Tai Sang Feeds Co Ltd and Others v. Sharply Development Ltd

HCA 1314/2020

[2021] HKCFI 643

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1314 OF 2020

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BETWEEN

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Before:  Hon Coleman J in Chambers (Open to Public)

Date of Written Submissions:  5 February 2021 and 8 March 2021

Date of Costs Decision:  12 March 2021

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COSTS DECISION

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A.  Introduction

1.In this Costs Decision, I shall adopt the definitions and abbreviations used in my Decision [2021] HKCFI 163, given on 25 January 2021 (“Decision”).

2.By the Decision, I dismissed P1-P6’s summons dated 6 August 2020, by which they applied for an interlocutory injunction against D, arising from what they say is substantial interference with their rights of way over the Subject Land.

3.As to costs, I stated that I could not then see any reason why the costs should not follow the event.  Therefore, I ordered P1-P6 to pay D’s costs of the application, to be taxed if not agreed, but at first on a nisi basis.  I directed that the order would become absolute after 14 days, unless in that time any party applies for variation of the nisi order.  I also stated that any variation application would be dealt with on paper submissions.

4.Within the 14 days, D has applied for variation of the costs order.  The proposed costs order sought by D is that the costs of the application, including the costs of the hearing on 14 August 2020, be to D, to be summarily assessed and payable forthwith.  Therefore, the proposed variations relate to (a) summary assessment and (b) payment forthwith.

5.P1-6 oppose the variation application.

6.Submissions have been filed from each side, with the parties represented by the same Counsel as previously.

B.  The Submissions

7.Mr Luk emphasised the context of the variation application.  P1-6’s application for the ‘interim-interim’ order was dismissed by Anthony Chan J on 14 August 2020, when the Judge noted (1) the application was for a mandatory injunction, (2) if accepted, D’s evidence which showed the Alternative Routes open to Ps would falsify the allegation that Ps’ businesses had come to a complete standstill and would undermine the claim to irreparable damage as well as urgency, and (3) Ps’ complaint that the Alternative Routes would entail considerable and lengthy travel was exaggerated and would hardly constitute proper support for an interlocutory injunction.

8.Nevertheless, the application was pursued at the substantive hearing on 20 January 2021, but was dismissed following my analysis in the Decision at §§62-75.

9.By reference to the comments made by Anthony Chan J and the analysis in the Decision, Mr Luk submits that both the ‘interim-interim’ application and the substantive application were unwarranted and inappropriate and should be discouraged.  In those circumstances, he submits, there is no good reason for the court to depart from the much-preferred practice of immediate payment by way of summary assessment.

10.Mr Chong submits that the starting point would be for the successful party of an interlocutory injunction to be granted his costs in the cause.  Further, when deciding on costs, the court should take into account the merits of the injunction application, but here the merits remain unresolved since the application for an interlocutory injunction is merely temporary by nature.  Further, Mr Chong submits that the refusal of the interlocutory injunction is not determinative of the action, and costs ought therefore to remain to be taxed only after the conclusion of the entire action.

11.Mr Chong also refers to authority identifying that, in the context of the wide discretion in relation to costs in an interlocutory injunction, the court could take into account (amongst other things) the consideration that the inherent nature of an interlocutory injunction may make it fair normally to require the unsuccessful party only to bear the costs of the application if the successful party also succeeds in the substantive action.

12.Mr Chong submits that the application was properly made by P1-6, because (1) the fence within D’s land was newly made since about July 2020, narrowing the right-of-way as claimed by Ps, (2) the court accepted from the aerial photos and expert reports that the land had been a load in continuous use for a period of not less than 20 years immediately preceding D’s acquisition of the land, (3) Ps’ application was dismissed on the ground of balance of convenience, and (4) it cannot be said that the application was made in bad faith.  There is nothing which could show Ps acted improperly or in some way ought to be penalised taking out an application which was totally baseless.

13.Mr Chong also submits that the contents of the affirmations used by the parties will be repeated in the witness statements to be filed for trial.  Therefore, the costs of the injunction are neither separable nor self-contained from the rest of the action, and so should be left for taxation until the end of the trial.  Further, he submits that there is no suggestion being put forward by D that being kept out of its money (in terms of costs awarded in its favour) that it would suffer any cash flow or other similar problem, whereas there is justifiable concern on the part of Ps as to the ability of D to meet any award of damages or costs.

C.  Analysis and Ruling

14.The effect of RHC Order 62 rule 9D is that the costs of any proceeding shall not be taxed until the conclusion of the action, unless the court when making a costs order specifies that all or any part of the costs to be taxed at an earlier stage.

