CRP/PE MUNROE STREET OWNER, LLC v. JUNWEI CONSULTING TRADE CO LTD AND ANOTHER
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DCCJ 4700/2019
[2021] HKDC 377
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL ACTION NO 4700 OF 2019
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| BETWEEN | ||
| CRP/PE MUNROE STREET OWNER, LLC | Plaintiff | |
and | ||
| JUNWEI CONSULTING TRADE | 1st Defendant | |
| CO., LIMITED (竣威諮詢貿易有限公司) | ||
| SAN JIN YUAN TRADING LIMITED | 2nd Defendant | |
| (三晉源貿易有限公司) | ||
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| Coram: | His Honour Judge H. Au-Yeung (Paper Disposal) |
| Date of the 2nd Defendant’s Submissions: | 3 March 2021 |
| Date of the Plaintiff’s Submissions: | 10 March 2021 |
| Date of the 2nd Defendant’s Submissions in reply: | 18 March 2021 |
| Date of Decision: | 30 March 2021 |
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DECISION
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THE APPLICATIONS
1. On 17 July 2020, a Master granted summary judgment in favour of the plaintiff.
2. Upon the 2nd defendant’s appeal, this court made the following orders in the Decision handed down on 22 January 2021 (“the Decision”):
(1) The learned Master’s order dated 17 July 2020 be set aside;
(2) The plaintiff’s application for summary judgment made under paragraph 1 of its summons filed on 13 March 2020 be dismissed;
(3) The 2nd defendant do pay the plaintiff within 28 days the sum of USD150,560, or its Hong Kong Dollar equivalent at the date of payment, by way of interim payment (“the Interim Payment Order”);
(4) A cost order nisi that the costs of and occasioned by this appeal and the summons filed on 13 March 2020 (including the costs of the hearing before the learned Master) shall be in the cause, with certificate for one counsel.
3. On 5 February 2021, the 2nd defendant filed 2 summonses for:
(1) leave to appeal from the Interim Payment Order, and stay of execution of the said order pending the 2nd defendant’s appeal[1]; and
(2) an order to vary the cost order nisi.
4. By consent, these applications are dealt with on paper.
5. I will adopt herein the abbreviations used in the Decision.
LEAVE TO APPEAL
Legal principles
6. The requirement for granting leave to appeal is set out in section 63A(2)(a) of the District Court Ordinance, Cap 336. It is trite that leave to appeal shall not be granted unless the court is satisfied that the intended appeal has a reasonable prospect of success or there is some other reason in the interest of justice why the appeal should be heard. It is also well established that a reasonable prospect of success means an appeal with prospects that are more than fanciful without having to be probable (SMSE v KL [2009] 4 HKLRD 129 at paragraph 17).
7. Kwan JA had the following to say in Waddington v Chan Chun Hoo Thomas & Others (HCMP 1327/2017, unreported, 18 October 2017) in relation to the situation where the decision sought to be appealed from involved the exercise of discretion by the court:
“It is trite that an appeal against the exercise of discretion will not be entertained unless it is shown that the discretion was not exercised at all, or that the judge made some error of law or facts or was in disregard of principle, or that he took into account irrelevant matters, or that the decision was ‘plainly wrong’ or was ‘outside the generous ambit within which a reasonable disagreement is possible’ (Hong Kong Civil Procedure 2018, vol 1, §59/0/54).” (at paragraph 10)
The draft grounds of appeal
8. The 2nd defendant’s draft grounds of appeal may be summarised as follows:
(1) This court erred in holding that there is no triable issue as to whether the source of USD150,560 was from the No 1 Trade Account (“Ground 1”);
(2) This court erred in holding that the 2nd defendant has failed to raise any arguable defence in relation to the question on “at the expense of the plaintiff” (“Ground 2”);
(3) This court erred in holding that there is no triable issue as to whether the plaintiff’s mistake had been tainted by doubt (“Ground 3”); and
(4) This court erred in making the Interim Payment Order in the circumstances where the plaintiff would not be able to obtain judgment as the Statement of Claim now stands (“Ground 4”).
9. I will deal with these grounds in turn below.
Ground 1
10. Under this ground, the 2nd defendant submitted that this court had erred in relying on a letter from the HKPF dated 26 November 2019 (“the HKPF Letter”) in holding that the sum of USD150,560 was transferred into D2’s HK Account directly from the No 1 Trade Account because:
(1) the source of information and belief of the HKPF was not disclosed;
(2) the said letter did not state that the money was transferred directly from the No 1 Trade Account into D2’s HK Account.
