CHEONG SHING LTD AND ANOTHER v. YU KWAN AND OTHERS

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DECISION  ON  COSTS

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Mr Justice Chan PJ (for the Court):

1.  On 29 October 2008, we handed down judgment in these two appeals which we heard together. We discharged the judgments in the courts below and replaced them with an order that there be judgment in favour of Minshen Hong Kong (“Minshen HK”) against Mr Lo and Cheong Shing in the sum of HK$28.26 million together with interest at 5 % as from the date of the writ in HCA 2183 of 2001. We also made an order nisi that there be no order as to costs (“the order nisi”), with directions for the parties to file written submissions on whether the order nisi should be made absolute. Pursuant to such directions, the parties have filed their written submissions. This is our decision on costs.

2.  Although the two appeals were allowed, the effect of our judgment is that only Mr Lo and Cheong Shing, but not Mr Kong, are liable to repay the balance of the money they had received to Minshen HK. The judgment in favour of Xian Minshen was discharged because Xian Minshen had been fully repaid. The judgment against Mr Kong was set aside since there was no evidence that he had benefited from the money received. Hence, Mr Lo and Cheong Shing, the appellants in FACV No 5 of 2008, have, for all practical purposes, failed in their appeal and Mr Kong, the appellant in FACV 8 of 2008, has succeeded.

3.  Before dealing with the question of costs, we would dispose of one matter raised by Mr Kong in his written submission. He seeks leave to file further submissions on “why he should have judgment for $5 million against Mr Yu”. This is part of his counterclaim which was for one reason or another not dealt with by the trial judge. At the hearing before us, we indicated that since there was no finding by the judge on this issue, it would be inappropriate for this Court to deal with it at this final appellate stage and that Mr Kong, if he considered it appropriate to do so, might wish to pursue the matter at first instance. For the same reason, we refuse his application to file further submissions on this matter.

Parties’ respective positions on costs

4.  In their written submissions, Mr Lo and Cheong Shing urge the Court to make the order nisi absolute. Mr Kong makes no submission on the costs of the trial but asks for his costs of the appeals to the Court of Appeal and to this Court or at least a substantial portion of such costs to be paid by Xian Minshen and Minshen HK. On the other hand, Xian Minshen and Minshen HK argue that they should be paid their costs at first instance and the costs of the appeals to the Court of Appeal and to this Court by Mr Lo and Cheong Shing. Alternatively, they ask for their costs of the appeals to the Court of Appeal and to this Court as well as their costs of and occasioned by the defence and counterclaim of Mr Lo and Cheong Shing including the costs of the trial to be paid by Mr Lo and Cheong Shing.

Costs at first instance

5.  As Mr Justice Litton NPJ (with whom the other members agreed) put it in paragraph 58 of his judgment,

“Each side to this litigation has put forward a case which has failed. They led evidence over many days which was largely disbelieved by the trial judge. Any award of costs in favour of such parties would seem wholly inappropriate.” (paragraph 58) 

6.  The case of Xian Minshen and Minshen HK was that the payment of money was a loan on certain terms. Although there was also a plea of restitution, it was not actively pursued as a separate head of claim. In answer to the claim for the repayment of a loan, Mr Lo and Cheong Shing alleged (by way of defence and counterclaim) that the money was paid for the purpose of a joint venture. This was supported by Mr Kong. These two issues were the principal dispute between the parties throughout the proceedings. After a trial which lasted for a total of 24 days, the judge found that none of the seven witnesses called on behalf of the parties told the whole truth. Neither version was accepted or acceptable. Having regard to the issues involved in this case and how they were presented, we see no justification in attempting, as suggested by Xian Minshen and Minshen HK, to distinguish between pursuing their claim and defending the counterclaim. Furthermore, we note that not only was Mr Yu, the key witness called on their behalf, not believed, the documents produced in court (including those relied on by him, e.g. KY-001 and KY-002), as analyzed by Mr Justice Litton in his judgment, either did not support their case or cried out for explanation and Mr Kong’s explanation was not credible. There is nothing to persuade us that we should vary the order nisi that there be no order as to costs in so far as the costs at first instance are concerned.

Costs of appeals as between Xian Minshen & Minshen HK and Mr Lo & Cheong Shing 

7.  On appeal to the Court of Appeal, the parties persisted in their respective claims and challenged the judge’s findings on the facts. Before this Court, Mr Lo and Cheong Shing presented their case in a different way, namely, that the money in question was paid for the purchase of shares. This however was in essence an inseparable part of their original case of a joint venture agreement. This Court was neither satisfied that the money paid was a loan nor that an agreement, be it a joint venture agreement or one for the purchase of shares, had been made out. Although Minshen HK was the successful party, the judgment in its favour was given on the basis of restitution, which was different from that actively pursued at the trial and maintained on appeal by Minshen HK. Further, the judgment in favour of Xian Minshen had to be set aside because it had been fully repaid.

8.  Having carefully considered their written submissions, we are not persuaded that Xian Minshen and Minshen HK should be awarded their costs of the appeals to the Court of Appeal and to this Court as against Mr Lo and Cheong Shing.

Costs of appeals as between Xian Minshen & Minshen HK and Mr Kong

9.  Mr Kong’s primary case was the same as that run by Mr Lo and Cheong Shing. He gave evidence in support of such a case and was disbelieved. Throughout the proceedings in the courts below and in this Court, he adopted the case of Mr Lo and Cheong Shing as his primary case and also raised several subsidiary issues, such as the Eastern Tower Transaction, restitution and privilege. These other issues were either irrelevant to the main issues the court had to decide or had no merits at all. Much time and costs were spent on appeal on his primary case and these other issues all of which were rejected. Although his appeal was allowed, he was held not liable for two reasons. First, the finding of the judge (which was upheld by the Court of Appeal) that he and Mr Lo were “in it together” was erroneous. Secondly, as the judgment in favour of Minshen HK is now based on restitution, Mr Kong should not be held responsible since there was no evidence that he had benefited in any way from the money received by Mr Lo and Cheong Shing. However, it is clear from the evidence that Mr Kong had played an active and crucial role in the whole episode and his evidence was not accepted.

10.  Having regard to all these matters, although Mr Kong was successful in his appeal, we do not think he should be awarded all his costs before the Court of Appeal and this Court. We take the view that he is only entitled a portion of such costs and taking a broad brush approach, we think that it is appropriate that he should only get one half of such costs.

Orders

11.  For the reasons given above, we make the following orders:

(1)  There be no order as to the costs of the trial;

(2)  There be no order as to the costs of the appeals to the Court of Appeal and to this Court as between Xian Mishen and Minshen HK and Mr Lo and Cheong Shing; and

(3)  Xian Minshen and Minshen HK should pay Mr Kong one half of his costs of the appeals to the Court of Appeal and to this Court.