THAPA KAMALA v. HO LAI MING (Deputy Special Magistrate at Eastern Magistrates’ Courts)

DCCJ 1719/2019

[2022] HKDC 102

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1719 OF 2019

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DECISION

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THE APPLICATION

1.  By Decision dated 1 November 2021 (“the Decision”), this court:

(1)  dismissed the defendant’s summons filed on 19 July 2019 to strike out the Statement of Claim indorsed on the Writ of Summons issued on 4 April 2019 (“the Striking-out Summons”); and

(2)  granted interlocutory judgment in favour of the plaintiff pursuant to her summons filed on 23 July 2019 (“the Summons for Judgment”).

2.  This court also made a costs order nisi that:

(1)  The defendant shall bear the plaintiff’s costs of the Striking-out Summons and the Summons for Judgment (collectively, “the Summonses”), with certificate for counsel, to be taxed if not agreed;

(2)  Costs on liability of this action up to the date of the Decision be to the plaintiff, to be taxed if not agreed.

3.  By letter dated 2 November 2021, the plaintiff applied to vary the first paragraph of the costs order nisi and asked the court to include all “reserved costs” therein.

4.  By another letter dated 12 November 2021, the plaintiff also asked the court to order that the costs of the Summonses shall be payable forthwith.

5.  The defendant indicated that she had no objection to bear all reserved costs in relation to the Summonses.  Her only objection in the present application is that there should not be an order for immediate payment of the plaintiff’s costs of the Summonses.

LEGAL PRINCIPLES

6.  Order 62 rule 9D of the Rules of the District Court (Cap.336H) provides that:

“(1) Subject to paragraphs (2) and (4), the costs of any proceedings shall not be taxed until the conclusion of the action.

(2) If it appears to the Court when making a costs order that all or any part of the costs ought to be taxed at an earlier stage it may order accordingly.

(3) No order may be made under paragraph (2) in a case where the person against whom the costs order is made is an aided person.

(4)  Where it appears to a taxing master that there is no likelihood of any further order being made in a cause or matter, he may order the person entitled to payment of the costs of any interlocutory proceedings which have taken place to commence taxation proceedings in accordance with rule 21.”

7.  Both parties had referred this court to the case of Midland Business Management Ltd & Another v Lo Man Kui (also known as Howard Lo) [2011] 2 HKLRD 667 in which Lam J (as his Lordship then was) had the following to say:

“7. In my judgment, what emerges from Kickers [International SA v Paul Kettle Agencies Ltd [1990] FSR 436] and Naf [Naf SA v Dickens (London) Ltd [1993] FSR 424] is neatly summarized by Hoffmann J (as he then was) at p.429 of Naf,

‘I indicated in a judgment in [Kickers] the matters which ought to be taken into consideration in deciding whether or not to make an order for immediate taxation and as I remember them, what they were concerned with was, first of all, the extent to which the proceedings are from a taxation point of view severable and self-contained from the rest of the action, secondly the justice of making such an order having regard to the effect on the cash flow of the respective parties, and the third matter to be taken into account was whether the amount at stake on the taxation was sufficient to justify putting the parties to the expense of having a separate taxation for it rather than bringing it in on the final taxation.’

8. In Kickers, Hoffmann J also referred to the possibility that there may be no trial. His Lordship also emphasized that his list of factors was not intended to be exhaustive, see p.439. Thus Miss Tam is correct in pointing out that the Kickers approach is not set in stone and the court must still exercise its discretion having regard to all relevant circumstances.

9. Under the Civil Justice Reform, the court is encouraged to order immediate payment of costs of interlocutory proceedings and if possible by way of summary assessment of costs. The objective is to discourage unnecessary and disproportionate interlocutory applications. It is recognized that the lack of immediacy of orders to pays costs ‘in the cause’ or ‘in any event’ weakens costs as a sanction against unwarranted applications or resistance, see paras.529 to 536 of the Final Report of the Chief Justice’s Working Party on Civil Justice Reform.

