Challenging costs orders nisi
Forewarned is forearmed
In Chan v Kwong,(1) the Court of Appeal allowed the plaintiff's appeal against the dismissal by a trial judge of her claim for adverse possession and ordered that the case be retried before another judge. That is a matter for another day. Of more interest, for now, is the Court of Appeal's observations on the plaintiff's challenge to the judge's costs order. The judge had made a costs order nisi (ie, on a provisional basis) that the plaintiff pay the defendant's costs on a higher ("indemnity") basis. Rather than challenge the costs order nisi within the required 14 days (after which it became absolute), the plaintiff challenged the costs order in her notice of appeal. The Court of Appeal described this way of proceeding as "unacceptable" and "tantamount to an abuse of process", with the possibility of a wasted costs order against the relevant party's legal representatives. Costs orders nisi are common in practice (particularly with respect to interlocutory matters) – where a party means to challenge such an order, they must do so before it becomes absolute.
After a court hearing, a court may reserve its judgment or reasons for decision to be handed down at a later date.(2) In doing so, the courts will often not have had an opportunity to hear the parties' submissions on costs. As part of such a judgment or decision, the court can make a costs orders nisi, which becomes absolute 14 days later, unless an application to vary the costs order is made.(3) Costs will normally "follow the event" (ie, be ordered in favour of the successful party) but the 14-day period allows the parties to make written submissions in support of an alternative costs order.
In Chan v Kwong, the plaintiff succeeded on appeal with respect to the dismissal at first instance of her claim for adverse possession. She had included a ground of appeal in her notice of appeal that, when ordering costs in favour of the defendant, the judge should not have departed from the standard basis for costs as opposed to a higher basis – namely, "indemnity" costs.
As part of its judgment the Court of Appeal ordered that the case be remitted to the Court of First Instance for re-trial before another judge. As regards its decision on costs, the Court of Appeal ordered that the defendant pay the costs of the appeal to the plaintiff and that the costs of the first trial be decided according to the outcome of the re-trial. This appears to have represented a significant victory for the plaintiff on appeal.
However, as regards the plaintiff's attempt to challenge the judge's costs order nisi by including it as a ground of appeal, as opposed to challenging it within 14 days, the Court of Appeal was critical of the plaintiff's approach. The plaintiff's legal representatives tried to justify that approach by arguing that the appeal with respect to the costs order nisi was not a standalone ground but part of the overall appeal.
The Court of Appeal made some forthright observations as regards challenges to costs orders nisi. These included the following:
- The purpose of a costs order nisi is to enable a dissatisfied party to make submissions to a judge on what they consider should be the appropriate costs order. After such submissions, the judge could give written reasons for the costs order absolute. This way, on appeal, an appellate court would have the benefit of the judge's reasons in the event that the costs order absolute is appealed.
- It was unsatisfactory for a party to appeal a costs order nisi, on the ground that the judge gave no explanation for it, where that party had failed to follow the appropriate procedure for challenging the costs order.
- Irrespective of whether an appeal of a costs order is a standalone ground of appeal, a party or their legal representatives could not ignore the proper procedure provided for in the rules for a judge to give a reasoned decision and then complain that the judge did not give reasons – such an approach is tantamount to an abuse of process.
The final and comprehensive word is probably best left to the senior judge who gave the unanimous judgment of the Court of Appeal:
In this court's experience, this is not the first time that legal representatives have chosen to ignore O.42 rule 5B(6) and failed to apply to vary a costs order nisi, only to appeal the costs order absolute on the ground that the judge had failed to give reasons for the order. It is our view that to ignore the rules of court in this way is tantamount to an abuse of process. Such a ground of appeal, stand-alone or not, is liable to be struck out, with the possibility of a wasted costs order against legal representatives.(4)
For further information on this topic please contact Jacky Darsono or David Smyth at RPC by telephone (+852 2216 7000) or email ([email protected] or [email protected]). The RPC website can be accessed at www.rpc.co.uk.
(1)  HKCA 346, 1 March 2022.
(2) Rules of the High Court, Order 42, rule 5B ("Reasons for judgment and order").
(3) Rules of the High Court, Order 42, rule 5B(6).