BANK OF CHINA (HONG KONG) LTD v.TWIN PROFIT LTD AND OTHERS

CACV 94/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 94 OF 2010

(on appeal from HCMP 874/2009)

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JUDGMENT

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Hon Yuen JA:

1.  This is an application for leave to appeal to the Court of Final Appeal (“CFA”) against:

(1) the judgment of this court (Yuen JA, Stone J and Sakhrani J) dismissing the defendants’ appeal from the judgment of Fok J (now Fok JA) dismissing the defendants’ appeal from an order of Master de Souza who gave summary judgment to the plaintiff on an application made under O.28 r.4 Rules of the High Court (“RHC”);

(2) the judgment of this court giving the costs of the appeal to the plaintiff on an indemnity basis. This was a majority decision, Stone J having taken the view that costs should be awarded on a party and party basis only.

The first judgment has been called for convenience “the substantive judgment” and the second, “the scale of costs judgment”.

THE SUBSTANTIVE JUDGMENT

2.  The defendants’ first argument was that the appeal falls within s22(1)(a) of the Hong Kong Court of Final Appeal Ordinance cap 484 (“HKCFAO”) which provides:

“(1) An appeal shall lie to the Court --

(a) as of right, from any final judgment of the Court of Appeal in any civil cause or matter, where the matter in dispute on the appeal amounts to or is of the value of $1000000 or more, or where the appeal involves, directly or indirectly, some claim or question to or respecting property or some civil right amounting to or of the value of $1000000 or more.”

(Emphasis added).

3.  The defendants argued that this was a final judgment, and as the plaintiff was claiming a liquidated sum of $265,840,469.02 and the defendants were counterclaiming a liquidated sum of $136,000,000, s22(1)(a) was satisfied.   The nature of the judgment is disputed by the plaintiff who argued that the judgment was interlocutory, at least for the purposes of an application for leave to appeal to the Court of Final Appeal. 

The Yien Yieh Bank case

4.  The defendants referred to Yien Yieh Commercial Bank Ltd v Hung Oi Wah CACV260/2009, unrep, where this court (Le Pichon and Cheung JJA and A Cheung J) gave leave to appeal to the Court of Final Appeal in an O.88 mortgage action on the basis that s22(1)(a) HKCFAO applied.

5.  The plaintiff’s reply was that in the Yien Yieh Commercial Bank case, no argument had been advanced by the plaintiff/respondent that s22(1)(a) did not apply and the court did not consider the point.  It would appear from para.2 of the Reasons for Judgment in that case that it was “common ground” that the defendant/applicant was entitled to appeal as of right.  Since the point was not argued, the Yien Yieh Bank case is not binding on this court and we therefore have to consider whether the appeal falls within s22(1)(a). 

The Shell case and the “application” test

6.  The plaintiff argued that our judgment was not a final one for the purposes of s.22(1)(a).  If one considered the matter on the basis of the common law “application” test adopted by the Court of Final Appeal in Shell Hong Kong Limited v Yeung Wai Man Kiu Yip Co Ltd (2003) 6 HKCFAR 222,the plaintiff’s application for summary judgment under O.28 r.4 was not one which, whichever way the decision went, would have determined the issues between the parties.  If the plaintiff had failed at the application for summary judgment under O.28 r.4, the defendants would simply have lived to fight another day.  No issues would have been finally determined against either party.  I agree that if the matter were considered on the basis of the Shell case only, it is clear beyond argument that our judgment was an interlocutory judgment and not a final judgment.

Subsequent legislation

7.  However, counsel for the defendants argued that legislation after the Shell case has changed matters.  I shall first consider the relevant legislation and then consider its effect as interpreted by the Court of Final Appeal in a recent case (Champion Concord Limited and anor v Lau Koon Foo and anor FACV Nos 16 and 17 of 2010, 23 Nov 2011, unrep) to which counsel’s attention was drawn by the bench at the hearing of this application. 

