WONG SAI CHUNG AND OTHERS v. THE JOINT AND SEVERAL LIQUIDATORS OF CHINA PROPERTIES GROUP LTD (IN LIQUIDATION)

HCMP 1015/2023

[2025] HKCFI 2094

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1015 OF 2023

____________

____________

BETWEEN

____________

______________________________

DECISION ON COSTS

______________________________

1.  The Liquidators, by a summons dated 3 April 2024 (the “Variation Summons”), seeks to vary the costs order nisi made by this Court on 29 February 2024 (“the Decision”).

2.  This Court have given directions for this matter to be dealt with by way of paper disposal.

3.  By the Costs Order Nisi, this Court ordered that the Relevant Plaintiffs to pay the Liquidators the costs of and occasioned by the Liquidator’ Summons dated 6 October 2023 (the “Liquidators’ Summons”), to be taxed on a party to party basis if not agreed.

4.  By the Variation Summons (which was taken out after the expiry of the 14-day deadline), the Liquidators seek to vary the Costs Order Nisi, such that the Relevant Plaintiffs do pay to the Liquidators the costs or and occasioned by the Liquidators’ Summons on an indemnity basis. The Liquidators’ submissions on the Variation Summons are set out in their letter via YTL LLP dated 14 March 2024 (the “Letter”). The Liquidators have also filed a written reply submissions and a further written reply submissions on 7 August 2024 and 29 August 2024 respectively.

APPLICABLE PRINCIPLES

5.  The legal legal principles in this area of the law are well settled. In Hsu Ching Fang v. Ng Chor Kuen and Ors [2023] HKCFI 1470, at §13, this Court said:-

5.1. “Costs are generally awarded on a party to party basis. To justify costs on an indemnity basis, the receiving party must show that the case has some special or unusual feature” (at §13(1); citing Commissioner of Island Revenue v. Poon Cho Ming John (No 2) (2020) 23 HKCFAR 74, at §4, per Bokhary NPJ);

5.2. “In this regard, the threshold is high. The losing party’s conduct must be “unreasonable to a high degree”, and not merely wrong in hindsight” (at §13(2));

5.3. “Insofar as the merits of the case are concerned, even where “severely adverse findings” are made against a party, this does not ipso facto justify an indemnity costs order” (at §13(3); citing Libertarian Investments Limited v. Thomas Alexej Hall FACV 14/2012 (11 March 2014), at §6, per Ribeiro PJ);

5.4. “Advancing a case which is difficult, unlikely to succeed or which in fact fails, or without any foundation in law or fact, or devoid of merits, is not necessarily in itself a sufficient reason for an award of indemnity costs […] The Court’s finding that the claim or the ground of defence is plainly and obviously incredible on the fact, or that the evidence has been deliberately untruthful will not necessarily in itself warrant an order for indemnity costs” (at §13(3)(a); citing KJ v. KMLM HCMC 4/2010 (21 May 2014), at §22);

5.5. “The conduct of the losing party must be of a more venal kind and the conduct of the litigation has in some sense been wicked” (at §13(3)(a); citing KJ v. KMLM at §22; Choy Yee Chun v. Bond Star Development Ltd [1997] HKLRD 1327 (CA), at 1336B, per Stock J (as he then was).

5.6. This Court observed that in the context of striking out or summary judgment, it “sometimes involves the Court making a finding that that the claim or the ground of defence is plainly and obviously incredible on the facts. Yet, we do not see the Court order indemnity costs in every such case. Indeed, in every case where there is a material dispute of fact, the Court is bound to prefer one party’s account. Such a finding, without more, is not a special or unusual feature making indemnity costs appropriate” (at §13(3)(b); citing Kao, Lee & Yip (A Firm) v. Midland Realty International Ltd HCA 2153/2007 (31 March 2010) at §18).

5.7. The high threshold above applies even to situations where serious allegations are made against a party (at §13(4)):-

(1) Even in contempt cases, “there is no general rule that indemnity costs should be awarded against the contemptor, the appropriateness of such order depending on all the circumstances of the case”: (at §13(4)(a); citing Libertarian, at §6, per Ribeiro PJ);

(2) “This is equally so in the context of striking out for an abuse of process, which does not ipso facto constitute a “special or unusual feature” for the purposes of an indemnity costs award” (at §13(4)(b)).

(3) The above applies a fortiori to the mere hostile conduct of litigation — “[n]ormal litigious hostility would not suffice” (at §13(4)(c); citing KJ v. KMLM at §21).

