Achieve Goal Holdings Ltd v. Zhong Xin Ore-material Holding Co Ltd

CACV 6/2019

[2020] HKCA 165

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 6 OF 2019

(ON APPEAL FROM HCA NO 1987 OF 2005)

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BETWEEN

(By original action)

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AND BETWEEN

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(By counterclaim)

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JUDGMENT ON COSTS

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Hon Kwan VP (giving the Judgment of the Court on Costs):

1.On 17 January 2020, we handed down our judgment in this appeal in favour of the 1^st and 2^nd plaintiffs by counterclaim (“the Bai Jun Camp”) and reversed the judgment of Au-Yeung J of 15 December 2018. In respect of the costs below, we directed the parties to serve submissions and indicated that this would be dealt with on paper. The terms and abbreviations in our judgment will be adopted here.

2.The judge made these observations^[1] in deciding to order the 1^st and 2^nd defendants by counterclaim (“the Angola Camp”) to bear 30% of the costs of the Bai Jun Camp of the whole action on an indemnity basis:

(1) The core of the counterclaim is for the shareholding in Zhong Xin held by Angola.  The Angola Camp is the true winner on the Stage 1 issue (this covers the construction and performance of the JV Agreement).  In the interim, the Angola Camp has withdrawn its claim under the Loan Agreement, of which costs should go to Bai Jun.

(2) The Stage 2 issue (this relates to the validity and effect of an injection of capital in February 2008 by Clarigain on behalf of Zhong Xin into CLB and Bai Jun’s claim for 20% of the shares of Zhong Xin from Angola under clause 4.3 of the JV Agreement) became unnecessary^[2] but the judge did not see how it could be said it was “not an unreasonable cause to raise or to defend”.

(3) Hence, the Angola Camp should have 80% of the costs of the action on a party and party basis relating to Stage 1 and generally under the JV Agreement.

(4) Costs should follow the event on the Stage 3 issue (this relates to the validity of the Settlement Agreement which was first revealed by the Angola Camp on 3 July 2009 when it issued a summons to stay the trial of these proceedings originally fixed for July 2009).  Stage 3 came about because of “gross litigation misconduct on the part of Angola Camp in misleading the Hong Kong and PRC Courts” and this trial “could have ended 9 years ago but for such misconduct”.  The Angola Camp should bear the costs of the Bai Jun Camp on an indemnity basis from and including 3 July 2009.

(5) Taking a broad brush approach and doing a notional set off, the judge ordered the Angola Camp to bear 30% of the costs of the Bai Jun Camp of the whole action on an indemnity basis.

3.By our judgment, we overturned the judge’s rulings on the Stage 1 issue.  Mr Chan SC submitted that the Bai Jun Camp is the winner of all issues of these proceedings generally and hence should be entitled to the costs of the entire action.  Furthermore, as found by the judge, Stage 3 was only raised because of gross litigation misconduct of the Angola Camp in misleading the Hong Kong and Mainland courts.  Such misconduct had generated significant unwarranted costs and pressure for the conduct of these proceedings including the adjournment of the original trial dates and the extensive involvement of interim receivers of Zhong Xin in the PRC Proceedings, which in turn generated satellite litigation regarding the conduct of the interim receivers.  The inordinate delay for the resolution of the disputes had caused extensive disruption to the operation of Zhong Xin and CLB.  Such misconduct caused significant prejudice and oppression to the Bai Jun Camp.  To reflect the overall misconduct in raising and pursuing the Stage 3 issues in a fraudulent and oppressive manner, an indemnity costs order is justified.

4.Mr Chan proposed these costs orders to be made:

(1) costs of the whole action incurred prior to 3 July 2009 be to the plaintiffs by counterclaim on a party and party basis; 

(2) costs of the whole action incurred after 3 July 2009 be to the plaintiffs by counterclaim on an indemnity basis; and

(3) a certificate for two counsel be made.

5.On behalf of the Angola Camp, Mr Dawes SC proposed that the Angola Camp should bear 80% of the costs below of the Bai Jun Camp on a party and party basis, with a certificate for two counsel.  He contended that Bai Jun should be deprived of its costs on the Stage 2 issues, which he submitted took up about 20% of the total costs and time of the action below on a broad brush approach.  And the Angola Camp should not bear the costs of the Bai Jun Camp after 3 July 2009 on an indemnity basis, as it did not raise the Stage 3 issues improperly or unnecessarily.

6.We do not accept Mr. Dawes’ submissions.

7.As we have noted earlier, the judge took the view that the Stage 2 issue was “not an unreasonable cause to raise or to defend”.  It is not appropriate for this court to differ from the evaluation of the trial judge, who has been involved with this case for years and has great familiarity with how the issues had evolved leading up to the trial and during the trial which lasted for 11 days.

8.As for the contention that the Stage 3 issues were raised by the Angola Camp reasonably and that it had filed a respondent’s notice to challenge the judge’s holding which we did not deal with in light of our holdings on the Stage 1 issues, it seems to us this is missing the point.  The reason for ordering costs on an indemnity basis was the litigation misconduct of the Angola Camp in misleading the courts of Hong Kong and the Mainland about the purported settlement.  Whether the actual authority argument ran by the Angola Camp is reasonably arguable is beside the point.  We agree with the judge that the fraudulent misconduct as found is sufficient to justify an indemnity costs order.

9.For the above reasons, we set aside the judge’s order on costs and make an order in respect of the proceedings below as submitted by Mr Chan.

10.The costs of the present application are dealt with on the same basis as the costs of this appeal, namely, that the Angola Camp is to pay the costs of the Bai Jun Camp, with a certificate for two counsel.

Mr Edward Chan SC and Mr Clark Wang, instructed by Kwok, Ng & Chan, for the 1^st and 2^nd Plaintiffs by counterclaim (Appellants)

Mr Victor Dawes SC and Mr James Man, instructed by Ince & Co, for the 1^st and 2^nd Defendants by counterclaim (Respondents)