China Medical Technologies, Inc (in Liquidation) and Others v. Wu Xiaodong and Others
Read the full judgment text of CAMP 340/2023 on BabelCite. This Court of Appeal judgment was delivered on 8 April 2024 before Au JA and Chow JA.
Civil procedure – leave to appeal – costs order – indemnity costs – joinder of parties – case management – Court of Appeal's approach to costs orders with high discretionary content – Poon Ching Man v Lam Hoi Pun [2016] 3 HKLRD 815 – Chan Shun Kei v Hong Kong Construction (HK) Ltd, CACV 192/2014 – Lau Muk Fat (Manager of Lau Shau Wo Tso) v Wong Kwok Wa [2023] 1 HKLRD 1067 – consolidated High Court Actions Nos 3391/2016 and 1417/2013 – China Medical Technologies, Inc (in liquidation) and others v Wu Xiaodong and others – 2nd Defendant's Joinder Summons seeking joinder of Bank of China (Hong Kong) Limited and Bank of East Asia Limited as 'interested parties' in respect of the nature of the FISH and SPR Transactions – dismissal of Joinder Summons by Ng J on 15 September 2023 for being wholly without merit and a delaying tactic – order that 2nd Defendant pay indemnity costs to the Plaintiffs, BoC and BEA – whether Lau Muk Fat establishes a general principle that a neutral costs order is more appropriate in case management matters unless a party acts in a 'culpable' way – whether BoC and BEA entitled to separate sets of costs notwithstanding that they adopted a 'united front' – whether judge erred in finding the Joinder Summons was an attempt to delay the consolidated action – whether indemnity costs were properly ordered on grounds of (i) improper purpose/delaying tactic, (ii) devoid of merits, and (iii) failure to withdraw after Banks objected – whether there is a high threshold for interfering with a discretionary costs order – Court of Appeal will only interfere where decision is wrong in principle or plainly wrong – court rejects the proposition that the court should generally order a neutral costs order in case management matters – court's discretion on costs is wide and depends on facts and circumstances of each case – Banks were separately represented from the outset and entitled to separate sets of costs – 2nd Defendant's professed reason for joinder was to benefit the Banks, yet he persisted when neither the Banks nor the Plaintiffs supported it – judge entitled to infer improper purpose – leave to appeal refused with no reasonable prospect of success and no other reason in the interests of justice – no oral reconsideration permitted under Order 59, rule 2A(8) – costs of the leave application summarily assessed on a party and party basis at HK$60,000 to the Plaintiffs, HK$40,000 to BoC, and HK$40,000 to BEA.
Legal issues: Whether leave to appeal should be granted against an indemnity costs order made in connection with a dismissed joinder application
Outcome: Leave to appeal refused. The 2nd Defendant's application for leave to appeal against the Costs Order was dismissed. The court further ordered that no party may request the determination to be reconsidered at an oral hearing inter partes pursuant to Order 59, rule 2A(8) of the Rules of the High Court.
Cited by 4 cases · Cites 7 cases
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CAMP 340/2023, [2024] HKCA 310 On An Intended Appeal From [2023] HKCFI 2350 & IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL MISCELLANEOUS PROCEEDINGS NO 340 OF 2023 (ON AN INTENDED APPEAL FROM HCA NO 3391 OF 2016) ________________________
________________________ AND IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL MISCELLANEOUS PROCEEDINGS NO 340 OF 2023 (ON AN INTENDED APPEAL FROM HCA NO 1417 OF 2013) ________________________
________________________ (Consolidated by Order of Master Chow dated the 23rd day of July 2018)
____________________ JUDGMENT ____________________ Hon Chow JA (giving the Judgment of the Court): INTRODUCTION 1.On 15 September 2023, Ng J made an order dismissing the 2nd Defendant’s summons filed on 13 October 2022 (“the Joinder Summons”) seeking the joinder of, inter alia, Bank of China (Hong Kong) Limited and Bank of East Asia Limited (“BoC” and “BEA” respectively, and “the Banks” collectively) as “interested parties” in the consolidated High Court Action Nos 3391 of 2016 and 1417 of 2013 (“the Consolidated Action”) “in respect of the adjudication on the nature of the FISH and SPR Transactions by the Court” (“the Common Issues”), and ordering the 2nd Defendant to pay the Plaintiffs, BoC and BEA’s respective costs of and occasioned by the Joinder Summons forthwith, to be summarily assessed on an indemnity basis (“the Costs Order”). 2.The relevant backgrounds facts are well known to the parties, and the Judge’s reasons for dismissing the Joinder Summons and making the Costs Order are set out in the Judge’s written judgments dated 15 September 2023 (“the Judgment”) and 27 October 2023 (“the Leave Judgment”) respectively. They will not be repeated here, save to mention, in summary, that:
3.On 27 October 2023, the Judge dismissed the 2nd Defendant’s application for leave to appeal against the Costs Order. 