Peregrine Fixed Income Ltd (in Liquidation) v. Jp Morgan Chase Bank

HCCL 2/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.2 OF 2004

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BETWEEN

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Before : Hon Stone J in Chambers

Date of Hearing : 4 March 2005

Date of Judgment : 15 March 2005

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JUDGMENT ON COSTS

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The application

1.By summons dated 18 February 2005 the plaintiff herein applies for variation of a costs order nisi made by this court by Order dated 4 February 2005, whereby the costs of this action, including the costs of the defendant’s application to stay this action on the ground of forum non conveniens, were ordered to be to the defendant in any event, to be taxed if not agreed.

2.The foregoing costs’ order was made as the consequence of a judgment of this court, dated 4 February 2005, wherein the action herein was stayed in favour of the United States District Court for the Southern District of New York.  This judgment speaks for itself.

The argument

3.On behalf of the plaintiff liquidators Mr Smith SC, who appeared also on the substantive argument, had a short point on the issue of costs.

4.It was this.  He submitted that although his clients ultimately had failed in their resistance to the defendant’s stay application, nevertheless it was clear from the judgment of the court that the application would have been dismissed but for the late undertaking by the defendant not to plead any time bar defence in New York, which undertaking had been refused by the plaintiff prior to the hearing.

5.Thus, said Mr Smith, the plaintiff had been justified in resisting the stay application, and should not suffer the consequences in terms of costs.

6.In all the circumstances, therefore, a fair order would be that each party should bear its own costs.

7.For the defendant Mr Jin Pao, who, together with Mr Shieh SC, had appeared upon the stay application, disputed this approach.  There was no reason, he said, why costs should not follow the event, as indeed was reflected in the existing order nisi.

8.The timing of the limitation undertaking was irrelevant to the question of costs, he argued, and any earlier undertaking could not properly be said to have disposed of the need for the substantive hearing.

9.Accordingly, looking at the matter in the round, Mr Jin Pao submitted that in this instance there were no exceptional circumstances justifying departure from the normal rule that costs should follow the event, and he asked that the order nisi be affirmed.

Decision

10.Since hearing this application to vary, I have reminded myself of the evidence filed upon this application, in particular in terms of the time bar issue.

11.I have come to two conclusions.

12.First, notwithstanding his attractive argument, I do not consider that Mr Smith is justified in putting his case as high as he has.  I recognize that he is not asking for any of his costs, and that he is simply contenting himself with a request that there be no order as to costs.

13.However, I have been unable to accept the premise necessarily implicit in his argument, namely that had the undertaking been forthcoming at an earlier stage, the plaintiff liquidators would have ceased to contest the defendant’s move to take this action to the New York court, and thus that the costs of the stay application would not have been incurred.

14.To the contrary.  It seems to me that even with the time bar issue out of the way in terms of the undertaking as eventually was forthcoming, the probability is that such undertaking would not have been dispositive of the forum non conveniens application, and that (as was the case) argument remained in terms of the twin elements of natural forum and juridical disadvantage.

15.In this context I note that the pre-application letter of 14 December 2004 from Messrs Richards Butler, the plaintiff’s solicitors, wherein a wide time bar undertaking was requested, had concluded that such undertaking was sought “with a view to disposing of the time bar issue and narrowing the matters in dispute at the forthcoming hearing”, and that there was no indication that any such undertaking effectively could or would signal the end of the plaintiff’s resistance to the defendant’s stay application.

16.It follows that I do not consider that Mr Smith’s bull point, which revolves around the observation of this court that, absent the undertaking, the stay application would have failed, suffices to get him home.

17.I have, however, come to a further conclusion involving an argument specifically not mounted by Mr Smith, although perhaps this is unsurprising in light of the general judicial approach as to costs, and the well-known reluctance to ‘fillet’ cases in terms of successful/unsuccessful issues, and their consequent costs’ implications.

18.The issue of time bar limitation, and in particular the ambit of any potential time bar, clearly was something whose dimension was not always fully appreciated, at least by the plaintiff.

19.Putting it at its lowest, it seems not unfair to conclude that the defendant skillfully ‘finessed’ this issue, against the backdrop of the rejection of the plaintiff’s pre-application request for a global time bar waiver, culminating in Mr Shieh’s unsuccessful submission, during argument upon the substantive application, to convince that the relative certainty of the plaintiff being time-barred in New York did not constitute a juridical disadvantage since this court could, and indeed should, depart from the established common law position — wherein statutes of limitation are regarded as procedural, and governed by the law of the forum — and adopt the ‘modern’ approach that limitation is a substantive defence governed by the proper law of the transaction, and thus that there would be no juridical advantage in going to New York because the like result, in terms of a limitation defence, would enure in Hong Kong.

20.It was only when this first instance court made it clear to leading counsel that it was not interested in overturning a century or so of conflicts jurisprudence, and upon an interlocutory application at that, that it became evident that the time bar issue was likely to loom large in the eventual decision, and efforts were set in train to make this issue disappear — as indeed it did, via the proffering by the defendant of the undertaking in question, the content of which was brought to the attention of the court a few days after the hearing of the defendant’s application.

21.I have focused upon the manner in which the time bar undertaking unfolded because it seems clear that such an undertaking was always ‘in play’, so to speak, but that for tactical reasons it was not produced in its eventual form until it became evident that, absent such undertaking, the stay application would be in difficulty.

22.I appreciate that adversarial litigation involves nice decisions as to how to deal/progress/argue particular aspects of a case.  However, the relevance of this point is that there is little doubt, in the context of the juridical disadvantage element of the stay application, that had the issue of time bar been conceded prior to, or at the outset of, the application in the form of the undertaking as ultimately was forthcoming, then this application would have been shortened, and certainly would not have taken in excess of one day.

23.The short point, therefore, is that in so far as the defendant wished to deal with the time bar issue in the manner that it did, it cannot expect fully to recoup its costs of the hearing as thus extended.

24.Accordingly, I have decided, in the particular circumstances, to vary/supplement the existing order nisi as to costs of this action/application in terms of the following order :

The costs of this action, including the costs of this application, be to the defendant, to be taxed if not agreed, with certificate for two counsel, save that there be no order as to costs of the second day of the application (that is, of the hearing on 20 January 2005) and save that there is to be no order as to the costs of the plaintiff’s application, by summons dated 18 February 2005, to vary the costs order nisi dated 4 February 2005.

I further order that such costs be paid in full out of the assets of the plaintiff in priority to creditors and the costs of the winding up.

Mr Clifford Smith SC, instructed by Messrs Richards Butler, for the plaintiff

Mr Jin Pao, instructed by Messrs Allen & Overy, for the defendant