KITAHARA HONG KONG CO., LTD v. CHENG KAM WAH GRACE (also known as CHENG GRACE)

DCCJ 1088/2019 & 139/2022 (Consolidated)

[2026] HKDC 1671

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NOS 1088 OF 2019 & 139 OF 2022

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BETWEEN

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(Consolidated by the Order of
Master Ebony Ling dated 21^st June 2023)

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DECISION

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Introduction

1.  On 20 January 2026, this Court handed down its decision[1] (“Appeal Decision”), allowing the Defendant’s appeal (“Appeal”) against that part of the order of the learned master in respect of security for costs made on 1 September 2025 (“Order”) by increasing the amount of security awarded to the Defendant from HK$250,000 to HK$400,000. I also made a costs order nisi that the costs of and occasioned by the Appeal pursuant to the Notice of Appeal filed on 15 September 2025 (“Notice of Appeal”) and the Defendant’s summons filed on 19 February 2025 (from which the Appeal arose) be paid by the Plaintiff to the Defendant, with Certificate for Counsel, to be taxed if not agreed, and the Defendant’s own costs be taxed in accordance with Legal Aid Regulations (“Costs Order Nisi”).

2.  On 3 February 2026, the Plaintiff took out a summons (“the Summons”) to vary the Costs Order Nisi as follows:-

(1) the costs of and occasioned by the Appeal be in the cause;

(2) alternatively, there be no order as to costs of the Appeal;

(3) still alternatively, the Defendant’s costs be in the cause;

(4) still alternatively, the Plaintiff shall pay no more than 20% of the Defendant’s costs of and occasioned by the Appeal, to be taxed if not agreed.

3.  This Court has directed that the Summons be disposed of on papers.

Clerical Error in Notice of Appeal

4.  Before considering the merit of the present application, it is necessary to set out the relevant background.

5.  As can be seen below, the Plaintiff’s primary position on the Summons is that this Court erroneously set aside the learned master’s costs order nisi in relation to the Defendant’s Discovery Summons, while the costs order nisi in relation to the Defendant’s application for security for costs was not challenged by the Notice of Appeal and therefore not set aside.

6.  On 12 February 2026, the Plaintiff took out a summons pursuant to Order 20 rule 11 of the Rules of the District Court (Cap 336H, sub leg) (“RDC”), seeking an order that the Appeal Decision “be amended or corrected or revised by deleting reference to the costs order nisi made by Master Bianca Yu dated 1 September 2025 that, costs of and occasioned by the Defendant’s Discovery Summons be borne by the Defendant, from the said Order of Master Bianca Yu that is set is [sic] aside in paragraph 19(1) of the [Appeal] Decision”. That day, the Plaintiff’s solicitors also wrote to this Court for the same purpose.

7.  Still on 12 February 2026, the Plaintiff also filed a summons for leave to appeal to the Court of Appeal against the Appeal Decision and an extension of time for application for such leave to appeal. According to the supporting 8^th Affirmation of Wai Yip Hin filed on 12 February 2026, the intended appeal raised a single point, namely whether this Court erroneously and/or without basis set aside the costs order nisi made by the learned master that costs of and occasioned by the Defendant’s Discovery Summons be borne by the Defendant.

8.  It is therefore clear that from the Plaintiff’s perspective, the Summons and the 2 summonses taken out on 12 February 2026 all concerned the costs order nisi of the learned master that costs of and occasioned by the Defendant’s Discovery Summons be borne by the Defendant.

9.  The Plaintiff’s said primary position on the Summons was wrong. In fact, this Court was fully aware, both at the Appeal and in the Appeal Decision, that the Appeal was in relation to the Defendant’s application for security for costs only:-

(1) In paragraph 1(3) of the Appeal Decision, this Court realised that the Defendant had wrongly described, in her Notice of Appeal, the order in respect of the security for costs application, and that was why this Court quoted the sentence “there be a costs order nisi that costs of and occasioned by the Defendant’s Discovery Summons be borne by the Defendant” with the word “[sic]” after “the Defendant’s Discovery Summons”.

