MASON GROUP HOLDINGS LTD (formerly known as MASON FINANCIAL HOLDINGS LTD) AND ANOTHER v. TAM JOSEPH WING ON AND OTHERS

HCA 1114/2021

[2024] HKCFI 1909

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1114 OF 2021

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DECISION
(On Variation of Costs Order Nisi)

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1.  I will continue to use the abbreviations in the Decision of this Court handed down herein on 22 December 2023 [2024] 1 HKLRD 601 (“the Decision”).

2.  By the Decision, this Court acceded to Hau’s application to strike out the claim and to dismiss the action as against him, and this Court also dismissed Ps’ application to amend their Statement of Claim insofar as relating to the claim against Hau. In §82 of the Decision, I made a costs order nisi that Hau’s costs of this action, including his costs of the 2 summonses and all costs reserved, be paid by Ps, to be taxed if not agreed.

3.  By summons filed on 5 January 2024, Hau seeks to vary the costs order nisi such that Ps would be ordered to pay Hau all his costs to be taxed on indemnity basis, in these terms:

“D4’s costs of and occasioned by this action, including his costs of and occasioned by (a) D4’s Summons filed herein on 28 September 2022; (b) Ps’ Summons filed on 16 December 2022; (c) Ps’ Summons filed on 14 August 2023; and all costs reserved, be paid by P1 and P2 on indemnity basis to D4 forthwith, to be taxed if not agreed.”

4.  Pursuant to the directions this Court gave on 25 January 2024 upon the joint application of Ps and Hau by Consent Summons for paper disposal of the matter, Hau lodged his written submissions on 29 February 2024 (“Hau’s Submissions”), Ps lodged theirs on 3 May 2024 (“Ps’ Submissions”) and Hau lodged his reply submissions on 7 June 2024 (“Hau’s Reply”).

5.  Hau’s Submissions were 16 pages in length and in it Hau relied on, among others,

a.  Hau’s negotiation with and then an offer made to Ps shortly before Ps commenced this action to buy out Pangenia at HK$50 million (“the Buy-out Offer”), which offer Ps refused;

b.  that Ps “have acted oppressively and unreasonably against D4 throughout the action” and a number of “examples” were referred to in relation to Ps’ litigation conducts going back to 2022 concerning various correspondence and matters before the Registrar; and

c.  That Ps have acted unreasonably and oppressively towards Hau in mid 2023 during Ps’ application to join 3 additional defendants (which joinder application has been dealt with by a Master).

6.  Hau provided to the Court a full 2-inch box file of various correspondence and other documents by way of Annexures to Hau’s Submissions. As I understand it, this bundle of documents have not been agreed.

7.  In Ps’ Submissions, broadly summarized and among others, Ps (a) complained that Hau has not sought any direction to file evidence and yet Hau was referring to various factual allegations, including the Buy-out Offer and the various alleged litigation conducts long prior and unrelated to the applications heard by this Court, and (b) Ps sought to explain and dispute by providing new details regarding the said joinder application and the other litigation conducts.

8.  Evidently, proper affirmation evidence ought to have been filed by Hau if he is to rely on these new factual matters which have not been placed before me in the striking out and amendment applications; and Ps should be given an opportunity to file evidence in response.

9.  I thus fixed a directions hearing to take place on 15 July 2024.

10.  On 9 July 2024, Hau and Ps filed a Consent Summons for (a) leave to be given to Hau to file a short 3^rd affirmation speaking to the Buy-out Offer and leave be given to Ps to file affirmation in response, (b) leave to Hau to lodge and serve an amended version of Hau’s Submissions deleting the entire sections C5 to C7 and a substantial part of C8, and (c) that costs of and occasioned by Hau’s said amendment be paid by Hau. I informed parties that I would deal with the Consent Summons in the directions hearing.

11.  At the directions hearing and after some exchanges between the bench and Ms Lai appearing for Hau, Hau confirmed that he would seek amendment of Hau’s Submissions by deleting not only Section C5 to C7 but also the entire C8 (which relates to the Buy-out Offer) and that Hau would withdraw the application to have the costs of the action be taxed on an indemnity basis, but would only now apply for the costs of the striking out application and the amendment application be so taxed. I ordered by consent that Hau do pay Ps’ costs of and occasioned by the application to amend Hau’s Submissions and Ps’ costs thrown away by the said withdrawals and amendments.

12.  Thus, at issue now is whether Hau’s costs of his striking out application and Ps’ amendment application should be taxed on indemnity basis.