11. Order 41 rule 5(2) of the Rules of the District Court (Cap.336H) provides that:
“An affidavit sworn for the purpose of being used in interlocutory proceedings may contain statements of information or belief with the sources and grounds thereof.”
12. The HKPF Letter was exhibited to Mr Procopio’s First Affirmation in support of his allegations, among other things, that the sum of USD150,560 was originated from the No 1 Trade Account. As Mr Procopio does not have personal knowledge on this matter, he is required by the said rule 5(2) to disclose his source of information and ground of belief. This he had done so.
13. What the 2nd defendant is now complaining is that the HKPF had not disclosed its source of information in the said letter. With respect, Mr Cheng has failed to cite any legal basis in support of this alleged requirement.
14. In my view, it is a question of how much weight the court should attach to the HKPF letter.
15. In the Decision, I have given due weight to the HKPF Letter. In my view, since, according to the HKPF Letter, what was stated therein was derived from police investigation, I cannot see anything wrong in relying on what was asserted in the said letter.
16. Furthermore, I do not accept Mr Cheng’s argument that the HKPF Letter “did not state the USD150,560 was transferred directly from No 1 Trade Account to D2’s Account”[2]. In the HKPF Letter, it was stated that:
“Your letter dated 15 November 2019 refers.
Upon police investigation, it was informed that your client made a transfer of $960,428-USD to the Bank of Communications (Hong Kong) Limited (BoComm) account no [….] held in the name of ‘No.1 Trade Limited’ on 2019-04-04. The fund was later transferred to different accounts on the same day (2019-04-04), in which two BoComm accounts with the following assets were frozen:
i. $56,956-USD in A/C no. […] (Junwei Consulting Trade Co. Ltd);
ii. $150,560-USD in A/C no. […] (San Jin Yuan Trading Ltd).”
17. In my view, the meaning of this letter is clear. It did not suggest that the funds had gone through any other account (apart from the No 1 Trade Account) before being deposited into D2’s HK Account.
18. The meaning of the HKPF Letter is even clearer if one reads the letter of the plaintiff’s solicitors dated 15 November 2019 which was referred to at the beginning of the HKPF Letter. The said letter of the plaintiff’s solicitors reads:
“We act for CRP/PE Munroe Street Owner, LLC, the reporting party in the captioned case.
We refer to the telephone conversation between Detective Inspector Joycelin Lee and our Mr Timothy Shaw on 13 November 2019.
To date, you have provided us with the following information on a verbal basis (the ‘Information’):
1. our client made a transfer of USD960,428 from the account no. […] held in its name with the North Shore Bank to the account no. […] held in the name of No 1 Trade Limited with the Bank of Communications (Hong Kong) Limited (‘BoComm’) (the ‘No 1 Trade Account’) on 4 April 2019 (the ‘Initial Transfer’);
2. subsequent to the Initial Transfer, an amount of USD56,956 was transferred from the No 1 Trade Account to account no. […] held in the name of Junwei Consulting Trade Co., Limited with BoComm (the ‘Junwei Account’) on 4 April 2019;
3. subsequent to the Initial Transfer, an amount of USD150,560 was transferred from the No 1 Trade Account to account no. […] held in the name of San Jin Yuan Trading Limited with BoComm (the ‘San Jin Yuan Account’) on 4 April 2019; and
4. the Junwei Account and the San Jin Yuan Account are currently frozen as a result of the matters listed above.
[…]
Whilst our client has commenced the Action, our client does not currently have access to any written records, documents or other evidence related to the information (other than in relation to the Initial Transfer). Given the Defendants are now contesting our client’s claim in the Action, we have been instructed to write to you to formally request for the written confirmation of the Information by the Hong Kong Police Force, in particular relating to the transfers to the Junwei Account and San Jin Yuan Account as described above, together with any related details you may be able to disclose…”
19. In my view, there is no room for the 2nd defendant to say that the sum of USD150,560 could have been “transferred from the No 1 Trade Account to another account or other accounts and subsequently to D2’s [HK] Account”.[3]
20. I therefore conclude that Ground 1 has no reasonable prospect of success.
Ground 2
21. By this ground, the 2nd defendant challenged this court’s conclusion that despite the fact that the fund involved was not transferred from the plaintiff’s account to the 2nd defendant’s account directly, the two transfers (i.e. (i) the transfer from the plaintiff’s account to the No 1 Trade Account and (ii) the transfer from the No 1 Trade Account to D2’s HK Account) should be treated as a direct payment. The 2nd defendant has put forward two reasons why they should not be so treated:
(1) There was no evidence that the 2 transfers were a set of co-ordinated transactions, taking into account the respective amounts of those two transfers were not the same;
(2) There was no plea that No 1 Trade was the agent of either the plaintiff or the 2nd defendant.
