Waddington Ltd v. Chan Chun Hoo Thomas and Others

HCA 3291/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3291 OF 2003

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D E C I S I O N

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INTRODUCTION

1.This case has come before me on a number of previous occasions.  The background facts are well known to the parties.  I do not propose to set them out again in this decision.

2.By a summons dated 30 November 2016 (“the Summons”), the plaintiff seeks the following relief against the 5^th defendant:-

(1) a further interim payment in the sum of HK$10,200,379.28 in respect of the costs of the action pursuant to the indemnity granted by Mr Recorder P Fung SC on 10 March 2014 (“the March Order”): see paragraphs 1 to 2 of the Summons;

(2) payment of the sum of HK$4,580,722.09 in respect of the costs incurred by the plaintiff in relation to CACV 10/2014 pursuant to the indemnity (“the Appeal Indemnity”) granted by Mr Recorder P Fung SC on 26 November 2014 (“the November Order”): see paragraphs 3 to 4 of the Summons; and

(3) an order for indemnity in respect of the plaintiff’s costs in relation to the 1^st defendant’s applications to the Court of Appeal/Court of Final Appeal for leave to appeal against the judgment of the Court of Appeal dated 20 May 2016 (“the Leave Indemnity”), and an interim payment in the sum of HK$16,800.00 pursuant to such indemnity: see paragraphs 5 to 7 of the Summons.

FURTHER INTERIM PAYMENT IN RESPECT OF THE COSTS OF THE ACTION

3.According to the plaintiff, it incurred costs of HK$29,526,728.39 (“the 1^st Set of Costs”) in the action up to 15 May 2014, and has incurred further costs of HK$3,673,650.89 (“the 2^nd Set of Costs”) since that date, making a total of HK$33,200,379.28.  Taking into account the interim payment of HK$23,000,000 already received by the plaintiff from the 5^th defendant, the plaintiff says that it is out of pocket to the extent of HK$10,200,379.28 and therefore seeks a further interim payment in that sum.

4.Mr Justin Lam accepts that the 1^st Set of Costs (HK$29,526,728.39) and part of the 2^nd Set of Costs (to the extent of HK$756,666.49) formed part of the total costs of HK$30,913,708.39 put forward by the plaintiff in support of the previous interim payment application before the learned Recorder in November 2014.  On that occasion, the learned Recorder exercised his discretion and made an order for interim payment to the plaintiff in the sum of HK$23,000,000 (see paragraph 44 of the learned Recorder’s decision handed down on 26 November 2014).

5.I am not prepared to order the 5^th defendant to make any further interim payment to the plaintiff in respect of the costs of the action, for the following reasons.

6.First, the bulk of the costs allegedly incurred by the plaintiff forming the subject matter of the present interim payment application was considered the learned Recorder in November 2014, and he ordered the 5^th defendant to make interim payment of HK$23,000,000 only.  There has not been any material change of circumstances since that date which would justify another interim payment application in respect of the same costs.

7.Second, although the plaintiff has been granted an indemnity in respect of the costs of the action, it is not the case that the plaintiff is entitled to recover from the 5^th defendant the full amount of the legal costs that it has incurred irrespective of whether such costs are reasonable or reasonably incurred.  On the footing that the plaintiff is entitled to have its costs of the action assessed on an indemnity basis for the purpose of the indemnity vis-à-vis the 5^th defendant, the plaintiff’s costs are still subject to scrutiny by the court.  This, I understand, is not disputed by Mr Lam.

8.I should mention that, according to Mr Edward Chan SC (for the 5^th defendant), the question of whether the plaintiff’s costs should be assessed on an indemnity basis or on a common fund basis is controversial, and he reserves the 5^th defendant’s position on this matter to be resolved when the plaintiff’s costs come to be assessed in future.  For the purpose of the present application, it is not necessary for me to decide whether, under the March Order, the plaintiff is entitled to have its costs assessed on an indemnity basis for the purpose of the indemnity vis-à-vis the 5^th defendant, and I express no view on this matter.

9.Mr  Chan has raised a number of objections to the costs allegedly incurred by the plaintiff, and submitted that those costs have been unreasonably or improperly incurred or relate to costs for which the 5^th defendant should not be held responsible (see paragraphs 3.7 and 3.8 to of his skeleton argument).  I do not propose to recite the details of those objections in this decision save to state that there is, prima facie, considerable force in those objections.

