SUNG CHUNG KWUN AND OTHERS v. ADDCHANCE HOLDINGS LTD (NOW KNOWN AS “GTI HOLDINGS LTD”) AND OTHERS

HCA 2385/2017 and HCMP 2556/2017 (Consolidated) [2026] HKCFI 554 HCA 2385/2017 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 2385 OF 2017 _______________ BETWEEN SUNG CHUNG KWUN 1st Plaintiff ADDCHANCE DYEING FACTORY LIMITED 2nd Plaintiff POWERLINK INDUSTRIES LIMITED 3rd Plaintiff and ADDCHANCE HOLDINGS LIMITED (NOW KNOWN AS “GTI HOLDINGS LIMITED”) 1st Defendant CHAMPION FOREVER GROUP LIMITED 2nd Defendant ADDCHANCE LIMITED 3rd Defendant CHINAKEY (HONG KONG) LIMITED 4th Defendant SKY EMPEROR INTERNATIONAL LIMITED 5th Defendant POON SUM 6th Defendant HAMMER CAPITAL PRIVATE INVESTMENTS LIMITED 7th Defendant CHAMPION ALLIANCE INDUSTRIES LIMITED 8th Defendant AND HCMP 2556/2017 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO. 2556 OF 2017 _______________ IN THE MATTER of Order 88 of the Rules of the High Court, Cap. 4A and IN THE MATTER of the property known as G/F, 1/F - 9/F and the roof of Sung's Tower (宋氏大廈) (formerly known as Kwai Chung Industrial Building (Phase II) (葵涌工業大廈(第二期)) and IN THE MATTER of the property comprised in the second Mortgage dated 8 June 2015 made between (i) the Mortgagor ADDCHANCE DYEING FACTORY LIMITED (互益染廠有限公司); and (ii) the Security Trustee HANG SENG BANK, LIMITED and registered in the Land Registry by Memorial No. 15061102430102 and IN THE MATTER of the Debt Restructuring Deed dated 9 March 2017 made between (1) ADDCHANCE HOLDINGS LIMITED and others; (ii) CHAMPION FOREVER GROUP LIMITED; and (iii) HANG SENG BANK, LIMITED and others and IN THE MATTER of the assignment of Second Mortgage dated 28 September 2017 made between (i) the Security Trustee HANG SENG BANK, LIMITED; and (ii) CHAMPION FOREVER GROUP LIMITED and registered in the Land Registry by Memorial No. 17101702150013 and IN THE MATTER of an application for an order for possession and payment by CHAMPION FOREVER GROUP LIMITED _______________ BETWEEN CHAMPION FOREVER GROUP LIMITED Plaintiff and ADDCHANCE DYEING FACTORY LIMITED Defendant (互益染廠有限公司) _______________ (Consolidated pursuant to the Order of Deputy High Court Judge Sherrington dated 29 November 2018) Before: Deputy High Court Judge MK Liu in Chambers (Paper Disposal) Date of Written Submissions by the 2nd, 7th and 8th Defendants in HCA 2385/2017 and by the Plaintiff in HCMP 2556/2017: 22 December 2025 Date of Written Submissions by the 1st to 3rd Plaintiffs in HCA 2385/2017 and by the Defendant in HCMP 2556/2017: 5 January 2026 Date of Reply Written Submissions by the 2nd, 7th and 8th Defendants in HCA 2385/2017 and by the Plaintiff in HCMP 2556/2017: 19 January 2026 Date of Decision: 26 January 2026 _____________ D E C I S I O N _____________ Introduction On 20 November 2025, I handed down a judgment in these consolidated proceedings (“the Judgment”) after trial, in which I gave judgment to Ds and ruled against Ps. I also made a costs order nisi that (a) Ds’ costs in HCA 2385/2017 are to be paid by Ps; and (b) CFGL’s costs in HCMP 2556/2017 are to be paid by ADFL, on a party and party basis, with a certificate for two counsel. By a summons dated 4 December 2025 (“Ds’ Summons”), Ds made an application for varying the costs order nisi such that the costs provided in that order be taxed on an indemnity basis. I have directed that Ds’ Summons be disposed of on paper without an oral hearing. The parties have lodged their respective written submissions in accordance with the directions. This is my decision on Ds’ Summons. For ease of reference, the abbreviations used in the Judgment are adopted herein. In this application, Ds are represented by Ms Clara Wong, and Ps are represented by Mr Julian Lam. Regarding the variation sought by CFGL, in view of Clauses 1.1 and 1.3 of the Second Mortgage, Ps do not oppose awarding indemnity costs to CFGL. Thus, the only issue in dispute in this application is whether indemnity costs should be awarded to HCPIL and CAIL. Discussion The principles concerning indemnity costs are well established and not in dispute: It is generally necessary for a party seeking an order for indemnity costs to demonstrate some “special or unusual feature” in the