AKTIESELSKABET DANSK SKIBSFINANSIERING (body corporate) v. WHEELOCK MARDEN & CO. LTD. AND OTHERS

CACV 107, 109 & 113/1997
CACV 29/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NOS. 107, 109 and 113 OF 1997
CIVIL APPEAL NO. 29 OF 1999

(ON APPEAL FROM HCMP 2625/1998 AND HCA 1670/1989,
CONSOLIDATED)

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J U D G M E N T

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Hon Godfrey VP :

Introduction

1. This is the judgment of the court on appeals relating to an order as to costs made by Barnett J on 13 March 1998 after the conclusion of a consolidated action in which the judge had given judgment on 25 March 1997. In that judgment, the judge had convicted the 1st and 5th defendants of fraudulent misrepresentation and had acquitted those, and other, defendants, of a charge of fraudulent trading in relation to the affairs of a partly owned subsidiary of the 1st defendant. However, on 12 June 1998, this court allowed appeals by the 1st and 5th defendants against their conviction on the fraudulent misrepresentation charge, with the result that the plaintiff's action was wholly unsuccessful; and, on 9 March 2000, the Court of Final Appeal affirmed this court's decision. The parties are agreed that the costs order made on 13 March 1998 by Barnett J (an order of some complexity) must, in these circumstances, be re-considered. But they differ as to the terms of the order which we should substitute for the judge's costs order.

The approach of this court to Barnett J's costs order

2. This is the first matter on which the parties differ. The plaintiff contends that we should disturb Barnett J's order only to the extent necessary to reflect the fact that the plaintiff lost in the end on the "fraudulent misrepresentation" issue as well as on the "fraudulent trading" issue. The judge, says the plaintiff, was better placed than we are to exercise the court's discretion as to the costs of the action. On the other hand, the defendants contend that we should approach the whole question of costs de novo. The facts are, say the defendants, that the judge's order was based on his findings that the plaintiff had in part succeeded, and that the basis of the judge's order has gone now that the defendants have been totally exonerated. We prefer the defendants' approach; and propose to adopt it.

The general costs of the action

3. Approaching the matter in this way, we consider that, following the rule that costs follow the event, the plaintiff must pay the defendants' general costs of the action. We do not overlook the views of the judge, expressed when giving judgment on costs, to the effect that the plaintiff had been "shabbily treated" by the defendants, nor his characterisation of their conduct towards the plaintiff as "cavalier". On the other hand, we cannot overlook the view expressed by the Court of Final Appeal that, on the judge's own findings of fact, the plaintiff did not "come within a mile of proving dishonesty" and that "the case on fraudulent trading was always hopeless" (though it should, nevertheless, be said that in this court Le Pichon J was of the opinion that the plaintiff's case on fraudulent trading, far from being "hopeless", was in fact made out). Further, although both sides, in our view, were guilty of conduct which considerably and unnecessarily prolonged the litigation, it must be remembered that a defendant (especially perhaps if charged with fraud) "is entitled to put his back against the wall and to fight from every available point of advantage" even if he loses on some points : see Blank v. Footman, Pretty, & Co. (1888) 39 Ch. D. 678, per Kekewich J at p. 685. In all the circumstances, we are simply not prepared to depart from the general rule and make the defendants bear the whole or any part of their general costs of the action, let alone make them pay the whole or part of the plaintiff's costs, as the plaintiff invited us to do; but, by the same token, we are simply not prepared to order that the defendants' costs be taxed on the indemnity basis, as the defendants invited us to do. Nor are we prepared (as Barnett J apparently was) to make any special order as to particular defendants, or as to particular issues, other than as mentioned below.

The conceded matters

4. The defendants concede that their own costs, and the plaintiff's costs, were increased by failures on the part of the defendants to admit, at an early stage, allegations made by the plaintiff to the effect that the 1st defendant was to be treated as a shadow, or de facto, director of its partly owned subsidiary to which we have referred. The order we will make will reflect this concession, mentioning the dates when the admissions were eventually made.

The illegality issue

5. The defendants raised this issue at a late stage, involving the court in what the judge described as "an independent and by any measure substantial trial". They failed on the issue, and the judge thought their conduct of their case in this connection fell to be condemned by an order, not only that they should pay the plaintiff's costs of this issue, but that those costs should be taxed on the indemnity basis. We refused to allow the defendants to re-open the issue before this court in order to show that the judge was wrong on the substantive issue and that he ought to have decided the issue in favour of the defendants. This issue had become academic, save as to costs only, and we considered that it would be a wholly disproportionate use of resources to allow it to be re-argued in this court, especially since a failure on the part of the defendants to comply, in relation to this issue, with certain directions given by this court for the conduct of these appeals might have placed the plaintiff at some disadvantage in any such argument. We are of the opinion that the costs of this issue should be dealt with in exactly the same way as the costs of the conceded matters to which we have referred. We are not satisfied that the judge's order as to the basis of taxation of those costs was justified, and approaching the matter de novo, as we do, we are not, in the exercise of our own discretion, prepared to order any taxation of the costs of this issue on the indemnity basis.