10.There is also the issue of proportionality when assessing the plaintiff’s costs, having regard to the total costs incurred (HK$33,200,379.28) and the amount of recovery made in this action (HK$33,511.220.32 by way of principal plus interest thereon).  I take into account Mr Lam’s submission that substantial costs were incurred by the plaintiff in relation to the 1^st defendant’s strike out application (which, I am told, was partly successful).  In my view, the proportionality between the costs incurred and the amount of the recovery made is something which the court can properly take into account when assessing the plaintiff’s costs (whether on indemnity or common fund basis) for the purpose of the indemnity vis-à-vis the 5^th defendant.

11.It is possible that the plaintiff’s costs, upon assessment, would exceed the HK$23,000,000 already received by the plaintiff by way of interim payment.  However, it is not at all clear what the excess may come to.

12.The purpose of ordering interim payment to the plaintiff is not, in my view, to enable it to be paid in full the amount which it may ultimately recover pursuant to the indemnity.  Mr Lam submits that the purpose of interim payment is to “ameliorate the injustice to [the plaintiff] for being out of pocket through continuous funding of the litigation for the benefit of the [5^th defendant]”.  It seems to me that the injustice to the plaintiff for being out of pocket for funding this action has been substantially ameliorated by the previous interim payment of HK$23,000,000.  There is no impediment to the plaintiff seeking assessment of its costs (whether on indemnity or common fund basis) vis-à-vis the 5^th defendant for the purpose of the indemnity and obtaining final payment under the indemnity.

13.Overall, I decline to exercise my discretion to order any further interim payment to the plaintiff in respect of the costs of the action.

PAYMENT/INTERIM PAYMENT PURSUANT TO THE APPEAL INDEMNITY

14.The 1^st defendant’s appeal in CACV 10/2014 was dismissed by the Court of Appeal on 20 May 2016.  The Court of Appeal also dismissed the plaintiff’s cross-appeals save in relation to the issue of pre-judgment interest.  At paragraph 192 of their Judgment, the Court of Appeal made an order nisi that the 1^st defendant was to pay the plaintiff 75% of its costs of the appeal and cross-appeals, to be taxed on a party and party basis.

15.According to the plaintiff, it has incurred costs of HK$4,580,722.09 in CACV 10/2014.  Mr Lam accepts that the said sum relates to the costs of both the 1^st defendant’s appeal and the plaintiff’s cross-appeals.

16.As originally worded in paragraphs 3 and 4 of the Summons, the plaintiff seeks payment of the sum of HK$4,580,722.09 pursuant to the Appeal Indemnity.  Such application would plainly be objectionable because, on any view of the matter, the 5^th defendant is entitled to have the plaintiff’s costs properly assessed by the court, whether on an indemnity or common fund basis.

17.When this objection was raised by Mr Chan at the hearing, Mr Lam in his reply submissions sought leave to amend the Summons such that the application would be treated as one for interim payment only.  I am not minded to grant leave to the plaintiff to amend the Summons because, even after the amendment, the plaintiff would still face considerable difficulties regarding the amount of the interim payment which may properly be ordered pursuant to the Appeal Indemnity.

18.On the face of the November Order, the Appeal Indemnity only covers the plaintiff’s costs incurred in relation to the 1^st defendant’s appeal, but not the plaintiff’s cross-appeals.  The plaintiff’s respondent’s notices by way of cross-appeal were dated 5 February 2014 and 3 June 2014 respectively, both prior to its summons dated 22 August 2014 seeking (inter alia) the Appeal Indemnity.  The plaintiff could have sought expressly an indemnity to cover its costs in relation to the cross-appeals, but did not do so.  Different considerations arise as to whether an indemnity should be granted in respect of the costs of the 1^st defendant’s appeal and the plaintiff’s cross-appeals.  I consider that a party seeking a costs indemnity in his favour should make clear what the indemnity is intended to cover.  It is not right to extend the scope of the indemnity by implication.

19.In his written reply submissions dated 7 February 2017 (faxed to the court shortly before the commencement of the hearing), Mr Lam invites that court to consider making a further indemnity order to cover the costs of the plaintiff’s cross-appeals under its inherent jurisdiction (and ordering interim payment pursuant thereto).  I am not prepared to entertain the plaintiff’s application for a further indemnity order made in this manner.  For the purpose of any such application, the plaintiff would have to show that it was reasonable for it to cross-appeal the principal judgment of the learned Recorder handed down on 18 December 2013. As a matter of fact, 3 out of 4 grounds of the plaintiff’s cross appeals were dismissed by the Court of Appeal.  I do not consider that the plaintiff has put forward sufficient materials for this court to consider whether it is proper to grant the further indemnity sought.  It would also be unfair, in my view, for the 5^th defendant to be suddenly faced with yet another application of the plaintiff.

