Introduction
Background
Decision
Comment
In a short but important decision on costs, the Court of First Instance of the High Court has clarified that it is more inclined, after the civil procedure reforms in April 2009, to make orders for the immediate payment of costs following the determination of interlocutory applications, rather than wait for the outcome in the substantive proceedings.(1) This should come as no surprise to parties to civil proceedings and the intention is clearly to encourage discipline against unmeritorious interlocutory applications.
The Court's decision follows the plaintiff's successful application for an interim injunction against the defendant in aid of arbitration.(2) The injunction was originally granted at an ex parte (on notice) hearing in March 2021 and unsuccessfully opposed by the defendant at an inter partes hearing in June 2021. Therefore, the injunction remained in place until further order of the court or arbitration tribunal. While the defendant's opposition to the grant of the injunction was unsuccessful, it did successfully argue that the plaintiff should fortify the undertaking as to damages (as a condition to the grant of the injunction) by means of a payment into court or bank guarantee.
Interestingly, following the hearing in June 2021, the Court ordered (on a preliminary basis) that the costs of the injunction application between the parties be costs "in the cause" – namely, that the order for costs follow the outcome of the substantive court proceedings. The defendant applied to vary the preliminary costs order, arguing that there should be a "general costs order" that the costs should follow the outcome of the arbitration because that was the substance of the dispute and until then the merits of the parties' respective claims would not be determined.
On the defendant's application to vary the costs order, the Court ordered that the defendant pay the plaintiff 60% of the costs of the injunction application. The Court held:
- as regards interlocutory costs orders, it was incorrect that costs should only be decided when the merits of the underlying claims had been decided. In an important passage, the Court stated:
As the authorities have emphasized, the court is more astute after the Civil Justice Reform to the impact of costs on legal proceedings and to making an order for immediate payment of costs as a discipline against unmeritorious interlocutory applications.(3)
- overall, the plaintiff had been successful as regards the issues arising out of its injunction application, albeit the defendant had been successful on the issue of the plaintiff's fortification of the undertaking as to damages. An order that the defendant pay to the plaintiff 60% of the costs of the injunction application represented the plaintiff's degree of success at the interlocutory hearing.
The Court's decision is useful clarification that it is quite normal for the court (when exercising its discretion) to grant costs orders that reflect the outcome of interlocutory proceedings, in addition to whether a party is seeking the court's indulgence by (for example) requesting more time to comply with a time period. Interlocutory costs orders are not necessarily dependent on the outcome of the substantive proceedings – it so happens that in this case the proceedings arose in an arbitration context.
It is worth noting the emphasis that the Court gave to the impact of costs on legal proceedings generally and to the use of costs orders to discourage unmeritorious interlocutory applications – this is likely to find favour with first-instance courts in Hong Kong.
It is also interesting to note that in this case 60% recovery of the plaintiff's interlocutory costs was allowed. Different judges have different practices and, on another day, the plaintiff may have sought an order that their interlocutory costs be summarily assessed (for a specific sum).(4) Summary assessment comes with the advantage of avoiding a full assessment (taxation) of costs and summarily assessed costs are usually enforceable as a debt after 14 days of the order for payment. However, summary assessment can come with the risk that the recipient's costs are substantially reduced by (for example) a third to a half – indeed, sometimes much more.(5)
For further information on this topic please contact Elly Tso or Charles Allen 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.
Endnotes
(1) Re Unipax Properties LLC [2021] HKCFI 3371, 10 November 2021.
(2) [2021] HKCFI 2912, 30 September 2021.
(3) Supra note 1, at para 6. Also see Rules of the High Court, Order 62 ("Costs"), Rule 3(2A) ("Entitlement to Costs").
(4) Rules of the High Court, Order 62, Rule 9A ("Summary assessment of costs on interlocutory application") and 9B ("Time for complying with direction or order for summary assessment"). High Court Practice Direction 14.3 ("Costs" – Appendix A).
(5) For example, see – Re Cornwall Agency Co. Ltd [2021] HKCFI 3718, 10 December 2021.