CNA v CNB and another and other matters [2023] SGHC(I) 12

Costs

By its judgment on the substantive issues raised in these originating summonses (CNA v CNB and another and other matters [2023] SGHC(I) 6) (the “Substantive Judgment”), the Court found in favour of the Defendants to all the summonses (CNB and CNC) and directed that the parties should seek to agree on an appropriate order as to costs.

Costs

The summonses were commenced in the High Court and were all transferred to the Singapore International Commercial Court on 4 January 2022 by order of Deputy Registrar Phang Hsiao Chung. By that order the learned Deputy Registrar directed that costs incurred prior to the date of transfer should be assessed on the basis of the costs regime under O 59 r 7 of the Rules of Court (Cap 322, 2014 Rev Ed) (“ROC 2014”) but that the approach to costs after transfer should be reserved to this Court.

Costs

Annex A to the Defendants’ Reply Submissions sets out their (revised) Costs Schedule which demonstrates that:

Costs

The Defendants contend that this schedule is an accurate reflection of the fees incurred pre- and post- transfer. In the main, although CNA and CND/CNE filed separate submissions on costs, the same points were taken and we shall therefore refer to them together as the Plaintiffs save where it is necessary to distinguish between the two sets of Plaintiffs. Whilst the Plaintiffs do not contest that these were the sums that the Defendants actually incurred, they assert that a disproportionately large amount of those fees have been incorrectly allocated to the post-transfer stage and that the sums claimed differ significantly from those projected in Defendants’ Case Management Costs Plan (“CMP”), so that this renders any excess over the projected fees unreasonable.

Costs

Relying on the observation in BLG and another v BLI and others [2018] SGHC 86 at [18] that the purpose of requiring costs estimates is “to restrain a litigant from claiming excessive costs when he wins a case”, the Plaintiffs submit that the Defendants should be held to the sums specified in the CMP both to form the basis for determining the ratio of the costs incurred pre- and post- transfer and also to form the starting point for assessing the sums to be awarded pre-and post- transfer.

Costs

In response, the Defendants assert that there was an error in the costs stated as having been incurred prior to 7 March 2022 as these had inadvertently included costs attributable to a striking out application of approximately S$400,000 which should not have been included. This serves to reduce the sums prior to 7 March 2022 to some S$450,000 – in contrast to the sum of S$266,127 actually incurred prior to 4 January 2022.

Costs

In any event, say the Defendants, since the Defendants have now provided a detailed costs schedule it is no longer appropriate to rely on estimates. So far as concerns pre-transfer costs, Appendix G of the Supreme Court Practice Directions 2013 (“Appendix G”) will serve to act as a regulator on any costs incurred above any estimate in the CMP and, in the case of post-transfer costs, Rule 46 proceeds on the basis of the costs actually incurred with the burden being placed at the outset on the successful party to demonstrate that its claimed costs are reasonable: Senda International Capital Ltd v Kiri Industries Ltd [2023] 1 SLR 96 (“Senda”) at [72]–[73]. Once done, the evidential burden to show the extent to which the claimed costs are unreasonable will transfer to the losing party: Senda at [75].

Costs

In our judgment, the correct approach in the SICC where there is a significant difference between the costs actually incurred as set out in an appropriately detailed costs schedule and the anticipated future costs set out in a CMP is as follows:

Costs

In the present case the Costs Schedule shows that pre-transfer costs were S$266,127 and that post-transfer costs were S$921,903. For the reasons given it is these figures rather than the figures estimated in the CMP that form the basis of the assessment of both pre- and post- transfer costs. The Plaintiffs’ contention that a disproportionately large amount of fees had been incorrectly allocated to the post-transfer stage was based on the figure of S$850,000 originally stated in the CMP as being attributable to the pre-transfer stage.

Costs

This has now been reduced to the figure of S$450,000 due to the erroneous inclusion of the striking out costs (see [12] above). This was a figure assessed as at 7 March 2022 whereas the figure of S$266,127 in the Costs Schedule were for pre-transfer costs assessed up to 4th January 2022, which suggests that the roughly the same amount of fees were incurred in the intervening period as had been incurred in the entire period from the commencement of the litigation until the date of transfer.

Costs

The Plaintiffs point to this as being an anomaly which serves to demonstrate that the Costs Schedule is inaccurate. This, they say, should be taken in conjunction with the fact that the ratio between the fees incurred pre-and post-transfer if the Costs Schedule is correct is 22/78% which they say “beggars belief”. They back this up with a brief analysis of the amount of work which they claim the Defendants would have had to do pre-and post- transfer. The Defendants’ response to this is to maintain its position that the Costs Schedule is accurate and to contend that the mere fact that the volume of documents produced prior to transfer exceeds those produced subsequently does not provide a rational basis for concluding that the time spent in preparing the documents was in proportion.

