DAIMLER AG (FORMERLY KNOWN AS MERCEDES BENZ AG) v. HELGE HERBERT LEIDUCK, APPOINTED BY ORDER TO REPRESENT THE ESTATE OF HERBERT HEINZ HORST LEIDUCK, DECEASED AND ANOTHER

HCA 4089/1994
[2018] HKCFI 383

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 4089 OF 1994

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DECISION ON COSTS AND CONSEQUENTIAL DIRECTIONS

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1.  By a Decision handed down on 16 November 2017 (“16.11.2017 Decision”), I indicated that, subject to condition of payment into court by the defendants to provide security for their liability for all wasted costs occasioned to the plaintiff, I am inclined to allow the defendants’ application by summons dated 15 December 2015 (“Summons”) for leave to appoint Mr Vladimir Yurievich Durasov (“Mr Durasov”) in place of Mr Karl Heinz Klenke (“Mr Klenke”) as the defendants’ expert on Russian company law and on the Russian company registration system relevant to the issue as to the date on which Stern-Stroy Limited was first established in Moscow and whether it was an existing company in Moscow as at 25 February and 1 July 1994 (“Issue”).

2.  To enable me to decide the amount of security to be paid into court, I directed the plaintiff to file and serve an estimate of the costs occasioned to it by the defendants’ change of expert and by the Summons, including the costs of the contested hearing on 25 April 2016 (“25.4.2016 Hearing”) in case it is awarded to the plaintiff, and the defendants to comment on the plaintiff’s costs estimate.

3.  Further, in anticipation of argument as to which side should bear the costs of the 25.4.2016 Hearing, I also gave directions for the parties to file and serve written submissions on the incidence of such costs.

4.  By this decision, I shall

(1) dispose of the issue of costs of the 25.4.2016 Hearing;

(2) set the amount to be paid into court by the defendants as the condition for leave to change expert; and

(3) give further directions for expert evidence.

Costs of 25.4.2016 Hearing

Principles

5.  Costs is in the court’s discretion, to be exercised judicially: see s 52A(1) of the High Court Ordinance (Cap 4) and Order 62 rule 2(4) of the Rules of the High Court (Cap 4A).

6.  Following the Civil Justice Reform, costs of interlocutory proceedings are dealt with in Order 62 rule 3(2A) which I set out below (together with rule 3(1) and (2) for proper context):

“(1) Subject to the provisions of this Order, no party shall be entitled to recover any costs of or incidental to any proceedings from any other party to the proceedings except under an order of the Court.

(2) If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings (other than interlocutory proceedings), the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.

(2A) If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any interlocutory proceedings, it may, subject to this Order, order the costs to follow the event or make such other order as it sees fit.” (emphasis added)

7.  The general rule of costs following the events does not apply in interlocutory proceedings.  As summarised by To J in Melvin Waxman v Li Fei Yu, HCA 1972/2012 (unreported), 11 September 2013 at [19]:

“Summing up on the post-CJR position, I think the court has much wider discretion as to costs in interlocutory proceedings. Unlike other proceedings, the general rule of costs following the events do not apply. The court is entitled to take into account all the circumstances of the case, including those set out in rule 5, to make such order as it thinks fit. In the exercise of its discretion, the court may take the issue-based approach or may take into account merit of the parties’ case or the possible outcome of the action. The circumstances of interlocutory proceedings are so numerous that it is impossible to make any general rule. Costs to follow the event and costs be to the successful party’s costs in the cause are obvious options.”

See also Hong Kong Civil Procedure 2018, Volume 1, §62/3/3B.

8.  Order 62 rule 5(1) sets out the matters that the court shall take into account in exercising the discretion as to costs including the following:

(1) the underlying objectives set out in Order 1A, rule 1;

(2) any offers made (unless they were made in circumstances when sanctioned payment or sanctioned offer could have been but was not made);

(3) conduct of the parties; and

(4) whether a party has succeeded on part of his case, even if he has not been wholly successful.

