Polyline Development Ltd (in Liquidation) v. Ching Lin Chuen and Others

HCA 2319/2019

[2021] HKCFI 1437

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2319 OF 2019

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BETWEEN

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Before:  Mr Recorder Manzoni SC in Chambers

Date of Written Submissions of the 4^th Defendant:  10 March 2021

Date of Written Submissions of the WG Defendants:  10 March 2021

Date of Written Submissions of the Plaintiff:  10 March 2021

Date of Reply Submissions of the 4^th Defendant:  15 March 2021

Date of Reply Submissions of the WG Defendants:  15 March 2021

Date of Reply Submissions of the Plaintiff:  15 March 2021

Date of Final Rejoinder of the Plaintiff:  17 March 2021

Date of Further Reply Submissions of the 4^th Defendant:  18 March 2021

Date of Rejoinder Submissions of the WG Defendants:  18 March 2021

Date of Costs Decision:  26 May 2021

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COSTS DECISION

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1.On 3^rd March 2021 I handed down Judgment in this matter. I struck out the Statement of Claim, and ordered that the action be dismissed as against D1, D4, D6 to D12, D14 to D16 and D18. I made a costs order nisi that the plaintiff was to pay the costs of those defendants to be taxed if not agreed, and I gave leave to the parties to apply to vary the costs order.

2.I have now received a total of 9 submissions in respect of applications to vary the costs order.

3.The plaintiff has applied to vary the order so that the costs are to be determined only after the completion of the appeal which I am told will be made by the plaintiff against my Judgment.  Alternatively, the plaintiff contends that it should pay only half of the defendants’ costs on a party and party basis, although by its responsive submissions the plaintiff increased the 50% reduction it was seeking to 100%, suggesting that in fact it should pay nothing to the defendants.

4.In respect of the application to wait the outcome of the intended appeal, the plaintiff spent several paragraphs arguing why, in my main Judgment, I misunderstood the claim being made and should have read the pleading “in its proper context”.

5.In relation to the proposition that the plaintiff should only be liable to pay half (or alternatively none) of the defendants’ costs, the plaintiff relies upon what it says was the overwhelming number of hearing bundles, skeleton submissions and affirmations, and that the defendants have not been entirely successful.  I assume this to be a reference to the limitation point on which I would have found for the plaintiff had it been necessary, but which in fact I did not need to decide. 

6.The plaintiff suggests that I have failed to exercise my discretion on costs and that, based on what it says are the special circumstances, I should vary the order nisi that I have made.

7.In response the WG Defendants contend that if there is to be a challenge by way of appeal, the proper route to delay any orders is to apply for a stay of execution.  It suggests that it is not appropriate to obtain what is effectively a stay of execution by adjourning a costs order pending appeal.  In this context it relies upon Jora Sisi Omar v Jora Harmidar Omar unreported HCAP 19/2011, 6 June 2014 per DHCJ Marlene Ng at [41] in which the deputy judge refused to adjourn taxation proceedings in similar circumstances. 

8.In addition, the defendants suggest that the arguments in support of the proposed appeal, which the WG Defendants say has not been launched, have no merit.

9.As to the alternative variation sought, the defendants emphasised that there is “no automatic rule requiring reduction of a successful party’s costs if he has lost on one or more issues in any litigation, particularly complex litigation. A winning party was likely to fail on one or more issues in the case”, citing the Hong Kong Civil Procedure (2021) at [62/5/6].

10.The defendants rely upon various passages within my Judgment in which I expressed concern as to the amount of time this matter had taken to come before the court, and suggest that in those circumstances it was reasonable for them to bring a challenge on limitation grounds.  They suggest that an arbitrary reduction of 50% is inappropriate in this circumstance.  The suggestion to reduce the amount by 100% is impermissibly made as it was made too late, coming only in the reply submissions.

11.I do not consider that it is appropriate for me to make any assessment of the merits of the proposed appeal.  That is entirely a matter for the court of appeal.  Neither do I think it appropriate that I should delay any decision on costs pending an appeal because such an approach would effectively be a backdoor application for a stay of execution.  The plaintiff has not applied for a stay of execution, and has not made any attempt to address the various matters that would need to be satisfied in order for a stay to be granted.  Therefore I dismiss the application to the extent that it is based upon intended appeal.

12.Insofar as the voluminous documents and the issue-based cost application is concerned, I am very conscious that the WG Defendants spent a great deal of time and money addressing limitation in a manner which I did not consider of any assistance, and frankly was not appropriate in the context of a strike out application. Never before in my experience has a strike out been run in reliance upon an expert report, whose opinions inevitably give rise to issues that will need to be determined by the court.  The very need to rely upon expert opinion should almost inevitably preclude a strike out application in the mind of most practitioners. 

13.In my view there is some merit the plaintiff’s contention that the defendants ought to be deprived of some of those costs, having regard to the normal basis on which issue based costs are granted.  Those principles are set out in various cases, including Re Elgindata No 2 [1992] 1 WLR 1207 at 1214.

