CHAN CHUNG SING v. QUPITAL LTD

HCA 40/2023

[2024] HKCFI 74

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 40 OF 2023

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DECISION

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INTRODUCTION

1.  Unless otherwise stated, I shall adopt the definitions used in the Decision dated 24 November 2023 (“the Decision”).

2.  By the Decision, this Court dismissed the plaintiff’s appeal against Master Dick Ho’s decision made on 21 June 2023, pursuant to which the Statement of Claim was struck out and this action was dismissed. 

3.  In the Decision, I made an order nisi that the plaintiff shall bear the defendant’s costs of the appeal (“the Order Nisi”).

4.  By letter dated 28 November 2023, the defendant applied to vary the Order Nisi and asked, among other things, for the following order:

“Costs of and occasioned by the defendant in respect of the plaintiff’s Notice of Appeal dated 5 July 2023 (“the Appeal”) shall be paid by the Plaintiff to the Defendant.  The Defendant’s costs of the Appeal up to and including 22 September 2023 be assessed on a party and party basis and thereafter from 23 September 2023 onwards be assessed on an indemnity basis.”

5.  The sole issue herein is whether the defendant’s costs incurred since 23 September 2023 should be taxed on indemnity basis.

THE LEGAL PRINCIPLES

6.  The starting point must be that costs are in the discretion of the court. 

7.  The usual order for costs made in favour of a successful party in litigation is that the party be awarded costs on party and party basis.  The Court’s discretion is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be appropriate: Town Planning Board v Society for Protection of the Harbour Ltd (No 2) (2004) 7 HKCFAR 114, at [13], [16] & [17].

8.  The general rules as to when the court may order costs on an indemnity basis are well established.  In Overseas Trust Bank Ltd v Coopers & Lybrand (a firm) and Others [1991] 1 HKLR 177, Godfrey J (as his Lordship then was) explained that:

“[…] In order to justify a taxation on the indemnity basis, the successful party has to show, either that the case is one of a type already recognised in the practice of the court as warranting a taxation on that basis (such as, for example, the contempt cases to which I have already referred) or that there is some feature in the case even more special or unusual than one which would justify a taxation on the common fund basis. A case in which the successful party has demonstrated that the proceedings were initiated or prosecuted by the unsuccessful party in a manner which constitutes that party’s proceedings an abuse of the process of the court might well be a candidate for an award of taxation of costs on an indemnity basis. A taxation of the successful party’s costs on an indemnity basis could properly be ordered, in my opinion, where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner. Any proceedings instituted or prosecuted in such circumstances as to constitute an affront to the court could properly be the subject of a direction for taxation of the successful party’s costs on an indemnity basis.” (at 182G – 183C)

9.  In Choy Yee Chun (The representative of the estate of Chan Pui Yiu) v Bond Star Development Ltd[1997] HKLRD 1327, Stock J (as his Lordship then was), having referred to the Judgment quoted above, stated:

“It has since been held that, though there must still be shown special and unusual features, even the circumstances particularised by Godfrey J. are not to be taken as exhaustive of the conditions in which it might be appropriate to make such an award, and that the power to award taxation on an indemnity basis is not confined to cases which have been brought with an ulterior motive or for an improper purpose. (See Macmillan Inc. v. Bishopsgate Investment Trust Ltd., 10 December 1993 (unreported) cited in Sung Foo Kee Ltd. v. Pak Lik Co. [1996]3 HKC 570).

In Sung Foo Kee Ltd a litigant had been repeatedly in contempt of court orders and the trial judge had found that the defendant had deployed defences which he termed “hocus pocus” and had used the legal process to prevent the plaintiff obtaining its just payment.  The Court of Appeal said that it would have awarded costs on an indemnity basis.  It remarked (at page 575) that the circumstances in which an indemnity award might properly be made were not restricted to circumstances such as those described by Godfrey J. in Overseas Trust Bank (supra).  At p.575B - E of Sung Foo Kee Ltd. (supra), Godfrey J.A. said –

‘Here, as in England and Wales, the judge has a discretion, in a case which does fall outside the general rule, to direct the taxation of the receiving party’s costs on the basis which he considers to be appropriate to that case. This is not a discretion limited by indications in previous cases, such as, eg the observations of Godfrey J in Overseas Trust Bank Ltd v Coopers & Lybrand [1991] 1 HKLR 177 (in which he declined to order the successful party’s costs to be taxed on the indemnity basis), as to the sort of special or unusual feature (there does have to be some special or unusual feature) which could justify an award of indemnity costs. Although the examples given in the judgment of Godfrey J at 182J‑183C may be of assistance in other cases in which indemnity costs are claimed, his judgment does not purport to be and is not to be taken as determinative of the sort of case in which indemnity costs may be ordered.’