10. By reason of Order 62 Rule 5(1)(aa), the court should take into account of the underlying objectives in Order 1A rule 1 in the exercise of its discretion. The objectives in rule 1(a), (c) and (d) are particularly relevant in the present context. In my view, the approach recommended by the Working Party should be adopted in furtherance of these objectives. Unwarranted interlocutory applications should normally be sanctioned by an immediate costs order.

11. In so saying, I must not be taken as saying that an immediate costs order should be made against every unsuccessful party in interlocutory application. I can readily see that there are cases where such party may have a proper justification for making an interlocutory application even though he fails at the end of the day. There could also be cases where the court considers that it would be more appropriate to make an order ‘in any event’ or ‘in the cause’ or to reserve costs.

12. However, what I do say is that after the Civil Justice Reform the court is more astute to the impact of costs on legal proceedings and order for immediate payment of costs will be made more readily as a discipline against unmeritorious interlocutory applications.”

8.  Lam J’s decision was referred to by Ribeiro PJ in The liquidator of Wing Fai Construction Company Limited v Yip Kwong Robert & Others (2012) 15 HKCFAR 454.   Having endorsed what Lam J stated, his Lordship further held that:

“7. Whether or not the immediate payment of costs should be ordered is quintessentially a matter within the court’s discretion. The former practice was generally to order interlocutory costs to be ‘in the cause’, to be settled up at the end of the proceedings where orders which may have been made in favour of the respective parties might be set-off against one another and when the overall result of the proceedings can be taken into account. However, it is now generally recognized that such an approach may lead to procedural laxity and a damaging proliferation of interlocutory or satellite litigation. The first four of the underlying objectives are relevant to redressing such tendency by emphasising the need:

‘... (a) to increase the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the Court; (b) to ensure that a case is dealt with as expeditiously as is reasonably practicable; (c) to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings; (d) to ensure fairness between the parties...’

8. In pursuing the underlying objectives, it is of course necessary to factor in any possible unfairness or prejudice which the party against whom an order for immediate payment of costs is sought may suffer in consequence of such an order.”

CONSIDERATION OF THE RELEVANT FACTORS

9.  Ms Chan submitted on behalf of the defendant that there should not be an order for immediate payment of costs because:

(1)  From a taxation point of view, the Summonses are neither severable nor self-contained from the rest of the action for assessment of damages;

(2)  The plaintiff has not placed before the court any evidence in relation to her financial position and the effect on her cash flow in the event no immediate payment of costs is ordered;

(3)  There is no justification for a separate taxation; and

(4)  The defendant’s striking out application was not entirely unmeritorious.

10.  I will consider these matters in turn below.

Severability of the interlocutory proceedings

11.  Ms Chan submitted that:

“On the issue of severability of the costs, the Court in the present case has concluded on the final liability of the parties by refusing to strike-out the Plaintiff’s claim and entering interlocutory judgment against the Defendant. What remains outstanding is the assessment of damages.

Given that the evidence considered during the assessment of liability will likely be redeployed again for the purpose of assessment of damages, it is submitted that the trials on liability and damages are intertwined in the sense that evidence to prove both is interconnected. From a taxation point of view, both the Striking-out Summons and the Summons for Judgment are neither severable nor self-contained from the rest of the action for assessment of damages.”[1]

12.  With respect, I do not agree with Ms Chan’s submissions.

13.  As far as the Striking-out Summons was concerned, the issues were whether the Statement of Claim disclosed any reasonable cause of action and whether it was an abuse of the process of the court.  On the first matter, the court should and did only consider the cause of action pleaded in the Statement of Claim.  No evidence was considered for this purpose.  Regarding the issue on abuse of process, the defendant’s grounds focused primarily on the actions taken by the plaintiff (in terms of the commencement of different legal proceedings) after the defendant made the bail decision on 11 January 2018 (“the Bail Decision”) and the effect of the plaintiff’s legal action herein on the independence of the Judiciary.

14.  In relation to the Summons for Judgment, the arguments were made purely on procedural steps taken in this action.

15.  On the other hand, if we go through the particulars of loss and damage pleaded in the Statement of Claim, it can be seen that the focus is more on the defendant’s conduct in the making of the Bail Decision. 

