COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A. v. BANK OF CHINA

HCCL 56/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.56 OF 2001

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JUDGMENT ON COSTS

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The application

1. On 11 June 2004 this court handed down its judgment in this action, which was a claim by the plaintiff against the defendant arising by reason of the non-payment under a letter of credit.

2. This judgment speaks for itself. In the event the plaintiff's action was dismissed, and the court made an order nisi that the defendant was to have the costs of the action, such costs to be taxed if not agreed.

3. The application now before the court is that of the plaintiff, which wishes to vary the order nisi as to costs.

The argument

4. On behalf of the plaintiff Mr Carolan, who appeared also at trial, submitted that whilst the plaintiff did not itself seek an award of costs, nevertheless this was not a case wherein it was appropriate for the successful defendant to be awarded all of its costs.

5. The basis underpinning the application was that although the defendant undoubtedly had succeeded in the case, nevertheless out of a total of five distinct issues before the court at trial the defendant had succeeded upon but two, namely the 'negotiation' and 'illegality' issues, whilst the unsuccessful plaintiff had got home on the remaining three, which were the 'discrepancy' and 'notice of rejection' points, together with the 'abuse of process' issue.

6. The end result of this, said Mr Carolan, was that out of the three days which it had taken to try this case, the evidence and submission in relation to the three issues on which the defendant had failed had taken up at least a day and a quarter, and in addition the defendant had called two experts to give evidence neither of whom, on analysis, need have been there.

7. Consequently he argued that the defendant's costs should be reduced by a proportion of some 30-40%; the manner in which this ultimately was put was that in these circumstances either there should be a global figure of 40% to be deducted from the defendant's taxed bill, alternatively if this did not meet with the court's approval, then there should be a reduction in the defendant's costs of 30%, and that the costs of the experts called should in the case of the banking expert, Mr Brown, be disallowed in toto, whilst the cost of the attendance at trial of the Chinese law expert, Professor Wang (who was not cross-examined) should also not be awarded.

8. For the defendant Mr Shieh SC, whom also appeared at trial, strongly resisted this line of argument which, he said, flew in face of established principle. The nub of his submission was that this was a short commercial trial containing a number of issues, some of which had been decided in favour of his client and some of which had not. As matters transpired, the particular issues upon which his client had got home had been sufficient to carry the day. Nevertheless, he said, the failure of the defendant to win upon the other points, which it had been reasonable to pursue, did not mean that his client should be penalized in costs for such lack of success.

9. Virtually every case, he submitted, contained within it distinct arguments which were won or lost. This instance was no different, and unless an issue, or a piece of evidence, could be categorized as clearly bad or demurrable on its face - in which case the cost of ventilating that issue should not be awarded - there was no justification for embarking upon the exercise the defendant now invited the court to do, and in effect to 'word count' the trial proceedings upon an issue success/failure basis, and to discount the costs of the winning party accordingly.

Decision

10. There is said to be no dispute as to general principle, although if this indeed be the case there clearly remains a substantial difference of view over the correct application. During the course of argument several authorities were cited: the leading English case of Re Elgindata (No 2), [1992] 1 WLR 1207 (CA), and two decisions from within this jurisdiction, namely La Chemise Lacoste SA v. Crocodile Garments, HCA No.2401 of 1995, a decision of Chung J dated 22 March 2000, and a decision emanating from this court, Nam Kwong Medicines & Health Products Co. Ltd v. China Insurance Company Ltd, HCCL No.27 of 1999, dated 6 August 2002.

11. In addition, Mr Carolan relied upon the provisions of Order 62, rule 3(2), RHC, which read :

"If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings, the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs." (emphasis added)

12. As reflected by the terminology of the rule, the court has conferred upon it an unfettered discretion to vary the 'normal' rule when it considers appropriate. The question, therefore, is whether Mr Carolan is correct when he asserts that in this case the court should deprive the successful defendant of a proportion of its costs?

13. As the court observed in Nam Kwong Medicines, op cit, as a matter of general approach to the issue of trial costs the occasions which justify the 'filleting' of costs according to the success or failure of any specific issue arising for decision within the composite whole are likely to be relatively few and far between, and in all probability are readily recognizable as meriting such treatment. Notwithstanding the persuasiveness with which Mr Carolan invested his argument, this does not strike me as one of those cases.

14. This was a strenuously contested commercial case involving a number of disparate arguments. With one exception, the 'abuse of process' issue, upon which very little time was taken consequent upon the court's early indication that it was uninterested and against the defendant on the point, of none of the other arguments can it reasonably be said that they should not have been pursued.

15. In this regard I consider that Mr Carolan is fundamentally incorrect in his assertion, within the present debate, that the exercise of the discretion of the court as to the costs of separate and identifiable issues is purely a quantitative and not also a qualitative exercise. Patently it is both. The court is in the position to assess the arguments, their place in the case, and the length of time required to make them, and to act accordingly.

