WADDINGTON LTD v. CHAN CHUN HOO THOMAS AND OTHERS

HCA 3291/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3291 OF 2003

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D E C I S I O N

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INTRODUCTION

1.  I have before me the following two summonses:-

(1)   the plaintiff’s summons dated 23 February 2017 (“the 1^st Leave Summons”) seeking leave to appeal against the orders that I made in my decision dated 9 February 2017 (“the Decision”) on the grounds as set out in a draft notice of appeal attached to the summons (“the 1^st Draft Notice of Appeal”); and

(2)   the plaintiff’s summons dated 13 April 2017 (“the 2^nd Leave Summons”) seeking leave to appeal against paragraph 5 of my order dated 5 April 2017 (“the Costs Order”) on the grounds as set out in a draft notice of appeal attached to the summons (“the 2^nd Draft Notice of Appeal”).

TEST FOR GRANTING LEAVE TO APPEAL

2.  The test for granting leave to appeal is well settled.  Leave to appeal shall not be granted unless the court hearing the application for leave is satisfied that (a) the appeal has a reasonable prospect of success; or (b) there is some other reason in the interests of justice why the appeal shall be heard.  Further, as explained by the Court of Appeal in SMSE v KL [2009] 4 HKLRD 127, at paragraph 17 per Le Pichon JA (with whom the other member of the Court of Appeal agreed), a “reasonable” prospect of success for this purpose means a prospect which is more than “fanciful” but without having to be “probable”.

THE 1^ST LEAVE SUMMONS

3.  The background facts are well known to the parties.  I do not propose to set them out again in this decision.

4.  By a summons dated 30 November 2016 (“the Further Interim Payment/Indemnity Summons”), the plaintiff sought the following relief against the 5^th defendant:-

(1)   a further interim payment in the sum of HK$10,200,379.28 in respect of the costs of the action pursuant to the indemnity granted by Mr Recorder P Fung SC on 10 March 2014;

(2)   payment of the sum of HK$4,580,722.09 in respect of the costs incurred by the plaintiff in relation to CACV 10/2014 pursuant to the indemnity (“the Appeal Indemnity”) granted by Mr Recorder P Fung SC on 26 November 2014; and

(3)   an order for (i) an indemnity (“the Leave Indemnity”) in respect of the plaintiff’s costs in relation to the 1^st defendant’s applications to the Court of Appeal and the Court of Final Appeal for leave to appeal against the judgment of the Court of Appeal dated 20 May 2016 (“the CA Judgment”), and (ii) an interim payment in the sum of HK$16,800.00 pursuant to such indemnity.

5.  In the Decision:-

(1)   I dismissed the plaintiff’s application mentioned in (1) above (see paragraph 13).

(2)   I dismissed the plaintiff’s application mentioned in (2) above, as well as the plaintiff’s application, made orally at the hearing on 7 February 2017, to amend the Further Interim Payment/Indemnity Summons such that the plaintiff’s application should be treated as one for interim payment in respect of the costs incurred by the plaintiff in relation to CACV 10/2014 instead of payment of those costs pursuant to the Appeal Indemnity (see paragraphs 17 and 22).

(3)   In respect (3) above, I dismissed the plaintiff’s application insofar as it relates to the costs incurred in relation to the 1^st defendant’s application to the Court of Appeal, but ordered the 5^th defendant to indemnify the plaintiff in respect of any costs reasonably incurred by it in relation to the 1^st defendant’s application to the Court of Final Appeal which the plaintiff will not be able to recover from the 1^st defendant, subject to a cap of HK$150,000.

6.  The 1^st Draft Notice of Appeal contains 4 proposed grounds of appeal.  For the reasons appearing below, I am not satisfied that any of the 4 proposed grounds of appeal has a reasonable prospect of success, or there is any other reason in the interests of justice why the appeal shall be heard.

The 1^st ground

7.  The 1^st ground relates to the plaintiff’s claim for further interim payment in respect of costs incurred in the action.  Ms Audrey Eu SC argues that I should at least have ordered further interim payment to the extent of HK$1,074,000, this figure being based on what it is alleged was “put forward and accepted” by the 5^th defendant as the “proposed costs”.

