Chow Steel Industries Public Co Ltd and Others v. Ko Sung and Others

CAMP 157 /2021

[2021] HKCA 1642

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 157 OF 2021

(ON AN INTENDED APPEAL FROM HCMP NO 2711 OF 2017)

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J U D G M E N T

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Hon Kwan VP (giving the Judgment of the Court):

1.This is the 2^nd defendant’s renewed application for (i) leave to appeal against Keith Yeung J’s decision dated 17 July 2020 whereby the 1^st to 3^rd defendants were ordered to bear the costs of the “Continuation Summons” and “Discharge Summons” (defined below) forthwith, with certificate for two counsel (“Costs Decision”); and (ii) stay of execution of the Costs Decision until the determination of the intended appeal or further order of the court.

Background

2.On 15 December 2017, the plaintiffs commenced the present action by way of Originating Summons under section 21M of the High Court Ordinance (Cap 4), seeking a Mareva injunction over the assets of the defendants in aid of the plaintiffs’ proceedings in Thailand (“Thai Action”).

3.The Thai Action is an action commenced by the plaintiffs before the Central Intellectual Property and International Trade Court (“Thai Court”) against, among other parties, the 1^st and 2^nd defendants.  In broad terms, the plaintiffs claimed damages as a result of the defendants’ unauthorized disclosures of the plaintiffs’ confidential information to the plaintiffs’ competitors.  According to the plaintiffs, such unauthorized disclosures were of (among others) legal due diligence reports commissioned by the plaintiffs in respect of various investment projects that the plaintiffs had been assessing in detail.  The unauthorized disclosures led to the plaintiffs’ competitors investing in those projects and usurping the plaintiffs’ investment opportunities.

4.On the same day the Originating Summons was issued, the plaintiffs obtained from L Chan J on an ex parte basis a Mareva injunction against the 1^st to 3^rd defendants to restrain the disposal of assets up to the value of HK$159,269,023.18 (“Injunction”).

5.The plaintiffs issued a summons for the continuation of the Injunction until further order of the court (“Continuation Summons”). Meanwhile, on 17 January 2018, the 1^st to 3^rd defendants issued a summons to discharge the Injunction (“Discharge Summons”).  The Continuation Summons and Discharge Summons were heard by Keith Yeung J on 24 to 25 July 2018^[1].

6.On 26 March 2020, the judge handed down a decision allowing the Continuation Summons^[2] and dismissing the Discharge Summons.  He found that the plaintiffs had satisfied the two-stage approach laid down by the Court of Final Appeal in Compania Sud Americana de Vapores SA v Hin-Pro International Logistics Ltd (2016) 19 HKCFAR 586.  There is no appeal against this part of the decision.

7.The judge also made a costs order nisi that the costs of and occasioned by the Continuation Summons and Discharge Summons be to the plaintiffs, to be taxed if not agreed.  Both sides then sought to vary this order:

(1)  The plaintiffs submitted that costs should be payable forthwith and with certificate for two counsel.

(2)  The 2^nd defendant submitted that costs should be either in the cause or the plaintiffs’ costs in the cause.

8.In support of his proposed variations, the 2^nd defendant advanced two points:

(1)  The Court of Appeal held in King Fung Vacuum Ltd v Toto Toys Ltd [2006] 2 HKLRD 785 that unless there are very special circumstances in an application for an interlocutory injunction, the appropriate costs order should be either costs in the cause or the successful party’s costs in the cause. Insofar as King Fung Vacuum conflicts with other first instance cases, the former being an appellate decision should prevail.  There are no special circumstances in the present case to justify departure from the normal costs order.

(2)  Contrary to the plaintiffs’ argument, there is a “cause” in these proceedings which the costs order can be “linked” to.  As held in Minmetals Inc v Dragon Boom Limited (HCMP 1702/2013, 24 July 2014) at §19, the “cause” of a s 21M application is the underlying foreign proceedings. The “cause” here is therefore the Thai Action.  If the Thai Court rules in favour of the 1^st and 2^nd defendants in the Thai Action, the OS should be dismissed, and vice versa.

The Costs Decision

9.On 17 July 2020, the judge handed down the Costs Decision acceding to the plaintiffs’ proposed variations.

10.The judge dismissed both arguments raised by the 2^nd defendant.  On the first point, he held that King Fung Vacuum was distinguishable as it did not concern any injunctive relief obtained in aid of foreign proceedings under s 21M.  In that case, the interlocutory injunction was obtained in a domestic commercial context to prevent certain correspondence, and there were substantive underlying proceedings^[3].

