YANCROWN LTD v. CHAN WAI PIU

HCA 527/2021

[2022] HKCFI 1555

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 527 OF 2021

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BETWEEN

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JUDGMENT

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Introduction

1.  This is an appeal against the costs order made by Master Alan Kwong (“Master”) at a hearing on 16 August 2021 (“Hearing”). Reasons for the decision were handed down by the Master on 24 August 2021 (“Decision”). In this judgment, I shall refer to the plaintiff and the defendant respectively as P and D.

2.  As seen in the Decision, there were 3 summonses before the Master, chronologically being:

(1) D’s summons issued on 20 May 2021, to strike out the present action on the ground of abuse of process, or alternatively the present action be stayed (“Strike Out/Stay Summons”) pending the final determination of the consolidated actions HCA 3259/2016 and HCA 973/2018 (“Consolidated Actions”)

(2) P’s summons issued on 28 May 2021, seeking to enter summary judgment against D for the sum of HKD 3,837,200 (“Summary Judgment Summons”)

(3) P’s Summons issued on 12 August 2021 seeking to amend the statement of claim by adding pleas concerning notice of dishonour (“Amendment Summons”)

3.  By the Decision, the Master ordered as follows:

(1) P’s Summary Judgment Summons be dismissed;

(2) The present action be stayed pending the final determination of the Consolidated Actions;

(3) Costs of P’s Summary Judgment Summons and D’s Strike Out/Stay Summons be paid by P to D, such costs summarily assessed at HKD 240,000 (“Costs Order”);

(4) P’s Amendment Summons be adjourned sine die with liberty to restore.

4.  On about 28 September 2021, D took steps to enforce the Costs Order and applied for and obtained a garnishee order nisi against a bank for the costs payable by P under the Costs Order. The garnishee order to show cause was filed on 8 October 2021 and fixed for hearing before Master Rita So on 8 November 2021.

5.  P lodged his notice of appeal out of time on 10 November 2021 (later amended on 14 April 2022) (“NoA”).

6.  On 22 November 2021, P took out a summons for a stay of execution pending the appeal (“Stay of Execution Summons”). On 24 November 2021, Master Rita So granted a stay of execution of the Costs Order pending determination of the appeal.

7.  The appeal was originally fixed for an oral hearing on 17 May 2022. By a consent summons filed on 7 April 2022 (“Consent Summons”), the parties agreed to the appeal being dealt with on paper without an oral hearing with consequential directions.

8.  Counsel Mr Roy Lau lodged written submissions on behalf of P, and Counsel Mr Osmond Lam and Mr Dexter Leung lodged written submissions on behalf of D.

Whether P had provided a satisfactory explanation for delay in appealing

9.  The burden is on P to satisfy this Court as to why the Court should exercise its discretion to grant P an extension of time for appealing against the Costs Order.

10.  The NoA was lodged by P only on 10 November 2021. Pursuant to Order 58 rule 1(3) of RHC, a notice of appeal must be issued within 14 days after the date of the order appealed against. Given the month of August was during the court summer vacation, the deadline to issue a notice of appeal against the Costs Order fell on 14 September 2021. Thus, the NoA was 8 weeks out of time. This in my view was a substantial delay.

11.  As for P’s reasons for the delay, first, it can be seen from the transcript of the Hearing (“Transcript”) that there was never any issue raised by P’s then counsel Mr Simon So (“Mr So”) as to whether the summary assessment should be under Order 62 Rule 9A (1) (a) or (b), nor was this raised after the Master gave his summary assessment. As seen in the Transcript, after delivering his ex tempore decision on the substantive issues, the Master asked D’s then Counsel Mr Martin Wong for D’s statement for gross sum assessment. Mr So then made his objections and comments on D’s statement of costs[1], and the Master and Mr So went through D’s statement of costs together. Mr So had said he had no objection to $143,000 for counsel fees and for solicitors fees, he had proposed $3,600 for someone with less seniority than Mr Heung, and with around 10 hours of working time, that would bring them to “30-odd something” and he would say a holistic sum of $ 180,000 to 200,000 would be sensible[2]. Upon hearing Mr So’s submissions, and adopting a broad brush approach, the Master then said the correct or reasonable amount would appear to him to be in the region of around 240,000 and he then made the Costs Order. There was no objection or clarification or proposals from Mr So, as to whether the summary assessment should be on a “provisional” basis only or whether P was entitled to any right to taxation, or to clarify with the Master then and there as to whether the Costs Order was made pursuant to Order 62 Rule 9A(1)(a) or (1)(b).

