ORIENTAL TEXTILE PRODUCTS LTD v. ASIA TELEVISION HOLDINGS LTD AND OTHERS

HCMP 1572/2025

[2026] HKCFI 1238

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1572 OF 2025

________________

________________

________________

___________________________

D E C I S I O N    O N
C O S T S

___________________________

I.  INTRODUCTION

1.  This is my decision on costs having considered the written submissions of the parties filed following my decision made after the substantive hearing on 31 October 2025 (the “Substantive Hearing”) (see Reasons for Judgment handed down on 7 November 2025 [2025] HKCFI 5387 (the “Reasons for Judgment”)).

II.  PARTIES’ POSITIONS

2.  The Plaintiff seeks the following:-

(1)  The reserved costs of the first hearing on 19 September 2025 (the “First Hearing”) should be paid by the 2^nd to 6^th Defendants and the 1^st Defendant (the “Company”);

(2)  The taxation basis of costs against the 2^nd to 6^th Defendants should be on an indemnity basis; and

(3)  A personal costs order in respect of all costs should be made against the 2^nd to 6^th Defendants, and there shall be an order that the 2^nd to 6^th Defendants shall not be entitled to seek indemnity from the Company.

3.  Mr Alex Yeung, counsel for the 2^nd to 6^th Defendants, rightly in my view, does not dispute on the liability to pay the Plaintiff costs of and occasioned by the Substantive Hearing. However, he disputes on the costs of and occasioned by the First Hearing and the taxation basis, taking the position that the Plaintiff should pay the costs of the First Hearing and the basis should be the usual party-and-party basis. He also submits that whether the 2^nd to 6^th Defendant can seek indemnity from the Company is a matter between the 2^nd to 6^th Defendants and the Company.

4.  The Company did not attend the Substantive Hearing. Its position only concerns the costs of and occasioned by the First Hearing. Its position is that there should be no order as to costs between the Plaintiff and the Company. As regards the indemnity for the 2^nd to 6^th Defendants, its position is that the Company is not liable to indemnify them.

5.  Therefore, the issues are:-

(1)  What the costs order in respect of the First Hearing should be;

(2)  What the basis of taxation of costs between the Plaintiff and 2^nd to 6^th Defendants should be; and

(3)  Whether the 2^nd to 6^th Defendants shall be entitled to seek indemnity from the Company.

III.  COSTS ORDER IN RESPECT OF THE FIRST HEARING

6.  Usually, costs of the first hearing of an application are regarded as part of the whole application and so should follow the event. Mr William Wong SC (leading Mr Charlie Liu and Ms Valerie Kwok) urged me to take this usual position.

7.  In my view, one matter here justifies a departure from this usual position. At the First Hearing, a contentious issue was whether section 570 of the Companies Ordinance would apply to the Company being an overseas company. Both the Company and the 2^nd to 6^th Defendants made detailed submissions to explain why section 570 would not apply. While I made no ruling on this legal question of law (because I did not have to on that occasion) and asked the Plaintiff to consider the matter and put its application in proper shape, after the First Hearing, by its amendment to the Originating Summons filed on 11 September 2025 (the “Originating Summons”), the Plaintiff no longer relied upon section 570. In my view, the costs of and occasioned by section 570 should follow the usual rule that costs should be awarded against the one who withdraws or discontinues a claim; in other words, the Plaintiff should pay the costs in respect of section 570. Although the First Hearing also dealt with other issues, mainly, filing of evidence after the 2^nd to 6^th Defendants filed evidence in opposition only shortly before the First Hearing, this issue on section 570 is, in my view, a self-contained issue for which costs could be readily segregated.

8.  Taking a broad-brush approach, I apportion 70% of the First Hearing (including preparation for the First Hearing) to this section 570 issue. For the remaining 30% of the First Hearing (including preparation for the First Hearing), it shall be in the cause of the Amended Originating Summons and the Summons.

9.  For the avoidance of doubt, I make it clear that the evidence filed prior to the First Hearing shall be in the cause of the Amended Originating Summons and the Summons. There may be some small parts of the evidence that could be regarded as related to the section 570 issue. However, they are, in my view, so small that it is not necessary to make any apportionment, and in any event, section 570 is a pure question of law that does not need evidence.