20.In so far as the quantum of the costs incurred by the plaintiff in relation to the 1^st defendant’s appeal is concerned, Mr Chan has provided a (preliminary) list of objections prepared by a law costs draftsman which suggests the costs should only be slightly over HK$2 million (assessed on an indemnity basis).  Mr Lam has not raised any argument in respect of that assessment, save to submit that the court should not carry out a mini-taxation in the present application (which I agree).

21.In my view, it is for the plaintiff to put forward and justify a proper sum by way of interim payment, which the plaintiff has failed to do.  It would not be right for the court to simply pluck a figure out of the air and make an order for interim payment accordingly.

22.In all, I decline to make any order under paragraphs 4 and 5 of the Summons.

23.In passing, I note that the plaintiff did not apply for interim payment in respect of its appeal costs until 30 November 2016, more than 6 months after the Court of Appeal handed down its Judgment dismissing the 1^st defendant’s appeal.  This delay shows that the 1^st plaintiff has no urgent need for the interim payment.

THE LEAVE INDEMNITY

24.Subject to (i) the question of undertakings, and (ii) the 5^th defendant’s right to tax the plaintiff’s costs, Mr Chan accepts that the plaintiff is entitled to an indemnity in relation to the 1^st defendant’s applications for leave to appeal.

25.In so far as the 1^st defendant’s application to the Court of Appeal is concerned, it was dismissed by the Court of Appeal on 14 October 2016 with costs to the plaintiff.  The plaintiff claimed costs in the total sum of HK$166,385.  The Court of Appeal made a slight reduction of HK$16,800 and allowed HK$149,585 as costs to be paid by the 1^st defendant.  The amount allowed comes to about 89.9% of the plaintiff’s costs.  It is not suggested by the plaintiff that it has encountered, or will encounter, any difficulty in recovering the sum of HK$149,585 from the 1^st defendant.

26.Even if one were to assume that the plaintiff’s costs ought to be assessed on an indemnity basis for the purpose of the indemnity vis-à-vis the 5^th defendant, I have reservation on whether there will be any substantial difference between the costs as ultimately assessed and the amount awarded by the Court of Appeal.  I repeat the observation in paragraph 12 above, and am not prepared, in the exercise of my discretion, to order any interim payment in respect of the plaintiff’s costs in relation to the 1^st defendant’s application to the Court of Appeal for leave to appeal.

27.In so far as the 1^st defendant’s application to the Court of Final Appeal is concerned, despite the court pointing out at the hearing that the plaintiff has not provided any estimate of the likely costs which it may incur, Mr Lam maintains that it is not necessary for the plaintiff to produce a draft bill or any information regarding its likely costs.  In my view, in any application for prospective indemnification of costs, the applicant ought to provide the court with a reasonable estimate of his likely costs so that the court can exercise a proper and reasonable control over the costs that may be incurred.  The applicant cannot take it for granted that the court will simply make a blanket order in its favour.

28.In all the circumstances, I would make an order that the 5^th defendant do indemnify the plaintiff in respect of any costs reasonably incurred by the plaintiff in relation to the 1^st defendant’s application to the Court of Final Appeal for leave to appeal which the plaintiff will not be able to recover from the 1^st defendant, subject to a cap of HK$150,000. For the avoidance of doubt, the plaintiff’s costs, for the purpose this indemnity vis-à-vis the 5^th defendant, are to be assessed on a common fund basis (see Wallersteiner v Moir (No 2) [1975] 1 QB 373, at 391-392 per Lord Denning MR and at 403 per Buckley LJ).

DISPOSITION

29.Save as mentioned in paragraph 28 above, the plaintiff’s Summons is dismissed.

30.On the question of costs, the 5^th defendant is, in substance, the successful party (including the argument in relation to the Leave Indemnity).  The Court of Appeal accepted the 5^th defendant’s argument that the plaintiff’s pervious application for interim payment could not be regarded as an application made for the benefit of the 5^th defendant, and thus the plaintiff was not entitled to any indemnity by the 5^th defendant for the costs of that application: see the Judgment of the Court of Appeal in CACV 142/2015 (17 February 2016), at paragraphs 28 and 29.  I consider the present application to be substantially of the same nature, and I see no reason why the plaintiff should not have to pay the 5^th defendant’s costs of resisting the Summons.  I make an order that the plaintiff shall pay the 5^th defendant’s costs of and occasioned by the Summons, including the costs of the hearing on 7 February 2017, to be taxed on a party and party basis if not agreed, with certificate for one counsel.

Mr Justin Lam, instructed by Kao, Lee & Yip, for the plaintiff

Mr Edward Chan, SC and Law Man-chung, instructed by ONC Lawyers, for the 5^th defendant