12.  Second, the Decision was handed down on 24 August 2021 and the Costs Order stated therein clearly did not refer to the summary assessment being made on a provisional basis only or that it was made pursuant to Order 62 Rule 9A(1)(b) of RHC. If P thought the Costs Order was ambiguous, or had needed any clarification, there was no reason as to why P could not have raised the query with D or with the Master immediately upon receipt of the Decision, and at the same time requesting D’s solicitors not to have the order sealed. Yet, P waited until 11 September 2021, after D’s solicitors served the sealed order on P’s solicitors on 8 September 2021 and demanded payment of the costs, to raise for the first time the issue that the Costs Order did not specify whether it was made under Order 62 Rule 9A (1)(a) or (b).

13.  Third, as seen in the solicitors’ exchange of correspondences, by 17 September 2021, P and his legal representatives should already have had time to consider the audio recording of the Hearing. It was on 11 September 2021 that P’s solicitors sent an urgent letter to the Registrar to seek an audio recording of the Hearing[3], and on 17 September 2021, P’s solicitors wrote to D’s solicitors requesting for a formal taxation of Ds’ bill. On the same day, D’s solicitors replied to point out that it was clear that the Costs Order was plainly made under Order 62 Rule 9A(1)(a) and not (1)(b). Yet, it was not another 12 days later, on 29 September 2021 that P’s solicitors wrote:- “After hearing the audio recording disc from the court, it seems that the materials contained therein do not clear the cloud or uncertainty on the issue raised and the replies made by our respective clients on the problematic question transpired in our previous correspondence.”[4]

14.  Fourth, despite P’s solicitors letter of 29 September 2021 maintaining that there was uncertainty, it was not until a month later, ie on 31 October 2021 that they wrote to the Master to seek clarification.

15.  Fifth, on 3 November 2021, Master had sent his comments through his clerk (“Court Note”) stating that “it was plain that the intention of conducting summary assessment of costs at the hearing on 16 August 2021 was to avoid a full taxation….. This was to save legal costs as well as judicial resources”, and further pointing out that P’s legal representatives did not even seek to contend that P wished to preserve the right to have the costs taxed pursuant to Order 62 Rule 9A (1)(b) &(2). The Master had further stated in the Court Note that “not an iota” of his order had suggested that (i) summary assessment was conducted on a provisional basis under Order 62 Rule 9A(1)(b); or (ii) P was entitled to have the costs taxed pursuant to Order 62 Rule 9A(2). The Master further stated that there was nothing ambiguous about his order and P’s contention was misconceived and that P should not be allowed to have a second bite of the same cherry[5]. It was only 7 days after P’s receipt of the Court Note that he lodged the NoA.

16.  Having considered all of the above and Mr Lau’s submissions, I am of the view that P has not been able provide a satisfactory explanation for its delay in lodging the appeal. In fact, what has been set out above would show that the appeal is no more than a delaying tactic on P’s part in response to D’s demand for payment and subsequent enforcement steps.

Merits of the appeal

17.  In the amended NoA, P now seeks the following orders:

(1) the Costs Order be set aside;

(2) Costs of the Summary Judgment Summons be costs in the cause pending the final determination of the Consolidated Actions; alternatively, costs to be paid by P to D in any event pending the final determination of the Consolidated Actions to be taxed if not agreed;

(3) 50% (or the percentage as the Court thinks fit) of the costs of D’s Strike Out/Stay Summons be paid by P to D in any event, pending the final determination of the Consolidated Actions;

(4) Alternative to (2) and (3) above, if the Court is of the view that it is an appropriate case for summary assessment, reassessment of the costs payable by P to D under Order 62 Rule 9A(1)(a) or(1)(b) as the Court thinks fit.