16. Thus in the instant case the defendant bank may indeed have failed on the 'discrepancy' and 'notice of rejection' issues, but the arguments put up by the defendant in this context demonstrably were not bad points. To the contrary, within the factual matrix thrown up by this case they were entirely respectable arguments which in the result failed, but this is a far cry from saying that they should not have been run at all.

17. Accordingly it cannot be, and indeed is not the case, that lack of success in any specific argument of itself attracts a costs sanction. Within a trial of a commercial dispute inevitably there are disparate and often interwoven strands, and unless the court is satisfied that time and effort manifestly has been wasted in terms of any particular argument I discern no basis for revisiting these issues from a purely costs' standpoint.

18. Indeed, in the present application it seems to me that the plaintiff is seeking to do precisely that which the existing jurisprudence does not countenance, although I accept that an oddity in this case is that the argument which initially spawned this litigation, namely the defendant's contention that the documentary tender was discrepant, ultimately was adjudged unfounded, and that the case was won on arguments - as to negotiation/locus and illegality - which saw the light of day only as the case progressed. In this connection Mr Shieh SC was correct when he submitted that the defendant's unsuccessful argument as to discrepant presentation in fact paved the way for his client's success in this litigation, albeit that there was failure upon that particular issue.

19. It follows, therefore, that I am against Mr Carolan in his submission that the allocation of costs in this case should be viewed as a function of specific issue success or failure. In my view he has not established the threshold necessary to embark upon this type of selective approach to trial costs.

20. This conclusion is not the end of the story, however, since Mr Carolan elided this argument with a submission as to the recovery of the fees of the two expert witnesses employed by the defendant. His contention is that in fact participation by the defendant's expert, Mr Brown, never was required, and that the evidence of the Chinese law expert, Professor Wang, was undisputed.

21. The use of expert witnesses in documentary credit cases represents something of a vexed issue. It appears to have become fashionable - in much the same way as, for example, engineers now frequently give evidence as to causation of traffic accidents in personal injury cases - although why this should be so is not entirely clear. And it follows that if one side has an expert the overwhelming temptation is for the other side to employ one also, in this case the employment of Mr Soh, the banking expert for the plaintiff.

22. I recognize that it may not always be evident to what extent expert evidence as to banking practice will impact upon the decision of the court, and I appreciate the genuine concern on the part of one side to expensive litigation that it should not be left exposed without an expert on hand if the other side is thus buttressed. At the end of the day, however, should the losing party be made to pay?

23. Clearly the matter cannot be resolved by simple declaration of principle, and each case must be considered on its own facts. Nor should such consideration be guided solely by the benefit of hindsight, and in particular by an examination of what the judge actually has done. Thus, it is not entirely fair to argue, as I think that Mr Carolan did, at least by necessary inference, that because in the event Mr Brown's views on the 'discrepancy' and 'notice of rejection' points were not embraced that it followed that this expense at least should not be laid at the plaintiff's door.

24. Within the Commercial List the practice of the court on a summons for directions is not simply to rubber stamp the request to use expert evidence. As practitioners are aware, in all cases the party asking for leave to adduce expert evidence is required to justify the position, and within the obvious constraints as to not at that stage knowing a great deal about the case in question, the court is thus able to form a preliminary view as to whether such evidence is warranted. In many instances the parties are agreed that it is necessary, or - as I think was the situation in this case - no real objection is voiced to the calling of expert evidence, particularly where aspects of banking practice may prove to be in issue. In the present case, of course, the matter was further complicated by the curious gyrations of the ICC upon the aspect of whether the Certificate of Origin was discrepant, in which context Mr Soh was called on behalf of the plaintiff to give the court the benefit of his views as to banking practice as reflected in the UCP 500 and the Asia Pacific region.

25. On reflection, I do not consider that in the particular circumstances of this case that the fees of the defendant's expert should justifiably be disallowed, any more than would the fees of the plaintiff's expert have been excluded had the decision in the case gone the other way. The views of the defendant's expert may not have been accepted, but this does not strike me as a case wherein legitimately it may be asserted that the defendant should have been expected to come to trial absent the assistance of an expert witness such as Mr Brown.

26. Turning now to Professor Wang, Mr Carolan does not seek to disallow the fees incurred save for the cost of his attendance at court. Professor Wang was of course not cross-examined, and I am told that on the Friday evening preceding the commencement of the trial on the following Monday that a letter was sent whereby a summary within a paragraph in Professor Wang's report was said to be agreed, and that the plaintiff would not seek to cross-examine.

27. The point here, it seems to me, is that this letter came very late in the day, and constituted neither specific admission of the pleaded illegality issue, nor indicated an unconditional acceptance of the report as a whole, but instead stated a willingness to agree the content of a specific paragraph. In the particular circumstances I have not been convinced that the defendant can be criticized for playing it safe and electing to call Professor Wang, and thus that the cost of his attendance should be disallowed.

28. It follows, therefore, that the plaintiff's attempt to vary the existing order nisi as to costs has been unsuccessful, and that this application is dismissed. The costs of this application must of course follow the event.