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World Fuel Services (Singapore) Pte Ltd v Florens Container Inc

Judgment Cited authorities 8 Cited in Precedent Map Related
Vincent
Judgment Date16 May 2007
Citation[2007] 2 HKLRD 507; (2007) 10 HKCFAR 256
Judgement NumberFACV22/2006
Subject MatterFinal Appeal (Civil)
CourtCourt of Final Appeal (Hong Kong)
FACV000022A/2006 WORLD FUEL SERVICES (SINGAPORE) PTE LTD v. FLORENS CONTAINER INC

FACV No. 22 of 2006

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 22 OF 2006 (CIVIL)

(ON APPEAL FROM CACV NO. 327 OF 2005)

_____________________

Between:

WORLD FUEL SERVICES (SINGAPORE) PTE LTD

Appellant

- and -

FLORENS CONTAINER INC.

Respondent

(“THE LIBERTY CONTAINER”)

_____________________

Court : Mr Justice Bokhary PJ, Mr Justice Chan PJ, Mr Justice Ribeiro PJ, Mr Justice Nazareth NPJ and Lord Millett NPJ

Date of Hearing : 7 May 2007

Date of Decision : 7 May 2007

Handing Down of Reasons : 16 May 2007

_____________________

J U D G M E N T

_____________________

Mr Justice Bokhary PJ:

1. At the conclusion of the hearing we announced that, for reasons to be handed down later, the appeal was allowed to restore the decision at first instance. Upon this announcement, the appellant World Fuel Services (Singapore) Pte Ltd (“World Fuel”) asked for costs here and below. And upon the respondent Florens Container Inc. (“Florens”) indicating that it did not resist such costs, the same were awarded to World Fuel. We now hand down our reasons for allowing the appeal.

Questions of law

2. The appeal concerns costs against persons who fund litigation by providing some or all of the funds for it. We will refer to such persons as “funders”. Section 52A of the High Court Ordinance, Cap.4, provides as follows :

“(1) Subject to the provisions of rules of court, the costs of and incidental to all proceedings in the Court of Appeal in its civil jurisdiction and in the Court of First Instance, including the administration of estates and trusts, shall be in the discretion of the Court, and the Court shall have full power to determine by whom and to what extent the costs are to be paid.

(2) Subject to specific provision made in this or any other Ordinance (other than subsidiary legislation) nothing in subsection (1) shall authorize an award of costs against a person who is not a party to the relevant proceedings.

(3) Nothing in subsection (1) shall alter the practice in any criminal cause or matter, or in bankruptcy.”

The first and most basic question in the appeal is whether s.52A confers jurisdiction to order costs against a person who, though not a party to the application giving rise to those costs, is a party of record in the action and had funded the application for his own financial benefit. If, as Florens contended, s.52A does not confer such jurisdiction, then World Fuel would fall at the first hurdle. But if, as World Fuel contended, s.52A does confer such jurisdiction, then it would become a matter of whether World Fuel can overcome all the other submissions made by Mr Clifford Smith SC on Florens’ behalf.

3. These other submissions, which raised questions of law as well as fact-sensitive issues of discretion, were shortly stated as follows. First, Mr Smith submitted that it is necessary to show, before costs can be ordered against a funder, that it was with a view to becoming the sole or substantial beneficiary that he funded the litigation. Secondly, Mr Smith submitted that the making of a costs order against an unsecured creditor who funded the litigation in the name of a company in liquidation in the hope of recovering assets for the benefit of the general body of unsecured creditors proving in the liquidation including himself is inhibited by the legal policy underlying s.265(5B) of the Companies Ordinance, Cap.32, which reads :

“Where in any winding up assets have been recovered under an indemnity for costs of litigation given by certain creditors, or have been protected or preserved by the payment of moneys or the giving of indemnity by creditors, or where expenses in relation to which a creditor has indemnified a liquidator have been recovered, the court may, on the application of the Official Receiver or the liquidator or any such creditor, make such order as it deems just with respect to the distribution of those assets and the amount of those expenses so recovered with a view to giving those creditors an advantage over others in consideration of the risk run by them in so doing.”

Thirdly, Mr Smith – relying on the fact that costs had been ordered against the funded litigant Powick Marine (S) Pte Ltd (“Powick”) prior to costs being ordered against Florens as the funder – submitted that ordering costs against a funded litigant exhausts the power to order costs against a funder. In other words, Mr Smith said, the making of the order as to costs against the funded litigant renders the court functus officio (as having discharged its duty) in regard to costs. Fourthly and finally, Mr Smith submitted there are three reasons why, quite apart from anything else, the judge (Waung J) should be held to have wrongly exercised his discretion when he ordered costs against Florens.

