KEEN LLOYD ENERGY LTD v. BANK OF CHINA (HONG KONG) LTD

HCA1299/2004

& HCA1092/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS. 1299 OF 2004 AND 1092 OF 2006

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(HEARD TOGETHER)

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D E C I S I O N   O N   C O S T S

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A.  Introduction

1. This Decision should be read together with the Decision that I handed down on 11 January 2008. 

2. In the earlier Decision, I allowed the Bank’s striking out application on Ground 1 (issues estoppel) and on Ground 3 (Energy’s abuse of process by re-litigating causes of action caught by the issues estoppel).  I also made an order nisi that the Bank shall have the costs including all costs reserved, to be taxed if not agreed. 

3. Both the Bank and Energy now apply to vary the costs order nisi.  The Bank asks that there should be a certificate for two counsel.  Energy contends that it should have :

(a)  the costs of and occasioned by the adjournment of the hearing scheduled for 14 and 15 February 2007 (“the Costs of the Adjournment”) with a certificate for two counsel; and

(b) two-third of the costs of and occasioned by the Bank’s striking out application with a certificate for two counsel. 

B.  The Bank’s application

4. The Bank’s application is not opposed. 

5. In my view, it is plainly an appropriate case to grant a certificate for two counsel.  The issues involved, both legal and factual, are complicated.  The allegations raised by Energy against the Bank are all very serious.  The claims are substantial indeed.  And both sides had instructed leading counsel. 

6. I will therefore allow the Bank’s application. 

C.  Energy’s application

C.1.   The Costs of the Adjournment

7. I first look at the Costs of the Adjournment.  Those costs, having been reserved, are now awarded to the Bank pursuant the costs order nisi. 

8. The hearing of the striking out application was fixed to be heard on 14 February 2007 with two days reserved.  Mr Yuen, SC, for Energy, applied for an adjournment on the grounds that the arguments raised by Mr Chow, SC, for the Bank, went considerably beyond the broad grounds stated in the letter of the Bank’s solicitors dated 11 August 2006; that there were new factual accusations raised against Energy and Mr Chin; and that Energy was deprived of an opportunity to file evidence in answer thereto.  The application was opposed.  After hearing arguments, I allowed it and gave directions for filing of evidence.  Costs were reserved because I wanted to know what new evidence Energy would file before making a final determination. 

9. Having looked at the further evidence filed by Energy again, I agree with Mr Chow that they contained substantially the same allegations Mr Chin had raised before.  The main purpose of the further evidence was effectively to beef up Energy’s case.  In the circumstances, I do not think it now lies in Energy’s mouth to argue that the adjournment was occasioned by the need to file further evidence to meet the so-called new factual allegations. 

10. Mr Yuen took a further point, which is this.  He said the adjournment was necessary for Energy to consider the matter further.  It was undoubtedly another reason for the adjournment.  But if it was Energy who wanted and was granted the indulgence, it should of course bear the costs. 

11. For the above reasons, Energy’s application for the Costs of the Adjournment fails. 

C.2.   The costs of the striking out application

12. I come now to the costs of the striking out application. 

13. The applicable principles are well settled.  They may be summarized as follows :

(1) costs are in the discretion of the court;

(2) they should follow the event, except where it appears to the court that in the circumstances of the case some other order should be made;

(3) the general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or costs of the proceedings he may be deprived of the whole or part of his costs; and

(4) where the successful party raises issues or makes allegations “improperly or unnecessarily”, the court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful party’s costs.

See In re Elgindata Ltd (No. 2) [1992] 1 WLR 1207 per Nourse LJ at 1214A-C applied by the Court of Appeal in Wang Din Shin v. Nina Kung, CACV67/2003, unreported, 19 April 2005, per Yuen JA at paragraph 39. 

14. The “costs to follow the event” principle is the starting point.  And the burden rests with the losing party to show that there is good reason to depart from it : Hong Kong Kam Lan Koon Ltd v. Realray Investment Ltd (No. 4) [2005] 4 HKC 162, per Lam J at paragraph 14 at p. 166I. 

15. Mr Yuen first relied on principle (4) and submitted that on its application, the courts now apply a more flexible approach and do not require the losing party to show that the successful party had raised the issues or allegations improperly or unnecessarily.  He derived support from two recent English authorities (see below) and Thomas Vincent v. South China Morning Post Publishers Ltd (No. 2) [2004] 3 HKLRD 471. 