9.  With regard to “conduct of the parties”, according to Order 62 rule 5(2)(a) and (b), it includes:

(1) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; and

(2) the manner in which a party has pursued or defended his case or a particular allegation or issue.

10.  Where the indulgence of the court is sought and contested (as in the present case), the practice has developed, even before the CJR, of distinguishing between two sets of costs:

(1) the costs of and occasioned (or thrown away or wasted) by the indulgence being granted and the costs of the summons by which the application for indulgence is made; and

(2) the costs of the contested substantive hearing.

Although the first set of costs would normally be awarded in favour of the other party in any event, the second set of costs would be made against him if he unreasonably opposes the application.

11.  This practice apparently first developed, and has become well recognised, in applications for leave for amendments.  The rationale for this practice was explained by Yam J in the context of an application for leave to amend a pleading in Lessy SARL v Pacific Start Development Ltd[1996] 2 HKLR 1 at 2C-J:

“The rationale behind differentiating these two sets of costs is not to encourage the other side who has decided to resist an application to amend to have a try-on. Otherwise the resisting party would be under an impression that, win or lose, they will get their costs any way. The resisting party should be deterred to adopt such an attitude. In deciding to resist the amendment, they should know that in the event they have lost the argument, they would be ordered to pay the cost of the argument and that is the costs of the hearing whilst the first set of costs (i.e. the costs of an occasioned by the amendment), would be to them in any event.”

12.  The English courts adopt a similar approach.  In Le Chemise Lacoste v Sketchers USA[2006] EWHC 3642 (Ch), which concerned an application for amendment by the claimant of the particulars of claim, Mann J observed in [12] in response to the claimant’s submission that the costs that had been inflated by an unreasonable refusal to consent to the amendment should be borne by the defendant:

“The first matter I have to deal with is whether that principle is right, and how it applies in this case. It has been agreed that under the CPR regime as party who has an amendment which really ought to be consented to and which it is obvious that the court is going to grant if there is a dispute, is an amendment in respect of which the costs of an application can be visited on the amended-against party, notwithstanding the normal rule as to the costs of amendment. It will behove parties in commercial litigation, and indeed in all litigation, to view sensibly applications to amend by the other side and not to inflate the costs unnecessarily by an unreasonable refusal to consent. If the amending party is put to the trouble of an application which is acceded to … it demonstrates the financial folly of the parties not dealing with matters sensibly and in a way in which the courts expect matters to be dealt with nowadays. The principle therefore is that which I have just expressed, that is to say the amended against party can expect to end up paying costs of an application for permission to amended which ought to be unnecessary.”

13.  The rationale behind Lessy SARL was held by Deputy High Court Judge A Cheung (as the Chief Judge then was) in Man Fong Hang v Man Ping Nam [2002] 4 HKC 545 at [17]-[24] to apply to an application for leave to adduce further or supplemental expert evidence. In particular, his Lordship said at [23]:

“However, as regards the second set of costs, i.e. the costs of the substantive hearing, assuming as I do that the application is resisted, the similarities between an application to amend and an application for leave to adduce further or supplemental expert evidence are marked. In my judgment, the same rationale applies. A party on the receiving end of such an application must decide before the hearing whether to resist the application. Any attempt to have a ‘try on’ must be discouraged. For as Yam J observed in Lessy SARL, otherwise a resisting party would be under an impression that win or lose he would get the costs anyway. The resisting party should be deterred from adopting such an attitude, which not only escalates costs unnecessarily but also consumes valuable court time and resources. In deciding to resist the application, a party must fully consider the risk of his losing the argument and being ordered to pay the costs of the argument, regardless of the incidence of the first set of costs (i.e. the costs of and occasioned by the application for leave to adduce further or supplemental expert evidence).”