4. The three reasons put forward by Mr Smith are : (i) that in holding that Florens was a funder, Waung J found the fact of funding on insufficient evidence; (ii) that Waung J wrongly proceeded on the basis that Florens’ solicitors had behaved improperly; and (iii) that all the steps taken in the funded litigation to resist the claim against the funded party were taken pursuant to decisions made by its liquidator upon the advice of its committee of inspection.

5. Each of these three reasons can be dealt with at once and quite briefly. As to the first reason, Waung J found the fact of funding by a process of inference upon the whole of the circumstances as they emerged from the evidence which he had. We are not persuaded that the evidence was insufficient for that purpose. Moreover, it is to be observed that the fact of funding is now admitted. As to the second reason, we do not understand Waung J to have proceeded on the basis that Florens’ solicitors had behaved improperly. He considered their position and activities only for the purpose of deciding whether funding had occurred. As to the third reason, the short answer to it is that it simply begs the questions at issue on this appeal.

Facts

6. Shortly stated, the facts are these. World Fuel is a Singaporean company. So is Powick which owned a fleet of container vessels including the “Convenience Container”, the “Kingdom Container”, the “Liberty Container” and the “Mandarin Container” (“the four vessels”). World Fuel claimed US$350,750 for bunkers supplied to the “Kingdom Container” and the “Mandarin Container” during March and April 2003 when they were under time charter to Kien Hung Shipping Co. Ltd (“Kien Hung”), a Taiwanese company which was under the same beneficial ownership as Powick. Pursuing that claim, World Fuel commenced in Hong Kong on 9 May 2003 an admiralty action in rem against the owners of the “Liberty Container” (“the Action”).

7. On 13 May 2003 Powick commenced proceedings for the purpose of putting itself into voluntary liquidation, and is now in liquidation. Kien Hung, too, is now in liquidation. During the period from 16 May to 2 June 2003 the four vessels were arrested in Hong Kong.

8. Florens is a Delaware company in the business of leasing containers. Its claim against Powick is under a guarantee executed in its favour by Powick on 17 March 2003 in respect of all sums due and payable under various agreements by which it, Florens, had leased containers to Kien Hung. Powick had intended to sell the four vessels. In anticipation of such sale, Powick had on 24 April 2003 assigned to Florens and two other creditors the balance of the proceeds left after payment of all mortgage loans. Under this assignment, such balance was to be paid into an escrow account of Messrs Holman, Fenwick & Willan (“Holman”) at their Hong Kong office. As things turned out, the four vessels were sold by the High Court pendente lite. So the intended sale by Powick did not take place and the balance contemplated by the assignment never materialised.

9. In due course, World Fuel, Florens, the other two assignees and another company became members of Powick’s committee of inspection in Singapore.

10. Florens asserted a vested interest in ascertaining whether or not World Fuel could establish its claim against Powick, the quantum thereof and its priority. On the basis of that assertion, Florens obtained leave from Waung J on 12 June 2003 to intervene in the Action. An intervener asserting an admiralty claim in rem has a right to be heard against any decree in the suit by which he may be injured (The Dowthorpe (1843) 2 W. Rob. 73; 166 ER 682); he may raise any defence which the shipowner could have raised (The Byzantion (1922) 12 Ll LR 9); and he may protect his interest in the res (The Lord Strathcona [1925] P 143). Moreover it has been held (in The Mardina Merchant [1975] 1 WLR 147) that even though a person has no interest in the property under arrest, the courts have an inherent jurisdiction to allow him to intervene if the effect of the arrest is to cause him serious hardship, difficulty or danger.

11. In the course of the hearing, Mr Smith confirmed that the reason why Florens intervened was the common one in admiralty actions in rem of putting oneself in a position, if necessary, to take over the shipowner’s defence.

12. After Florens became an intervener, the Action proceeded as follows. On 29 July 2003 Powick filed an acknowledgment of service. Unable therefore to obtain default judgment, World Fuel took out a summons on 24 December 2003 for summary judgment. Before that summons came on for hearing, Powick took out a notice of motion to set aside the writ on the ground that World Fuel’s claim did not fall within the admiralty jurisdiction of the Hong Kong courts. On 20 April 2004 Waung J dismissed this motion with gross sum assessment costs...

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