YOUNG CRYSTAL LTD AND OTHERS v. HANG SENG BANK LTD

HCA 1710/2021

[2024] HKCFI 2422

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1710 OF 2021

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BETWEEN

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DECISION ON COSTS

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1.  On 1 August 2024, upon this Court’s dismissal of the Plaintiffs’ application for leave to appeal (“the Leave Application”) against the direction given by the Court on 24 April 2024 (“the April Direction”) to vacate the hearing scheduled for 9 May 2024, the Defendant applied for (a) costs to be awarded on an indemnity basis and (b) for such costs to be borne by the Plaintiffs’ solicitors (“SWW”) personally. Directions were given for costs to be dealt with on the papers.

2.  Reference should be made to the Reasons for Decision (“Reasons”) handed down on 2 August 2024 for the relevant procedural background. This Decision will adopt the nomenclature used in the Reasons.

Indemnity costs

3.  The Defendant submitted that the reason for the April Direction was the fact of the Dismissal Order which dismissed the action in its entirety. The Plaintiffs’ application for leave to appeal the April Direction could not serve any useful purpose as it could not overturn the dismissal of the action or somehow revive it. The Leave Application was thus frivolous and pointless from the outset. It should never have been brought.

4.  The Plaintiffs submitted that the Application was not an abuse of process. They felt aggrieved by the April Direction. However, they have failed to explain what they hoped to achieve by making the Leave Application when the action had already been dismissed in its entirety. I do not accept that the Leave Application followed the “ordinary and proper use of the court process” and was not an abuse of process.

5.  What the Plaintiffs ought to have done (instead of taking out the Leave Application), was to prosecute the Tang Appeal. That was an avenue that was open to them to pursue.[1]

6.  Moreover, on 21 June 2024, the Defendant had written to the Plaintiffs explaining why the Leave Application was misconceived and unmeritorious. It also made the point that the continuation of an application that has no chance of success would constitute an abuse of process and a waste of the Court’s resources. The Plaintiffs did not reply but persisted with their Leave Application.

7.  The Defendant further submitted that it has been vexed to defend hopeless applications since the start of these proceedings in 2021. The Plaintiffs have a history of taking out similarly unmeritorious applications and referred to the fact that indemnity costs have been awarded on 3 separate occasions[2]. To date, the Plaintiffs have not complied with any of the costs orders made in the entire action.

8.  The Plaintiffs submitted that non-compliance with previous costs orders is not a valid reason to justify an indemnity costs order in the present application. Indemnity costs ordered against the Plaintiffs in previous applications turned on the particular circumstances arising in those applications.

9.  To illustrate the point, they referred to the hearing before Master Isaac Chan on 30 October 2023 suggesting that indemnity costs were not granted because there was “no reason to do so”. However, that submission is not borne out by the transcript.

10.  At that hearing, the Defendant applied for indemnity costs on the basis of a long-running series of similar applications which were dismissed on the grounds that they were misconceived. The Master declined to do so because of the lack of evidence in relation to those matters. In the present case, such material[3] is before the Court.

11.  In my view, the Plaintiffs’ litigation conduct in these proceedings as a whole is a relevant factor to which the Court should have regard. Multiple unmeritorious applications, repetitive flouting of procedural rules, the several indemnity costs ordered within the same set of proceedings together provide a relevant backdrop against which the present application has to be viewed.

12.  As regards the Plaintiffs’ submission that the Leave Application was not abusive because it made cost-effective proposals to the Defendant[4], it is undermined by the Defendant’s letter dated 21 June 2024[5].

13.  In any event, by 24 July 2024 (only 8 days prior to the hearing), both parties had already briefed counsel and filed skeleton submissions. The Plaintiffs’ invitation came far too late and would not have achieved significant savings on time and costs.

14.  For the reasons stated above, I have no hesitation in concluding that this an appropriate case for awarding indemnity costs.

