STANDARD CHARTERED BANK (HONG KONG) LTD v. SWEETMART GARMENT WORKS LTD AND OTHERS

HCA 1807/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1807 OF 2005

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BETWEEN

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DECISION ON APPLICATION FOR LEAVE
TO APPEAL AGAINST COSTS

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The summons

1.  There is before the court a summons dated 16 July 2010 taken out by the plaintiff herein for leave to appeal against an Order for costs made by this court on 6 July 2010.

The background

2.  On 10 March 2010 this court handed down its judgment in this action, which was a suit by the plaintiff bank against the 2^nd defendant, Mr Wong Chit Ming, for enforcement of his obligations under a guarantee executed by Mr Wong in favour of the plaintiff.

3.  That judgment upheld the validity of the guarantee, and found in favour of the plaintiff bank in the sum pleaded, together with interest and a nisi order as to costs.

4.  This substantive judgment presently is subject to an appeal, in CACV 77 of 2010, pursuant to a Notice of Appeal dated 7 April 2010; I am told this morning by Miss Queenie Lau that this substantive appeal is due to be heard on 19 May 2011.

5.  It is the costs’ element of the substantive judgment with which this application is concerned.

6.  Because notwithstanding the argument of Mr Shieh SC at trial that the successful plaintiff bank in the substantive action should have its costs on an indemnity basis, praying in aid a pro forma clause so stipulating in the guarantee, this court declined to accede to this request for indemnity costs, and instead ordered that the plaintiff was to have its costs on a normal party and party basis, to be taxed if not agreed.

The application to vary the costs’ order nisi

7.  On 10 May 2010 Mr Shieh SC, leading Miss Queenie Lau, returned to this court in an attempt to vary the costs’ order nisi.

8.  By a written decision dated 6 July 2010 this application was refused, for the reasons given therein.

This argument

9.  The plaintiff bank is aggrieved at the decision of this court to decline to vary the order nisi as to costs, and now wishes to obtain leave to appeal against that refusal to order indemnity costs, or, at the least, costs on a higher level than party and party.

10.  Miss Lau, who today appears on this application for leave without Mr Shieh SC, argues strongly that this decision was wrong in principle, and that this court ought to have followed the approach of the English Court of Appeal in Gomba Holdings (UK) Ltd v Minories Finance Ltd & ors (No 2), [1993] Ch 171, at 194, wherein it was decided that when a court is being asked to exercise its discretion and to depart from the parties’ contractual bargain, the burden is on the paying party to identify circumstances/materials in order to justify such departure.

11.  See also the treatment of Gomba Holdings, op cit, in Hong Kong in the Court of Appeal decision in Chekiang First Bank v Fong Siu Kin & anr, [1997] 2 HKC 302, and in a first instance decision on the point by Deputy Judge McCoy in Yeung Kwok Fan & anr v Standard Chartered Bank [2001] 4 HKC 486 ‑ both of which cases are discussed in this court’s judgment of 6 July 2010.

12.  On the other side of the bar table, Mr Alan Ng, who also appeared in the substantive case with Mr Ronny Wong SC, argued that there was a high threshold for leave to appeal against costs, and that in this case this court had had all relevant materials before it, and in light of its decision not to award indemnity costs could not be said plainly to have been wrong, or that extraneous and irrelevant matters had been taken into account which justified appellate interference with a decision which lay wholly within the court’s unfettered discretion.  In a nutshell he said that there was no realistic prospect of success of this proposed appeal against costs.

13.  Both counsel have put in helpful written skeleton arguments, but that at least is the gist of the argument.

Decision on application for leave to appeal

14.  In 99 cases out of 100 this court will have nothing to do with applications for leave to appeal against purely a costs’ decision, assuming always that the costs’ decision that is sought to be appealed is not obviously wrong or does not contain in the reasoning underpinning that decision some clear error.

15.  In fact, in a very recent decision specifically rejecting an application for leave to appeal against costs ‑ see HCA 496 of 2010, Decision dated 5 August 2010 ‑ this court observed (at para 13 thereof) that in some ways such application for leave to appeal against costs is analogous to the application of the “or otherwise” provision in the Court of Final Appeal Ordinance, wherefor the Court of Appeal rarely, if ever, grants leave under this ‘catchall’ provision, and leaves it to the CFA to decide whether they wish to entertain the matter.

16.  However, it strikes me that this is perhaps the one case out of the 100 which is the exception to the general rule.

17.  I say so for two reasons.

18.  First, the Court of Appeal will be seized with the substantive appeal in any event: CACV 77 of 2010 refers, and as I have said this has been fixed for 19 May 2011, and thus in the course of that hearing will, if you like, be knee deep in the factual matrix of this particular case, including of course the particular indemnity costs provision within the guarantee upon which the plaintiff bases its costs’ argument.

19.  Second, I consider that in principle this is a matter which merits appellate consideration.

20.  In the Decision dated 6 July 2010, of which the plaintiff bank now wishes to complain, this court makes the point (at para 20) that anecdotal evidence suggests that there is no consistent judicial practice amongst Masters and Judges in terms of the upholding of this type of clause; indeed, Miss Lau makes the point (at para 14 of her skeleton) that it would be helpful for the Court of Appeal to be in position to clarify the law in respect of indemnity costs’ provisions in commercial documents, which is a matter which very frequently arises, and which, as I have said, equally frequently generates disparate judicial treatment.

21.  Accordingly, whilst, if I may be permitted to say so, I do not consider my decision of 6 July 2010 declining to follow the English Court of Appeal in Gomba Holdings, op cit., as followed by Deputy Judge McCoy in Yeung Kwok Fan, op cit., to be incorrect, since in my decision of 6 July 2010 I am purporting to exercise an wholly untrammelled judicial discretion, I nevertheless can appreciate that there is real scope for argument as to the appropriate principle to be applied in such situations, and that, again as a matter of principle, an appellate court may take a different view of the situation, albeit I am reluctant at this stage to express any view as to the “realistic prospect of success” of any such appeal.

22.  It follows, therefore, that I have decided, in these very particular circumstances, and not without some hesitation given the nature of this subject-matter, to grant the relief sought in the summons.

Order

23.  Accordingly, I make an Order that:

(1)   the plaintiff do have an order in terms of paragraph 1 of its summons dated 16 July 2010, such appeal against costs to be heard at the same hearing as the substantial appeal;

(2)   as to the costs of this application, I make an order that such costs be costs in the appeal against costs; and

(3)    I further order that consequent on this decision, the plaintiff do have leave to file its Notice of Appeal against costs within 14 days of the date hereof.