Carewins Development (China) Ltd v. Bright Fortune Shipping Ltd

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NOS. 49 & 50 OF 2004

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HCCL 49/2004

BETWEEN

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Before : Hon Stone J in Chambers (Open to public)

Date of Hearing : 4 September 2006

Date of Judgment : 4 October 2006

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JUDGMENT  ON  COSTS

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Introduction

1.These were related actions wherein the plaintiff cargo owners sued the defendant carriers for damages for misdelivery.

2.On 27 July 2006 this court handed down its judgment consequent upon a six day trial.

3.The result was that the plaintiff failed in its claims, which were dismissed, and the defendants failed in their counterclaims, which were also dismissed.

4.The judgment, which is of some length, speaks for itself.

5.Of the six distinct issues which were debated within the framework of the plaintiff’s claims, five of those issues were decided in favour of the plaintiff.

6.However, upon one issue, that of the exemption clause, the plaintiff failed, and as a result failed on its claims in toto.

7.Under the exemption clause head this court decided first, that the Hague-Visby Rules had no application to post-discharge events – and hence at the time of the misdeliveries complained of the provisions of Article III, rule 8 had no application to these facts – and second, that the contractual exemption clause in the bills of lading thus was relevant and operational, and that on its particular wording it was not possible to ‘read down’ the exemption clause in question and to limit its ambit, notwithstanding the fundamental requirement upon the carrier to deliver the cargo only against presentation of an original bill.

8.That which now remains to be decided, and which is the subject of this judgment, is the issue of costs, as to which this court had called for argument from counsel.

The parameters of argument

9.The battle lines are clear.

10.For the defendant, Mr Wright says that he has clearly and obviously won. 

11.The plaintiff’s claims were dismissed, he said, and that although he acknowledged failure on the counterclaims, these were only mounted by reason of the initial claims, and that in any event the substance of the counterclaims was taken by way of the defence of equitable set-off.

12.Mr Wright says that either the defendants should have the costs of the action in their entirety, or alternatively that the costs should follow the respective events, with the result that the defendants should have the costs of the dismissed actions brought by the plaintiffs against them, and the plaintiffs should have the costs of the rejected counterclaims.

13.For the unsuccessful common plaintiff in each action, Mr Kerr firmly disagreed.

14.His position was that although indeed his clients had lost their claims, this had occurred solely by reason of the court finding against him on the discrete issue of the exemption clause, and that upon every other issue, and indeed upon every dispute of fact which the court had had to decide, his clients had succeeded.

15.Against this unusual background, therefore, Mr Kerr submitted that the appropriate order as to costs should be no order as to costs, this to reflect the reality of this litigation as presently concluded.

Relevant principle

16.There is, I think, no dispute as to underlying principle, although as is often the case it is the application thereof which produces contention.

17.Both counsel accept the principles laid down in In re Elgindata (No. 2) [1992] 1 WLR 1207, in which in a detailed judgment the English Court of Appeal laid down, inter alia, that the general rule that costs should follow the event unless there were circumstances suggesting that some other order should be made did not cease to apply merely because a successful party had raised issues or made allegations which he had failed to establish at the hearing of the action, and that a successful party to an action who had not acted improperly or unreasonably in raising issues ought not to be ordered to pay any part of the unsuccessful party’s costs.

18.Elgindata, op. cit., has been approved in the Hong Kong Court of Appeal – see La Chemise Lacoste SA v. Crocodile Garments Ltd [2000] 4 HKC 317 – and has also been applied in earlier decisions of this court – see, for example, Nam Kwong Medicines & Health Products Co. Ltd v. China Insurance Company Ltd & anr, HCCL 27 of 1999, judgment on costs dated 6 August 2002, and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., trading as Rabobank, Hong Kong branch v. Bank of China, HCCL 56 of 2001, judgment on costs dated 23 July 2004.

19.In Nam Kwong Medicines, op. cit., this court considered specifically the exercise of the undoubted discretion on the part of the trial judge to disallow costs in part which are referable to an issue that has failed and has taken up a substantial part of the trial, and noted (at paragraph 8) that “as a matter of general approach to the issue of trial costs, that the occasions which justify the ‘filleting’ of costs according to success or failure upon any specific issue arising for decision within the composite whole are likely to be relatively few and far between…”

20.There is no dispute, however, that the court can do so in appropriate cases.  The salient question is whether this is one of those cases?

