RE AXONA INTERNATIONAL CREDIT AND COMMERCE LTD

IN THE SUPREME COURT OF HONG KONG

COMPANIES (WINDING-UP) NO. 26 OF 1983

______________

___________

__________________

RULING ON COSTS

__________________

1. On 28th May last I gave judgment against the plaintiffs on the summons in the liquidation and on the two remaining summons in the action. At the parties' request I then stood over the argument on costs. It is with this that I must now deal.

2. This was a heavy piece of litigation. The plaintiffs avoided the simple, and adopted a multiple course which I earlier said "placed maximum risk and maximum expense on the joint liquidators". The issues were not purely domestic considerable investigation was necessary into U.S. law. I have no doubt that the joint liquidators and the official receiver are entitled to the costs of all the matters argued before me, including all costs reserved to me, upon the most generous appropriate scale. The problem has been to identify this scale.

3. In E. M. I. Records Limited v. Ian Cameron Wallace Limited (1983) 1 Ch. 59, Megarry V.C. most usefully identified and described the various scales available to the court under both the rules and judicial decisions. He concluded that or the latter basis, the court still had jurisdiction to award costs on the highest scale, namely an indemnity, notwithstanding the lack of provision for this in the rules. But in the vast majority of cases where this jurisdiction has been exercised a penal element associated with some contempt of court has arisen. There is no such consideration here, and for this reason I do not regard such an order as appropriate.

4. The choice then rests between the two forms of order considered by Parker J. (as he then was) in Project Development Co. Ltd. v. K.M.K. Securities Limited (1982) 1 W.L.R. 1470, namely: -

5. I share Parker J. 's aim. I think that the respondents here should have all their "reasonable costs": and that "it is right that (they) should have to establish as (they do) on the common fund basis the reasonableness of the costs for which they are contending" p.1472. My difficulty has been to detect the real differences in practice between these two approaches.

6. I agree with Parker J. that under the first alternative "the decision as to the extent to which that discretion will be applied will be left to the Taxing Master". But he is likewise the person who has to judge the reasonableness of any item in the bill under the second alternative. Once what Parker J. called "the constraints" of the first schedule are removed by direction, the reasonableness of any item should, to my mind, become a purely objective question of fact and degree, and answered without regard to the figures in the schedule. Given the target of "reasonable costs", it seems to me that if in all the circumstances a particular item is reasonable, that it should be allowed under both types of taxation and not allowed under one and disallowed under the other.

7. In these circumstances I am regrettably unable to follow Parker J. 's example. I share Megarry V.C. 's aversion to novel orders, p.75(C). I am minded to stick to the familiar, and to a form of taxation appropriate in liquidation, Re National Life Insurance Co. Ltd. (1978) 1 W.L.R. 45.

8. I therefore direct that the applicants do pay the costs of the respondents and of the official receiver and that (if not agreed) such costs are to be taxed on a common fund basis with a direction to the Taxing Master to exercise his discretion under O.62 r.32 (2).