11.He dealt with the second point as follows in §§13 to 18 of the Costs Decision:

“13. I do not accept that the Thai Action should be taken as the “cause” to which the costs concerned should be linked. S 21M proceedings were introduced so as to give Hong Kong courts power to assist where proceedings “have been or are to be commenced in a place outside Hong Kong”. The jurisdiction is not conditional upon the applicant having been successful in those foreign proceedings.

14. The right of a successful party in a foreign action is taken care of elsewhere. He can apply to enforce the judgment or award in Hong Kong, and injunctive relief may be obtained in that regard. The introduction of s 21M was indeed to address the previous lacuna of the Hong Kong Courts not being able to assist a party to an anticipated or on‑going foreign action ‒ see §E1/21L/7 of Hong Kong Civil Procedure 2020, Vol 2.

15. If an application under s 21M is otherwise justified and warranted, it will not cease to be so merely because the applicant ultimately fails in the foreign action which the injunctive relief aims to assist.

16. It should also be noted that under s 21M, the injunctive relief that may be obtained is statutorily specified to be interim in nature. Hence, for an application under s 21M, the application for an interim relief is itself the “cause”. There is no other substantive underlying “proceedings” or “cause”.

17. I heed the advice of Auld LJ in Bushbury Land Rover Ltd v Bushbury Ltd [1997] FSR 709 (at 712)that “the clear distinction between entitlement to interlocutory relief and final judgment”should not be ignored. In my view, it is particularly important not to do so in a case of an application under s 21M where the application for an interim relief is itself the “cause”.

18. Costs is in the discretion of the court. In Minmetals Inc v Dragon Boom Limited & Anor, unrep, HCMP 1702/2013, 24 July 2014, Deputy Judge Leung at §19 took the foreign proceeding as the “cause” for the purpose of a particular costs order. I do not believe that that was meant to be a general proposition.”

12.The judge then considered whether it is fair or appropriate to order the costs of the Continuation Summons and the Discharge Summons to be costs in the cause of the Originating Summons.  He took the view that it is not.  In allowing the Continuation Summons and dismissing the Discharge Summons in his decision on 26 March 2020, the judge applied the test in Compania and was satisfied with the merits of the plaintiffs’ application for the Injunction and that they were justified in invoking the court’s jurisdiction under s 21M.  He had “effectively granted” the relief sought by the plaintiffs in the Originating Summons.  If he were to order that costs should be either in the cause of the Originating Summons or the plaintiffs’ costs in the cause of the Originating Summons, as sought by the 2^nd defendant, this would in effect be forcing the plaintiffs, in order to get the costs, to prosecute the Originating Summons when, given the ruling in the decision of 26 March 2020, there is little point in doing so.  Forcing the plaintiffs to do so may also result in judicial resources being wasted^[4].

Leave to appeal application

13.On 31 July 2020, the 2^nd Defendant took out a summons (“Leave Summons”) for (i) leave to appeal against the Costs Decision; and (ii) stay of execution of the Costs Decision pending the determination of the leave application (and, if leave is granted, the substantive appeal).

14.Attached to the Leave Summons is a seven-page draft Notice of Appeal containing 13 paragraphs. Both at the court below and before this court, the 2^nd defendant distilled his intended grounds of appeal into the following two points:

(1)  The judge has erred as a matter of principle in holding that for an application under s 21M, the application for an interim relief is itself the cause, and the Thai Action should not be taken as the cause to which the costs concerned should be linked.

(2)  The judge has erred in exercising his discretion in refusing to order that costs should be in the cause (or the plaintiffs’ costs in the cause).

15.Before the leave application was heard, on 8 September 2020, the Thai Court gave its verdict in the Thai Action, ordering the 1^st defendant to pay damages of THB 10,000,000 to the 3^rd plaintiff but otherwise dismissing all of the plaintiffs’ claims (“Thai Verdict”).  This led to the 2^nd defendant issuing another summons on 21 October 2020 for leave to adduce the Thai Verdict as new evidence (“New Evidence Summons”).

16.The Leave Summons and New Evidence Summons were dealt with together on paper.  On 27 April 2021, the judge:

(1)  allowed the New Evidence Summons with costs to the 2^nd defendant; and

(2)  found that none of the intended grounds of appeal was reasonably arguable and therefore dismissed the Leave Summons with costs to the plaintiffs.