10.  For completeness, I do not think that in the present circumstances, costs should be awarded against the Plaintiff simply because the Plaintiff failed to obtain an interim-interim injunction at the First Hearing. This is because the Plaintiff did not press for the interim-interim injunction at the First Hearing and the Plaintiff did not do so because of the section 570 issue. The above apportionments based on the section 570 issue should be sufficient to do justice to the parties’ costs in relation to the First Hearing.

IV.  BASIS OF TAXATION

11.  To determine whether to order indemnity costs, an important consideration is whether there is any finding of dishonesty and bad faith. In the present case, both the Plaintiff and the 2^nd to 6^th Defendants filed evidence making accusation against each other for dishonesty and bad faith. However, bearing in mind that no oral evidence was directed and that the evidence on the affirmations were not clear-cut, I refrained from making any finding on these accusations. In short, there was no finding of dishonesty and bad faith.

12.  Thus, as is clear from the Reasons for Judgment, the Plaintiff won on the single issue, namely, the interpretation of article 58 of the Articles of Association. Also, it is clear from the Reasons for Judgment that some detailed analysis was undertaken for this interpretation issue. I would not say that the meaning of the phrase “proceed to convene” would be clear to anyone. Although when the articles are, as in the present case, governed by foreign law, interpretation of the articles is regarded as a question of fact, at least in respect of Cayman Islands law, one can regard such question of fact essentially as a question of law, and there were no cases cited to me directly on the meaning of this phrase used in an articles of association from any common law jurisdictions. So I would not say that the position taken by the 2^nd to 6^th Defendants on article 58 was so unreasonable as to warrant taxation on indemnity basis. Nor can I see any other basis for taxation on indemnity basis.

13.  Therefore, the taxation basis should be party-and-party basis.

V.  APPORTIONMENT OF COSTS TO ARTICLE 58 ISSUE

14.  Before I turn to the issue of indemnity from the Company, I should deal with apportionment of costs to article 58.

15.  As I mentioned above, parties have filed evidence making accusations against each other, but I did not make any finding on any of this. Such evidence proved to be unnecessary. The Plaintiff could have focused on article 58, and so did the 2^nd to 6^th Defendants. Taking a broad-brush approach, I think there should be no order as to costs of and occasioned by such accusations. The evidence adduced by the Plaintiff in this regard was quite substantial. Taking a broad-brush approach, I apportion 60% of the costs to the article 58 issue.

16.  Therefore, the 2^nd to 6^th Defendants shall pay 60% of the costs of the Originating Summons and Amended Summons (including the summons for interlocutory relief) (save and except those in relation to the First Hearing and section 570 issue) to the Plaintiff, and there should be no order as to the remaining 40% costs.

VI.  INDEMNITY FROM THE COMPANY

17.  As mentioned above, the Plaintiff seeks an order that the 2^nd to 6^th Defendants shall not be entitled to seek indemnity from the Company.

18.  First, they rely on article 167(1) of the Articles of Association (“Article 167(1)”):-

“The Directors… for the time being of the Company… and everyone of them, and everyone of their heirs, executors and administrators, shall be indemnified and secured harmless out of the assets and profits of the Company from and against all actions, costs… expenses which they or any of them… shall or may incur or sustain by or by reason of any act done, concurred in or omitted in or about the execution of their duty, or supposed duty, in their respective offices… PROVIDED THAT this indemnity shall not extend to any matter in respect of any fraud or dishonesty which may attach to any of said persons…”

19.  Further, 2^nd to 6^th Defendants filed affirmation exhibiting their director’s service agreement for their executive directorship between only the 2^nd and 6^th Defendants on the one hand and the Company on the other. Clause 15 (“Clause 15”) provides that:-

“The Company agrees to indemnify and hold harmless the Executive director on demand from and against any and all reasonable losses, claims, damages, liabilities, and expenses, including without limitation, any proceedings brought against the Executive Director, arising from the performance of his/her duties pursuant to his/her appointment under this Agreement, so far as permitted by law, except in any case where the matter in respect of which indemnification is sought under this Clause was caused by the serious or default or neglect of the Executive Director.”

20.  It is noteworthy that the Cayman law does not have any similar provision as section 468 of the Companies Ordinance (Cap. 622) that invalidates indemnity provided by the company for its directors. Therefore, there is no dispute that Article 164(1) and Clause 15 are not invalid under the Cayman law.