14.  In the different context of an application for leave to serve a notice of appeal out of time after leave to appeal had been granted, the Court of Appeal ordered the opposing party to pay the costs of the application incurred by the applicant after he had had the opportunity to peruse the summons and the supporting affirmation upon which he should have acceded to the application: Asgain Company Ltd v Cheng Ka Yan, HCMP 1019/2017, unreported, 31 August 2017.  Lam VP, giving the judgment of the court, said at [20]:

“Lessy SARL v Pacific Star Development Ltd [1996] 2 HKLR 1 and Man Fong Hang v Man Ping Nam [2002] 4 HKC 538 are simply instances where the court, in the exercise of its discretion on costs, took account of the unreasonable conduct of the litigation by a party. Thus, notwithstanding that the nature of relief is a matter of indulgence, if the opposition to such indulgence is unreasonably made, the party who unsuccessfully opposed could be ordered to bear some of the costs. Put in another way, if the court is of the view that the application should not have been opposed based on matters already known to the opposing party, the costs attributable to the unsuccessful opposition were actually caused by the opposition rather than the party seeking indulgence. In that event, there is no reason in principle why the court could not consider ordering costs against the unsuccessful opposing party.”

15.  It is clear from the parties’ respective submissions on costs that they both accept the applicability to this case of the distinction between (1) the costs of and occasioned by the defendants’ application for leave to change expert witness and (2) the costs of the contested substantive hearing.  

16.  This is clearly right.  I do not see why the party at the receiving end of an application for leave to change expert witness should be encouraged to oppose regardless of merits by the assurance that he would not be visited with any adverse consequence as to costs even if he fails in this opposition.

Discussion

17.  With regard to the first set of costs, as noted in paragraph 50 of the 16.11.2017 Decision, the defendants had, by their solicitors’ letter dated 25 January 2016 to the plaintiff’s solicitors, offered to pay the costs of the plaintiff’s expert, Mr Andrei Donstov (“Mr Donstov”), in reviewing Mr Klenke’s report dated 20 December 2012 and preparing the supplemental report dated 1 February 2013 in response thereto and in reviewing Mr Durasov’s report dated 28 November 2015 and responding with a fresh supplemental report.  Mr Horace Wong SC, for the defendants, also indicated at the 25.4.2016 Hearing his clients’ willingness to pay the costs of the Summons.

18.  As for the second set of costs, both parties claim to be entitled to the same. 

19.  The question raised is whether it was reasonable for the plaintiff to oppose the Summons.

20.  In this regard, although the plaintiff accepts the distinction between the two sets of costs, Ms Sara Tong, for the plaintiff, refers to a number of instances in which the party who failed in opposing leave to amend a pleading after a contested hearing was nonetheless given the costs of resisting the application because the opposition was not unreasonable.  I am afraid I have not derived any meaningful assistance from these cases as they were essentially decisions on their own facts.[i]

21.  In the specific context of an application to engage a new expert, Ms Tong refers firstly to Yip Kwok Sun v Poly-Style Limited, DCMP 2891/2011, unreported.  In that case, the plaintiff claimed to be in adverse possession of the subject land for over 20 years since 1982 or alternatively for more than 12 years since 1996.  An issue arose as to whether 4 aerial photographs taken in September 1999, October 2000, March 2001 and September 2001 showed the land in question to be in cultivation, thereby supporting the plaintiff’s case of factual possession, on the dates on which they were taken.  After the defendant’s expert witness produced a supplemental expert report which opined that most of the land was not under cultivation from September 1999 to September 2001, the plaintiff obtained an order by consent for leave to file and serve a supplemental report by his expert to respond to the defendant’s supplemental expert report, in particular, the defendant’s expert’s comments on the 4 aerial photographs.  However, the plaintiff’s expert then refused to prepare the supplemental expert report, leaving the plaintiff with no alternative but to apply for leave to engage another land surveyor for the limited purpose of preparing a supplemental expert report on the 4 aerial photographs.  By a decision dated 24 June 2015, District Judge Andrew Li granted leave.  By a further decision dated 18 January 2016, the judge gave costs, including the costs of the contested hearing, to the defendant who unsuccessfully opposed the plaintiff’s application.  

