RE PCCW LTD

HCMP 2382/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2382 OF 2008

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JUDGMENT  ON  COSTS

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1.  This is my judgment on costs.  Mr Todd seeks an order against the Securities and Futures Commission (“the SFC”) in respect of the additional costs incurred in these proceedings due to its intervention.  The SFC has submitted that no order should be made as to costs, as the intervention was to discharge its statutory duties, and the circumstances surrounding the Scheme were such as to call for its investigation and intervention.

2.  I decline to make an order for costs against the SFC.

3.  The Joint Offerors have no application for costs.

4.  The shareholders represented by Mr Fung seeks an order that their costs be borne by PCCW Limited (“the Company”).  This is resisted by Mr Todd who has submitted that no order should be made as to the costs of these shareholders.

5.  I have considered the authorities cited by Mr Fung.  I think the most helpful decision is the case of the Re Peninsular and Oriental Steam Navigation Company [2006] EWHC 3279(Ch), a case not mentioned by counsel. 

6.  In that case, Warren J conducted a comprehensive review of the approach of the court in dealing with costs concerning a scheme of arrangement.  He referred to one of the earliest reported cases in Re Thomas de la Rue [1911] 2 Ch 361 and a number of unreported decisions in paragraphs [4] to [37] of his judgment.  After completing that comprehensive review, he stated in paragraph [38] that what the cases established is “that the courts do not, as a rule, make costs order against objecting shareholders or creditors (in, respectively, shareholders and creditors schemes) when their objections are not frivolous and have been of assistance to the court.  Sometimes, no order for costs is made, sometimes an order is made in favour of the objector.  There is no established principle that this treatment, which differs from the ordinary rule in litigation that costs usually follow the event, applies to other objectors.”

7.  In paragraph [47], he also had this to say:

“For my part, I decline to elevate to some great principle of public policy the idea that, save in exceptional cases, objectors must, in order to ensure proper scrutiny of a scheme, always be immune from the normal costs rules provided only that their objections are genuine and not frivolous.  It seems to me that, as in any other litigation, the courts are perfectly capable of deciding, on a case by case basis, what the justice of the case demands in relation to costs.”

8.  I decide to exercise my discretion to order the costs of the shareholders be borne by the Company to be taxed on a party-and-party basis, if not agreed.

9.  I do this for three reasons:

(1)     these are shareholders whose shares are being compulsorily acquired.  They are not merely interested parties who objected out of commercial interests;

(2)     the principal objections raised are well-founded in the sense that they required careful consideration and raised points of importance; and

(3)     the court has been assisted by the submissions made by the objectors.