8.  Section 14AA High Court Ordinance (“HCO”) which came into effect in April 2009, provides:

“(1) Except as provided by rules of court, no appeal lies to the Court of Appeal from an interlocutory judgment or order of the Court of First Instance in any civil cause or matter unless leave to appeal has been granted by the Court of First Instance or the Court of Appeal.

(2) Rules of court may specify a judgment or order of any prescribed description to which subsection (1) does not apply and accordingly an appeal lies as of right from the judgment or order”.

(Emphasis added).

9.  The relevant rules of court are contained in O.59 r.21 RHC which provides:

“(1) Judgments or orders to which section 14AA(1) of the Ordinance (leave to appeal required for interlocutory appeals) does not apply and accordingly an appeal lies as of right from them are the following –

(a) a judgment or order determining in a summary way the substantive rights of a party to an action.

(2) Without affecting the generality of paragraph (1)(a), the following are judgments or orders determining in a summary way the substantive rights of a party –

(a) a summary judgment under Order 14 or Order 86; ...”

(Emphasis added).

10.  In other words, since April 2009, leave is required for appeals from interlocutory judgments from the Court of First Instance (“CFI”) to the Court of Appeal (“CA”), but certain interlocutory judgments (as specified in O.59 r.21) are “exempted”, and for those, appeals lie to the CA as of right. 

11.  In the present case, the CFI awarded summary judgment under O.28 r.4.  I accept the defendants’ argument that the judgment is analogous to a summary judgment under O.14 or O.86, and falls within O.59 r.21(1)(a).  The defendants were thus “exempt” from the requirement to obtain leave to appeal to the CA.

12.  Pausing there, it seems to me from the language of s.14AA(1) and O.59 r.21(1) (especially the references therein to “interlocutory judgment” and “interlocutory appeals” that I have emphasised earlier) that the legislature did not amend the law to do away altogether with the common law “application” test for the classification of “final” and “interlocutory” judgments.  What it did was to provide for new procedure in the High Court – by requiring leave for appeals from interlocutory judgments of the CFI to the CA, and by specifying certain “leave-exempt” judgments.

13.  The effect of these provisions on other matters of procedure in the High Court has been discussed by the CFA in the recent case of Champion Concord.                                                                                      

The Champion Concord case

14.  The particular facts of this case need not detain us.  Essentially, a vendor refused to complete a purchase after letting the purchasers into possession under a lease.  The purchasers sued in one action (HCCL1/2010) for specific performance, and the vendor sued in another action (HCCL5/2010) for declaratory relief that he was entitled to vacant possession and damages etc.

15.  Both parties applied for summary judgment for specific performance under O.86 in their respective actions. These applications were heard in the CFI by Stone J.  He gave judgment to the respondent in both actions

16.  The appellants appealed against the judgment in both actions. The appeals (CACV232/2010 and CACV233/2010) were heard by a 2-judge court of appeal (Rogers VP and Le Pichon JA).  At the commencement of the hearing of those appeals, the court asked the parties if they consented to the constitution of the court – which would be necessary if the appeals were final, but not if they were interlocutory.  Section 34B(4) HCO provides:

“The Court shall, if it consists of 2 Justices of Appeal, be duly constituted for the purpose of -

(a) hearing or determining any appeal against an interlocutory order or interlocutory judgment; ...

(c) hearing or determining any appeal where all the parties have before the hearing filed a consent to the appeal being heard and determined by 2 Justices of Appeal”.

(Emphasis added).

Consent was given by the parties, undertakings were given to “file” the consent, and the appeals proceeded. The court of appeal upheld Stone J’s judgment in both appeals. Subsequently however, no consent was “filed” notwithstanding the undertakings given.

17.  The appellants applied to the CA for leave to appeal to the CFA on the basis that the judgment was final.  The CA gave leave as of right under s.22(1)(a) in both appeals.  Brief reasons were given at the hearing on 3 December 2010.  It was said that normally an O.86 judgment would be regarded as interlocutory, but because of the “special situation” of the case where both parties sought summary judgment, such that the “winner will take all”, the decision was a final one (see para 6).  It would appear that the reasons were confined to the peculiar circumstances of that case.     

