Afro-Asia Shipping Co (Pte) Ltd v Da Zhong Investment Pte Ltd and Others (No 2) [2004] SGHC 105

Case Details

• Citation: [2004] SGHC 105
• Court: High Court of the Republic of Singapore
• Decision Date: 21 May 2004
• Coram: Judith Prakash J
• Case Number: Suit No 352 of 2001 (Writ of Summons 352/2001)
• Hearing Date(s): January and February 2004
• Claimants / Plaintiffs: Afro-Asia Shipping Co (Pte) Ltd
• Respondent / Defendant: Da Zhong Investment Pte Ltd (1st Defendant); Trevi Contractors (Singapore) Pte Ltd (4th Defendant); Chin Kok Kwong Design & Build Pte Ltd (5th Defendant)
• Practice Areas: Civil Procedure; Costs; Principles of Election

Summary

The judgment in Afro-Asia Shipping Co (Pte) Ltd v Da Zhong Investment Pte Ltd and Others (No 2) [2004] SGHC 105 serves as a definitive exploration of the costs consequences attending a defendant's tactical election not to call evidence under Order 35 Rule 4 of the Rules of Court. Following a protracted substantive trial regarding property damage, where the Plaintiff’s claims against the fourth defendant, Trevi Contractors (Singapore) Pte Ltd ("Trevi"), were entirely dismissed and claims against the fifth defendant, Chin Kok Kwong Design & Build Pte Ltd ("CKK"), were only marginally successful, the Court was tasked with apportioning costs in a manner that balanced the "costs follow the event" principle against the wasted preparatory efforts of the Plaintiff.

The central doctrinal contribution of this decision lies in its refusal to penalize defendants for exercising their procedural right to elect to call no evidence, even when such an election is made late in the proceedings after the Plaintiff has closed its case. Justice Judith Prakash clarified that the costs incurred by a plaintiff in preparing to cross-examine defense witnesses are generally considered a "basic part of trial preparation" and are not directly caused by the defendant's subsequent election. Consequently, these preparation costs are not typically recoverable by a successful plaintiff or deductible from a successful defendant’s costs award. However, the Court carved out a significant exception for hearing fees "thrown away," holding that a defendant who fails to provide timely notice of their intent to elect may be liable for the portion of hearing fees that cannot be recovered from the Registry.

Furthermore, the judgment addresses the "limited recovery" scenario, applying the English authority of Oksuzoglu v Kay [1998] 2 All ER 361. The Court determined that where a plaintiff’s success is so minimal as to be nearly nominal, the defendant may still be entitled to a substantial portion of their costs, notwithstanding the general rule that a "winner" (even of a small amount) receives costs. This decision reinforces the Court's wide discretion under Order 59 Rule 3(2) to ensure that costs awards reflect the commercial and procedural realities of the litigation, rather than a purely mechanical application of the "winner-takes-all" rule.

Ultimately, the case underscores the necessity for "serious and genuine" offers to settle to attract the favorable costs consequences of Order 22A. By scrutinizing the Plaintiff’s purported offers to settle, which the Court found lacked the requisite element of compromise or inducement, Prakash J affirmed that tactical maneuvers in the costs arena must be grounded in a bona fide attempt to facilitate settlement rather than mere posturing.

Timeline of Events

1. 9 May 2001: The Plaintiff, Afro-Asia Shipping Co (Pte) Ltd, commences Suit 352/2001 against multiple defendants, including Trevi (4th Defendant) and CKK (5th Defendant).
2. 4 March 2002: The first tranche of the substantive trial commences.
3. 5 March 2002 – 11 March 2002: Trial continues through its initial stages, involving the presentation of the Plaintiff's case.
4. 10 April 2002: The trial proceeds into its second tranche.
5. 2 September 2002: The trial resumes for the third tranche. On this date, Trevi and CKK formally elect not to call any evidence or witnesses, despite having previously filed numerous affidavits of evidence-in-chief.
6. 19 September 2002: Further trial proceedings or submissions occur following the defendants' election.
7. 25 September 2002: The trial concludes, and judgment is reserved on the substantive issues.
8. 13 January 2003 – 14 January 2003: Additional procedural steps or hearings related to the substantive matter.
9. 21 November 2003: Justice Judith Prakash delivers the substantive judgment ([2004] 2 SLR 117), dismissing the claim against Trevi and awarding only a minor sum against CKK.
10. January – February 2004: The parties appear before the Court to argue the outstanding issue of costs.
11. 24 February 2004: Final submissions or hearings regarding the costs applications are concluded.
12. 21 May 2004: The Court delivers the present judgment [2004] SGHC 105, finalizing the costs awards for Trevi and CKK.

