JUMBO FAIR LTD AND OTHERS v. PACM SERIES 235 LTD

HCMP 1258/2021

[2023] HKCFI 1026

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1258 OF 2021

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D E C I S I O N    O N    C O S T S

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1.  In exercising the Court’s discretion as to costs, having considered all the relevant circumstances and matters that should be taken into account, I find appropriate to order the Defendant to pay to the Plaintiffs four-fifths, i.e. 80%, of the costs of the proceedings incurred by the Plaintiffs on a full indemnity basis.

A.  THE PLAINTIFFS ARE THE SUCCESSFUL PARTY

2.  At paragraph 5 of the Judgment dated 30 December 2022, I have stated that the task of the Court in this case is to examine whether the Plaintiffs’ tender is spurious and whether the obstacles put up by the Defendant during the redemption process are spurious.

3.  On the first issue, although I have found, at paragraph 45 of the Judgment, that the tender served by the Plaintiffs on 30 August 2021 (the “Tender”) was invalid, I do not tag it as spurious.

4.  The reason for the Tender being found invalid is that I am not satisfied that the Plaintiffs as mortgagors have produced sufficient evidence to show that the tender sum was readily available at the time of the Tender, i.e. 30 August 2021 (see paragraph 43 of the Judgment). I did not find that the amount offered in the Tender for fees and expenses of approximately HK$8,000,000 was not enough to cover the full amount due for such fees and expenses. In fact, this amount (HK$8,000,000) was much more than what I found in the Judgment to be due for fees and expenses, i.e. HK$2,860,393.67 (see paragraph 8 below).

5.  I therefore agree with Mr Victor Dawes SC (Ms Astina Au with him) for the Plaintiffs that even if the Tender were valid (that it was served on the Defendant with satisfactory proof of the tender sum offered), it would not have disposed of these proceedings because of the parties’ tremendous difference in fees and expenses.

6.  The financial consequence of that finding is, as found in paragraphs 46, 52 and 53 of the Judgment, that interest on the principal should continue to accrue until 15 September 2021 when the Plaintiffs made the payment in court. Numerically, as found in paragraphs 60 and 109 of the Judgment, the interest on the principal which the Plaintiffs should pay is HK$4,045,850.76 (according to the Defendant’s calculation and on the basis that the Tender was invalid, see paragraph 58 of the Judgment), and not HK$2,592,830.54 (as calculated by the Plaintiffs on the basis that the Tender was valid, see paragraph 59 of the Judgment). The difference is HK$1,453,020.22.

7.  On the fees and expenses incurred by the Defendant, as shown in the summary of my findings at paragraph 110 of the Judgment, I have only allowed a total of HK$2,860,393.67, much lower than what the Defendant claimed.

8.  Originally, as mentioned in paragraphs 21 and 22 of the Judgment, the fees and expenses claimed by the Defendant amounted to HK$45,399,669.31 in total, which comprised HK$18,999,669.31 and HK$26,400,000. The Defendant informed the Plaintiffs these two sums were “fees and expenses” and “indemnity and break funding fees”. As I observed in paragraph 23 of the Judgment, they were very general description and no reasonable mortgagor could tell what exactly they entailed and how they were incurred by the Defendant.

9.  Then, two days before the hearing, as mentioned in paragraphs 55 to 58 of the Judgment, the Defendant made major concessions: firstly, the claim of the hefty “indemnity and break funding fee” of HK$26,400,000 was completely abandoned; and secondly, the claim of the fees of Ashurst Hong Kong, one of the Defendant’s legal advisors, was reduced from US$317,663.11 to US$228,198.41 (approximately HK$1,779,947.60). These two concessions reduced the Defendant’s claim of fees and expenses from HK$45,399,669.31 to HK$17,719,317.09 (i.e. the sum of (3a) to (3f) in the table of paragraph 58 of the Judgment), representing a reduction of 60.97% in the amount of the claim (i.e. (HK$45,399,669.31 - HK$17,719,317.09)/ HK$45,399,669.31 x 100%))

10.  As mentioned in paragraph 7 above, I allowed HK$2,860,393.67. The allowed amount represents 6.3% of the original claim (i.e. (HK$2,860,393.67/ HK$45,399,669.31) x 100%), or 16.14% of the reduced claim (i.e. (HK$2,860,393.67/ HK$17,719,317.09) x 100%).

