LO FONG HUNG v. FUNG YUEN KWAN, VERONICA AND ANOTHER

HCMP 2219/2020

[2026] HKCFI 741

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2219 OF 2020

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DECISION ON COSTS

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A.  Introduction

1.  On 9 June 2025, this Court handed down judgment (“Judgment”)[1], holding that the Petitioner (“Madam Lo”) failed to discharge her burden of proof in establishing the Co-operation Agreement that she had concluded with Sam Pa. In the Judgment, it was further held that, even if, contrary to the findings on fact, the parties had entered into the Co-operation Agreement, Madam Lo also failed to establish that it was binding upon the 1^st Respondent (“Ms Fung”).

2.  At §191 of the Judgment, this Court made a costs order nisi that the costs of and occasioned by the Preliminary Issue be paid by Madam Lo to Ms Fung, together with a certificate for three counsel, to be taxed if not agreed.

3.  On 23 June 2025, Ms Fung took out a Summons (“Ms Fung’s Summons”) for variation of the costs order nisi to the effect that such costs are to be paid forthwith.

4.  On the same day, Madam Lo also took out a Summons (“Madam Lo’s Summons”) for variation of the costs order nisi. The position of Madam Lo is that:-

(1)  there be no order as to costs of and occasioned by the Preliminary Issue;

(2)  the costs of Madam Lo’s Summons be paid by Ms Fung to Madam Lo, with certificate for two counsel, to be summarily assessed if not agreed; and

(3)  there be no order as to costs of Ms Fung’s Summons.

5.  The parties agreed that the said two Summonses should be disposed of on paper. Written submissions were filed accordingly.

6.  Ms Fung’s Summons is straight-forward. Her position is that costs should be paid forthwith. Very briefly, the arguments for Ms Fung may be summarized as follows:-

(1)  The successful party of a trial of preliminary issue(s) should have its costs and be entitled to have those costs assessed immediately: Greencore (UK) Holdings plc v Elemtis Plc [2005] EWHC 2139 (Comm) at §§5-6, per Aitkens J; Merck KGaA v Merck Sharp & Dohme Corp [2014] EWHC 3920 (Ch) at §6.

(2)  The amount at stake also justifies the expense of separate taxation and costs to be paid forthwith: Steadfast International Ltd v Tuenbo Co Ltd [2022] HKCFI 3578 at §11.

7.  On the other hand, Mr Wong SC,[2] counsel for Madam Lo, submits that the costs order nisi should be varied such that there should be no order as to costs and, on this basis, Ms Fung’s Summons would become academic. Alternatively, should this Court order Madam Lo to pay part or all of the costs of Ms Fung, Madam Lo has no objection to have the costs order varied such that the costs are paid forthwith.

8.  In the circumstances, I shall address Madam Lo’s Summons first.

B.  Madam Lo’s Summons

9.  Madam Lo’s arguments may be summarized as follows.

10.  First, given the parties have respectively lodged appeals[3] from the Judgment, this Court may consider waiting for the Court of Appeal to render its decision and clarify the position on the Co-operation Agreement Issue (as defined below) so as to avoid unnecessary expenses on taxation.

11.  Second, should the Court decide to resolve the matter now rather than to wait for the decision from the Court of Appeal, an issue-based approach should be adopted in considering costs. As contended for Madam Lo, there are 3 issues in these proceedings, namely (1) whether Ms Fung was at all material times a shareholder / director of the Company merely as Sam Pa’s nominees (“Nominee Issue”); (2) whether Madam Lo and Sam Pa had concluded the Co-operation Agreement (the “Co-operation Agreement Issue”); and (3) whether the Co-operation Agreement binds Ms Fung (the “Bindingness Issue”). The Issue-based approach is also consistent with Order 62, rule 5(1)(e) and (f) and rule 5(2).

12.  Relying on Pfeiffer GmbH v Cheng Hay Kit (unrep) CACV 245/2013, 29 October 2014 at §20 (per Kwan JA, as she then was), Mr Wong SC submits that an issue-based approach is more readily adopted after Civil Justice Reform because it encourages litigants to be selective as to the points they take and to decrease the costs of litigation. It is further argued that Madam Lo and Ms Fung each succeeded on one issue; and that the Bindingness Issue did not add much time; and thus there should be no order as to the costs of the trial of the Preliminary Issue (which reflects a rough and ready estimation). In this regard, Mr Wong SC also relies upon other cases[4] to support his contention that, when each party had succeeded on one issue and the issues are distinct, the Court of Appeal adopted an issue-based approach and made no order as to costs.  

13.  Mr Wong SC also argues that, in running the argument on the Nominee Issue, Ms Fung had significantly increased the length and costs of the proceedings. This is disputed by Ms Fung.