4.By summons filed on 9 November 2023 (“the Leave Summons”) in the Court of Appeal, the 2nd Defendant renewed his application for leave to appeal against the Costs Order. APPLICABLE PRINCIPLES 5.The test for granting leave to appeal against a costs order made by a judge at first instance, and the Court of Appeal’s approach in an appeal against such an order, are well settled. In general, costs are very much a matter of discretion for the judge. The Court of Appeal will be very circumspect in intervening in such a decision with high discretionary content. It will only interfere when it is satisfied that the decision of the judge is either wrong in principle or plainly wrong. See Poon Ching Man v Lam Hoi Pun [2016] 3 HKLRD 815, at §34; Chan Shun Kei v Hong Kong Construction (HK) Ltd, CACV 192/2014 (7 March 2016), at §22. The Court of Appeal will take into account the high threshold for intervention in a costs order made by a judge when deciding whether to grant leave to appeal. DISCUSSION 6.In the Further Revised Draft Notice of Appeal attached to “D2’s Written Statement for Leave to Appeal” dated 9 November 2023 (“D2’s Statement”), the 2nd Defendant raises 2 intended grounds of appeal, which have been summarized in §3 of D2’s Statement as follows:
(i) Ground 1 7.We shall first deal with the various arguments raised by Mr Lung in D2’s Statement in support of Ground 1. 8.First, Mr Lung argues that as regards case management matters, a neutral costs order is generally more appropriate unless a party acts in a “culpable” way. In support of this proposition, he relies on the judgment of Recorder Rachel Lam SC in Lau Muk Fat (Manager of Lau Shau Wo Tso) v Wong Kwok Wa [2023] 1 HKLRD 1067. We do not consider, upon a proper reading of the judgment of the Recorder, that she intended to lay down any general principle that a neutral costs order is more appropriate in case management matters unless a party acts in a “culpable” way. Lau Muk Fat concerned an application for consolidation of several sets of proceedings, and the Recorder noted that in a number of cases, the court made a neutral costs order (namely, costs in the cause) where applications for consolidation were rejected and also where consolidation had been granted despite unsuccessful opposition, the underlying rationale being that “consolidation was often a complex and difficult case management issue … Where any party does not act in a culpable way, the Court will be slow to impose costs consequences on any side if such issue of consolidation needs to be considered in due course”.[5] The application before the Judge was not for any consolidation of proceedings. In any event, we agree with the Judge that in relation to “case management applications, as in any other applications, the incidence of costs depends on numerous factors including inter alia the merits of the case management proposal put forward by an applicant”[6]. In matters relating to costs, the court has a wide and general discretion. How the discretion ought to be exercised in any given case must depend on the facts and circumstances of that case. It would not be appropriate to fetter or circumscribe the court’s broad discretion on costs by reference to any specific categories of cases. The Judge was correct to reject the general proposition advocated by Mr Lung. 9.Second, Mr Lung argues that it was eminently reasonable for the 2nd Defendant to take out the Joinder Summons to invoke the court’s active case management powers conferred by Order 1B, rule 1(2) of the Rules of the High Court (Cap 4A), when no party involved in the Plaintiffs’ multiple actions had ever attempted to make proposals to the court for the separate actions to be properly case-managed until the Plaintiffs were directed to address the problem at §38 of the Judgment. This general submission does not assist the 2nd Defendant, because it is still necessary to consider whether the “case-management” order or direction sought by the 2nd Defendant has any merits. If, as found by the Judge, the Joinder Summons was wholly without merits and was an attempt by the 2nd Defendant to delay the Consolidated Action, that would clearly provide good justification for the court to exercise its discretion to order the 2nd Defendant to bear the costs of the application. 10.Third, Mr Lung argues that there are common factual issues relevant to all of the Plaintiffs’ multiple actions (ie the Consolidation Action, the BOC Action and the BEA Action), namely, the nature and value of the FISH and SPR Transactions, the existence of which are recognised or acknowledged by the Judge, the Plaintiffs and BEA, but the Plaintiffs failed to provide any case management proposal or solution. Mr Lung relies on the fact that the Judge himself proposed a trial on preliminary issues (being the Common Issues) involving all parties. Mr Lung also refers to §9 of the Plaintiffs’ proposal dated 17 October 2023 (which was filed pursuant to the Judge’s direction at §38 of the Judgment seeking case management proposals to achieve the underlying objectives of the CJR), and submits that the Plaintiffs tacitly accepted that the Common Issues