The Owners of and/or Other Persons Entitled To Sue in Respect of the Cargo Lately Laden on Board the Ship or Vessel "Golden Georgia" v. The Owners and/or The Demise Charterers of the Ship or Vessel "Golden Georgia" and The Owners of the Sister or Vessel "Golden Elizabeth"

HCAJ45/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO.45 OF 2004

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Admiralty action in rem against : the ship or vessel “GOLDEN GEORGIA”
and the sister ship or vessel “GOLDEN ELIZABETH”

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BETWEEN

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Before : Hon Waung J in Chambers (Open to Public)

Date of Hearing : 22 November 2006

Date of Judgment : 22 November 2006

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J U D G M E N T

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1.I have before me a review of taxation ordered by Master De Souza.  On 21 June the taxation decision was handed down whereby the Master ordered in favour of the defendants in relation to the cost of the Action including, what I may call, some pre-action costs.  The plaintiffs having discontinued this Action objected to substantial items of pre-action costs and thereby have brought this review.

2.The matter in dispute in the Action involves a claim for cargo damage as a result of alleged contamination.  The plaintiffs sought security from mid-January 2004, and there were considerable correspondence for security.  Eventually, security in the agreed amount was given.  The Hong Kong proceedings were discontinued by the plaintiffs without leave because the plaintiffs perceived that the defendants were correct in that the dispute must be referred to New York arbitration under the relevant arbitration clause, and the plaintiffs having obtained the security required no longer thought it was necessary for the Hong Kong proceedings to continue.

3.The consequence however of the discontinuance of the Hong Kong action is the usual one of the defendants being entitled to the cost of the Action.  The master therefore proceeded to tax the costs, including those of two categories which the plaintiffs now dispute.

4.The first category of costs is, I might call, the costs in connection with examination of samples to determine the alleged contamination as well as to determine perhaps the extent of the alleged damages, and therefore also relevant to the question of the amount of security that had to be given.

5.The other category of costs disputed is the negotiation and agreement as to the correct form of security both in terms of quantum as well as in terms of jurisdiction of the dispute.

6.The very narrow point that eventually requires my focus for determination, as advanced by Mr Lam for the defendants is that as a result of Order 21, rule 2 the plaintiffs’ discontinuance without leave and the operation of Order 62, rule 10 the defendants upon discontinuance, are entitled to tax the cost of Action or costs occasioned by the matter withdrawn, and the defendants are entitled, pursuant to Order 62, rule 28, to what is provided therein.  I would read out what is said in Order 62, rule 28, paragraph 2 :

“Subject to the following provisions of this rule, costs to which this rule applies shall be taxed on the party and party basis, and on a taxation on that basis there shall be allowed all such costs as were necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed.”

7.It seems to me that having regard to that formula in the relevant rules, that the relevant question to ask, whether by the master or by this court, must be in relation to the disputed items or categories, whether those costs were necessary or proper for defending the right of the defendants.  If one looked at historically what were happening in January, February, this is the picture : the plaintiffs were threatening proceedings by demanding security, as result the defendants were taking steps on the question of the amount of security, on the question of the testing of samples and on the question of arrest in Hong Kong.  The sequence of events seem to me to indicate that the defendants were protecting their right to ensure that they would only be giving security in the proper amount for the right jurisdiction and to ensure that they are not vexed by unnecessary threats in Hong Kong, if I may put it in that way.

8.Both those two categories of the disputed costs seem to me to be incurred by the defendants to protect their right.  I totally accept what Mr Stock said that, for example, in relation to the examination of samples by defendants, that they may also benefit the New York arbitration, but that is not the reason or sufficient reason for the court not to apply Order 62, rule 28, paragraph 2.

9.A similar situation arises, in a reverse form, in a case cited to me of Registrar Chu (as she then was) Daewood Hong Kong Limited v Mana Maritime Inc., except there, it was in relation to costs incurred, in relation to Singapore proceedings which were not allowed.  Here, the costs were incurred in connection with Hong Kong proceedings.  It may also benefit New York, just as in the Daewood case, it might also benefit Hong Kong, but that is neither here nor there.  There might be a straddling of benefit between the two, and if so this does not change the picture.  That is not a reason for the court not to apply Order 62, rule 28, paragraph 2.

10.In a way, it is unfortunate that the court’s hand is tied because of the sequence of the various steps taken and not taken.  The Action could have been stayed pending arbitration, the parties could have come before the court on application for leave to discontinue when a specific order of costs could be made in relation to these disputed categories when the court has a greater flexibility, if I may put it in that way.  I do not disagree with what Mr Stock said that this is a highly technical matter and this may be a reflection of the very careful way Mr Dunlop for the defendants has handled this case, highly technical but to the defendants’ advantage.  But the reality is that this is what has happened and it seems to me that the Master was entirely right and I cannot see that it is within the power of this court to order otherwise.  It is my sincere hope that with this order in favour of the defendants, should the plaintiffs win in New York that the New York arbitrator would have the sufficient power and the discretion to do what is right in the circumstances.

11.In my conclusion, the application for review is dismissed.  I would hear the parties as to costs.

[Submissions for Costs]

Mr Alexander Stock, instructed by Messrs Clyde & Co., for the Plaintiffs

Mr Douglas Lam, instructed by Messrs Holman Fenwick & Willan, for the Defendants