Sina Hong Kong Ltd v. Pixel Media HK Ltd

HCA 1400/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1400 OF 2013

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DECISION ON COSTS

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Background

1.On 8 December 2014, I dismissed the plaintiff’s summons dated 15 May 2014 (“the Summons”) with costs order nisi that the plaintiff do pay the defendant costs of the Summons with certificate for counsel to be summarily assessed on papers.  By way of summons dated 19 December 2014 and pursuant to Order 42, rule 5B(6) of the Rules of the High Court, the plaintiff applies to vary the costs order nisi to an order that the costs of the Summons with certificate for counsel be costs in the cause.

2.By consent of the parties, on 6 January 2015, I ordered that the summons dated 19 December 2014 be determined without an oral hearing.  Thereafter, the plaintiff submitted its written submission on 20 January 2015, the defendant submitted its written submission on 4 February 2015 and the plaintiff submitted its written submission in reply on 11 February 2015.  In the plaintiff’s written submissions, the plaintiff invites the court to order (as an alternative) that the costs of the Summons be the defendant’s costs in the cause.

3.In the Summons, the plaintiff asked the court to determine whether the defendant was entitled to appoint independent auditors to give a second opinion in relation to the page views and unique users of the plaintiff’s websites given that third party site traffic verification software Nielsen/Netratings Site Census has been chosen by the parties throughout the term of the Agreement.  I ruled against the plaintiff in that it failed in its applications (1) under Order 14A seeking a construction of the Agreement in question in its favour, (2) under Order 14 seeking summary judgment against the defendant, and (3) under Order 18, rule 19 seeking a strike-out of the Defence and Counterclaim.  The Summons was dismissed in its entirety, and costs were ordered against the plaintiff in favour of the defendant as aforesaid.

4.Despite that, the plaintiff applies to vary the costs order nisi to one of “costs in the cause” or “defendant’s costs in the cause” as aforesaid by relying on 3 grounds: First, the plaintiff invites the court to note that as the defendant did not plead the factual matrix in its Defence and only raised it in its affirmation in opposition for the first time, it was reasonable for the plaintiff to issue the Summons.

5.Secondly, the plaintiff submits that there are triable issues, as held by the court, as to what the factual matrix is, and in the end the trial judge might very well reject the defendant’s version or rule against it on the relevance of its evidence.

6.Thirdly, the plaintiff submits that the Summons was taken out due to the way the defendant pleaded its Defence.  The defendant’s affirmation in opposition and its arguments at the hearing have substantially supplemented the original line of defence as pleaded in the Defence.  It is therefore unfair for the plaintiff to bear the costs of the Summons.

7.Thus, given all the circumstances, the plaintiff invites the court to vary the cost order nisi and order “costs in the cause” instead.  Alternatively, as the factual issues raised by the defendant in its affirmation in opposition might very well be rejected by the trial judge, the plaintiff invites the court to order “defendant’s costs in the cause” as a fallback.

First ground

8.In relation to the first ground, the plaintiff argues that the first time the defendant introduced the purported factual matrix was by the defendant’s affirmation in opposition.  At the time when the plaintiff received the Defence, it was not known the exact extent of the defendant’s evidence to be adduced, as the defendant has simply failed to plead the same.  Whether the defendant is duty bound to plead the factual matrix or not is not relevant. The fact remains that the Defence has only raised a simple construction point.

9.In the circumstances, the plaintiff submits that it was appropriate to take out an Order 14A summons given the way the Defence was drafted.  After all, Order 14A allows the plaintiff to have a question of construction to be determined in a summarily way.  Otherwise, Order 14A would be otiose.  When one simply looks at the Defence itself, the factual disputes are not apparent on its face.  The plaintiff could not have known the line of arguments raised only after the filing of the Defence.

10.The plaintiff disagrees that the introduction of the factual matrix was because of the plaintiff’s affirmation in support of the applications.  In the plaintiff’s affirmation in support, the plaintiff has mentioned nothing about the factual matrix.  The plaintiff has merely referred to the “3 options” as a matter of construction.  No facts were introduced by the plaintiff.  It is therefore incorrect for the defendant to allege that the introduction of the alleged factual disputes was in response to the plaintiff’s affirmation.