Wasted costs

(1) Applicable principles

15.  Relevant principles on wasted costs order may be found in Chung Ho Ming v Chan Wai Yip [2024] 1 HKLRD 138. For present purposes, of particular relevance are the following:

(1) Unreasonably to initiate or continue an action when it has no or substantially no chance of success may constitute serious misconduct giving rise to a wasted costs order (§§81-82); and

(2) While merely representing a client with a weak claim upon the client’s instructions would not amount to an abuse of process nor attract a wasted costs order, “the situation is different from where the solicitor has somehow connived at the client’s falsity, or assisted in the client’s improper/dishonourable conduct … The latter would amount to a serious dereliction of duty, invoking the court’s jurisdiction for a wasted costs order” (§87).

16.  They reflect the requirement that the solicitors were somehow complicit in wrongdoing: see Ridehalgh v Horsefield [1994] Ch 205, 234D-E.

17.  As stated in Hong Kong Civil Procedure 2024 at §62/8/4, where the allegation is that the solicitor has pursued a hopeless case, the question is whether no reasonably competent legal representative would have continued with the action.

18.  Ho Lee Man v Wong Wai Kai (No 2) [1993] 2 HKC 193 the appellant’s solicitors took out an interlocutory appeal without being aware that leave to appeal was required. That was found to be a gross dereliction of duty by the solicitors. Litton JA remarked (at 202) that the Courts “do not demand perfection from solicitors but they do expect high standards of professionalism”.

(2) The Leave Application

19.  SWW took over as the Plaintiffs’ solicitors on 31 May 2023.

20.  The Leave Application was a procedural application. As explained in §3 above, its purpose cannot be discerned: it could neither overturn the dismissal of the action nor somehow revive it. The Defendant submitted that, in those circumstances, SWW assisted the Plaintiffs in a procedurally hopeless case.

21.  The Dismissal Order was the result of SWW’s failure to comply with the Tang Decision to put in a fresh statement of claim within 14 days which was made on an unless basis. SWW also failed to apply for relief from sanction upon the Dismissal Order being made and failed to apply for a stay.

22.  Then, instead of pursuing the Tang Appeal, SWW assisted the Plaintiffs in taking out the Leave Application which could serve no useful purpose whatsoever. The Defendant submitted that is a blatant abuse of the Court’s process.

23.  In Fletamentos Maritimos SA v Effjohn International BV [2003] Lloyds Rep PN 26 at 36, Brown LJ concluded that the litigation before him “permitted of no reasonable explanation. It failed “the acid test”. It amounted to an abuse of process”. In my view, those observations are equally apt in relation to the Leave Application.

24.  Given the purely procedural nature of the Leave Application, it beggars belief that SWW was “simply acting on instructions”.

25.  SWW, as officers of the Court, are required to exercise their professional judgment on how best to advance the Plaintiffs’ interests in a manner that is not procedurally abusive. In that regard, they are expected to exhibit reasonably high standards of professionalism: see the Ho Lee Man case considered in §18 above.

26.  In my view, SWW unarguably failed to do so. I have no doubt that this is an appropriate case for the Court to grant a wasted costs order against SWW. The only remaining question is whether it should be on an indemnity basis.

27.  The Plaintiffs and SWW referred to PD 14.5 [33] which provides that:

“33. Where a wasted costs order is made such costs would normally be payable by the legal representative on a party and party basis. But account should be taken of any conduct on the part of the legal representative or the applicant in the course of the wasted costs proceedings which may indicate that a different Order should be made.”

28.  Showing disapproval for the solicitor’s conduct causative of the wasted costs is not a sufficient reason for the indemnity basis “where there has been no procedural or other impropriety justifying a special costs order”: per Li CJ in Ma So So v Chin Yuk Lun & Another (2004) HKCFAR 301 at §95.

29.  In the present case, the Defendant submitted that the procedural impropriety arises from the fact that no reasonably competent solicitor would take out the Leave Application instead of pursuing the Tang Appeal in circumstances where there is no dispute that the Leave Application (even if successful) would have no impact on overturning the dismissal of the action. I agree.

Conclusion

30.  Accordingly, it is ordered that (1) costs be borne personally by SWW on an indemnity basis; and (2) costs of this application be to the Defendant, with certificate for counsel.