CHINA MEDICAL TECHNOLOGIES, INC (IN LIQUIDATION) AND OTHERS v. WU XIAODONG AND OTHERS

CAMP 340/2023, [2024] HKCA 310

On An Intended Appeal From [2023] HKCFI 2350 &

[2023] HKCFI 2735

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 340 OF 2023

(ON AN INTENDED APPEAL FROM HCA NO 3391 OF 2016)

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AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 340 OF 2023

(ON AN INTENDED APPEAL FROM HCA NO 1417 OF 2013)

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(Consolidated by Order of Master Chow dated the 23^rd day of July 2018)

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JUDGMENT

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Hon Chow JA (giving the Judgment of the Court):

INTRODUCTION

1.  On 15 September 2023, Ng J made an order dismissing the 2^nd Defendant’s summons filed on 13 October 2022 (“the Joinder Summons”) seeking the joinder of, inter alia, Bank of China (Hong Kong) Limited and Bank of East Asia Limited (“BoC” and “BEA” respectively, and “the Banks” collectively) as “interested parties” in the consolidated High Court Action Nos 3391 of 2016 and 1417 of 2013 (“the Consolidated Action”) “in respect of the adjudication on the nature of the FISH and SPR Transactions by the Court” (“the Common Issues”), and ordering the 2^nd Defendant to pay the Plaintiffs, BoC and BEA’s respective costs of and occasioned by the Joinder Summons forthwith, to be summarily assessed on an indemnity basis (“the Costs Order”).

2.  The relevant backgrounds facts are well known to the parties, and the Judge’s reasons for dismissing the Joinder Summons and making the Costs Order are set out in the Judge’s written judgments dated 15 September 2023 (“the Judgment”) and 27 October 2023 (“the Leave Judgment”) respectively.  They will not be repeated here, save to mention, in summary, that:

(1)  the Judge dismissed the joinder application because (a) the 2^nd Defendant had failed to identify precisely the “Common Issues” involved in the Consolidated Action, the BOC Action[1] and the BEA Action[2] required to be determined by the court, (b) acceding to the 2^nd Defendant’s joinder application would bring about delay to the Consolidated Action and additional costs to the Plaintiffs and the Banks, but would give rise to no identifiable benefit to the 2^nd Defendant, and (c) the joinder application was just another attempt by the 2^nd Defendant to delay the Consolidated Action[3]; and

(2)  the Judge ordered the 2^nd Defendant to bear indemnity costs because (a) the application was of no benefit to the 2^nd Defendant and was made by him as another attempt to delay the Consolidated Action (in other words, it was made for an improper purpose), (b) the application was devoid of merits and should not have been brought, and (c) once the Banks made known that they did not want the “benefit” of joinder, the 2^nd Defendant should have withdrawn the Joinder Summons (ie he should not have persisted)[4].

3.  On 27 October 2023, the Judge dismissed the 2^nd Defendant’s application for leave to appeal against the Costs Order.

4.  By summons filed on 9 November 2023 (“the Leave Summons”) in the Court of Appeal, the 2^nd Defendant renewed his application for leave to appeal against the Costs Order. 

APPLICABLE PRINCIPLES

5.  The test for granting leave to appeal against a costs order made by a judge at first instance, and the Court of Appeal’s approach in an appeal against such an order, are well settled.  In general, costs are very much a matter of discretion for the judge.  The Court of Appeal will be very circumspect in intervening in such a decision with high discretionary content.  It will only interfere when it is satisfied that the decision of the judge is either wrong in principle or plainly wrong.  See Poon Ching Man v Lam Hoi Pun [2016] 3 HKLRD 815, at §34; Chan Shun Kei v Hong Kong Construction (HK) Ltd, CACV 192/2014 (7 March 2016), at §22.  The Court of Appeal will take into account the high threshold for intervention in a costs order made by a judge when deciding whether to grant leave to appeal.

DISCUSSION

6.  In the Further Revised Draft Notice of Appeal attached to “D2’s Written Statement for Leave to Appeal” dated 9 November 2023 (“D2’s Statement”), the 2^nd Defendant raises 2 intended grounds of appeal, which have been summarized in §3 of D2’s Statement as follows:

(1)  Ground 1: the Judge should have made no order as to costs of the Joinder Summons, or alternatively the 2^nd Defendant should only pay two sets of hypothetical proper or necessary costs (ie there will only be one set of costs in favour of the Banks); and

(2)  Ground 2: in any event, there is no or no sufficient basis for an order of indemnity costs against the 2^nd Defendant.