22. In the 2nd defendant’s submissions dated 10 December 2020[4], the relevant legal principles had been helpfully summarised as follows:
“In Investment Trust Companies v Revenue and Customs Commissioners[5], the United Kingdom Supreme Court provided ‘more precise criteria’ in response to the uncertainty in the approach to be adopted in determining whether the enrichment was ‘at the expense of’ the plaintiff. Bearing in mind that the purpose of the law of unjust enrichment is to correct normatively defective transfers of value, usually by restoring the parties to their pre-transfer positions, it held that: -
(1) Whether a defendant has been enriched ‘at the expense of’ a plaintiff depends on whether there has been a transfer of value between the parties in the sense that the defendant has received a benefit from the plaintiff and the plaintiff has suffered some form of economic loss through his provision of the benefit ([43]-[44]).
(2) The requirement that the plaintiff must also incur a loss through the provision of the benefit means that where the provision of the benefit is merely an incidental or collateral result of the expenditure, it would not normally satisfy such requirement. A ‘but for’ casual connection between the plaintiff’s being worse off and the defendant’s being better off is not sufficient in itself to constitute a transfer of value ([52]).
(3) Nor is the requirement satisfied by a connection between the parties’ respective benefit and loss merely as a matter of economic or commercial reality ([59]).
(4) The requirement would normally be satisfied if the transfer is direct, but there may also be other situations where an indirect transfer would suffice, for example through an agent, or the intervening transaction is found to be a sham, or that a set of related transactions operated in a coordinated way as forming a single scheme or transaction such that it would be unrealistic to consider each of the individual transactions separately, or the property received by the defendant from a third party is one that the plaintiff can trace an interest, or where the plaintiff discharges a debt owed by the defendant to a third party ([48], [49], [61]-[66]).
(5) When the defendant has not received a benefit directly from the plaintiff, no question of agency arises, and where the benefit does not consist of property in which the plaintiff has or can trace an interest, it will generally be difficult to maintain that the defendant has been enriched at the plaintiff’s expense ([51]).”[6]
23. It can be seen that “direct transfer” is not a pre-requisite for the establishment of “at the expense of”. “Indirect transfer” may also suffice. Whether the “indirect transfer” in a particular case is sufficient is necessarily fact-sensitive. In the present case, having taken into account the fact that the transfer between the plaintiff and No 1 Trade on one hand and the transfer between No 1 Trade and the 2nd defendant are closely related in time (only one working day apart) and that no credible reason had been put forward in relation to the transfer from No 1 Trade to the 2nd defendant, I held that to consider each individual transaction separately would be unrealistic, and therefore the transactions should be regarded as a direct payment. The 2nd defendant did not submit in the written submissions dated 3 March 2021 that it was wrong for the court to take those matters into account[7], but alleged that there is insufficient basis for the court to make such a finding. With respect, I do not agree.
24. I have not lost sight of the 5th paragraph of the summary of the legal principles quoted above which had been highlighted by the 2nd defendant’s senior counsel, in which it was said that it would generally be difficult to maintain that the defendant had been enriched at the plaintiff’s expense in the absence of an agency relationship where there was no direct payment. However, it is obvious that the door is not closed. As I mentioned above, it must be depending on the facts of the case before the court.
25. Under Ground 2(1), the 2nd defendant had laid emphasis on the fact that while the plaintiff had paid USD960,248 to the No 1 Trade Account, D2’s HK Account had only received USD150,560. I do not agree that such a difference would necessarily make it wrong for the court to come to the conclusion that the transfers should be looked at together and treated as if it were a single transfer.