11.The plaintiff further submits that it is incorrect for the defendant to say that even without looking at the factual matrix, the plaintiff’s construction was rejected by the court.  If so, it was not necessary for the court to go on to consider the factual matrix.

12.With respect, I cannot agree with the plaintiff’s submissions at all.  It is trite that pleadings are to contain material facts, not evidence.  In a pleading on a contract claim, the terms of the contract relied on are material facts, but the arguments relating to the construction of those terms, such as the law relating to the principles of construction, or the evidence which forms the factual matrix, are not supposed to be pleaded.  The defendant has clearly pleaded its case that independent auditors could be appointed to give a second opinion.  There was no need for the defendant to plead anything further, such as the factual matrix, to support the construction argument.

13.I accept that the defendant set out the relevant factual matrix in its affirmation as evidence in response to the plaintiff’s affirmation.  The plaintiff for the first time in the affirmation of So Chun Nei dated 14 May 2014 said that the plaintiff could provide a monthly page view report to the defendant in one of the 3 options, and that the plaintiff and the defendant had agreed to use the 2nd option from the very beginning (ie to use Nielson and nothing else).  The defendant did not agree with this construction of the 3 options or the claim of an agreement to use Nielson and nothing else, and the affirmation of Kevin Huang said so.  Thus, it is not a case that the defendant chose to plead the factual matrix in its affirmation instead of the Defence, but the factual matrix was adduced in response to the plaintiff’s affirmation.

14.In any event, it has never been the plaintiff’s case that any of the factual matrix was a surprise to it.  Kevin Huang’s affirmation condescended into particulars about how the Nielsen software was unreliable and why therefore the parties would not have agreed to use this without an audit option.  So Chun Nei’s affirmation in reply said that these defects of the software were “well-known to everyone who was familiar with the industry”. Thus the plaintiff would all along have known that this was the background against which the defendant was arguing, namely on a true construction, the Agreement provided for the right to an audit.

15.In fact, the defendant’s position had been amply explained to the plaintiff even before the commencement of proceedings.  In correspondence, the defendant has explained, inter alia, (1) the plaintiff’s obligations to achieve a minimum site traffic, (2) why the defendant did not accept the plaintiff’s reliance on the Nielsen figures, (3) why the plaintiff was not entitled to the payment it claimed, (4) why the defendant was entitled to an audit.  It had even said that it was willing to abide by the results of an independent audit to pay whatever was found to be due on such an audit (see Messrs K B Chau’s letters to Messrs Maurice WM Lee dated 24 June 2013 and 23 July 2013).

16.Even assuming that the factual matrix was a surprise to the plaintiff, the plaintiff has only itself to blame when it took out the Summons without raising the matter by way of correspondence beforehand (see Messrs K B Chau & Co’s letter to Messrs Maurice WM Lee dated 20 May 2014).  Had the plaintiff intimated that it intended to issue the Summons, the defendant could have explained the position by correspondence.

17.Moreover, the factual matrix was only one of the reasons why the plaintiff lost.  I rejected the plaintiff’s construction of the Agreement for four reasons: (1) the plaintiff’s construction is internally inconsistent; (2) the plaintiff’s construction ignores the commercial objects and factual matrix of the Agreement; (3) the plaintiff’s construction wrongly treats Nielsen figures as final and conclusive; and (4) the plaintiff’s construction ignores parts of the site performance subclause.  Thus even without looking at the factual matrix, the plaintiff’s construction would still fail.  It was necessary for me to consider the factual matrix simply because it was part of the defendant’s case.

Second ground

18.The plaintiff argues that since the court has held that there are triable issues as to what the factual matrix is, costs should be in the cause, as it is the usual order (see para 14/7/15 of Hong Kong Civil Procedure).  It is especially the case when the Defence has not clearly identified the line of defence presently raised.  The plaintiff refers to The Incorporated Owners of Hong Kong House v Senfield Limited CACV 117/2003, where Ma CJHC (as he then was) held that: -

“On costs, it is important to bear in mind that those issues which I have regarded as giving rise to arguable matters to be determined at trial, were barely raised in the defendant’s pleadings. No clear allegations were raised in the defence as to any possible breach of the covenant of quiet enjoyment or the right to water under the DMC, nor as to waiver, estoppels, acquiescence or delay. While it is right for us at this stage to take a broad view of the evidence and a more lenient view of the pleadings in determining the merits of the summary judgment application, as far as costs are concerned, it would be wrong to ignore the technicalities of the situation. I therefore regard the correct order for costs to be costs in the cause.”