What Were the Facts of This Case?

The litigation arose from a claim by Afro-Asia Shipping Co (Pte) Ltd (the "Plaintiff") for property damage allegedly caused by construction and design works. The Plaintiff sued five defendants in total. The present costs dispute focused on the fourth defendant, Trevi Contractors (Singapore) Pte Ltd ("Trevi"), and the fifth defendant, Chin Kok Kwong Design & Build Pte Ltd ("CKK"). The claim was substantial, with the Plaintiff seeking damages in the region of $2.5m.

The procedural history was marked by its complexity and duration, with the trial spanning three tranches in 2002 and 2003. Trevi, in preparing its defense, had filed affidavits of evidence-in-chief (AEICs) for seven witnesses. These witnesses were intended to provide technical and factual testimony to rebut the Plaintiff's allegations of negligence and breach of duty. Furthermore, the discovery process was "voluminous," involving a significant exchange of documents that the Plaintiff’s counsel had to review in detail to prepare for cross-examination.

A pivotal moment occurred on 2 September 2002, at the start of the third tranche of the trial. After the Plaintiff had closed its case, Trevi and CKK both exercised their right under Order 35 Rule 4 of the Rules of Court to elect not to call any evidence. This meant that the seven witnesses for Trevi and the witnesses for CKK would not be called, and the defendants would rely solely on the perceived weaknesses in the Plaintiff's case. This election was made without prior notice to the Plaintiff, who had spent the intervening months between tranches preparing cross-examination materials based on the filed AEICs.

In the substantive judgment delivered on 21 November 2003 ([2004] 2 SLR 117), the Court found that the Plaintiff had failed to prove its case against Trevi. Consequently, the claim against Trevi was dismissed in its entirety. Regarding CKK, the Plaintiff was only partially successful. While the Plaintiff had claimed approximately $2.5m, it succeeded against CKK only on a very minor portion of the claim, recovering a sum that was described as "limited" and nearly "nominal" in the context of the overall litigation. Specifically, the Plaintiff failed on the primary issues of liability and causation that formed the bulk of the trial's focus.

Following the substantive judgment, the parties could not agree on costs. The Plaintiff argued that even though it lost against Trevi, Trevi should bear the costs of the Plaintiff's preparation for cross-examination because Trevi's late election had rendered that work "wasted." The Plaintiff also sought to recover hearing fees that were "thrown away" because the trial ended earlier than scheduled due to the defendants' election. For CKK, the Plaintiff argued that as the "prevailing party" (having secured a judgment for some amount), it should receive its costs. Conversely, the defendants argued that the standard rule—costs follow the event—should apply, and that the Plaintiff’s limited success against CKK should actually result in the Plaintiff paying CKK’s costs.

The Plaintiff also relied on an "offer to settle" it had made, which it claimed should trigger the indemnity costs provisions of Order 22A. The defendants countered that the offer was not a genuine attempt to settle but a tactical move that offered no real compromise, as it essentially demanded the full amount of the claim plus costs.

What Were the Key Legal Issues?