(i)     Ground 1

7.  We shall first deal with the various arguments raised by Mr Lung in D2’s Statement in support of Ground 1.

8.  First, Mr Lung argues that as regards case management matters, a neutral costs order is generally more appropriate unless a party acts in a “culpable” way.  In support of this proposition, he relies on the judgment of Recorder Rachel Lam SC in Lau Muk Fat (Manager of Lau Shau Wo Tso) v Wong Kwok Wa [2023] 1 HKLRD 1067.  We do not consider, upon a proper reading of the judgment of the Recorder, that she intended to lay down any general principle that a neutral costs order is more appropriate in case management matters unless a party acts in a “culpable” way.  Lau Muk Fat concerned an application for consolidation of several sets of proceedings, and the Recorder noted that in a number of cases, the court made a neutral costs order (namely, costs in the cause) where applications for consolidation were rejected and also where consolidation had been granted despite unsuccessful opposition, the underlying rationale being that “consolidation was often a complex and difficult case management issue … Where any party does not act in a culpable way, the Court will be slow to impose costs consequences on any side if such issue of consolidation needs to be considered in due course”.[5]  The application before the Judge was not for any consolidation of proceedings.  In any event, we agree with the Judge that in relation to “case management applications, as in any other applications, the incidence of costs depends on numerous factors including inter alia the merits of the case management proposal put forward by an applicant”[6].  In matters relating to costs, the court has a wide and general discretion.  How the discretion ought to be exercised in any given case must depend on the facts and circumstances of that case.  It would not be appropriate to fetter or circumscribe the court’s broad discretion on costs by reference to any specific categories of cases.  The Judge was correct to reject the general proposition advocated by Mr Lung.

9.  Second, Mr Lung argues that it was eminently reasonable for the 2^nd Defendant to take out the Joinder Summons to invoke the court’s active case management powers conferred by Order 1B, rule 1(2) of the Rules of the High Court (Cap 4A), when no party involved in the Plaintiffs’ multiple actions had ever attempted to make proposals to the court for the separate actions to be properly case-managed until the Plaintiffs were directed to address the problem at §38 of the Judgment.  This general submission does not assist the 2^nd Defendant, because it is still necessary to consider whether the “case-management” order or direction sought by the 2^nd Defendant has any merits.  If, as found by the Judge, the Joinder Summons was wholly without merits and was an attempt by the 2^nd Defendant to delay the Consolidated Action, that would clearly provide good justification for the court to exercise its discretion to order the 2^nd Defendant to bear the costs of the application.

10.  Third, Mr Lung argues that there are common factual issues relevant to all of the Plaintiffs’ multiple actions (ie the Consolidation Action, the BOC Action and the BEA Action), namely, the nature and value of the FISH and SPR Transactions, the existence of which are recognised or acknowledged by the Judge, the Plaintiffs and BEA, but the Plaintiffs failed to provide any case management proposal or solution.  Mr Lung relies on the fact that the Judge himself proposed a trial on preliminary issues (being the Common Issues) involving all parties.  Mr Lung also refers to §9 of the Plaintiffs’ proposal dated 17 October 2023 (which was filed pursuant to the Judge’s direction at §38 of the Judgment seeking case management proposals to achieve the underlying objectives of the CJR), and submits that the Plaintiffs tacitly accepted that the Common Issues were relevant across the multiple actions.  In our view, this argument of Mr Lung misses the real point.  The question is not whether there are Common Issues to be resolved in the Consolidated Action, BOC Action and the BEA Action, but whether it is appropriate for the Banks to be joined as parties to the Consolidated Action, which raises numerous other issues which are or may be of no interest or concern to the Banks.  It may well be appropriate for there to be a trial of preliminary issues involving all interested parties (as to which we express no view since it is not a matter before us), but that would be very different from joining the Banks as parties to the Consolidated Action.  As for the Plaintiffs’ proposal dated 17 October 2020, what the Plaintiff said was that “an early resolution of the [Consolidated] Action will assist to narrow the issues in the remaining actions.  In particular, if the court is satisfied, in the [Consolidated] action, that the FISH and SPR Transactions are as contended by the Plaintiffs, it is anticipated that any dispute on that issue that exists in the other actions will be far more easily resolved in those other actions, and may even evaporate”.  In other words, the Plaintiffs were not proposing that the Banks should be joined as parties to the Consolidated Action for the purpose of determining the Common Issues.  Rather, according to the Plaintiffs, those issues should be determined in the Consolidated Action first.

