CPIT Investments Limited v Qilin World Capital Limited and another

• Jurisdiction: Singapore
• Judge: Vivian Ramsey IJ
• Judgment Date: 05 March 2018
• Neutral Citation: [2018] SGHC(I) 2
• Court: International Commercial Court (Singapore)
• Docket Number: Suit No 5 of 2016
• Year: 2018
• Published date: 18 July 2018
• Hearing Date: 28 September 2017
• Plaintiff Counsel: Tan Poh Ling Wendy and Chua Han Yuan, Kenneth (Morgan Lewis Stamford LLC)
• Defendant Counsel: Sharon Chong Chin Yee and Gideon Yap (RHTLaw Taylor Wessing LLP)
• Subject Matter: Civil Procedure,Costs,Principles,Singapore International Commercial Court,Offer to settle
• Citation: [2018] SGHC(I) 2

Vivian Ramsey IJ: Introduction

In this judgment, I deal with the costs of these proceedings.

On 17 July 2017, I handed down judgment in these proceedings which concerned an agreement (“the Loan Agreement”) under which the Second Defendant provided a non-recourse loan to the Plaintiff, with the Plaintiff providing certain shares (“the Pledged Shares”) as collateral for the loan: see CPIT Investments Ltd v Qilin World Capital Ltd and another [2017] 5 SLR 1.

I found, in favour of the Plaintiff, that the Second Defendant was not entitled to sell the Pledged Shares and, by selling those shares, it repudiated the Loan Agreement, and that the Plaintiff accepted that repudiation and terminated the Loan Agreement. I also found that the Second Defendant held the proceeds of that sale, less the loan amount, on a constructive trust for the Plaintiff.

Whilst the Plaintiff was, overall, the successful party, it failed on certain aspects. First, it had made the claim against the First Defendant, but I held that the Loan Agreement had been made with the Second Defendant and that the First Defendant was not the controller and/or manager of the business and/or operations of the Second Defendant. As a result, the First Defendant had no liability. Secondly, the Plaintiff had claimed that the sale of the Pledged Shares had been the cause of the substantial fall in the share price of those shares and had led the Plaintiff to suffer loss in the value of its further shareholding in those shares (“the Portfolio Claim”). I held that the cause of the fall in the share price was the overinflated share price and not the sale of those shares by the Second Defendant. As a result, the Plaintiff had not established a loss caused by the sale of the Pledged Shares. Thirdly, the Plaintiff had claimed that the Second Defendant, by selling shares after the termination of the Loan Agreement, had converted the remaining Pledged Shares and was therefore liable in conversion. I held that the Plaintiff’s claim in conversion failed because there was no allegation that there had been any interference with the share certificates so as to amount to conversion.

The parties’ submissions

The Plaintiff seeks recovery of its costs and disbursements on the basis that it was the successful party. It claims costs of S$56,000 (for interlocutory applications) and S$450,000 (for the proceedings, excluding interlocutory applications). In terms of disbursements, it claims S$5,681.82 (for interlocutory applications) and S$28,600.26 plus HK$648,427.57 (for the proceedings, excluding interlocutory applications). The Plaintiff also submits that it is entitled to indemnity costs from the date of service of an offer to settle (“the Offer”) dated 9 November 2016.

The Defendants accept that, in principle, the Plaintiff was the successful party but says that it should not be entitled to recover the whole of its costs because it failed on certain issues, including its claim against the First Defendant and the Portfolio Claim. The Defendants submit that an issue-based approach should be adopted. On that basis, they submit that the Plaintiff should only recover 40% of its costs because there should be a 10% reduction for failing to succeed against the First Defendant and a 50% reduction for failing on the Portfolio Claim and the claim in conversion. Further, the Defendants say that the disbursements should be reduced to take account of the same matters, and also claim that the costs of the Claimant’s accounting expert, Mr Clive Derek Conway Louis Rigby (“Mr Rigby”), should be deducted because of the Claimant’s failure in relation to the Portfolio Claim.

In making a costs order, the Defendants submit that the costs guidelines in Appendix G to the Supreme Court Practice Directions (“Appendix G”) apply and that nothing in O 110 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) (“the ROC”) or the Singapore International Commercial Court Practice Directions (“the SICC Practice Directions”) prevents the court from taking reference from Appendix G. The Defendants refer to the way in which costs were dealt with in the previous decision of the Singapore International Commercial Court (“SICC”) in Teras Offshore Pte Ltd v Teras Cargo Transport (America) LLC [2017] 4 SLR 38 (“Teras”).

