BIG BOSS INVESTMENT LTD v. SO LAI KEI AND ANOTHER

HCA 2184/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2184 OF 2009

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J U D G M E N T

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1. By consent, the parties disposed of an injunction application with “costs to be paid by the Plaintiff to the 1^st Defendant on a party and party basis to be taxed if not agreed”.  The Defendant commenced taxation proceedings but the Plaintiff applied for a stay on the ground that Order 62, rule 9D of the Rules of the High Court only permits the Defendant to do so after the action is completed.

The Law Before the Civil Justice Reform

2. The following rules are relevant:

Order 62, rule 4(1)

“Costs may be dealt with by the Court at any stage of the proceedings or after the conclusion of the proceedings; and any order of the Court for the payment of any costs may, if the Court thinks fit, and the person against whom the order is made is not an assisted person, require the costs to be paid forthwith notwithstanding that the proceedings have not been concluded.”

Order 62, rule 9(1)

“Subject to this Order, where by or under these rules or any order or direction of the Court costs are to be paid to any person, that person shall be entitled to his taxed costs.”

Order 14, rule 7(1) (and Order 86, rule 6 is in the same terms)

“If the plaintiff makes an application under rule 1 where the case is not within this Order or if it appears to the Court that the plaintiff knew that the defendant relied on a contention which would entitle him to unconditional leave to defend, then, without prejudice to Order 62 and in particular to rule 4(1) thereof, the Court may dismiss the application with costs and may require the costs to be paid by him forthwith.

Order 62, rule 11(1)

“Where an action, petition or summons is dismissed with costs, or a motion is refused with costs, or an order of the Court directs the payment of any costs, or any party is entitled under rule 10 to tax his costs, no order directing the taxation of those costs need be made.”

3. It would appear at first sight that Order 62, rule 4(1) and Order 14, rule 7(1) give the Court 2 discretions: one to determine the incidence of costs and, another to require those costs to be paid and taxed forthwith.  If it does not specify “forthwith”, then costs shall be taxed at a later stage.[1] However, the reverse was true.

4. Where the court orders that “the plaintiff shall pay to the defendants or their solicitors their costs of this appeal such costs to be taxed by a taxing master”, the paying party was entitled to immediate taxation and payment: Adam & Harvey Ltd. v. International Maritime Supplies Co. Ltd. [1967] 1 All ER 533.  In this case, costs were mentioned during the proceedings and the Court of Appeal intimated that there should be no immediate taxation.  It gave leave to amend the costs order to add the words “in any event” to reflect its true intention.

5. Similarly, use of the words “defendant’s costs” and the words “plaintiff’s costs” have the effect of entitling the party concerned to obtain an immediate taxation: Allied Collection Agencies Ltd v. Wood & Another [1981] 3 All ER 176.  In this case, there was no argument on costs.  Both parties agreed that costs should be to the defendant but the clerk to the court added the words “in any event”, later initialled by the judge.  Neill J was ready to delete the words “in any event” from the order.  The parties requested him to express his view on the meaning of the amended costs order.  He referred to Adam & Harvey Ltd, above, and JT Stratford & Son Ltd. v. Lindley (No. 2) [1969] 3 All ER 1122 where Lord Denning MR stated that "plaintiff’s costs” meant that the plaintiff was to have the costs of the interlocutory proceedings without waiting for a decision.”  He considered Order 62, rule 4(1), Order 14, rule 7(1), Order 86, rule 7 of the Rules of the Supreme Court, which had no practical difference from the Hong Kong version.  He, however, felt forced into the view stated in the beginning of this paragraph and regarded the state of the rules to be unsatisfactory.  He said,

“In the light of [Order 62, rule 11(1)], it can be argued that if a summons is dismissed with costs under Ord 14, r 7 or Ord 86, r 7 the defendant can proceed to taxation without any further order.  Why then is it necessary to include in these two rules the words ‘as to payment forthwith’, unless it is intended that a mere dismissal with costs would not be sufficient to secure immediate taxation and payment, notwithstanding the wording of Ord 62, r 11(1).

I can see the force of this argument, but I am satisfied that in the course of time the words ‘defendant’s costs’ have acquired a special meaning.  The words constituted, as counsel for the plaintiff company put it, a formula.  The formula is used where the court or, as in this case, the parties intend or must be deemed to intend that the defendant should be entitled to tax his costs immediately.  Moreover, I see no escape from the plain words of Ord 62, r 11(1) that where a summons is dismissed with costs no order directing the taxation of those costs need be made.”