(2) In paragraph 7 of the Appeal Decision, this Court expressly stated that the Plaintiff’s and the Defendant’s respective applications for specific discovery did not concern the Appeal.

(3) That this Court had not misunderstood the Defendant’s intention of appealing against the costs order nisi of the security for costs application only, despite the error in the Notice of Appeal, was apparent from the order of the learned master with the following costs orders:-

(a) Costs order nisi that costs of and occasioned by the Plaintiff’s application for specific discovery be to the Plaintiff (paragraph 36(1) of the learned master’s decision dated 1 September 2025);

(b) Costs order nisi that costs of and occasioned by the Defendant’s application for specific discovery be reserved (paragraph 36(2) thereof); and

(c) Costs order nisi that costs of and occasioned by the Defendant’s application for security for costs be borne by the Defendant (paragraph 36(3) thereof).

(4) It is clear that the learned master did not make any costs order nisi that “costs of and occasioned by the Defendant’s Discovery Summons be borne by the Defendant”, but only that “costs of and occasioned by the Defendant’s application for security for costs be borne by the Defendant”.

10.  As a result, on 1 April 2026, this Court referred to all 3 summonses and expressed to parties that its intention, as manifested in the Appeal Decision, was to set aside the Order in respect of the costs order nisi for the Defendant’s security for costs application but not the costs order nisi for the Defendant’s Discovery Summons. This Court made no error in the Appeal Decision.

Discussion on Costs of Appeal and Below

11.  As set out above, the Appeal was solely concerned with the Defendant’s application for security for costs. Parties never argued on the Defendants’ Discovery Summons. The reference to the costs order nisi in respect of the Defendant’s Discovery Summons was a clerical error that was not picked up by the parties at the Appeal.

12.  Moreover, the Plaintiff has never misunderstood, whether at the Appeal or in the present application, that the Appeal was concerned with the Defendant’s Discovery Summons, particularly the costs order nisi therefor. In fact:-

(1) In paragraph 12 of its solicitors’ letter dated 15 April 2026 to this Court, the Plaintiff admitted that it had not suffered any substantial prejudice as a result of the error in the Notice of Appeal.

(2) According to the 3^rd Affirmation of Chun Tsz Him Kenny filed on behalf of the Defendant on 22 May 2026 in opposition to the Summons, the Defendant took out a summons on 15 September 2025 for variation of the costs order nisi in respect of her application for security for costs before the learned master and, in anticipation of the eventuality that the said summons would not require determination if set aside at the Appeal initiated by the Notice of Appeal, expressly sought directions for the said summons to be dealt with after the Appeal. It is clear from its solicitors’ letters dated 15, 20 and 24 October 2025 that the Plaintiff was not mistaken as to the subject costs order nisi appealed against.

13.  Apparently, there was no misunderstanding on the part of this Court or the parties. The Defendant also confirmed in paragraph 7(d) of the 3^rd Affirmation of Chun Tsz Him Kenny that the reference to the Defendants’ Discovery Summons in the Notice of Appeal was a clerical error and the Defendant’s application for security for costs was the true subject of the Appeal.

14.  Clearly, at the Appeal, the Defendant sought to set aside the learned master’s costs order nisi in respect of the Defendant’s application for security for costs only but not the Defendant’s Discovery Summons. Equally clear was this Court’s intention in the Appeal Decision to set aside the costs order nisi in respect of the Defendant’s application for security for costs, but not that in relation to the Defendant’s Discovery Summons.

15.  In such circumstances, this Court rejects the Plaintiff’s argument that the Appeal Decision erroneously set aside the learned master’s costs order nisi in respect of the Defendant’s Discovery Summons but did not set aside that in respect of the Defendant’s security application.