11.  In terms of substantive items, in addition to the Defendant’s voluntary abandonment (at the eleventh hour before the substantive hearing) of the hefty “indemnity and break funding fees” of HK$26,400,000, I have disallowed in whole the valuation fees of HK$600,000 of CBRE (see paragraph 76 of the Judgment) as well as another hefty item of “Fonto asset disposal consultancy fee” for HK$12,495,000. These three abandoned/disallowed items amount to HK$39,495,000 in total.

12.  Comparing with the hefty amount of the Defendant’s claims abandoned belatedly and also those disallowed, i.e. HK$42,539,275.64 (HK$45,399,669.31 - HK$2,860,393.67), the additional interest which the Plaintiffs were required to pay because of the invalid Tender, i.e. HK$1,453,020.22, is insignificant.

13.  Therefore, the Plaintiffs are the successful party in these proceedings.

B.  THE DEFENDANT’S CONDUCT

14.  In my view, the obstacles put up by the Defendant are spurious. I agree with Mr Dawes’ submissions that the whole proceedings could and would have been avoided if the Defendant have not swollen up its fees and expenses, for the purpose of obstructing the Plaintiffs’ redemption of the mortgages.

15.  Moreover, looking at its conduct, the Defendant has not been cooperative from the beginning and throughout the redemption process.

16.  As observed in paragraph 17 of the Judgment, after the Plaintiffs informed the Defendant of their intention to redeem the mortgaged properties, the Defendant did not provide the amounts required for the redemption, but instead asked the Plaintiffs to disclose the source of repayment. And when the Defendant later saw fit to provide a very large figure of HK$296,301,980.66, it did not see fit to provide any breakdown (see paragraph 19 of the Judgment). When pressed for a breakdown, the Defendant disclosed the aforesaid two figures of HK$18,999,669.31 and HK$26,400,000, but with very unhelpful descriptions of “fees and expenses” and “indemnity and break funding fees” (see paragraph 8 above). The only hint given was if the refinancing with the Plaintiffs was brought to fruition, the Defendant would have “absorbed” a majority of the break funding costs, and other fees and expenses (see paragraph 24 of the Judgment). In other words, the Defendant was saying its preferred course for the Plaintiffs were not redemption but refinancing.

17.  It is also clear that the Defendant kept using anti-money laundering and counter-terrorist financing checks as an excuse for insisting to check the Plaintiffs’ source of fund for redemption. As explained in paragraph 26 of the Judgment, this requirement could not have been genuine – all but one of the measures set to obstruct the intended redemption.

18.  The next was the claims of “fees and expenses” and “indemnity break funding fees” totalling over HK$45 million. As can be seen from Section A above, and from the observations made in Section D of the Judgment, such claims are extortionate.

19.  A few weeks before the substantive hearing, the Plaintiffs issued a “without prejudice save as to costs” offer which comprises payment of fees and expenses of HK$4,041,350.67. This was quite unreasonably rejected by the Defendant and counteroffered a figure comprising payment of fees and expenses totalling HK$8,606,037.28. As it transpires, this figure of more than HK$8 million is much more than the figure allowed by the Court, i.e. HK$2,860,393.67. The result is that the Defendant chose to persist in prosecuting the extortionate claim of fees and expenses.

20.  In my view, the Defendant’s conduct in the redemption process has been extraordinary, obstructive, unjustifiably persisted and unreasonable, to the extent of near oppressive, and the fees and expenses that it claimed are unreasonable, exaggerated and extortionate[1].

21.  Taking account of all the circumstances including the matters listed in order 62 rule 5 of the Rules of the High Court and those highlighted above, I find it to be fair and just to order costs of the proceedings to be paid by the Defendant on the indemnity basis, save that since the Tender issued by the Plaintiffs have been held in the Judgment to be invalid, albeit not amounting to spurious, I do not consider that the Defendant should bear this part of the costs, which I assess on a broad-brush basis to be one-fifth.

C.  CONCLUSION AND DISPOSAL

22.  In conclusion, for the above reasons, I order that the Defendant do pay the Plaintiffs four-fifths, i.e. 80% of the costs of these proceedings (including all costs reserved) on the indemnity basis, to be taxed if not agreed, with certificate for two counsel.