WALLBANCK BROTHERS SECURITIES (HONG KONG) LTD v. EMILY TSE AND OTHERS

CACV 222/2015
AND HCMP 1464/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 222 OF 2015 AND

MISCELLANEOUS PROCEEDINGS NO. 1464 OF 2015

(ON APPEAL FROM DCCJ NO. 2422 OF 2013)

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REASONS FOR JUDGMENT AND DECISION ON COSTS
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Hon Lam VP (giving the Reasons for Judgment and Decision on Costs of the Court):

Leave Application

1.  This is the Plaintiff’s application for leave to appeal against the decision of District Judge A Li [“the Judge”] on 31 March 2015 in DCCJ 2422 of 2013.  By that decision, the Judge struck out the claim of the Plaintiff in the sum of $38,000 against the Defendants as damages.   The Plaintiff’s claims were, with respect, badly pleaded in the different versions of the statement of claim.  What can be discerned, in essence and as far as private civil causes of action are concerned, is that the claims were for fraudulent misrepresentation and misfeasance in public office.  The defendants were officers in the Securities and Futures Commission [“SFC”].  The claims were originally brought by the Plaintiff in the Small Claims Tribunal.  On 19 June 2013, the Tribunal transferred the case to the District Court.    

2.  The Judge, upon striking out the Plaintiff’s claim, ordered the Plaintiff to pay the costs of the Defendants on indemnity basis with certificate for 2 counsel.  He also made a gross sum assessment of the costs at $1,087,567.01, reducing the figure from $1,515,793.26.   

3.  The Plaintiff applied for leave to appeal against that decision and costs order.  Leave was refused by the Judge on 2 June 2015.

4.  The Plaintiff now renews its application for leave before us.

5.  Initially, the papers lodged by the Plaintiff were not prepared by counsel and they were unfocused and singularly unhelpful in identifying the real issues in the case.  Further, they did not comply with the standard directions in respect of the length of documents filed in support of a leave application.  This necessitated this court giving directions on 22 July 2015 as to how the application should proceed.   Since then, the Plaintiff engaged Mr Lam to conduct the application on its behalf.  Mr Lam had prepared the necessary documents according to the directions and helpfully identified the issues in his statement in support of the application.

6.  Despite his valiant attempts, we do not think there is any reasonable prospect of success in the challenge to the striking out of the Plaintiff’s claims.    

7.  We do not accept the submission that the decision of the adjudicator in the Small Claims Tribunal refusing to strike out the claims as they were before the Tribunal can be the basis for precluding the Defendants from making the application for strike out before the Judge.  Mr Lam quite properly accepted that there cannot be any operation of the strict doctrine of res judicata.  If there were to be a bar, it has to be premised on issue estoppel for which, according to modern jurisprudence, the ultimate question should be whether the second striking out application is an abuse of process, see Ko Hon Yue v Chiu Pik Yuk (2012) 15 HKCFAR 72; Virgin Atlantic Airways v Zodiac Seats UK Ltd [2014] AC 160.  

8.  On the facts of the present case, it is clear to us that the application before the Judge could not be characterized as an abuse of process: the rules of pleadings are applied in the District Court in a manner different from the processing of a claim in the Tribunal, the statements of claim considered by the Judge were not before the Tribunal, the question of fraudulent misrepresentation (which as we shall see formed a major plank in the Plaintiff’s case) was apparently not considered in the Tribunal, nor did the Tribunal consider the statutory defence of section 380 of the Securities and Futures Ordinance, Cap 571.  The Tribunal did not focus on whether there was any viable case on bad faith. Further, as submitted by Mr Jat SC, the Tribunal only decided that the claims should be not struck out “at this stage” and that they should be transferred to the District Court.  Clearly, the Tribunal did not intend its ruling in the context of an application to strike-out/ transfer to pre-empt how the District Court should exercise its power.  

9.  Mr Lam identified paragraphs 28, 29, 31 to 34 of the Amended Statement of Claim as setting out the proper basis for asserting bad faith and malice in order to defeat the s380 statutory immunity and to sustain a cause of action in misfeasance in public office.  We have considered the pleadings carefully and we do not accept these paragraphs as providing a proper foundation for the very serious allegations (involving dishonesty, bad faith and malice) against the Defendants.

10.  On the allegation of fraudulent misrepresentation, what was alleged in substance is only a complaint that the defendants did not comply with the alleged internal protocol of the SFC in the handling of complaints.  Whatever one may say on the validity of this allegation, it can hardly give rise to a cause of action based on misrepresentation, not to mention the serious allegation of fraudulent misrepresentation.  On the pleadings, we cannot see any arguable case of fraudulent misrepresentation. 

11.  We also agree with Mr Jat that the other paragraphs relied upon by Mr Lam have no substance.  It is a fundamental principle of pleadings that the court will not allow bare assertions of such serious nature to be advanced without proper particulars: ADS v Wheelock Marden & Co Ltd [1994] 2 HKC 264; Davy v Garrett (1878) 7 Ch D 473.  The matter must be considered in the overall context that the Defendants were corresponding with the Plaintiff in the capacity of regulators and “intimation and threats” are not to be lightly inferred.  Empty allegations of falsified and fabricated criminal offences, intimidation and threats, ulterior motives, dishonesty and bad faith cannot get the Plaintiff’s case off the ground.   