Costs

In assessing whether this was a case where fees were significantly back-loaded, the Court might have been assisted by being provided with a Costs Statement by each set of Plaintiffs which would serve to demonstrate the balance between the pre-transfer and post-transfer fees incurred by them: Senda at [75] and [90]. The Plaintiffs were asked by the Defendants to do this but declined, claiming for various reasons that their costs would not be comparable. Be that as it may, it is for the Plaintiffs to demonstrate that the Defendants’ Costs Schedule is inaccurate. This is a means by which they might have sought to do so but they have elected not to.

Costs

Taking all this into account, whilst we accept that the Plaintiffs’ submissions do raise some concerns as to the accuracy of the Costs Schedule, these are not sufficient for us to cease to place reliance on the Schedule as being an accurate analysis of when the fees were incurred.

Costs

Under Order 59 of the ROC 2014 the court applies an objective standard, based on what ought to be recoverable by a successful party in litigation of the nature in question regardless of the level of costs actually incurred. The underlying policy consideration is to ensure that litigants with meritorious claims are not deterred or prevented from seeking justice by the possibility, if the claim fails, of having to pay large sums by way of costs.

Costs

In the present case the Plaintiffs assert that, if Appendix G is to be applied, the total award for pre-transfer costs should be S$50,000 with each set of Plaintiffs paying S$25,000. The Defendants accept that this would be the appropriate figure if Appendix G is applied but contend that on the facts of this case the court should depart from Appendix G.

Costs

Part IV(B) of Appendix G provides that the daily tariff for an Originating Summons for an arbitration matter should fall within the range between S$13,000 and S$40,000. Hence, at the top end of the range, had the matter proceeded in the High Court the maximum sum that could have been awarded under Appendix G would have been S$120,000. Based on the division of 22/78 between pre- and post- transfer costs this reduces the maximum amount for pre-transfer costs to S$26,400.

Costs

However, in their written submissions both sets of Plaintiffs invited the Court to work on the basis that the correct division between pre- and post- transfer costs was in the ratio of 55/45(for CNA) and 56/44 (for CND/CNE). Had the Court accepted these ratios, the maximum amount that would have been payable under Appendix G would have been of the order of S$66,000. The Plaintiffs based their assertion that the correct award of pre-transfer costs would be S$50,000 on the basis of a limited discount to this figure because this case did not merit being considered to be at the highest end of Appendix G.

Costs

We have not accepted this higher ratio of costs which will, of course, benefit the Defendants when it comes to assessing post-transfer costs and it is not therefore surprising that having argued for a lower ratio the Defendants were prepared to accept the Plaintiffs’ assertion that pre-transfer costs should be S$50,000. On the ratio that we have considered to be appropriate however, such an award would constitute an increase of almost 100% on the maximum Appendix G award.

Costs

In the Defendants’ Costs Submissions (“DCS”), the Defendants put forward the following reasons for contending that this is a complex case justifying a departure from Appendix G:

Costs

Applying the objective standard required by Order 59, we do not consider in the circumstances of this case that a return of less than 12% by way of an award over the costs actually incurred would be seen to be objectively reasonable. A figure of around 25% would seem to us to be more appropriate which leads to a conclusion that an award of S$50,000, as suggested by all parties would constitute a proper award for pre-transfer fees although for the reasons given, we reach this figure for different reasons from those proposed by any of the parties.

Costs

Each set of Plaintiffs shall therefore pay S$25,000 to the Defendants in relation to pre-transfer costs. We shall consider the question of pre-transfer disbursements after deciding the question of post-transfer costs.

Costs

The correct approach to assessing post-transfer costs pursuant to Rule 46 has now been considered in a number of cases, particularly in Senda, Lao Holding NV v Government of Lao PDR [2022] SGHC(I) 6 and CBX v CBZ [2022] 1 SLR 88. All the parties accepted that the starting point was a subjective enquiry into what costs were actually incurred by the successful party and then to apply a test of reasonableness to reach an appropriate award. The test of reasonableness is to be guided by the considerations outlined in Paragraph 152(3) of the Singapore International Commercial Court Practice Directions Part XXIII Costs which state:

Costs

In such a case it is understandable that the costs incurred will be high and the correct approach is to have regard as a starting point to the sums actually incurred and then seek to identify any aspect of costs which could be said to be unreasonably incurred, the burden being on the losing party to do this.

