Kam Hing Trading (Hong Kong) Ltd v. The People's Insurance Co of China (Hong Kong) Ltd and Another
Read the full judgment text of HCCL 27/2009 on BabelCite. This HCCL judgment was delivered on 15 December 2010.
1. This was an action brought by the plaintiff log trader against the 1 st defendant insurer and the 2 nd defendant insurance broker in respect of a cargo of Malaysian round logs which went down with the carrying vessel, the “WORLDWIDE SHANGHAI”, in heavy weather in the Taiwan Strait on 10 November 2007.
Cited by 5 cases · Cites 1 case
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HCCL 27/2009 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMMERCIAL ACTION NO. 27 OF 2009 ---------------------- BETWEEN
---------------------- Before: Hon Stone J in Chambers [Decision upon written submissions] Dates of Parties’ Written Submissions: (a) Between plaintiff and 1st defendant: (b) Between plaintiff and 2nd defendant: Date of Handing Down Decision: 15 December 2010 --------------------------------------------------------------- DECISION UPON CROSS APPLICATIONS TO VARY --------------------------------------------------------------- The judgment 1.This was an action brought by the plaintiff log trader against the 1st defendant insurer and the 2nd defendant insurance broker in respect of a cargo of Malaysian round logs which went down with the carrying vessel, the “WORLDWIDE SHANGHAI”, in heavy weather in the Taiwan Strait on 10 November 2007. 2.The plaintiff sought an indemnity against the 1st defendant against the loss thus suffered pursuant to a Marine Cargo Policy, backdated to 31 October 2007, issued in respect of the cargo, such policy having been issued consequent upon an Open Cover dated 12 December 2006. 3.In the alternative, the plaintiff pursued a case against the 2nd defendant broker, which had made a declaration on behalf of the plaintiff under the Open Cover in relation to this cargo, and in response to which declaration the 1st defendant had issued the relevant policy; the causes of action against the 2nd defendant focused upon the alleged breach of the duty owed to the plaintiff by the broker in obtaining the insurance in question in terms of failing to ensure that the plaintiff understood the terms of the insurance it was obtaining, in particular that the 2nd defendant had failed to advise the plaintiff that vessels not classed in accordance with ICC/01(as the “WORLDWIDE SHANGHAI” in fact was not) would jeopardize such cover. 4.After a trial of some 9 days spread over an extended period between end March and early July 2010, this court issued its Judgment dated 31 August 2010, and dismissed the plaintiff’s action against both the 1st and 2nd defendants. 5.This Judgment, of some 75 pages, speaks for itself. 6.In each instance, an order nisi was made ordering that the costs of the action be to the 1st and 2nd defendants, such costs to be taxed if not agreed. 7.The necessity for this Decision arises first, because of the written cross applications of the plaintiff and the 1st and 2nd defendants’ to vary such costs’ order nisi, and second, by reason of the application by the 1st defendant regarding the reserved costs of the 1st defendant’s application to adduce expert evidence. 8.I take each of these aspects in turn. Variation of the Costs’ Order Nisi 9.By written submissions sent under cover of a letter dated 14 September 2010, the plaintiff made application to vary the costs’ order nisi as made against the plaintiff in paragraphs 187(2) and 253(2) of the Judgment dated 31 August 2010. 10.Cross-applications so to vary the order nisi were made by the 1st defendant by Counsel’s written submission dated 28 September 2010, and by the 2nd defendant by its solicitor’s written submission dated 14 September 2010. 11.Written replies to these respective submissions duly were submitted by the three parties, and the court was thus left to deal with the matter on paper absent an oral hearing. Costs relating to the action between plaintiff and 1st defendant (i) Costs generally 12.The plaintiff makes this application to vary the order nisi as to costs thus awarded to the 1st defendant without prejudice to its right to appeal against the substantive judgment. 13.The plaintiff naturally accepts that costs are in the discretion of the court, and for general guidelines relies on the well-known summary of the English law position in Re Elgindata (No 2), [1992] 1 WLR 1207. 14.The essence of the plaintiff’s application to vary the costs’ order nisi as made against it in this action is that there has been “full blown argument” in this case upon three main issues, first, whether the plaintiff is entitled to claim for loss against the 1st defendant, second, the issue of insurable interest, and third, the issue surrounding construction of the marine insurance as was issued. 15.The plaintiff says that the 1st defendant has failed on the first two issues, and has won this case solely upon the conclusion of the court relating to the third and last issue, namely that of construction. The plaintiff maintains that it always had been its case that the issue of construction, namely whether the loss and damage as suffered by the plaintiff consequent upon loss of the logs was subject to coverage by the policy, and that despite repeated attempts which had been made on its behalf to “narrow down and clarify” the relevant issues, nevertheless the plaintiff had used the ‘non-relevant issues’ to launch extraneous interlocutory applications for specific discovery, which amounted to nothing more than ‘fishing expeditions’ in a bid to support its wide-ranging and irrelevant defences. 16.The result of all this activity, the plaintiff maintains, is that the proceedings and trial unnecessarily had been prolonged, and unnecessary costs thereby incurred for which it should not now be made to pay. The plaintiff contends that but for the conduct of the 1st defendant, the trial would have been considerably shorter, and that there would have been no need to have had the lengthy examination and cross-examination of witnesses such as took place. 17.Accordingly, in the circumstances it is submitted that in view of the underlying objectives of the CJR and the fact that the conduct of the parties should be taken into account in making a costs’ order, the existing order nisi should be varied either so as to order that the plaintiff should be entitled to the costs of the unnecessary discovery applications as mounted against it, or alternatively that, looked at from a macro perspective, the 1st defendant should be entitled only to 40% of the costs of the action as mounted by the plaintiff against the 1st defendant. 18.Perhaps unsurprisingly, the 1st defendant roundly rejects these contentions, and Mr Bartlett, counsel for the 1st defendant at trial, has filed a highly detailed skeleton submission; I hope I will be forgiven for referring to this extensive document in general terms only. 19.On the part of the 1st defendant, it is accepted that the principles in Re Elgindata (No 2), op cit., apply in Hong Kong, and the point is made that it is trite law that under Order 62 r3 (2) RHC the court will order costs to follow the event except where it appears to the court that some other order should be made as to the whole or part of the costs. In fact, the point has been emphasized at the highest level that, even in the post-CJR environment, the courts will depart from the normal rule only where there are exceptional circumstances: see Regent National Enterprises Ltd v Goldlion Properties Ltd., FACV 10 of 2008, judgment dated 14 September 2009. 20.In his written submission, Mr Bartlett also draws attention to the observations of this Commercial Court as to costs in Akai Holdings Ltd (in liquidation) v Thanakharn Kasikorn Thai Chamkat (Mahachon) [2008] 6 HKC 82, wherein the suggestion emphatically was rejected that the Hong Kong courts have moved away from the Elgindata approach in favour of the interstitial approach described by Lord Woolf in AEI Rediffusion Music Ltd v Phonographic Performance Ltd, [1999] 1 WLR 1507, and declined to accept the proposition that henceforth the courts were more readily minded to make costs’ orders reflective of success or failure upon individual issues. 21.I take this opportunity to re-emphasise the view as earlier expressed, namely that the Commercial Court, in its present incarnation at least, has no intention of readily acceding to the “filleting” of costs according to the success or failure of any specific issue arising for decision arising for decision within the composite whole, noting once again that if and when such is to occur such occasions will be readily recognizable and are likely to be few and far between. 22.In short, the party seeking to vary the order nisi – in this instance the unsuccessful plaintiff – in favour of such a costs’ “filleting” exercise has the burden of establishing that issues were improperly/unnecessarily raised and/or that exceptional circumstances justify departure from the normal rule such that, on discrete claims, it is clear that significant time and effort manifestly was wasted. 23.I shall not here revisit the content of what is a detailed judgment, in which the various arguments are articulated and evaluated; as earlier observed, that judgment speaks for itself. 24.However, having reconsidered the entire case as it evolved between the plaintiff and the 1st defendant, not only in terms of the trial but in terms of the various interlocutory applications, and having reflected upon the disparate written submissions regarding variation of the existing order nisi as to costs, I have concluded that ultimately no good basis has been established to justify alteration to the existing order, in terms either of the alternative suggestions made on behalf of the plaintiff that discovery costs be to the plaintiff or that the 1st defendant’s costs’ entitlement be reduced to 40%. 25.To the contrary, I would go so far as to venture the opinion that in light of the ‘drip feed’ manner in which documents emanated from the plaintiff in this case, I regarded the plaintiff’s submission relating to allegedly unnecessary and ‘fishing’ discovery costs to be ambitious and ultimately misplaced, and in this regard I agree with Mr Bartlett’s careful analysis of the manner in which discovery purportedly had taken place. I realize that in this context the plaintiff suggests that based on the pleadings and evidence as they existed at the material time, the relevance of the documents requested by the 1st defendant was not immediately apparent, but, with respect, I take this submission with a pinch of salt. It became abundantly clear at trial precisely what the 1st defendant had been after, and why, and I decline to accede to the plaintiff’s submissions in this regard. 26.As Mr Bartlett has pointed out, continuing discovery is an independent obligation, and the test for whether documents are discoverable is not to be dictated by whether subsequent argument on the basis of these documents is or is not successful; he also suggests with some force (although I make no specific finding in this regard), that the ‘drip feed’ of documents to which his client was subject verged on abuse of process, and that the evidence of the plaintiff’s own witnesses bore testimony to the prior ‘suppression’ of documents. Accordingly, it strikes me that in asking for ‘discovery costs’ the plaintiff doth protest too much, and in the circumstances as they transpired I am unsympathetic to its overtures. 27.As to whether any of the issues should not have been taken qua individual issues, even though ultimately the 1st defendant lost the argument on such issues, having reflected on the matter I am not satisfied that it is correct to say that, albeit unsuccessful, they should not have been pursued, notwithstanding that the court took the view that the arguments were unconvincing, and thus were rejected. It strikes me that, with the benefit of hindsight (and knowledge of the judge’s reasoning) it is always open to a losing party to argue that issues upon which they have succeeded should attract costs in its favour, alternatively that the successful party’s costs’ entitlement should be reduced, but it will in my view be relatively infrequent that an issue which has been taken, and thus subject to evidence and argument, can be characterized as so ‘out of kilter’ as to attract an adverse costs’ sanction. 28.I also venture the view that had discovery been more readily made by the plaintiff (as to which I repeat the views expressed above) there may have been more substance to the argument that certain lines should not have been proceeded with; however, given the manner in which discovery came out, I do not consider that the 1st defendant validly should be criticized for developing the issues/argument in the case in the manner that it did. 29.This court has said on many occasions over the past 14 years that costs are not and cannot be a matter for precise calibration, and that necessarily there must be an element of ‘broad brush’ involved in their award. It is not possible to define the instances when this will occur; if I may say so, the court knows the situation when it sees it, and in this case this court does not regard any particular argument as one which neither should have been contemplated nor taken, even though at the end of the day such argument did not have attract judicial agreement. 30.Commercial cases generally are complex animals, and it is a far cry from an unsuccessful argument on a particular issue to an issue which clearly should not have been contemplated, pleaded nor even attempted to be run. It is in this regard that, with the greatest respect, this court repeats that it disagrees profoundly with the approach adumbrated by Lord Woolf in AEI Rediffusion Music Ltd., op cit., which if followed would lead to precisely the complex costs’ arguments which the principles evinced in Elgindata (No. 2), op cit., no doubt carefully were designed to avoid. 31.Accordingly, the plaintiff’s application to vary the costs’ order nisi for the reasons and upon the bases submitted is dismissed, and (it must therefore follow) that the costs of and occasioned by the application thus to vary must be to the 1st defendant, to be taxed if not agreed. 