Decision

21.Tempting as it is simply to follow the general rule that costs are to follow the respective events in terms of the dismissal of claim and counterclaim, I do not consider that in the particular circumstances of this case that this would be appropriate.

22.The crucial aspect of this case, at least from a costs’ perspective, is that, save for one issue only, namely that of the effect upon the factual matrix of this particular exemption clause – which, as earlier indicated, is an argument necessarily arising from a conclusion as to the ambit of the operation of the Hague-Visby Rules – the fact remains that the plaintiff has been successful upon every other matter of fact and law.

23.In the particular circumstances, therefore, I have some sympathy with Mr Kerr’s complaint that were costs simply to be ordered to follow the event, which would be the normal course, this would be tantamount to ‘rewarding’ defendants whose factual evidence specifically has been rejected by the court; had it not been for the court’s reluctant view of the effect of this particular exemption clause, he submitted, upon every other issue his client had been successful.

24.Nor, Mr Kerr said, was it correct to clothe the counterclaims in the descriptive garb of the defence of equitable set-off; the fact was that declaratory relief specifically had been sought, and refused, and if obtained such would have been determinative of contingent claims, and thus it was entirely right for the plaintiff successfully to have resisted this relief mounted by way of true counterclaim.

25.Mr Kerr also specifically drew the court’s attention to the provisions of Order 62, rule 7(1), which refers in terms to the treatment of costs arising from any improper or unnecessary matter.

26.Mr Wright’s spirited riposte essentially was that in the final presentation of his client’s case he had been careful not to rely upon the alleged oral agreement which had been propounded by the defence witnesses, and which had been rejected by the court, and that in his final address the specific points which he had pressed on the court were all respectable and arguable points; true it was that he had lost on all those points save for one, namely, the exemption clause which had got him home, but the fact that he had been unsuccessful on these arguable issues certainly was not, and should not, be a matter conclusive of the costs’ argument, and in any event the points taken in the closing submission all had been pleaded, and could not be characterized as points which should not have been pursued, or which clearly were demurrable on their face.

27.I have reflected at some length on the attribution of costs in this case, not least by reason of the relative oddity that a litigant which has won on all issues, factual and legal, save for one, has been unsuccessful by reason of that single failure.  On the other hand, of course, I recognize that this eventuality is part and parcel of the overall risk of litigation, and I bear in mind also Mr Wright’s submission that the fact that he has lost on these other issues in itself should not penalise his client in costs provided that those points were reasonably taken.

28.At the end of the day the determination of costs is to a substantial extent impressionistic on the part of the tribunal which has seen and heard the case, and the court has to grasp the nestle and come to an overall view.

29.In this instance I do not think that it can be right to go so far as Mr Kerr has suggested, and to make no order as to costs, attractively though he put the point; equally, I am unable to convince myself that in the circumstances that it would be just and appropriate for the defendants, ultimately successful though they have been in each of these actions, to be awarded the entirety of their costs.

30.Doing the best that I can in what I have not found to be an easy decision, and after reflecting on the particular circumstances of this case, I have concluded that the proper order is as follows :

That the plaintiff is to pay the defendant 50% of the defendant’s costs in each action, such costs to be taxed if not agreed, save and except that the defendant is to pay the plaintiff the costs of and occasioned by the defendant’s counterclaim in each action, such costs to be taxed if not agreed.

31.I recognise that this formulation represents a ‘broad brush’ approach, but this order nevertheless is one that feels right in the circumstances of this case, besides having the advantage of being relatively easy to implement in terms of any taxation assessment as may be required.

32.The sole costs’ issue remaining is as to the costs of the costs’ argument. 

33.In this connection I have been informed by counsel that in this regard there are matters about which I should be apprised, and in the circumstances, and absent agreement thereon, I will entertain brief written submissions; if and in so far as the parties wish actually to be heard on the point, this can be accomplished at a short 9.30 a.m. appointment to be arranged.

Mr John Kerr, instructed by Messrs Ho, Tse, Wai & Partners, for the plaintiff in both actions

Mr Colin Wright, instructed by Messrs H H Lau & Co., for the defendant in both actions