The order of this court

6. We set out in the Appendix to this judgment the form of the order which we will make (see especially the Second Schedule thereto). We do not think we can do justice to either side by attempting to apportion the costs ourselves in the absence of agreement between the parties. We believe the taxing master will be better able to do so than we are.

The costs of these appeals

7. The plaintiff and the defendants each having had some successes, and some failures, in the argument before us as to costs, we do not think fit to make any order as to the costs of these appeals.

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A P P E N D I X

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UPON READING the Notices of Appeal dated 3 April 1998 and filed on behalf of the 1st Defendant and of the 5th Defendant; the Respondent's Notice also dated 3 April 1998 and filed on behalf of the 2nd, 3rd and 5th Defendants; and the Notice of Appeal dated 25 January 1999 and filed on behalf of the 2nd, 3rd, 4th, 6th and 10th Defendants, all by way of appeal (with leave where the same was required) from the order of the Honourable Mr Justice Barnett dated 13 March 1998 as to the costs of the above-mentioned consolidated action (the terms of which order are reproduced in the First Schedule to this Order)

AND UPON READING the pleadings in the said consolidated action and the said costs order

AND UPON HEARING counsel for the Plaintiff and for the said Defendants on 11, 12 and 13 July 2000

AND after mature deliberation

IT IS ORDERED that the said appeals be allowed to the extent hereinafter indicated and that the said costs order be set aside and that in lieu thereof there be substituted the orders as to costs set out in the Second Schedule to this order

AND THIS COURT DOES NOT THINK FIT to make any order as to the costs of the said appeals.

THE FIRST SCHEDULE

Barnett J's order of 13 March 1998

"IT IS ORDERED :

1. The 1st, 2nd, 3rd, 4th, 5th, 6th and 10th Defendants do pay the Plaintiff's costs of and occasioned by the Illegality issue on the indemnity basis, such costs to be taxed, if not agreed;

2. The costs of the action other than the costs of the Illegality issue are to be paid as follows, such costs to be taxed, if not agreed:

(1) The 1st and 5th Defendants do pay the Plaintiff's costs on the common fund basis;

(2) The Plaintiff do pay the 2nd, 3rd and 6th Defendants 50% of their costs;

(3) The plaintiff do pay the 4th Defendant 65% of his costs;

(4) The Plaintiff do pay the 10th Defendant 70% of his costs;

(5) The 2nd, 3rd and 6th Defendants do pay the Plaintiff 35% of its costs; and

(6) The 4th Defendant do pay the Plaintiff 20% of its costs.

3. The Taxing Master is to set off the costs of the Plaintiff and the costs of the 2nd, 3rd 4th, 6th and 10th Defendants and is to certify to which of them the balance after such set off is due.

4. In respect of any balance due from the Plaintiff to any of the 2nd, 3rd, 4th, 6th and 10th Defendants after such set off, the Plaintiff is at liberty to set off against such amounts as it may be due to pay to any of the 2nd, 3rd, 4th, 6th and 10th Defendants pursuant to this Judgment the amount which the 1st and/or 5th Defendant are to pay to the Plaintiff pursuant hereto.

5. Interest on all such costs is to run at the Judgment rate as from 25th March 1997.

6. The consolidated action is suitable for three counsels.

7. There be liberty to apply."

THE SECOND SCHEDULE

Substituted Costs Order

IT IS ORDERED THAT it be referred to the Taxing Master to tax (if not agreed) :-

(a) the costs of the Defendants of the said consolidated action except so much of the said costs as relate to the following matters, that is to say :

(1) the preparation and service of all notices served by the Plaintiff upon the Defendants pursuant to the provisions of Part IV of the Evidence Ordinance, Cap. 8;

(2) the failure by the Defendants to admit before 19 February 1993 and 18 November 1994 respectively the allegations made in paragraphs 1.3 and 1.4 of the re-re-amended consolidated statement of claim; and

(3) the allegations made in paragraphs 175 and 176 of the 1st Defendant's re-amended Defence;

(b) the costs of the Plaintiff of so much of its costs of the said consolidated action as relate to the above-mentioned matters numbered (1), (2) and (3)

AND the Taxing Master is to set off the said costs of the Plaintiff and of the Defendants when so taxed or agreed and certify the balance which upon such set off is due from the Plaintiff to the Defendants or from the Defendants to the Plaintiff as the case may be

AND IT IS ORDERED that the balance certified as aforesaid be paid by the party from whom the same shall be certified to be due.