32.I so order. (ii) 1st defendant’s expert evidence application 33.The foregoing decision dismissing the plaintiff’s application to vary the costs order nisi does not conclude the costs’ debate between the plaintiff and the 1st defendant, which debate has a second limb. 34.This is represented by the 1st defendant’s application that the order nisi as to costs (as now standing unvaried) specifically should include the costs of the 1st defendant’s application to adduce expert evidence. 35.The background to this aspect of the case is curious. 36.This is because what seems to have transpired (I am told that this occurred prior to the transfer of this litigation to the Commercial List) is that the plaintiff and the 2nd defendant broker applied for leave to appoint a ‘Single Joint Expert’, which presumably was envisaged to cover certain aspects of insurance broking practice. 37.This resulted in what became known as ‘the Bilney Report’, to which document the 1st defendant was even more surprisingly initially denied access, purportedly on the basis that the Report was not relevant to the 1st defendant’s case. 38.However, upon this court ordering that the 1st defendant be supplied with a copy of the Report, it immediately became apparent to the 1st defendant that there were passages therein which clearly were prejudicial to the 1st defendant’s case; in fact, arguably the terms of the Report fell outwith the scope of the leave originally granted by Registrar Au Yeung (as she then was) to provide for a single joint expert. 39.The 1st defendant then says that it obtained counsel’s advice upon the existing Report in its then form, and itself sought a suitable expert; in addition, it is said that the plaintiff declined the 1st defendant’s attempts to adduce a responsive report on its own behalf, which thereafter resulted in the need for a summons to be issued, dated 1 February 2010, which was returnable before this court on 8 February 2010. 40.Consequent upon that hearing – and, it might fairly be said, in face of some pithy observations from the court – the plaintiff and the 2nd defendant agreed to excise from the ‘Bilney Report’ the potentially prejudicial passages which had caused the 1st defendant concern, the consequence of such agreement being that there was thus no necessity for the 1st defendant to be given leave to adduce its own directly responsive expert evidence. 41.At the end of that hearing this court reserved the costs of and occasioned by the 1st defendant’s concerns, and subsequent summons, in relation to the ‘Bilney Report’, and I apprehend that it is these reserved costs which form part of the 1st defendant’s present application for such to be included within the costs otherwise addressed by the existing order nisi. 42.It should also be noted that so exercised was (and remains) the 1st defendant by this sequence of events arising in connection with the adducing of expert evidence in the form of a single joint report, that an integral part of its application is that such costs should be awarded on an indemnity basis, the point made in this regard being that the plaintiff unreasonably had declined all attempts by the 1st defendant to deal with the potentially prejudicial aspects of this expert report – to the creation and terms of reference of the 1st defendant had not been privy – and that as a consequence the 1st defendant itself was forced to spend unnecessary time and money first in locating a relevant expert, and second in issuing the relevant summons which was heard on 8 February 2010. All of this activity proved nugatory, submits Mr Bartlett, because of the plaintiff’s “last minute capitulation” when faced with a court which, perhaps unsurprisingly, was resistant to the innovative concept of ‘expert evidence by ambush’, and in its substantive judgment had referred to this somewhat quixotic state of affairs as “procedural nonsense”. 43.By its reply submission of 14 October 2010, in addition to taking a time point, to which I will accord the attention it merits, the essence of the plaintiff’s response to this argument is that the 2nd defendant’s summons to adduce expert evidence indeed was served on the 1st defendant, albeit the 1st defendant’s solicitor did not attend at the adjourned hearing at which Registrar Au Yeung made her Order giving leave to produce a single joint expert report; thus, says the plaintiff, the representatives of the 1st defendant should have attended all the hearings, of which they had notice, and if they had done so they would have been party to the terms of reference of the expert evidence, and thus the subsequent events – whereby complaint was made as to the content of the ‘Bilney Report’ – would have been rendered unnecessary. 44.Hence, the plaintiff says that the application by the 1st defendant for a costs’ order in respect of the reserved costs should be dismissed. 