The Court of Appeal endorsed the view of the English courts that :

‘The power to order taxation on an indemnity basis is not confined to cases which have been brought with an ulterior motive or for an improper purpose. Litigants who conduct their cases in bad faith, or as a personal vendetta, or in an improper or oppressive manner, or who cause costs to be incurred irrationally or out of all proportion as to what is at stake, may also expect to be ordered to pay costs on an indemnity basis if they lose, and have part of their costs disallowed if they win.  Nor are these necessarily the only situations where the jurisdiction may be exercised; the discretion is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be ‘appropriate’.’ (see Macmillan Inc. v. Bishopsgate Investment Trust Ltd. supra)

Further at p.576 -

‘… it is a pity that various courts have attempted to define in exactly what circumstances indemnity costs may be ordered.’ (see Munkenbeck & Marshall v. McAlpine (1995) 44 Con LR 30 per Hollis J, at page 33)

The Court of Appeal in Sung Foo Kee Ltd at page 576F added :

‘… Our rules do now expressly provide for the taxation of costs on an indemnity basis and when they consider it appropriate judges should not be slow to make orders for the receiving party’s costs to be taxed on that basis.’ ”

(at 1334G – 1335G)

10.  In Cheung Wei Man Vivien and Chan Kim Thiam v Centaline Property Agency Ltd & Others (HCA 286/2000, unreported, 15 December 2006), Lam J (as Lam PJ then was) also had the following to say:

“It is also useful to remind ourselves what Simon Brown LJ said in Liam v MGN Ltd (No.2) [2002] 1 WLR 2810 at Paras.11 and 12 in considering whether the conduct of a losing party is so unreasonable so as to warrant an award of indemnity costs. In particular, at Para.12, His Lordship observed,

‘I for my part understand the court there to have been deciding no more than that conduct, albeit falling short of misconduct deserving of moral condemnation, can be so unreasonable as to justify an order for indemnity costs.  With that I respectfully agree.  To my mind, however, such conduct would need to be unreasonable to a high degree; unreasonable in this context certainly does not mean merely wrong or misguided in hindsight.’ ”

DISCUSSION

11.  The sole ground of the defendant’s application herein is that it is an abuse of the process of the Court for the plaintiff to proceed with the appeal despite the fact that he has made a relief from sanction application in the 2017 Action on 23 September 2023. 

12.  For this purpose, it may be worthwhile to highlight the following history of the present case which has been set out in the Decision as follows:

“6.  This in fact is not the first action that the plaintiff commenced for the resolution of his disputes with Andy, David and Qupital Limited, as the plaintiff had started HCA 1582/2017 (“the 2017 Action”) on the basis of the same dispute in 2017. As Mr Fong himself described, in the 2017 Action, the plaintiff ‘claimed against Andy and David essentially on the same factual matrix’.

7.  It should be pointed out that, when the 2017 Action was commenced, the plaintiff only sued Andy and David as defendants.

8.  Unfortunately, there had been various defaults/breaches of court orders on the part of the plaintiff in the 2017 Action, and as a result, the learned Registrar made an unless order against the plaintiff therein as follows on 11 December 2020 (“the Unless Order”).

‘Unless the Plaintiff do take out applications for amendment, joinder of parties and discovery […] on or before 4:30pm 8 January 2021, the Plaintiff’s action against the Defendants be dismissed without further order with costs of the action to the Defendants, to be taxed if not agreed.’

9.  On 8 January 2021, the plaintiff took out a summons (“the 2021 Summons”) […]

10.  However, since the plaintiff did not make any application for discovery (whether by virtue of the 2021 Summons or otherwise), the 2017 Action was dismissed automatically on 8 January 2021 pursuant to the Unless Order.

[…]

12.  On 11 January 2023 (that is, two years after the dismissal of the 2017 Action), the plaintiff commenced the present action against Qupital Limited.

13.  On 8 March 2023, Qupital Limited applied herein to strike out the plaintiff’s claim, which led to the Master’s Decision on 21 June 2023.

14.  The plaintiff then filed a Notice of Appeal to Judge in Chambers on 5 July 2023.

15.  On 23 September 2023, the plaintiff filed a summons in the 2017 Action and asked for relief from sanctions out of time (“the Relief from Sanctions Summons”). The said summons has now been fixed to be heard on 28 November 2023.”

13.  Having taken into the above history into account, this Court held in the Decision that the plaintiff’s appeal in itself was an abuse of the process of the Court.  This was explained as follows in the Decision:

“32. It has been expressly stipulated in Order 2 rule 5(1)(f) of the Rules of the High Court (Cap.4A, Laws of Hong Kong) that, when deciding the question of relief from sanctions, the court is obliged to consider all the circumstances including whether the failure to comply with the Unless Order was caused by the party in default or his legal representative. In other words, the difficulty encountered by the plaintiff in relying on the fault of his solicitor as discussed above would not exist in the application for relief from sanctions in the 2017 Action.

