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 two applications to vary the costs orders nisi which I made in paragraph 23 of my previous decision handed down on 6 December 2016, as follows:-

(1) the 1^st defendant and the 5^th defendant shall pay the plaintiff the costs of the plaintiff’s summons dated 30 September 2016 (“the Waddington Summons”); and

(2) the 5^th defendant shall pay the plaintiff its costs in relation to the 5^th defendant’s summons dated 25 November 2016 (“the Profit Summons”), and there shall be no order as to costs as between the 5^th defendant and the 1^st defendant in relation to that summons.

2.  The plaintiff now seeks, by a summons dated 14 December 2016 as amended by a further summons dated 15 December 2016, the following costs orders instead:-

(1) the 1^st defendant shall pay the plaintiff the costs of the Waddington Summons; and

(2) the 5^th defendant do indemnify the plaintiff for all costs incurred in relation to the Waddington Summons and the Profit Summons, and there shall be no order as to costs as between the 5^th defendant and the 1^st defendant in relation to that summons.

3.  On the other hand, the 5^th defendant seeks, by a summons dated 20 December 2016, the following costs orders-

(1) the 1^st defendant shall pay the plaintiff the costs of the Waddington Summons; and

(2) there shall be no order as to costs as between the 5^th defendant and the plaintiff and as between the 5^th defendant and the 1^st defendant in relation to the Profit Summons.

4.  By way of alternative, the 5^th defendant seeks an order that: (i) the 1^st defendant and the 5^th defendant shall pay the plaintiff the costs of the Waddington Summons, and (ii) the plaintiff shall pay the 5^th defendant the costs of the Profit Summons.

COSTS OF THE WADDINGTON SUMMOMS

5.  By the Waddington Summons, the plaintiff sought an order that (i) the Shortfall, (ii) the post-judgment interest on the Shortfall at the judgment rate from 18 December 2013 to the date of payment in, and (iii) the post-judgment interest on the Judgment Sum at the judgment rate from 18 December 2013 to 21 March 2014, be paid into court.

6.  The 1^st defendant opposed (i) and (ii) above, but was prepared to pay the post-judgment interest referred to in (iii) above (in the sum of HK$683,078.03) into court.  In respect of (i), the 1^st defendant contended that the Shortfall should be paid to the 5^th defendant directly, instead of into court.  In respect of (ii), the 1^st defendant contended that the Shortfall did not carry any further post-judgment interest.

7.  The 5^th defendant opposed (i), (ii) and (iii) above, contending that the amounts of interest (in so far as payable) should be paid to it directly, instead of into court.

8.  For the reasons given in my written decision dated 6 December 2016, I rejected the 1^st and 5^th defendants’ respective arguments and made the order sought by the plaintiff under the Waddington Summons.

9.  In relation to the costs of the Waddington Summons, since both the 1^st defendant and the 5^th defendant unsuccessfully opposed that summons, prima facie both ought to pay the plaintiff’s costs.

10.  The plaintiff has not advanced any reason in its skeleton argument dated 20 February 2017 as to why the 5^th defendant should not be liable to the plaintiff for the costs of the Waddington Summons. However, in his oral submissions, Mr Lam on behalf of the plaintiff argues that the 1^st defendant, but not the 5^th defendant, should be liable for those costs because the primary responsibility to pay the interests fell on the 1^st defendant.

11.  On the other hand, Mr Law on behalf of the 5^th defendant argues that the major issues in relation to the Waddington Summons were between the plaintiff and the 1^st defendant. This is not correct.  There were two major points raised in relation to the Waddington Summons: (i) whether the amounts of interest ought to be paid into court or to the 5^th defendant directly, and (ii) whether the Shortfall should carry any further post-judgment interest.  Although the 5^th defendant maintained a neutral position in respect of point (ii), it made detailed submissions on point (i), contending that the amounts in question ought to be paid to it directly.

12.  Mr Law further argues that the 5^th defendant was entitled to make submissions in respect of point (i), because “it has concerns that any payment-in might be treated by Waddington as its reserve funds for satisfaction of its costs order”.  I accept that the 5^th defendant was entitled to make submissions on point (i), but its opposition to the Waddington Summons was ultimately not accepted by the court.

13.  There is no good reason why the 5^th defendant should not be liable to pay costs for its unsuccessful opposition to the Waddington Summons.  In all, the costs order nisi previously made, namely, that the 1^st defendant and the 5^th defendant shall pay the plaintiff its costs of the Waddington Summons, is confirmed.  Further, the plaintiff’s costs are to be assessed on a common fund basis, if not agreed, in line with the previous order made by Mr Recorder P Fung SC in March 2014.

COSTS OF THE PROFIT SUMMOMS

14.  By the Profit Summons, the 5^th defendant applied for leave to intervene in the Waddington Summons, and for an order that the hearing of that summons be adjourned so that it could be heard together with a separate application made by the plaintiff seeking disclosure of information relating to the 5^th defendant’s funder(s) in this litigation (“the Disclosure Application”).  I accepted the former application but rejected the latter one.  As earlier mentioned, I made an order nisi that the 5^th defendant shall pay the plaintiff its costs in relation to the Profit Summons, and there be no order as to costs as between the 5^th defendant and the 1^st defendant in relation to that summons.

