LO KAI SHUI v. HSBC INTERNATIONAL TRUSTEE LTD AND OTHERS

CACV 329/2021, CACV 181/2022, CACV 180 & 181/2023,

CAMP 137/2022, [2023] HKCA 1328

On appeal from [2021] HKCFI 1539

(Heard together)

CACV 329/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 329 OF 2021

(ON APPEAL FROM HCA NO 404 OF 2018)

________________________

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AND

CACV 181/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 181 OF 2022

(ON APPEAL FROM HCA NO 404 OF 2018)

________________________

________________________

AND

CACV 180 & 181/2023

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NOS 180 AND 181 OF 2023

(ON APPEAL FROM HCA NO 404 OF 2018)

________________________

________________________

AND

CAMP 137/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 137 OF 2022

(ON AN INTENDED APPEAL FROM HCA NO 404 OF 2018)

________________________

________________________

(Heard together)

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DECISION ON COSTS

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Hon Kwan VP (giving the Decision on Costs of the Court):

1.  In this decision on costs, we adopt the terms and expressions in our judgment handed down on 18 August 2023 in these appeals (“Judgment”). In the Judgment, we have ordered as follows:

CACV 329/2021

2.  We allowed the appeal and set aside the judge’s orders for striking out the specified parts of the statement of claim and his costs order nisi awarding costs of the striking out applications to the Trustee and KS as varied by his order made on 19 April 2022. We further ordered that Lu’s Action be referred to the Listing Judge for assignment to another trial judge. For the costs below and of the appeal, we made an order nisi that the Trustee and KS should pay Lu’s costs, with a certificate for two counsel both here and below.

CACV 181/2022 and CACV 180/2023

3.  We allowed the appeals and granted the amendments which have been disallowed by the judge save for these words in footnote 1 to §34 of the draft amended statement of claim which read: “shareholders whose proxies have been provided from time to time to KS to vote (without any directions/instructions as to how the votes should be cast)”. We made these orders nisi on costs. We set aside the judge’s costs order and ordered instead the costs of and occasioned by the amendment shall be to the defendants in any event and the costs of the hearing below shall be paid by the Trustee and KS to Lu. We ordered the costs of these two appeals be paid by the Trustee and KS to Lu. For the costs awarded to Lu both on appeal and below, we allowed him 85% of his costs both here and below, with a certificate for two counsel.

CACV 181/2023[1]

4.  We dismissed this appeal and made an order nisi of no order as to costs. This was stated in §145 of the Judgment which reads as follows:

“As for CACV 181/2023 which relates to Lu’s application under Order 15 rule 14, as this appeal was not pursued at the hearing, I would simply dismiss this appeal with an order nisi of no order as to costs.”

5.  On 4 September 2023, Lu issued a summons for variation in each of the four appeals and in CAMP 137/2022 for variation of the costs orders nisi. The variation he seeks is only in respect of the costs order nisi in §145 of the Judgment. The order for variation sought in each of the summonses, which is in identical terms, reads as follows:

“The costs order nisi made by the Court of Appeal in paragraph 145 of the Judgment herein delivered on 18 August 2023 that there be no order as to costs of the CACV 181/2023 appeal be varied to an order that there be no order as to the costs of the CACV 181/2023 appeal and below.”

The arguments

6.  It was submitted on behalf of Lu that the costs order nisi in §145 of the Judgment only dealt with the costs of the appeal but not the costs below. Lu does not challenge that part of the order there should be no order as to the costs of CACV 181/2023 but contended that there should also be no order as to the costs of Lu’s application under Order 15 rule 14 in the court below.

