NEWOCEAN PETROLEUM CO LTD v. O.W. BUNKER CHINA LTD (in liquidation) AND OTHERS

HCA 384/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 384 of 2015

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DECISION ON COSTS

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1. In a decision dated 29 June 2016 I dismissed the 2^nd and 3^rd defendants’ Summons dated 3 November 2015 seeking to set aside leave to serve out of the jurisdiction, save that, to the extent leave to serve out of the jurisdiction granted by Master K Lo gave leave under Order 11, rule 1(1)(d), leave under that sub‑rule was set aside. I made a cost order nisi that each party should bear its own costs, and I gave directions for the filing of written submissions in the event that either party wished to vary the costs order nisi.

2. By letter dated 13 July 2016, solicitors for the plaintiff sought a variation of the costs order nisi, and in accordance with my directions by letter dated 20 July 2016 the 2^nd and 3^rd defendants (“the Defendants”) resisted the variation.  This is my decision in relation to the application to vary the costs order nisi.

3. The plaintiff seeks an order that the costs of the summons be paid by the 2^nd and 3^rd defendants to the plaintiff forthwith, to be taxed if not agreed. Alternatively it seeks an order that two thirds of the plaintiff’s costs be paid by the 2^nd and 3^rd defendants forthwith.

4. The plaintiff relies upon the statement in paragraph 68 of my decision that the claim in conversion, upon which the plaintiff succeeded, and the chain of contracts are closely intertwined.  It suggests that because it was only at what it describes as the “last step” of jurisdictional connection that its claim for leave to serve out in contract failed this is a factor in support of it recovering its costs.  It suggests that the claim in contract was an alternative claim and hence by its nature only one of either the contract or the conversion claim could succeed.  It also relies upon the fact that I dismissed the suggestion of material nondisclosure.

5. The Defendants point to the affidavit of Fung Chi Man, in which he deposed that there was a good arguable case under both Order 11 rule 1(1)(d) and Order 11 rule 1(1)(f).  They also point to paragraph 13 of the statement of claim which demonstrates that the claim for conversion was made both “further” and “alternatively”.  These points, they say, undermine the proposition that the two claims were purely alternative. They also identify the full extent of the choice made by the plaintiff to run its argument by way of affidavits under the contract limb.

6. I do not consider that the claims were genuinely alternative claims, such that inevitably only one would succeed.  A claim in conversion can coexist with a claim in contract which is why, in my view, the plaintiff pleaded that the claim in conversion was both “further”, and “alternative” to the claim in contract.  The plaintiff pursued both, and won on only one of them.

7. The plaintiff also suggests that there has been only a slight change in its case due to the judicial development which is discussed in more detail in my original decision.  I consider this to be an understatement.  The case progressed before the Master was predominantly under the contractual limb whereas the case progressed before me was predominantly under the conversion limb, and Mr Sussex SC quite rightly accepted that he was unable to pursue a claim for the price of the bunkers.  In my view this is not a slight change in case, but represents a fairly fundamental shift of emphasis.

8. In all the circumstances I do not consider that it is appropriate to vary the costs order nisi so as to provide for the entirety of the plaintiff’s costs to be paid by the Defendants.

9. In the alternative the plaintiff claims two thirds of its costs.  This is suggested on the basis that the Defendants application consisted of three parts namely the plaintiff’s failure to make full and frank disclosure (on which the plaintiff succeeded), the failure to show a good cause of action in contract (on which the plaintiff failed), and the failure to show a good cause of action in conversion (on which the plaintiff succeeded).  As a result it suggests that two thirds of the costs should be paid by the Defendants.

10. As is clear from my original decision, there was a significant shift in the emphasis in the way in which the plaintiff put its case as a result of the judicial development in this area.  In my view this would invalidate any approach to the exercise of my discretion which considered the position only by reference to the three issues which were raised by the Defendants.  I need to look at the matter in the round having regard to all the circumstances.  Those circumstances include that the arguments as subsequently developed were put on a very different basis to the way in which they were originally put.  In all the circumstances, having regard to everything which is contained within my original decision, I decline to vary the costs order nisi in the manner suggested by the plaintiff.

11. Within the correspondence between the parties there has developed a debate as to whether or not the plaintiff was justified in instructing Senior Counsel for the hearing.  It is not clear to me why this debate has developed because neither side have asked for any variation in relation to the costs order nisi concerning Counsel.  Therefore I do not propose to deal with this debate any further.

12. I am also aware that in the Defendants’ letter of 20 July 2016 the Defendants seek to suggest that the application which was heard before me should have been heard together with a similar application in a different action, namely HCA 381/2015.  The Defendants suggest that had that occurred costs would have been saved.  In fact, the Defendants took out an application for the two summonses to be heard together but, according to the Defendants’ letter, that application was dismissed.  In such circumstances, when exercising my discretion on costs, I pay no regard to the submission that the two summonses should have been heard together.

13. The Defendants also make an allegation that there was a misrepresentation in the affidavit of Fung Chi Man, and rely upon that allegation to support the proposition that I should not change my costs order nisi.  Given that I have declined to vary my costs order without considering this allegation, I do not need to, and do not, make any findings on this allegation.

14. Finally the Defendants rely upon a sanctioned offer made on 24 September 2015, to the effect that if the plaintiff withdrew its claim the Defendants would not claim costs against the plaintiff.  The Defendants seem to suggest that this might justify an order that the plaintiff should pay half of the Defendants’ costs on an indemnity basis since 24 September 2015.  Yet there is no clear application made by the Defendants to vary my costs order nisi (and if the letter of 20 July was such an application, it was not made in accordance with the directions set out in paragraph 74 of my decision).  In any event, I do not see that this offer provides the Defendants with any protection, and I would decline to order the payment of the Defendants’ costs, or any portion of them, on an indemnity basis.

15. Accordingly I confirm my order that each party should bear its own costs of this application.

16. The Defendants then suggest that the costs of this application to vary the costs order nisi should be paid by the plaintiff to the Defendants.  I decline to make such an order.  The application was a permitted part of the process of the original application to set aside leave to serve out of the jurisdiction.  The costs involved in seeking to vary the costs order nisi should be considered as part and parcel of the costs involved in the application to set aside leave to serve out.