16.  For the record, I grant leave to the Defendant to amend the Notice of Appeal by replacing the words “the Defendant’s Discovery Summons” by the words “the Defendant’s application for security for costs” in the description of the Order, and the Defendant do file and serve the Notice of Appeal as amended within 7 days.

17.  I now turn to the Plaintiff’s arguments relating to the merits of the Appeal.

18.  As stated in paragraph 6 of the Appeal Decision, the Appeal was dealt with by way of an actual rehearing of the Defendant’s application for security for costs, and this Court treated the matter as though it came before it for the first time.

19.  It should be noted that the Defendant’s stance at the Appeal, as indicated in paragraph 96 of her Skeleton Arguments, was that she sought security for costs in the amount of HK$2,009,000 (ie a rounded up figure from the original claim for HK$2,230,000 less HK$221,147 being the Defendant’s cost for the worldwide Mareva injunction) or such sum above HK$250,000. I accept the Plaintiff’s argument that the amount of security for costs awarded at the Appeal (viz HK$400,000) is still far less than the amount sought (viz HK$2,009,000) at the Appeal, and the Defendant did not seriously pursue the alternative position of any sum above HK$250,000. I also accept the Plaintiff’s submission that the general rule that costs follow the event should be displaced where a party has only been partially successful, and a successful party may be deprived of costs to reflect the realities of the case such as where a party’s case has ‘for the most part failed’: Re Elgindata Ltd (No 2) [1992] 1 WLR 1207, at 1212 to 1216; Hung Fung Enterprises Holdings Ltd v The Agricultural Bank of China [2012] 3 HKLRD 679.

20.  Moreover, as submitted by the Plaintiff, most of the Plaintiff’s arguments in resisting the quantum, being the same as those run before the learned master, were accepted at the Appeal, as reflected in my adoption of the reasoning of the learned master’s decision in paragraph 15 of the Appeal Decision. Further, some time was spent at the Appeal on arguing the admissibility of a letter marked “without prejudice save as to costs” dated 17 December 2024, which was resolved in the Plaintiff’s favour.

21.  That said, it should not be forgotten that the Defendant emerged victorious at the Appeal in the sense that the Plaintiff decided not to dispute its liability to pay security for costs for the purpose of the Appeal and the underlying application (see paragraph 3 of the Appeal Decision), and that the amount of security for costs was increased from HK$250,000 to HK$400,000. Such increase in the quantum was the result of my acceptance of the Defendant’s arguments of the remarkable difference in the size of the Plaintiff’s claim and the Defendant’s counterclaim, the commonality of issues, the Plaintiff’s own incurrence of considerable legal fees and the substantial volume of legal work done and expected to be done: paragraph 16 of the Appeal Decision.

22.  Further, it cannot be disputed that the quantum of security for costs is determined at a broadbrush but not as a result of taxation or precise calculation, and it is not strictly correct to determine the issue of costs of the Appeal by measuring the Defendant’s success based on the percentage increase of the security awarded.

23.  Considering the matter in the round, especially the success, albeit limited, achieved by the Defendant at the Appeal, it is inappropriate to order costs of the Appeal be in the cause, or the Defendant’s costs of the Appeal be in the cause, or no order as to costs. In my judgment, the appropriate costs order is that the Plaintiff do pay 50% of the Defendant’s costs of and occasioned by the Appeal, with Certificate for Counsel, to be taxed if not agreed.

24.  In respect of the amendment to the Notice of Appeal, no doubt indulgence is now granted out of this Court’s own volition to the Defendant to correct her clerical error. I also consider that neither the Plaintiff nor the Defendant spotted the error before or at the Appeal, and in fact as stated above the Plaintiff was not prejudiced by the error at the Appeal. The amendment is simply for the court record. A just order is that there be no order as to costs for the amendment to the Notice of Appeal.

