BGA HOLDINGS LTD (IN LIQUIDATION) (formerly known as BEIBU GULF OCEAN SHIPPING (GROUP) LTD AND OTHERS v. CHU KONG AND OTHERS

HCA 631/2022

[2025] HKCFI 3487

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 631 OF 2022

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DECISION

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1.   Introduction

1.1     By my decision dated 25 April 2025 (“Decision”), I dismissed the Plaintiffs’ application for a worldwide Mareva injunction against D1, ie the Application[1]. At Decision §11.2, I directed the parties to lodge their submissions.  This is my decision on the issue of costs.

1.2     D1 seeks an order that the costs of the Application be paid by the Plaintiffs on an indemnity basis and a certificate for 3 counsel[2].  The Plaintiffs agree that D1 is entitled to costs in principle and do not object to a certificate for 3 counsel.  However, the Plaintiffs say that the present case does not attract an order for indemnity costs, and given the relative success of the parties on the issues, there should be an appropriate discount on D1’s costs entitlement.  In any event, the Plaintiffs observe that the quantum claimed, over HK$11 million for an interlocutory application, is excessive by any measure.

2.   Whether discount on D1’s costs entitlement

2.1     As may be seen from Decision §4.1, the Plaintiffs’ overall case of misappropriation of assets against D1 is made by reference to the Ausca Transaction and the Lohas Transaction.  In dismissing the Application:

(1)     I decided that there was no good arguable case on quantum in respect of the Ausca Transaction (Decision §7.24);

(2)     Whilst I came to the view that the Plaintiffs were able to surmount the merit threshold in respect of the Lohas Transaction (Decision §§8.2 to 8.3), I ultimately found that the Plaintiffs were unable to establish a risk of dissipation of assets (§§9.6-9.8) and the balance of convenience lies against the grant of the Application (§§10.2-10.4).

2.2     The only factor which the Plaintiffs rely on as justifying a discount of D1’s costs entitlement is the fact that the D1 failed to persuade me that the Lohas Transaction did not meet the merit threshold of a good arguable case (“Failed Issue”).

2.3     I have considered the parties’ submissions.  There is no dispute between counsel that where, as here, D1 is the successful party, he should be entitled to costs.  The only question is whether a discount is appropriate. Essentially:

(1)     D1 submits that an issue-based costs order should not be so readily made as to undermine the utility of the general rule that costs should follow the event (Pony HK World Ltd v Vand Petro-Chemicals (BVO Co Ltd), FACV 4/2013, 1 March 2014 at §4), and in any event, it cannot be said that the Failed Issue can be characterized as so distinct and separate in itself that the decision of it constitutes an “event” (Hong Kong Kam Lan Koon Ltd v Realray Investment Ltd (No 4) [2005] 4 HKC 162 at §13) nor can it be said that the Failed Issue had caused a significant increase in the length or costs as the Failed Issue was inextricably woven with the issues of risk of dissipation and balance of convenience;

(2)     Conversely, the Plaintiffs disagree with D1’s characterization of the Failed Issue and contend that the Lohas Transaction was one separate from the Ausca Transaction and had significantly increased the length or costs of the proceedings, relying on the observations made at Decision §§8.1 and 8.2, namely that very detailed submissions were made by D1 but the “valiant” attempt ultimately was in vain.  The Plaintiffs say that under RHC Order 62, rules 5(1)(e) and 5(2)(a) and (b), in exercising its discretion as to costs, the court may take into account the conduct of the parties, including whether it was reasonable for, and the manner in which, a party raise or pursue a particular allegation or issue.

2.4     At the end of the day, the court has to exercise its discretion to achieve a just result having regard to the circumstances of the case: Hong Kong Kam Lan Koon §14.

2.5     As regards the Plaintiffs’ submission that D1 did not merely adopt a light-touch attempt to deal with the Lohas Transaction but took a deliberate decision to mount a full-throated and comprehensive attack in the context of an interlocutory application, it seems to me that the following observations made in Chinaplus Wines Ltd v Berry Bos & Rudd Ltd & Ors, HCA 1818 of 2012, 13 December 2012 are apposite:

“[52] I have alluded to the amount of evidence filed in this application in para 22 above. Both Mr Huggins and Mr Burns have fairly agreed that there is an excessive amount of evidence in this application.

[53] With respect, the parties (and their lawyers) appear to have lost sight of the fact that this is an interlocutory application and the court is not required, and indeed will not be able, to make any finding of fact on the disputes before it. It is plainly unhelpful to swamp the court with such a mountain of evidence for an application of this nature. For example, there are no less than 8 affidavits from CWL’s customers to prove how they dealt with CWL in the purchase and storage of their wine. Another example is the detailed evidence on how customer data was input into the computer system. There is simply no chance that all the evidence will be read by the court. During the hearing, it became apparent that counsel also struggled with the details in this case.

[54] Over the years, on countless occasions the court had lamented upon the excessive volume of evidence. I cite, as an example, the observation by Stone J in Jau-Hwa Stewart v E Excel Ltd & Ors, unrep, HCA 2493/01, para 3 :

‘This is a case which is larded with detail. It has attracted a very considerable amount of paper, there being well over 30 affidavits and some 15 box files placed before the court at this inter partes stage, together with skeleton arguments from each camp each in excess of 100 pages. I am reminded of Lord Templeman’s celebrated observation that disputed interlocutory applications should be measured in hours, not days. …’

Advice like this has fallen upon deaf ears and such excesses would no longer be tolerated.