22.  I regard the disposal of the costs of the contested substantive hearing in Yip Kwok Sun as a decision on its own facts.  However, Ms Tong relies on what was said at [19]-[23] and [27] of the decision on costs:

“19. Second, as explained in Fung Chun Man, supra, admission of expert evidence is never a rubber-stamping exercise. It is most unusual, as in the circumstance of this case, that the court would allow a single party to have different experts in the same area of expertise to comment on an overlapping subject matter, whether it is consented by the parties or otherwise. I agree with the defendant’s submissions that the plaintiff’s application for calling the 2^nd expert to comment on the 4 aerial photos is in itself an extraordinary application when the 1^st expert had already commented on many of the aerial photos already, with only 2 overlapping photos. Hence, in my judgment, the defendant was perfectly entitled to object to such unusual application, including attending the hearing for the oral arguments.

20. Third, this court when exercising the discretion to allow such unusual, if not extraordinary, application had to strike a “fine balance” between the various factors mentioned in Fung Chun Man in order to ensure “cost effectiveness and economy, expedition, proportionality and fairness between the parties”.  I agree with Mr Chan that most of the oral arguments at the hearing was concentrated on whether there could have been an alternative way to obtain the 1^st expert’s opinion, ie to put the relevant aerial photos to the 1^st expert when he comes to court to testify or to allow the plaintiff to call a different expert solely to give evidence on those 4 aerial photos, the latter would create a rather odd if not absurd scenario. In the end, the court reluctantly struck that balance by tilting towards the latter, but certainly less than ideal, approach.

21. However, that does not mean the plaintiff had “won” the arguments at the hearing as the plaintiff’s counsel seems to have suggested in his written submissions.

22. In my judgment, given the rather unusual background to this case and the extraordinary behaviour of the 1^st expert, not only the court is entitled to, but, in my view, it will be conducive to good case management and pursuant of justice, that full arguments on both sides should be heard in court.  I therefore do not consider that the defendant had behaved in an unreasonable manner as alleged by the plaintiff by insisting on the oral hearing for the 2014 Summons.

23. Further, in the rather unusual circumstances of this case, I do not consider it was fair for the plaintiff to say that the defendant had behaved unreasonably when it insisted that the same expert should give opinion on the 4 additional aerial photos at trial in the first place.  In this regard, I would like to make the observation that the plaintiff did not have leave to submit the supplemental expert report and did not ask for such leave until the last possible moment on 17 September 2014, being the last date of an unless order to require him to seek such direction.  Hence, when the 2014 Summons was taken out on 17 November 2014, it was already out of time under the unless order and the plaintiff was debarred from seeking leave to file any supplemental expert report.  But for the defendant’s consent and subsequently the court’s order pursuant to the consent summons, the plaintiff could not even started the process out of time.

…

27. As for the costs of the hearing, as found above, I do not consider the defendant’s attendance (represented by counsel and solicitors) unreasonable, even though it had not been successful in opposing the application.  After all, the application involved a fine balancing exercise of the court.  In this case, the plaintiff just managed to persuade the court to tilt the balance in his favour.  However, that in my judgment does not mean that he should be entitled to costs of the hearing.” 

