SHENZHEN FUTAIHONG PRECISION INDUSTRY CO LTD AND ANOTHER v. BYD CO LTD AND OTHERS

HCA 2114 / 2007

 IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2114 OF 2007

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DECISION ON COSTS

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I. Introduction

1.  On 27 June 2008, I handed down written judgment (“the earlier judgment”) dismissing the 1^st and 2^nd Defendants’ application for stay of these proceedings on the ground of forum non conveniens.  I further granted a costs order nisi that the 1^st and 2^nd Defendants (collectively “the Defendants”) should pay the Plaintiffs’ costs of the application with certificate for two counsel[1].

2.  By a letter dated 9 July 2008, the Defendants through their solicitors apply to vary the costs order nisi to the extent as follows:

(1) There should not be certificate for two counsel, or alternatively, if one is to be granted, it should be clarified that counsel fees recoverable should be those for one Senior Counsel and one junior Counsel.

(2) There should be a reasonable deduction in the costs recoverable by the Plaintiffs, since the Plaintiffs only confirmed the withdrawal of the 2006 PRC Action (as defined in the earlier judgment) in the beginning of March 2008.

3.  The parties have agreed to dispose of this application by way of written submissions.  The Defendants set out their submissions in their solicitors’ letters dated 9 and 31 July 2008, while the Plaintiffs’ submissions are in their solicitors’ letter dated 14 July 2008.

4.  This decision should be read together with the earlier judgment, and I also adopt in this decision the abbreviations used in the earlier judgment.

II.      The application

Applicable principles

5.  Costs are within the general discretion of the Court, to be exercised judicially:  Hong Kong Civil Procedure 2008, paras 62/2/5 – 62/2/8.

6.  Insofar as whether costs of two counsel should be allowed, such costs are generally recoverable if they are necessarily and properly incurred. Whether the costs incurred are proper or necessary depend on all the circumstances of the case:  Hong Kong Civil Procedure 2008, para 62/App/48.

7.  I consider that following non exhaustive factors are relevant to the exercise of the discretion as to whether costs of two counsel be allowed:

(1) The nature of the case.

(2) The complexity of the case, such as whether it involves difficult question of fact or difficult or novel points of law.

(3) The skill, specialized knowledge or expertise required for the case.

(4) Where money or property is involved, its amount or value.

(5) The importance of the matter to client.

(6) The general importance of the case, for example as affecting other cases;

(7) If a junior counsel has already been instructed, the experience, competency and seniority of that junior.

(8) Whether the other side has instructed a leader.

(9) Whether it is necessary to instruct a junior to assist in carrying out legal research on difficult or novel questions of law.

See:  Hong Kong Civil Procedure 2008, para 62/App/48, citing the decision of Master Poon (as he then was) in Xin Juan Trading Co Ltd v NPH Petrochemical Ltd (unrep., HCA 18159/1998 and CACV 276/1998, 25^th September 2000)

The Defendants’ submissions

8.  The Defendants’ submissions in support of the application to vary the costs order nisi can be summarized as follows:

(1) The stay application did not justify the engagement of two counsel or alternatively two senior counsel for the following reasons:

(a) The governing principles on forum non conveniens are well established and settled, and thus the Defendants’ stay application involved no difficult or novel question of law.

(b) It was only an interlocutory application and the evidence of facts involved was contained in a relatively small number of affidavits and exhibits.

(c) The case was not of any general importance.

(d) The Defendants did not instruct counsel at all.

(2) There should be a reduction of the Plaintiffs’ recoverable costs because:

(a) The Defendants had included in their Summons for stay an independent ground based on the existence of the 2006 PRC Action.

(b) Since the Plaintiffs only applied to the Shenzhen Court to withdraw the 2006 PRC Action in February 2008 (which application was allowed in March), the Plaintiffs should only be entitled to their costs relating to the Defendants’ application from the date of the withdrawal of the 2006 PRC action, or alternatively the Plaintiffs’ costs should be reduced by an appropriate percentage.