18.  When the appellants got to the CFA (in FACV 16/2010 and FACV17/2010), they argued that the judgments were final, and thus the 2-judge CA had no jurisdiction to hear the appeals as no consent had been filed prior to the hearing of the appeals.  Not surprisingly that argument was rejected by the CFA.  Whatever the nature of the judgments, the parties had expressly consented to the constitution of the 2-judge court.

19.  However Ribeiro PJ (with whom the other judges agreed) took the opportunity to consider the effect of s.14AA HCO and O.59 r.21 on the nature of appeals in the CFI and CA in the context of s.34B(4) - which governs the constitution of the CA in interlocutory appeals, in contrast to final appeals.  He held:

“31. Although the legislation [s.14AA HCO and O.59 r.21 RHC] does not in terms state that appeals from the Court of First Instance falling within Order 59 rr.21(1)(a) or (2)(a) are to be treated as final and not interlocutory, that is their effect. Those rules therefore address the same questions as that which has bedevilled section 34B(4), namely: Is the appeal in question an appeal from an interlocutory or final judgment or order of the Court of First Instance? While section 14AA and Order 59, r 21 ask that question to determine whether leave to appeal is required, the same question has to be asked in the section 34B(4) context to determine whether the Court of Appeal would be duly constituted if sitting with two Justices of Appeal, or whether such a bench requires the consent of the parties to be properly constituted.

32. There is, in my opinion, no reason in logic or policy to adopt different tests in approaching these two questions. Where by operation of the aforesaid rules, the appeal to the Court of Appeal does not require the [High] Court’s leave, that appeal should equally be treated as final and as requiring a bench of three unless there is the requisite consent of the parties to the appeal being dealt with by a panel of two members. I would however add that these remarks are not intended to apply to applications for leave to appeal to the Court of Final Appeal under section 22(1)(a) of the Court [of Final Appeal]’s statute since considerations going beyond the requirement of finality of the judgment arise in that context”.

(Emphasis added).

Discussion

20.  As I understand those passages, which are binding on this court, what Ribeiro PJ was saying was that the effect of s.14AA HCO and O.59 r21 RHC was to deem “leave-exempt” interlocutory judgments as “final” judgments for the purposes of determining (1) whether leave is required for appeals from the CFI to the CA, as well as (2) the constitution of the CA bench hearing the appeal.  These provisions, set out in the High Court Ordinance and its subsidiary legislation, govern procedure “within” the two levels of the High Court.   

21.  The question facing us is whether they also govern an application for leave to appeal to the CFA, where the relevant provision is s.22(1)(a) HKCFAO.  I acknowledge the defendants’ argument that if the “application” test is retained for s.22(1)(a), an anomaly may be created, as the same judgment would be treated as “final” for an appeal from the CFI to the CA but would be regarded as “interlocutory” for an intended appeal from the CA to the CFA.  As for the caveat in para. 32 of Ribeiro PJ’s judgment referring to applications for leave to appeal to the CFA, the defendants argued that that was only a reference to the additional “financial” requirements of s.22(1)(a).

22.  Whilst acknowledging the anomaly, I am not persuaded that our judgment, from which the defendants are now seeking leave to appeal to the CFA, is a “final” one for which leave to appeal to the CFA should be given as of right.

(1) As discussed earlier, the HCO and the RHC did not amend the law to do away altogether with the common law “application” test and the distinction between final and interlocutory judgments. Section 14AA and O.59 r 21 themselves allude to “leave-exempt” judgments as “interlocutory” judgments.

(2) The effect of those provisions (as determined in Champion Concord) was to treat “leave-exempt” interlocutory judgments as “final” judgments for procedures governing appeals “within” the High Court only (ie from the CFI to the CA).

(3) Although an application for leave to appeal to the CFA is made first to the CA in proceedings in the High Court, the governing legislation for the grant of leave is the HKCFAO, not the HCO, and different considerations arise (see also para. 11 of Champion Concord).

(4) There is nothing in the HKCFAO that requires the word “final” in s.22(1)(a) to be given anything other than its natural meaning.