17.The 2^nd defendant renewed his application for leave to appeal and stay of execution before this court.  There is no challenge by the plaintiffs against the ruling on the New Evidence Summons.

Whether to grant leave to appeal

18.As the courts have repeatedly emphasised, costs is very much a matter of discretion for the trial judge and the Court of Appeal would be very circumspect in interfering with a decision with such high discretionary content.  In the absence of any palpable error in the exercise of the discretion on costs, the mere fact that the appellate judges might have exercised the discretion in a different manner is not a sufficient ground to warrant interference with the discretion of the primary judge: see Poon Ching Man v Lam Hoi Pun [2016] 3 HKLRD 815 at §34.

19.In our view, in the context of the costs of an interlocutory injunction, the discretion is encapsulated in the following statement of Au J (as he then was) in Mendlowitz & Associates Inc. v Winner International Group Ltd & Anr (HCA 574/2009, 14 May 2010) at §28:

“28. I do not think it is now right to say that as a matter of principle, the costs of an interlocutory injunction should be in the cause unless there is justification for its departure. The Court is entitled to and should look at the merits of the injunction itself as at the time of the application to decide what should be the proper costs order for that application in all the circumstances, which do not necessarily depend on the outcome of the trial.” (original emphasis)

20.DHCJ Kenneth Kwok SC expressed the same sentiment in Xcelcom Ltd v BGI-Hongkong Co Ltd (No 2) [2017] 1 HKLRD 436.  The deputy judge described the “modern approach to costs of interlocutory applications” in §11:

“11. There is no necessary correlation between success in an interlocutory application and success at trial. A successful plaintiff at trial may have no basis for wasting time and costs by making a thoroughly unmeritorious interlocutory application. A successful defendant at trial may have no basis for wasting time and costs in putting up frivolous grounds for resisting a proper interlocutory application. There is no reason why the costs of an interlocutory application should invariably be made to follow the event at trial. There is also no reason why payment of the costs of an interlocutory application should invariably wait until after trial. There may be no trial and this is not surprising in IP cases.”

21.These decisions correctly identify that there is no invariable principle against the making of an immediate order as to costs in respect of an application for interlocutory injunction.  Nor is there any “default rule” or “starting point” that the costs of such an application should normally be in the cause of the action.

22.If anything, in the wake of the Civil Justice Reform, the courts should be more inclined to make an immediate costs order in interlocutory applications.  As Lam J (as he then was) said in Midland Business Management Ltd v Lo Man Kui [2011] 2 HKLRD 667 at §§9 to 12:

“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 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 an interlocutory application. I can readily see that there are cases where such a 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 Civil Justice Reform the court is more astute to the impact of costs on legal proceedings and an order for immediate payment of costs will be made more readily as a discipline against unmeritorious interlocutory applications.”

23.These observations were approved by the Court of Final Appeal in Wing Fai Construction Co Ltd v Yip Kwong Robert (No 2) (2012) 15 HKCFAR 454.  Ribeiro PJ added at §7 that:

“7. Whether or not the immediate payment of costs should be ordered is quintessentially a matter within the court's discretion. 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.”

24.Likewise in England, it is not the law or practice that the costs of interlocutory injunctions should normally be in the cause of the underlying action.  In Bushbury Land Rover Ltd v Bushbury Ltd [1997] FSR 709, the first instance judge refused to grant an interlocutory injunction against the respondent and ordered the applicant to pay the respondent’s costs.  The applicant sought leave to appeal against the costs order, contending that it should be the respondent’s costs in the cause, which was the normal costs order for an interlocutory application.  In refusing to grant leave to appeal, Auld LJ said at 712:

“In my judgment, that argument [that the normal costs order for interlocutory injunction should be the respondent’s costs in the cause unless there was anything to justify a departure] … ignores the clear distinction between entitlement to interlocutory relief and final judgment which underlines Lord Diplock’s identification in American Cyanamid Co v Ethicon Ltd [1975] AC 396 of the criteria on which the court should exercise its discretion whether to grant the former. The fact that a plaintiff may succeed ultimately does not demonstrate that he should have been granted interlocutory relief when the merits of the matter were still unresolved and the court was still balancing convenience. Final judgment provides no hindsight, tipping the earlier balance one way or the other.”