8.  The amount of the further interim payment now sought by the plaintiff is materially different from, and smaller than, the amount originally sought under the Further Interim Payment/Indemnity Summons, namely, HK$10,200,379.28.  That figure was arrived at after deducting the interim payment granted by the Recorder (HK$23,000,000) in November 2014 from the total costs which the plaintiff has allegedly incurred in this action (HK$33,200,379.28).  For the reasons given in paragraphs 6 to 12 of the Decision, I declined to grant any further interim payment to the plaintiff.

9.  The plaintiff now argues that the 5^th defendant, through Mr Edward Chan SC’s skeleton argument dated 3 February 2017, accepted that the plaintiff had incurred some further costs over and above the amount of HK$30,913,708.39 which were considered by the Recorder when the first application for interim payment was considered by him in November 2014, and the figure of HK$1,074,000 was “put forward and accepted” by the 5^th defendant as the “proposed costs”.  However, as explained by Mr Edward Chan SC and as can be seen from the 5^th defendant’s skeleton argument dated 3 February 2017, the figure of HK$1,074,000 was based on some “preliminary objection” prepared by the 5^th defendant’s law costs draftsman.  They included costs that (it was argued) “D5 should not be responsible, i.e. costs incurred in relation to taxation proceedings between P and the non-parties, namely Ms Chiang (Deacons), HSBC (JSM) and other non-parties (Cheung Tong & Rosa)” (see paragraph 3.9(2) of the skeleton argument dated 3 February 2017), and the figure of HK$1,074,000 was put forward “without prejudice to the 5^th Defendant’s right to make further objections and lower suggestions upon a full taxation” (see page 1 of Table 1 attached to the skeleton argument dated 3 February 2017).

10.  I do not accept the premise of the plaintiff’s argument that the 5^th defendant put forward and accepted that the plaintiff should at least be entitled to interim payment to the extent of HK$1,074,000.

11.  In paragraph 1(c) of the 1^st Draft Notice of Appeal, the plaintiff complains that “[t]he Judge provided no or no sufficient reason for declining to order an interim payment even to such limited extent [ie, HK$1,074,000]”.  There was no reason given because the plaintiff did not argue that the court should grant interim payment to the extent of HK$1,074,000 only at the hearing on 7 February 2017.  I would add that the raising of a new point in a proposed appeal, as the plaintiff now seeks to do, often causes unfairness to the proposed respondent and adds to the costs of the proceedings.  If there is a good point to be made, it should generally be made at the original hearing and not be reserved for deployment in the appeal court.

The 2^nd ground

12.  The 2^nd ground relates to the plaintiff’s claim for payment under the Appeal Indemnity.

13.  Paragraph 2(a) of the 1^st Draft Notice of Appeal contends that I ought to have granted leave to the plaintiff to amend the Further Interim Payment/Indemnity Summons such that the plaintiff’s application should be treated as one for interim payment in respect of the costs incurred by it in relation to CACV 10/2014 instead of payment of those costs pursuant to the Appeal Indemnity.  The application to amend was expressly considered and rejected by me in paragraphs 16 to 22 of the Decision which I do not propose to repeat here.

14.  Paragraph 2(b) of the 1^st Draft Notice of Appeal alleges that the sum put forward and accepted by the 5^th defendant for the purpose of this application was slightly over HK$2 million and, given this acceptance/admission, there was no reason for the court not to, inter alia, grant “an interim payment at least to the extent of that sum”.  Again, as explained by Mr Edward Chan SC and as can be seen from the 5^th defendant’s skeleton argument dated 3 February 2017, the figure of slightly over HK$2 million mentioned in Table 2 thereof only represented the “preliminary opinion of D5’s law costs draftsman” and the 5^th defendant’s objections as stated in that table were made “without prejudice to the 5^th defendant’s right to make further objections and lower suggestions upon a full taxation”.

15.  Paragraph 2(c) and (d) of the 1^st Draft Notice of Appeal contends that I ought to have granted interim payment to the extent of HK$2,300,000, being two-thirds of 75% of the total costs allegedly incurred by the plaintiff in CACV 10/2014 (ie HK$4,580,722.09 x 75% x 2/3).  As I understand it:-

(1)   the “75%” comes from the fact that in paragraph 192 of the CA Judgment dismissing the 1^st defendant’s appeal and allowing the plaintiff’s cross-appeal in relation to the issue of pre-judgment interest rate but dismissing rest of the plaintiff’s cross-appeals, the Court of Appeal made a global costs order that the 1^st defendant should pay the plaintiff 75% of its costs of the appeal and cross-appeals; and

(2)   the “two-thirds” reduction comes from what is said to be a “general rule” referred to by Barma J (as he then was) in Re Lehman Brothers Securities Asia Ltd (No 1) [2010] 1 HKLRD 43 at paragraphs 26 and 27 of his judgment.