14.Neither am I persuaded by the WG Defendants’ suggestion that it would be inappropriate for the court to make a global reduction in the circumstances.  I do not consider it would be arbitrary in the manner which they suggest.  Costs is a broad discretion and should not form what would become satellite litigation by requiring direct causation and financial precision to be demonstrated in order to justify a variation to a costs order on an issues basis.

15.I accept that very significant costs were spent on the limitation issue.  It formed a large part of the submissions by the WG Defendants, they produced an experts report and affirmations from the expert.  Large parts of the documentation in the voluminous bundles were devoted to the question of limitation, and significant parts of both written submissions and oral submissions addressed it. Consequently there is no doubt in my mind that it increased the costs to the WG Defendants and the plaintiff, increased the size of the bundles, increased preparation time for all the lawyers as well as the court, increased the hearing time and increased the time taken by the court to assess the application.

16.However, I do not think that a 50% reduction is appropriate. Overall, taking a broad-brush approach, I consider that a reduction of 25% of the costs of the WG Defendants is appropriate to reflect that they did not succeed on the issue which probably incurred greatest amount of costs.  I do not think that a similar reduction ought to be made as against the 4^th Defendant, because he was separately represented, and although he adopted the position of the WG Defendants, the point taken was far less ambitiously run and argued.

17.The WG Defendants have also made an application to vary the costs order nisi.  They seek the following order:

“the plaintiff is to pay the WG Defendants there costs of the action including the costs of the strikeout application and all costs previously reserved, on a full indemnity basis, with a certificate for two Counsel, to be taxed forthwith if not agreed, and that the WG Defendants the liberty to take out any application against third parties under section 52 A (2) of the High Court Ordinance (Cap form) and Order 62 rule six A of the Rules of the High Court (Cap 4A) if so advised as and when appropriate.”(my emphasis)

18.The 4^th Defendant has also sought to vary the costs order nisi.  It applies for the following order:

“the plaintiff is to pay the fourth defendant the costs of the action, including (a) the costs of the fourth defendant’s striking out application by way of summons filed on 20 August 2020; and (b) all costs reserved, on an indemnity basis to be taxed if not agreed, with certificate for two Counsel.”

19.Insofar as the application for a certificate for two Counsel is concerned the plaintiff resists that application on the basis that it only had one senior counsel and the matter was not complicated. 

20.In my view two counsel were appropriately instructed in this case by both the WG Defendants and D4.  The case was complex both factually and legally.  I grant a certificate for two Counsel.

21.As to the position on all costs previously reserved, I agree that if there are any costs previously reserved in the action, then they should be rolled up into my costs order, given that I have dismissed the action.

22.Insofar as the application for indemnity costs is concerned, I am not prepared to grant indemnity costs.  Despite my conclusions that the action should be struck out, I do not think that the advancement of the claim was such as should attract the opprobrium of the court so as to justify indemnity costs.

23.As the plaintiff has recognised in its submissions, paragraphs 67 to 70 of the Judgment has identified that the plaintiff may have a complaint against some of the defendants concerning the manner in which its business was conducted.  The difficulty, and ultimately the underlying reason why the statement of claim was struck out, was due to inadequate pleading rather than necessarily because there was not a case lurking somewhere beneath the surface.  It would not be appropriate for me to say more about that in a costs judgment, save to reflect that I do not think that the bringing of these proceedings justifies indemnity costs.

24.Although D4 is separately represented, and was only a director of D12 from 30 June 2008, he is in the same position as some of the WG Defendants in that his involvement was far later than the relevant transfers to D12.  However, on balance, and despite the submissions made separately on his behalf, I do not consider that his position is sufficiently different to justify an order for costs on an indemnity basis.

25.The final order sought is that the WG Defendants be at liberty to take out applications against third parties if so advised.  In my view it is not appropriate for me to grant a blanket leave of the sort applied for.  If the WG Defendants seek an order that a third party is to pay costs, then that must be done with some specificity. There is no specificity in the application, and I do not think that I should give a general leave.

26.In the circumstances, my order absolute for costs is as follows:

26.1.  the plaintiff is to pay the WG Defendants 75% of their costs of the action including the costs of the strikeout application and all costs previously reserved, with a certificate for two Counsel, to be taxed if not agreed.

26.2.  the plaintiff is to pay D4 his costs of the action including the costs of the strikeout application and all costs previously reserved, with a certificate for two Counsel, to be taxed if not agreed.

Mr Barrie Barlow SC, instructed by William K W Leung & Co, for the plaintiff

Mr Horace Wong SC and Mr Michael Lok, instructed by Wilkinson & Grist for the 1^st, 6^th to 12^th, 14^th to 16^th and 18^th defendants

Mr Anson Wong SC and Mr Martin Kok, instructed by Chungs Lawyers, for the 4^th defendant