18.  The grounds of appeal originally set out in paragraph 16 of the affirmation of To Kwan Siu filed on behalf of P at the time of lodging the NoA were as follows[6]:

“16. The grounds of the appeal are as follows:

Erred in law

(i) the Master failed to take into account of the contents of O 62 r 9A(1)(a) and O 62 r 9A(1)(b) before he exercised his discretion on the Costs Order in the hearing;

Unreasonableness

(ii) the Master failed to consider the reasonableness and the justification of the costs proposed by the Defendant in the hearing;

Failure to take into account of proper matters

(iii) the Master failed to consider whether there was any prejudice to the Plaintiff.

(iv) the Master deprived the Plaintiff’s right to full taxation which prejudiced the Plaintiff.

(v) The Plaintiff had sought advice from their law costs draftsman after the Costs Order was granted and he was of the opinion that the appropriate costs to the Defendant was in the range of $100,000.

Taking into account matters that should not have been taken into account

(vi) the Master was erred to have taken into consideration the saving of legal costs and judicial resources when exercising his discretion to choose O 62 r 9A(1)(a) which was unfair to the Plaintiff.

Procedural Irregularity

(vii) the Master failed to entertain further relevant law by way of a further written submissions on behalf of the Plaintiff for the costs being taxed;

(viii) the Master failed to consider whether there was any prejudice to the Plaintiff.

(ix) the Master was in breach of the audi alteram partem principle of natural justice and procedural fairness. The Plaintiff will leave it to their Legal Representative to elaborate more on this.

(x) the Master was in breach of principle of “the justice be seen to be done”. The Plaintiff will leave it to their Legal Representative to elaborate more on this.”

19.  No submissions were made along the above grounds. As pointed out by Mr Lam on behalf of D, upon the amendment of the NoA, the arguments had been reformulated in P’s skeleton submissions. There are presently 3 issues/grounds raised:

(1) Issue 1 – Problems with the summary assessment at HKD 240,000

(2) Issue 2 – (a) Costs of the Summary Judgment Summons and the Strike Out/Stay Summons should be costs in the cause, pending the final determination of the trial of the Consolidated Actions, alternatively (b) costs of the Summary Judgment Summons be paid by P to D in any event, pending the final determination of the trial of the Consolidated Actions and to be taxed if not agreed

(3) 50% (or the percentage as the Court thinks fit) of the costs of D’s Strike Out/Stay Summons be paid by P to D in any event, pending the final determination of the Consolidated Actions and to be taxed if not agreed

20.  There is no dispute in relation to the applicable test. An appeal under Order 58 Rule 1, RHC, from the costs order of a master to a judge in chambers is not a hearing de novo, as set out in paragraph 10 of Paul Y ITC Construction Limited v Kin Shin Company Limited, HCA 2220/1998, unrep, 02.12.1998, which states as follows:

“10. As this is an appeal as to costs only from the discretion of the Master, such application should not be allowed unless it can be shown that the order made by the Master was unreasonable or erred in law ie, if he either failed to take into account proper matters or took into account matters that should not have been taken into account………….”

(emphasis added)

Issue 1

21.  It is contended on behalf of P that the proper order should be costs of the Summary Judgment Summons and the Strike Out/Stay Summons be paid by P to D to be taxed if not agreed.

22.  However, there were no explanations as to why the Master should not have conducted a summary assessment of costs at the Hearing under Order 62 Rule 9A(1)(a). There was no objection at the Hearing to the Master conducting a summary assessment of costs as such. In any event, as seen in the authorities submitted on behalf of D, the Master was perfectly entitled to conduct a summary assessment of costs in lieu of taxation.