(5) In light of the CFA’s remarks concerning the anomaly of having an “as of right” ground of appeal to the highest court (see Champion Concord, para 6, and Wealth Duke Ltd and ors v Bank of China (Hong Kong) Ltd FACV2/2011, 23 Nov 2011, unrep, para 33), this court should err on the side of caution when considering whether to grant leave under s22(1)(a). The defendants have recourse in making a direct application to the CFA if so advised.

Any questions of great general or public importance?

23.  As for the defendants’ argument that leave should be given on the s.22(1)(b) ground, they have suggested that the following questions are ones of great general or public importance:

‘1. the true and proper construction, interpretation and application of an important statue – Bank of China (Hong Kong) Limited (Merger) Ordinance (Cap 1167) – affecting a substantial and important bank and persons who have prior to 1st October 2001 dealt with any of the ‘merging banks’;

2. ascertaining what assets and liabilities were or were not merged into the entity that is now the Plaintiff (previously known as Po Sang Bank);

3. ascertaining the scope and ambit and true and proper construction, interpretation and application of the statutory expression “business carried on in or from Hong Kong” when applied to the former Mainland PRC entities – Bank of China and Kincheng Bank;

4. whether the statutory expression includes Bank of China or Kincheng Bank conducting business through the use of nominees, corporate vehicles, wholly owned subsidiaries and/or disclosed agents that are controlled, managed and/or located or incorporated in or from Hong Kong;

5. whether the statutory expression includes Bank of China or Kincheng Bank, whether acting as principal, ‘trustee’ and/or agent, for business conducted through or represented by officers of Bank of China or Kincheng Bank positioned, stationed, located, employed and/or who work in or from Hong Kong and/or who manage or control or work for Bank of China or Kincheng Bank in or from Hong Kong;’

24.  I do not consider that any of those questions raises points of great general or public importance.  The statute is clear, and the judgments of this court and of Fok J were reached by the application of the statute to the facts of this case.             

25.  No submissions have been made by the defendants on the basis of the “or otherwise” limb of s.22(1)(b).

26.  Accordingly, I take the view that leave should not be given to appeal to the CFA against the substantive judgment.

THE SCALE OF COSTS JUDGMENT

27.  As for the scale of costs judgment, the majority of this court followed the decision of this court (Litton VP, Godfrey and Ching JJA) in Chekiang First Bank v Fong Siu Kin [1997] 2 HKC 302, which applied the decision of the English Court of Appeal in Gomba Holdings (UK) Ltd v Minories Finance Ltd [1993] Ch. 171 – essentially, that the court would, when exercising its discretion over costs, normally give effect to the scale of costs expressly agreed by the parties.

28.  The defendants suggest that the following question of great general or public importance arises:

“1. the correct legal principles and proper approach to be applied to the question of costs and the exercise of discretion when awarding costs in circumstances where consumer contractual documents such as mortgages and guarantees contain ‘indemnity costs’ clauses or provisions, and whether the Court’s discretion is fettered or affected, and if so in what way or to what extent, and how (if any) the ‘indemnity costs’ clauses or provisions are to be given effect (if any) to or considered (if at all) in the balance of discretion.”

29.  I do not see how the Chekiang case fetters the exercise of discretion.  On the contrary, it held that there should be no fetter on the court’s exercise of discretion on costs - not even by anything in the contractual document, although in the normal course of events, the court would give effect to the parties’ express agreement.  That cannot be a surprising proposition, and in any event in the present case, there was no evidence that these corporate defendants are consumers as that term is normally understood.

30.  No submissions have been made by the defendants on the basis of the “or otherwise” limb of s.22(1)(b).

31.  I therefore take the view that leave should not be given to appeal to the CFA against the scale of costs judgment either.

Order

32.  The application should be dismissed with an order nisi that the defendants should pay the plaintiff’s costs of the application.  With respect to Mr Coleman and Mr Jat, I do not think that attendance by senior counsel was necessary. 

Hon. Kwan JA:

33.  I agree with the judgment of Yuen JA.

Hon. Sakhrani J:

34.  I agree with the judgment of Yuen JA.