25.  In relation to costs of the Defendant’s application for security for costs before the learned master which I set aside in the Appeal Decision, whilst the Defendant was awarded only HK$250,000 compared with the amount of HK$2,008,853 sought, the Defendant was successful in establishing the Plaintiff’s liability to pay security for costs, despite the Plaintiff’s objection to pay due to delay, prejudice and the Defendant’s indebtedness for the costs of the application for the Mareva injunction. A just costs order would be that there be no order as to costs for the Defendant’s application for security for costs before the learned master.

Discussion on Costs of Summons

26.  Turning to the costs of the Summons, the Plaintiff is successful in varying the Costs Order Nisi in respect of both the Appeal and below, though not in the precise terms sought. I also take into account that despite my variation of the Costs Order Nisi in respect of the proceedings before the learned master from “costs of and occasioned by the application be paid by the Plaintiff” to “no order as to costs”, the Defendant is still achieving better than the costs order nisi made by the learned master, namely that “costs of and occasioned by the application be borne by the Defendant”.

27.  Also, should the Defendant have been careful in drafting the Notice of Appeal and not making the clerical error, and should the Defendant have applied for leave to amend at the Appeal, arguments on the subject matter of the Appeal would have been avoided in this application.

28.  That said, I accept the Defendant’s argument that the parties to any proceedings and their legal representatives shall assist the Court to further the underlying objectives pursuant to Order 1A rule 3 RDC. The Plaintiff did not spot the clerical error at the Appeal either. In addition, with this Court’s clear indication in the Appeal Decision including the insertion of ‘[sic]’ when referring to the Defendant’s Discovery Summons in the Order, the Plaintiff should have clarified the position with my Clerk before alleging that this Court had no basis to set aside the “Defendant’s Discovery Summons”. This is especially so in view of the Plaintiff’s understanding, as set out above, that the subject matter of the Appeal including the costs order nisi appealed against was the Defendant’s application for security for costs but not the Defendant’s Discovery Summons. I reject the Plaintiff’s argument that the Costs Order Nisi which purported to override the Order was not properly appealed against.

29.  I also reject the Plaintiff’s argument that the Defendant was unreasonable to pursue an inflated security for costs claim at the Appeal, bearing in mind that the Plaintiff only conceded the issue of its liability to pay security at the Appeal and that the Defendant successfully obtained an increase in the quantum of security. I do not take the Plaintiff to mean that it has made any offer to pay security of such an amount that the acceptance of which should have rendered the Appeal unnecessary.

30.  For such reasons, I hold the view that the clerical error, the Defendant’s failure to spot the same at the Appeal and the pursuit of HK$2 million odd as security are far from justifying the Plaintiff’s contention for a wasted costs order. Neither is a personal costs order against the Defendant pursuant to sections 16(1)(b)(ii) and 17(3) of the Legal Aid Ordinance (Cap 91) and the Court of Final Appeal’s decision in Common Luck Investment Ltd v Director Legal Aid (2002) 5 HKCFAR A467 justified given the success enjoyed by the Defendant at the Appeal, namely the Plaintiff’s concession regarding its liability to pay security and the increase in the quantum.

31.  In the circumstances, I consider it just to order the Defendant to pay 70% of the Plaintiff’s costs of the Summons, to be taxed if not agreed.

Disposition

32.  I order that:-

(1) The Defendant do file and serve, within 7 days, an Amended Notice of Appeal by replacing the words “the Defendant’s Discovery Summons” by the words “the Defendant’s application for security for costs” in the description of the Order.

(2) The Plaintiff do pay 50% of the Defendant’s costs of and occasioned by the Appeal, with Certificate for Counsel, to be taxed if not agreed.

(3) There be no order as to costs in respect of the amendment to the Notice of Appeal by the Defendant.

(4) There be no order as to costs in respect of the Defendant’s application for security for costs before the learned master.

(5) The Defendant do pay 70% of the Plaintiff’s costs of the Summons, to be taxed if not agreed.

(6) The Defendant’s own costs at the Appeal and below and of the Summons and the amendment to the Notice of Appeal be taxed in accordance with Legal Aid Regulations.