23.  As seen in the Transcript and set out earlier, P was given the opportunity at the Hearing to make submissions on D’s statement of costs, which his then counsel Mr So duly did on various items. D’s statement of costs[7] was of the standard format consisting of 5 sections A to E, and totalled HKD 307,558, and covered 2 hearings, ie the call over on 18 June 2021 and the substantive hearing on 16 August 2021. As said earlier, Mr So indicated clearly that he had no objection to the sum of HKD 143,000 for counsel fees in section E. Further, even though D was represented by two counsel, D only sought the brief of one counsel in the statement of costs for the hearing on 16 August 2021, namely that of Mr Martin Wong only. Mr Lau’s submission in paragraph 12(a) of his submissions appeared to have been misconceived. There was no objection to D being represented by one counsel, and in fact P had also instructed counsel to attend. As the issue was never raised nor disputed, it was not necessary for the Master to specify that there be a certificate for counsel, nor was there any reason why the Master should be criticised for failing to specify a certificate for counsel.

24.  It is submitted on behalf of P that the Master had “mixed together” the costs of all 3 summonses, including the costs of the Amendment Summons, when there was no order in relation to the costs of the Amendment Summons which was adjourned sine die.

25.  The submissions or objections made by Mr So were only in relation to the solicitors fees, the claimed sum of which under sections C & D totalled about HKD 160,000. As seen in the Transcript, Mr So did not challenge D’s handling solicitor’s charging rate of HKD 5,800 but only suggested as it was a simple matter, someone with less seniority of about HKD3,600 per hour and that about 10 hours of work would suffice, and on this basis had suggested a sum of about around HKD 30,000 odd for the solicitors’ costs.

26.  P now claims that it is indisputable that costs of the 3 summonses were “mixed together”. Mr Lau complains that D’s legal team attending the Hearing had a duty to inform the Master and to assist the Master to come to a proper foundation in costs assessment and that there was nothing in the Transcript to show that the Master was aware of this, which presumably Mr Lau was referring to the statement of costs having included the costs of the Amendment Summons.

27.  First, P’s then legal team (including P’s solicitors) equally had a duty to assist the Master at the Hearing. Second, the issue was never raised. Third, the items of costs had been clearly set out in D’s statement of costs. The Amendment Summons was only a 3 minute summons which was taken out on 12 August 2021 less than 2 clear days before the Hearing and after D’s skeleton submissions had been lodged. No supporting affirmation was filed on behalf of P. It was clearly set out in D’s statement of costs, the costs claimed by D in section C under items C1 and C3 in relation to the Amendment Summons totalled only 1 hour of HKD 5,800 and all the other items concerned work done were prior to 12 August 2021. As for section D, only D2 (item 17) was specifically in relation to the Amendments Summon, which was only 0.5 hour of HKD 2,900 only. Even if item 18 in D2 was taken into account, in relation to the perusal of P’s Reply Submissions, which was after the issue of the Amendment Summons, the total time claimed was only 0.5 hour. The costs of the items claimed in respect of the Amendment Summons were minimal. At the Hearing, as seen in the Transcript, the Master had suggested to Mr So to go through the items in the statement of costs together. There was simply no evidence to suggest that the Master was not aware that there were items claimed in respect of the Amendment Summons, or that he had “mixed together” the costs of all 3 summonses. In any event, when making the Costs Order, the Master had stated clearly that the costs summarily assessed were in relation of the Summary Judgment Summons and the Strike Out/Stay Summons.

28.  As to the quantum, I reiterate that there was no objection made by Mr So to D’s counsel’s fees in section E. Although it was stated “drafting” in section E1, it was clear under section D1 (items 2 and 3), that counsel was “settling” the draft affirmations. Master’s summary assessment of a total of HKD 240,000 indicated that he allowed about HKD 100,000 for solicitors costs and disbursements under sections B, C & D (or about 62.5% of costs claimed thereunder), in addition to the counsel fees under section E for the Summary Judgment Summons and the Strike Out/Stay Summons. P complained that the sum of HKD 240,000 representing 78% of the sum claimed by D was a high percentage. However, there were no authorities produced by P to say what would be an appropriate percentage.