26. The 2nd defendant submitted that it was wrong for this court to say that the transfer between the plaintiff and No 1 Trade on one hand and the transfer between No 1 Trade and the 2nd defendant are closely related in amount because while the plaintiff had transferred USD960,248 to No 1 Trade, the amount received by the 2nd defendant was just USD150,560. I agree that I should not have stated that they are “closely related in amount” in the Decision. Be that as it may, I still hold the view that, in the circumstances of the present case, there is enough basis for the court to treat the two transfers as one.
27. The 2nd defendant argued in its reply submissions dated 17 March 2021 that the explanation provided as to why it had received the sum of USD 150,560 was to address the issue of “bona fide purchaser” only but not “at the expense of”, and therefore the rejection of the 2nd defendant’s explanation is neither here nor there. This was not the approach adopted by Mr Cheng when he was led by Mr Edward Chan SC in the substantive argument. In their written submissions dated 10 December 2020, they argued that:
“20. Regarding the issue of “at the expense of”, the following facts are highly relevant: -
(1) …
(2) …
(3) …
(4) On D2’s case, D2 had provided valuable consideration for the money in the currency of USD transferred to D2’s Bank Account (§12-13 of D2’s Aff) [A/8/63]
21. Based on the aforesaid facts, it is submitted that there was no sufficiently close causal connection between P’s loss and D2’s gain…”
28. I am of the view that the 2nd defendant’s explanation must be a relevant matter which the court can take into account.
29. I therefore hold the view that Ground 2 has no reasonable prospect of success.
Ground 3
30. Under this ground, the 2nd defendant submitted that the court should have ruled that the plaintiff’s mistake had been tainted by doubt because:
(1) The evidence of Mr Procopio that “he had no reason at the material time to suspect that the wiring instructions were not genuine” was no more than a bare assertion;
(2) There were indisputable facts indicating the existence of a doubt that the No 1 Trade Account was not the one Colliers intended the plaintiff to transfer the sum of USD960,428 to; and
(3) The Decision was self-contradicting in that on one hand, this court ruled that there was a live issue between the parties as to whether the plaintiff had made the payment to No 1 Trade by mistake, and on the other hand, it was ruled that there was no triable issue as to whether the plaintiff’s mistake was tainted by doubt.
31. I should point out right away that I do not agree that the Decision was self-contradicting. With greatest respect, Mr Cheng has quoted the Decision out of context. For clarity, I should quote paragraph 53 of the Decision:
“Mr Lee [for the plaintiff] argued, by relying on Comprehensive Auto Restoration Limited v Lee Seng Siew (HCA 960/2011, unreported, 15 June 2012), that even if “mistake” is a material fact, its omission from the Statement of Claim is not a defect “of substance”, because “there could not be any live issue between the plaintiff and the 2nd defendant on whether the plaintiff paid away the sum by mistake”.
32. It was in answer to Mr Lee’s argument that it was stated in paragraph 54(1) of the Decision that:
“I do not accept that there is no live issue between the plaintiff and the 2nd defendant on whether the plaintiff made the payment to No 1 Trade by mistake. While Mr Lee is right to say that it seems that the 2nd defendant did not have any positive knowledge on whether the said payment was made under a mistake, there is nothing which stops the 2nd defendant from pleading a non-admission and putting the plaintiff to strict proof. The issue on “mistake” would still be a live one under such circumstances.”
33. Hence, what was said in the Decision was that even if the plaintiff had pleaded “mistake” in the Statement of Claim, the 2nd defendant is entitled not to admit to it despite the fact that it does not have any positive case in this regard, and to put the plaintiff on strict proof. If the matter proceeds to trial, the plaintiff has to prove its case, which includes the assertion that a mistake had been made. However, this does not mean that if a summary judgment application is made, the court is, by reason of the non-admission, bound to rule that there is a triable issue in this regard. If that is the case, any defendant can resist a summary judgment application successfully by putting in a Defence which contains nothing but non-admissions. That cannot be right.
34. This then brings me to the next question: whether there is any reasonable prospect for the 2nd defendant to successfully argue that there is a triable issue on the “tainted by doubt” point.
35. As I pointed out in paragraph 46 of the Decision, the grounds put forward by the 2nd defendant suggested that Mr Procopio should have taken various steps in verifying the wiring instructions. I think that is beside the point, because the question is not whether Mr Procopio was negligent at the material time.