15.  None of the parties has sought to vary the second aspect of the order nisi, ie that there be no order as to costs as between the 5^th defendant and the 1^st defendant in relation to the Profit Summons.

16.  In respect of the first aspect of the order nisi, the 5^th defendant submits that either (i) the plaintiff should pay the 5^th defendant its costs in relation to the Profits Summons, or (ii) there should be no order as to costs as between the plaintiff and the 5^th defendant, on the ground that the 5^th defendant succeeded in obtaining leave to intervene in the Waddington Summons despite the plaintiff’s opposition which Mr Law submits was wholly misconceived.  Mr Law also argues that although the court declined to adjourn the hearing of the Waddington Summons, the 5^th defendant’s application for such direction was sought with a view to saving costs and to ensure that all issues can be dealt with in one go.

17.  In relation to the Profits Summons, the focus of the arguments at the hearing on 1 December 2016 was not in fact on whether the 5^th defendant should be allowed to intervene in the Waddington Summons, but whether the amounts of interest ought to be paid to the 5^th defendant directly, instead of into the court.  Further, it is obvious that the 5^th defendant sought leave to intervene not for the sake of intervening, but in order to enable it to advance arguments as to why the amounts in question should be paid to the 5^th defendant directly.  As it was, the 5^th defendant’s arguments were rejected by me.  I do not consider the fact that the 5^th defendant was granted leave to intervene to be of much significance in relation to the issue of the costs of the Profits Summons.

18.  In so far as the 5^th defendant’s application for adjournment of the hearing of the Waddington Summons is concerned, that was rejected for the reason given in paragraph 12 of my written decision dated 6 December 2016, namely, that I failed to see any reason why the Waddington Summons should be heard together with the Disclosure Application.  The two applications concerned completely different matters and were independent of each other.

19.  The 5^th defendant failed to achieve the purpose of seeking leave to intervene in the Waddington Summons (namely, to resist the plaintiff’s application for payment into court), and further failed to obtain an adjournment of the hearing of the Waddington Summons.  In my view, the Profits Summons should be regarded as having arisen incidentally to the Waddington Summons.  In all the circumstances, I consider that the 5^th defendant ought to pay the plaintiff its costs incurred in relation to the Profit Summons.

20.  I therefore confirm the order nisi that the 5^th defendant shall pay the plaintiff its costs in relation to the Profit Summons, and there be no order as to costs as between the 5^th defendant and the 1^st defendant in relation to that summons.  The plaintiff’s costs to be paid by the 5^th defendant are to be assessed on a common fund basis, if not agreed.

FURTHER INDEMNITY SOUGHT BY THE PLAINTIFF

21.  On the question of indemnity, the Waddington Summons may be regarded as part and parcel of the steps taken by the plaintiff in this multiple derivative action to pursue a claim against the 1^st defendant for the benefit of the 5^th defendant.  In principle, the plaintiff ought to be indemnified by the 5^th defendant in respect of any costs incurred which it may not be able to recover from the 1^st defendant. For this purpose, the plaintiff’s costs should be assessed on a common fund basis (see Wallersteiner v Moir (No 2) [1975] QB 373, at 391-392 per Lord Denning MR and at 403 per Buckley LJ).

22.  However, I have already ordered the 5^th defendant to pay, along with the 1^st defendant, the plaintiff’s costs incurred in relation to the Waddington Summons, also to be assessed on a common fund basis.  There is thus no purpose in making any further costs indemnity order in favour of the plaintiff in relation to the costs of the Waddington Summons.  The same logic applies to the plaintiff’s costs incurred in relation to the Profits Summons.

23.  In all, I decline to make any further costs indemnity order in favour of the plaintiff in respect of the Waddington Summons and the Profits Summons.

24.  I shall now hear the parties on the question of the costs of the various applications before me.

[The court heard further submissions made on behalf of the plaintiff, the 1^st defendant and the 5^th defendant.]

25.  The plaintiff and the 5^th defendant has each been largely unsuccessful in its respective application(s) to vary the costs orders nisi.  I consider that it would be fair in the circumstances to make no order as to costs as between them in respect of the plaintiff’s summonses dated 14 December 2016 and 15 December 2016 respectively and the 5^th defendant’s summons dated 20 December 2016, including the costs of the hearing today, and I so order.

26.  Mr Lam informs the court that the plaintiff will not be maintaining the application for an indemnity in respect of its present applications.  I should mention that I would not, in any event, order the 5^th defendant to indemnify the plaintiff in respect of the costs of their summonses dated 14 December 2016 and 15 December 2016 respectively, because (i) the plaintiff has been largely unsuccessful in those applications (save in respect of the basis of assessment of the costs to be paid by the 1^st defendant and the 5^th defendant[1]), and (ii) the application for indemnity cannot be regarded as an application made for the benefit of the 5^th defendant.

27.  The 1^st defendant has been successful in resisting the variations sought by the plaintiff and the 5^th defendant in so far as he might be affected by them. I consider that his costs should be borne by the plaintiff and the 5^th defendant, to be assessed on a party and party basis, if not agreed, and I so order.

28.  Lastly, I should mention that I would not in any event have been disposed to deal with these summonses by written submissions only.  I consider the oral submissions to be helpful in distilling and clarifying the true issues between the parties on the various summonses, and also in answering a number of queries that I had in my mind when reading the papers and the parties’ respective submissions.

[Costs were then summarily assessed.]