David Subotic and Others v. Securities and Futures Commission

FACV No. 4 of 2023

[2023] HKCFA 40

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 4 OF 2023 (CIVIL)

(ON APPEAL FROM CACV NO. 510 OF 2021)

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JUDGMENT ON COSTS

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Mr Justice Ribeiro PJ:

1.This appeal was brought by the six appellants[1] who were resident or incorporated abroad, referred to below as the “Eastmore defendants” (“the appellants”). They had sought to challenge the jurisdiction of the Hong Kong court which had been assumed pursuant to orders granting leave to the respondent (“the SFC”) to serve the appellants out of the jurisdiction pursuant to O 11 r 1(1).[2] Such leave was based on the SFC’s claims for contravention of SFO section 274 and for relief under section 213 being treated as coming within the “tort gateway” under O 11 r 1(1)(f). The appellants contended that that gateway was inapplicable and that jurisdiction had not been validly founded in Hong Kong.

2.Prior to the hearing, this Court raised the question whether the claims were more properly regarded as falling within O 11 r 1(2) and thus not requiring the court’s leave for service out of the jurisdiction. After hearing argument, the Court held that O 11 r 1(2) applies and unanimously dismissed the appeal.[3] It granted the parties liberty to lodge written submissions regarding costs. Following consideration of such submissions, this is the judgment of the Court on costs.

3.The appellants submit that there should be no order as to costs throughout and ask that the sum of HK$400,000 paid into court by way of security for costs be paid out to them.

4.They argue that since the Court has found that O 11 r 1(1)(f), relied on by the SFC in the courts below was irrelevant: “It follows that all the costs associated with the appellants’ application to set aside the leave granted … under O 11 r 1(1) … have been wasted.”[4] The appellants go on to submit that if the SFC had served them under O 11 r 1(2) without seeking leave, “the appellants’ application to set aside leave and the appeal proceedings would ... have been avoided”.[5]

5.The appellants also seek to contend that it was “in the public interest” for the Court to clarify the applicability of O 11 r 1(2) in conjunction with the SFO provisions, given the SFC’s role of protecting the investing public.

6.The SFC submits that the costs orders below[6] should not be disturbed and that the appellants should pay all the costs of the appeal. The appellants issued a summons under O 12 r 8 to set aside service and the interim injunctions. They have failed throughout, albeit ultimately on a ground not originally relied on.

7.The SFC points out that its statutory duty to protect the investing public made it imperative for it to secure an estimated amount of between HK$101.28 million and HK$124.88 million by a freezing injunction and thereafter to uphold the Hong Kong court’s jurisdiction.

8.In our view, this Court’s decision in Luo Xing Juan Angela v The Estate of Hui Shui See, Willy, Deceased[7] relied on by the SFC, provides apt guidance. In that case, on “[the] same evidence and findings”, the Court “altered the legal foundation for the orders made below” but the “net result in each court was ... the same”.[8]  It was held that in such circumstances, the costs ought in principle to follow the event – “an ‘event’ which involved the respondent having the winning case at every level of court”.[9]  Very much the same can be said of the present case.

9.After they were served, the appellants applied under O 12 r 8 to set aside the writ and interim injunctions. Their aim was thus to challenge the jurisdiction of the Hong Kong courts and to unfreeze the frozen assets. They failed at every level of court, albeit that this Court altered the legal basis on which that result was reached. Their suggestion that “the appellants’ application to set aside leave and the appeal proceedings would ... have been avoided” if the SFC had effected service without seeking leave entirely lacks credibility. It is impossible to believe that the appellants would not likewise have issued an O 12 r 8 summons and pressed on with their attempts at every level of court to set aside service effected without leave and to unfreeze significant sums frozen, no doubt running arguments along the same lines as those advanced before this Court.

10.Not all the costs associated with the arguments below were wasted. It is true that the Court did not need to decide whether the SFC’s claim should be classified as a “tort” under O 11 r 1(1)(f). However, the juridical nature of the SFC’s claim under section 213, construed contextually and purposively within the framework of the SFO, remained in issue and had to be examined, including in relation to the question whether it raised “any claim at all”.

11.The proceedings instituted by the appellants were obviously brought in their own private interests. The suggestion that such proceedings should be regarded as involving public interest litigation for costs purposes is wholly unsustainable.

12.For the aforesaid reasons, the costs should follow the event and should be paid by the appellants to the SFC. We accordingly make the following orders, namely:

(a)  That the costs orders granted by the Courts below do remain in place; and

(b)  That the appellants do pay to the SFC the costs of and occasioned by this appeal, including the costs of the leave application and of the present submissions on costs.

Written submissions by MinterEllison LLP, for the 2^nd, 3^rd, 13^th, 14^th, 18^th and 19^th Defendants (Appellants)

Written submissions by Mr Bernard Man SC and Ms Sheena Wong, instructed by Securities and Futures Commission, for the Plaintiff (Respondent)