Knowledge Highlights 29 November 2022
On 25 November 2022, a five-judge coram of the Singapore Court of Appeal in Senda International Capital Ltd v Kiri Industries Ltd  SGCA(I) 10 ruled on the principles for the assessment of costs for proceedings in the Singapore International Commercial Court (“SICC”) for the first time. This decision relates to the costs and disbursements of S$8,111,642.11 awarded by the SICC to Kiri Industries Limited (“Kiri”) in respect of a long-standing minority oppression dispute with Senda International Capital Ltd (“Senda”). In the substantive proceedings of the minority oppression dispute, Senda was ordered to buy out Kiri’s shares in a global dye conglomerate, DyStar Global Holdings (Singapore) Pte Ltd, at US$481.6 million (sum to be increased following Kiri’s successful appeals in the Court of Appeal’s decision dated 6 July 2022 (click here to read more about the successful appeals)).
Before the Court of Appeal, Allen & Gledhill Partners Dinesh Dhillon and Loong Tse Chuan successfully defended the SICC’s decision dated 8 December 2021 to award Kiri costs and disbursements of S$8,111,642.11.
Key findings set out by the Court of Appeal
In this decision, the Court of Appeal set out the following significant points of law:
- The approaches to the assessment of costs under Order 59 and Order 110 Rule 46 of the Rules of Court (2014 Rev Ed) (“ROC”) are fundamentally distinct. Assessment under Order 59 focuses on the level of costs which a successful party ought to be able to recover and is independent of subjective considerations, while that under Order 110 Rule 46 focuses on the level of costs which a successful party has in fact reasonably incurred and involves a subjective inquiry.
- For proceedings in the SICC, it is for the trial court that heard the matter to assess costs. It is also within the trial court’s discretion to determine the manner in which costs are to be assessed. The factors to be considered in the exercise of the court’s discretion as to how to determine questions of costs include the complexity of the issues in the substantive proceedings, the amount of costs claimed by the successful party, and the nature and extent of the differences in the respective positions on costs taken by the parties. The nature of the inquiry, level of detail sought and expense associated with such inquiry must be proportionate to the amount of costs claimed by the successful party. For instance, where the costs claim is higher, more may have to be done for the court to satisfy itself that such claimed costs are reasonable.
- Under Order 110 Rule 46 of the ROC, the legal burden of proof lies on the successful party to prove that its claimed costs are “reasonable costs”. The successful party should adduce evidence of information on its incurred costs and include a sufficient breakdown of such costs. An exhaustive line-by-line breakdown of each item of incurred costs is not required. A successful party need only provide information showing broadly how costs had been incurred at each stage of the proceeding. This level of information also applies to claims for expert fees.
- Once the successful party has adduced the requisite level of information in support of its claimed costs, the evidential burden shifts to the unsuccessful party to adduce evidence to show that the claimed costs are not “reasonable costs”. In this regard, the best evidence that the unsuccessful party can adduce would often be information as to the costs that it had correspondingly incurred for the matter. It will not suffice for the unsuccessful party to make unsubstantiated contentions as to the reasonableness of the successful party’s claimed costs.
- It is not relevant to the assessment of costs under Order 110 Rule 46 of the ROC that a party had objected to the transfer of a matter from the High Court to the SICC.
Further and importantly, the Court of Appeal found that there were no grounds for it to interfere with the SICC’s discretion to award Kiri around S$8.2 million in costs and disbursements. In this regard, the Court of Appeal recognised that it is the judges who have heard the matter who would have the clearest sense of the complexity of the matter and so what level of incurred costs may seem reasonable. Particularly, in its decision dated 8 December 2021, the SICC held that the dispute in question was “more complicated than usual”, that it was “an understatement simply to call it “complex””, there was a “deluge” of documents, “the value of Kiri’s claim … was monumental”, the “degree of complexity was only heightened post-transfer” and that “there was a need to understand difficult principles on valuation, economics and statistics”. Click here to read more about the SICC’s decision.
Indeed, as the Court of Appeal noted, the nature of the dispute and the complexity of the issues raised therein meant that, even if the dispute had been heard in the High Court, a significant uplift would have been applied to the figures in Appendix G of the Supreme Court Practice Directions 2013 setting out “Guidelines for Party-and-Party Costs Award” under Order 59 of the ROC.
Key takeaways of the decision
This decision is significant because it clarifies the proper interpretation of “reasonable costs” under Order 110 Rule 46 of the ROC as well as the manner in which such “reasonable costs” are to be assessed. Such clarification of these principles is valuable as it illustrates that the costs regime for SICC proceedings is closer to that in arbitration than in the Singapore High Court. For instance, Rules 40.2(e) and 42 of the UNCITRAL Arbitration Rules 2013 and 2021 similarly make reference to the reasonableness of costs incurred. The issue of costs recovery in various forums could impact the choice of dispute resolution forum by parties seeking to resolve their international commercial disputes in Singapore.
This is also an important decision for third party funders seeking to fund disputes to be resolved in Singapore, as the degree to which costs may be recovered would be a relevant factor in making the commercial decision to fund a dispute. In this regard, the release of this decision by the Court of Appeal is timely as the categories of proceedings for which third party funding is permitted have recently been extended to include, among others, proceedings commenced in the SICC as well as related appeals.