16.  It is true that the plaintiff’s Affidavit filed on 28 August 2019 in opposition to the Striking-out Summons did touch on what happened at the material time from the plaintiff’s perspective, but the evidence filed was not long.  Hence, even if such evidence would be deployed again in the proceedings for assessment of damages, in my view, any duplication of costs would be minimal.

17.  I therefore hold the view that from a taxation point of view, the Summonses are, at least to a very large extent if not entirely, self-contained and severable from the rest of the action for assessment of damages.

Financial position

18.  Ms Chan discussed this factor in the following way:

“It is for the parties to adduce evidence on their financial positions in support of or opposition to a forthwith order. The Court will pay minimal weight on bare assertion as to the potential repercussions on a party’s financial position flowing from costs orders. In the present case, the Plaintiff made no submissions in this regard. She has not provided the Defendant and the Court with evidence in relation to her financial position and the effects on her cash flow should the variation application be dismissed.”[2]

19.  If the receiving party can show to the court that he will suffer cash flow problem without an order for immediate payment of costs (as in the case of Wing Fai, where the Court appreciated that to make the liquidator wait until the end of the proceedings would have a seriously negative effect on the cash flow of the winding-up and might unjustly inhibit proper determination of the substantive proceedings), then that would no doubt be a factor tilting the balance towards the making of such an order. However, it does not mean that it is a prerequisite for the receiving party to show that he would have cash flow problem without such an order. 

20.  On the other hand, it has been held by M Ng J in Seridom Servicios Integrados Idom S.A.U. v Heng Wen Trade Co., Limited & Others [2019] HKCFI 761 that:

“[…] If there were no order for immediate quantification/payment of its costs, P would be out of pocket for a substantial sum in the meantime. Even though P might be able to afford it in terms of cash flow, it was still a prejudice to P. Underlying objectives in Order 1A rule 1(c)-(d) of the RHC militated in favour of ordering immediate quantification/payment of the cost order in respect of the Summons. In my view, the discretionary considerations were substantially in favour of such an order.” (at paragraph 21)

21.  As the plaintiff has not indicated the level of legal costs incurred in relation to the Summonses, it is unknown whether “a substantial sum” (as in the case of the plaintiff in Seridom) has been spent.  However, taking into account of the fact that 7 sets of written submissions have been lodged by counsel from both sides and the volume of the exhibits placed before the court, my estimation is that the plaintiff’s costs would, at least, not be minimal.  Keeping her out of pocket for such costs would still be a prejudice to her.

Justification for separate taxation

22.  In relation to this factor, Ms Chan argued for the defendant that:

“The present case does not justify a separate taxation for the following reasons:-

(a) The amount at stake on the taxation is insufficient to justify putting the parties to the expense of having a separate taxation given that:-

(i) both the Striking-out Summons and the Summons for Judgment were dealt with by way of paper disposal without any oral hearing;

(ii) District Court rate applies; and

(iii) amongst the 916 pages of court documents used for the purpose of the hearing of the summonses, majority of the pages are materials arising out of the underlying criminal proceedings in which the Plaintiff was represented by the same legal team; and

(b) having regard to the stage of proceedings in that liability has been concluded leaving damages to be assessed, the Plaintiff would not be prejudiced for being deprived of the interlocutory costs for a substantial period pending the Court’s assessment of damages.”[3]

23.  With respect, I cannot accept Ms Chan’s arguments, for the following reasons.

24.  Even though the Summonses were dealt with by way of paper disposal, and as a result the costs of attendance at the substantive hearing for argument had been saved, it cannot be said that the costs to be recovered by the plaintiff from the defendant would be of such a small amount which renders a separate taxation unjustifiable.  It must be borne in mind that counsel from both sides had lodged 7 sets of written submissions altogether, with a total of more than 60 authorities. 

25.  Further, in support of her application to strike out the plaintiff’s claim, the defendant had filed an affidavit which exhibited, among other things, the transcripts of previous hearings held in the Magistrates’ Court on 12, 15 and 16 April 2019 which were of no less than 350 pages in total.  It would take time for the plaintiff’s legal team (especially the plaintiff’s counsel who did not represent the plaintiff in those hearings) to read these documents, even if they were not perused in detail. 