Discussions

Certificate for two counsel

9.  Having considered all the circumstances of the present case, notwithstanding the Defendants’ submissions, I consider it appropriate to grant certificate for two counsel in relation to the stay application.  My reasons are as follows:

(1) Although the principles on the doctrine of forum non conveniens are generally settled, in the present case, I am of the view that the following issues cannot be said to be simple and well settled: 

(a)  the specific application of these principles to a claim which is based on breach of confidence (which is the main cause of this action), and the interplay between this cause of action and a claim based on tort, and

(b) whether procedural differences in discovery and interrogatories between the two jurisdictions can amount to a juridical disadvantage to be considered under Stage II of the Spiliada test.

(2) In my view, these issues involve a degree of complexity and more extensive legal research.  This could be borne out by my discussions on the issues set out at paragraphs 51 to 61, and 80 to 97 of the earlier judgment.  They justify the engagement of a leading counsel, and a junior counsel to assist.

(3) The evidence involved in the application cannot be described as little.  It was contained in 13 affidavits and affirmations filed by the parties.  It also involved expert evidence on PRC law.  Together with the exhibits, the evidence occupied some five lever arch files.  I found leading counsel’s involvement in addressing the Court on the evidence useful and helpful.

(4) The claim involves a claim for injunction, account of profit and damages (of a substantial amount) against the Defendants for breach of confidence in relation to commercial confidential information.   The matter is clearly important to the Plaintiffs.  This is particularly so as the Defendants are one of their main competitors.   An application to stay the proceedings for the Shenzhen Court is thus similarly important to the Plaintiffs, especially when it is accepted by the Defendants that the remedies of tracing and constructive trust are not available under the PRC legal system.  I therefore regard this a good justification for the Plaintiffs to engage leading counsel with the assistance of a junior.

(5) In light of the above, I do not think the Defendants’ own decision not to engage counsel at all to conduct the application, and that the case may not be of general importance amount to sufficiently weighty factors to justify the disallowance of certificate for two counsel. 

10.  On the other hand, I accept the Defendants’ submissions that only the fees of Mr Poon, SC and a junior counsel should be recoverable under the certificate for two counsel, as I do not think the application justifies the engagement of two senior counsel.  Given the Plaintiffs’ submissions that Mr Lam SC had been involved in the matter as a junior before he took silk this year, it is up to them to satisfy the taxing master that Mr Lam’s fee incurred during the preparation for the stay application was so incurred as junior counsel, and before Ms Cheung’s involvement.  To avoid any doubt, I would also direct that, insofar as the briefs and refreshers for the actual hearing are concerned, it is only those of Mr Poon, SC and Ms Cheung that are recoverable under the costs order.

Withdrawal of the 2006 PRC Action

11.  For the following reasons, I also do not see any basis for any reduction in the costs recoverable by the Plaintiffs by reason of the their withdrawal of the 2006 PRC action in March 2008:

(1) Although the existence of 2006 PRC Action was raised as an independent ground in the Defendants’ Summons to stay the proceedings, in the Plaintiffs’ evidence filed in opposition, matters relating to the 2006 PRC Action constitutes only an insignificant part. 

(2)  Further, in the Plaintiffs’ skeleton, submissions made in relation to the issue of the existence of the 2006 PRC Action, as an independent reason for staying the proceedings, constitutes also an insignificant proportion. 

(3)  Given that the 2006 PRC Action had been withdrawn, at the hearing, practically no time was spent on dealing with this as an independent ground in support of the stay application. 

(4)  In light of the above observations, I do not think it has been demonstrated to me that any of the Plaintiffs’ costs  (since we are now dealing with the recoverability of the Plaintiffs’ costs) have been substantially or appreciably increased by reason of the independent issue relating to the 2006 PRC Action.   In other words, no appreciable extent of the Plaintiffs’ costs has been incurred solely for this issue. 

(5)  In the premises, I do not see any reason to justify the reduction of any parts of the Plaintiffs’ costs, simply because this issue was no longer live in the stay application as a result of the Plaintiffs’ withdrawal of the 2006 PRC Action. 

III.    Conclusion

12.  For the above reasons, I vary the costs order nisi to the extent that the certificate for two counsel granted covers only the fees of Mr Poon SC and a junior counsel, and subject to my directions set out at paragraph 10 above.  The costs order nisi as varied is also hereby made absolute.

13.  To avoid any doubt, it must be emphasized that nothing said in this decision are intended to (and should not be read as to) limit or restrict the taxing Master’s power and discretion to tax the costs in accordance with the basis and principles of taxation.

14.  I further order that costs of this application be part of the costs of the stay application.