12.  Thus, there is simply no sustainable basis for overcoming the statutory immunity.  Nor is there any reasonable basis for the claim for fraudulent misrepresentation or misfeasance in public office.

13.  It is not necessary for us to consider the other grounds for striking out.  We wish to say we agree with the Judge that the pleadings of the Plaintiff are prolix, hopelessly unfocused and embarrassing. In line with the underlying objectives in Order 1A and the spirit of the Civil Justice Reform, it was within the Judge’s case management power to strike out the whole pleadings and let the Plaintiff prepare and apply to file a fresh set of statement of claim if there are viable claims.  However, as we said above, we do not consider the Plaintiff to have a reasonable cause of action in the present case.  

14.  Having studied the relevant parts of the transcripts, we do not see any merit in the intended challenge by the Plaintiff on the ground of apparent bias.

15.  In the circumstances, it is plain to us that the intended appeal against the striking out has no reasonable prospect of success and there is no other reason in the interest of justice to grant leave to appeal in that respect. 

16.  We therefore refused to grant leave in respect of the striking out of the Plaintiff’s claims. 

17.  We turn to the appeal in respect of the costs order of the Judge.  We do not see any basis for disturbing the Judge’s exercise of discretion in ordering indemnity costs.  We also refused to grant leave to appeal against the order that the Plaintiff should pay the costs of the Defendants on indemnity basis. 

18.  We however see room for argument relating to the grant of certificate for 2 counsel in a case concerning a claim for $38,000 with the gross sum assessment of costs at $1,087,567.01.  We granted leave to the Plaintiff to challenge these two aspects of the costs order made by the Judge.  

The appeal

19.  As it would be disproportionate if another set of costs is to be incurred for an appeal on costs in respect of those 2 questions, we forewarned the parties by letter on 18 September 2015 that we were minded to proceed with the hearing of the substantive appeal if leave were granted to appeal on costs only. 

20.  The parties sensibly agreed to such course. They also agreed to have the appeal heard by 2 judges.

21.  Thus, on 22 September 2015, after we heard submissions on the leave application and told the parties that we would only give leave on the two aspects relating to the costs order (as set out above), Mr Lam gave an undertaking on behalf of the Plaintiff to file a Notice of Appeal by 23 September 2015.  We then proceeded to hear the appeal. 

22.  In respect of the certificate for 2 counsel, Mr Jat adopted Mr Chan’s submission at the leave stage.  It was submitted that in view of the serious nature of the allegations against the Defendants, and bearing in mind the role and reputation of the SFC as regulator, it was reasonable for the Defendants to have the best representation to assist the court.

23.  But one must not lose sight of the fact that the claims of the Plaintiff were only in the sum of $38,000.  Further, though the pleadings of the Plaintiff were defective in many respects, the claims do not involve complicated principles of law or facts.  The Plaintiff did not engage counsel to appear before the Judge.  Mr Chan, appearing here and below as junior counsel for the Defendants, is experienced and competent enough to deal with the matter.

24.  Mr Jat had certainly provided the best assistance to the Judge at the court below.  However, in the present circumstances, we are of the clear view that it is outside the reasonable range for the proper exercise of discretion to grant certificate for 2 counsel. 

25.  We therefore allowed the appeal accordingly.  We set aside the grant of certificate for 2 counsel and the gross sum assessment of costs at $1,087,567.01.  In its place, we ordered the Plaintiff to pay the Defendants’ costs below on indemnity basis, with certificate for one counsel, and such costs are to be taxed if not agreed.

Costs in the leave application before us and the appeal proper

26.  It is agreed by the parties that in the exceptional circumstances (that the appeal was heard immediately after leave was granted) there could be a global order for costs for all the proceedings before us. 

27.  Though the Plaintiff succeeded on the 2 aspects in relation to costs, they only represented a small portion of the contest between the parties.  It is clear from the scope of submissions advanced before us that most of the costs would have been incurred in relation to the striking out aspect of the case.  The Plaintiff failed dismally in that respect. 

28.  On a global basis, having considered the submissions of counsel, and paying due regard to the extent to which the Plaintiff succeeded before us, we agreed with Mr Jat that the Defendants should have 80% of the costs before us.

29.  In the Court of Appeal, the court will usually grant certificate for 2 counsel.  Notwithstanding that this is only a leave application, and our above assessment of the situation in respect of costs below, we accept it was reasonable for the Defendants to engage leading counsel to appear before us. 

30.  The Defendants placed before us a statement of costs of 8 September 2015 in the sum of $490,525.67 (of which $400,000 were counsel fees) and a supplemental statement of costs of 22 September 2015 in the sum of $33,566.65.  They added up to  $524,092.32.

31.  We agree with Mr Lam that there is scope for reducing the amount to be awarded.  This court has reduced counsel fees on previous occasions when gross sum assessment on costs was made in the context of a leave application.  Having considered the matter, we fix the overall costs of the Defendants at $400,000 (of which $300,000 is counsel fees).  Having regard to what we said at paragraph 28 above, the sum we order the Plaintiff to pay to the Defendants by way of costs of the proceedings before us (viz leave together with the appeal) is $320,000.