23.  Ms Tong also places reliance on Chang Pui Yin v Bank of Singapore Limited, HCCL 12/2013, unreported (5 April 2017), which involved an application by the defendant to change expert for the trial on quantum after it lost on liability and after the trial judge made negative comments on the defendant’s expert which caused the defendant to lose confidence in him.  Madam Justice Mimmie Chan dismissed the application.  Without going into all her reasons, her Ladyship said at [7] and [8] the following upon which Ms Tong relies:

“7. It should be recognized that any application for leave to adduce expert evidence is a matter involving the court’s case management powers, and for an application which involves a change of expert, particularly at a late stage, it is an application which seeks the indulgence of the court. No party may adduce expert evidence without the court’s leave first having been obtained under Order 38. The powers and discretion of the court have to be exercised with the underlying objectives of the CJR in mind. Cost effectiveness, dealing with cases expeditiously, ensurance of fairness and the promotion of reasonable proportion are all relevant considerations.

8. It must also be accepted that expert shopping is not encouraged by the court.  It is not conducive to costs effectiveness of the proceedings nor the expeditious disposal of a case.  As observed in Chinachem Charitable Foundation Limited v Chan Chun Chuen [2009] 5 HKC 190, expert shopping can lead to potential abuse and unfairness, as well as compromising the impartiality of expert evidence which is of great importance in the fair resolution of disputes by the court.  To say the least, permitting a party to instruct a new expert inevitably requires the parties to restart the whole process of expert instruction which effectively means wasting all the time and costs already incurred in compiling and preparing for the existing expert reports.  The court should not permit the change of experts without very good reasons being adduced.”

24.  In reliance on these decisions, particularly the passages quoted above, Ms Tong makes the points in paragraphs 12 and 15 of her written submissions on costs dated 30 November 2017 that the admission of expert evidence is never a rubber-stamping exercise but involves the exercise of case management discretion with reference to the underlying objectives in Order 1A rule 1 which requires the court to strike a “fine balance” to ensure “cost effectiveness and economy, expedition, proportionality and fairness between the parties”; that it is conducive to good case management and in pursuance of justice that full arguments on both sides should be heard in court.

25.  With respect, I disagree if Ms Tong is suggesting that, because of its nature, an application for leave to switch expert should generally be dealt in court after a contested hearing. 

(1) First, I do not see an application for leave to change expert as being in a special category, at least not generally. The said points that Ms Tong seeks to make from what District Judge Andrew Li said in Yip Kwok Sun and Madam Justice Mimmie Chan said in Chang Pui Yin appear to me to be applicable to most interlocutory applications.  

(2) Second, the principles governing the grant or refusal of leave to substitute an expert witness are settled (see paragraph 40 of the 16.11.2017 Decision), as acknowledged in the plaintiff’s solicitors’ letter dated 17 March 2016 (quoted in paragraph 27(3) below).  In most cases, I would expect the party at the receiving end of such an application to be able to assess its position with reference to such principles and to consent to the application where appropriate.

26.  It appears to me that, in opposing the Summons, the plaintiff has lost sight of the principle that, barring other relevant (overriding) circumstances, the key consideration that governs an application to replace expert is whether there are relevant matters canvassed by the substitute expert which may be important to the just resolution of the dispute which was omitted from the reports of the original expert, or which was outside the expertise of the original expert.  To my mind, for reasons already explained in the 16.11.2017 Decision, there can be no doubt that Mr Durasov’s Expert Report dated 28 November 2015 passes this test.  The plaintiff has not even attempted to explain to me how it could reasonably have formed a different view.  As I see it, the only question is therefore whether there are other relevant circumstances of sufficient weight to override this key consideration.

27.  Before I turn to the plaintiff’s reasons for opposing the Summons, by way of general observation, I have been shown the correspondence between solicitors on the Summons after the Summons and the affidavit evidence in support thereof (including a full copy of Mr Durasov’s report) were served on the plaintiff.  The following exchanges are worthy of note:

(1) As stated in paragraph 50 of the 16.11.2017 Decision, the defendants have, by their solicitors’ letter dated 25 January 2016 to the plaintiff’s solicitors, offered to pay the costs of Mr Donstov in reviewing Mr Klenke’s report and preparing a supplemental report in response thereto and in reviewing Mr Donstov’s report and responding with a fresh supplemental report.