25.In Albon v Naza Motor Trading Sdn Bhd [2008] 1 Lloyd’s Rep 1, the applicant obtained an interlocutory anti-arbitration injunction on the ground that his signature on the joint venture agreement that contained the arbitration clause was forged.  The respondent (Naza) sought inter alia permission to appeal against the judge’s decision to award to the claimant the costs of the application.  In refusing to grant permission to appeal, Longmore LJ said at §21:

“21. The argument for Naza on this issue is that costs are not usually ordered on applications for interim injunctions since it is not until trial that it can be known whether the claimant has the right which he asserts he has. … This is not, however, an invariable rule. The narrow issue in the present case is what is to happen while the forgery issue is being determined; that does not depend on the claimant being right on the forgery issue. Granted that the forgery issue is to be determined in England, Naza was perfectly able to form a view as to the likelihood of their persuading the court that that the arbitration should continue meanwhile. The judge was entitled to conclude that they miscalculated and should suffer the consequences. This is very much a matter for the judge’s discretion and I would refuse permission to appeal on this question.”

26.Albon was affirmed in Koza Ltd & Anr v Koza Altin Isletmeleri AS [2020] Costs LR 1479, in which Popplewell LJ emphasised at §4 that there is no “general rule applicable in all cases” and “no invariable practice” that where an applicant obtains an interlocutory judgment on the balance of convenience, the court should reserve costs.  In that case, the injunction was not of a “holding the ring” type, and the issues which were ventilated upon the application would not be revisited as part of the substantive dispute. 

27.What is important to note from these decisions is that the court’s hands are not tied.  If factors are present that warrant an immediate order as to costs, the court may exercise in the exercise of its discretion make such an order.

28.In the 2^nd defendant’s written submissions, he again relied on King Fung Vacuum at §27 in support of his contention that this passage “established the general principles on costs for interlocutory injunction which are applicable to both domestic and s 21M proceedings”.  We do not think the observations of Rogers VP at §27, which were obiter, established general principles applicable to s 21M proceedings as contended.

29.We are mindful that by the Thai Verdict, the 2^nd defendant has succeeded in the Thai Action whilst the 1^st defendant was ordered to pay damages of only THB 10,000,000, which is substantially less than the limit of the Injunction continued by the judge.  The fact that the defendants ultimately and largely succeeded in the Thai Action does not mean that they should have resisted the continuation of the Injunction, which only required the plaintiffs to demonstrate a good arguable case and the balance of convenience in favour of continuing an interim injunction.  To borrow the words of Auld LJ in Bushbury: “Final judgment provides no hindsight, tipping the earlier balance one way or the other”.

30.Whether the “cause” of a s 21M application is the underlying foreign proceedings is a red herring.  The judge refused to accede to the 2^nd defendant’s proposed variation not because he thought he could not make such an order, but because he took the view that he should not do so.  The judge took that view because, as he put it at §15, “If an application under s 21M is otherwise justified and warranted, it will not cease to be so merely because the applicant ultimately fails in the foreign action which the injunctive relief aims to assist.” We agree.

31.In our judgment, the judge was entitled to make an immediate order as to costs in this instance for the reasons he gave.  His decision cannot be said to be plainly wrong, nor did he make any error of law or principle.  We see nothing to criticise about the judge’s reasoning in coming to the conclusion that it is not fair or appropriate to order the costs of the Continuation Summons and the Discharge Summons to be costs in the cause of the Originating Summons.  There is no basis to interfere with the Costs Decision.

32.For all the above reasons, we do not find the intended grounds of appeal of the 2^nd defendant reasonably arguable. We refuse to grant leave to appeal against the Costs Decision.  We make a further order under Order 59 rule 2A(8) that no party may under rule 2A(7) request the determination of this court to be reconsidered at an oral hearing inter partes, as this application is wholly without merits.

33.In light of our refusal to grant leave to appeal, the application for stay of execution of the Costs Decision pending determination of the intended appeal does not arise.  We therefore dismiss the stay application.

34.We order the 2^nd defendant to pay the plaintiffs’ costs of this application.  Having considered the plaintiffs’ statement of costs for summary assessment, we allow the amount in full at $65,500.

35.The costs order and summary assessment are orders nisi.  Any application for variation must be made within 14 days of the handing down of this judgment.

Fangda Partners for the plaintiffs (respondents)

ONC Lawyers for the 2^nd defendant (applicant)