45.To this submission the 1st defendant responds that indeed it is correct that the 2nd defendant’s summons to adduce expert evidence was served upon its solicitors, but that on no occasion was the 1st defendant alerted to the possibility of any matter adverse to its interests being ventilated in the forthcoming joint expert report, since leave to adduce expert evidence ostensibly had been sought on the issue of “industrial practice and standards observed by insurance brokers”, which on its face at least did not give the 1st defendant any inkling of the wider range of observations, some of which clearly were antipathetic and prejudicial to the interests of the 1st defendant, and in the fullness of time were excised by consent upon the 1st defendant’s application. Decision 46.Having considered all the circumstances, it seems to me that procedurally matters began to go off track when the 1st defendant was disallowed sight of the ‘Bilney Report’ by the plaintiff (upon what logical basis I cannot begin to imagine), thereby necessitating the 1st defendant’s ultimate application by summonsdated 1 February 2010 and the ensuing hearing of 8 February 2010. 47.In the circumstances, I consider that the fairest and most balanced order is that the Order nisi as to costs in favour of the 1st defendant, which now has been confirmed upon application by the plaintiff so to vary, should include the costs of and occasioned by the 1st defendant’s summons dated 1 February 2010, and the consequent hearing on 8 February 2010, such costs, if not agreed, to be taxed and paid by the plaintiff to the 1st defendant. 48.I so order. 49.For the avoidance of doubt, however, I decline Mr Bartletts’ attempt to have such costs taxed and paid upon an indemnity basis; in the circumstances the 1st defendant will have to be content with the usual party and party basis. 50.As to the costs of this element of the application, given that the plaintiff asked for this to be dismissed and the 1st defendant maintained its request for the costs, it seems to me that, as normal, costs should follow the event and be to the 1st defendant, such costs to be taxed if not agreed. 51.The foregoing decisions dispose of the outstanding costs’ issues between plaintiff and 1st defendant, and I turn now, therefore, to the debate as it has developed between plaintiff and 2nd defendant. Costs relating to the action between the plaintiff and the 2nd defendant (i) Costs relating to expert evidence/apportionment of trial costs 52.In its written submission dated 14 September 2010, the plaintiff submits that the existing costs’ order nisi in favour of the 2nd defendant broker should be varied to reflect the fact that as matters at trial transpired, the expert evidence was not relevant to the issues between the parties, and argues that the expert evidence as adduced “was neither relevant or necessary to resolve the issues in dispute between the plaintiff and the 2nd defendant.” 53.The plaintiff further says that the court would have been able to reach its decision without the help of the expert, and indeed that the court had indicated in passing that had the application to adduce expert evidence been made before it that the application may well not have been granted, an observation, says the plaintiff, that chimes with the apparent “reluctance” of Madam Registrar Au Yeung to make the order giving leave to adduce such evidence, apparently questioning at the time whether the 2nd defendant would be able to recover the costs of this application given that such evidence might not prove relevant and necessary. 54.Moreover, says the plaintiff, as matters transpired such evidence indeed was not necessary, in that the plaintiff’s claim against the 2nd defendant broker effectively came down to a straightforward issue of fact as to what had occurred during the meetings/communications between the respective employees of the plaintiff and the 2nd defendant. 55.Accordingly, submits the plaintiff, it is clear that time and costs were wasted by the 2nd defendant’s application for expert evidence, and thus that the costs’order nisi should be amended in order to give to the plaintiff its costs of and occasioned by the 2nd defendant’s application for leave to adduce expert evidence. 56.Once again, however, the plaintiff puts forward an alternative case: if and in so far as the court does not agree with the submission made regarding the wasted costs of expert evidence, then the plaintiff says that the 2nd defendant “is only entitled to say 75% of their costs of the action”. 57.By its solicitor’s letter dated 11 October 2010 the 2nd defendant opposes these twin applications on behalf of the plaintiff. 58.Those acting for the 2nd defendant adopt the submissions as to the relevant principles of law in terms of the variation of costs’orders nisi as contained in paragraphs 6-14 of the 1st defendant’s detailed written submission, and state in terms that the plaintiff simply has failed to prove that exceptional circumstances exist which would or should move the court to depart from the normal rule that ‘costs should follow the event’. 