JINGCHENG ASIA GROUP LTD v. ASIAN INSTITUTE OF ADVANCED MEDICINE LTD

HCA 1348/2023

[2025] HKCFI 305

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1348 OF 2023

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DECISION

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1.  The Plaintiff (“P”)  commenced this action against the Defendant (“D”)  for having made fraudulent misrepresentations said to have induced P to place purchase orders of certain COVID Test Kits (“the Subject Goods”)  for export to Germany and Mexico.  P claimed the return of a total of US$2.7 million and damages.

2.  Upon D’s application and on 20 September 2024, Master Lewis Law enforced the exclusive jurisdiction clause (“EJC”)  contained in 2 distribution agreements entered into by the parties in respect of the Subject Goods and set aside the Writ herein and made a declaration that the Hong Kong Court has no jurisdiction in respect of P’s present claim.  Having heard the parties on costs, the Master ordered P to pay D the costs of its application taxed on indemnity basis, which he summarily assessed at HK$400,000.

3.  For determination now by way of paper disposal is P’s Notice of Appeal dated 2 October 2024 appealing against the part of the Master’s costs order ordering such costs to be taxed on indemnity basis rather than the usual party and party basis.

4.  As this appeal is an appeal against a costs order made by a Master, a judge in chambers in general will not allow such an appeal unless the costs order is unreasonable or the Master erred in law, ie, if he either failed to take into account proper matters or took into account matters that should not have been taken into account (Hong Kong Civil Procedure 2025 §58/1/6).  This is trite and not disputed by the parties.

5.  P submitted that the Master erred in law in accepting D’s submission at the hearing, relying on Deltatre S.P.A. v Hong Kong Sports Industrial Development Ltd [2018] 4 HKLRD 478 at §125 and Hong Kong Civil Procedure 2024 §11/1/165, that the normal practice or rule was that upon acceding to an application to enforce an EJC, costs should be awarded on indemnity basis.

6.  P relied on the recent decision of the Court of Appeal in Re Guy Kwok-hung Lam (No 3) [2024] 1 HKC 16 handed down on 20 September 2023.  There, the CA adjudicated on the application by the appellant Lam for varying the costs order nisi given by the CA when the CA set aside the bankruptcy order against Lam on the ground that the EJC in the agreement between Lam and the petitioner should be adhered to so that the petition should not be allowed to proceed in Hong Kong without strong cause.

7.  One of the main issues before the CA concerned whether Lam’s costs of the appeal should be taxed on an indemnity basis, as being the normal rule or practice.  The learned G Lam JA, giving the only judgment which was agreed to by Barma and Chow JJA, examined the origin of that supposed normal rule or practice, reviewed the earlier cases in Hong Kong and also considered a number of foreign decisions.  The learned Judge observed that in Hong Kong there was yet no decision from the CA concerning it and that the approach in A v B (No 2)  [2007] 1 Lloyd’s Rep 358 did not yet represent a uniform practice and indeed has met with a mixed reception in the common law world.

8.  The learned Judge then analysed and reasoned on the issue in detail (§§22 to 34)  and concluded that he was not persuaded that a general rule or presumption should be adopted in Hong Kong for ordering indemnity costs against a litigant who has brought proceedings in Hong Kong in breach of a jurisdiction agreement.

9.  Therefore, it has already been authoritatively decided at the time the Master made the costs order, and the correct law was, that there was no such general rule or presumption.  That such was the correct law was not seriously disputed by Mr Chan, counsel for D.

10.  Mr Chan made 2 submissions contending that the Master’s costs order should not be disturbed.

11.  First, he submitted that P could not now challenge taxation on indemnity basis as at the hearing it has not objected to it.  He submitted that P has effectively consented to it and should be estopped from arguing against it on appeal.  He also submitted that it would be most unfair if P was to be allowed to challenge it on appeal when it has not objected to it before the Master when it had an opportunity to do so.

12.  In support, Mr Chan cited Chan Kai Man v Wong Ka Wai DCMP 4019/2020 [2022] HKDC 341, which was an application by the ex-husband under the Partition Ordinance for an order that the property registered in the joint names of him and the ex-wife to be sold.  There, HHJ Liu held that the defendant ex-wife was estopped from asserting that the property was beneficially owned solely by her in view of the fact that in 2012 the parties sought and obtained a consent order in the Divorce Proceedings ordering by way of ancillary relief that the property, acknowledged to be jointly-owned, remained to be so jointly owned.

