ACTIVE PROFIT LTD v. NISSHO IWAI HONG KONG CORPORATION LTD AND OTHERS

CACV 289/2004, CACV 290/2004, CACV 331/2005 AND CACV 333/2005

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no S. 289 OF 2004, 290 OF 2004, 331 of 2005

AND 333 OF 2005

(on appeal from HCCL NO. 47 of 1998)

BETWEEN

  ACTIVE PROFIT LIMITED Plaintiff
  and   
  NISSHO IWAI HONG KONG 1st Defendant
  CORPORATION LIMITED  
  (now known as SOJITZ (HONG KONG) LIMITED)  
  MILEMORE INVESTMENT LIMITED 2nd Defendant
MOTOYUKI KODERA 3rd Defendant
CARLOS YUK KEI CHO 4th Defendant

Before: Hon Rogers VP and Le Pichon JA in Court

Date of Hearing: 23 February 2006

Date of Handing Down Judgment: 8 March 2006

______________________

J U D G M E N T

______________________

Hon Rogers VP:

1. These were appeals in respect of various orders for costs which were made following the judgment in this case at first instance. The background to this matter was set out in the reasons for judgment handed down on 28 September 2005 when leave to appeal wasgiven in respect of many of them. Although these appeals were listed to be heard before 3 judges, unfortunately, one member of thecourt was ill. Mr Jat SC, who appeared on behalf of the 2nd to 4th defendants indicated that this would cause no difficulty as these were interlocutory appeals. Since none of the parties indicatedany contrary view and this court held that these were interlocutory appeals, the matter proceeded before 2 judges.

2. The orders for costs were made in various applications following judgment given at first instance on 30 June 2003. Those includedapplications for interim payments, orders made on applications for discovery, specifically that related to a tracing exercise, ordersrelating to use of documents disclosed on discovery in other proceedings, orders made by the master in fixing the date for taxationand orders made on the application by the defendants for a stay of execution pending the appeal.

3. Preliminary applications were made on behalf of the plaintiff that these appeals should be stayed pending the outcome of the appealto the Court of Final Appeal in October this year. After it had been indicated that the applications for stay of the appeals wereunlikely to be successful in view of the fact that the applications were made late in consequence of which all costs relating tothe appeals had effectively been incurred and that nothing would result from the appeals which could not be undone should the Courtof Final Appeal allow the plaintiff’s appeals, the applications for stay were not argued any further. In my view, they were madefar too late.

4. In the reasons for judgment handed down on 28 September 2005, reference was made to the principle that a party that successfullyappeals a judgment against it is entitled to costs which it has incurred following that judgment as a result of the party that wassuccessful at first instance prosecuting the relief which it had been granted at trial. In this respect, I would refer specificallyto paragraphs 6-9 of those reasons. On the hearing of these appeals, the defendants adopted the reasoning that had been set out.

5. Ms Tong, who appeared on behalf of the plaintiff, raised as a general matter that the defendants should not be entitled to any costsin respect of orders which they resisted. This was a somewhat adventurous argument particularly in the light of the fact that anotherof the arguments put forward was that the defendants had consented to some of the orders and they could not go behind that consent. In my view, both arguments were wrong. The general principle must apply and, except if costs have been wasted in a culpable manner,the fact that a particular order is resisted in the ordinary course of litigation cannot, it seems to me, be grounds for deprivinga defendant of costs in respect of the matter which the plaintiff has ultimately been held not to be entitled to pursue.

6. In relation to the orders where there has been a consent order, as was pointed out by Mr Jat SC, who appeared on behalf of the 2nd to 4th defendants, the underlying orders have been agreed to be set aside, for example the interim payments have been repaid. In thosecircumstances, it cannot be right that the orders for costs should remain. Were it necessary to consider the matter further, itwould be clearly the case that special circumstances have arisen which would permit a consent order to be appealed because thereis now a fundamental difference in the underlying circumstances.

7. There remain only the costs of the applications for stay of the order below. Applications for stay pending appeal are requiredto be made, in the first instance, to the court below: see order 14(4) of the Rules of the High Court. As set out in the notes inthe Hong Kong Civil Procedure at 59/13/7 the application, should, if possible, be made to the court below at the time it gives judgment. Although not always part of the order after trial at first instance, it in effect is a part of the process of working out the reliefto which the plaintiff is entitled. As set out at 59/13/18:

“costs of application-The costs are in the discretion of the court; the modern practice is for the costs to be made costs in the appeal, unless the applicantis appealing out of time or has, in some other way, being dilatory.”

8. In my view, in this case there was ample reason for such application to be made to the court below. This litigation was highlyunusual and the relief sought, including the extensive discovery leading to litigation seeking payment of a substantial sum againsta solicitor of one of the parties, was by no means run-of-the-mill, seeking to stay the effect of the order could not, on any footing,be said to have been an improper or unnecessarily contentious application. In those circumstances, it appears to me that the properorder for costs, in the absence of special circumstances, should have been that the costs of the application for a stay in the courtbelow should have been costs in the appeal. In this respect, I would say nothing in respect of any renewed application for a staymade in this court since, no doubt, it can be argued that different considerations apply once the Court of First Instance has exerciseda discretion.

9. In the circumstances, I would allow all the appeals before this court and make the orders sought in the notices of appeal.

Hon Le Pichon JA:

10. I agree.

(Anthony Rogers)
Vice-President
(Doreen Le Pichon)
Justice of Appeal

Ms Sara Tong, instructed by Messrs Kao, Lee & Yip, for the Plaintiff

Mr Bernard Man, instructed by Messrs Clement Ng & Co., for the 1st Defendant/Appellant in CACV 290/2004 & CACV 333/2005

Mr Jat Sew-Tong SC & Mr Abraham Chan, instructed by Messrs Hastings & Co., for the 2nd, 3rd & 4th Defendants/Appellants in CACV 289/2004 & CACV 331/2005