AKAI HOLDINGS LTD (in Compulsory Liquidation) v. ERNST & YOUNG (a Hong Kong firm)

HCCL 29/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 29 OF 2004

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BETWEEN

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DECISION ON COSTS

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The applications

1.  On 17 July 2009 this court handed down a judgment on discovery. There were 3 summonses before the court, and this judgment, which speaks for itself, reflects the views of the court as to the discovery as then sought.

2.  For present purposes, suffice to say that of the summonses in question two orders nisi were made, and one costs’ issue specifically was reserved; upon this issue the court wished to hear submissions from the parties.

3.  Accordingly, the purpose of this Decision is to clarify the question of costs in terms of each of these summonses.

4.  I take these applications in order of significance.

(a) Defendant’s summons dated 26 June 2009

5.  The ambit of this summons is dealt with in the Judgment (at paragraphs 6-61).

6.  At paragraphs 85-86 of the Judgment the court observes thus:

“Whilst I have made an order nisi as to costs in the two discrete summonses, I have essayed no such costs’ order nisiupon the ‘main summons’, as Mr Hapgood aptly termed it.

Absent agreement between counsel as to the appropriate order in light of this judgment, I will entertain brief written submissions … on the costs to be attributed to this summons prior to ruling thereon.”

7.  Such written submissions duly were received on behalf of the plaintiff and defendant from the solicitors for each party: for the defendant under cover of a letter dated 24 July 2009 and for the plaintiff under cover of a letter dated 29 July 2009.

8.  The 3 summonses in question had been entertained during the 5^th Case Management hearing held on 13 and 14 July 2009; as matters transpired, before this court was able to clarify the costs’ issue consequent upon receipt of the written submissions, the 6^th (and presumably, now, the last) Case Management hearing took place on 30 July 2009, during which the court also had the advantage of hearing submissions from leading counsel upon these same costs’ issues.

9.  For the plaintiff, Mr Kosmin QC asserted that in terms of the ‘main summons’ the net result was that the plaintiff liquidators clearly had emerged very much on top.

10.  He noted – as indeed had been pointed out in the body of the written submissions – that in purely mathematical terms the defendant had enjoyed very limited success indeed.

11.  As to the broad attempt to extend the purview of discovery beyond the ‘key’ date of 19 November 2002, this had been rejected, whilst of the 10 general categories of documents sought in Schedule 1 to the summons, orders were made in respect of 2 categories only (both of which having been volunteered by the plaintiff in advance of the hearing), whilst the plaintiff had succeeded in its opposition to the 8 general categories also sought.

12.  In terms of the documents canvassed in Schedule 2 to the summons, the net position was that 6 of the documents/categories of documents already had been discovered (albeit this fact had not been appreciated by the defendant), 19 of the documents/categories of documents were to be voluntarily discovered, and 11 of the documents/categories of documents as were sought either did not exist or could not be located.

13.  In relation to the production of the documents sought at items 1 and 2 of Schedule 2, both items being resisted by Akai, the order for the production of the ‘CCB List’ represented the sole success enjoyed by the defendant upon this application, Akai otherwise having been wholly successful in defeating the defendant’s ‘blanket’ requests for discovery of documents, in particular the work records/time sheets of the plaintiff liquidators at the relevant time.

14.  For the defendant, Mr Smith SC, who had appeared with Mr Hapgood QC upon the substantive discovery application now in question, strongly submitted that although in purely numerical terms the defendant had not succeeded as widely as it had wished, nevertheless as a matter of fairness, and to be consistent with past applications which had been conducted within the framework of a Case Management Hearing, that an order for costs in the cause was appropriate, and that once again this practice should be adopted in this instance. Mr Smith made reference to a number of related matters, but that at any rate was the basic thrust of his submission.

Decision

15.  I do not consider that it would be right to accept Mr Smith’s persuasive submission, tempting as it otherwise is, since to do so would, I think, be to apply far too broad a brush to what became a most particular argument – an argument, moreover, upon which the plaintiff was by far the more successful.

16.  Mr Kosmin clearly was correct when he described the defendant’s ‘main summons’ of 26 June 2009 as “hoovering up” all the outstanding discovery requests which had been accumulating over a period of time, but which, for forensic reasons, had been consolidated to await argument until this particular hearing, which happened to be another Case Management hearing; indeed, at the urging of the parties this court had gone to some length to make 2 days available, primarily because of the wide-ranging scope of the defendant’s discovery requests, and as matters transpired, the hearing took a full 1.5 days, the court sitting into the lunch adjournment on the second day in order to complete the task.

17.  It follows, therefore, that I am unable to ignore the forensic reality and simply work on the basis that, since case management issues also were canvassed at the hearing, that ‘costs in the cause’ would be the natural and fair outcome of this major discovery exercise: there is no doubt but that the major part of this hearing over the 2 days set aside actually was devoted to discovery, and that within this hearing the summons of 26 June 2009 was by far the most significant element.

18.  The question which thus is begged, if Mr Smith’s argument is to be rejected, as I believe is the correct course, is how costs are to be apportioned, given that the defendant at least did achieve something, namely the ‘CCB List’, which Mr Hapgood chose to characterize as his ‘major target’.

19.  In the circumstances I decline to make cross-orders as to costs, and I consider that the best way in which to deal with this is to arrogate to the primarily successful party on this application, that is, the plaintiff, a proportion only of its costs.

20.  This in turn begs the further question as to the appropriate costs’ percentage which does justice – or, at the least, does not do injustice – in all the circumstances.

21.  Having reflected on the matter, in my view it is right that in any event the plaintiff is to have 75% of its costs arising from and arising from this application, such costs to be taxed if not agreed, and I so order. For the avoidance of doubt, there is to be a certificate for two counsel.

(b) Defendant’s summons dated 8 July 2009: application to vary order nisi

22.  As the Judgment makes clear (at paragraphs 62-71), this was the defendant’s request for discovery of the affidavits filed by the liquidators and the CCB, together with exhibits, in support of or in opposition to the liquidators’ section 221 applications in HCCW 49 and 50 of 2000.

23.  This request was declined, for the reasons given, and the court made an order nisi that costs should follow this event.

24.  Mr Smith sought to vary this order to ‘costs in the cause’, on much the like grounds as his opposition to an adverse costs’ order on the main summons, but I fail to see why this should be so.

25.  Accordingly, I confirm the order nisi as set out in paragraph 70 of the Judgment.

(c) Plaintiffs’ summons dated 8 July 2009

26.  This was the plaintiffs’ application for discovery of the Settlement Agreement dated 30 October 2006 in respect of the Semi-Tech Corporation in the United States, and to which the defendant was privy.

27.  This application is dealt with in the Judgment (at paras 72-82), and was granted, subject to the conditions set out at paragraph 81.

28.  Once again, the order nisi as to costs was that such works should follow this event; once again I see no reason to accede to Mr Smith’s request to vary this order in the terms stated at paragraph 82 of the Judgment, which I now confirm.

Costs of the 6^th Case Management Hearing

29.  The foregoing costs’ argument was canvassed at this hearing, together with various assorted matters of case management.

30.  I order that the costs of the hearing on 30 July 2009 be costs in the cause, such costs to be taxed if not agreed.