GRANT DAVID VINCENT WILLIAMS v. JEFFERIES HONG KONG LTD

HCA 320/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 320 OF 2011

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R E A S O N S   F O R   D E C I S I O N   O N   C O S T S

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1. The plaintiff seeks an order for indemnity costs in this action, the judgment in which I delivered in two parts on 20 June and 8 July 2013.

2. As the authorities clearly indicate, such an order is to compensate the successful and not to punish the losing party. Factors to be taken into consideration include the nature of the proceedings and the attributes of the parties as well as the conduct of the litigation.

3. In this action an essential part of the factual matrix to be considered is the fact that an individual, who has been virtually unemployed for over 2½ years as a result of the action of his former employer who dismissed him summarily for alleged gross misconduct, had to bring an action in Hong Kong against the company which is a subsidiary of a large group in the financial world based in New York.  He sought vindication in order to restore his reputation and be treated on his merits in the employment market place.  He has achieved that without even the slightest degree of diminution in his standing.  In the context of what must have been for him a stressful, drawn-out piece of litigation, he came across, in my view, as an essentially reasonable and honest man of no little ability.

4. In Society for the Protection of the Harbour Ltd v Town Planning Board [2003] 4 HKC Chu J (as she then was) held that:

“Plainly, the circumstances in which an indemnity costs award may properly be made are not limited to cases amounting to an abuse of process, or brought or defended with an ulterior motive or for an improper purpose.”

The very fact that the purpose of such an order is to indemnify the successful party, makes it clear that no windfall is involved but simply an indemnity “as to the costs actually incurred.”

5. Lord Woolf MR in Petrograde Inc v Texaco Ltd [2002] 1 WLR 947 considered the appropriateness of indemnity costs order as a matter of exercising fairness to parties in litigation, albeit in the context of Part 36 offer under the English Civil Procedure Rules:

“63. The ability of the court to award costs on an indemnity basis and interest at an enhanced rate should not be regarded as penal because orders for costs, even when made on an indemnity basis, never actually compensate a claimant for having to come to court to bring proceedings. The very process of being involved in court proceedings inevitably has an impact on a claimant, whether he is a private individual or a multinational corporation. A claimant would be better off had he not become involved in court proceedings. … In the case of an individual proceedings necessarily involve inconvenience and frequently involve anxiety and distress. These are not taken into account when assessing costs on the normal basis. …

64. The power to order indemnity costs … is a means of achieving a fairer result for a claimant.  …”

6. I have cited those two paragraphs, with omissions that relate to Part 36 offers, because they encompass the approach that I should adopt as well as being the general rationale behind such order.  They also reflect the human factors which I have earlier set out as being an aspect which must properly be considered.

7. Earlier Lord Woolf emphasized that an order for indemnity costs does not produce “penal consequences”:

[from §62] “An order for indemnity costs does not enable a claimant to receive more costs than he has incurred. Its practical effect is to avoid his costs being assessed at a lesser figure. When assessing costs, on the standard basis [read as: ‘party and party’] the court will only allow costs ‘which are proportionate to the matters in issue’ and ‘resolve any doubt which it may have as to whether costs were reasonably incurred or reasonable and proportionate in amount in favour of the paying party’. On the other hand, where the costs are assessed on an indemnity basis, the issue of proportionality does not have to be considered. The court only considers whether the costs were unreasonably incurred or for an unreasonable amount. The court will then resolve any doubt in favour of the receiving party. Even on an indemnity basis, however, the receiving party is restricted to recovering only the amount of costs which have been incurred.”

8. There are many well-known cases whose facts and conduct have given rise to orders for indemnity costs.

9. In the Bank of Baroda v Panessar [1987] Ch 335 — an authority cited by the Deputy High Court Judge in Cooper v P & O Stena Line Ltd [1999] The Times 8 February 1999 — was established an approach that if a person conducted himself on a wholly false basis, the true state of affairs being within that person’s knowledge, or at least capable of ascertainment if properly investigated, and the proceedings were thereby significantly prolonged and the costs commensurately increased the court was entitled to order that the person so adversely affected by that conduct should receive its costs on an indemnity basis.  Walton J held that “the defences of the defendants … were persisted in to an extent which was totally and utterly unreasonable”.

10. The learned Deputy Judge in the P & O Stena case held that if the case had been properly investigated by P & O “it seemed very unlikely that liability would have been defended at all.”

11. There is in the judgment of Langley J in Amoco (UK) Exploration Co v British American Offshore Ltd (No 2) [2001] ALL ER(D) 327 a statement particularly apposite to the circumstances of the case tried before me:

“There is in my judgment a sound basis for concluding that [the Plaintiff] conducted itself throughout the relevant events on the basis that its commercial interests took precedence over the rights and wrongs of the situation and that it was prepared to risk the outcome of litigation should the Defendant resist the pressures upon it and take on the challenge … If a party embarks on or brings upon itself and pursues litigation of the magnitude of this litigation in such circumstances and suffers a resounding defeat, involving the rejection of much of the evidence adduced in support of its case, in my judgment that provides a proper basis on which it is appropriate to award costs on an indemnity basis.”