C.  Applicable principles

14.  It is well established that the discretion as to costs is to be exercised in a principled way with a view to reality and justice: YBL v LWC (No 2) [2017] 2 HKLRD 783 at §§9 and 10(c) per Lam VP (as Lam PJ then was), applying Mimi Far Kee Wong Hung v. Raymond Kin Sang Hung (unrep) FACV 10 and 11/2014, 7 July 2015 at [7], per Ma CJ.

15.  Further, under Order 62, rule 5, the court in exercising its discretion shall take into account the matters set out in rule 5(1) as may be appropriate in the circumstances of the case. Rule 5(2) highlights some conduct which the court may take into account, including whether it is reasonable for a party to take an issue, the manner in which the matter was pursued or defended and the extent of success: YBL (No 2) (above) §§10(d)-(e).

16.  The Court will take an overall view of the justice of the case to arrive at a suitable order. The court will not generally go into a minute examination of whether each issue, sub-issue, or arguments therein have been argued successfully by the parties: Cathay Pacific Airways Ltd v. Kwan Siu Wa Becky (unrep) FACV 5/2012, 26 July 2013 at §4.

17.  The Court should examine all the factors and circumstances, taking into account the extent to which a party has succeeded or lost as the case may be, the nature and basis of the case. This is to encourage litigants to be selective as to the points they take and to decrease the costs of litigation: Pfeiffer GmbH v Cheung Hay Kit (unrep) CACV 245/2013, 29 October 2014, at §§8, 19-20, per Kwan JA.

18.  Nonetheless, the discretion to deprive a successful party of his/her costs is to be approached with due circumspection so as not to undermine the utility of the general rule that costs follow the event. Too ready a departure from the general rule encourages unnecessary arguments which will itself increase costs: Pony HK World Ltd v Vand Petro-Chemicals (BVI) (unrep), FACV 4/2013, 18 March 2014 at §4.

19.  Whilst the costs are in the unfettered discretion of the court, costs should normally follow the event. The general rule does not cease to apply just because the successful party raises issues on which he fails. After all, costs are not to be decided according to a score sheet on how many issues have gone one way or another: Yiu Hon Lam v. Chan Yu Chun (unrep) CACV 383/2007, 15 January 2009, §23 per Tang VP (as he then was); Happy Fish Co Ltd v Tang Jeb Ming [2023] HKCFI 600, §3, per DHCJ Jonathan Chang SC.

20.  Whilst one may adopt an issue-approach in an appropriate case, such approach also has its limits. For instance, in Merck KGaA (above) at §9, Nugee J said this:-

“… Mr Hollingworth refers to the fact that the Defendants succeeded on the issue-within-an-issue” of what may be called compendiously the federal law point. I accept that in some cases the Court can take the view that a party that has succeeded overall should not recover all its costs if it has lost on some sub-issues. But there is a limit to which this principle can be taken. I do not regard it as appropriate in this case to drill down below the overall issue of “what is the proper law” to “does the agreement have any connection with New Jersey law or only federal law”? If that were to be done, the Claimant could equally well say that I largely, although not wholly, accepted its position on the various matters addressed by the experts eg whether the District Court was applying State law in any meaningful sense, or would have applied federal choice-of-law rules. Any issue of any complexity is likely to involve sub-issues and sub-sub-issues on which one side or other has the better of the argument: this is not by itself a reason for departing from the general rule. …”

21.  Similarly, in Pigot v The Environment Agency [2020] Costs LR 825 at §6(1), Stephen Jourdan QC (sitting as a Judge of the High Court) said this:-

“The mere fact that the successful party was not successful on every issue does not, of itself, justify an issue-based costs order. In any litigation, there are likely to be issues which involve reviewing the same, or overlapping, sets of facts, and where it is therefore difficult to disentangle the costs of one issue from another. The mere fact that the successful party has lost on one or more issues does not by itself normally make it appropriate to deprive them of their costs.”

D.  Discussion

D1.  Should the question of costs be adjourned?

22.  First, Mr Wong SC’s argument that the matter be adjourned pending the determination of the Court of Appeal’s determination on the appeal and cross-appeal has no merits and should be dismissed straight away. The question here is one of incidence of costs rather than taxation. It is trite that an appeal does not operate as a stay. As such, the fact that the parties had lodged appeal by itself is no justification for this Court to withhold the decision of costs pending the outcome of the appeal.

23.  Further, the fact is that Madam Lo has not taken out any application for stay of taxation pending appeal.

D2.  Reality and justice of the case

24.  The reality and justice do not provide for any justification as to why Madam Lo could avoid the costs consequences.

25.  The hearing is a trial of the Preliminary Issue. Madam Lo as the Petitioner failed to establish the Co-operation Agreement, both on the facts and on the law.