13.  Hau says they should on the following grounds :

a.  Ps’ claim against D4 are plainly unarguable and obviously unsustainable justifying an award of indemnity costs; and in that connection, Hau refers to my findings and conclusions at §54, §55 and §57 “to highlight the absurdity of Ps’ action against D4”.

b.  There were significant additions as well as abandonments of Ps’ claim against Hau which were made last minute just before the substantive hearing of the 2 applications on 22 September 2023 (“the Hearing”). However, Ps handled the new proposed Amended Statement of Claim by way of the 2^nd Draft and then the 3^rd Draft “in a highly unsatisfactory and misleading manner” in that

i.  It was said by Ps misleadingly and inaccurately that the amendments in the 2^nd Draft “do not represent any major departure from the original draft filed with the Summons in December 2022” (§1 of Ps’ Reply Note dated 22 September 2023);

ii.  Ps’ refused to indicate the new amendments introduced by the 2^nd Draft as compared with the earlier draft annexed to Ps’ Summons;

iii.  Though a track-change version of the 3^rd Draft was provided to Hau and the Court at the Hearing, the same was shown to have been inaccurate in its identification of the proposed changes introduced; and

iv.  These conducts resulted in much additional work to be performed by Hau’s legal team right before the Hearing and was prejudicial to Hau’s preparation for the Hearing;

c.  Ps’ amendment application was pointless and frivolous, particularly the proposed new §34A to §34D (on what I called “the subsequent 3 incidents”), many of the new averments were not relied on and were effectively abandoned by Ps at the Hearing. Ps’ amendment application served no purpose but to delay the hearing of the striking out application; and

d.  Ps’ written submissions and list of authorities for the Hearing were served late by 6 hours.

14.  In Hau’s Reply, Hau impressed upon this Court his broad case thus: “the central idea of D4’s Skel is Ps’ undesirable pattern of highly unreasonable/oppressive/unjustified behaviour throughout the proceedings ought to be discouraged by the Court. Signs of ulterior motives are noticeable from Ps’ pattern, which exacerbate those behaviour”. Hau also impressed upon this Court to look at matters globally.

15.  Hau relied heavily on the following observations made and the decision of K Yeung J in China Shanshui Cement Group Ltd v Tianrui (International) Holding Co Ltd [2021] HKCFI 2745:

“28. … the pursuit of unarguable, weak or thin points, or points which are plainly wrong in law, can result in indemnity costs — Nintendo Co Ltd v The World Camera and Radio Co Ltd & Others [1999] 2 HKLRD 199, at 201E-G and 202D-E, and Dixon v Blindley Health Investments Ltd [2016] 4 Costs LO 627 at §26.

29. Mr Suen submits that the abandonment of §§1-3 has resulted in some saving of the hearing time. I accept that. Those paragraphs were abandoned at the beginning of the hearing upon my invitation for clarifications. But the result remains that the late abandonment has resulted in wastage of time, costs and judicial resources. In particular, the costs, time and resources incurred by Ps’ team in dealing with those paragraphs could have been saved, and the distraction to them could have been spared.

30. Such late and equivocal abandonment should be discouraged, and in my view constitutes on the facts of the present case special and unusual features which justify indemnity costs.

31. On the other hand, given my observation above that the abandonment of §§1-3 did result in some saving of the hearing time, and on a broad brush approach, I apply the apportionment of 35% in respect of the costs of and occasioned by §§1-3 of the 14/8/2019 Summons, so that those percentage of the costs should be assessed on an indemnity basis.”

16.  In Ps’ Submissions, Ps essentially submitted:

a.  As a matter of principles, (i) indemnity costs should only be awarded where there is a high degree of unreasonableness of conduct, (ii) the threshold for establishing so is high, (iii) even though severely adverse findings are made against a party, this does not ipso facto justify indemnity costs, and (iv) citing Mimi Kar Kee Wong Hung v Severn Villa Ltd (HCMP 243/2011, 31 October 2011) as an example, that a piece of litigation may be very hostile from the start which “inevitably raises the strongest suspicion of an ulterior motive” (at §14), but such suspicion is insufficient to support the finding of an ulterior motive.

b.  Ps regretted the lateness in serving Ps’ Skeleton Submissions for the Hearing, but said that a copy was emailed to Hau earlier, even though it was still late. But the late service was not mala fides and there was no express suggestion on Hau’s part that it was.

c.  The incorrect identification of the changes introduced in the 2^nd Draft and the 3^rd Draft by the colour coding were “clerical errors”. Such was not a conduct unreasonable to such a high degree as to attract indemnity costs.

d.  Regarding the amendment application, Ps submitted that it may be unmeritorious, but to justify indemnity costs, “the conduct of the losing party must be of a more venal kind and the conduct of the litigation has in some sense been wicked” (KJ v KMLM HCMC 4/2010, unrep, 21 May 2014, To J at §22).

e.  The same applied to Hau’s successful strike out, even though this Court found that Ps’ claim lacked reasonable cause of action, there must be identified some special or unusual factor to justify the departure from party-to-party costs into indemnity costs; and there was no such sufficient factor shown.

