China Medical Technologies, Inc. (in Liquidation) and Others v. Wu Xiaodong and Others

HCA 3391/2016

[2019] HKCFI 1809

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3391 OF 2016

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HCA 1417/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1417 OF 2013

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RULING ON COSTS

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1.This is the 2^nd Defendant’s application by Summons dated 4 June 2019 (“Summons”) to vary the costs order nisi at para 91 of this court’s 22 May 2019 Judgment so that the costs of and occasioned by the Plaintiffs’ Continuation Summonses, including all costs reserved, be to the 2^nd Defendant to be taxed if not agreed on the indemnity (or common fund) basis up to and including 13 July 2018 and on indemnity basis thereafter and be paid forthwith, with certificate for 2 Counsel.

2.As far as “costs reserved” are concerned, Mr Lee accepts that the 2^nd Defendant should have those costs.  But he does resist costs to be taxed on a higher basis than party and party.

3.The starting point is that an order for costs made in favour of a successful party in litigation is on a party and party basis: Town Planning Board v Society for Protection of the Harbour Ltd (No 2) (2004) 7 HKCFAR 114 at [13].

4.In Town Planning Board, the Court of Final Appeal observed at [17] that the discretion to award indemnity costs is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be “appropriate”.  However, at [15], the Court of Final Appeal also held that in order to obtain an order for indemnity costs, the successful party should show that the case has some “special or unusual feature”, citing inter alia Overseas Trust Bank Ltd v Coopers & Lybrand [1991] 1 HKLR 177.

5.In Overseas Trust Bank Ltd v Coopers & Lybrand at 182J‑183A, Godfrey J held that in order to justify the award of costs on a common fund basis, the case had to have some special or unusual feature, whereas in order to justify the award of costs on an indemnity basis, the case must either be one of a type already recognized in the court’s practice as warranting a taxation on that basis (such as contempt cases) or the case had some feature even more special or unusual than that which would justify common fund costs.

6.In the 22 May 2019 Judgment, this court held that the Plaintiffs had committed a procedural irregularity in applying for the Injunction ex parte in that they had failed to show any need for confidentiality or urgency and hence there was absolutely no valid basis for them to do so.  While committing a procedural irregularity by making an unjustified ex parte application in itself is sufficient ground for discharging the Injunction, it does not necessarily justify an award of indemnity costs.  In Luck Continent Ltd v Leonora Yung unrep, CACV 42 of 2010, 22 October 2010, for instance, the Court of Appeal set aside the Injunction unjustifiably obtained ex parte but took the view at [23] that it was sufficient penalty that the plaintiffs had to pay all the defendants’ costs and refused to award indemnity costs.

7.This court respectfully adopts the same view in this case.

8.In the 22 May 2019 Judgment, this court held that there was no solid or cogent evidence to justify an inference that the Opposing Defendants, including the 2^nd Defendant would, given the opportunity, dissipate their assets so as to evade the due process of the law and that the Plaintiffs had failed to show a real risk of dissipation of assets.  But this court also held that a good arguable case based on fraud/dishonesty against the 2^nd Defendant had been made out as his counsel was “content to leave the matter in the Court’s hand for the limited purpose of the application” — a good arguable case being a case which is more than barely capable of serious argument but not necessarily one which has a better than 50% chance of success.

9.On real risk of dissipation, it is undisputed that the 2^nd Defendant had been given many years’ notice of the claim against him by the Plaintiffs.  Further, the Plaintiffs admittedly did not have any direct evidence against him and relied on no recent development concerning the 2^nd Defendant in justifying the ex parte application.  Nevertheless, the Plaintiffs’ Continuation Summonses cannot be said to be “entirely devoid of merit” as in Huge Dragon Corp Ltd v Lung Mun Oasis (IO) [2014] 3 HKLRD 286 (CA) at [14] or “hopeless from the outset” and “a total waste of the court’s time” as in David Golan v Janek Davitashvili & Anr unrep, HCCW 255 of 2016, 1 March 2017, DHCJ Le Pichon at [78].

10.It was not wholly unreasonable for the Plaintiffs to pin their hope on the Honsaico Trading Ltd v Hong Yiah Seng Co Ltd [1990] 1 HKLR 235 and Standard Chartered Securities Ltd v Lai Arthur [1993] 1 HKC 375 line of authorities, as well asAkai Holdings Ltd & Ors v Ho Wing On, Christopher & Ors unrep, HCCL 37 & 40 of 2005, 9 February 2009, Stone J and Crete Maritime Corp v Emirates Shipping Line DMCEST [2017] 5 HKLRD 345 in trying to persuade this court to infer a real risk of dissipation by the 2^nd Defendant as an alleged fraudster, albeit eventually this court was not so persuaded after evaluating the totality of the evidence.

11.The fact that the 2^nd Defendant had been given many years’ notice of the claim against him by the Plaintiffs cannot be disputed.  The Plaintiffs’ delay in making the ex parte application years after alerting the 2^nd Defendant to the claim against him, coupled with the lack of a proper explanation for it, was a relevant consideration when assessing whether there was a real risk of dissipation: Re Chau Cham Wong Patrick (a bankrupt) [2016] 2 HKLRD 278.  Mr Alder submits that at the ex parte application, the Plaintiffs had failed to point this out fairly to L Chan J and this constitutes a factor in support of indemnity costs.

12.But as Mr Lee points out, the ex parte application was handled by reputable senior counsel and some attempts had been made to draw L Chan J’s attention to the various weaknesses of the Plaintiffs’ case, including delay, in their skeleton argument in the section “Full and frank disclosure”.  This court has considered the ex parte skeleton argument.  Although the Plaintiffs’ senior counsel could have put the weaknesses of their case on risk of dissipation, in terms of facts and the law, more fully, this court does not accept that was a deliberate attempt to withhold relevant materials from the ex parte Judge so as to justify indemnity costs: New Asia Energy Ltd v Concord Oil (Hong Kong) Ltd [2000] 2 HKC 681 at 690‑1.

13.Lastly, regarding the warning letter dated 25 June 2018 from the 2^nd Defendant’s solicitors to the Plaintiffs’ solicitors pointing out the weaknesses of their case coupled with a threat of indemnity costs which was ignored by the Plaintiffs, this court does not regard this as possibly constituting a “special or unusual feature” of the case.  In this court’s experience at the Bar and as a Judge, that sort of correspondence is anything but unusual in litigation.  The Plaintiffs have ignored the warning at their own peril and will have to pay the usual price of bearing the 2^nd Defendant’s costs.  But that does not justify indemnity costs.

14.To conclude, this court is not satisfied that there are any “special or unusual” features which make indemnity costs against the Plaintiffs appropriate.  

15.Save that all costsof and occasioned by the Plaintiffs’ Continuation Summonses previously reserved, if any, should also be to the 2^nd Defendant to be taxed if not agreed and paid by the Plaintiffs forthwith, with certificate for 1 counsel or 2 counsel, as the case may be, the Summons is hereby dismissed.

16.There shall be a costs order nisi that costs of and occasioned by the Summons be to the Plaintiffs, to be taxed if not agreed, and paid by the 2^nd Defendant forthwith, certificate for 1 counsel.

Mr Thomas Lee, instructed by Lipman Karas, for the Plaintiffs

Mr Edward Alder and Mr Newton Mak, instructed by P. C. Woo & Co, for the 2^nd Defendant