7.  The costs order made below was initially a costs order nisi that the costs of and occasioned by the Order 15 rule 14 application be borne by Lu, such costs to be taxed if not agreed, with certificate for two counsel to the Trustee and KS, and to be paid forthwith. On the application of four of the five defendants, the judge varied the costs order nisi and made an order on 19 April 2022 that the costs of and occasioned by the Order 15 rule 14 application be borne by Lu on an indemnity basis, to be taxed if not agreed, with certificate for two counsel. The judge took the view that the Order 15 rule 14 application, while ostensibly separate and distinct from the striking out applications of the Trustee and KS (which were successful before the judge, but overturned on appeal), was “clearly incidental to the Striking Out Applications and the claims which have now been struck out” and was taken out by Lu “in an attempt to circumvent the common law doctrines of res judicata and abuse of process which formed the basis of [the Trustee’s] application to strike out the Overlapping Claims”[2] and hence costs should be taxed on an indemnity basis. The judge found there was justification to award indemnity costs against Lu in respect of the striking out applications and the Order 15 rule 14 application as there was clear abuse of process and his opposition to the striking out applications was “wholly without merit”; he had caused the Trustee and KS substantial prejudice and wasted the court’s time and resources[3].

8.  Mr Ho, SC pointed out on behalf of Lu that leave was given by this court at the rolled-up hearing on 14 June 2023 to pursue his appeal against the dismissal of his Order 15 rule 14 application. He maintained there are good grounds to argue that Lu was entitled to an order under that provision that the judgment in Madam Lo’s Actions was not binding on him, and the judge was wrong in holding that such an order was academic or irrelevant. Lu did not pursue this appeal on 14 June 2023 in light of the indication of this court that it wished to focus on three issues in Lu’s appeal against the striking out orders. In order not to trouble this court with an appeal that might not be necessary if he was to succeed on the issues this court wished to focus on, and that the proceedings should be conducted in a focused and efficient manner, the decision was made by Lu’s legal team not to pursue CACV 181/2023.

9.  Mr Ho argued that had the judge adopted the correct approach to the issues of privity and abuse of process/collateral attack, it would likewise not be necessary for Lu to pursue his application under Order 15 rule 14, and the same costs order (ie no order as to costs) should apply to the costs below. Given that the holdings of the judge regarding the striking out applications have been overturned, and this court is not going to receive full argument on the issues raised by the Order 15 rule 14 application, Mr Ho submitted that a just and fair order would be to vary the costs order below to no order as to costs regarding the Order 15 rule 14 application.

10.  The Trustee opposed the application. Mr Fung, SC advanced these arguments.

11.  First, by not pursuing CACV 181/2023 and by making the present application to vary the costs order below, Lu is effectively seeking to appeal against the judge’s costs order in the Order 15 rule 14 application. CACV 181/2023 was dismissed as it was not pursued, hence the costs made below would not be re-opened automatically. There is no appeal against the costs order and this court should not disturb it. Lu has not sought leave to bring a costs-only appeal, as required by section 14(3)(e) of the High Court Ordinance, Cap 4 and Order 59 rule 2B of the Rules of the High Court. Moreover, in the judgment of the Court of Appeal in CAMP 137/2022 on 15 September 2022[4], whilst the court directed that a rolled-up hearing be held regarding the application for leave to appeal against the dismissal of the Order 15 rule 14 application, the court refused leave to appeal against the indemnity costs order made by the judge on 19 April 2022, finding no ground to interfere with the judge’s exercise of discretion in that the judge took the view that the Order 15 rule 14 application was bound up with, and raised in opposition to, the striking out applications and this was a rational basis open to the judge to order costs on the same basis as the striking out applications. This was a final decision on the merits which gives rise to a res judicata estoppel.

12.  Second, the argument that there should be no order as to costs is in any event without merit. The Order 15 rule 14 application was dismissed by the judge and the appeal against the dismissal was not pursued and was dismissed. Costs of this application should naturally be borne by Lu. There is nothing in the contention that the costs order below should mirror the costs order on appeal. As Lu had pursued the application below but abandoned his appeal against the dismissal of the application, there is clear basis for differentiating the costs orders at the two stages. Insofar as it is sought to argue that the Order 15 rule 14 application was somehow caused by the judge, this is without merit. Lu’s decisions to pursue the application at first instance and to abandon his appeal were entirely his own. If Lu maintains that the judge erred in dismissing his application, he ought to have maintained his appeal (with the likelihood of an adverse costs order). He cannot abandon his appeal and be heard to say at the same time that the judge had erred. The judge’s reasons for dismissing that application have not been directly contradicted by the Judgment.