The Court identified several critical legal issues that required resolution to determine the appropriate costs orders:

• The Costs of Election: Whether a defendant who elects not to call evidence under Order 35 Rule 4 should be liable for the plaintiff's costs of preparing to cross-examine witnesses who were never called. This involved interpreting whether such costs were "caused" by the defendant's conduct or were a "basic part of trial preparation."
• Hearing Fees Thrown Away: Whether the Plaintiff could recover hearing fees paid to the Registry for trial days that were ultimately not used because the defendants' election shortened the trial. The Court had to decide if the lack of notice by the defendants justified shifting this specific financial burden.
• Costs in Limited Recovery Scenarios: How costs should be apportioned when a plaintiff succeeds on only a tiny fraction of its claim. The Court considered whether the "event" should be viewed globally or whether the defendant (CKK) could be considered the "successful" party for costs purposes despite a technical loss.
• Validity of Offers to Settle: What constitutes a "serious and genuine" offer to settle under Order 22A. The Court examined whether an offer that requires the defendant to concede almost the entire claim can trigger the punitive costs consequences of the Rules of Court.
• Relevance of Substantive Merits in Costs: Whether a party can relitigate the merits of the dismissed claim during costs submissions to argue that the defendant's conduct was "unreasonable" or that the claim was "almost successful."

How Did the Court Analyse the Issues?

1. The Election Not to Call Evidence and Preparation Costs

The Plaintiff’s primary contention was that Trevi’s decision to elect no evidence on 2 September 2002 was a "late" decision that caused the Plaintiff to waste significant resources. The Plaintiff argued that it had spent months preparing to cross-examine seven witnesses and reviewing voluminous discovery. Justice Judith Prakash rejected the argument that Trevi should pay for these preparation costs. The Court emphasized that Order 35 Rule 4 provides a procedural right to the defendant. At [9], the Court held:

"It would not be right to penalise a defendant for adopting a course which the Rules of Court make available to him and which will also lead to the saving of costs in that the case will not be prolonged by the cross-examination of the defendant’s witnesses."

The Court reasoned that preparation for cross-examination is a "basic part of trial preparation" that any diligent plaintiff must undertake regardless of whether the witnesses actually take the stand. There was no causal link between the election and the preparation; the preparation happened because the Plaintiff chose to sue and the trial was ongoing. The Court noted that if the Plaintiff had won, it would have recovered these costs as part of its general costs. Since the Plaintiff lost against Trevi, the "event" dictated that the Plaintiff bear its own costs of preparation.

2. Hearing Fees Thrown Away

A distinction was drawn between general preparation costs and "hearing fees thrown away." The Plaintiff had paid $4,960 in hearing fees for days that were not used because the trial ended abruptly. Under the Registry's rules, these fees were non-refundable because the trial was vacated on short notice. The Court found that while the election itself was a right, the timing and lack of notice had specific financial consequences. The Court observed that if Trevi had notified the Plaintiff even a week earlier, the hearing fees might have been saved or reduced. Consequently, the Court ordered Trevi to pay 85% of the hearing fees thrown away, amounting to $4,219, as a matter of fairness, while the Plaintiff remained liable for the other 15% to reflect its own role in the litigation's pace.

3. Limited Recovery and the Oksuzoglu Principle

Regarding CKK, the Plaintiff had technically "won" but recovered only a fraction of the $2.5m claimed. The Court applied Oksuzoglu v Kay [1998] 2 All ER 361, which establishes that where a plaintiff's success is purely nominal or very limited, the court can depart from the rule that costs follow the event. Prakash J noted that the Plaintiff had failed on almost all the major issues of liability and causation that consumed the trial's time. The Court cited the English Court of Appeal's view that "where there is a limited recovery by the plaintiff, questions of a particular order for costs do not arise only and exclusively where the plaintiffs’ success has been purely nominal" (at [21]).

The Court found that CKK had been "substantially successful" in defending the bulk of the claim. Therefore, it was not appropriate for CKK to pay the Plaintiff's costs. Instead, the Court determined that CKK should receive 85% of its costs for defending the liability aspect of the claim, reflecting the fact that the Plaintiff had failed on the vast majority of the issues litigated.