21.  In terms of jurisdiction, the Court no doubt has jurisdiction to order that a director shall be personally liable to pay costs, and for that purpose, the Court also has jurisdiction to order that a director cannot seek indemnity from the company. A weighty factor would be whether the director acts in good faith and/or in the interests of the Company. Given my decision on article 58, the 2^nd to 6^th Defendants were no longer directors of the Company after 12 August 2025. Their acts therefore cannot be in the interests of the Company. Their resistance in the present proceedings was purely for themselves personally. They should be personally liable to pay the costs subject to any agreement to the contrary.

22.  This is where Article 167(1) and Clause 15, on which the 2^nd to 6^th Defendants rely to say that they are entitled to indemnity from the Company, come into the play because while costs is a matter for the Court’s discretion, the Court would usually defer to any contractual agreement between parties.

23.  Mr Yeung, for the 2^nd to 6^th Defendants, submits that it would be for another occasion to decide whether the 2^nd to 6^th Defendants could seek indemnity from the Company under Article 167(1) and Clause 15. Mr Yeung relies on John and Others v Price Waterhouse (a firm) and Another [2022] 1 WLR 953, and thus the Court should not now order that the 2^nd to 6^th Defendants are not to be indemnified by the Company. In that case, after a costs order based on standard basis was made against the claimant in favour of the auditor defendant and perfected, the defendant auditor would like to reopen the costs order and claim costs from the claimant on an indemnity basis based on the indemnity agreement. Ferris J refused to reopen the costs order for lack of jurisdiction to do so after the order was perfected. His Lordship also said that in any event, the indemnity agreement was not in issue in the proceedings and the Court may determine the costs basis in such circumstances “only if it were clear that there could be no defence to a contractual claim for indemnity costs, so that if a fresh action were commenced summary judgment would be given”: see §23. Though obiter, this comment makes sense and strikes a balance between fairness and economic use of judicial resources. I adopt this as the right course to take. I would, however, add a caveat – where the relevant parties have been afforded fair opportunity to address this indemnity issue, it is not necessary for a fresh action to be commenced, but the Court should, where it feels able to do so, rule on the matter at the costs stage once and for all. I add this caveat because if, like in the present case, I directed the parties, including the Company, to make submissions on this indemnity issue, and the parties have ventilated their full arguments on the issue, it would be a waste of the parties’ time and the judicial resources to require the matter to start afresh.

24.  In the present case, after this indemnity issue was raised, the 2^nd to 6^th Defendants filed evidence (for which I gave leave) about Article 167(1) and Clause 15. Then I directed the parties, including the Company, to exchange submissions and reply submissions on this issue. While the 2^nd to 6^th Defendants’ primary position is that the matter should be for a fresh action, all the parties (including the 2^nd to 6^th Defendants themselves) also make full submissions on the scope and effect of Article 164(1) and Clause 15. Therefore, in my view, the parties have been afforded fair opportunity on this matter, and I see no point to require them to repeat all the same evidence and arguments in a fresh action, whether or not the summary judgment threshold is met.

25.  I have, in §39 of the Reasons for Judgment, set out the legal principles in relation to construction of articles of an articles of association and construction of contract, and I shall not repeat here. Suffice to say that I shall construe the words with reference to their natural and ordinary meaning in proper context bearing in mind their purposes, and that where the meaning is ambiguous, I should choose the one that would result in reasonableness rather than absurdity, but I should be cautious against re-writing the contract.   

26.  Article 167(1) covers directors and former directors in respect of their act or omissions “in or about the execution of their duty, or supposed duty, in their respective offices” (emphasis added). Textually, it applies in respect of the office of directorship. It follows that even though former directors would be covered by Article 167(1), a fact emphasised by Mr Yeung for the 2^nd to 6^th Defendants, it is for a situation where the former directors should be covered in respect of what they did or omitted “as directors” but when they would like to invoke Article 167(1), they have been removed.

27.  Mr Yeung seems to suggest that a strict requirement for “offices” would deter directors from defending their offices whenever challenged and this would be contrary to the interests of the Company especially when the directors actually have good grounds to oppose the challenges and they are remaining directors as a matter of law. In the light of the strict requirement, Mr Yeung effectively submits, the directors may simply jump the boat not willing to take any risk of a failed challenge the costs consequence of which would be deterring to the “directors”.