36. Furthermore, I do not agree that Mr Procopio’s evidence was a bare assertion, for his assertion was supported by the circumstances of the case which he explained in his 1st Affirmation:
“7. …On 29 March 2019, I emailed Mr. Jeff Black, Executive Vice President of Colliers to arrange for the payment of its commission for this transaction, since Colliers had agreed to be paid outside of closing for this particular transaction for internal logistical reasons. On the same day, Mr. Black responded to me, copying his colleague Ms Kathy Ferraro, Deal Coordinator of Colliers, and said that Ms. Ferraro could assist with the wiring instructions.
8. On 1 April 2019, I received two emails from Mr. Black and from Ms. Ferraro. Neither email was copied to the other individual or anyone else. Both emails included an attachment printed on what appeared to be Colliers’ letterhead, headed “WIRING INSTRUCTIONS” and which included the following details (the “Wiring Instructions”):
‘ACCOUNT NAME: NO 1 TRADE LTD ACCOUNT NUMBER: […] BANK NAME: […] BANK ADDRESS: […]’ 9. …
10. Having no reason at that stage to suspect that the Wiring Instructions were not genuine, and accordingly acting under the belief that the Colliers had instructed the Plaintiff to wire its commission to the No 1 Trade Account, Kathleen M. Nolan, the Vice President – Finance of The Procopio Companies, submitted an international wire request form on 2 April 2019 to the North Shore Bank…”
37. In effect, the 2nd defendant is saying that the plaintiff’s evidence should not be accepted before it is tested under cross-examination at the trial. I do not agree that is the correct approach.
38. I therefore hold the view that Ground 3 has no reasonable prospect of success.
Ground 4
39. Under this ground, the 2nd defendant submitted that the court should not have made the Interim Payment Order because the exercise of its discretion must be based on what was pleaded in the Statement of Claim.
40. This ground contradicts what the 2nd defendant argued when Mr Cheng was led by Mr Edward Chan SC, who made the following submissions in the substantive argument of the application:
“27. We have already informed the court that the sum of USD150,560 has been frozen, so that there is no risk of P not being able to recover the sum: §45 of D2’s written submission.
28. For interim payment, even though the strict requirement of the Statement of Claim is not applicable, the Plaintiff should not be given interim payment of any amount where there is a bona fide dispute on the Plaintiff’s entitlement. As shown in D2’s submission, even assuming in the Plaintiff’s favour the Plaintiff may rely on mistake, there are still many bona fide triable issues. The Plaintiff has adduced no evidence to show why the Plaintiff should be so exceptional to be awarded interim payment before proving its case.” (emphasis added)
41. In his submission in support of this leave to appeal application, Mr Cheng stated that:
“15. Also, from a pleading point of view, an application for interim payment must be made on the basis of what is pleaded in P’s Statement of Claim.
16. Although the strict requirement of the Statement of Claim is not applicable, it is only in the sense that there is no authority suggesting that, if the Statement of Claim is defective, the plaintiff must make a new application.
17. It is of no dispute that, even after D2 had raised a number of pleading objections in his skeleton submissions, P still maintain its stance that it did not have to amend the Statement of Claim.
18. Accordingly, when this Court was considering the interim payment application, the Statement of Claim was a defective one.”
42. If the 2nd defendant still accepts that “the strict requirement of the Statement of Claim is not applicable” to an application for interim payment (see paragraph 16 of Mr Cheng’s submission quoted above), I cannot see how the 2nd defendant may argue at the same time that “the exercise of its discretion must be based on what was pleaded in the Statement of Claim”.
43. Mr Cheng referred this court to the case of Speed Sourcing Ltd v. Rainbow State Investments Ltd (HCMP 1839/2015, unreported, 13 April 2016) (which was not cited during the substantive argument), and submitted that in deciding whether interim payment should be ordered, the court can only base on the pleading before it and cannot make an award on the basis of a case which is yet to be pleaded.
44. I agree with Mr Lee that the 2nd defendant’s reliance on Speed Sourcing Ltd is misplaced, for the cause of action pleaded by the applicant for interim payment in that case was totally different from that relied on in support of the application for interim payment. The case here is different. The plaintiff’s Statement of Claim, though defective, has relied on “unjust enrichment” as its cause of action, which is consistent with its basis for its application for interim payment. It should also be bone in mind that it has been held herein that the 2nd defendant has failed to raise any triable issue.