4. Offers to Settle under Order 22A

The Plaintiff attempted to rely on an offer to settle to secure indemnity costs. The Court referred to The Endurance [1999] 1 SLR 661 and Singapore Airlines Ltd v Fujitsu Microelectronics (Malaysia) Sdn Bhd (No 2) [2001] 1 SLR 532. The Court reiterated that an offer to settle must be "serious and genuine" and must contain an "element which would induce or facilitate settlement."

The Plaintiff's offer in this case was found to be lacking. It essentially demanded that the defendants pay the full amount of the claim. The Court held that such an offer was not a genuine attempt at compromise but a tactical attempt to invoke the costs rules. As there was no real "concession" by the Plaintiff, the offer did not attract the consequences of Order 22A.

5. The Merits of the Case in Costs Arguments

The Plaintiff attempted to argue that Trevi’s conduct was "unreasonable" and that the claim against Trevi was "meritorious" despite being dismissed. Justice Prakash firmly rejected this approach. The Court held that the costs stage is not an opportunity to relitigate the substantive merits. Once a claim is dismissed, the defendant is the successful party. Unless there is distinct "misconduct" in the litigation process (as opposed to the underlying facts of the dispute), the successful defendant is entitled to its costs. The Plaintiff’s dissatisfaction with the substantive judgment was a matter for appeal, not for adjusting the costs award.

What Was the Outcome?

The Court made the following specific orders regarding costs:

• In relation to Trevi (4th Defendant): The Plaintiff was ordered to pay Trevi the costs of defending the claim. However, Trevi was ordered to pay the Plaintiff $4,219, representing 85% of the hearing fees thrown away due to the late election.
• In relation to CKK (5th Defendant): The Court awarded CKK 85% of its costs of defending the Plaintiff’s claim with respect to liability. This reflected the Plaintiff's very limited success.
• General Basis: All costs were to be taxed on the standard basis if not agreed.

The operative paragraphs of the judgment setting out these orders are as follows:

"25. In relation to Trevi, I award them the costs of defending the plaintiffs’ claim. I also order them to pay the plaintiffs $4,219 being 85% of the hearing fees thrown away."

"26. In relation to CKK, I award them 85% of their costs of defending the plaintiffs’ claim with respect to liability."

The Court also clarified that the Plaintiff's arguments regarding the "reasonableness" of its claim against Trevi did not justify a departure from the standard rule. The Plaintiff was essentially the "loser" against Trevi and a "nominal winner" against CKK, and the costs awards reflected this reality. The Plaintiff's attempt to use Order 22A was unsuccessful as the offer to settle was not deemed serious or genuine.

Why Does This Case Matter?

This judgment is a cornerstone for practitioners navigating the tactical landscape of trial elections and costs. Its significance can be categorized into three main areas: the protection of procedural rights, the definition of "success" in complex litigation, and the policing of settlement tactics.

1. Procedural Rights vs. Wasted Costs
The decision provides a clear shield for defendants who choose to elect no evidence under Order 35 Rule 4. It establishes that exercising a procedural right granted by the Rules of Court is not, in itself, "unreasonable conduct" that justifies a costs penalty. This is a vital protection for defense counsel who may realize only after the plaintiff's evidence is heard that the plaintiff has failed to meet its burden of proof. By ruling that preparation for cross-examination is a "basic part of trial preparation," the Court prevents plaintiffs from "holding hostage" the defendant's right to elect by threatening massive wasted-preparation costs.

2. The Commercial Reality of "Success"
The application of the Oksuzoglu principle is a pragmatic acknowledgment that not all "wins" are equal. In large-scale commercial or construction litigation, a plaintiff might technically succeed on a minor point while losing on the primary, time-consuming issues of liability. This judgment empowers the Court to look behind the technical result and award costs to the party that was "substantially successful." This discourages "shotgun" litigation where plaintiffs bring numerous weak claims in the hope that one small success will immunize them against the defendant's costs.

3. The Standard for Offers to Settle
The judgment reinforces the high bar for Order 22A offers. By requiring an offer to be "serious and genuine" and to contain an "element of inducement," the Court ensures that the indemnity costs regime is used for its intended purpose: encouraging settlement. It prevents the regime from being weaponized by parties who make "take-it-or-leave-it" demands for the full claim amount just to set up a future costs argument. This provides clarity for practitioners on how to draft effective offers that will actually be recognized by the Court.

