ALEXINA INVESTMENTS LTD AND ANOTHER v. KEYSBERG LTD AND OTHERS

HCA6359/1992

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.6359 OF 1992

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J U D G M E N T

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1. I have before me an application by the defendant to vary the order of costs nisi that I made in my judgment of 8 January 2004. The order I made in relation to the costs of the action except the costs of the trial is that the costs of the action shall be paid by the defendants to the plaintiffs and to the third party on an indemnity basis. It has been suggested to me that I should vary that costs order, on the basis that it is an unusual order - indemnity costs - and that where there is hostile litigation, which it is suggested this is, the court should not go so far as to make this draconian order. I, of course, accept that indemnity cost is not the usual order of costs in a hostile litigation. It is, however, well accepted and I think the cases cited to me of both Choy Yee Chung v. Born Star Development, as well as Sung Foo Kee v. Pak Lik, amply demonstrate that the court has a wide discretion, an unfettered discretion, to make an indemnity costs order as it thinks appropriate. This principle is set out both in the White Book as well as clearly brought out by a careful reading of those two judgments cited, and that is not seriously in dispute. What however is in dispute is what are the special features in this case which led to the court making indemnity cost nor is it in dispute that some special features must be present in order that the court should exercise that unfettered discretion.

2. Mr Burns, for the plaintiffs, had helpfully referred to, in his skeleton argument, at least three areas where the court has taken into account the special circumstances of this case. The first is the way the case has been conducted, in particular it is only until the very end i.e. until final submissions that many of the defences that had been in the forefront of the case of the defendants have been abandoned and when some new defences were attempted to be raised.

3. Mr Burns referred me to the three issues where I came to the view that the defendants have no merit. I will not elaborate on how I came to the view that I did in my judgment. But perhaps it is instructive to look at a particular paragraph in my judgment, paragraph 37, where I said that there is no merit in the New Novation Issue, I said this argument was new and not pleaded and was simply a last minute desparate attempt to find a viable defence in the face of the collapse of so many other defences. So the first special feature is that the way the defence is conducted so that bad defences were raised which was simply abandoned.

4. The second feature that Mr Burns has referred me to was the character of Mr Chhabria, a man who lacked honour, who abuse the fiduciary relation inherent in the joint venture and in this context, at paragraph 55, is what I said :

"Words of promises of 'milk and honey' by the Chhabria camp were in fact doses of arsenic and poison. Honour has no meaning for Chhabria and I regret having to make this finding against a deceased person but the overwhelming weight of evidence suggests to the Court only one picture, namely of a very shrewd businessman who managed to persuade a young and inexperienced Vijay Mallya into a partnership and took advantage of the government investigations to abuse the partnership and fiduciary relationship. When the danger had disappeared, Chhabria dishonoured the joint venture agreement and reneged on promises made. ... The fact that no payment was made by the plaintiffs after April 1987 was not an indication of abandonment of the joint venture but was the result of the abuse of the joint venture by the defendants." (namely, by all the defendants, not just by Mr Mallya personally.)

5. The third special feature is the elaborate and unmeritoriously defences which were build up by the various teams of the defendants' lawyers and these prolonged proceedings and contributed to the delay in the plaintiffs being able to obtain proper remedies and relief. I do not of course for a minute forget that had the plaintiffs' professional lawyers been more alert and had done their work better, the matter might have come on earlier. But certainly, the various teams of the defendant's lawyers had made sure that they could exploit it to the full of whatever weaknesses there might be in the plaintiffs' preparation of the case.

6. The fourth special feature which I would like to refer to is that the lamentable conduct of the defendants was not limited to only the conduct of the trial. I have been nursing this case from December 2000 until I gave judgment in January 2004 (a three-year period) and in the course of nursing that case, I have to make myself familiar with the case. In fact I have studied the court files. Mr Griffits even accused me of studying the court files, saying that a judge should not be allowed to do that sort of thing. I came to know this case. I have no doubt that this is an extraordinary case - even in my limited exposure in commercial litigation where big and bad points were taken, this is the one of the worst case I have come across, including oppressive satellite litigation. In paragraph 11 of my discovery judgment given on 27 March 2002, I said this :

"This is a litigation which has taken gigantic proportions. The events of the action went back to 1985. The claim started in 1992. By 1996 if my recollection is correct, pleadings had closed and discovery then followed. Discovery fight has taken some six years from 1996 to now and I suspect if the defendants are given the free hand, it can go on for considerably longer period. This is a deplorable state of affairs, satellite litigation of this kind has taken a life of its own and in the John Wu case of Kaplan J, as well as I think in the judgments from the English Courts that I had been referred, there were repeated references to the satellite litigation over discovery which should be put to an end and desirability for early resolution by the most effective means that our system of justice knows and that is a trial."

7. There were repeated resistance by the defendants to a trial and the court had to move through very difficult paths in order to eventually arrive at a position where the trial could take place. All those hurdles were put in front of the plaintiffs and the court to prevent an early just resolution of the case. So I have no hesitation in coming to a view that this case has so many special features that it rightly deserves a very special order and I make no apology for the making of order unprompted by the plaintiffs that there should be an indemnity costs against the defendants. Now Mr Barrie Barlow, for the 1st to 5th defendants, accused the court of being biased because the view taken by the court is all one way. I would however suggest that the court is concerned in ensuring that justice is done that there will be equality of arms as well as fairness being done so that there is an early, just and fair resolution of the dispute. I hope I have done that and if I have not, then I apologise for my shortcoming. But, certainly, in my view, this is a case that warrants a very special order. It is therefore not a case where as Mr Barlow says the defendants have been in the role of letting sleeping dogs lie and that they could not be blamed for the long delay in the proceedings. I believe - and I certainly take that view that what I have seen repeatedly in my court are not sleeping dogs but a little bit of a different kind of salvage canine.

8. The question for me is whether the oppressive conduct "game plan" in the words of Mr Burns, that we have seen justify this special order. The view I have taken overall of the defendants' conduct of the case is that the defendants for a long time perhaps from the beginning right to the end had been fishing to find a defence, any defence, in order to avoid a final judgment that they will have to meet. I therefore come to the same view as I have expressed in my judgment i.e. that there should be an order of costs of indemnity against all the defendants because, it seemed to me, that it is impossible to say that indemnity costs should only be insisted on one particular defendant. Further it seems to me it is also impossible to say that it will be right that there will be indemnity costs only against the defendants vis-à-vis the plaintiffs and not indemnity costs between the defendants and the third party. In fact in relation to the third party, the case for an indemnity costs is even stronger because it was brought late in the day in respect of a claim of a personal contract which they have abandoned.

9. It follows from what I have said that the order I have made on 8 January must be confirmed. The application for a variation of the nisi order is therefore dismissed with costs, the amount of which will be ascertained by gross sum assessment.