16. In Phonographic Performance Limited v. AIE Rediffusion Music Ltd [1999] 1 WLR 1507, Lord Woolf said at 1522H :

“From 29 April 1999 the ‘follow the event’ principle will still play a significant role, but it will be a starting point form which a court can readily depart.  This is also the position prior to the new rules coming into force.  The most significant change of emphasis of the new rules are reflecting a change of practice which has already started.  It is now clear that a too robust application of the ‘follow the event’ principle encourages litigants to increase the costs of litigation, since it discourages litigants from being selective as to the points they take.  If you recover all your costs as long as you win, you are encouraged to leave no stone unturned in your effort to do so.”

And at 1523H :

“The ‘well-established practice’ on which Nourse LJ based his third principle is, as I have already indicated, less generally followed than it has been in the past and it is no longer necessary for a party to have acted unreasonably or improperly to be deprived of his costs of a particular issue on which he has failed.”

Lord Woolf then went on to say that where the successful party raised issues on which fails, he may not only be deprived of his costs but may also be ordered to pay the other party’s costs, even though those issues may not have been raised improperly or unreasonably. 

17. Lord Woolf’s approach was followed by Longmore LJ in Summit Property Ltd v. Pitmans (a firm), [2001] EWCA Civ. 2020, at paragraph 16. 

18. In the SCMP case, Yuen JA also cited Lord Woolf’s judgment and said :

“16.   In circumstances where there were discrete claims for different sums and the time spent on the failed claims could be differentiated from that spent on successful claims, I think the traditional practice of simply ordering costs to ‘follow the event’, however much time may have been wasted on the failed claims, should give way to a fairer, more precise approach that would reflect the realities of litigation.”

19. For my part, I think what Lord Woolf had advocated in extending the application of principle (4) is a merited approach.  But I do not think it is as yet permissible under the Rules of the High Court.  For under Order 62, rule 7(1), it is only where a successful party raises issues or makes allegations improperly or unnecessarily that he may be ordered to pay a part of the other party’s costs. 

20. In fact, Yuen JA recognized this statutory restriction in the Nina Wang case, where she said in paragraph 40 thus :

“The judge had expressly stated his reliance on these principles.  These principles were discussed by Lord Woolf M.R. in AEI Rediffusion Music Ltd v Phonographic Performance Ltd [1999] 1 WLR 1507, a judgment delivered before the Civil Procedure Rules took effect.  Lord Woolf stated that the position (even prior to the new Rules coming into effect) was that the courts have become more ready to depart from the ‘follow the event principle’ as too robust an application of that principle encourages litigants to increase the costs of litigation, since it discourages litigants from being selective as to the points they take.  However, I fear I may have overstated the extent of Lord Woolf’s preparedness to depart from the Elgindata principles when in Thomas Vincent v South China Morning Post Publishers Ltd (No. 2) [2004] 3 HKLRD 471, I suggested that where the successful party raises issues on which he fails, he may not only be deprived of his costs but may also be ordered to pay the other party’s costs, even though those issues may not have been raised improperly or unreasonably (§15).  Under Order 62 rule 7(1) RHC, it is only where a successful party raises issues or makes allegations improperly or unnecessarily that he may be ordered to pay a part of the other party’s costs.”

21. For the above reasons, I am unable to accept Mr Yuen’s submission that for principle (4), the losing party needs not show that the successful party has raised issues or made allegations improperly or unnecessarily. 

22. Applying principle (4), I am of the view that the Bank had not been acting unreasonably or unnecessarily in raising Grounds 2 and 3 in the striking out application.  The Bank cannot be ordered to pay Energy the costs associated with them. 

23. Mr Yuen next relied on principle (3) and argued that the Bank should be deprived of the costs in connection with Ground 2 and Ground 3. 

24. In my view, in raising Ground 2 and the matters that I mentioned in paragraph 52 of the earlier Decision in support of Ground 3, the Bank had indeed significantly increased the preparation and the length of the hearing.  It is fair to deprive the Bank of the related costs.  Taking the matter in the round, I think 50% is appropriate. 

D.  Conclusion

25. For the above reasons, I will vary the costs order nisi to the effect that the Bank shall have :

(a)  the Costs of the Adjournment; and

(b) 50% of the costs of the striking out application, including all costs reserved

with a certificate for two counsel. 

26. On the costs of the present applications, my view is as follows.  The Bank should have the costs of its application and the costs of Energy’s failed application for the Costs of the Adjournment.  On Energy’s failed application for the costs of the striking out application, I agree with Mr Chow that the Bank, having won that application substantially, is entitled to costs. 

27. Accordingly, I will order that the Bank shall have the costs of its and Energy’s applications for variation of the costs order nisi, to be taxed if not agreed, with a certificate for two counsel.