Sican Petroleum Plc v. Wang Guo Ju and Others

HCA978/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 978 OF 2009

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BETWEEN

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Before: Master K. Lo in Chambers (open to public)

Date of Hearing: 25 June 2010

Date of Decision: 25 June 2010

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D E C I S I O N

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1.This is the Defendants’ application against the Plaintiff for security for costs in the sum of $38 million.

2.The summons was taken out on 17 May 2010 after the Defendants sought the said sum of $38 million from the Plaintiff, to which the Plaintiff replied and said that the sum sought was excessive, without disclosing their stance as to whether they concede there is liability to pay security for costs.

3.After the summons was issued on 24 May 2010, the Plaintiff’s solicitors wrote to the Defendants, conceding liability to pay security and indicated that they just disputed quantum.

4.In their written submission, the Plaintiff urged this Court to award no more than $1 million as security for costs up to and including the PTR or the CMC setting the case down. 

5.Counsel for the Defendants concedes that there be security for costs payment from the Plaintiff up to the stage including the PTR.  They ask for $28 million.

6.The only issue before the Court is therefore quantum.  Parties concede that the Court should consider the amount of costs on party and party basis.  They also agree that the test applied is that proper or necessary for the attainment of justice or enforcing or defending the rights of a party whose costs are taxed.

7.I am told by Counsel for the Defendants that the Plaintiff in this case is seeking damages from the Defendants in the sum of around $1 billion.  In support of this contention, he invited the Court to the announcement notice (page 238 of bundle B).  It was said that the notice concerns the acquisition of a contract which the Plaintiff said the Defendants had obtained, using confidential information from the Plaintiff, and the consideration of the contract is stated to be not less than $2 billion and not more than $10 billion.  The Defendants say the Plaintiff is asking damages to be assessed at 50 per cent of the profits obtained by the Defendants using the said confidential information, which basically is therefore the sum of around $1 billion.

8.Counsel for the Plaintiff submitted that she had no idea of the amount of the claim of her client.

9.In any event, the Court is satisfied that the claim of the Plaintiff is a colossal sum.  From the pleadings, one notes that there is disputed issues of fact.

10.I was told that breach of fiduciary duty, equitable duty of confidence and dishonest assistance was pleaded and law in these areas are to be considered.  Whilst I could not say that the case is very complex, it is a fact that the same involves a substantial amount.  According to the timetabling questionnaire of the parties there are 12 witnesses.  There is also a vast volume of documents, including technical documents from data package which is conceded by Counsel for the Plaintiff that one might need the assistance of experts before one can interpret these documents into meaningful information.

11.At this moment in time, however, there has been no leave granted for the use of expert evidence.  The need for the same is disputed, as one can see from the timetabling questionnaire of the Plaintiff filed 20 April 2010, as compared to a different stance taken by the Defendants in their timetabling questionnaire filed on 12 May 2010.

12.The Defendants, in support of their original application for $38 million security for costs, have disclosed their skeleton bill of costs for the consideration of the Court and the Plaintiff.  The Defendants’ updated application for security for costs, up to the stage of PTR is now $28 million as opposed to $38 million.

13.The skeleton bill of costs has been prepared on 17 May 2010, i.e., before the Plaintiff indicated their liability to pay, the same has not since been updated to reflect the actual situation.  In fact, on 25 May 2010, the Plaintiff already indicated to Master Ng that for the purpose of the present application for security for costs, no affirmation in opposition would be filed by the Defendant as they will not dispute liability to pay security for costs.  Nevertheless, up to this date, i.e. date of hearing, the skeleton bill of costs has not been rectified and has still included items which should not be included, such as non-existent consideration of affirmations filed by the Plaintiff.

14.It was said by Counsel for the Plaintiff that in the skeleton bill of costs, the amount of costs claimed is astronomically inflated or excessive.