59.As to the first of the twin elements of the plaintiff’s submission, namely the plaintiff’s request for the costs of the application for the adducing of expert evidence, the 2nd defendant makes the point (which presumably is irrefutable as a matter of fact) that when allowing the 2nd defendant’s application for leave to adduce expert evidence on 27 July 2009, the learned Registrar made an order nisi that the costs of and occasioned by the application be costs in the cause, with a concomitant direction that any variation to such order nisi be applied for within 14 days. I am told that there was no such application so to vary by the plaintiff, but that the 2nd defendant applied on 18 September 2009, and in her decision dated 18 September 2009 the learned Registrar maintained the order as to costs in the cause, and specifically included therein the cost of preparing the 2nd defendant’s affirmation, from which there was no appeal. 60.Thus, the 2nd defendant wonders rhetorically how it is now open to the plaintiff to re-open an existing order as to the costs “through the backdoor”, as it were. The point also is made that the plaintiff did make an attempt to persuade the Registrar to order that it should be open to the trial judge to review and decide this costs’ application afresh, depending upon how valuable that judge considered the evidence to be, but I am further told that the learned Registrar did not so rule: had she been minded to do so, costs would have been reserved, instead of maintaining her ruling (as was the case) that costs of the application to adduce expert evidence should be in the cause. 61.I am constrained to agree. The issue of the costs of the application for leave are done and dusted, and remain unappealed, and in these circumstances I have no intention of further considering the matter. 62.This then leaves the plaintiff’s alternative application that the costs nisi awarded to the 2nd defendant in the judgment of this court should be reduced by 25%, which in light of the terms and ambit of the preceding costs’ order of the learned Registrar I agree must be limited to the costs incurred by the parties in reviewing the expert report and in dealing with such report at trial. 63.This aspect is within the competence of this court to evaluate (or re-evaluate), and in this context it is hard not to comment on the fact that not only was the ‘Bilney Report’ a Single Joint Report made on behalf of the plaintiff and 2nd defendant, but that it was the plaintiff itself who called Mr Bilney to give evidence at trial – albeit in the terms of the Report which by then had been excised by agreement subsequent to the interlocutory order of this court that not only should the 1st defendant be shown a copy of the original Report, but that if and in so far as the plaintiff/2nd defendant were unwilling to excise the passages therein of which the 1st defendant made complaint, the court would do so. 64.Be that as it may. The 2nd defendant now says that given that it was the plaintiff itself who chose to call Mr Bilney – as I recall Mr Sussex for the plaintiff was in the peculiar position of ‘cross examining’ Mr Bilney – that it now does not lie in the mouth of the plaintiff to complain of the trial being excessively lengthened by virtue of evidence which they themselves called. The point is also made that in any event Mr Bilney’s evidence last for no longer than about one and a half hours, and the 2nd defendant submits that it fails to comprehend how this can be translated into an overall costs’ reduction of some 25%. 65.I think it fair to agree with the contention that parts of Mr Bilney’s evidence could not fairly be considered to have been of no assistance to the court, vide the court’s decision to reject the argument that the 2nd defendant had an independent duty to ascertain the class/age of the vessel to be insured, and that even if this was not the case, and had such evidence not been relied upon, this was because the plaintiff had fallen at the first hurdle (that is, no contractual duty to advise, and no breach of tortious duty if such duty existed), and thus it could not be said that it had been unreasonable to prepare the ‘Bilney Report’ in the form in which emerged. 66.Once again I agree with this submission. 67.Accordingly, in the circumstances I see no reason to do other than to dismiss the plaintiff’s application to vary the order nisi as made in favour of the 2nd defendant against the plaintiff, which I now do. 68.The plaintiff having thus failed in its alternative submissions, I cannot see any reason not to order that the costs of and occasioned by the plaintiff’s variation argument should also be to the 2nd defendant, such costs to be taxed if not agreed. I so order. (ii) 2nd defendant’s cross-application for indemnity costs, including certain reserved costs 69.Finally this leaves for consideration the application by the 2nd defendant, by letter dated 14 September 2010, that the existing costs’ order nisi in its favour be varied in the following manner:
70.I am told that the hearing of 19 October 2009 before Master Levy involved discovery applications against Sun Fung Insurance Agency Limited and MSIG Insurance (Hong Kong) Limited, as the consequence of which an order was made resulting in the disclosure of the Mitsui Open Policy and some 52 cargo policies as hitherto taken out by the plaintiff. I am also told that at this hearing Master Levy ordered that the 2nd defendant do pay two thirds of the third parties’ costs and expenses of and occasioned by the application, and that otherwise costs be reserved. 71.Costs also were reserved at the hearing before this court on 8 February 2010: this was a hearing convened by the 1st defendant for leave to adduce expert evidence of one Mr Gooding in response to the Joint Expert Report of plaintiff and 2nd defendant dated 2 November 2009. 72.Since the parties had agreed between themselves to excise parts of the ‘Bilney Report’ without further troubling the court, the 2nd defendant now says that since the court has dismissed the plaintiff’s claim against both the 1st and 2nd defendants, there is thus no reason why such reserved costs should not follow the event. 73.As to this element of the application, namely the reserved costs of the stipulated hearings before Master Levy and this court, I take the following view:
74.In my judgment this was a hearing which never should have taken place, nor should have been required to take place, and for this purpose I make no distinction between the attitude of the plaintiff and that of the 2nd defendant. I so order. 75.Having thus dealt specifically with the costs of the two interlocutory hearings to which parenthetical reference is made in the form of order for which the 2nd defendant now submits, I turn now to the other element, which is that of the 2nd defendant’s claim for indemnity costs. For the avoidance of doubt, the order to be made in this regard is to be to be read necessarily as incorporating the decision I now have made with regard to the reserved interlocutory costs. 76.The basis for the ‘indemnity costs’ application by the 2nd defendant is that on 29 October 2009, in an attempt to get rid of this litigation against it, the 2nd defendant caused a ‘Calderbank’ offer to be made to the plaintiff in the terms following:
77.The obvious point here being made by and on behalf of the 2nd defendant is that the 2nd defendant made a realistic attempt to “buy” its way out of this litigation (to the tune of HK$2 million), litigation which it considered both a nuisance and unmeritorious, and thus the offer was made inclusive of costs, with a concomitant undertaking not to make any attempt to ‘clawback’ even should the plaintiff’s sole success at trial have been against the 1st defendant insurer. 78.However (and in my view somewhat surprisingly) this offer was not accepted, the 2nd defendant thus being forced to go through an expensive and time-consuming trial, and it now submits that its pre-trial offer should loom large in the exercise of this court’s discretion as to the proper basis for taxation of costs already awarded under the existing order nisi; the hard fact is that in the end result the plaintiff failed completely against the 2nd defendant, it now is said that on any basis the 2nd defendant’s pre-trial offer was “more than reasonable” and thus clearly should have been accepted by the plaintiff which, in rejecting the offer, caused costs to be incurred “out of all proportion” to what was at stake. 79.The 2nd defendant also mounts its application for indemnity costs on the basis of the plaintiff’s “evasive and uncooperative” conduct in the course of the proceedings, particularly in the area of disclosure of documents, which it is said caused the 2nd defendant to take out various unnecessary and expensive interlocutory applications. 80.By its letter dated 22 September 2010 in opposition to the 2nd defendant’s application to vary the costs’ order nisi, the plaintiff submits that the court should not take into account the ‘Calderbank’ offer on the ground that the offer was not made by way of sanctioned payment or sanctioned offer, and thus that there should be no such sanction attached to such offer pursuant to RHC, Order 22; it is here asserted that according to Order 22, rule 3, RHC, an offer by a defendant to settle the whole or part of any claim or an issue arising from the claim does not have the consequences specified in the Order unless it is made by way of sanctioned offer or a sanctioned payment or both. It is further submitted that nothing precluded the 2nd defendant from making a sanctioned payment in respect of the offer of HK$2 million, and to couple that payment with a sanctioned offer setting out the terms that the 2nd defendant undertook not to ‘claw back’ the settlement funds even if the plaintiff succeeded against the 1st defendant at trial. 