26.  Although the District Court rates are applicable herein, this does not mean that the amount of costs to be recovered would be small, particularly after the increment of such rates from 1 January 2018.

27.  In the event this court decides to conduct summary assessment of the plaintiff’s costs of the Summonses (which is indeed the case here (see further below)), the defendant’s argument in this regard would be further weakened.

28.  Even though interlocutory judgment has been entered and what remains to be resolved is the assessment of damages, I would not assume that the action could be disposed of within a short period of time, as there are always uncertainties in litigation.  The time required would also be affected by the state of the court’s diary at the material time.

Merits of the defendant’s striking out application

29.  Ms Chan submitted that:

“Unsuccessful application is not equivalent to the application being totally without merit as the Plaintiff alleged. It is worth emphasizing that the Judge made no ruling that the Striking-out Summons is entirely unmeritorious. Moreover, given that interlocutory judgment was entered against the Defendant for default of pleadings, no finding was made by the Judge in respect of the merits of the Plaintiff’s claim.”[4]

30.  While it is recognised that one of the objectives of the Civil Justice Reform in encouraging the court to order immediate payment of costs of interlocutory proceedings (and if possible by way of summary assessment of costs) is to discourage unnecessary and disproportionate interlocutory applications, I do not think there is any rule to the effect that the court should only make an order for immediate payment when it is satisfied that the arguments in support or in resistance of the interlocutory applications (as the case may be) are entirely unmeritorious.

31.  If one refers to the discussion under Proposal 32 in the Final Report of the Chief Justice’s Working Party on Civil Justice Reform (which was also referred to by Lam J in paragraph 9 of Midland Business Management Ltd & Another (supra)[5]), the recommendation made at the end of it (Recommendation 88) reads:

“The court should, whenever appropriate (whether as a response to an unwarranted application or unwarranted resistance to an application, with a view to saving costs or otherwise), make a summary assessment of costs when disposing of interlocutory applications” (emphasis added)

32.  The words “or otherwise” show that the court’s discretion is unfettered and can be exercised in circumstances not limited to the case where an unwarranted application is made or when the resistance to an application is unwarranted.

33.  Indeed, the case of Wing Fai cited above has provided a clear example.  That was a case argued in the Court of Final Appeal, pursuant to leave to appeal granted by the Appeal Committee to the respondents therein.  I do not think the Appeal Committee would have granted such leave if the respondents’ proposed appeal was totally unmeritorious.  Yet, the Court of Final Appeal, having dismissed the respondents’ appeal, considered it appropriate to make an order for immediate payment against them.

Other factors

34.  Ms Chan also reminded the court to factor in any possible unfairness or prejudice which the party against whom an order for immediate payment of costs is sought may suffer in consequence of such an order.  That is indeed a reminder which was given by the Court of Final Appeal in Wing Fai.  However, she has not further explained why it is said to be unfair if such an order is made, nor did she particularise how the defendant would be prejudiced by such an order. 

35.  On the other hand, I think it is unfair to the plaintiff if she is unable to recover her legal costs from the defendant until the conclusion of the whole action.  There is simply no reason why she has to wait.  The defendant should be ordered to face the costs consequence right away. 

CONCLUSION ON IMMEDIATE PAYMENT OF COSTS

36.  Having considered all the relevant matters in the present case, I am of the view that it is appropriate to order that the plaintiff’s costs of the Summonses should be paid forthwith by the defendant.

SUMMARY ASSESSMENT VS TAXATION

37.  Lam J explained in Midland Business Management Ltd & Another (supra) that once a decision is made that there should be immediate payment for the costs of an interlocutory proceeding, the court has 3 options:

“18. Once I reach this conclusion, there are three options. First, I can order immediate taxation of the Defendant’s costs of the summons. Second, I can do a summary assessment and order payment of such costs as assessed in lieu of taxation under Order 62 Rule 9A(a). Third, I can make an order under Order 62 Rule 9A(b) for provisional summary assessment. If the second or third option is adopted, one needs not be concerned about the proportionality of the costs of a separate taxation hearing as compared with the costs of the summons. Otherwise, this issue has to be addressed […]”

38.  These options are also referred to in PD 14.3. Paragraph 6 thereof provided that:

“Upon the disposal of any application, cause or matter, the Court may make one of the following orders in respect of the costs of and incidental thereto:

(1) summary assessment of such costs, in which event Part C(1) below applies;

(2) provisional summary assessment of such costs; or

(3) taxation of such costs, in which event Part C(2) below applies.