45. Furthermore, Mr Lee has also drawn this court’s attention to an older Court of Appeal authority in New Jet Harbour Ltd v Yueh Hsi HK Transportation Co Ltd [2005] 1 HKC 190 in which it was held that it is proper for the court to take into account possible claim when exercising its discretion on interim payment even though such a claim has not been pleaded.
46. Mr Cheng, in his reply submissions, argued that even if an interim payment order should be made, such payment should be paid into court, rather than to the plaintiff directly. However, it should be pointed out that this was not the stance adopted by the 2nd defendant in its substantive argument. Even in the draft Notice of Appeal, the 2nd defendant has not put this forward as an alternative order to be sought on appeal. The said argument is therefore not open to the 2nd defendant at this stage.
47. I therefore hold the view that Ground 4 has no reasonable prospect of success.
Other Grounds
48. In Mr Cheng’s written submissions, he has referred to other factors which allegedly show that it is inappropriate to award interim payment in the present case. In a gist, it was suggested that the 2nd defendant would face serious problems in recovering the interim payment “should the trial unexpectedly go against [the plaintiff]”[8]. It was also proposed that the 2nd defendant might pay the USD150,560 into court[9]. These matters are not relevant to any of the aforementioned draft grounds of appeal at all. As far as the 2nd defendant’s point about the plaintiff’s financial ability to repay is concerned, it was not even raised before this court when the application was argued.
49. Lam VP’s reminder in this regard given in Lehmanbrown Limited v Union Trade Holdings Inc & Others (HCMP 977/2015, unreported, 17 June 2015) should be borne in mind:
“Whilst the Court of Appeal obviously has power to entertain new points in an appeal, it is also clearly and firmly established that new points which are fact sensitive or otherwise affect the course of evidence or conduct of the case at the hearing below should not be allowed. Though this principle is usually applied in situations where the new points necessitate further evidence to be adduced, it is not confined to such scenarios. Very often, the raising of new point by one party may lead to the other party raising counter arguments and the consideration of such counter arguments may involve factual assessment in a different light from that undertaken by the court below. Sometimes, it may involve a different weighing of factors in the exercise of discretion. Alternatively, the other party may embark on a different course of forensic conduct if the new point were taken earlier. The appellate court, in considering whether the new point would be entertained, is entitled to take these matters into account in order to avoid unfairness to the other party.” (at paragraph 10)
50. If the 2nd defendant had raised these arguments earlier, the plaintiff might have adduced evidence on its financial ability. This court would have taken these matters into consideration when it exercised its discretion. It is therefore unfair for the 2nd defendant to raise these matters for the first time at this stage.
51. I would therefore disregard these points in this application.
52. In the very last paragraph of his written submission in reply, Mr Cheng submitted that “based on the aforesaid, it is open to the learned Judge to grant D leave to appeal on the interests of justice ground”. The “interest of justice” ground was not mentioned anywhere else, in particular, in his submission lodged in support of the application for leave to appeal. With respect, it is very unfair for Mr Cheng to rely on a new point in reply. I am not prepared to consider this new point under such circumstances.
Conclusion on leave to appeal
53. By reasons of the aforesaid, the 2nd defendant’s application for leave to appeal should be dismissed.
Stay of execution
54. The 2nd defendant’s application for leave to appeal has been dismissed. It follows that the stay of execution pending appeal application should also be dismissed.
VARIATION OF COSTS ORDER NISI
55. In relation to costs, paragraphs 78 and 79 of the Decision read:
“78. The 2nd defendant has been successful in its appeal against the summary judgment granted by the learned Master whereas the plaintiff, despite its failure to resist the 2nd defendant’s appeal, has now obtained an order for interim payment.
79. I make a cost order nisi that the costs of and occasioned by this appeal and the summons filed on 13 March 2020 (including the costs of the hearing before the learned Master) shall be in the cause, with certificate for one counsel. The above order nisi shall become absolute in the absence of application to vary within 14 days hereof.”
56. The 2nd defendant now seeks to vary the order nisi.
57. The crux of the 2nd defendant’s argument in support of variation is as follows:
“27. Thus, the award of interim payment must have been based on the assumption that P would have amended the Statement of Claim sometime in the future.
28. Where the amendment asked for is [a] substantial one, such that the plaintiff could not succeed without it, he will in a proper case be only allowed to amend at the trial on payment of all costs incurred up to date, and any costs thrown away by reason of the amendment: Hong Kong Civil Procedure 2021, Note 20/8/12.
