CHOI CHUNG BUN VINCENT v. AUSTRALIA CHINA HOLDINGS LTD

CACV 263/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 263 OF 2011

(ON APPEAL FROM HCA NO 539 OF 2009)

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BETWEEN

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J U D G M E N T

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Hon Yuen JA (giving the Judgment of the Court):

1.  This is an appeal by the defendant from an order of McWalters J in relation to costs. The order was given on 27 April 2011. Leave to appeal was granted by Fok JA on 29 November 2011. Somewhat surprisingly the length of hearing of this appeal was estimated at 1 day, which probably accounted for the length of time between the setting down of the appeal and the hearing.

2.  The costs in question relate to a 4-day hearing before the learned judge of the defendant’s appeal from Master K Lo’s decision on 13 October 2010 to dismiss the defendant’s summons to set aside default judgment.  At the hearing, the defendant mounted a jurisdictional challenge by reason of the service of proceedings out of the jurisdiction, and also sought to argue that in any event, the default judgment should be set aside as it had a meritorious defence. 

3.  In a detailed judgment, the learned judge allowed the appeal from the master and set aside the default judgment, but ordered the defendant to bear the costs of both hearings, i.e. the hearing of the appeal as well as the hearing before the master.

4.  Before this court, counsel for the defendant (who did not appear before the judge) has conceded that the defendant should bear the costs of the application before the master.  However, he contended that since the defendant was the successful party on appeal, costs should have followed the event and it should have had the costs of that appeal.

5.  Before discussing the circumstances of this case, we note that this is an appeal from the exercise of a judge’s discretion, and more importantly a discretion in relation to costs.  Accordingly an appellate court would normally not interfere unless satisfied that the discretion had been exercised on incorrect principles of law, or under a misapprehension of material facts, or there had been errors in considering relevant or irrelevant facts, or the decision was demonstrably incorrect.

6.  At para 95 of the judgment, the learned judge said in respect of his order for costs that “the normal rule in applications of this nature is that the defendant should bear the costs of setting aside.  The defendant asks me to depart from this rule and allow the defendant to have the costs of the application”.  The learned judge then proceeded to deal with two points raised by the defendant (service out of the jurisdiction and variation of the quantum of the original judgment) which the defendant’s counsel argued took the case out of the “normal rule” that the defendant should bear the costs of the application to set aside default judgment.   

7.  It would appear that in his submissions on costs which were part of his written submissions on appeal, counsel for the defendant had referred the learned judge to the decision of this court (Le Pichon and Cheung JJA and Andrew Cheung J, as he then was) in Ko Sin Yun v Chan Chuen [2007] 1 HKLRD 324 where it was held that where a regular default judgment was set aside by reason of a meritorious defence, the general rule was that the defendant should bear the costs of the application to set aside the default judgment, with the alternative of costs in the cause of the action.  However, it should be noted that that statement was made in the context of a case where apparently there was only one set of costs in the application to set aside default judgment, the application having been made to a judge in the District Court, with no reference to any prior hearing before a master.  The defendant’s then counsel did not seek to argue that even if the defendant had to bear the costs before the master, nevertheless if it should succeed on appeal, it should have the costs of the appeal.         

8.  Counsel for the defendant now argues that where, as in the present case, there had been a prior application to the master, where the merits of the defence had been disclosed to the plaintiff, the judge should have ordered that the costs of the application before the master should be borne by the defendant, but the costs on appeal should follow the event (see eg the decision of the English Court of Appeal in Humberclyde Finance Ltd v Thompson and anor [1997] CCLR 23).  No such authorities had been referred to the learned judge.

9.  As the learned judge’s decision was not fully informed on all relevant principles, it falls to this court to exercise the discretion afresh.

10.  The approach now advanced by the defendant is that it concedes it must bear the costs of the application before the master as the default judgment was a regular one, but it should have the costs of the appeal following the usual principle that costs should follow the event. Subject to the two refinements at para 14 below, that seems to us to be the appropriate order if (but only if) the defendant succeeded on appeal without resort to new materials.     

11.  In the present case, new materials had been filed by the defendant after the hearing before the master in the form of the 5^th affirmation of Nelson Chiu filed on 24 November 2010 of the defendant.  (Just prior to the hearing before the judge, there was an application by the defendant to file a further affidavit with exhibits, which his lordship dismissed).

12.  So the question is, had there not been the 5^th affirmation of Nelson Chiu, would the defendant still have succeeded in reversing the master on appeal?  If the answer is ‘Yes’ as the materials before the master had already disclosed a meritorious defence, then the court would be justified in ordering that the successful appellant should have its costs following the event.  If the answer is ‘No’, and this affirmation was necessary to persuade the judge of the merits of the defence, then even if the judge had been apprised that he was at liberty to draw a distinction between the costs before the master and on appeal, the result would still have been the same.

13.  We have read the 5^th affirmation of Nelson Chiu.  Essentially it only produced additional pages to company reports which had been before the master.  We take the view that in substance it did not add much to the previous affirmations.  The merits of the defence had been adequately disclosed before the master. 

14.  That being the case, in the exercise of our discretion, we order that the defendant should have the costs of its successful appeal, subject to two refinements – (1) that since the defendant had been unsuccessful in its jurisdictional challenge, which took up a substantial amount of time before the judge, the defendant should only have part of the costs before the judge; and (2) that as the judge may not have been prepared to allow an appeal from the master by consent, a short hearing before the judge would probably have been necessary.  We consider a 50% apportionment to be appropriate.  Consequently we order that the defendant should have 50 % of the costs of the appeal before the judge.

15.  The learned judge’s orders in respect of the costs of the application before the master and of the defendant’s application to adduce additional materials remain undisturbed.

16.  As for the costs before this court, this appeal would probably not have been necessary if the learned judge had been apprised by the defendant of the full extent of the choices open to him.  Having heard the parties on this issue, in the exercise of our discretion, we would make an order that the defendant should have only 50% of the costs of this appeal.