The Court will give preference to the first two options where an interlocutory application is concerned, unless there is good reason not to do so, e.g. where the paying party shows substantial grounds for disputing the sum claimed for costs that cannot be dealt with summarily.”

(emphasis added)

39.  Mr Leung for the plaintiff preferred to have the costs taxed rather than summarily assessed because:

“(1) there is a large volume of documents for the hearing; (2) there is a real chance that the parties would agree on the quantum upon negotiations (but it will take some time for doing so), such that the Court need not be troubled; (3) even if the parties could not reach agreement on quantum, taking into the amount of work done (hence the costs), taxation is not disproportionate.”[6]

40.  The defendant did not express any view on whether there should be taxation or summary assessment.

41.  Bearing in mind the direction given by virtue of paragraph 6 of PD 14.3 that summary assessment of costs should be preferred over taxation unless there is good reason not to do so, I hold the view that the plaintiff’s costs of the Summonses should be summarily assessed.

42.  In reply to Mr Leung’s point that there is a large volume of documents involved, my view is that that may well be a reason in support of summary assessment by this court, because, having considered all the relevant materials placed before this court by the parties and made the Decision, I am in a better position to assess what the necessary or proper costs should be as far as those documents are concerned.

43.  Concerning Mr Leung’s anticipation that the issue on quantification of costs may well be resolved between the parties themselves without troubling the court, I should say that the court would always welcome settlement between the parties such that judicial resources may be spent on other cases.  Given Mr Leung’s optimism (as to which Ms Chan for the defendant did not query), I would allow a longer period than usual for the plaintiff to lodge her statement of costs for the purpose of summary assessment, so that parties would be able to make use of the time given to negotiate on the matter first.  In the event they can agree on the quantum of costs, they should inform the court immediately.

ORDER

44.  By reasons of the aforesaid, I make the following orders:

(1)  Paragraph 3(i) of the order made on 1 November 2021 be varied to:

“The defendant shall bear the plaintiff’s costs of the Striking-out Summons and the Summons for Judgment, (including all costs reserved) with certificate for counsel.  Such costs shall be summarily assessed in lieu of taxation pursuant to Order 62 rule 9A(1)(a) of the Rules of the District Court (“RDC”) if not agreed, and payable forthwith.”

(2)  For the purpose of summary assessment of the plaintiff’s costs of the Summonses:

(i)  The plaintiff shall lodge and serve her statement of costs on or before 31 March 2022;

(ii)  The defendant shall lodge and serve her statement of objection on or before 8 April 2022. 

(3)  Summary assessment of the costs of the Summonses will be conducted on paper (no matter whether any statement of objection is lodged by the defendant within time) thereafter.  The costs assessed shall be payable by the defendant within 14 days after assessment.

COSTS

45.  I make a costs order nisi that the defendant shall bear the plaintiff’s costs of the variation application, with certificate for counsel.  Such costs shall be summarily assessed in lieu of taxation pursuant to Order 62 rule 9A(1)(a) of the RDC together with the costs of the Summonses if not agreed, and payable forthwith.    Directions on the lodging and service of statement of costs and statement of objection given in the preceding paragraph shall be applicable to the costs of the variation application.  

46.  If any party wishes to vary the costs order nisi:

(1)  Such a party shall lodge and serve written submissions within 14 days hereof;

(2)  The other party shall lodge and serve written submissions within 14 days thereafter;

(3)  The applying party shall lodge and serve written submissions in reply within 7 days thereafter;

(4)  The application to vary shall then be disposed of on paper.

47.  The above order nisi shall become absolute in the absence of application to vary within the first 14-day period mentioned above.