In relation to the Offer, the Defendants submit that O 22A r 9, which applies to offers to settle in the High Court, does not apply in the SICC and that the Offer is a factor that the court may take into account in assessing costs under the relevant paragraphs of the SICC Practice Directions.

The Plaintiff submits, by reference to Singapore Civil Procedure 2017 vol 1 (Foo Chee Hock JC gen ed) (Sweet & Maxwell, 2017), that an issue-based approach should not be adopted unless the case is unusual or if a particular issue has unnecessarily or unreasonably protracted or added to the costs or complexity of the proceedings. It submits that the costs order should be made, taking things in the round, rather than taking an issue-based approach. On that basis, if the court is inclined to apply a discount to reflect the fact that the Plaintiff did not succeed on certain claims, then taking matters in the round, any discount ought to be only, at most, 15%.

In relation to the costs guidelines in Appendix G, the Plaintiff submits that those costs guidelines do not apply in the SICC, and that the case of Teras, where the court appeared to apply those costs guidelines, is irrelevant because the parties were content to rely on the costs guidelines and no arguments were made on the issue of whether the costs guidelines should apply.

The appropriate costs orders

In order to come to a conclusion on the appropriate order as to costs in this case, the following issues must first be considered: the basis upon which costs orders are made in the SICC; whether the costs guidelines in Appendix G apply in the SICC; and the way in which offers to settle are to be dealt with and, in particular, whether O 22A of the ROC applies.

The applicable principles The basis for costs orders in the SICC

The starting point for costs in the SICC is O 110 r 46 of the ROC, which provides as follows :

Costs (O. 110, r. 46)

46.—(1) The unsuccessful party in any application or proceedings in the Court must pay the reasonable costs of the application or proceedings to the successful party, unless the Court orders otherwise.

(2) The unsuccessful party in any appeal from the Court to the Court of Appeal, or in any application to the Court of Appeal, must pay the reasonable costs of the appeal or application to the successful party, unless the Court of Appeal orders otherwise. (3) For the purposes of paragraphs (1) and (2), the court may, in particular — (a) apportion costs between the parties if the court determines that apportionment is reasonable, taking into account the circumstances of the case; (b) take into account such circumstances as the court considers relevant, including the conduct of the case; (c) order costs to be paid by counsel personally, or by a person who is not a party; (d) order interest on costs; or (e) make any ancillary order, including an order as to the time and manner of payment. (4) Paragraphs (1), (2) and (3) are subject to paragraph (5) and Rules 15(5), 17(3) and 19(4). (5) If the defendant in an action begun by writ pays the amount claimed within the time and in the manner required by the endorsement on the writ, the costs allowed are to be fixed at $5,000. (6) Order 59 (costs) does not apply to — (a) proceedings in the Court; (b) appeals from the Court to the Court of Appeal; or (c) applications to the Court of Appeal in relation to such appeals or in relation to proceedings in the Court.

Order 110 r 46(4) of the ROC does not restrict the applicability of rr 46(1) and 46(3) in this case. Rules 15(5) and 17(3), which apply when a party requests documents, do not apply in this case because there was an order under O 110 r 21(1) that O 24 should continue to apply. Neither does r 19(4) apply, given that there was no application for pre-action production of documents.

It follows that the rules applicable to a costs order in this case are that the unsuccessful party must pay the reasonable costs of the proceedings to the successful party, unless the court orders otherwise (O 110 r 46(1) of the ROC), and the court may, in particular: (a) apportion costs between the parties if the court determines that apportionment is reasonable, taking into account the circumstances of the case; and (b) take into account such circumstances as the court considers relevant, including the conduct of the case (O 110 r 46(3)).

The fact that O 110 r 46(6) of the ROC expressly precludes the application of O 59 to proceedings in the SICC is also of importance. Order 59 contains a separate regime for costs in the High Court, including the definition of “standard” and “indemnity” costs (provided for under O 59 r 1(1) read with O 59 rr 27(2) and 27(3) of the ROC), and also the manner in which costs might be ordered, which differs from O 110 r 46. From that, it is clear that the usual High Court costs regime in O 59 was intended to be replaced with the simpler regime in O 110 r 46.

The provisions of O 110 r 46 of the ROC are supplemented by the SICC Practice Directions made pursuant to O 110 r 54. In relation to costs, the SICC Practice Directions contains the following additional guidance at para 152:

General

(1) The costs of and incidental to any application or proceedings shall be in the discretion of the Court and the Court shall have the full power to determine by whom and to what extent the costs are to be paid. (2) In assessing costs, the Court: (a) shall have regard to Order 110, Rule 46(1) of the Rules of Court, which provides that the reasonable costs of any...