Friendship Shipping and Trading S.A. v. I.V.L. Dhunseri Polyester Company S. A. E.

HCCT 66/2024

[2024] HKCFI 3511

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS NO. 66 OF 2024

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DECISION AS TO COSTS

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Introduction

1.The OS was argued before me for half a day on 6 November 2024. I handed down judgment in this matter on 19 November 2024 (“the Judgment”). Essentially I dismissed the OS because P’s OS was, as at the date of the substantive hearing, not supported by admissible evidence. In case I was wrong on the admissibility of evidence issue, I addressed the substantive arguments by having regard to P’s evidence de bene esse. On the substantive argument, I did not consider it appropriate to grant P an anti-suit injunction (“ASI”) against D, principally on the grounds of delay and comity (having regard to the resources expended by the parties and the Egyptian Court), and also having regard to P’s lack of clean hands in dealing with this Court.

2.The parties have filed written costs submissions as directed.

(1)  D seeks costs on an indemnity basis, certificate for two counsel, and seeks a summary assessment of costs. It has lodged a statement of costs totalling HK$2,895,778.06.

(2)  P resists an indemnity basis award, resists certificate for two counsel, and resists summary assessment of costs, describing the costs claimed as “outrageous”.

Taxation basis

3.The parties have agreed the legal principles applicable to a consideration of whether to award costs on an indemnity basis.

(1)  Costs are at the Court's discretion pursuant to Order 62 of the Rules of the High Court (“RHC”).

(2)  In exercising its discretion, the usual order for costs made in favour of a successful party in litigation is costs on a party and party basis.

(3)  Pursuant to O. 62 r. 28(3) of the RHC, the Court has a broad discretion to order costs on an indemnity basis if it thinks fit to do so. Town Planning Board v Society for Protection of the Harbour Ltd (2004) 7 HKCFAR 114 at §§6 to 7 & 12.

(4)  As held by the Court of Final Appeal in Commissioner of Inland Revenue v Poon Cho-Ming John (No.2) (2020) 23 HKCFAR 74 at §4:

“(a) In certain circumstances, costs may be awarded on a more generous than usual basis of taxation so as to achieve a fairer result.

(b) It is for the receiving party to show that the case has some special or unusual feature.

(c) Such features are not confined to an ulterior motive, an improper purpose, deception or underhand conduct on the part of the paying party.

(d) Neither the attributes of the parties nor the character of the proceedings are irrelevant to the question of whether a more generous than usual basis of taxation should be ordered.

(e) The discretion to order a more generous than usual basis of taxation is not to be fettered or circumscribed beyond the requirement that such taxation be ordered only when it is appropriate to do so.

(f) As to that, the grounds on which a more generous than usual basis of taxation is to be ordered must be connected with the case. That extends to – but no further than to – any matter relating to the litigation and the parties’ conduct in it, and also to the circumstances leading to the litigation.”

(5)  RHC O.62 r. 5 sets out “special matters” to be taken into account when the Court is exercising its discretion as to costs. These include the underlying objectives in RHC O. 1A, r. 1, and the conduct of the parties (including the manner in which a party has pursued his case).

4.I remind myself of the underlying objectives as set out in RHC O.1A r.1:

“(a) to increase the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the Court;

(b) to ensure that a case is dealt with as expeditiously as is reasonably practicable;

(c) to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings;

(d) to ensure fairness between the parties;

(e) to facilitate the settlement of disputes; and

(f) to ensure that the resources of the Court are distributed fairly.”

5.In my view, it is highly unusual to reach a substantive hearing without sworn evidence in support of the application having been filed. The reason it happened here is because:

(1)  P’s solicitors filed evidence (namely, Tsui 2 and Tsui 3 as described in para. 5 of the Judgment) to exhibit the unsworn evidence sought to be relied on by P;

(2)  P’s solicitors stated that the duly executed evidence would be filed and served as soon as possible.

6.Generally, solicitors who file evidence in this way on behalf of their clients will use the language of “undertaking” to file the duly executed evidence when available. However, where solicitors have stated on the general oath of their affidavit/affirmation that they will do something, I consider there is no material difference in effect. I will describe the statements of intention to file as “undertakings”.

