Tuenbo Company Ltd v. Cheung Sung Lam and Others

HCA 566/2019

[2021] HKCFI 2532

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 566 OF 2019

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BETWEEN

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Before:  Deputy High Court Judge Alexander Stock, SC in Chambers (by paper disposal)

Dates of Plaintiff’s Written Submissions on Costs:  7 and 28 July 2021

Date of Defendants’ Written Submissions on Costs:  21 July 2021

Date of Decision on Costs:  1 September 2021

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DECISION ON COSTS

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1.I refer to my Decision in this action dated 11 June 2021 (the “Decision”), whereby I: (i)  dismissed the appeal of the 1^st to 4^th defendants (“Ds”)  in respect of their summons seeking to strike out these proceedings; and (ii)  granted to the plaintiff (“TCL”)  an order for the preservation of certain documents held by Ds and their inspection and copying by TCL.

2.The background and substantive issues are out in the Decision. I will not here repeat them, and I adopt the terminology in the Decision.

3.At §§98(1)  and 99 of the Decision, I pronounced costs orders nisi that: (i)  Ds pay the costs of their appeal to be taxed if not agreed; and (ii)  the costs of TCL’s Summons be in the cause.

4.Subsequently, TCL applied by summons (the “Costs Summons”)  to vary the costs orders nisi to provide that Ds pay TCL’s costs of both D’s Appeal and of TCL’s Summons, forthwith with certificate for two counsel, to be summarily assessed if not agreed.

5.Directions were made for the exchange of written submission on the Costs Summons, which I have now received and considered.

6.By their submissions, Ds indicated that they did not oppose the proposed variations to the costs order for Ds’ Appeal. The main item of controversy is therefore the appropriate costs order for TCL’s Summons, in particular whether it should be costs in the cause as per the nisi order, or whether this should be varied such that Ds pay TCL’s costs.  

7.The principles on the award of costs where a plaintiff is successful in obtaining interlocutory injunctive relief, were considered by Au-Yeung J in Hengshi International Investments Limited v Bayspring International Limited, HCMP 1916/2015, 10 March 2016, at §§38-43. I take the principles to be as summarised in that decision[1].

8.Where a plaintiff successfully obtains interlocutory injunctive relief despite a defendant’s opposition, the court has a broad discretion on costs, considering what is fair and just in the circumstances, by reference to the various considerations summarised in Hengshi International Investments. The approach is not mechanistic. The following may be relevant: (i)  the merits of the injunction application itself at the time it was made and considered, as a matter distinct from the possible outcome at trial; (ii)  the risk of injustice to the defendant in making a final costs order in the plaintiff’s favour, when upon mature consideration at trial a different view might be taken; (iii)  the countervailing risk of injustice to the plaintiff in delaying the issue until conclusion of trial, which might have the practical effect of depriving the plaintiff of some or all costs which it should in fairness have been awarded (eg if a trial never materialises).

9.Further, a costs order should be made against an unsuccessful defendant in an application for an interlocutory injunction where: (a)  the outcome of the hearing might be so plain that the court should conclude that an order should be made against the defendant for wasting time and money in fighting the issues; or (b)  where the substantive merits were very plain and the court did not expect the case to go any further: Hengshi International Investments at §43, citing Picnic at Ascot v Kalus Dergis [2001] FSR 2.   

10.Despite TCL’s detailed submissions, I am not persuaded that TCL should now be awarded the costs of TCL’s Summons, irrespective of the outcome of the action. I remain of the view that the fairest order is costs in the cause, for the following main reasons. 

(1)  I do not accept TCL’s arguments that the summons falls within the classes of cases described at §9 above.  Whilst I ultimately granted to TCL some relief under its summons, I do not think that this outcome was plain and obvious from the outset, and I consider that Ds levelled at least some reasonable arguments in opposition to TCL’s Summons.

(2)  I am also not persuaded by TCL’s arguments to the effect that the merits and outcome of its summons were plain or inevitable given a company’s prima facie entitlement to its own books and records. Rather, the Decision proceeds on the basis that Ds’ complaint of lack of authority remains (at least potentially)  to be finally resolved at a later stage (Decision §§71 and 75), and that the injunctive relief granted is a ring-holding measure (Decision §92).

(3)  I take the view that it would be substantially unfair if Ds/the Tuenbo parties were to ultimately succeed in establishing an entitlement to control TCL at the present time, but Ds were nevertheless left bearing the costs of TCL’s Summons. On the facts of this case, I consider that this potential unfairness outweighs countervailing considerations of the nature summarised at §8 above.

11.As to the costs of Ds’ Appeal, as noted above, the variations sought were ultimately not opposed. Further, I am satisfied that it is appropriate to grant a certificate for two counsel and for the costs to be summarily assessed and paid forthwith.

12.The written submissions also addressed the costs of TCL’s Costs Summons, and I have considered the parties’ various arguments on point.

13.In my view, the most significant matter raised by the Costs Summons was TCL’s argument that the costs of TCL’s Summons be to TCL rather than in the cause; upon which TCL has not prevailed. The other matters raised by the Costs Summons appear comparatively minor, and indeed turned out to be uncontroversial.

14.Accordingly, taking a broad-brush approach, I will order that TCL pay 75% of Ds’ costs of the Costs Summons forthwith, to be summarily assessed if not agreed.

Conclusion and disposition

15.In conclusion:

(1)  the costs order nisi pronounced at §98(1)  of the Decision will be varied to provide that Ds pay TCL’s costs of Ds’ Appeal forthwith, to be summarily assessed if not agreed, with certificate for two counsel;

(2)  the costs order nisi pronounced at §99 of the Decision will not be varied save that I will indicate a certificate for two counsel in respect of both sides’ costs;

(3)  TCL will be ordered to pay 75% of Ds’ costs of the Costs Summons forthwith, to be summarily assessed if not agreed.

16.I also give the following directions for the summary assessments of costs referred to at §§15(1)  and (3)  above:

(1)  within 14 days from the date hereof, TCL and Ds are each to lodge and serve a succinct statement of costs in support of their respective claims for costs, pursuant to Practice Direction 14.3;

(2)  within 14 days thereafter, TCL and Ds are each to lodge and serve a succinct summary of objections (if any)  to the opposing parties’ statements of costs;  

(3)  the summary assessments of costs will be disposed of on paper (unless otherwise directed).

Mr Kenny Lin and Ms Natalie So instructed by Messrs Jones Day for the Plaintiff

Mr Danny Tang and Mr Brian Lee instructed by Messrs Edmund Cheung & Co for the 1^st, 2^nd, 3^rd and 4^th Defendants