DING HUIRONG v. CHINA TIMES SECURITIES LTD AND ANOTHER

CACV 112/2020
and CACV 122/2020
(Heard together)

[2021] HKCA 927

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 112 AND 122 OF 2020

(ON APPEAL FROM HCA 365/2018)

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DECISION ON COSTS

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

1.  In the judgment handed down on 26 March 2021 (“the Main Judgment”), this Court made two orders nisi for costs in these appeals that the 1^st and 2^nd Defendants shall each pay the costs of the Plaintiff in their respective appeal.

2.  The 1^st Defendant applied to vary the costs order nisi against it by a summons of 9 April 2021 in CACV 122/2020.  In the submissions lodged on its behalf, it contended that it should have the costs of the appeal as well as the costs below.  It did so primarily on the basis that it would have succeeded on Ground 1 but for the change of stance of the Plaintiff at the hearing of the appeal as recorded at [5] and [20] of the Main Judgment.  It relied principally on [17] to [19] of the Main Judgment in advancing such submission.

3.  As stated in [14] of the Main Judgment, the Defendants contended under Ground 1 that the Recorder erred in entertaining the Order 14A application when the Plaintiff disputed the relevant facts and the determination of the preliminary issue was on assumed facts contrary to the Plaintiff’s pleadings.

4.  As a fall-back position, the 1^st Defendant submitted there should be no order as to costs in the appeal and below.

5.  The 2^nd Defendant made a similar application by another summons of 9 April 2021 in CACV 112/2020.  In its submissions on costs, it also took a similar stance as the 1^st Defendant, viz it primarily sought to have the costs of its appeal and below on the basis of Ground 1; alternatively, there should be no order as to costs in the appeal and below.

6.  The applications are opposed by the Plaintiff. Mr Lam, counsel for the Plaintiff invited this Court to make the costs order nisi absolute.  Counsel disputed the proposition that Ground 1 would have succeeded but for the change of stance of the Plaintiff at the appeal.  He asked this Court to bear in mind the conduct of the parties, something to which Order 62 Rule 5(1)(e) of the Rules of the High Court Cap 4A requires the courts to pay regard in exercising discretion on costs, as well as the underlying objectives under Order 1A Rule 1 as required by Order 62 Rule 5(1)(aa).

7.  Mr Lam also referred to correspondence between solicitors showing that the Plaintiff had on 13 March 2020 offered to the Defendants to redeem the shares by paying the loan amount plus interest to the 2^nd Defendant.  In other words, the Plaintiff had not insisted on pursuing with the contention that it had not made any loan agreement with the 2^nd Defendant.

8.  It is therefore no surprise that when this Court inquired at the appeal hearing with the leading counsel for the Plaintiff on the practical difficulty occasioned by the dispute on the identity of the lender, counsel quite readily provided us with the undertaking as set out in [5] and [20] of the Main Judgment.  

9.  We agree with Mr Lam that this is relevant conduct which should be taken into account in assessing the costs of the appeals.

10.  Further, in light of the way in which the Defendants conducted themselves in these appeals, it is quite clear that they would dispute the application to the transaction of the concept of clog on the equity of redemption, no matter what was the stance adopted by the Plaintiff on the identity of the lender.  Thus, whilst they did advance Ground 1 as one of the grounds of appeal, that was not their only ground for seeking to overturn the judgment below.  They continued to pursue the appeals after the undertaking was given by the Plaintiff. 

11.  It is obvious that the main bone of contention was the issue of clog on equity of redemption which we resolved in favour of the Plaintiff in the Main Judgment.  But for the resolution of that issue, it seems clear to us that the Defendants would not accept the Plaintiff was entitled to seek redress on the basis of the equity of redemption.

12.  This is reflected in their lack of constructive response to the offers in the letters of 13 March 2020.  In this connection, we cannot accept the submission of the Defendants that the fraud allegation was a stumbling block to the acceptance of such offers.  Had that really been their concerns, they could have raised it with the Plaintiff in their replies.  As can be seen from the correspondence, they simply refused to engage with the Plaintiff on the offers for redemption. 

13.  Notwithstanding what had been said at [17] to [19] of the Main Judgment, we do not agree with the submissions of the Defendants that what had been said in those paragraphs was tantamount to a notional victory on their part regarding their Ground 1.

14.  In light of the very sensible stance taken by the Plaintiff, we did not hear further submissions from the parties on Ground 1.

15.  What we said at [17] to [19] did not pre-empt the possibility of the Plaintiff persuading this Court, as he successfully did before the Recorder, that as a matter of discretion the resolution of the clog on the equity of redemption issue is conducive to the overall resolution of the dispute between the parties even though the dispute on identity of the lender remains unresolved.  

16.  In short, this Court did not determine Ground 1 as it was not necessary for us to do so.

17.  Further, we do not agree with the Defendants that the stance of the Plaintiff was only belatedly adopted at the hearing of the appeal.  As reflected in the letters of 13 March 2020, the Plaintiff had been quite willing to proceed on the basis that the 2^nd Defendant was the lender.  As noted above, such offer from the Plaintiff was not taken up by the Defendants.

18.  In light of our analysis above that the clog on equity of redemption issue was the main bone of contention between the parties and the persistent refusal by the Defendants to acknowledge the Plaintiff’s equity of redemption, it is entirely possible that the Plaintiff might have persuaded us in any event that we should not interfere with the exercise of discretion by the Recorder to entertain the Order 14A application.

19.  Given that the Plaintiff had succeeded on the substantive issue which had been thoroughly argued before us, we cannot accept the Defendants’ submissions that they should have the costs of the appeal or that there should be no order as to costs in the appeal.

20.  Further, whilst it is true that some of costs would have been incurred on Ground 1, we do not think this is an appropriate case for deducting a percentage of costs of the Plaintiff in the appeal because:

(a)  It is not the submissions of the Defendants that there should be any apportionment of costs in respect of different issues;

(b)  As mentioned, this is not a case where we have decided against the Plaintiff on Ground 1; and

(c)  We do not find that the arguments on Ground 1 had significantly increased the costs of the appeals.  In light of all the circumstances of the case, including those we have alluded to above, we do not find it appropriate to adopt the issue-based approach in these appeals.

21.  We agree with Mr Lam that the Plaintiff should have all the costs of the appeal.  The cost orders nisi in the Main Judgment are made absolute.

22.  As regards the costs below, since we have not disturbed the Recorder’s exercise of discretion in hearing the Order 14A application and we have upheld his conclusion on the clog on equity of redemption issue, there is no basis for us to disturb his order on costs.

23.  We order the 1^st Defendant to pay the Plaintiff’s costs of the summons in CACV 122/2020, such costs are to be taxed if not agreed.

24.  We also order the 2^nd Defendant to pay the Plaintiff’s costs of the summons in CACV 112/2020, such costs are to be taxed if not agreed.