7.It is standard practice to proceed on the basis of such undertakings where a little more time is required to fulfil technical requirements and/or to overcome logistical difficulties in filing properly executed documents. Legal practitioners and the Court in Hong Kong are familiar with this practice and will proceed on trust that the relevant solicitors will ensure the filing of duly executed documents before any material date. The failure to actually file duly sworn evidence pursuant to an undertaking before a milestone date which is months after the date of the undertaking is in my own experience unheard of, and at the very least strikes me as very unusual. The OS was issued on 25 June 2024. Tsui 2 with the first undertakings was dated 2 August 2024. The substantive hearing was on 6 November 2024, over 3 months after Tsui 2.

8.On the basis of the undertakings, D understandably prepared its evidence and its case in response, and took no objection to proceeding towards the substantive hearing. If at any time prior to the hearing on 6 November, the duly executed affirmations on behalf of P had been filed, there would have been no issue and the OS would have been substantively argued on the basis of such evidence.

9.Yet, the duly sworn evidence was clearly not filed in advance of the hearing. No warning of this was given by P to D or to the Court. Indeed (as I found at para. 17 of the Judgment), at no time has P or its solicitors provided a full, proper, consistent explanation for this turn of events. Accordingly, D prepared fully to argue the case, and the Court allotted resources to hear the case. Had P been acting responsibly, if faced with logistical difficulties in filing duly executed evidence, P ought to have informed D and the Court, and sought directions, presumably for an adjournment of the substantive hearing if it was going to be possible to overcome the logistical difficulties in the future. Yet, P allowed the OS to proceed to a substantive hearing without admissible supporting evidence which has led to a waste of court resources, and unfairness to D who has been misled by the undertakings to prepare for a case which was never in fact made. (I note that P’s written submissions on costs assert that P filed ‘original signed affirmations’ on 11 November 2024 – i.e. 5 days after the hearing. Whether or not these affirmations were properly executed, I do not know, but that is immaterial once the milestone date of 6 November had been and gone).

10.I find this feature of the case to be special and unusual, and that it alone warrants a more generous than usual basis of taxation. This feature permeates the entirety of the OS from the moment it was issued until the substantive hearing, and accordingly all of D’s costs of and incidental to the OS should be taxed on the indemnity basis.

11.Whilst I found the substantive application for the ASI (assuming P’s evidence to be admissible) to be unmeritorious, I do not regard it as unusually so, or sufficient to warrant a more generous taxation.

12.At para. 92 of the Judgment, I found that P’s failure to disclose all of the VCPs to the Court on its ex parte application for leave to serve the OS out of the jurisdiction was material. Material non-disclosure on an ex parte application is often addressed by a higher basis of taxation of costs. This feature fortifies my view that P should pay a higher rate of taxation. However, I consider that full disclosure would not have led to a different order on service out. If the “inadmissible evidence” feature was not present, then I would have wished to consider a higher basis of taxation in respect of part rather than the whole of the OS proceedings on the basis of the material non-disclosure alone.

Summary assessment

13.There is no dispute that I have jurisdiction to make an order that D be entitled to a sum of money summarily assessed in lieu of taxed costs: RHC O.62 r.9(4)(b).

14.There is no dispute that D failed to provide a statement of costs with its skeleton argument in advance of the 6 November hearing as provided for in Practice Direction 14.3 para. 8. Para. 15 of the Practice Direction states that such failure is a matter to be taken into account when deciding what costs order to make. The obvious impact is I do not have the benefit of counsel’s submissions at the hearing on the statement of costs. Nor do I have the benefit of being able to compare D’s statement of costs with P’s statement of costs. I still have not been provided with P’s statement of costs and assume that P also failed to comply with para. 8 of P.D. 14.3.

15.It seems to me that D’s costs are very substantial and ought to be considered more carefully than is possible on a summary assessment on paper without the benefit of P’s own statement of costs and/or an oral hearing.

Certificate for two counsel

16.P opposes certificate for two counsel for D on the basis it has not been justified, and P was represented by one counsel only.

17.I consider that the relief sought by the OS was a matter of great significance to D and that there was sufficient factual and legal complexity to warrant D instructing two counsel. I refrain from any comment on the seniority or rates of counsel as that is a matter for taxation.

Order to be made

18.I accordingly order that D’s costs of and incidental to the OS be taxed on an indemnity basis if not agreed, with certificate for two counsel.

Mr Edward Alder, instructed by Tsui & Co. for the Plaintiff

Mr Eugene Kwok & Mr Lavesh Kirpalani, instructed by Baker & McKenzie for the Defendant