Bluesun Capital Ltd v. Tewoo Group Finance No 3 Ltd and Others

HCA 1428/2020

[2021] HKCFI 2267

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1428 OF 2020

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Before:  Mr Recorder Manzoni, SC in Chambers

Date of Written Submissions of the 1^st and 2^nd Defendants:  21 July 2021

Date of Reply Submissions of the Plaintiff:  28 July 2021

Date of Reply Submissions of the 1^st and 2^nd Defendants:  30 July 2021

Date of Costs Decision: 30 September 2021

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COSTS DECISION

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1.On 14 July 2021 I handed down my decision in this matter setting aside the default judgment which had been entered by the Plaintiff. I do not repeat the reasons that I gave in that decision. I made a costs order Nisi that the Plaintiff was to pay first and second Defendants’ costs, and invited submissions in the event that either party wished to seek a variation of costs order.

2.On 21 July 2021 the first and second Defendants applied to vary the Costs Order Nisi, inviting the court to award costs on an indemnity basis, and to summarily assess them.

3.The first and second Defendants also noted, by way of the letter dated 21 July 2021 that the decision of the court had not addressed the existence of a Charging Order Nisi dated 11 December 2020 arising from, and based upon, the default judgment. That in itself is not surprising because no submissions were made to the court about it.

4.The principles governing applications for costs to be paid on an indemnity basis have been summarised by Coleman J in Kwok Hiu Kwan v Convoy Global Holdings Ltd [2020] HKCFI 3026 at [11] – [12] as follows:

“In certain circumstances, costs may be awarded on a more generous than the usual party and party basis of taxation, so as to achieve a fairer result. It is for the receiving party to show that the case has some special or unusual feature. Such features are not confined to an ulterior motive, or an improper purpose, deception or underhand conduct on the part of the paying party… The attributes of the parties and the character of the proceedings may be relevant to the question as to which basis taxation should be ordered. The discretion to order a more generous than usual basis of taxation is not to be fettered or circumscribed beyond the requirement that such a taxation will be ordered only when it is appropriate to do so. The matters which may indicate a more generous than usual basis of taxation will include any matter relating to the litigation and the parties’ conduct in it, and also to the circumstances leading to the litigation.”

5.The first and second Defendants rely first upon the conclusion that I reached that the Plaintiff is guilty of serious and material nondisclosure.  They also contend that in the light of the defences served by the Trustee and BMO, the Plaintiff should not have resisted the application to set aside the default judgment.  They also demonstrate that the Plaintiff knew full well of the arguments that the first and second Defendants would raise in any application to set aside, because they were clearly articulated in correspondence leading to the application.

6.On 28 July 2021 the Plaintiff served its submissions in response.  It resists costs being addressed on an indemnity basis, although it does not dispute the principles upon which the question must be assessed.

7.The Plaintiff contends that the first and second Defendants have not demonstrated any special or unusual feature.  It says that the Trustee and BMO have simply distanced themselves from the action, and that in itself does not justify indemnity costs.  Indeed it was the delay of the first and second Defendants themselves which has given rise to the default judgment as there was no acknowledgement of service and it was therefore a reasonable application to make.  It also contends that the evidence of the first and second Defendants was only filed two weeks before the substantive hearing thus leaving little time to address the real question.

8.On balance, I have been persuaded that it is appropriate to award costs on an indemnity basis.  In my decision I have explained why the judgment was irregular.  That irregularity has arisen through an abandonment of any claim which might otherwise have justified it.  It must have been obvious to the Plaintiff that it was abandoning that part of the statement of claim which justified the default judgment and yet it proceeded notwithstanding.  In my view that was inappropriate and would, in itself, justify indemnity costs on a set aside application.  To put the matter another way, contrary to what the Plaintiff now says, the application was not a reasonable application to make because the Plaintiff had not pleaded any claim, other than that which it had abandoned, which would justify the relief.

9.Secondly, my decision explained that the Plaintiff had been guilty of serious material nondisclosure relating to the locus of the Plaintiff to bring the action.  The courts have, time and time again, explained the importance of full and frank disclosure when an ex parte application is made.  Its importance cannot be stressed enough because in any application for ex parte relief the court relies heavily upon the applying party being full and frank with the court so as to enable the court properly to reach a conclusion in circumstances when one side is not represented.  The granting of ex parte relief is an important part of the armoury of the court, but if a party misuses the privilege of being able to ask for ex parte relief, then it must expect to suffer the consequences.  In my view where there has been a serious material nondisclosure such as exists in this case, the applicant is likely to be visited with indemnity costs.  In this case indemnity costs is an appropriate conclusion.

10.As to the summary assessment, there is no objection to the court undertaking a summary assessment.  The first and second Defendants have already submitted their statement of costs and proposed that the Plaintiff should provide comments within seven days of the order to be made, with the court making a summary assessment the papers thereafter.  The Plaintiff accepts those directions as appropriate and therefore I make those directions.

11.As to the application to discharge the Charging Order Nisi, by letter dated 28 July 2021 the Plaintiff’s solicitors have said that the Plaintiff does not object to the charging Order Nisi being set aside unconditionally.

12.In the circumstances, I consider that it is appropriate to make an order discharging Charging Order Nisi on the basis that there is no dispute about whether or not it should be discharged.  Therefore I make an order in those terms.

13.The first and second defendants have also asked for an order for time to serve the defence so that the action can proceed.  That is appropriate, and I order that it be served within 28 days of the date of the order made following this decision.

Messrs Kwok Yih & Chan, for the Plaintiff

Messrs WK To & Co, for the 1^st and 2^nd Defendants