…                                                                                                                        …

I can therefore state my conclusion as follows.  (1) Where on an interlocutory application the court intends that one party is to have the costs, the usual form of order is ‘costs in any event’.  It is only in exceptional circumstances that the words ‘defendant’s costs’ or the words ‘plaintiff’s costs’ are used.  (2) If the words ‘plaintiff’s costs’ or ‘defendant’s costs’ are used they are effective to entitle the party concerned to obtain an immediate taxation.

I would only add this.  I have been forced to conclude on the material which has been put before me that the words ‘defendant’s costs’ have the meaning for which counsel for the defendants contends.  One cannot, however, regard the present situation as satisfactory.  There is an apparent inconsistency between RSC Ord 62, r 11(1), on the one hand, and Ord 62, r 4(1), Ord 14, r 7(1) and Ord 86, r 7, on the other hand.  I would hope that the matter can be brought to the attention of the Rule Committee so that the present formula can be replaced and a form of order can be prescribed to cover the exceptional case where immediate taxation is intended.  I regard the present formula as a source of confusion.”

6. As it were, this unsatisfactory situation has remained for about 19 years until 1999 when new rules emerged to govern the Civil Procedure Reform in England.  The practice in Hong Kong remained the same, namely, that unless a costs order included the words “in any event”, it would be taken to mean “taxation and payment forthwith”.   I would add that that was in an era when “costs in any event” was the usual order in interlocutory matters.

Civil Procedure Reform 1999 in England

7. Under rule 47.1 of the Civil Procedure Rules 1999,

“The general rule is that the costs of any proceedings or any part of the proceedings are not to be assessed by the detailed procedure [i.e. the parallel of taxation in Hong Kong] until the conclusion of the proceedings but the court may order them to be assessed immediately. (The costs practice direction gives further guidance about when proceedings are concluded for the purpose of this rule.)”

8. For the purpose of rule 47.1, proceedings are concluded when the court has finally determined the matters in issue in the claim, whether or not there is an appeal: 47PD-001.

The Position After the Civil Justice Reform (“CJR”) in Hong Kong

9. The rules set out in paragraph 2 above have been retained in Hong Kong but Rule 9D is added to Order 62 since the coming into effect of the Civil Justice Reform on 2 April 2009  :

“(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.”

10. Section 2 of the High Court Ordinance defines “an action” as “a civil proceeding commenced by writ of summons or in such other manner as may be prescribed by any law.”

11. The effect of rule 9D, in my view, is to reverse the “formula” and unsatisfactory position as described by Neill J.  The “default position” under rules 9D(1) and (2) is thus to allow taxation only after conclusion of an action unless the costs order specifies taxation to be “forthwith” or at some designated time.  The adding of the words “to be taxed” without “forthwith” does not entail immediate taxation.  This is because “taxation” is a matter as of right and wrong, whether or not “to be taxed” are specified in the casts order:  see Order 62, rule 9(1)[2] and 9A(1)(c)[3] and 2[4].  By this construction, Order 62, rule 4(1) and Order 14, rule 7(1) will give the Court discretion to determine the incidence of costs.  It will also have the discretion to specify taxation forthwith but in the absence of its exercise, the taxation will be done at the end of the action.

12. Notwithstanding this major change to the time for taxation, no injustice will be created to the party who has a costs order in his favour.  As provided for under Order 62, rule 9 and 9A, it is always open to a party to seek summary assessment of costs.  This is in fact encouraged for interlocutory applications:  see paragraph 6 of PD 14.3, especially for interlocutory applications.  If, for some reason, summary assessment cannot be done, a party can always ask for taxation forthwith to safeguard his position.  Otherwise, taxation can only proceed upon completion of an action.  This will lead to one taxation per party per action.  In the course of the action, where different parties obtain costs orders, there may be discussions on the amount and set off so that taxation may be dispensed with at the end of a case.

13. Once taxation is done, I can see no problem with payment “forthwith” in the absence of an order for stay of execution. 

Application to the Present Case

14. Mr. Chong for the receiving party asserts his understanding that costs should be taxed and paid forthwith even post Civil Justice Reform.  He has exhibited the series of correspondence between the parties in support.  The correspondence was not marked “without prejudice” and was admissible.  It included attempts to agree the amount of costs to be allowed on summary assessment although that attempt failed. 