5.8. Further, the threshold required is high for seeking indemnity costs on the alleged basis of an “ulterior motive”. “[I]f the Court finds there could well be “other less sinister reason[s]” for commencing proceedings, this is insufficient”. Even in a case where there has from the start been “very hostile litigation”, and that the application “inevitably raises the strongest suspicion of an ulterior motive”, this was insufficient to support the finding of an ulterior motive and for the award of indemnity costs (at §13(5)).

6.  Moreover, for an award of indemnity costs to be made, “[t]he proceedings must be instituted or prosecuted in circumstances as to constitute an affront to the court. Usually there must be something disgraceful in the conduct of the losing party or his legal representatives such as to cause the court to feel a proper sense of indignation. Normal litigious hostility would not suffice”: KJ v. KMLM at §21; citing Man Fong Hang v. Man Ping Nam and Others HCA 7935/1998 (26 March 2004), §11, per Johnson Lam J (as he then was).

ANALYSIS AND DETERMINATION

7.  I fully appreciate that the Liquidators took the view that the Relevant Plaintiffs’ opposition to the Liquidators’ Summons is unmeritorious. However, the above legal principles apply equally to applications made by the Liquidators.

8.  Mr Kok for the Relevant Plaintiffs is correct, in fact, the Relevant Plaintiffs were partially successful in resisting the Liquidators’ Summons. Mr Kok pointed out that the Relevant Plaintiffs were successful in resisting the Liquidators’ application to dismiss the Relevant Plaintiffs’ Originating Summons in HCMP 1015/2023 (the “HCMP Action”): see Decision, §§78 to 83.

9.  Secondly, Mr Kok pointed out that the Court accepted the Relevant Plaintiffs’ submissions that the orders sought by the Liquidators for the books and records were too wide, in that they encompass even documents which belonged to other entities outside of the Group.

10.  This Court ruled that the Liquidators were “not entitled to the books and records of, say the 38^th Plaintiff, Frank Union, which is a co-tenant of the Premises” (at §66 of the Decision), and that the Liquidators must “return the other properties to other owners” outside the Group (at §67 of the Decision).

11.  This Court also accepted the Plaintiffs’ submissions and confined the orders sought by the Liquidators in §§3, 5, 6, and 8 of the draft Order, namely to the books, records, and documents of the Group (at §85(2), (4), (5), (8) of the Decision).

12.  I agree that the Relevant Plaintiffs were able to successfully limit and confine the orders sought by the Liquidators, the Relevant Plaintiffs’ opposition cannot be said to be “unreasonable to a high degree”: Hsu Ching Fang (supra) at §13(2).

13.  Importantly, I also ruled that section197 of the Companies Ordinance, Cap. 32 was “not a proper avenue for the Liquidators to obtain their relief” (at §63 of Decision) and it was “not appropriate for the Liquidators to advance this application on the basis that it is in substance an application under section 286B of the Companies Ordinance, Cap.32” (at §64 of Decision). The Liquidators had heavily relied upon sections 197 and 286B at the forefront of their submissions, and it was fair for the Relevant Plaintiffs to have opposed the Liquidators’ applications which were made on improper and inappropriate bases.

14.  Further, this Court also accepted the Relevant Plaintiffs’ submission that it was not appropriate for the Liquidators to apply under section 53 of the High Court Ordinance, Cap. 4, namely for an independent review lawyer to determine the disputes LPP between the parties (at §70 of Decision).

15.  Finally, this Court did not make orders in terms of further orders sought by the Liquidators by way of the draft Order, including (i) for the Relevant Plaintiffs to procure the “full assistance at all times of all persons and/or staff present in the Premises”, (ii) for the Relevant Plaintiffs to “instruct and procure those persons or staff present at the Premises” to provide the Liquidators with physical and electronic documents, and (iii) for the independent review lawyer to attend the Premises to facilitate the inspection of the office area (see §85(6) of the Decision). The Court further accepted the Plaintiffs’ proposed amendments on other terms of the draft orders (see §85(3) and (9) of the Decision).

16.  I have noted the Liquidators’ submission that this Court should consider the overall conduct of the Relevant Plaintiffs (and those persons directing the acts or omissions of those parties) in the context of a liquidation in Hong Kong. However, to be fair, the Court has also to consider the outcome of a particular application before it.

17.  I am thus of the view that a fair costs order is the costs order nisi made by this Court.

18.  However, I am of the view that a practical way forward is for this Court to determine the costs of the Liquidators on a gross sum assessment basis so that such costs can be assessed and paid forthwith to the Liquidators.

19.  Accordingly, I make an order to dismiss the Liquidators’ Variation Summons with costs to be paid by the Liquidators to the Relevant Plaintiffs.

20.  I direct both parties to:

(1) file a schedule of costs within 14 days herein and;

(2) file a list of objections to the items of costs claimed with reasons stated within 14 days thereafter.