were relevant across the multiple actions. In our view, this argument of Mr Lung misses the real point. The question is not whether there are Common Issues to be resolved in the Consolidated Action, BOC Action and the BEA Action, but whether it is appropriate for the Banks to be joined as parties to the Consolidated Action, which raises numerous other issues which are or may be of no interest or concern to the Banks. It may well be appropriate for there to be a trial of preliminary issues involving all interested parties (as to which we express no view since it is not a matter before us), but that would be very different from joining the Banks as parties to the Consolidated Action. As for the Plaintiffs’ proposal dated 17 October 2020, what the Plaintiff said was that “an early resolution of the [Consolidated] Action will assist to narrow the issues in the remaining actions. In particular, if the court is satisfied, in the [Consolidated] action, that the FISH and SPR Transactions are as contended by the Plaintiffs, it is anticipated that any dispute on that issue that exists in the other actions will be far more easily resolved in those other actions, and may even evaporate”. In other words, the Plaintiffs were not proposing that the Banks should be joined as parties to the Consolidated Action for the purpose of determining the Common Issues. Rather, according to the Plaintiffs, those issues should be determined in the Consolidated Action first. 11.Fourth, Mr Lung argues that the Judge’s observation that the 2nd Defendant’s joinder proposal could have been raised at a Case Management Conference (the latest one being scheduled for 30 October 2023), instead of by way of a separate summons, would only add to the delay. This argument has no merits. In view of the Judge’s view that the 2nd Defendant’s joinder application is devoid of merits, it would be dismissed by the Judge whether the application is considered separately or at a Case Management Conference. There is no evidence that any delay to the overall progress of the Consolidated Action will be occasioned by the joinder application being considered at a Case Management Conference. On the other hand, as observed by the Judge at §19 of the Leave Judgment, the incidence of costs of the Case Management Conference may well be different from that of the Joinder Summons. 12.Fifth, Mr Lung argues that there is no effective “winner” in the dismissal of the Joinder Summons, because the Banks are still required to address the “Common Issues” in their respective actions. We do not accept this argument. The Judge considered the Joinder Summons to be without merits and should have been withdrawn. Plainly, the 2nd Defendant is the “loser” insofar as the Joinder Summons is concerned. Further, whether the Common Issues will require to be addressed in the BOC Action and BEA Action remains to be seen. This is because, as submitted by Mr Manzoni SC (for the Plaintiffs) and recorded by the Judge at §20 of the Judgment –
13.Sixth, Mr Lung argues that the 2nd Defendant should only pay 2 sets of costs, being those of (i) the Plaintiffs, and (ii) BoC/BEA, because the Banks essentially adopted a “united front” for the purpose of the Joinder Summons (namely, they insist that the Commons Issues be tried in their respective actions), and there is plainly no conflict of interest between them. As earlier mentioned, it is by no means certain that the Commons Issues will have to be tried again in the BOC Action and BEA Action. In any event, the Judge held, correctly in our view, that “the fact of the matter is that BOC and BEA have been separately represented from the very beginning of the proceedings against them. The 2nd Defendant issued the Joinder Summons with his eyes open. Whether or not there is conflict of interest between BOC and BEA vis-à-vis the Joinder Summons is irrelevant. Each of the Banks was entitled to separate legal representation and came to its own view as to the merits of the Joinder Summons. The Banks objected to the Joinder Summons for reasons of their own. If conflict of interest were the test, the Plaintiffs, BOC and BEA should only get 1 set of costs since they all opposed the Joinder Summons on the ground that it had no merits. The 2nd Defendant’s proposition that there should be 1 set of costs for BOC/BEA need only be stated to be rejected”[7]. (ii) Ground 2 14.Mr Lung argues that the reasons given by the Judge for awarding indemnity costs against the 2nd Defendant were flawed or incorrect. According to Mr Lung, the Judge gave the following reasons for ordering the 2nd Defendant to pay indemnity costs:
15.By way of preliminary observation, it may be noted that the Judge’s reasons for making an indemnity costs order against the 2nd Defendant are set out at §25 of the Leave Judgment, as follows –
