XCHRX BOUYGUES S.A. and Another v. SHANGHAI LINKS EXECUTIVE COMMUNITY LTD.

1998 No. A3259

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

____________

____________

_______________

J U D G M E N T

_______________

1. I propose to vary the order nisi which I made as to costs in the judgment which I handed down on 4th June. The Defendant succeeded in the action on the basis of a short issue of construction. However, the Plaintiffs succeeded on all the other contested issues which were necessary for me to decide and to which most of the evidence related, namely whether Mr. Ng's letter was intended to create contractual obligations and was therefore more than a mere letter of comfort, and whether the sums in the segregated account were intended to provide the Plaintiffs with security for the payment of "the Contract Price".

2. Although I think that the costs should follow the event, so much time was taken up on the various issues on which the Plaintiffs succeeded that the events should be regarded, in the exceptional circumstances of this case, as not merely the dismissal of the action, but also the issues on which the parties respectively won and lost. That is another way of applying principle (iii) in Re Elgindata Ltd. (No.2) [1992] 1 WLR 1207 at p.1214A-D. It would not be possible for the taxing master to decide what proportion of the time was devoted to which issue, and in any event the fact that the Defendant succeeded in the action should receive some weighting. Broad justice would be done, I think, by ordering the Plaintiffs to pay one-third of the Defendant's costs of the action to be taxed if not agreed. That would leave the Plaintiffs having to pay the whole of their costs of the action, because I do not think that the Defendant raised the issues on which it lost improperly or unreasonably so as to justify the invocation of principle (iv) in Elgindata.

3. So far as the proceedings for interlocutory relief are concerned, the Plaintiffs succeeded in obtaining interim relief on 3rd April. On that date, I would have ordered that the Plaintiffs' costs of the application be in the cause, but for the argument on quantum which had to be adjourned but which was in fact never resolved. It is true that I did not have to decide where the balance of convenience lay because of the order I made for a speedy trial of the action, but the fact remains that I decided the issue of arguability in favour of the Plaintiffs, and I granted the Plaintiffs interim relief.

4. Since the Plaintiffs have now lost the action, I believe that I should reflect the order which would have been made on 3rd April but for the issue of quantum by ordering that there be no order as to the costs of and occasioned by the application for interlocutory relief. That applies also to the costs of the hearing before Stock J. on 20th March. I appreciate that the Plaintiffs are saying that the hearing on that day had to be adjourned because of the late production of the Defendant's evidence. But there were, I think, factors relating to the timetable for the filing of the evidence which were not of the Defendant's making which contributed to the late production of the evidence.

5. Finally, these proceedings could have been brought to an end within a short time of their commencement if the Defendant had been able to provide the Plaintiffs with an enforceable indemnity, indemnifying the Plaintiffs against any failure on the part of SPNA to pay to the Plaintiffs such sums as might be awarded to the Plaintiffs in the arbitration. That was accepted by the Plaintiffs' solicitors in a letter sent to the Defendant's solicitors at about the time the writ was issued. I raised that with Mr. Ronny Tong S.C., who was then representing the Defendant, at the commencement of the hearing of the application for interlocutory relief on 2nd April, and he told me that such an indemnity was not forthcoming. However, when I handed down judgment in the action on 4th June, Mr. Barrie Barlow for the Plaintiffs asked me to stay for the time being the discharge of the injunction I had granted on 3rd April, so as not to frustrate any appeal by the Plaintiffs to the Court of Appeal. Mr. Tong on that occasion told me that there was no need for a stay because funds might be available to fund the provision of such an indemnity by reputable insurers overseas. Since that indemnity was not in place then, but was expected to be in place in a few days, I granted a stay of the discharge of the injunction, but I gave the Defendant liberty to apply for the discharge of the stay.

6. The relevance of all this is that if an enforceable indemnity would have been available within a few days of 4th June, could it not have been available at the time the writ was issued? If it could have been available then, it would not have been necessary for these proceedings to be continued. That is a significant factor to be taken into account in deciding who should pay the costs of these proceedings.

7. This point was not taken by Mr. Barlow today, and it was raised by me with Mr. Peter Clayton who appears for the Defendant. Mr. Barlow has now adopted the argument on behalf of the Plaintiffs. In those circumstances, Mr. Clayton told me that he wished to file evidence on the point if I continued to think that there was merit in it. I do think that there is potentially some merit in the point, though it depends upon what the true facts are. However, now that I have varied the order nisi in the way that I have in the light of the arguments which Mr. Barlow originally intended to deploy, it may be that the Plaintiffs will be content with that. If they are, their solicitors should notify my clerk of that within 7 days, in which case the variations which I have ordered today will take effect according to their terms. If, however, the Plaintiffs are not content with the variations I have made today, and seek a further variation of the order nisi in the light of the argument which I put to Mr. Clayton, the Plaintiffs' solicitors should notify my clerk of that within 7 days. In that case, there will have to be a further hearing after the evidence which Mr. Clayton wishes to rely upon has been filed.

(Brian Keith)

Judge of the Court of First Instance