33. As admitted by the plaintiff’s counsel, all the arguments which the plaintiff have relied on herein can be relied on in support of his Relief from Sanctions Summons.

34. In such circumstances, I do not understand why the plaintiff should be allowed to proceed with the appeal herein. In my view, in the circumstances where the plaintiff has made an application in the 2017 Action for relief from sanctions, it is an abuse of process of the court for the plaintiff to proceed with this appeal. There is no reason why the plaintiff should be entitled to have 2 chances to make the same arguments.

35.  I therefore take the view that the plaintiff’s appeal should be dismissed also on this ground.”

14.  The plaintiff submitted that despite the Court’s finding that there was an abuse of the process of the Court (even though the plaintiff now recognises that he should not have proceeded with the appeal[1]), he should not be visited with an indemnity costs order because:

(1)  As the plaintiff had been acting in person, he was not advised on the application for relief from sanction until the hearing before the learned Registrar on 31 August 2023;

(2)  It was not the plaintiff’s intention “to deploy tactical gamesmanship in having two chances to make the same arguments when taking out the Relief Summons”[2]. He was only trying “to put the house in order by taking the correct procedure i.e. Relief Summons”[3];

(3)  There was no culpable/abusive conduct on the part of the plaintiff in proceeding with the appeal after the Relief from Sanctions Summons has been taken out;

(4)  This case has no “special or unusual feature”.

15.  The plaintiff’s submissions are rejected:

(1)  Since the defendant is now only seeking indemnity costs in respect of the period after the Relief from Sanctions Summons has been taken out, it does not matter as to whether the plaintiff should have taken out such a summons earlier.  In other words, while there had been delay on the part of the plaintiff to take out the Relief from Sanctions Summons, that is not the basis upon which this application is made.  The focus of the defendant is that the plaintiff had elected to proceed with the appeal despite his application for relief from sanction in the 2017 Action;

(2)  The plaintiff’s assertion that he was only trying “to put his house in order” by making the relief from sanction application has failed to explain why he did not withdraw the appeal upon the taking out of the Relief from Sanctions Summons.  In the circumstances where even his counsel unequivocally accepted that all the arguments which the plaintiff have relied on in the appeal can be made in support of his Relief from Sanctions Summons, it is plainly the plaintiff’s intention to have two chances to make the same arguments.  This must be an abuse of the process of the Court as well as a “special or unusual feature” which the Court must not condone;

(3)  I also take the view that the plaintiff’s conduct must be unreasonable to a high degree, and not merely wrong or misguided in hindsight.  While some emphasis had been laid on the fact that the plaintiff was acting in person at the time when the appeal against the learned Master’s decision was lodged, it must be borne in mind that the plaintiff had subsequently briefed counsel to appear for him in the appeal before this Court, and that despite his counsel’s clear knowledge of the fact that the Relief from Sanction Summons had been taken out in the 2017 Action[4], it was apparently a deliberate decision on the part of the plaintiff to proceed with the appeal nonetheless.

DISPOSITION

16.  For reasons of the aforesaid, the Order Nisi is hereby varied.  I make the following orders:

(1)  The defendant’s costs of the plaintiff’s Notice of Appeal filed on 5 July 2023 (“the Appeal”) shall be paid by the plaintiff. Such costs up to and including 22 September 2023 shall be assessed on party and party basis, whereas the defendant’s costs from 23 September 2023 onwards shall be assessed on indemnity basis.

(2)  The defendant’s costs of the appeal shall be summarily assessed on paper. 

(3)  For the above purpose:

(a)  the defendant shall lodge and serve Statement of Costs within 7 calendar days hereof;

(b)  the plaintiff shall lodge and serve Statement of Objections within 7 calendar days thereafter;

(c)  Summary assessment of costs will then be conducted on paper (no matter whether the Statement of Objections is lodged within time) thereafter;

(d)  The costs assessed shall be payable within 14 days after assessment.

COSTS OF THIS APPLICATION

17.  Costs of this application should follow the event.

18.  The defendant only asks for its costs of the present application to be summarily assessed on party and party basis.  I hereby order accordingly.

19.  For the above purpose:

(a)  the defendant shall lodge and serve Statement of Costs within 7 calendar days hereof;

(b)  the plaintiff shall lodge and serve Statement of Objections within 7 calendar days thereafter;

(c)  Summary assessment of costs will then be conducted on paper (no matter whether the Statement of Objections is lodged within time) thereafter;

(d)  The costs assessed shall be payable within 14 days after assessment.