(2) By a further letter dated 16 March 2016, the defendants’ solicitors advised the plaintiff’s solicitors that they intended to deliver briefs to counsel on 24 March 2016 and urged the plaintiff to consent to the Summons on the terms as to costs proposed in their letter dated 25 January 2016 by close of business on 23 March 2016.

(3) The plaintiff responded by their solicitors’ letter dated 17 March 2016.  The only material paragraph is the third one as follows:

“We have now taken instructions and write to inform you that we have instructions from our client to oppose the Defendants’ Application. On the evidence and explanation provided by the Defendants in support of the Defendants’ Application (namely, the 28^th Affidavit of Jeremy David Levy and the 7^th Affidavit of Helge Leiduck), we take the view that the proposal by your clients to appoint a new expert at this stage is not justified, applying the well established legal principles in the relevant authorities.”

28.  With respect, I do not find such response by the plaintiff to be conducive to good case management or the achievement of the underlying objectives of the CJR.  It simply brushed off the application without raising any of the concerns that are now said to have prompted the plaintiff to oppose the Summons.

29.  On this note, I turn to the 5 reasons advanced by the plaintiff to justify its opposition to the Summons, by which I am afraid I was (and still am) not convinced.

30.  First, it is said that the parties had already incurred significant costs in obtaining and preparing Mr Donstov and Mr Klenke’s reports and that a substantial part of such costs would be entirely wasted if the defendants were permitted to engage Mr Durasov. 

(1) Wastage of costs incurred would often follow a change of expert by one party. 

(2) And the prejudice to the other party is always a relevant consideration. 

(3) In this case, the prejudice as to costs suffered by the plaintiff can be mitigated by ordering the defendants to secure the eventual payment of such wasted costs on a party and party basis by a payment into court.

(4) While it is true that the defendants only indicated through Mr Wong SC their willingness to pay the costs of the Summons and to secure their liability for all wasted costs by a payment into court at the 25.4.2016 Hearing, such indication was made as soon as the issues were raised.

(5) Indeed, I note that the defendants offered, by their solicitors’ said letter dated 25 January 2016, to “agree to all reasonable orders or directions providing for our clients’ responsibility for such costs, which orders or directions may no doubt be made by way of consequential directions upon the parties’ agreement to an order in terms of the Application”.

(6) It is regrettable that the plaintiff did not raise its concern as to wasted costs in correspondence.

(7) As it turns out, the plaintiff’s opposition to the Summons has occasioned to it further costs in excess of HK$1 million, if one goes by the plaintiff’s costs estimate dated 27 November 2017.

31.  Second, it is said that the defendants and their legal team must have, or ought to have, realised the obvious inadequacies of the evidence of Mr Klenke much earlier, i.e. at least by the time Mr Klenke’s expert report dated December 2012 was made available to them.  Yet, the Summons was only taken out on 15 December 2015, some 3 yearsafterthe parties exchanged their respective expert reports in December 2012 and adduced their respective supplemental expert reports in February 2013. There was no apparent reason why the defendants’ search for a new expert only began since October 2014, some 6 months after Mr Leiduck Jr was appointed to represent Mr Leiduck’s estate in April 2014.

32.  Delay in making the application, where it exists, is no doubt a material consideration. However, the weight to be attached to a delay in making the application has to be assessed in the context of the facts of the particular case.  In the instant case, there is no pressure from any fixed dates for the resumption of the trial.  That being the case, the time lapse between Mr Klenke’s reports and Mr Durasov’s report (during which the parties were also pre-occupied with other issues), though relevant, is patently insufficient to override the benefit that the court would derive from having Mr Durasov as an expert witness.