17.  Both parties accept that costs is a matter of discretion and whether to award indemnity costs is very much fact sensitive.

18.  I would first note my broad agreement with some of Hau’s complaints against Ps’ conducts, as follows.

19.  Firstly, the amendment application was taken out on 16 December 2022 in response to Hau’s application to strike out, yet it was only 2 days before the Hearing that the 2^nd Draft was introduced, and the 2^nd Draft sought to introduce very substantial departures and additions from the draft annexed to Ps’ Summons. There was no explanation offered at all on this lateness and as to why Ps could not have produced this 2^nd Draft any earlier, such that Hau (and this Court) would have a fair opportunity to study it. In this regard, I commend Hau and his legal team for their exceeding fairness and good sense in not insisting at the Hearing the objection against this Court considering it based on lateness.

20.  Secondly, in introducing such substantial proposed changes at the very last minute, Ps were clearly under a duty to facilitate Hau’s (and the Court’s) easy understanding of them to minimize prejudice to Hau and to assist its efficient resolution. However, as complained by Hau, the changes had not been correctly identified by the colouring code such that Hau (and this Court) was mis-informed as to what the latest changes entailed. It has created unnecessary complications at the Hearing. To term it as “clerical error” might have been correct only in expressing that the incorrect colour coding might not have been intentional. It however did not excuse Ps from the failure in that duty and from bringing about extra work to Hau’s legal team (and this Court) just before the actual Hearing, which indisputably would prejudice Hau’s legal team in their preparation of the Hearing. Indeed, it was as a result of Hau’s complaint of this incorrect presentation that prompted this Court to have to undertake its own analysis and accordingly recorded the changes in Footnote 2 to the Decision. While presently there is before me no reason not to accept Mr Kwan’s point that it was not established that it was a result of mala fides or wicked intent, such conduct was not clearly far from satisfactory.

21.  Then at the Hearing, a 3^rd Draft was introduced by Ps albeit with relatively minor changes, which ultimately was not further relied on.

22.  With all these said and though I found the amendments proposed by the 2^nd Draft did not assist in salvaging Ps’ claim as against Hau, I am not prepared to characterize the amendment application as pointless or frivolous. However, I find the specific introduction of the “3 subsequent incidents” by the proposed §34A to §34D unjustified and did tend to suggest some ulterior motive on Ps’ part as the complaint over these 3 events, as I found, evidently added nothing to Ps’ claim of unlawful conspiracy.

23.  I accept Mr Kwan’s submission, which is based on applying established principles, that while I acceded to the striking out and found some aspects of Ps’ claim against Hau rather difficult to understand or even illogical or absurd (see §§52-57 of the Decision), I should not readily find established that Ps commenced this action against Hau with ulterior motive or with malice.

24.  In the round, I am not persuaded that I should exercise my discretion to order Ps to pay the whole costs of these 2 applications on indemnity basis. However, for the reasons expressed above, this Court must express its disapproval of Ps’ conducts relating to the introduction of the 2^nd and 3^rd Drafts as set out above and must recognize that some unjustified prejudice has been caused to Hau and that certain unnecessary work had to be undertaken by Hau’s legal team. I am thus persuaded that it is appropriate to order taxation on indemnity basis in respect of Hau’s costs incurred from the time Hau was served with the 2^nd Draft proposed Amended Statement of Claim to the time when the Hearing actually commenced.

25.  Thus, I vary the costs order to: Hau’s costs of this action, including his costs of his summons filed on 28 September 2022 and Ps’ summons filed on 16 December 2022 and all costs reserved, be paid by Ps to be taxed on party and party basis, save that the costs incurred by Hau from the time Hau was served with the 2^nd Draft proposed Amended Statement of Claim to the time when the Hearing actually commenced be taxed on an indemnity basis, all such costs to be taxed if not agreed.

26.  Part of the costs of this variation application has been ordered to be paid by Hau, as mentioned in §11 above. That part, it seems to me, would be a significant portion of the costs of this variation application. For the remaining part, much of Hau’s contention surrounds Ps conducts relating to the introduction of the 2^nd and 3^rd Drafts, which I accept, albeit Hau is not successful in obtaining indemnity taxation over the whole costs of these 2 applications. Considering the need to mark disapproval and though Hau is successful only in a limited way, I think it would be just and appropriate that this Court be more generous to Hau and have Ps pay Hau the remaining part of Hau’s costs of this variation application, to be set off against the part of costs Hau is to pay to Ps, to be taxed if not agreed. I so order on nisi basis.

27.  Lastly, I thank Mr Kwan and Messrs ONC Lawyers for their assistance.