FIRST LASER LTD v. FUJIAN ENTERPRISES (HOLDINGS) CO LTD AND ANOTHER

CACV 97/2020

[2021] HKCA 122

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 97 OF 2020

(ON APPEAL FROM HCA 4414/2001)

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J U D G M E N T

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

Introduction

1.  This is the plaintiff’s application for security for its costs in the appeal lodged by the defendants in the sum of HK$5,146,150.  The defendants oppose the application.

2.  Both parties have filed their affirmation evidence and lodged written submissions.  The defendants make it clear that they do not contest liability to pay security, but they disagree on the quantum.

3.  Having considered the papers, we are of the view that it is appropriate to deal with the application based on the written submissions only without an oral hearing, pursuant to Order 59 rule 14A(1) of the Rules of the High Court, Cap 4A.

Background

4.  By a judgment dated 5 February 2008, Deputy High Court Judge To entered judgment in favour of the plaintiff.

5.  The defendants appealed to the Court of Appeal (“2010 Appeal”).  By judgment dated 4 January 2011, the appeal was allowed on the ground that PRC law rather than Hong Kong law applied to the dispute in question.

6.  By a judgment dated 6 July 2012, the Court of Final Appeal dismissed the plaintiff’s appeal and upheld the Court of Appeal’s conclusion (“CFA Judgment”).  The plaintiff’s claim for restitution under PRC law was, as a result, remitted for determination by the Court of First Instance (“Remitted Issue”): see paragraph 74 of the CFA Judgment.

7.  The Remitted Issue was tried in a 10-day trial in September and December 2019 before Deputy High Court Judge To.  By a judgment dated 8 April 2020 (“Remitter Judgment”), the learned Deputy Judge found in favour of the plaintiff and awarded a sum of HK$250,168,048 with interest under the plaintiff’s claim for restitution under PRC law.

8.  The defendants appealed against the Remitter Judgment to the Court of Appeal.  The Notice of Appeal was filed on 7 May 2020.  The plaintiff filed the Respondent’s Notice on 27 May 2020.

9.  By a letter dated 17 July 2020, the plaintiff requested the defendants to provide security for the costs of the appeal, enclosing a skeleton bill of estimated costs.  The defendants did not reply to the plaintiff’s request.

10.  By a summons dated 30 September 2020, the plaintiff issued the present application.

Discussion

11.  Before examining the skeleton bill of costs filed in this application (“Skeleton Bill”), we first deal with various miscellaneous points raised by the parties.

12.  First, it is suggested by the plaintiff that a party is entitled to “complete” security as opposed to “sufficient” security in an appeal.  Order 59 Rule 10(5) refers to “such security … as may be just”.  What is just depends on the circumstances in each case and there is no reason why such discretion should be further fettered by prescribing if such costs should be “complete” or otherwise.  Generally, the amount of security should be premised on the estimated costs that would be allowed on taxation on a party-and-party basis: see Sinoearn International Ltd v Hyundai-CCECC Joint Venture (unrep., CACV 83/2011, 26 August 2011) at [8].

13.  Second, the plaintiff submits that the costs of the 2010 Appeal are a useful indicator of the scale of costs allowable in this appeal.  In the 2010 Appeal, the defendants claimed costs in the sum of HK$8,885,960.57 and were allowed upon party-and-party taxation the sum of HK$3,879,481.51.

14.  With respect, there is nothing to suggest that the scope of the appeal and the issues involved in the present appeal would be similar to those canvassed in the 2010 Appeal.  We do not regard the costs of the 2010 Appeal to be relevant for present purposes.

15.  Third, the defendants point out that for the entire Remitter proceedings, Deputy High Court Judge To only ordered security for costs to be paid by the plaintiff in the sum of HK$2,500,000.  The defendants submit this reflects the excessiveness of the amount claimed by the plaintiff in this application.  On the other hand, the plaintiff submits that the security for costs for proceedings in the Court of First Instance was ordered at an early stage of the Remitter proceedings before the plaintiff’s amendment of pleadings and the exchange of further expert/factual evidence which became the focus of the Remitter proceedings, and before the increase of the allowable solicitors’ hourly rates on party-and-party taxation.  Thus, it is said that the estimate did not take account of the length and complexity of the Remitter proceedings.

16.  There is simply no evidence before us as to when and how the court below assessed the security for costs in the Remitter proceedings and what changes had since been introduced into the proceedings.

17.  In the premises, like the costs of the 2010 Appeal, we do not find it useful for present purposes to refer to the security for costs at the court below.

18.  Finally, the plaintiff invites this Court to take into account that an underestimate in the security ordered would result in significant prejudice to the plaintiff, whilst an overestimate would not cause material prejudice to the defendants.

19.  We agree with the defendants’ submission that the task of this Court is to reach an appropriate amount, being neither excessively generous to the respondent nor unduly lenient to the appellant.  It is unhelpful to refer to the question of prejudice when quantum is the only issue.

20.  We now turn to the Skeleton Bill.  The claim for security for costs by the plaintiff may be summarized as follows:

(1)  Costs for perusing the Notice of Appeal and the Remitter Judgment to give preliminary advice (“Item 1”): HK$319,200;

(2)  Costs incurred in the application for security for costs of appeal (“Items 2 to 13”): HK$975,850; and

(3)  Costs to be incurred for the hearing of the appeal (“Items 14 to 24”): HK$3,851,100.

