Jose Miranda Da Costa Junior and Another v. Lorenzo Yih, also known as Yu Chuan Yih and Others

HCA 156/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 156 OF 2010

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(by original action)

AND BETWEEN

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(by counterclaim)

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REASONS FOR DECISION

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Introduction

1.This reasons for decision concerns an application which was about the decision I handed down on 8 October 2013 (“the Oct 2013 decision”).  The same abbreviations used in the Oct 2013 decision will be used herein.

2.As between MGB and MGHK, the outcome of MGB’s appeal (against the master’s order to provide security for MGHK’s costs in the action) was that the appeal was allowed, and that the costs of the said appeal be paid by MGHK to MGB.

3.Subsequent to October 2013, MGHK entered into correspondence with MGB, contending (among other things) the proper reading of the Oct 2013 decision was that I had:

“… found that the gemstones consigned by [MGB] to [MGHK] stands as security … ”,

and that:

“… [MGHK] must be granted an Order directing that the gemstones presently in its possession stand as security for its costs … ”;

“… in order to give proper effect to [the Oct 2013 decision] an Order in the following terms must be granted in favour of [MGHK]:

‘[MGHK] shall be entitled to retain possession and hold the gemstones presently in its possession belonging to [MGB] as further security for [MGB’s] costs incurred and to be incurred in the proceedings pending trial’”

(letter dated 9 October 2013).

4.On costs, MGHK also said in the said letter:

“From this it follows a fortiori that [MGHK] has in fact succeeded in establishing its entitlement to further security for its costs of the action ... In light of such judicial finding, … The costs of the appeal in relation to MGHK be paid by MGB to MGHK … ”.

5.Although the Oct 2013 decision has not yet been “perfected”, MGHK has confirmed that it was not seeking to re-open the appeal brought by MGB against it (which was one of the reasons for the Oct 2013 decision; the other reason being MGB’s appeal against Yih).

6.Such being the case, I agree with MGB that this application is misconceived and groundless.  To understand that, one must look at what happened during MGB’s said appeal as against MGHK.

7.As stated above, MGB appealed against the master for ordering it to provide security for MGHK’s costs for this action.  The gist of MGHK’s case is that, although it does not dispute holding MGB’s gemstones, it is entitled to do so pending the payment of its processing expenses by MGB (because of contractual entitlement to do so and/or a common law lien).

8.Not only is the above defence denied by MGB, the following are also disputed:

(a) the market value of MGB’s gemstones held by MGHK (MGB: US$2.5 million; MGHK: US$1 million);

(b) the amount of processing expenses payable by MGB to MGHK (MGB: not more than US$321,000; MGHK: about US$1.5 million).

9.It was in the context of such disputes that MGB argued that, on MGHK’s own case (that is, assuming MGHK manages to establish its case (but without conceding such to be the proper outcome of this action)), MGHK would still have owed to MGB a net sum which far exceeded the amount of security which the master ordered MGB to provide as security (para 9 to 11, the Oct 2013 decision).

10.To this argument, MGHK put forth the argument that MGB’s gemstones are not liquid assets which could readily be converted into cash (para 13, the Oct 2013 decision).

11.MGHK never argued it has been holding MGB’s gemstones as the security for its costs.  The market value of those gemstones has not been accepted by MGHK during the appeal hearing either (besides the other points of dispute set out in para 7 and 8(b) above).

12.In such circumstances, I have never been asked to make the finding (or make the order) now alleged by MGHK (which first appeared in the letter referred to in para 3 above).

13.In the context of (1) the matters still in dispute in this action, and (2) the manner in which the parties advanced their respective case during the appeal hearing (see above), it would in any event have been inapt for such a finding (or order) to be made.

14.By reason of the above matters, I conclude this application has no merits and should be refused.

15.As regards the indemnity costs award, the following matters have been taken into account:

(1) the statutory basis for such award lies in RHC Ord 62 r 28(4A);

(2) such award is more generous than party-and-party costs, and should only be made “where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner.  Any proceedings instituted or prosecuted in such circumstances as to constitute an affront to the court could properly be the subject of a direction for the taxation … on the indemnity basis” (emphasis supplied) (Hong Kong Civil Procedure 2014, Vol 1, para 62/App/12, citing in support Choy Yee Chun (The Representative of the estate of Chan Pui Yiu) v Bond Star Development Ltd [1997] HKLRD 1327));

(3) further to sub-para (2) above, “[where] the defendant instituted against the plaintiff interlocutory proceedings based on a point which is plainly wrong and the outcome of which could achieve no benefit to the parties and did not decide any issue between them, the Court of Appeal awarded costs on an indemnity basis … ” (Hong Kong Civil Procedure 2014, Vol 1, para 62/App/13).

16.One of the matters repeatedly asserted by MGHK for making this application was its fear that MGB might at some stage pay off the processing fees whereupon MGHK would lose its right to hold on to the said gemstone.

17.The fear is groundless and imaginary because:

(a)   even assuming MGHK to be able to establish MGB’s liability (and MGHK’s entitlement to retain the gemstones), the net amount which is payable by MGB differs to a great extent between MGB and MGHK that it is quite inconceivable MGB would be prepared to make a payment which MGHK would consider acceptable (see para 8 above);

(b)   in any event, MGB has expressly undertaken not to make such payment (para 8 and 9, MGB’s skeleton submissions).

18.In view of the above, this application falls within the categories of “useless” litigation, or litigation which amounts to an affront to the court.

Ms Elizabeth Cheung, instructed by Reed Smith Richards Butler, for the 2^nd plaintiff (by original action)

Mr Toby Brown, instructed by Kennedys, for the 3^rd defendant (by original action)