Securities and Futures Commission v. Mo Shau Wah and Others

CACV 207/2017

[2018] HKCA 598

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 207 OF 2017

(ON APPEAL FROM HIGH COURT ACTION NO 353 OF 2013)

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Before: Hon Cheung, Yuen and Kwan JJA in Court

Date of the Intervener’s submissions: 29 June 2018

Date of the 1^st Defendant’s submissions: 6 July 2018

Date of Judgment on Costs: 12 September 2018

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J U D G M E N T  O N  C O S T S

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Hon Cheung JA:

1.I agree with the judgment of Yuen JA.

Hon Yuen JA:

2.1.On 22 June 2018 at the conclusion of the hearing, this court gave Judgment dismissing the 1^st defendant’s appeal against a judgment of DHCJ Francis given on 25 July 2017 in which he dismissed the 1^st defendant’s summons filed on 12 June 2017. 

2.2.Reasons for Judgment of this court[1] were handed down on 29 June 2018.

3.1.At the conclusion of the hearing on 22 June 2018, the SFC did not apply for costs, but the Intervener CPSL applied for indemnity costs and a wasted costs order against the 1^st defendant’s legal representatives.  The court gave directions for written submissions to be provided.

3.2.On 29 June 2018, CPSL filed a Supplemental Skeleton Submission on Costs.  On 6 July 2018 the 1^st defendant filed her Submissions on Costs.

4.CPSL sought:

(1)  an order that costs of the appeal be paid by the 1^st defendant on an indemnity basis;

(2)  directions that the 1^st defendant’s legal representatives attend a hearing to show cause why a wasted costs order should not be made against them.

Indemnity costs?

5.In respect of (1), the Court of Final Appeal has held in Town Planning Board v Society for Protection of the Harbour Ltd (No2)[2] that the court has a broad discretion to determine whether indemnity costs should be ordered.  This basis of costs is justified where the successful party can show that the case has some “special or unusual features”, which features were intentionally left undefined[3].  However the attributes of the parties and the character of the proceedings may be relevant, and the grounds for making an indemnity costs order may extend to any matter relating to the litigation and the parties’ conduct in it, and also to the circumstances leading to the litigation[4].

6.1.In the present case, CPSL submitted that:

(a)  the judge below had only given the 1^st defendant leave to appeal in respect of the arguments whether, by way of a variation to the Mareva injunction, CPSL should be ordered to sell the shares and how the proceeds should be dealt with.  Nevertheless the 1^st defendant’s counsel still sought to argue on appeal that the summons was only to implement the Consent Order, and that CPSL should be ordered to “cease and desist” from obstructing such implementation, an argument for which leave had not been given;

(b)  in relation to the issues for which the 1^st defendant was given leave, the arguments were unmeritorious.  Her counsel Mr George Chu merely asserted, without reference to any legal authority or analysis, that the test for determining whether a Mareva injunction should be varied does not apply where the opponent is an intervener and not the plaintiff[5].  And the evidence which would have been relevant was left incomplete.  As this court noted, “such information should have been supplied by way of D1's affirmation in a properly-prepared application for variation of the Mareva, and it is noticeable that no such evidence was made available even during the adjournment prior to the second hearing before the judge, when CPSL’s opposition to the proposed variation was made clear to D1"[6].

6.2.In opposition, it was submitted on behalf of the 1^st defendant that:

(a)  her counsel had not persisted with the “cease and desist” order argument on appeal;

(b)  the judge had granted leave to appeal because of the absence of authority on the issue whether CPSL had locus standi to oppose the 1^st defendant’s summons

7.Having checked the court’s notes of the hearing of the appeal, it is clear that Mr Chu did in fact attempt to argue at the appeal that his client was not asking for a variation of the Mareva injunction[7] but was merely trying to implement the Consent Order.  And I have to say he was unable to provide any assistance to the court on the legal analysis of the issue for which the judge had given leave, viz CPSL’s locus standi.  Indeed we were grateful to Mr Bernard Mak, counsel for CPSL, for his assistance in putting the 1^st defendant’s submissions in a more comprehensible manner.  

8.As for the 1^st defendant’s submission that “authoritative guidance” from the court was required on appeal, that alone is not a ground to launch a hopeless appeal.  An appeal is not simply an opportunity for a losing party to have a second bite of the cherry, for that is all it is if he cannot add anything of value at all to the discussion of the issues considered and determined by the judge.

9.In the present appeal, the impermissible focus on the issue for which the judge did not give leave, and the failure to put forward any viable argument on the issues for which the judge did give leave, are in my view special or unusual features which justify an order for costs on the indemnity basis.

Legal representatives to show cause for wasted costs order?

10.The court may make a wasted costs order against a legal representative[8] if he has caused a party to incur wasted costs[9], and it is just in all the circumstances to order the legal representative to compensate the party for the whole or part of those costs[10].

11.In Ma So So v Chin Yuk Lun & Anor[11], the Court of Final Appeal held that the jurisdiction was compensatory as well as punitive.  Given that it was a summary jurisdiction, it would be confined to clear cases where the need for an order was reasonably obvious and where there was a clear picture of the legal representative’s fault.

12.At this first stage that we are in, the court would assess the strength of the applicant’s (CPSL’s) prima facie case[12] and the proportionality of the exercise, comparing the amount of costs at stake with the likely costs of the application, before deciding whether the matter should go further to the second stage.

13.1.In the present case, CPSL has relied on the same matters set out above in support of their application for indemnity costs.  It also relied on the lack of candour in some of the solicitors’ correspondence. 

13.2.In the 1^st defendant’s submissions, it is said that this was not a “hopeless case”, that “the tone and tenor of the learned Judgment of the CA did not level any blame on the professional conduct of solicitors/counsel of D1" and that they had “conducted the case in good faith without any procedural defects or causing any undue delay.  D1 strictly lost on merits”.

14.First, it must be noted that the fact that a judgment is written in professional and restrained language should not be misconstrued.  What is important is the contents of the judgment and not the style.  The criticism in this court’s Reasons for Judgment of the 1^st defendant’s appeal is plain for all to see.

15.Second, it is not enough for legal representatives to say that they had conducted a case in good faith and without undue delay.  That should go without saying.  On top of that, they bear a professional responsibility, not only towards their client but also towards the court, to approach the case in a forensically viable way.  That involves a thorough intellectual analysis which was regrettably absent in this case on the part of counsel for the 1^st defendant.

16.Having said that however, I do not think it would be proportionate in this case to proceed to the second stage of a wasted costs order exercise.  That would create further satellite litigation and lead to greater delay from which this case has already suffered.  Irregularities at CPSL were found by the SFC nearly 6 years ago.  The SFC action was commenced more than 5½ years ago.  CPSL has since commenced its own action.  Subject to the criminal proceedings against the defendants[13], the case should proceed to trial without delay especially when some of the parties are elderly and have had proceedings hanging over their heads for a number of years.  For this reason only, I would decline to entertain CPSL’s application. 

Order

17.I would make an order that the 1^st defendant should pay the Intervener’s costs of the appeal on an indemnity basis, as well as the costs of the application for indemnity costs as part of the costs of the appeal, and that there be no order as to the costs of the Intervener’s application for the exercise of the wasted costs order jurisdiction.

Hon Kwan JA:

18.I agree with the judgment of Yuen JA. 

Mr Bernard Mak, instructed by Y T Chan & Co, for the Intervener, China Pacific Securities Limited

Mr George Chu, instructed by Damien Shea & Co, for the 1^st Defendant