楊佩玲 v. SUPER BEST INVESTMENT LTD

HCA 1465/2022

[2023] HKCFI 2998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1465 OF 2022

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DECISION ON COSTS

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1.  I refer to my Decision handed down on 29 September 2023 (the “Decision”)[1].

2.  For the reasons set out therein, I set aside the Default Judgment, granted D leave to file its acknowledgement of service out of time, and ordered that the proceedings be stayed in favour of arbitration.  On the question of costs, for the reasons set out in §54 of the Decision, I made a costs order nisi that D nonetheless should bear the costs of and occasioned by the Summons, to be assessed summarily (the “Costs Order Nisi”).

3.  By letter of 5 October 2023, D seeks variation of the Costs Order Nisi, to the effect that P shall pay 90% of D’s costs of and occasioned by the Summons on an indemnity basis, or alternatively that P shall pay such part of D’s said costs for such period and on such basis as the Court shall deem fit.

4.  Mr Co has filed his submissions in support and reply.  Mr Chan has filed his submissions in opposition.  I have read all of them.

5.  In respect of the costs on an application to set aside a default judgment, Mr Co has brought to my attention Welson International Ltd v Jebson Investments Ltd (HCA 2620/2008, 29 June 2010, §§16, 23 and 26) and Harbour Hero Enterprises Ltd v Chau Nung Tai [2019] 3 HKLRD 174.  In the latter case, Kwan V-P observed at § 27 as follows:

“As for the costs below, the defendant has conceded that as the default judgment is a regular judgment, the plaintiff should have the costs incurred up to 12 July 2017, when the summons for setting aside the default judgment was filed with the defendant’s supporting affirmation (including the costs of perusal). Once the merits of the defendant’s case have been disclosed, Mr Siu submits the costs for resisting the setting aside application should follow the event and should be borne by the plaintiff, citing Welson International Ltd v Jebson Investments Ltd, HCA 2620/2008, 29 June 2010, Andrew Chung J, §§16, 23, 26. We agree this is the right approach and we so ordered.”

6.  I do not accept Mr Chan’s submissions, relying on Ko Sin Yun v Chan Chuen & Another [2007] 1 HKLRD 324, that as a general rule, it is only when the plaintiff, upon disclosure of the defendant’s defence, nonetheless unreasonably resists the application to set aside when costs should follow the event.  As submitted by Mr Co, Welson and Harbour Hero does not involve any consideration of reasonableness (or unreasonableness).  If the court upon the materials disclosed to the plaintiff subsequently rules that merits to the requisite threshold has been shown, regardless of the question of reasonableness, it is appropriate for the costs occasioned by the further resistance of the application be borne by the plaintiff.  If unreasonableness can further be shown, it may form the basis for enhanced assessment.

7.  In respect of the costs on an application for stay in favour of arbitration, save when special circumstances exist, the general rule is that costs in an unsuccessful challenge to an arbitration agreement should be ordered on an indemnity basis – Chimbusco International Petroleum (Singapore) Pte Ltd v Fully Best Trading Ltd [2016] 1 HKLRD 582, §§19 – 21. Mr Chan for P does not dispute that.

8.  The Summons was a combined one, in the sense that it sought both an order to set aside and an order to stay.  I have been informed that there is no prior authority on costs in respect of such applications.

9.  When exercising my discretion on costs, I find the following matters relevant:

(a)  D’s application to set aside is based on the existence of the Arbitration Clause.  Merits of any underlying defence have not been raised, and are not in play – see §81 of Au/Aff1;

(b)  At §16 of the Decision, I stated my view that in the context of an application to set aside, the challenge of a stay in favor of arbitration should be a freestanding matter not encompassed within the consent of a defence on the merits;

(c)  P’s opposition of the stay application, and hence the application to set aside, is based on her denial of knowledge of the negotiations and discussions, and denial of the Arbitration Clause or any arbitration agreement in relation to the 2015 Loan;

(d)  I have rejected P’s case in those regards.  As submitted by Mr Co, the position of a combined application was not addressed in P’s written submissions.  The test of a higher threshold P put forward in the case of a stay application is inconsistent with PCCW Global, retracted by Mr Chan in the course of oral submissions, and was in any event rejected by this Court (see §24 of the Decision).  The lack of signature and the facts of the case does not advance P’s opposition.  I repeat section D.2. of the Decision, and in particular §§36 to 44 thereof;

(e)  On the facts, I was of the view that whether the threshold be prima facie case or real or good prospect of success (or negative good prospect), D has met it;

(f)  On the facts, and given the nature of the issues before me, I agree with Mr Co that the same general rules on costs (as discussed above) should be adhered to despite the fact that this was a combined application.

10.  I accept Mr Co’s alternative submissions that P must have had, or ought to have appreciated the merits of D’s application when Au/Aff1 (but not the draft) was served on 1 February 2023 and after consideration of the same.

11.  I accept hence Mr Co’s submissions that whilst D shall bear the costs of and occasioned by the Summons up to 1 February 2023, P shall bear the costs after that date.  In my view, D shall in addition bear P’s costs for perusal of Au/Aff1.

12.  I accept also Mr Co’s submissions that rather than having separate costs assessments before and after 1 February 2023, this Court may adopt a broad brush basis and set-off approach, so that P shall bear a discounted percentage of D’s costs from 2 February 2023.

13.  Mr Co suggests a discount of 10%.  Upon my view that D shall also bear P’s costs for perusal of Au/Aff1, I adopt the percentage of 20%.

14.  For the above reasons, upon consideration of the authorities now cited to me, I accede to D’s application to vary the Costs Order Nisi.  I order instead that 80% of the costs of and occasioned by the Summons on or after 2 February 2023 be to D (including the costs for this application to vary, such that the 20% discount equally applies), with certificate for one counsel, to be assessed summarily on indemnity basis.

15.  D is directed to lodge its statement of costs within 14 days from the date hereof, P to lodge its statement of objection 14 days thereafter, and D to lodge its reply within 7 thereafter.  The summary assessment will then be proceeded with on the papers.