28.  I see force in Mr Yeung’s submissions. However, a strict requirement could also be regarded as furthering the interests of the Company. Like in the present case, had the 2^nd to 6^th Defendants properly understood their duties and properly “proceeded to convene” the EGM but not just mentioned the date of the EGM without specifying the time and the venue (which would not be burdensome to them), they would have been regarded as “proceeding to convene” the EMG and might well still remain directors. If there is no such strict requirement, they could easily invoke Article 167(1) without taking prudence in understanding and performing their duties. Although there is a safeguard in Article 167(1) that “any fraud or dishonesty” would not be covered, the reality is that cogent evidence would be required and it would be easy for the directors to rely on some “dodgy” advice from “professionals” to say that no cogent evidence of fraud or dishonesty is available.

29.  What I am trying to demonstrate in the preceding paragraph is that it is easy to point to any reasonable rationale either way behind a certain position on Article 167(1), and it is the reason why the Court is always cautious against assessing the reasonableness of certain contractual provision. It is for the contractual parties to see where the risk lies, more towards directors or more towards the Company. It is not for the Court to rewrite the contract now with the benefit of hindsight. In my view, the phrase “in their respective offices” are unequivocal condition for the invocation of Article 167(1), namely, to indemnity the directors or the former directors, the duties or supposed duties (or omissions) should be carried out in their offices of directorship.

30.  In my view, Clause 15, though not having such a phrase as “in their respective offices”, applies also only to duties performed or omissions made as executive directors. I take this view because of the phrase “arising from the performance of his/her duties pursuant to his/her appointment under this Agreement”. If he or she is no longer an executive director, he is no longer performing his or her duties pursuant to the appointment under the Agreement. My analysis as regards the reasonableness in §§28-29 above applies here with equal force.

31.  Since the 2^nd to 6^th Defendants have since 12 August 2025 been removed as directors and from that moment, are no longer directors (and also no longer executive directors in the case of the 2^nd and 6^th Defendants), when they were defending the present action commenced by the Plaintiff, they were not performing their duties “in their respective offices” as directors, and were not performing their duties “pursuant to [their appointments]” as executive directors in the case of the 2^nd and 6^th Defendants. Therefore, Article 167(1) and Clause 15 do not cover the legal costs incurred by them, and they cannot claim indemnity from the Company.

32.  Therefore, I order the 2^nd to 6^th Defendants to pay the costs, and also declare that the 2^nd to 6^th Defendants are not entitled to any indemnity from the Company.

VII.  COSTS OF THE ARGUMENTS ON COSTS

33.  As regards the costs of the arguments on costs, much of the time and costs appear to have been incurred on the indemnity issue. By a broad-brush approach, 60% should be apportioned to this issue. For the remaining two issues, namely, the costs of the First Hearing and the taxation basis, I apportion 20% to each.

34.  The 2^nd to 6^th Defendants lose on the indemnity issue, and thus, they should pay 60% of the costs to the Plaintiff. For the costs on the costs of the First Hearing issue, there should be no order as to costs. For the taxation basis issue, the Plaintiff loses, and thus it should pay the 2^nd to 6^th Defendants 20%. Again, by a broad-brush approach, I order that the 2^nd to 6^th Defendants shall pay the Plaintiff 40% costs of the arguments on costs, to be summarily assessed. I also make an order that there is no order as to costs as between the Plaintiff and the Company, and between the 2^nd to 6^th Defendants and the Company.

VIII.  CONCLUSION

35.  In the circumstances, I make the following order:-

(1)  The Plaintiff shall pay 70% of the costs of the First Hearing to the 2^nd to 6^th Defendants, to be summarily assessed.

(2)  The Plaintiff shall pay 70% of the costs of the First Hearing to the Company, to be summarily assessed. I note that the Company’s position seems to be that it asks for no costs, understandably because the Company is now effectively under the Plaintiff’s control. However, as a matter of principle, I should still make this costs order, and it is for the Company to decide whether to enforce this costs order.

(3)  The 2^nd to 6^th Defendants shall pay the Plaintiff 60% of the costs in relation to the other parts of the Originating Summons and 30% costs of the First Hearing and the costs of the Summons for interlocutory relief, to be summarily assessed.

(4)  The 2^nd to 6^th Defendants are not entitled to indemnity from the Company in respect of the costs in §35(3) above.

(5)  There shall be no order as to all other costs as between the Plaintiff and the Company.

36.  For the summary assessments, I shall conduct it on paper. For this purpose, I order that the receiving parties shall lodge and serve statements of costs within 3 days from today, and the paying parties shall lodge and serve lists of objections within 3 days thereafter.

37.  Lastly, I thank counsel for their able assistance.