15.As this Court has pointed out, in view of the amount of claim involved and the issues of fact and law under consideration, though not very complex, it is proper to instruct a senior counsel.  However, as the case is not of particular complexity, I do not consider it reasonable on a party and party taxation, the handling solicitor be awarded anything more than $4,000 per hour.

16.It is also hard to believe that the costs incurred by the Defendants’ update is already up to $6 million, having regard to the nature of the case, stage of proceedings and the work done.  I do not see e.g., why a PRC lawyer is needed.  It has not been pleaded that PRC law is applicable or relevant. Further, disbursements alone charged for taking instructions by travelling to and from Shenzhen or Beijing by counsel or lawyer of the Defendants is already $0.5 million.  This could not be justified nor considered proper or necessary.

17.Whilst I agree for preliminary instructions taking it might be necessary that the counsel and solicitors do travel to and from the mainland but for future conduct of the case, I do not see that it is proper or necessary that these further instructions taking need necessarily be done that way.  Other modes of taking instructions, using modern technology depending on the circumstance may be the only proper or necessary mode of taking instructions on a party and party taxation basis.  The total number of hours in taking instructions from client or communicating with client claimed by the Defendants is also hard to accept, and is considered grossly inflated and unnecessary.

18.The bill of costs alone for the Further and Better Particulars request is stated to be around $0.9 million.

19.For the present security for costs application, the cost is said by the Defendants to be around $1 million, although the time fixed for hearing today is only two hours.

20.Costs for general discovery and specific discovery, just communication alone, is said to be $0.84 million, involving more than 200 professional man hours.

21.The cost of expert evidence alone is said to be $3.5 million, not taking into account the cost of attendance of these experts at hearing, if necessary.  I could not see how, by any standard, the same is justified.  There is no fee schedule or any documents in support of such contention.

22.In fact, as noted by counsel for the Plaintiff, although it is said that $6 million in costs has been incurred, on a solicitor and own client basis, no fee note, receipt or any document to that effect from the Defendants’ solicitors or counsel was produced for the purpose of this application.

23.As I have said, costs of mediation is initially usually being borne equally by parties to mediation.  This is the usual mode and is confirmed by counsel for the Plaintiff to be so.  If the same should take place for a period of five days, which is rare, it would be, according to the charges charged by Ms Teresa Cheng, $400,000, half‑share of which is only $200,000.

24.Costs of use of lawyer’s office are minimal.

25.Preparation and exchange of witness statements, probably involving the 12 witnesses are said by the Defendants to cost $5.4 million.  It is again incredible.

26.I conclude therefore that the skeleton bill of costs submitted by the Defendants for the attention of the Court are totally unhelpful to the Court.  They do not reflect the costs awardable to the Defendants in reality on a party and party taxation basis.

27.I have regard to the underlying objectives set out in Order 1(a) of the RHC, i.e. to promote reasonable proportion and procedural economy in the conduct of proceedings.  I adopt a broad brush approach to the quantum for further security for costs applicable in this case.

28.Having regard to all the circumstances of this case, the preparation and progress of the case so far and in the future up to the stage of PTR, I find that the appropriate figure would be $1.8 million.

29.I therefore order that the Plaintiff do give security for the Defendants’ costs up to and including the PTR or the CMC setting the case down for trial by paying into court within 21 days from the date hereof the sum of $1.8 million, and until such security moneys is paid, all further proceedings be stayed.

30.Costs normally follow the event.  In this case, the Plaintiff has indicated the appropriate amount of security is $1 million.  The Defendants however have asked for $28 million.

31.I find the sum sought by the Defendants totally unreasonable and absurd.  On the other hand, the Plaintiff has only acceded to liability to pay security for costs after the issue of the summons and failed to make any payment as security.

32.Costs are always a matter of discretion for the court.  In this case, I find that the appropriate costs order I make is one of no order as to costs, and I so make the order.

Ms Karen Cheung, instructed by Messrs Hammonds, for the Plaintiff

Mr M T Yeung, instructed by Messrs Hui & Lam, for all Defendants