Libertarian Investments Ltd v. Thomas Alexej Hall

FACV Nos 14 & 16 of 2012

FACV No. 14 of 2012

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 14 OF 2012 (CIVIL)

(ON APPEAL FROM CACV NO. 54 OF 2011)

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BETWEEN

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FACV No. 16 of 2012

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 16 OF 2012 (CIVIL)

(ON APPEAL FROM CACV NO. 54 OF 2011)

BETWEEN

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JUDGMENT ON COSTS

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Mr Justice Ribeiro PJ:

1.On 6 November 2013, the Court allowed the plaintiff’s appeal and awarded the plaintiff equitable compensation, ordering the defendant to pay to the plaintiff the sum of £14,183,851.72 together with interest.[1]

2.The Court also made an order nisi that the defendant pay the plaintiff’s costs here and below, certified fit for two counsel throughout, giving the parties liberty to lodge written submissions on costs.  Such submissions were lodged and this is the Court’s judgment on costs.

3.The plaintiff submits that the defendant ought to be ordered to pay to the plaintiff:

(a) the costs thrown away in the taking of accounts pursuant to the Order of Stone J; and

(b) the costs here and below to be taxed on an indemnity basis.

4.The defendant accepts that he has to bear the costs incurred in the taking of the account pursuant to Stone J’s order.  In our view, those costs are already covered by the order that the defendant pay the costs here and below so no more needs to be said about them.  The defendant resists the application for costs on an indemnity basis.

5.The plaintiff submits that the indemnity basis is justified because of the findings made by the Court regarding the defendant’s repeated dishonest misrepresentations and breaches of fiduciary duty.  The defendant counters that the way in which the plaintiff formulated and prosecuted its claims added unnecessarily to the overall costs.

6.As this Court made clear in Town Planning Board v Society for Protection of the Harbour Ltd (No 2),[2] the usual order for costs in favour of a successful party is an award on a party and party basis.  An order for costs on an indemnity basis is only considered where the case has some “special or unusual feature”.  The Court’s discretion may be exercised in relation to (but is not limited to) cases “brought with an ulterior motive or for an improper purpose or where there is some deception or underhand conduct on the part of the losing party”.  However, such improper conduct generally relates to the conduct of the litigation rather than conduct which constituted the cause or matter giving rise to the litigation.[3]  Thus, even in contempt cases, there is no general rule that indemnity costs should be awarded against the contemnor, the appropriateness of such an order depending on all the circumstances of the case.[4] It may be important to consider whether the contemnor’s conduct has resulted in a separate penalty which sufficiently expresses the court’s disapproval; in which case, indemnity costs as an additional penalty may not be justified.[5]

7.Severely adverse findings were made against the defendant in the present case.  They have resulted in remedies designed to provide the plaintiff with appropriate compensation.  Equitable compensation has been ordered on the wilful default basis, designed to place the plaintiff in the position which it would have enjoyed if the defendant had duly performed his duty of acquiring the third tranche shares on the its behalf, the Court assessing quantum with the full benefit of hindsight.  Compensation has therefore been ordered on a basis which neutralizes the effects of the defendant’s breaches of fiduciary duty, treating the defendant as if he had not told lies about his management of the funds entrusted to him.   It is therefore unnecessary and inappropriate for costs additionally to be awarded on the indemnity basis to mark the Court’s disapproval of his behaviour as a defaulting fiduciary. 

8.So far as the conduct of the litigation is concerned, it is clear that both sides contributed to the length and complexity of the proceedings.  Accordingly, we conclude that the order nisi should be made absolute with costs to be taxed on a party and party basis.  As the plaintiff has failed in its attempt to secure an order for indemnity costs, we direct that it pay the costs of these written submissions to the defendant to be taxed if not agreed.

Written submissions by Mr Barrie Barlow SC and Mr Chan Pat Lun, instructed by Haldanes for the Plaintiff

Written submissions by Mr Colin Wright, instructed by Kennedys for the Defendant