WADDINGTON LTD v. CHAN CHUN HOO THOMAS AND OTHERS

CACV 142/2015

[2019] HKCA 1452

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 142 OF 2015

(ON APPEAL FROM HCA NO 3291 OF 2003)

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J U D G M E N T

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Hon Poon CJHC:

1.  I agree with the judgment of Yuen JA.

Hon Kwan VP:

2.  I agree with the judgment of Yuen JA.

Hon Yuen JA:

3.  This is an application for leave to appeal to the Court of Final Appeal from a decision of this court on the basis of costs to be paid in an interlocutory appeal. 

4.  The history of this matter relevant to this application has been set out in this court’s Judgment of 17 February 2016. 

5.  Very briefly, Waddington had taken out a derivative action on behalf of Profit Point (“the Company”) against Thomas Chan (“TC”).  Waddington was successful.  The trial judge made an order that TC pay a sum into court, and also made various costs orders vis-a-vis Waddington, TC and the Company, including an order that the Company indemnify Waddington [1]. 

6.  Subsequently, Waddington applied to the trial judge for an interim payment of $30m from the sum in court.  The Company opposed the application, but the judge ordered interim payment of $23m subject to various undertakings from Waddington.

7.  The Company appealed that order, which appeal was dismissed by this court on 17 February 2016 with an order nisi that it pay Waddington’s costs of the appeal [2].  We gave directions that written submissions be lodged on the basis of those costs.

8.  Waddington submitted that it should be paid the costs on an indemnity basis, which was opposed by the Company.  After consideration of the written submissions from both sides, we gave Judgment on 20 April 2017 ordering that costs be paid on a party and party basis.  The reasons for this basis were set out at §§5-6:

“5. In my view, the interim payment application was clearly for the benefit of Waddington and not of the Company and I do not see that application (unlike the derivative action itself) as being similar to Beddoe applications. It has not been suggested that if the interim payment application had been unsuccessful, that Thomas Chan’s appeal against the main judgment in the derivative action would have gone undefended…

6. The allegations that the Company was still controlled by Thomas Chan after his departure from the board were not supported by evidence before us ...”.

9.  It is against this basis of costs that Waddington is seeking leave to appeal to the Court of Final Appeal.  It suggests that the appeal involves the following question of great general or public importance:

“In the context of costs incurred by a trustee/ fiduciary/agent/personal representative/minority shareholder (“T”) who acts on behalf or for the benefit of a trust/principal/estate/company (“P”), in order for the indemnity principle to apply (ie T’s costs are to be paid out of the P’s assets on an indemnity basis unless T is guilty of improper conduct) (“the Indemnity Principle”), whether:

(a)  it is sufficient that such costs as incurred by T are part and parcel and/or a necessary or reasonable step in the execution of T’s duties vis-à-vis P, even though such step, if viewed in isolation, may not be to the direct or immediate financial benefit of P; or

(b)  T’s application for interim payment in respect of T’s costs already incurred may be part and parcel and/or a necessary or reasonable step in the exercise of its duties”.

10.  In my view, it should first be noted that what we were concerned with was an interim payment application, and secondly that the application was for the benefit of Waddington and it alone.  It was not a necessary part of the performance of its duties for the Company’s benefit.  As noted in the Judgment, it had not been suggested that if the interim payment application had been unsuccessful, that TC’s appeal against the main judgment in the derivative action would have gone undefended.  Absent evidence that TC was still in control of the Company, the Company’s board was entitled to oppose the application, for an interim payment would result in the reduction of the sum in court (on which interest would accrue).

11.  Our decision on the basis of costs was made in the exercise of the court’s discretion in the circumstances above.  I do not see how it leads to a question of great general or public importance.  Accordingly the Notice of Motion is dismissed with costs which we summarily assess at $250,000.  The delay in rendering this Judgment is regretted.