81.It is thus argued that whilst the court undoubtedly has a discretion in respect of costs’issues, the court’s room for manoeuvre nevertheless is bound by the clear words of the Order, and therefore should not allow itself to take into account the ‘Calderbank’ offer when the statutory alternative procedure could and should have been utilized. 82.As to the argument that the plaintiff had caused unnecessary interlocutory applications, in any event it is the plaintiff’s position that the plaintiff’s conduct all along must be considered as reasonable and sensible in resisting the 2nd defendant’s applications for specific discovery, which are characterized as having been no more than ‘fishing’ expeditions. Decision 83.Having considered all the relevant submissions, I am disinclined to accede to the 2nd defendant’s argument that the plaintiff’s conduct of the proceedings was so unreasonable and that the various interlocutory applications of which the 2nd defendant makes resultant complaint ultimately justifies making a costs’ order other than upon the normal party and party basis. It follows that this particular aspect of the indemnity costs application is refused, and I so order. 84.Accordingly, the sole remaining element of the present debate which in my view is worth powder and shot is the issue as now raised by the 2nd defendant which involves the ‘Calderbank’ offer. 85.As to this, I fail to see why, in the context of Commercial Court litigation, this court should be hidebound by the procedural constraints for which the plaintiff argues; in other words, the plaintiff’s position appears to be that a ‘sanctioned offer/payment’, or nothing, is a matter legitimately to be taken into account in the exercise of the court’s unfettered discretion as to costs. 86.In this instance, whilst of course this court knew nothing of the existence of this purported ‘Calderbank’ compromise until informed thereof in the context of this post-trial debate, it strikes me as fundamentally commercially unrealistic not to take the existence of this offer into account in deciding upon the appropriate basis for the taxation of costs which, pursuant to the existing order nisi, as now sought to be varied by the 2nd defendant, are to accrue to the 2nd defendant; with respect, I consider it nonsense to suggest that the provisions of Order 22 are to be considered as having any adverse restraining effect upon the hitherto wholly unfettered residual discretion of the trial court when it comes to making sensible and just decisions on costs. 87.After reflecting on all the circumstances as now known to, and appreciated by, this court, and in particular against the backdrop of that which this court regarded as a ‘paper thin’ case against the 2nd defendant broker (a case which fairly obviously constituted forensic insurance for the plaintiff in the event that it failed against its main target, the 1st defendant), it seems to me that a fair and equitable result of the 2nd defendant’s application must produce a varied costs’ order in the following terms:
88.I so order. Finally 89.I have seen fit to entertain these applications purely on a paper basis, but I wish to draw the parties’ attention to the fact that this court no longer will thus be as amenable, and that if and in so far as applications to vary costs’ orders nisi are to be made in future, such applications are to be made on the back of a formal summons, or at the very least pursuant to an appropriate letter of application setting out the order desired and the basis for such variation. 90.I have accommodated the present proliferation of paper because once the procedure was commenced in this way it would only have added to the costs by requiring an additional hearing. However, the fact that this matter has been dealt with in this fashion should not be taken to mean that henceforth the normal procedures should not be followed, and oral argument entertained – which in the ultimate analysis is the more time-productive, both for the court and for the parties, than the protocol unilaterally adopted in this case. 91.It follows from this that if and in so far as any costs’ issue remains outstanding which, due to the deluge of paper, inadvertently has been omitted to be dealt with by the court, such must be subject to oral application.
Messrs Holman Fenwick & Willan for the plaintiff Mr Jeremy Bartlett, instructed by Messrs Stephenson Harwood, for the 1st defendant Messrs Ince & Co for the 2nd defendant | ||||||||||||||
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