13.  That case is clearly distinguishable on the facts and I do not think it assists D here.

14.  In considering whether a consent order can be disturbed, and if so how, the law has always drawn a distinction between on the one hand a consent order which was made pursuant to an agreement reached between and thus was or evidenced a contract binding the parties, and on the other hand a consent order made when the other party did not object, in which case there was no real contract between the parties.  For the former, the Court will only interfere with such an order on the same grounds as it would with any other contract, or where there are exceptional circumstances.  While the latter can be altered or varied by the Court in the same circumstances as any other order that is made by the Court without the consent of the parties (see Siebe Gorman & Co Ltd v Pneupac Ltd [1982] 1 WLR 185 Lord Denning MR at p 189E-G; CY Tsun Investment Co Ltd v The Incorporated Owners of Hoi To Court HCSA 16/2003, 2 July 2004, A Cheung J (as the CJ then was); Taibao Investment And Management (Hong Kong)  Company Limited V Kary Enterprises (Holdings)  Limited and Another HCA 642/2011, unrep., 16 April 2012, Deputy High Court Judge Lok (as he then was); and Chan Fok Yi（陳福如）, the executor of the estate of Chan Li Mui（陳李妹）, Deceased v All Occupiers of Lot No. 2 In Demarcation District 79, North New Territories and Another DCCJ3157/2016 [2020] HKDC 1021).

15.  As clearly borne out by the exchanges between counsel and the Master at the hearing concerning costs (at p.7E to 8E of the transcript[1]), Mr Chan, appearing for D made the submission that ordering indemnity costs was the normal rule or practice and cited the above-mentioned authorities; the Master asked and Mr Leung, appearing on behalf of P, initially indicated that he would resist indemnity costs, but then after having confirmed with his instructing solicitors, did not make any submission thereon.  It is clear that the taxation on indemnity basis was ordered by the Master in the absence of real resistance – therefore falling within the second scenario set out above. Thus, the order is one that may be altered or varied or appealed against as any other order of the Court.  In my judgment, P is not estopped and may challenge it by appealing against it.

16.  On D’s argument about unfairness, I accept that there is an element of unfairness where P did not resist and did not draw the attention of the Master to the correct law (as expounded in Re Guy Kwok-hung Lam (No 3)), which evidently it ought to have, but then raised it on appeal.  However, in my judgment, such is not sufficient to deny P the appeal where it can be shown that the Master erred in law.  In my view, this fairness could and should be properly addressed instead when the Court exercises its discretion on the costs of this appeal.

17.  The second contention by Mr Chan, as I understand it, was that the costs order was made without real contest, the Master therefore did not give any reasons for ordering the indemnity taxation, and without the benefit of his reasons, it could not be shown that the Master erred by applying the wrong law, as the Master might very well have so ordered because of the conducts of P.  Mr Chan then made complaints about some of P’s conducts as would justify indemnity costs, such as P raising a number of arguments before the Master which were totally unmeritorious and rejected by the Master.  Mr Chan submitted that thus it was not shown that the Master’s order was unreasonable.

18.  With respect, I cannot accept that contention.  Having considered the transcript of proceedings before the Master carefully, I think it very clear that the only basis advanced by D was the said “normal rule and practice” and no other conducts or matters were even mentioned by D to the Master.  I accept P’s submission that the Master ordered indemnity costs based solely on the said “normal rule and practice”.

19.  As the correct law is that there is no such general rule or presumption, the Master ought not have taken it into account and based on it ordered costs to be taxed on indemnity basis.  I am satisfied that the Master erred in law and would set aside his costs order.  I would thus exercise the discretion afresh. 

20.  As said, Mr Chan referred to a number of P’s conducts.  They included that P pursued a claim over fraudulent misrepresentation and has not pleaded the distribution agreements, that P raised the argument that the cause of action was tortious rather than contractual and had raised a number of further arguments before the Master, which like the others were unmeritorious and were rejected.  In all, I am not persuaded that these conducts were sufficiently egregious as would make it appropriate to order indemnity costs, I thus refuse to so order.

21.  For the above reasons, I allow the appeal and set aside the costs order made by the Master and instead order P to pay D’s costs of its application, with certificate for counsel, to be taxed on party and party basis, which, as asked by the parties, would be summarily assessed by this Court based on D’s Statement of Costs and P’s Objections submitted to the Master.  Having considered them, I summarily assess such costs at HK$310,000 to be paid by P forthwith.

22.  As I indicated in paragraph 16 above, P has not resisted indemnity costs and addressed the Master on the correct law when it had the opportunity, and ought to have done so, before the Master.  Without having done that, it now raises it by way of an appeal.  As said, there was an element of unfairness in this.  Moreover, the basis of the appeal, namely, the correct law and the case Re Guy Kwok-hung Lam (No 3), was only first set out in P’s written submissions dated 14 November 2024 lodged for this paper disposal and has not stated or referenced in the Notice of Appeal or, as far as I am aware, has not been communicated to D by any correspondence, such that it cannot be said that D ought to have conceded earlier which would result in saving the expenditure of counsel fee and further costs.  In the circumstances, I think the just and fair order for the costs of this appeal is no order as to costs.  I so order on nisi basis to become absolute in 14 days unless any party applies to vary by letter within that time.

23.  Lastly, I thank Mr Leung and Mr Chan for their assistance.