13.  Mr Ho served submissions in reply which will be considered in the latter part of this decision.

14.  KS and the 4^th defendant lodged brief submissions by their solicitors[5]. They made the point that they had adopted a neutral stance below with regard to the substance of the Order 15 rule 14 application, as it was prima facie a matter between Lu, the Trustee and the 5^th defendant. Given their neutral position and the minimal costs incurred by them in relation to it, they would not make further submissions and would abide by any order which this court may make.

Discussion

15.  We do not agree with Mr Fung that in applying for variation of the costs order nisi in §145 of the Judgment, Lu is effectively bringing a costs-only appeal for which leave is required. In the notice of appeal of Lu in CACV 181/2023 filed on 14 June 2023 pursuant to leave granted by this court the same day, it was stated that the appeal is against the order dismissing the Order 15 rule 14 application made on 1 June 2021 and the costs order of the judge in that application, being a costs order nisi as varied on 19 April 2022. In the notice of appeal, he sought to set aside both orders and sought costs against the Trustee, KS and the 5^th defendant on appeal and below. We agree with Mr Ho that even if Lu’s appeal in relation to the Order 15 rule 14 application was dismissed as stated, that does not render it now a costs-only appeal for these reasons:

(1) The order made in §145 of the Judgment only disposed of the appeal in relation to the Order 15 rule 14 application and the costs of that appeal. It has not dealt with the costs below, a matter specifically raised in the notice of appeal.

(2) Order 62 rule 4(2) of the Rules of the High Court provides as follows: “In the case of an appeal the costs of the proceedings giving rise to the appeal, as well as the costs of the appeal and of the proceedings connected with it, may be dealt with by the Court hearing the appeal; …”. The Court of Appeal is empowered to make an appropriate order in relation to the costs below.

(3) Section 14(3)(e) of the High Court Ordinance and Order 59 rule 2B would have no application here. The costs order below is part and parcel of an order for which leave to appeal is given. It is part of a larger appeal based on genuine grounds of substance. Even if all those other grounds fail, the appeal as to costs stands and is within the jurisdiction of the court to consider it (Wheeler v Somerfield [1966] 2 QB 94 at 106B to E; Yu Kit Chiu & Anr v Chan Shek Woo, CACV 129/2006 & CACV 159/2006, 20 December 2006, §§23 to 24).

(4) The decision of the Court of Appeal in CAMP 137/2022 on 15 September 2022 refusing to grant leave to appeal in respect of the indemnity costs order made on 19 April 2022 was on the premise of this being a costs-only appeal, which is not the situation as it transpired, in that leave to appeal was granted on 14 June 2023 against the substantive order and no leave to appeal was required for the costs order separately.

16.  As to the merits of the application to vary the costs order below, the reasons for awarding costs against Lu and on an indemnity basis cannot stand in light of the Judgment allowing his appeal against the orders for striking out. The costs order in the Order 15 rule 14 application should be set aside just as the costs order in the striking out applications was set aside. Lu’s decision not to pursue the appeal against the Order 15 rule 14 application was made in the spirit of assisting this court so that the other appeals of a more substantive nature could be conducted in a focused and efficient manner, without any admission of lack of merits on his part. Given that there is not now going to be full argument on the merits of that application, we agree with Mr Ho it is just and fair to vary the costs order below to no order as to costs.

Costs of this application to vary the order nisi

17.  In each of his summonses, Lu seeks costs of this application against the Trustee and KS. As the successful party, he should have the costs of this application, but only against the Trustee, not against KS who adopted a neutral stance by and large in the Order 15 rule 14 application and has not made any substantive argument in opposition.

18.  We have considered the statement of costs for summary assessment lodged by Lu’s solicitors in each of the five proceedings, which is identical and each gives the total sum of $406,646. We wish to make clear he is entitled to only one set of costs against the Trustee in these proceedings. We assess the amount of his reasonable costs at $197,340 (of which $154,000 is counsel’s fees), and round this up to $200,000.