11.  Fourth, Mr Lung argues that the Judge’s observation that the 2^nd Defendant’s joinder proposal could have been raised at a Case Management Conference (the latest one being scheduled for 30 October 2023), instead of by way of a separate summons, would only add to the delay.  This argument has no merits.  In view of the Judge’s view that the 2^nd Defendant’s joinder application is devoid of merits, it would be dismissed by the Judge whether the application is considered separately or at a Case Management Conference.  There is no evidence that any delay to the overall progress of the Consolidated Action will be occasioned by the joinder application being considered at a Case Management Conference.  On the other hand, as observed by the Judge at §19 of the Leave Judgment, the incidence of costs of the Case Management Conference may well be different from that of the Joinder Summons.

12.  Fifth, Mr Lung argues that there is no effective “winner” in the dismissal of the Joinder Summons, because the Banks are still required to address the “Common Issues” in their respective actions.  We do not accept this argument.  The Judge considered the Joinder Summons to be without merits and should have been withdrawn.  Plainly, the 2^nd Defendant is the “loser” insofar as the Joinder Summons is concerned.  Further, whether the Common Issues will require to be addressed in the BOC Action and BEA Action remains to be seen.  This is because, as submitted by Mr Manzoni SC (for the Plaintiffs) and recorded by the Judge at §20 of the Judgment –

“… within the 2 ‘base claims’, there are multiple issues that the Court needs to consider and determine in the present Action. In this court’s present estimation, a majority of these issues will be contested by the active Defendants, in particular the 2^nd Defendant, and will occupy a large part of the trial of the present Action. The same cannot be said of the BOC Action or the BEA Action, at least at this stage. This is because their involvement only began after the FISH and SPR Transactions had been entered into and they may well be advised to take a passive position by just putting the Plaintiffs to prove. This is of course entirely up to BOC and BEA and their legal advisers.”

13.  Sixth, Mr Lung argues that the 2^nd Defendant should only pay 2 sets of costs, being those of (i) the Plaintiffs, and (ii) BoC/BEA, because the Banks essentially adopted a “united front” for the purpose of the Joinder Summons (namely, they insist that the Commons Issues be tried in their respective actions), and there is plainly no conflict of interest between them.  As earlier mentioned, it is by no means certain that the Commons Issues will have to be tried again in the BOC Action and BEA Action.  In any event, the Judge held, correctly in our view, that “the fact of the matter is that BOC and BEA have been separately represented from the very beginning of the proceedings against them.  The 2^nd Defendant issued the Joinder Summons with his eyes open.  Whether or not there is conflict of interest between BOC and BEA vis-à-vis the Joinder Summons is irrelevant.  Each of the Banks was entitled to separate legal representation and came to its own view as to the merits of the Joinder Summons.  The Banks objected to the Joinder Summons for reasons of their own.  If conflict of interest were the test, the Plaintiffs, BOC and BEA should only get 1 set of costs since they all opposed the Joinder Summons on the ground that it had no merits.  The 2^nd Defendant’s proposition that there should be 1 set of costs for BOC/BEA need only be stated to be rejected”[7].

(ii)    Ground 2

14.  Mr Lung argues that the reasons given by the Judge for awarding indemnity costs against the 2^nd Defendant were flawed or incorrect.  According to Mr Lung, the Judge gave the following reasons for ordering the 2^nd Defendant to pay indemnity costs:

(1)  The Joinder Summons was “another attempt to delay the present action by the 2^nd Defendant” (§33 of the Judgment).

(2)  “The Banks, being independently advised by reputable solicitors and counsel, do not want the purported benefit … The 2^nd Defendant should have withdrawn the Joinder Summons” (§32 of the Judgment).

(3)  The 2^nd Defendant did not gain any personal benefit from the proposed joinder and therefore, an improper purpose can be inferred against him (§25 of the Leave Judgment).

15.  By way of preliminary observation, it may be noted that the Judge’s reasons for making an indemnity costs order against the 2^nd Defendant are set out at §25 of the Leave Judgment, as follows –

“It is clear from the Judgment at [31] to [34] that (i) the Joinder Summons was of no benefit to the 2^nd Defendant and was brought by him as another attempt to delay the present Action - in other words, it was brought with an improper purpose; (ii) the Joinder Summons was devoid of merits and should not have been brought; (iii) once the Banks made known that they did not want the ‘benefit’ of joinder, the 2^nd Defendant should have withdrawn the Joinder Summons ie he should not have persisted.”

