AKAI HOLDINGS LTD (IN LIQUIDATION) v. THANAKHARN KASIKORN THAI CHAMKAT (MAHACHON)

HCCL 59/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 59 OF 2004

----------------------

----------------------

--------------------------------------------------------------------

JUDGMENT ON COSTS OF THE PLAINTIFF'S
APPLICATION TO VARY COSTS ORDER NISI

--------------------------------------------------------------------

Background

1. In its judgment dated 26 May 2008 this court dismissed the claim by the plaintiff Hong Kong liquidator against the defendant Thai bank, and made a order nisi as to costs whereby the costs of the action and of the defendant’s counterclaim were awarded to the defendant.

2. By summons dated 13 June 2008 the defendant applied to vary this order nisi, and by its further judgment dated 31 July 2008 this court revisited the costs’ issue and acceded to the application so to vary the original order nisi.  This ‘variation judgment’ speaks for itself.

3. The variation so ordered was in the following terms: first, to award to the unsuccessful plaintiff its costs of and incidental to the issue of Thai law and the calling of expert evidence upon that issue, and second to deprive the successful defendant of its costs of and incidental to the calling of Mr Pakorn Partanapat as a witness on Wednesday 5 March 2008.

4. Upon the issue of the costs of the plaintiff’s application so to vary the original order nisi, the court concluded (at paragraph 50 of this variation judgment) that it was disinclined to venture yet another order nisi, and in lieu thereof invited the parties to make written representations on the matter, not exceeding 2 pages in each case, on the basis of which the court would make a final costs’ order.

5. This therefore is the last in this sequence of judgments.

The argument

6. Each party helpfully made written submissions of the stipulated length.  Equally, each party claimed to have succeeded, and thus to be entitled to the costs of the hearing thus held to argue about costs.

7. For the plaintiff Mr Kosmin QC, who has appeared for the plaintiff throughout this litigation, submitted that the court should order the defendant to pay the plaintiff’s costs of the variation application in any event, such costs to be taxed if not agreed, on the basis that (i) the plaintiff was “substantially successful” on the application as a whole, and the ordinary rule was that costs should follow the event; and (ii) to the limited extent that the plaintiff was unsuccessful on certain issues, and that established principles applicable to departure from the ordinary rule apply, the matters relied upon by the plaintiff genuinely were arguable, and did not materially contribute to the length of the hearing, nor the parties’ preparation for it.

8. Mr Kosmin maintained that at the half-day hearing on 31 July 2008, the hearing time was occupied principally by argument as to the costs of that which conveniently has become known as ‘the Thai law issue’, and that minimal time was spent on the balance of the plaintiff’s application to vary the initial order nisi. 

9. In this regard, he asserted, the plaintiff had been wholly successful upon what had been a self-contained issue raised by the defendant, and which had involved the use of expert evidence as to aspects of Thai law, which in the event the court wholly had disregarded – hence the variation as had been achieved.

10. As to the comparatively small amount of time spent on the plaintiff’s application for a percentage reduction in the defendant’s costs of the action, Mr Kosmin said, the greater part of this debate had been spent on the costs of and incidental to the defendant calling Mr Pakorn Partanapat as a factual witness, and the defendant had been successful on this element of the application also, on the basis that this gentleman clearly had had little or no knowledge of events the subject of this trial, and thus effectively had contributed nothing to the dispute between these parties.

11. As to the remaining matters the subject of the variation application – upon which the plaintiff had been unsuccessful in obtaining any variation of the original order nisi, albeit at trial the plaintiff’s ultimate success on such issues had been “resounding” – leading counsel argued that argument as to a percentage reduction in the defendant’s costs was “genuinely arguable”, notwithstanding that it had failed, the court having taken the view that the defendant nevertheless had been justified in raising these arguments.

12. Thus, said Mr Kosmin, the discrete ‘Thai law issue’ apart, the plaintiff’s reliance, albeit unsuccessful, upon its successes upon other issues at trial (eg breach of fiduciary duty) was proper and reasonable, and had caused no significant increase in the hearing length or indeed in the costs of the argument to vary the existing order nisi.

13. Accordingly, counsel concluded, the plaintiff had obtained a positive order as to costs of the ‘Thai law issue’, had obtained a reduction in part of the defendant’s costs, in terms of Mr Partanapat’s participation, and that the work involved in preparing for and arguing the application would have been largely the same on both sides had the variation application in fact limited to seeking the variations in costs as in fact were achieved.

14. In these circumstances, therefore, and in light of the rules espoused in Re Elgindata Ltd [1992] 1 WLR 1207, it would not be appropriate to depart from the ordinary rules as to costs, and thus the plaintiff should have the costs of this application absent any dimunition.

15. For the defendant Mr Eugene Fung, whom as junior counsel had appeared for the defendant throughout this case, took a markedly different view.

16. His submission was that the proper order as to costs of the variation application should be reflective of the overall success/failure of the parties in terms of the outcome of that application.

17. Mr Fung points out that in the plaintiff’s application to vary the order nisi the plaintiff’s position, as specifically set out in its summons dated 13 June 2008, was that (i) there should be a deprivation of 40% of the defendant’s total costs of the action; and (ii) that the defendant should pay to the plaintiff the costs of the ‘Thai law issue’.