29.  Having considered all the above and the evidence, I am of the view the Costs Order was not unreasonable and the Master was entitled to summarily assess D’s costs, in lieu of taxation, and to award D HKD 240,000. P’s ground under Issue 1 must in my view fail.

Issue 2

30.  It is Mr Lau’s submission that costs of the Summary Judgment Summons should have been ordered to be costs in the cause or alternatively, be paid by P to D in any event to be taxed if not agreed.

31.  Mr Lau has referred the Court to the principles set out in the decision in The Pool Company Limited v Sino Rise Realty Limited, HCA 1744/2012, (unrep) 22.01.15.

32.  In the Decision, Master has set out his reasons for dismissing the Summary Judgment Summons in paragraphs 37-39 of the Decision[8]. In particular, P should have known that there are triable issues relating to section 23 of the Moneylenders Ordinance in light of the procedural history of the Consolidated Actions, and that P’s claim in the present action had not been properly pleaded and/or formulated, and that P should not have taken out the Summary Judgment Summons. The Master had said the appropriate course was to dismiss the summons.

33.  There has been no appeal against the Master’s dismissal of the Summary Judgment Summons. On dismissal, the Master was plainly entitled to order P to pay D’s costs to be summarily assessed and payable immediately. In any event, it was not submitted on behalf of P at the Hearing that any other order for costs should have been made.

34.  Having considered P’s submissions, I am of the view P has not been able to make out any grounds for appeal in respect of Issue 2.

Issue 3

35.  It is argued on behalf of P that as D only succeeded with his alternative application, in that he did not succeed in striking out P’s claim, D should only be awarded 50% of the Strike Out/Stay Summons.

36.  Again, this was not an issue raised by P at the Hearing.

37.  This argument is unmeritorious. As seen in the two affirmations filed by D, in relation to the Strike Out/Stay Summons, D’s application whether for striking out or for a stay was based on the same ground that P’s present action is an abuse of the process of the court, in that P’s present action arises out of the same set of facts and duplicates the Consolidated Actions. There was no evidence that D had pursued with his application for striking out on a separate ground, nor was it D’s position that it was only in the event that he did not succeed with his application for striking out then he sought the alternative relief. All that was submitted on behalf of D at the Hearing was that if not struck out, then it ought to be stayed[9].

38.  As seen in the Decision, pursuant to the directions given by Registrar Kwong, P’s Summary Judgment Summons was to be dealt with before D’s Strike Out/Stay Summons, and the Master was of the view that the issues in the Consolidated Actions clearly overlap with the issues in the present action and in fact the proposed amendments in the pleadings would not help P, and it was on this basis that he dismissed the Summary Judgment Summons. As for D’s Strike Out/Stay Summons, all the Master said was that it made sense to stay the present action while the Consolidated Actions were pending resolution.

39.  There was nothing to indicate as to why the Master should only order P to pay 50% of the Strike Out/Stay Summons or that his discretion in granting the Costs Order was plainly wrong. P’s ground under this issue must fail.

Issue 4

40.  As this appeal is not a hearing de novo, there is no basis for this Court to reassess the quantum of the costs, whether under Order 62 rule 9A(1)(a) or (b).

Conclusion

41.  Costs were in the discretion of the Master. For all the reasons set out above, P has not been able to satisfy this Court that Master’s exercise of discretion in granting the Costs Order was unreasonable or erroneous in law. P’s appeal is unmeritorious. There is no reason why this Court should extend time for P to appeal.

42.  P’s appeal out of time against the Costs Order is hereby dismissed.

43.  Costs should follow the event, which is also P’s own position. In light of the dismissal, D is entitled to his costs of P’s application to appeal out of time. I grant certificate for one counsel, as sought by D. As pointed out by Mr Lam, such costs should include the costs of P’s Stay of Execution Summons and costs of the Consent Summons, both of which have been ordered to be costs in the cause of the appeal.