19.The plaintiff also refers to Chen Lip Keong v Evolution Master Fund Limited SPC, Segregated Portfolio M, HCA 575/2010, where Suffiad J held that: -

“ 24. On the basis therefore that the defence put forward at the hearing was far more developed and had changed in some important details than what was contained in the letter from Messrs Simmons & Simmons dated 23 April 2010, I am of the view that that letter from Messrs Simmons & Simmons does not adequately show that the plaintiff knew at the outset before issuing the summons for summary judgment that the defendant was relying on a contention which would entitle them to unconditional leave to defend.

25. According, there will be a cost order that the costs of and occasioned by the application for summary judgment taken out by the plaintiff by summons dated 1 June 2010 be costs in the cause with certificate for two counsel.”

20.However, the usual order that the plaintiff relies on is applicable to cases where leave to defend is given, but not when the application for summary judgment is dismissed.  In fact, as aforesaid, even without relying on the factual matrix, the plaintiff would have lost.  So the argument that there are triable issues on the factual matrix is a non-starter.  On the issue of construction, I have held that the plaintiff is wrong.  I mentioned that Order 14A procedure is not appropriate because there are triable factual issues and determination of the issue of construction would not have saved time or costs.  So the presence of factual issues meant that the plaintiff was wholly wrong to use Order 14A procedure in the first place.  It is wrong for the plaintiff to turn it around and say that because there are factual issues, it can escape the costs consequence in losing the application.  The presence of the factual issues is in fact the very reason why the plaintiff should not have taken out the application and hence ought to bear costs.

21.As to the Order 14 application, one of the significant triable issues is that the Nielsen figures relied on by the plaintiff are inherently self-contradictory in themselves, and that there is something wrong with them even without comparing them with ComScore.  This point was first raised with the plaintiff in about mid-2011, but it has not been answered.  The plaintiff is the party who placed the Nielsen tags on its pages, so it should be able to explain what has gone wrong, but it has chosen not to do so.  Moreover, the point was raised in the pre-action correspondence by the defendant in detail (see Messrs K B Chau’s letter to Messrs Maurice WM Lee dated 24 June 2013).  It was also pleaded in the Defence.  There is simply no basis to ask for summary judgment when the basic facts are in such grave doubt.  The presence of triable issues is precisely the reason why the plaintiff should be paying costs, and the situation here is very different from the aforesaid 2 cases referred to by the plaintiff.

22.Likewise, for the Order 18, rule 19 application, the presence of triable issues meant that the case was clearly not a “plain and obvious one” and the application was bound to fail.

23.Thus, there is nothing wrong for the plaintiff to pay the costs for an entirely misconceived application.

Third ground

24.There is no need for the defendant to present its arguments in pleadings or affirmation.  It is absurd for the plaintiff to say that because the defendant fleshed out its case at the hearing, it should be deprived of costs.  In fact the defendant did not take any new point at the hearing which was inconsistent with its pleadings.  Furthermore, as aforesaid, the defendant had explained its position in correspondence before the commencement of the proceedings.  After reading such correspondence, it would have been apparent that the defendant’s construction was reasonable, that there could not possibly be any summary judgment and that it was not a “plain and obvious case” for striking out.

25.Thus, the plaintiff is clearly wrong in taking out the Summons and in proceeding with it even after the defendant’s affirmation was filed.  This is plainly a case where costs should follow the event and the plaintiff should pay for losing the Summons.

Conclusion

26.By reasons aforesaid, the plaintiff’s application to vary the costs order nisi must fail.

27.I therefore order as follows: -

(a) The summons dated 19 December 2014 be dismissed.

(b) The costs order nisi of 8 December 2014 be made absolute.

(c) Costs order nisi: The plaintiff do pay the defendant costs of the summons dated 19 December 2014 with certificate for counsel to be summarily assessed on papers.  The defendant do submit and serve its Statement on Costs within 14 days hereof and the plaintiff do submit and serve its Summary of Objection on Costs within 14 days thereafter.

Mr Patrick Chong, instructed by Maurice W M Lee, for the plaintiff

Ms Yvonne Cheng SC, instructed by K B Chau & Co, for the defendant