21.  In assessing the appropriate amount for security for costs, the Court normally takes a broad-brush approach and does not conduct a taxation of the respondent’s costs. Instead, the exercise on which it is engaged is to arrive at an appropriate estimation of the likely amount of costs which would be ordered to be paid by the appellant to the respondent on a party-and-party taxation: see Re Lam Kau Sing Dickie, ex p Lo Hon Kwong [2020] HKCA 459, [20].

22.  On Item 1, the sum claimed by the plaintiff represented a total of 64 hours for “perusal of the Judgment and the Notice of Appeal”, and for “informing client of the appeal and preliminary advice, and taking instructions in relation to appeal”.  Despite the length of the Remitter Judgment (with 189 pages and 322 paragraphs) and the Notice of Appeal (with 47 pages), we agree with the defendants’ submission that the amount claimed is excessive.  Adopting a broad-brush approach, we would allow HK$120,000 for Item 1.

23.  On Items 2 to 13, the plaintiff claims HK$440,850 (91 hours) for solicitors’ fee incurred in this application, and HK$535,000 for instructing both leading counsel and junior counsel for this application.  Given that it is clear that there is no dispute on liability after the defendants filed their affirmation in opposition, in our judgment the sums claimed are excessive.  In particular, we agree with the defendants’ submissions that: (1) it is excessive for the plaintiff’s solicitors to claim a total of 32 hours for reviewing the parties’ respective skeletons; and (2) no costs should be allowed for instructing Leading Counsel in this application, as the proper measure is the fee demanded by a hypothetical counsel having regard to the complexity or otherwise of the application.  This is certainly not a complicated application and the only dispute is on quantum.  On a broad-brush basis, we are of the view that HK$200,000 is the appropriate level of costs for Items 2 to 13.

24.  Further, given the costs order we make for this application (see paragraph 27 below), and as we are going to fix the costs and order separately the same to be payable forthwith, we would not include the same in the amount of security to be provided by the defendants.

25.  Lastly, in respect of Items 14 to 24, we note that the appeal is fixed for a 5-day hearing and we have regard to the complexity of the issues raised in the Notice of Appeal and the Respondent’s Notice:

(1)  The plaintiff claims HK$2,470,000 for instructing 3 counsel for the hearing of the appeal.  At the trial of the Remitter proceedings the plaintiff was only awarded a certificate for two counsel and there was no application to vary the costs order nisi.  We agree with the defendants’ submission that there is no justification for allowing security for 3 counsel though we accept the plaintiff’s argument the appeal will involve complex legal and factual arguments.  Taking a broad-brush approach, we would allow HK$1,800,000 for counsel’s fee.  And

(2)  On top of counsel’s fee, the plaintiff claims HK$1,381,000 (276 hours) for solicitors’ costs.  Although we accept that the solicitors have an independent duty to serve their client even after instructing a barrister, the amount claimed remains excessive.  We would therefore only allow HK$1,000,000 for solicitors’ fee. 

Disposition

26.  The total amount of security we would order is therefore $120,000 + $1,800,000 + $1,000,000 = $2,920,000.

27.  For the above reasons, we make the following orders:

(1)  The defendants shall within 28 days from the date of this order give security for the plaintiff’s costs of this appeal in the sum of HK$2,920,000, by making payment into court of the said sum;

(2)  Until the defendants have given the security ordered in paragraph (1) above and notice thereof is given to the solicitors for the plaintiff (such notice to be given on the same day as the lodgment is made), all proceedings in this appeal be stayed;

(3)  In default of the defendants giving security as ordered in paragraph (1) above, this appeal do (upon the solicitors for the plaintiff certifying such default to the Registrar of High Court) stand dismissed out of this court without further order; and

(4)  In the event that the appeal is dismissed in the circumstances provided for in paragraph (3) above, the defendants shall pay the plaintiff the costs of this appeal, such costs to be tax if not agreed.

28.  As to the costs of this application, we have already commented about the grossly excessive nature of the amounts sought in the plaintiff’s statement of costs.  We also cut down substantially the amounts in the skeleton bill for the costs of the appeal. There have been instances in the past where this Court had disapproved the inflation of costs in skeleton bill put forward in support of an application for security for costs and disallowed the party the costs of the application on that ground. 

29.  In the present case, whilst we find the skeleton bill to be excessive in some respects, we give the benefit of doubt to those advising the plaintiff in view of the complexity of the issues in the appeal.  But we would sound a warning for future cases.  This Court may consider penalizing the party putting forward wholly unrealistic bill to support an application of this nature by ordering the party to pay the costs of the application if the other side has acted reasonably in contesting quantum. 

30.  In the instant case, given that the ultimate figure we arrive at is somewhere between the amount claimed by the plaintiff and the amount suggested by the defendants, we shall make no order as to costs after the defendants made clear in the Affirmation of Zheng Feng filed on 14 October 2020 that they would not contest the liability to pay security.

31.  However, the defendants should bear the plaintiff’s costs prior to that date since they failed to respond to the plaintiff’s letter dated 17 July 2020 requesting for security. Taking account of items 2 to 4 in the skeleton bill, and reducing the excessive amounts claimed under those items, we would fix such costs at $100,000.  That sum shall be payable by the defendants to the plaintiff forthwith.