16.  In my view, the fact that the Court of Appeal made a global costs order that the 1^st defendant should pay the plaintiff 75% of its costs of the appeal and cross-appeals cannot be taken to mean that 75% of the total costs allegedly incurred by the plaintiff in CACV 10/2014 are, or should be treated as being, attributable to the 1^st defendant’s appeal and 25% to the plaintiff’s cross-appeals.  In this regard, it is relevant to note that, for the reason given in paragraph 18 of the Decision, I consider that the Appeal Indemnity does not cover the plaintiff’s costs in relation to its cross-appeals.  This finding is not challenged by the plaintiff in the 1^st Draft Notice of Appeal.

17.  In so far as the so called “general rule” is concerned, as I read Barma J’s judgment Re Lehman Brothers Securities Asia Ltd (No 1), two-thirds of the amount sought is considered to be the appropriate starting point for the amount of the interim payment if the court decides that interim payment ought to be granted.  In other words, the “general rule” relates to the question of the “quantum” of the interim payment to be granted, but not the anterior question of whether an order for interim payment should be made.  Moreover, Re Lehman Brothers Securities Asia Ltd (No 1) related to a claim by provisional liquidators, being a well-known accountancy firm, for interim payment whom it was said had a proven track record showing that their claims could be relied upon as being generally reasonable.  At paragraph 31 of the judgment, Barma J said that “the general level of recovery in other cases provides a certain level of comfort” (see paragraph 31).  The same cannot be said of claim(s) previously made by the plaintiff.

18.  Lastly, I repeat my observation above regarding the raising of a new point by the plaintiff in the proposed appeal.  At the hearing on 7 February 2017, the plaintiff argued that it was entitled to interim payment of the sum of HK$4,580,722.09 in respect of the costs incurred in relation to CACV 10/2014.  It was not suggested by the plaintiff that the court should make an order for interim payment limited to two-thirds of 75% of that sum.

The 3^rd ground

19.  The 3^rd ground relates to the plaintiff’s claim for (i) the Leave Indemnity, and (ii) an interim payment in the sum of HK$16,800.00 pursuant to such indemnity.

20.  In so far as the plaintiff’s costs incurred in relation to the 1^st defendant’s application to the Court of Appeal for leave to appeal against the CA Judgment are concerned:-

(1) the 5^th defendant did not dispute that that plaintiff was entitled to an indemnity in principle, subject to the question of undertakings and the 5^th defendant’s right to tax the plaintiff’s costs (see paragraph 24 of the Decision); and

(2) in relation to the question of interim payment, it is not in dispute that, of the total costs of HK$166,285 allegedly incurred, the plaintiff has already been paid the sum of HK$149,585 by the 1^st defendant as ordered by the Court of Appeal. The remaining minor sum of HK$16,800 plainly cannot justify leave to appeal being granted to the plaintiff. 

21.  In so far as the plaintiff’s costs incurred in relation to the 1^st defendant’s application to the Court of Final Appeal are concerned, I made an order that the 5^th defendant was to indemnify the plaintiff in respect of such costs but the indemnity was to be subject to a cap of HK$150,000.  The plaintiff’s objection relates to the cap that was imposed.  As mentioned in paragraph 27 of the Further Interim Payment/Indemnity Decision, the cap was imposed because the plaintiff’s counsel refused to produce a draft bill or any information regarding its likely costs despite being invited to do so by the court.  Also, the cap relates to the maximum amount which the 5^th defendant can be called upon to indemnify the plaintiff in respect of any costs reasonably incurred by it in relation to the 1^st defendant’s application to the Court of Final Appeal which it “will not be able to recover from the 1^st defendant”. There has never been any suggestion that the 1^st defendant will not pay, or be able to pay, any amount which he is adjudged liable to pay to the plaintiff, and there is no evidence, even up to now, that the sum of HK$150,000 is not sufficient to cover any shortfall of the actual costs incurred by the plaintiff after taking into account the costs recoverable from the 1^st defendant.

