CITI CREATION INVESTMENT LTD v. THE INCORPORATED OWNERS OF KWAI WAN INDUSTRIAL BUILDING AND OTHERS

LDBM180/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION  NO. LDBM180 OF 2009

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DECISION

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1. The respondents’ appeal against Master Mak’s order making the taxation order nisi absolute on 25 February 2010 on the applicant’s bill of costs of 4 November 2009.

2. Mr Lee, representing the respondents, submitted that even though the respondents failed to lodge a list of objections on the applicant’s bill within 28 days under Practice Direction 14.3, paragraph 21, the respondents have followed the directions under the order nisi on cost after provisional taxation dated 4 January 2010 and lodged a list of objections to the order nisi within 14 days of the order, i.e. on 18 January 2010.  It was followed by a letter to the taxing clerk of the Registry requesting for a hearing as directed in paragraph 5 of the order nisi of 4 January 2010 in accordance with Order 62 rule 21B(3).  However, at the date set down by the Registry in accordance with Order 62 rule 21B(4) on 25 February 2010, the date of the hearing, Master Mak refused to tax the bill formally and made the provisional taxation order absolute.  The respondents therefore appealed to this court to set aside the order absolute and ask for a formal hearing of taxation.

3. Mr Lui, representing the applicant, opposed the appeal.  His reasons were that the respondents had failed to follow Practice Direction 14.3, paragraph 21(1) and file a list of objections with 28 days.  When the respondents filed the list of objections for the first time on 4 January 2010, they were out of time.  The respondents’ earlier attempt to extend the time for filing of the list of objections for the first time under a time summons heard on 14 January by Master Lai was dismissed.  Therefore, the respondents should not be allowed to go to the next step for a full taxation hearing.

4. Mr Lui submitted that Master Mak was correct in making the order nisi absolute and refusing a formal taxation.  Mr Lee, however, argued that since a formal taxation hearing was set down on 25 February, the respondents did not require an extension for time to file the first list of objections in order to go to the next step of a formal taxation hearing.  What the respondents did was to follow the procedure under Order 62 rule 21B(3) and (4), which was what was directed under paragraph 5 of the order nisi.

5. Mr Lui argued that unless good cause or good reasons were given, the Master has a discretion not to conduct a formal taxation hearing and to make the order nisi absolute.

6. After careful consideration of Order 62 rule 21B and Order 62 rule 21C, I find the rules give the Master a discretion under 21C to set down a date of hearing of the taxation.  However, under order 62 rule 21B(4), when a party applied under 62 rule 21B(3) asking for a formal hearing of taxation or clarifications, the Master had no discretion but to set down a date for hearing.  This is what is stated:

“(4) The taxing master shall set down the taxation for hearing upon application made by a party under paragraph (iii) and that party shall serve a notice of the hearing on every other party entitled to be heard on taxation.”

Even though the taxing master may allow or disallow the objections, in my view, the hearing of formal taxation must take place.

7. The Hong Kong Civil Procedure notes on Order 62 rule 21B(3) allowed the respondents to request for a formal hearing.  62 rule 21B(4) does not give the Master any discretion but to set down a date for the hearing.  The notes on Order 62 rule 21B(1) of the Hong Kong Civil Procedure at page 1129 stated the rationale behind the conduct of the provisional taxation on paper, it said:

“Provisional Taxation:  Rule 21B was added to Order 62 under the Civil Justice Reform to introduce a new procedure to enable the taxing master to conduct a provisional taxation without a hearing.  Recommendation 134 of the Working Party on Civil Justice Reform states:

 “The court should have a general discretion to conduct provisional taxations on the papers, with any party dissatisfied with the award being entitled to require an oral taxation hearing, but subject to possible costs sanctions if he fails to do materially better at the hearing.”

In this regard, the Final Report of the Working Party explains:

“Proposal 60 canvasses giving the court a discretion to adopt the provisional taxation procedure in relation to bills exceeding $100,000, while giving any party unhappy with the result a right to require an oral hearing, subject to possible costs sanctions when nothing significant is achieved at such hearing.”

8. Clearly, the procedure for paper taxation for costs over $100,000 is to save time and costs.  But the parties are entitled to a hearing if it is requested.  In the present case, albeit the respondents were late in filing a list of objections within 28 days of the applicant’s bill of costs, I cannot find anywhere in Order 62 or PD14.3 that they are not permitted to request for a clarification hearing if they follow the directions given under paragraph 5 of the order nisi which was made in accordance with Order 62 rule 21B(3) and (4).

9. The court has an inherent jurisdiction when there is a challenge to a decision by the taxing master on procedure to consider the challenge.  In this regard, I refer to the Court of Appeal’s decision in CFK v LLL HCMP4738/2002 at paragraph 17:

“In In re Macro (Ipswich) Ltd  [1996]1 WLR 145, Ferris J following an earlier decision of Wolfe J in R v Taxing Officer, ex parte Bee-Line Railway Limited (decision dated 5 January 1982 reported in the Times, 11 February 1982), held that even where the review mechanism cannot be invoked because the challenge is on a decision by the taxing master on procedure, the court still maintains the power under its inherent jurisdiction to consider the challenge.  This is so despite the absence of any provision for appeal.  Ferris J drew a distinction between matters relating to quantification and procedure.”

10. Clearly, even if the challenge is not on procedure the court has an inherent jurisdiction to consider the challenge.  In my view, the respondents should be given the opportunity to be heard at a formal taxation hearing once Order 62 rule 21B(3) and (4) are set into motion.  I will not go so far as to say the order nisi has been set aside by the setting down of a taxation hearing as Mr Lui had argued.  An order nisi is an order to show cause, and the paying party has a right to show cause.  Order 62 rule 21B(3) and (4) are rules that allow cause to be shown, setting out the procedure to be followed.  Therefore, a full taxation hearing should be conducted for that reason.

11. For the aforesaid reason, I allow the appeal and order a date to be set down before the taxing master for a formal taxation hearing to be conducted.

12. As to costs, I make no order as to costs.  Part of the reason the formal taxation hearing was not conducted was the delay in the paying party’s filing of the first list of objections and failure to give good reasons for the delay.