case. Indemnity costs is not only ordered where the paying party’s conduct lacks moral probity or deserves moral condemnation for which the Court wishes to express disapproval. Conduct which falls short of that can be so unreasonable as to justify an order for indemnity costs. But such conduct would need to be unreasonable to a high degree. Unreasonable in this context does not mean merely wrong or misguided in hindsight. Ordinarily, merely pursuing a weak claim would not justify indemnity costs. On the other hand, maintaining a claim that one knows, or ought to know, is doomed to fail on the facts and on the law, is conduct that is so unreasonable as would justify indemnity costs. Ultimately, what the receiving party must demonstrate is something in the conduct of the action or other circumstances of the case that “takes it out of the norm” which warrants an order for indemnity costs. It is an abuse of process for a litigant, with full knowledge of the facts, to dishonestly invent a claim, and the Court may award costs on an indemnity basis against such a litigant. The underlying rationale of indemnity costs is to indemnify the successful party, not as punishment on the paying party. Ms Wong submits that indemnity costs to HCPIL and CAIL are justified: HCPIL and CAIL’s participation in these proceedings was necessitated solely by Ps’ highly unreasonable conduct of fabricating the two alleged agreements (ie the AHL Sale Agreement and the SMA/CRA), and in turn conjuring up an “equitable interest” in the Second Mortgage Rights held by CFGL based on the same. But for Ps’ disingenuous attempt to do so, HCPIL and CAIL need not have joined these proceedings to ensure that their rights and interest in the same would not be adversely affected by Ps’ claims. In these circumstances, an order for indemnity costs is plainly warranted. Further, Ds also rely on Ps’ wholesale failure in their attempt to impugn the fides of HCPIL and CAIL (Judgment §267), in circumstances where (a) Ps’ contention of CFGL’s “trusteeship” (which they say HCPIL and CAIL should have known) is wholly devoid of factual basis, and (b) Ps’ criticisms of HCPIL and CAIL’s witnesses were invariably rejected as invalid. Mr Lam submits that costs to HCPIL and CAIL should not be on an indemnity basis: It was HCPIL which sought to be joined, and CAIL consented to being joined upon Ps’ counter-proposal, which Ps made so that the controversy regarding Sung’s Tower and the Second Mortgage could be finally resolved vis-à-vis all parties claiming an interest therein. It would be wrong for Ps to be ordered to pay indemnity costs for adopting this reasonable and sensible approach to the proceedings. HCPIL and CAIL’s participation in these proceedings was not necessitated by Ps’ conduct vis-à-vis CFGL: Since HCPIL and CAIL were in control of CFGL, they did not have to be involved as independent parties. Furthermore, HCPIL’s and CAIL’s stance at trial confirms that there was not in fact any independent issue involving HCPIL and CAIL that needed to be resolved in these proceedings. HCPIL and CAIL could have completely protected their rights and interest through their control of CFGL, which they in fact did. Ps case was not wholly devoid of factual basis. The Court has found that Poon in fact did request Sung Sr to agree to the Second Mortgage. On Ps’ case, the undisputed and indisputable facts were a sufficient foundation for the implied terms and/or fiduciary duties to arise where ADFL qua surety provided a guarantee to the debtor at the request of the debtor’s controller. Although the Court ruled that this was not open to Ps on the pleadings and evidence, Ps’ case on the undisputed/indisputable facts was not so bad to take it out of the norm. The only controversies between Ps on the one hand and HCPIL and CAIL on the other hand were the fides of HCPIL and CAIL. The evidence of HCPIL’s witnesses was fairly and squarely tested in cross-examination, and the fact that the Court disagreed with Ps’ submissions does not bring this case out of the norm. Ms Wong in reply submits that: Ps were, from the very outset, already made aware of HCPIL and CAIL’s intention to join these proceedings. With