29. By parity of reasoning, even if P applied for leave to amend the Statement of Claim before the learned judge having made the decision, the usual order would have been that P may have to bear the costs up to date.
30. Since the Statement of Claim has not yet been amended, and without amending it P would not succeed in its interim payment application, the learned judge ought not to have made a cost order of costs in the cause, but should have awarded costs of the appeal and the summary judgment application to D2 in view of his success. As for the costs of the interim payment application, the court should make no order as to costs in view of its conduct, i.e. disregard the pleading objections raised by D2, refused to amend the Statement of Claim and chose to rely upon it in support of its application.”
58. I do not agree that, in the circumstances of the present case, if the plaintiff were granted leave to amend its Statement of Claim, it would necessarily be ordered to bear all the 2nd defendant’s costs incurred up to the date of the amendment. Mr Cheng’s reliance on the commentary at paragraph 20/8/12 of Volume 1 of Hong Kong Civil Procedure 2021 is misconceived. The said commentary only gave some examples as to how the discretion could be exercised, but by no means such a commentary should be treated as having laid down any legal principle as such.
59. Neither do I agree that, if the plaintiff had applied for leave to amend the Statement of Claim before the Decision was handed down, “the usual order would have been that the plaintiff may have to bear the costs up to date” as suggested in paragraph 29 of the 2nd defendant’s submissions quoted above.
60. I do not understand why the 2nd defendant would submit in paragraph 30 of its submission quoted above that “Since the Statement of Claim has not yet been amended, and without amending it P would not succeed in its interim payment application…”. This was not my ruling. Although the 2nd defendant does not agree with my ruling, such a ruling has to be the basis for this court’s consideration of the appropriate costs order herein.
61. The 2nd defendant submitted that it should be entitled to the costs of the appeal and of the summary judgment application in the light of its success in having the appeal allowed and the summary judgment application dismissed. As I pointed out in the Decision, the plaintiff’s application for summary judgment failed only because of the inadequacy of the Statement of Claim, and such inadequacy can be remedied without much difficulty. Further, I am of the view that, in the circumstances of the present case, justice requires this court to consider not only the result, but also the fact that many of the arguments raised by the 2nd defendant had been rejected. In particular, it must be noted that the 2nd defendant’s defence of “provision of valuable consideration” had been rejected.
62. The 2nd defendant further suggested that there should be no order as to the costs of the interim payment application on the grounds that the Statement of Claim is defective and that its defect has not been remedied. With greatest respect, in the light of its acceptance that the strict requirement of the Statement of Claim is inapplicable to interim payment application, such grounds are totally unmeritorious.
63. I am of the view that the term of the costs order nisi would best serve the justice between the parties, and therefore it is made absolute herein.
COSTS
64. The 2nd defendant shall bear the plaintiff’s costs of both summonses, with certificate for counsel.
65. Such costs shall be assessed summarily pursuant to Order 62 rule 9A(1)(a) of the Rules of the District Court (Cap.336H).
66. For the purpose of summary assessment of costs, the plaintiff shall lodge and serve Statement of Costs within 7 days. The 2nd defendant shall lodge and serve Statement of Objection within 7 days thereafter. The summary assessment will then be conducted on paper.
| ( H. Au-Yeung ) District Judge |
Mr Brian Lee, instructed by Messrs. Herbert Smith Freehills, for the plaintiff
Mr Bosco Cheng, instructed by Messrs. K M Lai & Li, for the 2nd defendant
[1] It has been clarified in the 2nd defendant’s written submissions that it does not seek to appeal against the court’s decision on the plaintiff’s Order 14 application
[2] Paragraph 14(2) of the 2nd defendant’s written submissions dated 3 March 2021
[3] Paragraph 14(2) of the 2nd defendant’s written submissions dated 3 March 2021
[4] Lodged for the substantive argument of the applications
[5] [2018] AC 275
[6] Emphases were the 2nd defendant’s.
[7] Mr Cheng’s position has changed since then, see paragraph 27 of this Decision
[8] Paragraph 21(3) of the 2nd defendant’s written submissions dated 3 March 2021.
[9] The plaintiff has indicated its agreement to this proposal pending the court’s disposal of the 2nd defendant’s proposed appeal, should leave to appeal be granted