16.  It seems clear that one of the reasons given by the Judge, but not mentioned by Mr Lung, was that the Joinder Summons was devoid of merits and should not have been brought.  In any event, we are not persuaded by Mr Lung’s criticisms of the Judge’s reasons for making an indemnity costs order against the 2^nd Defendant.

17.  In respect of §14(1) above, Mr Lung argues that the finding of “another” attempted delay is incorrect, because there was no such prior finding.  He also argues that the suggestion that the 2^nd Defendant took out the Joinder Summons to stall the progress of the Consolidated Action disregards the full procedural context, and refers to various matters by way of “example” at §17 of D2’s Statement, which it is not necessary to set out in this judgment.  Mr Lung’s complaint that there was no finding of any previous attempt by the 2^nd Defendant to delay the progress of the Consolidated Action is just a semantic point.  Regardless of whether there was any such finding, the Judge was entitled to find, on the materials before him, that the Joinder Application was a delaying tactic by the 2^nd Defendant and brought with an improper purpose.  This finding, coupled with the other matters mentioned by the Judge at §25 of the Leave Judgment, would justify an order for indemnity costs against the 2^nd Defendant.

18.  §14(2) and (3) above can be considered together:

(1)  In respect of §14(2), Mr Lung argues that whether the Banks wish to have the benefit conferred by the proposed joinder is not relevant, because it is not for the Banks to dictate how the various actions ought to be properly case-managed; instead, it is a matter that the Court has an active duty to resolve even if the parties do not agree.

(2)  In respect of §14(3), Mr Lung argues that the lack of personal benefit should not be taken as a factor to infer an improper purpose on the part of the 2^nd Defendant.

19.  It is, of course, correct to say that it is not for the Banks to dictate how various actions ought to be properly case-managed. We do not accept, however, that the proposed joinder sought by the 2^nd Defendant would achieve the object of proper case-management of the actions.  In our view, it is important to consider the 2^nd Defendant’s professed reason for making the joinder application, which was purely to benefit the Banks.  No benefit to the 2^nd Defendant was identified[8].  In such circumstances, when neither the Banks nor the Plaintiffs were in favour of the proposed joinder, one may expect the 2^nd Defendant to withdraw the application at that point.  The 2^nd Defendant did not do so.  The question which naturally arose was why the 2^nd Defendant would persist with the application.  Plainly, the Judge did not consider that the 2^nd Defendant made the application for any altruistic purpose.  He inferred that the application was an attempt to delay the progress of the Consolidated Action.  We consider it was open to the Judge to take such a view. 

20.  Overall, Grounds 1 and 2 are not reasonably arguable, and the 2^nd Defendant’s intended appeal does not have a real prospect of success.  There is also no other reason in the interests of justice why the appeal should be heard.

21.  In passing, we should mention that Ms Xu has objected to the 2^nd Defendant’s reliance on the “Common Issues” as (allegedly) reframed in §9 of D2’s Statement.  Ms Xu says that at the substantive hearing before the Judge, the 2^nd Defendant identified 2 base claims as “Commons Issues”, covered by Sections D and G of the Amended Statement of Claim consisting of 60 pages of pleaded facts, and the Judge did not consider this sufficient to identify the “Common Issues” or justify the joinder application.  Ms Xu argues that the 2^nd Defendant should not be permitted to narrow down the “Common Issues” in the present application[9].  Neither Mr Julian Lam nor Mr Keith Lam has raised any similar objection on behalf of BoC and BEA respectively.  For the purpose of disposing of the present application, it is not necessary for us to resolve this objection, because we are of the view that the leave application ought to be dismissed even if one proceeds on the basis of the “Common Issues” as defined in D2’s Statement.

DISPOSITION

22.  The Leave Summons dated 9 November 2023 is dismissed with costs to the Plaintiffs, BoC and BEA, which we summarily assess, on a party and party basis, in the amounts of HK$60,000, HK$40,000 and HK$40,000 respectively.  We do not consider that the 2^nd Defendant should be ordered to pay indemnity costs in relation to the leave application, notwithstanding Mr Keith Lam’s submission.  The above costs orders, including assessments of the costs of the Plaintiffs, BoC and BEA are orders nisi, which shall become absolute unless an application is made to vary the same within 14 days from the date of this judgment.

23.  Lastly, as the 2^nd Defendant’s application for leave to appeal is totally without merit, an order is made that no party may request the present determination to be reconsidered at an oral hearing inter partes pursuant to Order 59, rule 2A(8) of the Rules of the High Court.