15.Since Civil Justice Reform, the court has been given a wide discretion as to costs in interlocutory proceedings.  For example, Order 62 rule 3(2A) specifically empowers the court to order the costs of and incidental to any interlocutory proceedings to follow the event or to make such other order as it sees fit.  Further, it has been recognised that the reforms included encouraging the court to order immediate payment of costs of interlocutory proceedings and if possible by way of summary assessment of costs.  Part of the objective is to discourage unnecessary and disproportionate interlocutory applications.  Another part is the recognition that the lack of immediacy of orders to pay costs “in the cause” or “in any event” weakens costs as a sanction against unwarranted applications or resistance: see, for example, Wing Fai Construction Co Ltd v Yip Kwong Robert (No 2) (2012) 15 HKCFAR 454 at §5, approving the approach adopted in Midland Business Management Ltd v Lo Man Kui (No 2) [2011] 2 HKLRD 667 at §9.

16.Order 62 rule 5 identifies those matters which, to the extent if any as is appropriate to the circumstances, the court shall take into account in the exercise of its discretion as to costs.  Amongst the matters listed are the underlying objectives set out in Order 1A rule 1.  Those objectives include increasing the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the court, and promoting a sense of reasonable proportion and procedural economy in the conduct of proceedings, as well as ensuring fairness between the parties and facilitating settlement of disputes.  One way of achieving those objectives is, when appropriate, making immediate costs orders relating to interlocutory applications (and making summary assessments).

17.The court shall, to the extent appropriate, also take into account the conduct of the parties, including whether it was reasonable for a party to raise or pursue or contest a particular allegation or issue, and the manner in which the party has done so.

18.Reference can also be made to Practice Direction 14.3 which includes identification of a preference to be given to summary assessment of costs where an interlocutory application is concerned, except where there is good reason not to do so.

19.In the particular circumstances of this case, the original basis underpinning Ps’ application was readily demonstrated to have been at least exaggerated, if not simply false.  The comments made by Anthony Chan J were entirely apposite.  It is to be presumed that it was in recognition of the force of those comments that a rather different tack was taken on the substantive hearing of the application before me.  I, in my Decision, have identified that change and the impact I think it had on the assessment of the evidence overall.

20.Further, the application for the injunction did not fail simply on the balance of convenience.  Rather, I identified the fatal flaw as being that damages would appear to be an adequate remedy.  It was only after pointing out that the adequacy of damages point was fatal that I went on to say that, in any event, I thought the balance of convenience was in favour of refusing the injunction.

21.Further, I do not think it is a requirement that there has been some form of improper behaviour on the part of the losing party before the costs can be ordered to be paid forthwith, and made the subject of a summary assessment.

22.In the overall context of the failed application, it seems to me that this is a case where the exercise of the wide discretion as to costs should lead to an order that the costs be payable forthwith, and subject to summary assessment for that purpose.

23.There is, however, some force in the point that much of the evidential material generated for the purpose of applying for and opposing the application will be likely redeployed in the action proper. Indeed, in the Decision, I expressly noted that much of the evidence as would be necessary for a trial appeared to have been produced already.

24.Hence, in so far as it can be achieved in a reasonably broad brush fashion, I shall seek to separate (a) those costs which are specifically referable (only) to the interlocutory application from (b) the other costs otherwise so far expended and which will have real value in the action.  Such costs referable to the application would obviously include the costs of the two hearings on 14 August 2020 and 20 January 2021, but it ought to be possible to identify other elements of costs specifically referable to Ps’ failed interlocutory application.  Those separated costs will be payable to D forthwith upon the summary assessment I shall perform in accordance with the directions given below.  The remainder of the costs will be costs in the cause of the action.

25.As neither side has fully prevailed on the argument arising on the variation application, I will make no order as to the costs of the variation application.

26.As to summary assessment, D will provide a Statement of Costs for Summary Assessment by 5pm on 23 March 2021.  That Statement should make clear the items of costs claimed, and why it is said they are specifically reference to the interlocutory application (as opposed to costs of the action more generally).  Ps will then provide their comments and objections by 5pm on 1 April 2021.  I will then make the summary assessment on the papers.

Mr K.M. Chong and Ms Vivian Li, instructed by C&Y Lawyers, for the 1^st to 6^th plaintiffs

Mr Victor Luk and Mr Wa Shing Chan, instructed by Johnnie Yam, Jacky Lee & Co., for the defendant