[55] At the risk of explaining the obvious, it should not be forgotten that the court has limited time for pre-hearing preparation. Reading time will have to be found. To put the matter in context, one of the affidavits filed by the defendants is 62 pages in length and it required over 2 hours to read. It should also be remembered that the court has a duty to all the users. Time wasted on irrelevant material means that the court has less time to read the useful material or to deal with other cases. This kind of excess therefore impacts adversely on the system as a whole.

[56] The professionals are obviously not free from blame in this regard. It is the duty of solicitors, and counsel if they are involved, to temper the enthusiasm of the hot-headed litigant and to ensure that the court will be assisted rather than hampered in the performance of its duty. Ironically, in the affidavits of both sides it had been said that some of the material adduced before the court was irrelevant and would therefore not be answered. It is the professionals who should be controlling the conduct of court proceedings. The same applies to other professionals in their fields. If a bridge collapsed, the engineers would have to answer for it. From now on, lawyers should be prepared to answer to the court for the failing of their duty in controlling the amount of evidence filed.

[57] However, it ought to be recognised that it is not always easy to decide what is or is not relevant and how much detail is to be adduced in evidence. Proper consideration will be given to such matters and costs penalty will only be imposed on clear case.

[58] This is one such case. I have given an opportunity to the parties to make submissions on what costs have been wasted and how they should be assessed. However, I am unable to derive any assistance from the correspondence received by the court in this regard.

[59] Doing the best I can with a broad brush approach, and erring on the side of conservatism, I disallow 25% of the total costs of preparing the evidence in this application.” (emphasis added)

2.6     Although the observations made in Chinaplus Wines are directed at the volume of evidence, it seems to me that they are in principle applicable to case preparation generally. 

2.7     I bear in mind the admonition that the discretion to impose costs sanctions should only be exercised in clear cases.

2.8     In the present case, I have no hesitation in coming to the view that D1 should be deprived of some of the costs as a result of the Failed Issue.  I disagree with D1 that the merits of Lohas Transaction were intertwined with the issue of risk of dissipation and balance of convenience:

(1)     As can be seen from Decision §§9.6 and 10.3, my conclusions that the issues of risk of dissipation and balance of convenience should be decided in D1’s favour was reached despite having found that the Plaintiff’s case on the Lohas Transaction met the merit threshold;

(2)     As observed at Chinaplus Wines §53 and is trite, whilst I had commented at Decision §8.2 that the picture painted by D1 “was credible”, the existence of a good arguable defence does not negate a good arguable case (Decision §6.2(4));

(3)     By way of a quantitative indication, of the 146-page Skeleton Submissions (not including appendices) lodged by D1, 40 pages were dedicated to the Lohas Transaction.  Of the 56-page Speaking Note lodged by D1 consisting of 148 paragraphs, §§80-130 were dedicated exclusive to the Lohas Transaction;

(4)     In my view, it is clear that the position adopted by D1 on the Lohas Transaction was ambitious and had unnecessarily increased the length or costs of the hearing.

2.9     Taking a broad-brush approach, I disallow 30% of D1’s costs entitlement.

3.   Whether indemnity costs

3.1     It is common ground that indemnity costs can only be justified by some “special or unusual feature”: Town Planning Board v Society for Protection of the Harbour Ltd (No 2) (2004) 7 HKCFAR 144 §§13-15.  Abuse of process may justify an order for costs to be taxed on an indemnity basis: Overseas Trust Bank Ltd v Coopers & Lybrand (a firm) [1991] 1 HKLR 177 at 183A-B.

3.2     D1 says that the Application amounted to an abuse of process, on the grounds that (1) there was inordinate delay and (2) in view of the indisputable longstanding legal battle between D1 and Mr Lau Wing Yan, the Plaintiffs only made provision for very modest legal fees in the Application.

3.3     I agree with the Plaintiffs that this is not a case justifying the imposition of indemnity costs.  Despite arguments to the contrary made by D1, the Plaintiffs were able to establish a good arguable case on liability in respect of the Ausca Transaction and a good arguable case on both liability and quantum in respect of the Lohas Transaction.  As is plain from the authorities, delay does not as a matter of course defeat an application for a Mareva injunction and the monetary exception sought to be imposed by the Applicant is but an aspect to be argued between the parties, had the Application been successful.

3.4     I decline to accede to D1’s invitation for an order that costs should be taxed on an indemnity basis.

4.   Whether summary assessment

4.1     Whilst Decision §11.2 directed D1 and the Plaintiffs to lodge and serve their Statement of Costs and his Statement of Objection respectively, no order was made for summary assessment.

4.2     Having perused D1’s Statement of Costs by which a sum of over HK$11 million is claimed, I agree with the Plaintiffs that the claimed quantum is on any view excessive. 

4.3     As is stated at Hong Kong Civil Procedure 2025 Note 62/9A/1, whether to carry out summary assessment is discretionary, and in a case whether the costs claimed are substantial, summary assessment may be unsuitable.

4.4      I decline to carry out summary assessment.  It seems to me that the costs claimed by D1, if persisted with, should be subject to the process of taxation and in that process be examined under the scope of the factors enumerated under RHC Order 62, rule 3A.  Should D1 proceed with taxation of the quantum sought, in deciding whether D1 should be entitled to the costs of the taxation, regard will be had to, for example (1) the amount by which the bill of costs has been reduced and (2) whether it is reasonable for a party to claim the costs of a particular item or to dispute that item.

5.   Conclusion

5.1     For the above reasons, I make an order that the Plaintiffs are to pay to D1 70% of the costs of the Application (including the costs of the costs arguments) on a party-and party basis, with a certificate for 3 counsel (except a certificate for 2 counsel is to apply to the costs of the costs arguments) to be taxed if not agreed.