12. I have had regard to other cases and authorities before me which reflect the principles and approach set out in the ones I have reviewed.  Each has a different set of facts or circumstances to justify the order made for indemnity costs.

13. My judgments on liability and quantum have already highlighted the shortcomings of the defendant in what I acknowledge are critical and unflattering terms.  Therefore I will not repeat them in extenso. Instead I will highlight the features which in my view establish the justification for an order for the defendant to pay the plaintiff’s costs on an indemnity basis. 

14. None of the directors or executives at the “damage control” centre in New York came to give evidence at the trial.  Mr Michael Alexander was clearly not the real decision maker but was linked with Mr Jason Griffith in that he agreed with the decision to dismiss the plaintiff summarily for gross misconduct.

15. He, and I am sure the principal decision-makers, proceeded on the basis that the plaintiff was the author of the subtitles to the video.  Perhaps the others simply adopted Mr Alexander’s misconception, and felt that to do so would make their decision appear more reasonable.

16. Every effort was made to heap blame upon the plaintiff for the publication when it was obvious that it had been distributed as a result of an error, which was not the plaintiff’s.

17. Allied to this was a “back-sliding exercise” in which they made concerted efforts through a pleading, which they verified, and witnesses who were remote from the decision making, to dilute or misrepresent a vetting or checking process which they had so clearly established after much consideration.

18. I am satisfied that they have withheld e-mail communications and/or other records dealing with the heart of the matter.  One e-mail made a very belated appearance in the proceedings and it tellingly illustrated the complete catalogue of errors or distortions committed by them.

19. Mr Alexander was eventually constrained to admit that had the newsletter not been distributed the plaintiff would not have been dismissed.  He compounded the gross errors, and in my view they were undoubtedly such, by broadcasting the decision, and the explanation put forward for it, to clients of the defendant company.  It appears that he must have included in that briefing his own misconception concerning the authorship of the subtitles.

20. Amongst the many distorting aspects of the defendant in relation to their conduct vis-à-vis the plaintiff was the excessive, perhaps obsessive preoccupation with a fear of offending an American banking icon, or rather its Chief Executive Officer.  I have used several epithets to describe those aspects of the defendant’s behaviour and will not repeat them. 

21. The evidence given on behalf of the defendant disclosed that its main concern was with a perception that the J P Morgan CEO had been vilified or insulted by what it had done in respect of the publication of the newsletter.  Perhaps it was a belated realisation that such a thought was itself irrational which led to some perverse thinking which sought to taint or smear the plaintiff with tags of racism and anti-semitism.  I have dwelt enough on that earlier.  My reference earlier to part of Langley J’s judgement in the Amoco case illustrates the defendant’s failing in this regards.

22. The defendant’s case at trial disclosed some extremely unpleasant features.  It was not a pretty picture, although Mr Maurellet did his very best to dissipate the effects and put a different complexion on the actions.

23. However even Mr Maurellet could not sanitise the picture which emerged from the pre-action correspondence which was disclosed to me for the purposes of this hearing on costs. 

24. There had been, as one would have expected, efforts to settle this action but the defendant’s approaches or reactions seemed to me to be utterly unrealistic, even to the point of suggesting direct contact between the plaintiff and an unidentified (at first) member of the Jefferies Group. The later identified employee of the defendant, being part of the caucus which had dismissed him but not one responsible for the decision, was unsurprisingly unacceptable as a realistic “negotiator” — if that was the intention of the defendant.  Wasteful and unconstructive as the defendant was in these manoeuvrings in response to the plaintiff’s extremely reasonable proposals, they added yet another unattractive dimension to the scene.

25. They pressed for security for costs from the plaintiff and in support of a proposed application for such, submitted a Skeleton Bill of Costs.  I have perused this with some care.  I am not unaware of the level and extent of professional work required for such a case.  Suffice it to say that the alleged hours for aspects of work are grossly over and above what is reasonably necessary with a significant duplication of manpower.  The total of the bill is HKD1,815,360 — nearly twice the annual salary to be paid to the plaintiff.  I do not believe that inflation, even in Hong Kong, could justify such a claim.  I have concluded that this exercise was being used to try and overawe the plaintiff.  This is another, though perhaps less significant feature, of the defendant’s conduct of this litigation which makes an order for indemnity costs in the plaintiff’s favour, the appropriate one.  I have so ordered.

26. As far as the costs of some belated re-re-amended pleadings are concerned, they are included in the order for the Plaintiff’s costs.  The Plaintiff’s counsel put his case necessarily on the revised basis.  The Defendant’s response was cosmetic and barely necessary save for completeness.