33.  Third, it is said that there was no or no proper explanation for Mr Klenke’s unavailability, particularly as the dates for the resumption of the trial had not yet been fixed.  As noted in paragraph 30 of the 16.11.2017 Decision, in support of the Summons, the defendants rely on Mr Klenke’s inability, rather than unavailability, to deal with the Issue. Although Mr Wong SC put this beyond doubt at the 25.4.2016 Hearing, I am inclined to agree with him that Klenke’s unavailability was not put as the basis of the application but was disclosed as part of the background circumstances only.  It would have been apparent from the summary in paragraphs 23 to 28 of the 16.11.2017 Decision that the inadequacies of Mr Klenke’s reports are glaring.  Paragraph 10 of Mr Leiduck Jr’s 7^th Affidavit explained that “the matters referred to in Mr. Durasov’s Report are pertinent to the court’s consideration of the Issue and are thus of significant value to the just resolution of the dispute in relation to the Issue”.  Paragraph 10 of Mr Levy’s 28^th Affidavit of Jeremy Levy was to like effect.  Further, according to paragraphs 6 to 8 of Mr Leiduck Jr’s 7^th Affidavit, his search for a new expert started way before Mr Klenke confirmed his unavailability. 

34.  Fourth, it is said that there was no evidence that the defects in Mr Klenke’s report could not be remedied by a supplemental report from him, there being no mention in the defendants’ supporting affidavit evidence as to whether Mr Klenke was unable to give evidence on the new or additional information and materials contained in Mr Durasov’s report or to provide his opinions on such matters (and if not, why not) or whether they had approached Mr Klenke to ask whether he was willing or able to provide evidence on such new or additional information and materials.  It was only in their written submissions dated 20 April 2016 and oral submissions at the 25.4.2016 Hearing that the defendants made submissions to the effect that Mr Klenke had no professional expertise in the Russian company registration system, and only acquired “general and second-hand” knowledge/experience from a “user point of view”.

35.  Mr Klenke’s lack of relevant qualifications or experience is obvious.  In light of the nature and complexity of the Issue and having regard to Mr Klenke’s qualification and experience, as noted in paragraph 45 of the 16.11.2017 Decision, this is not a case in which the defects in Mr Klenke’s reports can be remedied by further communications with the expert.

36.  Fifth, it is said that the defendants only sought to rely on the 4 points dealt with in paragraphs 34 to 38 of the 16.11.2017 Decision as being “particularly pertinent” to the resolution of the Issue in paragraphs 22 to 32 of their written submissions dated 20 April 2016. They were not specifically raised in the supporting affidavit evidence.  By then, the plaintiff was left with no reasonable opportunity to consult its own expert as to the significance or merits of the 4 points for the resolution of the Issue.

37.  I am unimpressed by such complaint.  I find it hard to accept that the plaintiff only came to appreciate the relevance and significance of Mr Durasov’s report after reading the defendants’ written skeleton submissions.  Whether there are relevant matters canvassed by Mr Durasov which may be important to the just resolution of the Issue which was omitted from Mr Klenke’s reports, or which was outside Mr Klenke’s expertise, should be evaluated with reference to Mr Durasov’ report and the supporting materials referred to therein.  One would have expected the plaintiff to consider its position in respect of the Summons after a careful study of such report and materials which, together with the English translations thereof, were exhibited to Mr Levy’s 7^th Affidavit and served on the plaintiff’s solicitors in December 2015.  Had it done so, the relevance and significance of Mr Durasov’s report would have been apparent.  I agree with Mr Wong SC that the plaintiff is represented by a formidable team of lawyers and cannot be expected to do less.  Indeed, it is apparent that Mr Donstov was also consulted on the matter.

38.  For these reasons, I find the plaintiff’s opposition to the Summons unreasonable.  The defendants should have the costs of the 25.4.2016 Hearing.

Amount of security for costs to be paid into court by the defendants

39.  For the avoidance of doubt, I am not taxing the plaintiff’s costs of having Mr Donstov reviewed (1) Mr Klenke’s report dated 20 December 2012 and preparing the supplemental report dated 1 February 2013 in response thereto or (2) Mr Durasov’s report dated 28 November 2015 and responding with a fresh supplemental report.  Nor am I assessing the costs of the Summons.

