Shenzhen Honeycomb System Co Ltd v. Hct Technologies (Hong Kong) Co Ltd

CACV 199 /2020

[2021] HKCA 387

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 199 OF 2020

(ON APPEAL FROM HCCT NO 20 OF 2019)

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DECISION ON COSTS

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1.On 2 February 2021, the respondent (the appellant in this appeal, CACV 199/2020) sought leave to dismiss this appeal with costs. The applicant (the respondent in this appeal) asked for costs on an indemnity basis. I made an order for dismissal of this appeal on 18 February 2021 and gave directions for the parties to lodge written submissions whether indemnity costs should be ordered.

2.The material facts are as follows.

3.On 27 March 2019, the applicant commenced proceedings in HCCT 20/2019 to enforce an award made against the respondent on 20 June 2017 by the Shenzhen Arbitration Commission.  The award is in the region of US$2.2 million.  Shortly afterwards, the respondent challenged the applicant’s authority to institute these proceedings and sought an order for dismissal of the entire proceedings.

4.On 20 May 2020, Mimmie Chan J dismissed the respondent’s challenge with costs.  On 17 June 2020, the respondent filed a notice of appeal against the judge’s order.  This is the present appeal.

5.On 24 July 2020, the respondent issued a summons to stay the proceedings in HCCT 20/2019 pending the determination of this appeal (“the Stay Application”).

6.On 2 December 2020, Mimmie Chan J granted leave to the applicant to enforce the subject award despite the respondent’s opposition.

7.The Stay Application came before Anthony Chan J on 15 December 2020.  Having considered the decision of Mimmie Chan J on 20 May 2020, the grounds of appeal in CACV 199/2020 and the respondent’s submissions on the merits of its appeal, the judge took the view that there is nothing in the arguments of the respondent to undermine the decision of 20 May 2020 and no reasonable prospect has been demonstrated in respect of the appeal.  He took into account that the applicant is a Mainland company and its appeal may be rendered nugatory if the award is paid before the appeal is scheduled to be heard on 27 May 2021.  He made an order that unless the sums made up of the award, interest, legal costs and arbitration fees be paid into court by 31 December 2020 by the respondent, the Stay Application be dismissed with costs.

8.As no payment was made pursuant to the above order, the Stay Application was dismissed on 31 December 2020.

9.Having failed to obtain a stay of the enforcement of the award, on 13 January 2021, the respondent’s solicitors made an offer to the applicant to withdraw this appeal with no order as to costs.  This was rejected by the applicant.  In the end, the respondent applied to the Court of Appeal for dismissal of this appeal with costs, on a party and party basis.  The outstanding question is whether costs should be ordered against the respondent on an indemnity basis.

10.Insofar as it is suggested by the respondent that indemnity costs are to be awarded only when there is abuse of court process, scandalous or vexatious proceedings, proceedings improperly prosecuted with malice or an ulterior motive or in an oppressive manner, circumstances constituting an affront to the court etc, this proposition has long been rejected.  The courts have emphasized the undesirability of attempting to define the circumstances in which orders for indemnity costs are to be made. The discretion is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be ‘appropriate’. The grounds upon which indemnity costs are awarded may extend to any matter relating to the litigation and the parties’ conduct in it, and also to the circumstances leading to the litigation. (Town Planning Board v Society for Protection of the Harbour Ltd (2004) 7 HKCFAR 114 at §§16 to 18).

11.I agree with the assessment of Anthony Chan J on the lack of merits of this appeal and that no reasonable prospect has been demonstrated for this appeal.  I agree with the applicant’s submission that an inference may properly be drawn that this appeal was mounted to delay the enforcement of the award and to facilitate the Stay Application, despite the clear lack of merits.  It was only after the Stay Application was dismissed that the respondent approached the applicant with a view to dropping its appeal. In the end, the appeal was abandoned two months after a notice of hearing of the appeal (with a scheduled hearing date in May 2021) was issued on 4 December 2020.  Judicial resources and costs have been wasted as a result.

12.The litigation conduct of the respondent is an abuse of the appeal procedure.  I am satisfied it is appropriate to order indemnity costs against the respondent in this instance and I so order.

Mr Paul Wong, instructed by LIMS Solicitors, for the Applicant (Respondent)

Yan Lawyers, for the Respondent (Appellant)