4. Hearing Fees as a Specific Head of Loss
The Court’s nuanced approach to hearing fees—distinguishing them from preparation costs—creates a middle ground. It recognizes that while a defendant has a right to elect, the timing of that election has a direct, quantifiable impact on the public and private resources of the court system. The 85% award against Trevi for hearing fees serves as a cautionary tale for defendants: while you have the right to elect, failing to give notice can result in a direct out-of-pocket penalty for fees that the Registry will not refund.

Practice Pointers

• Timely Notice of Election: If a defendant intends to elect not to call evidence, notice should be given as early as possible. Even if the final decision is made only after the plaintiff's case closes, providing a "heads up" may mitigate liability for hearing fees thrown away.
• Preparation Costs are Sunk: Plaintiffs should be aware that costs incurred in preparing for cross-examination are generally not recoverable if the defendant elects no evidence and the plaintiff ultimately loses the case. These are viewed as inherent risks of litigation.
• Drafting Genuine Offers to Settle: To trigger Order 22A consequences, an offer must involve a real compromise. Demanding 100% of the claim plus costs is unlikely to be viewed as a "serious and genuine" offer to settle.
• Focus on Substantial Success: In cases with multiple issues, practitioners should focus on the "event" in terms of the time and resources spent on specific issues. A technical win on a minor point does not guarantee a costs award and may still result in paying the other side's costs if they were "substantially successful."
• Avoid Relitigating Merits at the Costs Stage: Arguments for costs should focus on the conduct of the litigation and the results obtained. Attempting to convince the judge that a dismissed claim was "actually quite strong" is generally a futile exercise and may be viewed as an attempt to circumvent the substantive judgment.
• Hearing Fee Recovery: When a trial is shortened due to an opponent's election or sudden withdrawal, immediately quantify the non-refundable hearing fees. These are a distinct category of "thrown away" costs that the Court is more willing to shift than general legal fees.
• Standard vs. Indemnity Basis: Without a valid Order 22A offer or evidence of litigation misconduct, costs will almost always be awarded on the standard basis. Practitioners should manage client expectations regarding the "gap" between actual legal spend and taxed costs.

Subsequent Treatment

The principles in this case regarding the "limited recovery" of costs and the application of the Oksuzoglu principle have been consistently referred to in Singaporean jurisprudence to justify departures from the "costs follow the event" rule. The Court's stance on the "serious and genuine" requirement for offers to settle remains a leading authority for interpreting Order 22A (now mirrored in the Rules of Court 2021). The distinction between "basic trial preparation" and "costs thrown away" continues to guide Taxing Masters and Judges in assessing the consequences of tactical elections during trial.

Legislation Referenced

• Rules of Court (Cap 332, 2004 Rev Ed):
  • Order 35 r 4 (Election not to call evidence)
  • Order 35 r 5
  • Order 59 r 3 (General allowance of costs)
  • Order 59 r 3(2) (Court's discretion in costs)
  • Order 22A (Offers to Settle)

Cases Cited

• Applied:
  • Oksuzoglu v Kay [1998] 2 All ER 361 (English Court of Appeal)
• Referred to:
  • The Endurance [1999] 1 SLR 661 (Court of Appeal)
  • Singapore Airlines Ltd v Fujitsu Microelectronics (Malaysia) Sdn Bhd (No 2) [2001] 1 SLR 532 (Court of Appeal)
  • Beoco Ltd v Alfa Laval Co Ltd [1994] 4 All ER 464; [1995] QB 137
  • Afro-Asia Shipping Co (Pte) Ltd v Da Zhong Investment Pte Ltd and Others [2004] 2 SLR 117 (Substantive Judgment)

Source Documents

• Original judgment PDF: Download (PDF, hosted on Legal Wires CDN)
• Official eLitigation record: View on elitigation.sg