LIANG CURRENT TIEN TZU v. HUTCHISON GLOBAL COMMUNICATIONS HOLDINGS LTD

HCA 15/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 15 OF 2003

(TRANSFERRED FROM LABOUR TRIBUNAL

CASE NO. LBTC 9780/2002)

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JUDGMENT  ON  COSTS

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The application

1. This is an application to vary a costs order nisi as made in a judgment dated 4 October 2006.

2. That judgment speaks for itself.

3. The result of this case, which was a claim for unpaid performance bonus by the plaintiff, the erstwhile Chief Financial Officer of the defendant, was that the plaintiff’s claim was dismissed, as was the defendant’s contingent counterclaim.

4. The order nisi as to costs – vide paragraph 113 of the judgment – was that the costs of the action were to follow the event, and were to be paid by the plaintiff to the defendant, to be taxed if not agreed.

5. The plaintiff now seeks to modify this order.

The scope of the argument

6. On behalf of the plaintiff Mr K C Chan (who did not appear at the trial) made what essentially was a two-pronged submission : first, that the defendant, albeit successful in the main claim, at least should be deprived of a substantial part of its costs (and preferably should be paid wasted costs) in light of now-abandoned issues which had served to increase the cost of trial preparation; and second, that as the plaintiff has been successful in defending the defendant’s counterclaim, he should be entitled to the costs thereof.

7. For the defendant, Mr Carolan resisted both limbs of this argument. 

8. True it was, he said, that at the outset of the trial he had abandoned any reliance upon the ‘qualitative’ aspects of the plaintiff’s work in respect of the two bond deals for which bonus entitlement had been claimed, but this issue, he argued, had arisen because the plaintiff had put this issue into play in the first place.

9. As to the counterclaim, upon which the defendant had not succeeded, Mr Carolan submitted that this was a contingent claim only, and that the facts underpinning it arose as part and parcel of the plaintiff’s factual case, and had required no separate or discrete treatment.

10. Mr Carolan also pointed out that there were in place Calderbank letters from the defendant, the first of which dated 4 December 2003, which canvassed a ‘drop hands’ suggestion with no order as to costs, and that further, on 1 September 2006 an offer in like terms was repeated; both such approaches were rejected by the plaintiff.  Accordingly, he argued that such rejections should be placed into the ‘costs’ mix’, and given such weight as this Court thought appropriate.

11. Counsel were in agreement as to the general principles applicable to costs’ apportionment, both citing with approval the well-known observations of their Lordships in the English Court of Appeal in Re Elgindata (No 2), [1992] 1 WLR 1207.

12. In particular, it is accepted that the general rule as to costs following the event does not cease to apply simply because the successful party raises allegations/issues upon which he fails, although “where this has caused a significant increase in the length or costs of the proceedings he may be deprived of the whole or part of his costs” – per Nourse LJ in Elgindata, op cit, at 1211.

Decision

13. Of the two main lines of argument raised by Mr Chan, I take the second first, because it can, I think, the more easily be dismissed.

14. Having reflected on the circumstances in which the Counterclaim came into being – it was, as I have earlier observed, essentially a contingent plea – and also as to the course of the trial, I do not consider that the dismissal of the Counterclaim (vide paragraphs 99-104 of the judgment) merits any separate costs’ treatment in favour of the plaintiff or at all.

15. This essentially was a matter which arose as part of the necessary consideration/evaluation of the entire matrix of facts – indeed it was inseparable therefrom – and, as is clear from the judgment, it became a ‘live’ issue only upon specific rejection of the ‘compromise’ line of defense run by the defendant.

16. In the circumstances do not consider that any justifiable case can be made for expenditure of any significant additional costs in dealing with the counterclaim, and so far as I am concerned the costs therefore necessarily fall to be included within the costs that follow the event.

17. I turn now to the other string to Mr Chan’s bow, which at first blush struck me as somewhat more promising from his viewpoint.

18. In this regard the submission put forward is that the hotly-pursued but belatedly abandoned defence of “lack of qualitative input” by the plaintiff in respect of the DBS and HIL deals, which first was raised by paragraph 7 of the defence dated 10 April 2003, and further ‘boosted’ by amendments dated 4 July 2003, added very significantly to the costs of preparation for this trial (although not the trial itself, given Mr Carolan’s abandonment of the point on the opening day), and that it would be unfair in this situation for the plaintiff to shoulder the bulk of these costs incurred in preparation for this defence.

19. For his part Mr Carolan, who was counsel for the defendant at trial, disputed the validity of this argument.  He submitted that the matter of the plaintiff’s input in terms of these deals first had been raised by the plaintiff in its own pleading, and that the defendant merely was meeting the case as raised against it.  He had decided, he said, not to pursue this aspect of the matter at trial because he then took the view – correctly as it transpired – that he did not need to spend time on this issue in order to prevail in the case.

20. This aspect of the argument has provided pause for thought.

21. I accept that by his decision not to take the point at trial that Mr Carolan usefully minimized the significant additional costs which otherwise would have been necessary to examine the ‘qualitative issue’ within the context of the defendant’s bond issues; however, I do not think it is wholly fair to say that effectively this is a matter brought by the plaintiff on himself, given that the defence raised was that the plaintiff was not involved in HIL at all, and that his involvement in the DBS issue was immaterial to its success, both matters which involved considerable documentation and would have necessitated complex analysis had this issue been fought out.

22. Against this background the plaintiff says that simply to lump the preparatory costs for this issue into the costs normally accruing to the winner would be manifestly unfair, and more than justifies departure from the general rule to which reference was made in Elgindata (No 2), op cit. 

23. In fact, argued Mr Chan, the potential but ultimately unrealized debate about this ‘qualitative input’ issue put into play a mass of factual issues, embracing the initiation of the deals, the entire complicated negotiation process, and the drafting and documentation process relating to a period of about 10 months, from late May 2001 to early April 2002.

24. In this context Mr Chan went so far as to suggest that, ‘from a volume point of view’, the plaintiff would say that preparation for this defence had taken up 75% of the relevant preparatory work for trial, and that by reason of Mr Carolan’s concession on opening day all the costs of such work had thereby been wasted.  In this connection he put his case as high as submitting that in the circumstances the defendant should be deprived of two thirds of its costs to reflect the justice of this argument.

25. This is a difficult area in which now to venture, not least because at trial the court has not been required to deal with or evaluate the evidence which went to these issues, although at the same time I bear in mind that significant time clearly was saved at trial as a consequence of the view that Mr Carolan took.

26. I am not prepared, as Mr Chan initially suggested, to award the plaintiff costs in this regard, but after due consideration it does seem to me that it would be inappropriate in the circumstances not to recognize that this was a not insignificant issue which required extensive preparation, and that this was work which came to nought upon abandonment of the point.

27. Accordingly, it is as a consequence of this element of the argument that the plaintiff has succeeded in persuading me to vary the existing order nisi as to costs.

28. Finally, and for the sake of completeness, I refer to an additional argument mounted by Mr Chan to the effect that the plaintiff also succeeded on the issues of the ‘settlement defence’ and on the point that the HIL deal did not amount to ‘fund raising’.

29. In contrast to the ‘qualitative input’ argument these matters, it seems to me, fall naturally within the principle that the general rule of costs following the event does not cease to apply simply because the successful party raises issues or makes allegations upon which he fails, and I decline to accede to this element of Mr Chan’s application in this regard; were it to be otherwise, any relief as to costs on issues such as this, which have been fought and lost in the normal course of trial, would lead to endless ‘filleting’ of costs orders, which by their very nature are essentially ‘broad brush’.

30. However, as I have said, I do consider that in his argument Mr Chan has made some headway, although I dare say not as much as he would have liked, in terms of his primary submission regarding wasted costs of the ‘qualitative issue’.

31. The interesting part of this costs’ debate, and one for which in my view there is no ready answer (or authority), is the effect upon Mr Chan’s argument of the spurned Calderbank offers; as Mr Carolan remarked in his Reply, the difficult question is “the importance of the Calderbank(s)”, a sentiment with which I agree.

32. In this situation the court necessarily seeks refuge in basic principles.  It is naturally accepted that costs are in the discretion of the trial court, and it seems to me that in the circumstances the existence of these Calderbank offers is simply part and parcel of the overall picture which the court must take account in the exercise of its costs’ discretion.

33. I do not consider, for example, that the general rule that a party failing to ‘beat’ a Calderbank offer normally is made to pay all the costs of the offeror from the date of rejection of such offer should apply irrespective of the fact that the ‘successful’ offeror may have caused costs to be incurred, as for example, causing expenditure on a disputed issue or issues only to abandon the point at the eleventh hour (notwithstanding the eminent good sense which was demonstrated by counsel in so acting).

34. If this approach be correct, therefore, and I consider that it is, it seems to me that there is a case for variation of the existing order nisi, and after hearing argument and taking all the factors into consideration I have decided to vary the order nisi and to make a costs’ order in the terms following :

          Save that the plaintiff is to pay to the defendant 70% of the defendant’s pre-trial costs, the defendant is to have the costs of this action, such costs to be taxed if not agreed.

35. This formulation addresses the argument that has succeeded upon this application so to vary, and strikes me as the fairest solution in all the circumstances (including that of the ‘Calderbank offers’), whilst at the same time it assumes a ‘global’ approach which does not unduly complicate the taxation process which inevitably will be required.

36. This, then, leaves outstanding the issue of the costs attributable to the costs’ argument itself.

37. This again is not straightforward, not least in a situation when (as here) each side has won part at least of its costs’ arguments.

38. There is no doubt but that the plaintiff has had some element of success in its application, and on reflection, I consider that the fairest approach is that the plaintiff do have 50% of its costs of and incidental to the hearing to vary the costs’ order nisi, such costs to be taxed if not agreed.  I so order.  The sum thus due conveniently can be set-off against the plaintiff’s accrued costs’ liability to the defendant.