on costs, to explore that party’s motivation.

I see no reason to defer my ruling nor any to depart from the normal course that costs should follow the event.”

19.Applying the above legal principles to the facts of the present case, as the Debtors are the effective winners, I am of the view that the Debtors should be entitled to the costs of the Inspection Summons.

UNLESS ORDER SUMMONSES

20.However, I am of the view that different considerations apply to the Unless Order Summonses. I agree with Ms Chiang that the Unless Order Summonses, filed less than a week after the Inspection Summonses, in fact relate to the same subject matter, i.e., the Requisitions and are duplicated with the Inspection Summonses.

21.There is also no explanation as to why it is thought proper to issue the Unless Order Summonses and to incur extra and unnecessary costs. It is an unnecessarily aggressive move which is unwarranted. Ms Chiang submitted that interlocutory proceedings that are instituted based on a point that is plainly wrong and the outcome could achieve no benefit to parties and could not decide any issue between them, should be penalized with costs on an indemnity basis (See Hong Kong Civil Procedure 2020, at §§62/App/12-13). I agree. I cannot see how the Court can make an order in terms of the Unless Order Summonses and why it was necessary at all to take out such summonses.

DISPOSITION

22.For all the reasons stated above, on the issues of costs, I make the following orders:

(1)  For the Inspection Summonses, the Debtors are entitled to costs of and occasioned by the said Summonses, on a party to party basis, to be taxed if not agreed.

(2)  For the Unless Order Summonses, the Petitioner is entitled to costs of and occasioned by the said Summonses, on an indemnity basis, to be taxed if not agreed.

23.Finally, it remains for me to thank Ms Chiang for the Petitioner and Mr Brown for the Debtors for the helpful assistance.

Ms Melinda Chiang, instructed by Cheung & Choy Solicitors, for the Petitioner in HCB 2757/2019 and HCB 2758/2019

Mr Toby Brown, instructed by Payne Clermont Velasco Solicitors, for the Debtors in HCB 2757/2019 and HCB 2758/2019