40.  My concern is to arrive at an amount that would give the plaintiff security that such costs, after taxation, would be paid by the defendants.  I have therefore approached the plaintiff’s estimate of costs as I would have done in an application for security for costs.

41.  In this regard, the plaintiff claims that it has incurred and will incur sums totalling HK$1,716,386 for the items of costs to be secured.

42.  Not surprisingly, the defendants object.  They propose the sum of HK$670,090.

43.  The figure claimed by the plaintiff is, on any view, excessive (especially on a party and party basis) based on the understanding that I have acquired of the Issue from hearing this case since February 2013.  For instance, while estimating that Mr Donstov would charge HK$311,200 for all necessary works up to and including the production of a supplemental report in response to Mr Durasov’s report, the plaintiff has budgeted the respective sums of HK$300,000 and HK$350,000 for the related review and advice by solicitors and counsel!  There is no breakdown or explanation as to how any of these 3 sums (adding up to close to BHK$1 million) have been arrived at.

44.  It is unnecessary to deal with the plaintiff’s costs estimate item by item.  I have had the benefit of the defendants’ detailed comments thereon.  Apart from the said unexplained estimates for future costs, I generally find that:

(1) I should be mindful of the possibility of overlaps between the works done by a partner and 3 associates in the plaintiff’s solicitors.

(2) The total hours claimed for the works done by the partner and the 3 associates in relation to Mr Klenke’s reports and the response thereto to be disproportionately high, having regard to the rather sparse contents of Mr Klenke’s reports.

(3) The hourly rates claimed for such partner and associates significantly exceed those allowed on party and party taxation.

(4) The total amount claimed for works that were done by the solicitors for the plaintiff in relation to Mr Klenke’s reports and the response thereto (HK$562,096) appears to me to be disproportionately high as compared to what Mr Donstov himself (HK$108,240) and leading and junior counsel (totalling HK$84,250) have charged.

45.  Looking at the matter in the round, I consider HK$850,000 to be an appropriate amount to be paid into court by the defendants.

Further directions for expert evidence

46.  Given the amount of time that Mr Durasov had and the nature, volume and complexity of his report and supporting materials as well as the lack of pressure from any fixed trial dates, it is not unreasonable for the plaintiff to have 90 days to file and serve a new supplemental report by Mr Donstov.

47.  As both Mr Donstov and Mr Durasov live in Moscow, I will resurrect the directions for a joint expert meeting and joint expert report after the filing and service of Mr Donstov’s new supplemental report.

Disposition

48.  I formally give the defendants leave to appoint Mr Durasov in place of Mr Klenke as their expert on the Issue on the condition that they pay HK$850,000 into court within 28 days from today as security for the plaintiff’s costs to be ordered in paragraph 50(1) below.

49.  The plaintiff shall have leave to file and serve a supplemental report by Mr Donstov in response to Mr Durasov’s report within 90 days from the date of the defendants’ payment into court, to be followed by a without prejudice joint expert meeting of the experts within 30 days thereafter and then by a signed joint expert report from such joint meeting, within 42 days thereafter, identifying (1) the issue(s) on which the experts have reached a common opinion and the common opinion in respect of each such issue and (2) the issue(s) on which the experts have failed to reach a common opinion and the competing views on each such issue and the reasons for the opposing views.

50.  On costs:

(1) The defendants shall pay the plaintiff’s costs of

(a) review of and response to Mr Klenke’s report dated 20 December 2012;

(b) review of and response to Mr Durasov’s report dated 28 November 2015; and

(c) the Summons.

(d) On the other hand, the plaintiff shall pay the defendants’ costs of the 25.4.2016 Hearing with certificate for 2 counsel.

All the aforesaid costs shall be taxed, if not agreed, on a party and party basis.