GHAZI FAIDI v. QANTEX CAPITAL MARKETS LTD AND OTHERS

CACV 296/2023, [2025] HKCA 342

On appeal from [2023] HKCFI 2184

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 296 OF 2023

(ON APPEAL FROM HCA NOS 272 AND 486 OF 2018

(CONSOLIDATED))

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ACTION NO 272 OF 2018

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AND

ACTION NO 486 OF 2018

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(Consolidated by Order of Master Queenie Lau dated 2 October 2018)

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DECISION ON COSTS

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Hon Kwan VP (giving the Decision on Costs of the Court):

1.  On 25 February 2025, we dismissed the defendants’ appeal at the conclusion of the hearing and ordered them to pay the plaintiff’s costs of the appeal. Reasons for our judgment were handed down on 7 March 2025[1]. We will adopt the terms in the Reasons in this decision on costs.

2.  On 14 March 2025, the plaintiff informed the court that he had made a sanctioned offer to the defendants in the sum of US$750,000 on 20 November 2020 for “full and final settlement of the Consolidated Action and any matters related to it”, under Order 22 of the Rules of the High Court. The defendants failed to accept the sanctioned offer by the prescribed date of 18 December 2020. By obtaining summary judgment before DHCJ Sara Tong SC on 25 August 2023, the plaintiff had done better than the sanctioned offer. In the decision of DHCJ Tong on 11 December 2023, the judge had granted the plaintiff enhanced interests on the judgment sum and indemnity costs in respect of the Bonus Claim and Bonus Counterclaim. The plaintiff seeks to vary the costs order of the appeal to indemnity costs pursuant to Order 22 rule 24 and/or the inherent jurisdiction of the court and asks for summary assessment of the costs of the appeal.

3.  We gave directions on 17 March 2025 for the parties to lodge submissions for the above purpose.

4.  The defendants oppose the application to vary the costs order on these grounds:

(1)  The costs order pronounced by the court at the end of hearing on 25 February 2025 was not an order nisi. In neither the oral pronouncement nor the Reasons was the costs order expressed to be made nisi. The court is functus and has no jurisdiction to reopen the costs issue. The costs order made on 25 February 2025 may only be challenged by an appeal but not an application to vary. The plaintiff’s application to vary should be dismissed with costs to the defendants.

(2)  If the court is minded to treat the costs order as nisi, the defendants would seek an order they be awarded costs in relation to issue 1 of this appeal (in which they were successful), alternatively, the plaintiff’s costs on issue 1 be disallowed. The submissions and discussions on issue 1 accounted for half of the costs of the appeal.

(3)  A sanctioned offer made below does not entitle a party making it to invoke Order 22 for the purpose of the costs of the appeal. Appeal costs should be considered having regard to all the circumstances. Given that the defendants were partially successful on appeal, they should not be visited with indemnity costs. As such, the appeal court is not bound to follow DHCJ Tong to award costs on indemnity basis. The claimed costs for the appeal should be assessed on party and party basis, which is reflective of the result of this appeal.

(4)  In any event, the quantum of costs of the appeal sought by the plaintiff is grossly excessive.

5.  The plaintiff’s solicitors contend that the costs order of 25 February 2025 was an order nisi. In support of this, they cited the decision of Mimmie Chan J in Chan Shun Kei v Hong Kong Construction (Hong Kong) Limited, HCCT 2/2011, 21 August 2014, at §1, which read as follows: “Where a judgment or order is pronounced at the conclusion of the hearing, but the reasons are given in writing at a later date, or the judgment or order is recorded in writing and handed down at a later date, the order as to costs in the written decision is by its nature an order nisi under O 42 r 5B RHC.” This broad statement at the outset of that decision should be read in light of what actually happened when the judge pronounced the costs order orally at the conclusion of the hearing. That order was made without hearing the parties on costs and the judge had made clear to the parties at the end of the hearing that an application for variation could be made with regard to the costs order, on grounds being shown. There was no doubt in that case that the costs order was an order nisi (§§3, 6, 7 to 9).

