SUN YAN v. SUPERB JADE LTD AND OTHERS

HCA 813/2014

[2023] HKCFI 2650

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 813 OF 2014

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BETWEEN

(by Original Action)

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AND BETWEEN

(by Counterclaim)

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REASONS FOR DECISION ON COSTS

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1.  These are two applications to vary the costs order nisi I made in the Judgment handed down on 30 May 2023 (“the Judgment”).

2.  For the purpose of this Reasons for Decision on Costs, I would adopt the same abbreviations that were used in the Judgment.

3.  In the Judgment, I made the following costs order nisi (“the Nisi Order”): (i) the costs of the Original Claim be to the Plaintiff (Sun) and the costs of the Counterclaim be to the Defendants in the Counterclaim (Sun, SWS and Shum) to be taxed if not agreed; (ii) there be certificate for 2 counsel for the Plaintiff in the Original Claim (Sun) and the 1^st Defendant in the Counterclaim (Sun).

4.  Sun applies to vary the Nisi Order to the effect that Super Jade should not be ordered to bear the costs of the Original Claim and the Counterclaim since Super Jade is beneficially owned by Sun as found by the court. On the other hand, SWS applies for its costs of the Counterclaim to be paid by Super Jade and Lin jointly and severally on an indemnity basis to be taxed if not agreed with certificate for 2 counsel. I refer these two applications as “the Sun’s Application” and “the SWS’s Application” respectively.

5.  By letter dated 28 June 2023, W K To & Co (“WKT”) indicated on behalf of Lin and Brother Zhao that:

(i) Lin and Brother Zhao would take a neutral stance on the issue of whether Super Jade should pay SWS’s costs of the Counterclaim;

(ii) Lin would have no objection to SWS’s request that Lin should pay SWS’s costs of the Counterclaim on an indemnity basis with certificate for 2 counsel;

(iii) as to the costs of the SWS’s Application, Lin would request that there be no order as to costs as between Lin and SWS.

6.  With the permission of the court, WKT, Yung, Yu, Yuen & Co (solicitors for Tang) and Nixon Peabody CWL (solicitors for Shum) were excused from attending the hearing.

7.  After hearing the submissions from Sun and SWS, I varied the Nisi Order in the following manner:

(i) the costs of the Original Claim be paid by the 2^nd to 4^th Defendants (Lin, Tang and Brother Zhao) to the Plaintiff (Sun);

(ii) the costs of the 2^nd Defendant in the Counterclaim (SWS) be paid by the Plaintiffs in the Counterclaim (Super Jade and Lin) to be taxed on an indemnity basis;

(iii) the costs of the 1^st and 3^rd Defendants in the Counterclaim (Sun and Shum) be paid by the 2^nd Plaintiff in the Counterclaim (Lin) to be taxed on a party-and-party basis;

(iv) there be certificate for 2 counsel for the Plaintiff in the Original Claim (Sun) and the 1^st Defendant (Sun) and the 2^nd Defendant (SWS) in the Counterclaim; and

(v) costs of the Sun’s Application and the SWS’s Application be paid by the 1^st Defendant in the Counterclaim (Sun) to the 2^nd Defendant in the Counterclaim (SWS).

8.  I now give my reasons for such decision.

9.  The background of this case and the reasons for ruling the case in favour of Sun, SWS and Shum have been fully set out in the Judgment and I do not want to repeat the same here.

10.  I first deal with the Sun’s Application. So far as the Original Claim is concerned, it was actually Sun on the one camp and Lin and Brother Zhao on the other who were fighting over the ownership of Super Jade. As Super Jade is the subject matter of the dispute, it was proper for Sun to join Super Jade as a party to the proceedings. However, as the court eventually found that Sun is the beneficial owner of Super Jade, there is no reason why Super Jade should be ordered to pay for the costs of Sun in respect of the Original Claim. Hence, I vary the Nisi Order to the effect that only the other Defendants, i.e. Lin, Tang and Brother Zhao, would have to pay for Sun’s costs in respect of the Original Claim.

11.  Both the Sun’s Application and the SWS’s Application touch on the costs of the Counterclaim. I first deal with the question as to whether Super Jade should be ordered to pay for the costs of the Defendants in the Counterclaim, i.e. Sun, SWS and Shum.

12.  In my judgment, as between Super Jade and SWS, the former should be ordered to pay for the costs of the latter. Insofar as SWS is concerned, it was only dealing with Super Jade in respect of the opening and operation of the SWS Account. For that, Sun had authorised Lin to open and operate the SWS Account in the name of Super Jade. Under such circumstances, there is no reason why Super Jade should not be asked to pay for the SWS’s costs in respect of the Counterclaim.

13.  In fact, under Clause 5 of the Application Form submitted by Super Jade to SWS in applying to open the SWS Account, Super Jade had agreed to be bound by the Terms and Conditions relating to the sale and purchase of securities (Cash Account) (“the Terms and Conditions”). Under Clause 16.4 of the Terms and Conditions, Super Jade undertook to indemnify SWS in respect of any damages, costs and expenses (including but not limited to legal expenses on a full indemnity basis) reasonably and properly incurred by SWS in the enforcement of any of the provisions of the Terms of Business. Further, by Clause 16.6 of the Terms and Condition, Super Jade further agreed to indemnify SWS fully and completely against all costs, claims, liabilities and expenses arising out of or in connection with the performance or exercise of their duties or discretion under the Terms of Business or arising out of or in connection with any breach by Super Jade of the obligations of Super Jade to SWS or if any representation or warranty made by Super Jade becomes untrue or inaccurate.

14.  It is quite clear that the Counterclaim arose because of the misrepresentation that Lin was the beneficial owner of the SWS Account. As Sun had authorised Lin to make such untrue representation on behalf of Super Jade, Super Jade should be asked to honour its obligations under the said clauses to indemnify SWS of the costs associated with the Counterclaim. That should be the case even if the court eventually found that Super Jade is beneficially owned by Sun. In a way, Sun himself has to bear great responsibility for causing the dispute in the Counterclaim to arise.

15.  As specified in the said clauses, SWS’s costs should be paid on an indemnity basis. Adopting such basis, it cannot be regarded as unreasonable for SWS to have engaged 2 counsel to defend the Counterclaim. I therefore allow SWS to obtain certificate for 2 counsel.

16.  The agreement for full indemnification should only apply to the contractual arrangement for the opening and the operation of the SWS Account as between Super Jade and SWS, and hence the costs of Sun and Shum in respect of the Counterclaim should only be paid on a party-and-party basis. There is no issue that only Lin (and not Super Jade) would have to pay for the costs of Sun and Shum in respect of the Counterclaim.

17.  As between Sun and SWS, Sun should be regarded as the loser for both the Sun’s Application and the SWS’s Application. The end result is that Super Jade has to pay the costs of SWS in respect of the Counterclaim on an indemnity basis. As Sun is the only party opposing the making of such order, he should pay for the costs of SWS for both applications. I therefore so ordered.