16.It seems clear that one of the reasons given by the Judge, but not mentioned by Mr Lung, was that the Joinder Summons was devoid of merits and should not have been brought. In any event, we are not persuaded by Mr Lung’s criticisms of the Judge’s reasons for making an indemnity costs order against the 2nd Defendant. 17.In respect of §14(1) above, Mr Lung argues that the finding of “another” attempted delay is incorrect, because there was no such prior finding. He also argues that the suggestion that the 2nd Defendant took out the Joinder Summons to stall the progress of the Consolidated Action disregards the full procedural context, and refers to various matters by way of “example” at §17 of D2’s Statement, which it is not necessary to set out in this judgment. Mr Lung’s complaint that there was no finding of any previous attempt by the 2nd Defendant to delay the progress of the Consolidated Action is just a semantic point. Regardless of whether there was any such finding, the Judge was entitled to find, on the materials before him, that the Joinder Application was a delaying tactic by the 2nd Defendant and brought with an improper purpose. This finding, coupled with the other matters mentioned by the Judge at §25 of the Leave Judgment, would justify an order for indemnity costs against the 2nd Defendant. 18.§14(2) and (3) above can be considered together:
19.It is, of course, correct to say that it is not for the Banks to dictate how various actions ought to be properly case-managed. We do not accept, however, that the proposed joinder sought by the 2nd Defendant would achieve the object of proper case-management of the actions. In our view, it is important to consider the 2nd Defendant’s professed reason for making the joinder application, which was purely to benefit the Banks. No benefit to the 2nd Defendant was identified[8]. In such circumstances, when neither the Banks nor the Plaintiffs were in favour of the proposed joinder, one may expect the 2nd Defendant to withdraw the application at that point. The 2nd Defendant did not do so. The question which naturally arose was why the 2nd Defendant would persist with the application. Plainly, the Judge did not consider that the 2nd Defendant made the application for any altruistic purpose. He inferred that the application was an attempt to delay the progress of the Consolidated Action. We consider it was open to the Judge to take such a view. 20.Overall, Grounds 1 and 2 are not reasonably arguable, and the 2nd Defendant’s intended appeal does not have a real prospect of success. There is also no other reason in the interests of justice why the appeal should be heard. 21.In passing, we should mention that Ms Xu has objected to the 2nd Defendant’s reliance on the “Common Issues” as (allegedly) reframed in §9 of D2’s Statement. Ms Xu says that at the substantive hearing before the Judge, the 2nd Defendant identified 2 base claims as “Commons Issues”, covered by Sections D and G of the Amended Statement of Claim consisting of 60 pages of pleaded facts, and the Judge did not consider this sufficient to identify the “Common Issues” or justify the joinder application. Ms Xu argues that the 2nd Defendant should not be permitted to narrow down the “Common Issues” in the present application[9]. Neither Mr Julian Lam nor Mr Keith Lam has raised any similar objection on behalf of BoC and BEA respectively. For the purpose of disposing of the present application, it is not necessary for us to resolve this objection, because we are of the view that the leave application ought to be dismissed even if one proceeds on the basis of the “Common Issues” as defined in D2’s Statement. DISPOSITION 22.The Leave Summons dated 9 November 2023 is dismissed with costs to the Plaintiffs, BoC and BEA, which we summarily assess, on a party and party basis, in the amounts of HK$60,000, HK$40,000 and HK$40,000 respectively. We do not consider that the 2nd Defendant should be ordered to pay indemnity costs in relation to the leave application, notwithstanding Mr Keith Lam’s submission. The above costs orders, including assessments of the costs of the Plaintiffs, BoC and BEA are orders nisi, which shall become absolute unless an application is made to vary the same within 14 days from the date of this judgment. 23.Lastly, as the 2nd Defendant’s application for leave to appeal is totally without merit, an order is made that no party may request the present determination to be reconsidered at an oral hearing inter partes pursuant to Order 59, rule 2A(8) of the Rules of the High Court.
Ms Cherry Xu, instructed by Karas So LLP, for the Plaintiffs Mr Vincent Lung, instructed by P. C. Woo & Co, for the 2nd Defendant Mr Julian Lam, instructed by Allen & Overy, for Bank of China (Hong Kong) Limited Mr Keith Lam, instructed by Linklaters, for Bank of East Asia Limited [1] This is a reference to HCA 1742/2018 commenced by the Plaintiffs against BoC. [2] This is a reference to HCA 1741/2018 commenced by the Plaintiffs against BEA. [3] See §§19-34 of the Judgment. [4] See §25 of the Leave Judgment. [5] See §§4 and 5 of the judgment in Lau Muk Fat. [6] See §18 of the Leave Judgment. [7] See §21 of the Leave Judgment. [8] See §31 of the Judgment. [9] See §9 of Statement in Opposition of the Plaintiffs dated 23 November 2023. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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