6.  The correct position is as stated by Chow JA in Kung Kwok Wai David v Commissioner of Estate Duty [2022] 1 HKLRD 965 at §7:

“In support of her argument, Ms Wong relies on O. 42 r. 5B(6) of the Rules of the High Court (Cap.4A, Sub. Leg.), which states as follows: ‘Where a written decision is given pursuant to this rule the Court may make therein an order nisi as to costs and, unless an application has been made to vary that order, that order shall become absolute 14 days after the decision is pronounced.’ Order 42 r. 5B(1) permits a court to give reasons for any decision either at the time the judgment or order is pronounced or, where it is at that time announced that the reasons will be given at a later date, at such later date as may be fixed. In either case, O. 42 r. 5B(6) relied upon by Ms Wong provides that the court may make a costs order nisi. It seems to me clear that under this rule, the court has a discretion, but is not bound, to make[2] a costs order nisi. A costs order, like any order of the court, is prima facie an order absolute, and may only be challenged by way of an appeal but not an application to vary. There are of course exceptions to this general position, eg an ex parte order, or where the court indicates (either expressly or by necessary implication) at the time of the making of the order that it is provisional only. There may be other exceptions, but they are exceptions to the general rule. In my view, a simple order as to costs made by the court, without more, should be regarded as an order absolute, and not an order nisi.”

7.  When we dismissed this appeal at the conclusion of the hearing, we gave the parties an opportunity to address us on costs and heard them on costs before we made the order. There was no express or implicit indication that the costs order we made is provisional only. We did not intend the order to be nisi.

8.  The plaintiff then asks this court to exercise its inherent jurisdiction to entertain the application to vary where he had omitted to ask us to make an order nisi, on the basis that this court is not functus officio as the order has not been drawn up, entered or otherwise perfected, citing CEP Ltd v Wuxi Jiacheng Solar Energy Technology Co Ltd, CACV 97/2014, 29 October 2014 at §2. There is power to alter the costs order which has not been sealed or perfected. The question is whether we should exercise our discretion to entertain the application. The plaintiff also seeks retrospective leave to apply to vary.

9.  We will exercise our discretion and grant retrospective leave to apply. We take into account the sanctioned offer is plainly relevant to costs and the plaintiff was only three days out of time in making this application.

10.  The general principles relating to sanctioned offers as affecting the costs below and on appeal have been stated in Ryder Industries Ltd v Chan Shui Woo, CACV 164/2013, 13 March 2015 at §34:

“From the rules as they are presently worded and the case law as they now stand, we derive the following general principles:

(1) A sanctioned offer made below does not entitle the party making it to invoke the provisions in Order 22 for the purpose of the costs of the appeal.

(2) In dealing with the costs below, by reason of the combined effect of Order 59 rule 10(1) and Order 22 rule 23[3], the Court of Appeal should take into account the sanctioned offer made below where appropriate, having regard to all the circumstances, including how the appeal is disposed of.

(3) In dealing with the costs of the appeal, the Court may take into account the sanctioned offer made below where appropriate, having regard to all the circumstances, including the result of the appeal.”

11.  The court in Ryder Industries Ltd left open the question if the party who made a sanctioned offer below is entitled to make a fresh sanctioned offer to protect his costs of appeal. In this instance, as no fresh sanctioned offer was made in the appeal, the sanctioned offer made below does not entitle the plaintiff to invoke Order 22 for the purpose of the costs of the appeal. Nevertheless, in dealing with the costs of the appeal, this court may take into account the sanctioned offer made below.

12.  Applying the above principles, we accept the defendants’ submission that it is not appropriate to award costs on an indemnity basis in this instance. The plaintiff’s counsel did not concede issue 1 and the defendants did succeed on this issue. This is an important consideration which distinguishes this case from other cases where the appeal failed entirely and was without merit, see Ryder Industries Ltd at §37 and the cases cited. We decline to vary the costs order to indemnity costs.

13.  As for the defendants’ contention that they should be awarded costs on issue 1 or that the plaintiff should be disallowed his costs on issue 1 in the event that we are minded to entertain the plaintiff’s application to vary, we reject this opportunistic move. The application to vary is solely to enable this court to exercise our discretion on costs in light of a relevant matter we were unaware of at the time, namely, the sanctioned offer. It is not meant to give the parties another opportunity to raise matters they had raised before or run different arguments on matters known to the court at the time.

14.  We proceed to assess costs of the appeal summarily on a party and party basis. The plaintiff lodged a statement of costs for summary assessment of $399,040. Having considered the defendants’ list of objections, we award costs to the plaintiff in the sum of $261,840. We decline to disallow all of the costs in respect of one of the fee earners as suggested by the defendants.

15.  As for the costs of this application, the defendants are the overall successful party in resisting the plaintiff’s attempt to seek costs on an indemnity basis. We make an order nisi that costs should follow the event and such costs are to be assessed summarily.