22.  Paragraph 3(d) of the 1^st Draft Notice of Appeal contends that I erred in law and in principle in requiring taxation of the plaintiff’s costs (whether on a common basis or otherwise), and further contends the plaintiff’s right to an indemnity from the 5^th defendant is akin to that of a trustee from a trust.  In my view, it cannot seriously be argued that for the purpose of assessing the amount of the indemnity, the plaintiff is entitled to be paid whatever costs that it alleges it has incurred without any form or scrutiny or assessment.  Whether such scrutiny or assessment should be called a taxation or some other name does not matter.  I accept that the standard to be applied in assessing the plaintiff’s costs is a matter of principle which may merit further consideration.  However, that is not an issue which requires determination in the plaintiff’s applications for interim payment or indemnity, but will arise when the court comes to actually assess the plaintiff’s costs for the purpose of the indemnity.

The 4^th ground

23.  The 4^th ground relates to the costs of the Further Interim Payment/Indemnity Summons.  The fact of the matter is that the plaintiff substantially failed in its applications under that summons.  I see no good reason why costs should not follow the event.

THE 2^ND LEAVE SUMMONS

24.  The 2^nd Leave Summons relates solely to the costs order made consequent upon my decision to grant leave to the 5^th defendant to intervene in the plaintiff’s summons dated 14 March 2017.  The 5^th defendant’s application to intervene was strenuously opposed by the plaintiff’s counsel at the hearing on 5 April 2017.  Since the plaintiff failed in its opposition to the 5^th defendant’s application, I saw no reason why costs should not follow the event. 

25.  In paragraph 1 of the of the 2^nd Draft Notice of Appeal, the plaintiff argues that I should have reserved the issue of costs until the substantive determination of the plaintiff’s summons as the outcome of the summons must be a highly material consideration in determining costs.  I do not accept this argument.  The two matters are separate and distinct.  For the reasons given when I granted the 5^th defendant’s application, I consider that the 5^th defendant is plainly entitled to intervene in the plaintiff’s summons in view of the fact that the relief sought by the plaintiff directly concerns or affects the 5^th defendant. Even if the plaintiff should ultimately succeed in obtaining the relief that it seeks under the summons, there is, I consider, no reasonable basis for the plaintiff to oppose the 5^th defendant’s application to intervene.

26.  Ms Eu refers me to an earlier order that I made on 23 February 2017 in relation to another application by the 5^th defendant to intervene in the plaintiff’s summons dated 30 September 2016 to compel the 1^st defendant to pay judgment interest into court.  On that occasion, both applications were heard together in one hearing.  There was no serious, stand-alone, argument raised by the plaintiff that the 5^th defendant’s application to intervene should be refused.  In fact, the 5^th defendant was treated more or less as being a party to the plaintiff’s application, and the hearing on 23 February 2017 was focused on the question of whether the 1^st defendant ought to pay judgment interest into court.  I do not see how the costs order made against the 5^th defendant there should be treated as a precedent for the present situation.

27.  None of the matters advanced in paragraph 2 of the 2^nd Draft Notice of Appeal seems to me to afford a good or sufficient reason for making a different costs order.  In particular:-

(1)   The point raised in paragraph 2(a) is a new point which was not raised at the hearing on 5 April 2017.  Whether the 5^th defendant’s application amounted to a breach of the BVI Court Order dated 30 September 2005 is a matter of BVI law, and cannot be determined simply on the basis of the wording of that order.

(2)   The other matters raised in paragraph 2(b), (c) and (d) are all controversial, but could not justify denying the 5^th defendant an opportunity to be heard in respect of a matter which directly concerns or affects its interest.

28.  In all, I do not consider that the plaintiff’s proposed appeal against the Costs Order has a reasonable prospect of success, or there is any other reason in the interests of justice why the appeal shall be heard.

DISPOSITION

29.  The 1^st Leave Summons is dismissed with costs to the 5^th defendant, to be taxed on a party and party basis if not agreed with certificate for two counsel.

30.  The 2^nd Leave Summons is dismissed with costs to the 5^th defendant, to be taxed on an indemnity basis if not agreed with certificate for junior counsel only.  The costs are to be taxed on an indemnity basis because, as submitted by Mr Chan, the application for leave to appeal is completely without merits.  However, it is a simple matter which would not justify the costs of senior counsel.