18. Mr Fung submits that the purported deprivation of 40% of the defendant’s costs was, by value, “by far the greater part of the attack” mounted by the plaintiff against the order nisi, and that this attack was rejected; in fact, he said, there were five topics of ‘costs’ contention’ before the court and the plaintiff had won on but two of them, namely the Thai law issue and the issue of Mr Pakorn’s participation, both of which the court considered to be essentially ‘discrete matters’ (vide para 32 of the costs’ judgment dated 31 July 2008).

19. Thus, counsel contended, the plaintiff’s suggestion in its written submission dated 7 August 2008 that it had been “substantially successful” on the application as a whole was “absurd”; to the contrary, Mr Fung said, it was the defendant which had been the “substantially successful” party, and accordingly the order of costs of the variation argument should reflect that fact.

20. Nor was it accepted that the two discrete issues upon which the plaintiff had succeeded in the argument to vary the order nisi had occupied the majority of the time at the variation hearing on 9 July 2008; indeed, he said, this characterisation was both wrong and misconceived, and at most the submissions regarding these issues had taken approximately half of the hearing time.

21. In any event, submitted Mr Fung, the only logical basis for determining costs in an argument of this nature was to make a comparison between the relative size of that portion of costs which the applicant plaintiff either had deprived, or recovered from, the defendant against that portion of costs which it had set out to deprive or to recover from the defendant, and that when this exercise is performed it is “plain” that it was the defendant which had emerged the more successfully at the end of the day.

22. In these circumstances, therefore, counsel submitted that the defendant should have the costs of the application to vary the order nisi, but that if the court were not to be attracted by such an “all or nothing” approach, then a not inappropriate alternative would be to award the defendant 60% of its costs, and that such order fairly would reflect that which had occurred.  Certainly, Mr Fung concluded, it would be wrong in principle for the defendant, qua “substantially successful party”, to be ordered to pay any part of the plaintiff’s costs of the variation application.

Decision

23. The oft-stated refrain of the Commercial Court is that in many instances, of which this certainly is one, the decision as to costs often provokes greater reflection than the decision upon the substantive issue underlying the costs’ argument; a fortiori when the immediate issue is who is to pay the costs of the argument about costs.

24. As an analytical tool, I am not attracted by Mr Fung’s suggestion that the key to solving this debate simply is to do the maths, and to compare and contrast the quantum of variation of costs the plaintiff which was after when issuing the summons to vary the order nisi with the quantum of variation as in fact was achieved. This strikes me as tempting but ultimately unsatisfactory.

25. The threshold question to ask, it seems to me, is whether any offer was made by the defendant to the applicant plaintiff in terms of any variation of the initial costs’ order nisi.  The answer to this presumably is ‘No’, otherwise I assume that I should have been the first to have been told.

26. Thus, against this background, wherein the defendant strove to hold, in its entirety, the order nisi as to costs in its original terms, the first and most obvious point is that, in part at least, the plaintiff’s variation summons ‘has had its effect’.

27. If this be right, as it clearly is, since there was a variation successfully achieved within two discrete areas, the concomitant question is whether the relative success of the summons is to have its reward in terms of the totality of the costs of and incidental to such application, or whether the partially successful applicant for such a variation is to have but a proportion of such costs, and if so, how much?  I pause to note that I do not think it right to invoke a yet third alternative, which would be to make positive cross-orders as to costs in favour of each party, which would result in an unsatisfactory ‘set-off’ exercise; it seems to me that in this connection the court has to be more robust.

28. I also consider, as the target of oral submission at the hearing of the costs’ variation application, that Mr Kosmin indeed did place the ‘Thai law issue’ very much at the forefront of his submission, whilst as for Mr Pakorn’s involvement at trial, the substantive judgment provided him with ample ammunition to twin that aspect with that of the waste of costs involved in terms of the introduction of expert evidence as to Thai law.

29. True it is that, with his usual skill, Mr Kosmin trailed his coat upon the other issues, wherein he hopefully suggested a dimunition of 40% of the defendant’s costs to represent the issues upon which the defendant failed at trial, but I do not consider that in substance this was a great deal more than forensic makeweight, thrown in the hope that he could persuade the tribunal to ‘bite’; as I recall, he could not, for example, bring himself to say that these were issues which (unlike the foreign law defence) simply never should have seen the light of day, however poorly they fared within the resultant judgment.

30. At the end of the day I confess that I find it difficult to light upon an approach that I can be sure provides the fairest solution to all; perhaps the opposite is the more apposite, and that the tribunal should attempt to produce a result which, at the least, is not obviously unfair.  As is known to all practitioners, the issue of costs is far from an exact science, and often depends as much upon stomach as cerebrum.

31. In my judgment, the justice of the situation is best expressed in an order which gives to the plaintiff, which undoubtedly was successful in varying the original order nisi, a proportion of the costs of this application.

32. After some reflection, in my view an appropriate outcome is that the plaintiff is to have 65% of the costs of and occasioned by the plaintiff’s variation summons dated 13 June 2008, including the costs of the hearing on 9 July 2008.

33. I so order.