Costs

As indicated above at [9], the Plaintiffs’ primary contention is that the magnitude of fees incurred post-transfer (S$921,903) was almost three times higher than the sum estimated in the CMP (S$350,000). This is a factor which merits serious consideration in the case of an application to set aside an arbitral award where there is unlikely to be any oral evidence, and the route to and likely costs involved in a substantive hearing will be relatively clear from the outset. In these circumstances, experienced solicitors should be well able to assess future costs with a greater degree of accuracy than in the case of a witness trial.

Costs

This contention would however carry far greater weight had the Plaintiffs themselves filed Costs Schedules showing that the fees that they had incurred more nearly reflected the sum projected by the Defendants in the CMP. The Defendants requested that they should do this but the Plaintiffs declined to do so. Without seeing any Costs Schedules from the Plaintiffs, it is impossible to assess what weight, if any, should properly be attributed to the suggestion that the costs they had incurred did not properly reflect the costs that the Defendants should reasonably have incurred.

Costs

We have accordingly been denied this “best evidence” and can therefore only conclude that the provision of Costs Schedules would not have supported the Plaintiffs’ case.

Costs

Further, having made the submission that the better view of what constituted reasonable costs was the sum of S$350,000 quoted in Defendants’ CMP, the Plaintiffs went on to submit that even these figures should be reduced by 70% on the basis that such a reduction was in line with reductions which had been made in other equivalent cases. This is not a logically sound submission unless the Plaintiffs were able to demonstrate that there were elements of unreasonableness in the figure in the CMP. The purpose of referring us to that figure was to indicate what a reasonable figure might have been, not to indicate that even that figure would necessarily be unreasonably high.

Costs

We therefore reject the Plaintiffs’ assertion that the figure in the CMP represents a reasonable figure for post-transfer costs – far less that there should be any deduction from that figure.

Costs

The starting point must be the sums actually incurred. In their Reply Costs Submissions, the Defendants submitted that “they should be compensated 70% of their actual post-transfer fees, which amounts to S$645,332”. Whilst this deduction equates to that in Senda at first instance, it has to be remembered that a discount of this magnitude in Senda was justified in part by the fact that the successful party has acted unreasonably in pursuing a particular argument: Kiri Industries Ltd v Senda International Capital Ltd and another [2022] 3 SLR 174 at [90]–[93].

Costs

Having received the Defendants’ Costs Schedule, based on the Defendants’ overall submission of 70% of all costs and disbursements, the Plaintiffs purported to accept that submission in relation to the disbursements incurred in Singapore dollars, the “normal” disbursements, and also in relation to Professor Kwon’s fees and disbursements together with translation and notary fees, both pre-and post-transfer. However they objected to any sums being awarded in relation to KL fees and disbursements.

Costs

Dealing first with the “normal” pre-and post- transfer disbursements charged in Singapore dollars, we see no reason why these should not be paid in full in the normal way. Equally, it is conventional for expert’s fees and attendant costs to be allowed in full unless they are unreasonably incurred. There is no such contention here and the Plaintiffs have not provided their own costs schedules which might serve to demonstrate that in some way excessive sums were incurred. Accordingly, each set of Plaintiffs will pay 50% of S$67,877 in relation to “normal” disbursements and KRW90,713,150 in relation to Professor Kwon’s fees and attendant costs.

Costs

This leaves KL’s fees which in total amount to KRW85,683,400 pre-transfer and KRW150,992,600 post-transfer together with disbursements of KRW7,438,026. These are substantial sums of money. The Defendants contend in their Reply Costs Submissions that KL supported and assisted Professor Kwon in preparing his affidavits and written submissions without which Professor Kwon’s fees would have been significantly higher. Further, they submit that having a representative of KL present at the hearing was reasonable since the Plaintiffs were also each represented by two Korean counsel.

Costs

For their part, the Plaintiffs contend that any assistance provided to Professor Kwon constituted (in effect) a luxury rather than a necessity, that Professor Kwon did not have the benefit of their assistance in the underlying arbitration and that all submissions made at the hearings were made by Prof Kwon without input from KL Partners. Finally, they contend that if the Defendants are to recover anything in relation to KL’s fees, they should be classified as legal costs and not disbursements.

Costs

We do not accept that the involvement of KL was a luxury. In some respects it must have taken the burden of preparing Professor Kwon’s reports and submissions off Singapore Counsel and reduced the overall costs owing to the absence of any language barrier but, having regard to Professor Kwon’s command of the English language, this would not have been ideal. Doing the best we can on the information available to us, we have concluded that only 25% of KL’s fees and disbursements should be taken into account.

Costs

Each set of Plaintiffs, CNA and CND/CNE shall pay the Defendants the following sums by way of costs: