SHANDONG HONGRI ACRON CHEMICAL JOINT STOCK CO LTD v. PETROCHINA INTERNATIONAL (HONG KONG) CORPORATION LTD

CACV 31/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 31 OF 2011

(ON APPEAL FROM HCCT NO. 45 OF 2009)

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BETWEEN

SHANDONG HONGRI ACRON CHEMICAL JOINT STOCK COMPANY LIMITED Applicant/
Creditor
and
PETROCHINA INTERNATIONAL (HONG KONG) CORPORATION LIMITED Respondent/
Debtor

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Before: Hon Kwan JA in Chambers

Dates of Written Submissions: 14, 21 and 28 July 2011

Date of Handing Down of Decision on costs: 11 August 2011

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DECISION ON COSTS

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1. On 13 June 2011, I handed down my decision dismissing the respondent’s application for security for costs of the appeal. I madean order nisi that the respondent is to pay the applicant’s costs in any event on a party and party basis, with a certificate for two counsel.The respondent applied by summons on 27 June 2011 to vary the order nisi that there should be no order as to costs of its failed application, alternatively the applicant be deprived of half of its costsand with no certificate for two counsel. I directed that this application be dealt with on the basis of written submissions withouta hearing.

2. To seek a no costs order on an application which the respondent has lost is simply unrealistic. Nothing further need be said aboutthis.

3. The respondent’s position, as stated in its two submissions of ten pages, may be summarised as follows:

(1) it is not asking for an “issue based order” but a “proportionate costs order”, namely, that the costs awarded to theapplicant should be reduced by 50%;

(2) it is relying on principle (iii) in In re Elgindata Ltd. (No. 2) [1992] 1 WLR 1207, namely, that the court may deprive a successful party of part of his costs if that party raises issues or makes allegations on whichhe fails and such issues have caused a significant increase in the length or costs of the proceedings;

(3) the applicant has raised a number of grounds to oppose the application for security for costs (set out in paragraphs 1 and 17of my earlier decision) and has failed on all of them except the issue that the court should not exercise its discretion to ordersecurity in the context of a foreign arbitration award against an award creditor (“the Discretion Issue”);

(4) the issues on which the applicant failed constituted the bulk of the issues or arguments between the parties, a substantialproportion of the time and costs was spent on those issues and this has significantly increased the length and costs of the proceedings;

(5) the applicant had never made clear to the respondent or explained in detail its argument on the Discretion Issue until it servedits skeleton on the respondent five days before the hearing; and

(6) a certificate for two counsel should not be granted as the application is a straightforward interlocutory application.

4. I reject the above contentions of the respondent. I see no sufficient basis for departing from the general rule that costs shouldfollow the event. The issues on which the applicant failed were easily disposed of and would not have caused significant increasein the length or costs of the proceedings. Besides, it lies ill in the mouth of the respondent to complain of lengthy affidavitsand evidence filed by the parties dealing with the substantive merits of the case of each when it was the respondent who assertedthat the appeal had no merits in the first letter of its solicitors seeking security for costs.

5. Quite clearly, it was the Discretion Issue that was the substantial issue in this application. It was not a point decided previouslyby the Court of Appeal and which I did not find easy to resolve. The applicant had given notice to the respondent that the DiscretionIssue would be taken to oppose the application in the letter of its solicitors dated 24 March 2011 and its affidavit in oppositionfiled on 23 May 2011, although the detailed arguments were not developed. It was really up to the respondent’s legal team to dotheir own research and form their own view on the Discretion Issue. They decided to proceed with the application and the DiscretionIssue was resolved against them. This issue justified the engagement of leading counsel, who prepared the written submission.

6. I decline to vary the order nisi as sought by the respondent. I also decline to vary the order from paying costs in any event to costs forthwith, as sought by theapplicant. I order the respondent to pay the applicant’s costs of the application for security for costs and the application tovary the order nisi in any event. I grant a certificate for two counsel in the application for security for costs only.

(Susan Kwan)
Justice of Appeal

Ms Teresa Cheng, SC and Mr Adrian Lai, instructed by Messrs Hogan Lovells, for the Applicant

Messrs Mayer Brown JSM, for the Respondent