15. With respect, a person’s understanding of the legal effect of a costs order is an opinion not binding on the other party or the Court.

16. Moreover, it is for the coram who made the costs order to clarify its meaning having regard to the materials laid before him/her at the time of making of the costs order.  (That was what the parties did in the cases of Adams & Havey Ltd and Allied Collection Agencies Ltd.) The taxing master’s role is to interpret and apply its terms when it comes to taxation.

17. In the present case, the costs order was made without argument before the learned judge.  The learned judge’s amendments to the draft consent order did not touch on the provision for costs.  I doubt if there was anything in the costs order for him to “clarify”.  Ultimately, it is for the taxing master to consider the meaning of the costs provision as it finally ended.

18. Even if I am wrong, I do not think the materials produced by Mr. Chong assisted him.  The materials included correspondence in a case he had handled before, wherein Mr. Recorder Shieh clarified his own costs order by stating that “unless he ordered costs to be paid in any event, he meant costs to be paid forthwith”.  He gave leave to add the words “forthwith” to the order for costs “to be taxed if not agreed”.  In my view, the ruling of the learned Recorder had not laid down any fresh principle of law.  He had considered the arguments on costs and was merely making clear his own intentions, just as in the case of Adams & Harvey Limited, above.  He expressly refrained from deciding the effect of Order 62, rule 9D(1).  I would add that practitioners who want to cite an authority should produce the proper reasoned judgment instead of exhibiting the sealed copy order and correspondence they had come across in another case.

19. Finally, Mr. Chong prayed in aid Rule 9D(4).  He submitted that since the “cause or matter” (which was an interlocutory injunction) was over, the taxing master can order taxation proceedings to commence.  I respectfully disagree.  This rule is applicable to the situation where, e.g. an action never comes on for trial; no costs have ever been awarded. nobody has lost or won; the action goes to sleep and neither side wants to go on; neither wants to pay the costs of the other side:  c.f. JT Stratford Ltd. v. Lindley [1969] 1 WLR 1547, at 1553.  Moreover, an express order of the taxing master is required before the receiving party can even commence the taxation under this sub-rule.  I can see no good reason why an order should be made under this sub-rule to disturb the consent of the parties.

Conclusion

20. Where a costs order does not specify the time for taxation, or does not state that a party should have costs “forthwith”, taxation shall be done upon completion of an action under Order 62, rule 9D(1).  A party who has won an interlocutory application and wants immediate payment is thus well-advised to seek summary assessment or costs with taxation forthwith.

21. In the present case, the taxation proceedings shall be stayed until the action has been completed.  No date for taxation will be given even though the 1^st Defendant has filed the Application to Set Down a Bill for Taxation.

22. I make an order nisi that the Plaintiff is to have the costs of this application to be summarily assessed and set-off against the amount allowed to the 1^st Defendant on taxation of his bill of costs.  Each party is at liberty to seek variation of this order within 14 days, failing which the order will be made absolute.  The Plaintiff shall file a costs statement by 4 February 2010.  The Defendant shall file grounds in opposition by 10 February 2010.  There will be summary assessment on the papers on 11 February 2010.  No attendance is required.

[1] “I have been under the impression that the court, when it intended that result [i.e. immediate taxation and payment], would say expressly ‘costs to be taxed and paid forthwith’; but the Supreme Court Practice, 1967 (1) shows that I was wrong about that.”  per Harman LJ in Adam & Harvey Ltd. v. International Maritime Supplies Co. Ltd. [1967] 1 All ER 533. 

[2] Order 62, rule 9(1) provides, “(1) Subject to this order, where by or under these rules or any order or direction of the Court costs are to be paid to any person, that person shall be entitled to his taxed costs.”

[3] Order 62, rule 9A (1)(c) provides, “Where the Court has determined an interlocutory application at any stage of proceedings and orders a party to pay costs in respect of the interlocutory application to any other party, it may, if it considers it appropriate to do so but subject to rule 9C- order that the costs be taxed in accordance with this Order.”

[4]Order 62, rule 9A (2) provides, “Where the Court has made an order under paragraph (1)(b), either party to the interlocutory application is entitled to have the costs in respect of the interlocutory application taxed in accordance with this Order.”