26.  As rightly submitted by Ms Natalie So,[5] counsel for Ms Fung, it is incorrect for Madam Lo to characterize the question of nomineeship as a separate and distinct issue. It is contrary to the position that Madam Lo took at the trial of the Preliminary Issue (i.e. that the question of nomineeship was “part and parcel” of the question as to whether the Co-operation Agreement existed). The substantial facts and evidence adduced by Madam Lo during the hearing of the Preliminary Issue addressed both the questions of whether Ms Fung was merely a nominee of Sam Pa; and whether the Co-operation Agreement was concluded between Madam Lo and Sam Pa.

27.  Similarly, as apparent from the Judgment, I accept the argument advanced for Madam Lo at the hearing of the Preliminary Issue that the question of nominee forms part and parcel of the Preliminary Issue, i.e. whether the Co-operation Agreement was concluded between Madam Lo and Sam Pa. This question cannot be brushed aside when the Court had to consider the factual dispute as to whether the Co-operation Agreement was concluded between Madam Lo and Sam Pa.

28.  Further, Mr Wong SC’s argument cannot stand, when it is unrealistic to dissect the evidence for the purpose of the issues and sub-issues in the present case. The evidence on nomineeship was entangled with the other factual issues and formed part of the big picture for the Court to determine if the oral Co-operation Agreement was concluded between Madam Lo and Sam Pa.

D3.  Whether Ms Fung significantly increased the costs of the trial

29.  Mr Wong SC argues that Ms Fung had significantly increased the length and costs of the proceedings by raising the Nomineeship Issue. A schedule is also placed before this Court setting out the respective amount of evidence, submissions and time spent on the various issues. With respect, this argument has no merits. Madam Lo essentially asks this Court to determine the matter like a score sheet, which is objectionable in the light of Yiu Hon Lam (above) §23 per Tang VP (as he then was) and Happy Fish Co Ltd (above) at §3, per DHCJ Jonathan Chang SC.

30.  I also do not accept Madam Lo’s argument that Ms Fung had significantly increased the length and costs of the proceedings by raising the Nominees Issue. Instead, it is Madam Fong who put in a lot of materials on matters such as Madam Lo’s involvement in companies (including pictures with various senior political figures) in order to establish the existence of the Co-operation Agreement. Madam Lo also saw fit to adduce expert evidence on the family law in Cambodia. With respect, such evidence was not germane to any issues here and unnecessarily complicates the matter.

D4.  Other matters

31.  The cases that Mr Wong relies upon, such as Kung Kwok Wai David (above) and Cheng Sing Keung (above) are very different from the present one. In Kung Kwok Wai David (above), the question before the court was whether the costs order made was an order nisi or an order absolute; and whether a successful plaintiff should be ordered to pay the costs of an unsuccessful defendant. Such issues do not arise in the present case. Similarly, in Cheng Sing Keung (above), the Court of Appeal held that an issue-based approach could be adopted on the question of costs in that case, when the issues involved were distinct; and the 1^st defendant in that case was not even involved in one of the issues litigated between the plaintiffs and the other defendants ; and that the plaintiffs only succeeded on one issue with only nominal damages: see Cheng Sing Keung §§9(1)-(3).  

32.  In any event, ultimately the question of costs is a matter of discretion and essentially turns on how the discretion is to be exercised in the light of the facts of the case. I discern no principles of law from those cases which support Madam Lo’s case.

33.  In the premises, I am not persuaded that the costs order should be varied in the manner as argued for Madam Lo. Her Summons should be dismissed with costs.

E.  Ms. Fung’s Summons

34.  Given my determination on Madam Lo’s Summons as set out above, Ms Fung’s Summons should be allowed such that Madam Lo has to pay the costs in respect of and occasioned by the Preliminary Issue forthwith.

35.  There is no dispute between the parties that there should be no order as to costs on Ms Fung’s Summons; and I so order.

F.  Conclusion

36.  In conclusion, I make the following order:-

(1)  Ms Fung’s Summons be allowed; and the costs order nisi be varied, such that the costs of and occasioned by the Preliminary Issue be paid by the Petitioner to the 1^st Respondent forthwith, together with a certificate for three counsel, to be taxed if not agreed.

(2)  There be no order as to costs on Ms Fung’s Summons.

(3)  Madam Lo’s Summons is dismissed.

(4)  Costs of and occasioned by Madam Lo’s Summons be paid by Madam Lo to Ms Fung, summarily assessed at HK$160,000, to be paid forthwith.