44.  D has sought costs on indemnity basis.

45.  D’s reasons for seeking costs on indemnity basis have been set out clearly in paragraph 46(6) of D’s written submissions. In his reply submissions, all Mr Lau submitted was that there was no basis to seek costs on indemnity basis.

46.  It has been said that indemnity costs are no longer limited to cases where a party’s conduct lacks moral probity or deserves moral condemnation, but such conduct must be unreasonable to a high degree, and whilst pursuit of a weak claim will not usually on its own justify an order for indemnity costs, the pursuit of a hopeless claim or a claim which the party pursuing it should have realized was hopeless may well lead to such an order[10].

47.  Having considered D’s submissions, I am satisfied that D has made out his case for costs to be awarded on indemnity basis, for the following reasons:-

(1) As set out above, the appeal is unmeritorious;

(2) As found earlier, P has not been able provide a satisfactory explanation for its delay in lodging the appeal, the delay being substantial, and as said earlier, the appeal is no more than a delaying tactic on P’s part in response to D’s demand for payment and subsequent enforcement of the Costs Order;

(3) P’s litigation conduct in lodging the appeal bundle unilaterally without reference to D notwithstanding D’s solicitors having written to ask P’s solicitors on two occasions, namely 1 and 26 April 2022, to request P’s solicitors to provide them with the draft appeal bundle index for consideration and comments should also be taken into account. This had resulted in D seeking leave on 10 May 2022 to lodge a revised appeal bundle and further costs and time were wasted.

48.  I thus order P to pay D’s costs of the appeal (including the costs of the Stay of Execution Summons and Consent Summons), to be summarily assessed on indemnity basis, and paid within 14 days of summary assessment.

Summary assessment under Order 62 rule 9A(1)(a)

49.  In his statement of costs, D seeks a total of HKD 206,661.70 including the costs of the Consent Summons for the appeal, and a total of HKD 16,570 in relation to the Stay of Execution Summons.

50.  In P’s lists of objections, P assessed costs of the appeal to be HKD 21,874 (although in the summary, it appeared to be HKD 54,784) and costs of the Stay of Execution Summons to be HKD 209.99. Even on party and party basis, P’s list of objections did not appear to be reasonable or realistic.

51.  When costs are allowed to be on an indemnity basis, costs are allowed except to the extent that they are unreasonably incurred (or unreasonable in amount), with the benefit of the doubt being given to the receiving party.

52.  D’s solicitors have charged under sections C & D a total of HKD 101,650, being 18 hours at HKD 5,800 per hour. Master Rita So has in her assessment of D’s costs in relation to the costs of the hearings before her and costs related to the hearing of the Stay of Execution Summons allowed HKD 4,500 per hour. As costs of the appeal have been awarded on indemnity basis, and Mr Heung has been the handling solicitor throughout, and he was admitted in 1990, I will allow his rate of HKD 5,800 per hour for the appeal. However, bearing in mind that the appeal does not involve any complicated legal issues, in my view 18 hours of solicitors’ work seemed to be excessive and not reasonable and on a broad brush basis, I will apply a 20% deduction across the board, allowing a total of HKD 81,320. The charges under section B are reasonable and counsel fees for Mr Lam are reasonable. Thus, on a broad brush basis, I summarily assess D’s costs of the appeal including the Consent Summons to be HKD 183,581 inclusive of all disbursements and counsel fees. As for the Stay of Execution Summons, bearing in mind that D’s solicitors have already been awarded HKD 7,000 for attending the hearings and costs directly related to the hearing including costs for preparation of the written submissions and for the hearings, in my view, the solicitors’ costs now claimed are excessive, and on a broad brush basis, I allow only HKD 10,000 inclusive of disbursements.

53.  In total, D’s costs summarily assessed on indemnity basis are HKD 193,581.