full knowledge of HCPIL and CAIL’s position, Ps agreed to the joinder of HCPIL and CAIL. Having adopted such a position, Ps must be taken to have acknowledged the legitimacy of the basis of HCPIL and CAIL’s joinder and, in particular, the existence of a proper question to be tried as between Ps and HCPIL/CAIL which is necessary or just and convenient for resolution as between them. That being the case, and knowing full well the costs implications flowing from their joinder, it is not open to Ps to now seek to evade liability for indemnity costs when their claim over the Second Mortgage and Sung’s Tower, being the very reason prompting HCPIL and CAIL’s joinder in the first place, have catastrophically failed. Even if HCPIL and CAIL might potentially be able to ventilate their claims via CFGL, this does not in any way diminish the utility in their joinder. As Ps rightly acknowledged, the “existence and extent of any alleged interests of both HCPIL and CAIL” over Sung’s Tower, being the very subject-matter of Ps’ claims herein, is squarely in issue. This itself is a sufficiently good reason for HCPIL and CAIL to be joined, such that all proper questions as between the parties on the same subject-matter could be resolved in one go. This is particularly so given the complexity of the dispute at hand. A judgment resolving all issues relating to Sung’s Tower, which binds all parties who assert an interest over the same (including HCPIL and CAIL), would be desirable. Ps’ utter failure and their conduct in these proceedings was plainly out of the ordinary and highly unreasonable. The entirety of Ps’ case boiled down to two dishonestly concocted oral agreements, which the Court found to be the only pleaded basis of Ps’ claims. Ps’ last-ditch attempt to salvage their unsustainable factual case by praying in aid an unpleaded argument does not assist them. That was in any event was not the main reason why Ps’ claims were wholly refuted by the Court. Having considered the parties’ respective submissions, I am in respectful agreement with Ms Wong. In particular, Ps’ whole case is based upon the AHL Sale Agreement and SMA/CRA, which were lies knowingly fabricated by Sung Sr. Both ADFL and Powerlink were controlled by Sung Sr at all material times. Thus, Ps together have put forward a case based upon the lies knowingly fabricated by Sung Sr, and the lies knowingly told by Sung Sr under oath. In my view, this is very unreasonable and indeed amounts to an abuse of the process of this Court. In these circumstances, an order of indemnity costs is justified and appropriate. The purpose of awarding indemnity costs to HCPIL and CAIL is to ensure HCPIL and CAIL to have a fuller compensation, not to punish Ps. I would allow Ds’ application and order Ps to pay indemnity costs to Ds. As to the costs of Ds’ Summons, Mr Lam submits that CFGL’s claim for indemnity costs has never been disputed by Ps. In reply, Ms Wong submits that Ps have never consented to CFGL’s claim for indemnity costs. After issuing Ds’ Summons, Ds’ solicitors wrote to Ps’ solicitors, asking whether they would agree to Ds’ Summons. No reply was given by Ps. Having considered the parties’ respective submissions, I am of the view that there is no reason to depart from the general rule that costs should follow the event. Further, the consideration of the submissions on costs should be regarded as part of the trial. I am of the view that costs of Ds’ Summons should be borne by Ps on an indemnity basis. Disposition I allow Ds’ application and vary the costs order nisi to the extent that the costs provided in that order be taxed on an indemnity basis. Costs of Ds’ Summons be paid by Ps to Ds forthwith on an indemnity basis. Those costs be summarily assessed at HK$78,000. Lastly, it remains for me to thank Ms Wong and Mr Lam for the helpful assistance rendered to the Court. (MK Liu) Deputy High Court Judge Mr Julian Lam, instructed by DLA Piper Hong Kong, for the 1st to 3rd Plaintiffs in HCA 2385/2017 and for the Defendant in HCMP 2556/2017 Ms Clara Wong, instructed by Reynolds Porter Chamberlain, for the 2nd, 7th and 8th Defendants in HCA 2385/2017 and for the Plaintiff in HCMP 2556/2017