PATRICK JOHN WEE EWE SENG AND ANOTHER v. KONTAFARMA CHINA HOLDINGS LTD (formerly known as TONGFANG KONTAFARMA HOLDINGS LTD) AND ANOTHER

HCA 1469/2019

[2024] HKCFI 350

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1469 OF 2019

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REASONS FOR DECISION

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1.  On 18 September 2023, Master Grace Chow granted Kontafarma Holdings Limited (formerly known as Tongfang Kontafarma China Holdings Limited) (“D1”) and its subsidiary Fester Global Limited (“D2”) (collectively “the Defendants”) their application. It was made by way of a summons dated 17 May 2023 (“the Summons”) for specific discovery of 5 categories of documents against Patrick John Wee Ewe Seng (“P1”) and his wholly-owned company Active Gains Universal Limited (“P2”) (collectively “the Plaintiffs”). The Master awarded costs to the Defendants, summarily assessed at HK$500,000 (“the costs order”).

2.  P1 (on behalf of the Plaintiffs) filed a Notice of Appeal on 17 October 2023 that is before this Court challenging the costs order. P1 appeared in person and the conclusion of the hearing, the appeal was allowed with costs. My reasons appear below.

Background

3.  The Plaintiffs’ former solicitors (“L & Co”) advised the Plaintiffs of the hearing date about 2 months prior to that date and provided a fee quotation shortly thereafter.

4.  By letter dated 21 August 2023, L & Co advised that they were filing an application to cease to act for the Plaintiffs. P1 did not receive that letter and only became aware of L & Co’s intention upon receiving their email on 12 September 2023, the date L & Co obtained a cease to act order from the Court, to take effect upon compliance with the requirements of Order 67, rule 6 (1) (“the requirements”).

5.  P1’s attempt to obtain an adjournment directly from the Court failed as L & Co remained on record as solicitors for the Plaintiffs pending compliance with the requirements and any application had to be made by them.

6.  By 18 September 2023, the date of the hearing, the cease to act order still had not yet taken effect. Although L & Co attended the hearing, they had no instructions to make submissions.

7.  The Summons was supported by the 3^rd and 4^th affidavits of Si Tou Man Wai respectively dated 17 May 2023 and 11 August 2023 (respectively “Si 3^rd” and “Si 4^th”) filed on behalf of the Defendants.

8.  The Plaintiffs filed the 3^rd affidavit of P1 dated 4 July 2023 (“P 3^rd”) in opposition, raising the defence of legal professional privilege (“LPP”) in respect of the first 4 categories of documents sought.

9.  The Master allowed the Defendants’ application and upon the Master ordering summary assessment of costs, the Defendants’ solicitors (“WL”) submitted their statement of costs of and occasioned by the Summons in the sum of $531,950. The Master summarily assessed the Defendants’ costs at $500,000 (“the costs order”).

Applicable legal principles

10.  It is common ground that on an appeal against costs, the principles are those laid down by the Court of Appeal in Poon Shu Fan v Wong Tin Yan [2012] 5 HKLRD 512. The CA adopted the 2-stage approach set out by Lord Woolf CJ in Lownds v Home Office [2002] 1 WLR 2450 at §31. A summary appears in HKCP 2024 at §62/9/10. In pertinent part, this reads as follows:

“First, the court will take a global approach, which will indicate if the total sum claimed is or appears disproportionate - if the costs as a whole are not disproportionate, then all that is required is each item of cost should be reasonably incurred. Where the costs as a whole appeared disproportionate, the court will need to be satisfied that each item was necessary … The conduct of the other party is also “highly relevant”, as by their cooperation, costs can be reduced, or if they are unco-operative, costs may be increased. In this context, it is acceptable for the paying party to have to pay for otherwise unnecessary expenses made necessary by their unco-operativeness.”

11.  On the question whether or not a time extension should be granted when a notice of appeal is filed out of time, the relevant factors for consideration include the length of delay; the reasons for the delay; the merits of the proposed appeal; and the degree of prejudice to the other party: see HKCP 2024 at §58/1/9.

Procedural matters

12.  P1 who is a litigant in person filed written submissions on his behalf and on behalf of P2 although without obtaining the requisite leave required by RHC Order 5 rule 6 to represent P2.

13.  Procedurally, P1 is not in a position to represent P2. However, there is no reason why P1’s appeal cannot proceed: P1 is a party affected by the costs order and is entitled to appear as a litigant in person.

14.  The delay involved in the present case is 2 weeks. Whether or not one accepts P1’s reasons for the delay, this appeal only involves the costs order and the Defendants have not identified in what way they have been prejudiced. On the question of merit, in their written submissions submitted that the court should not grant a time extension as there is no merit in the appeal.

15.  At the hearing, there was no objection to the Court hearing P1. Plainly, fairness requires that P1 (a litigant in person) should not be deprived of the opportunity to be heard.

16.  Mr Liu, counsel for the Defendants, submitted that the present appeal from the Master’s decision “is a costs-only appeal against a Master’s decision, and the Court does not conduct a re-hearing as with other appeals under Order 58[1]”. In support of that proposition, he cited a passage from my decision in Ming Lee Foundation Co Ltd v WM Construction Limited [2022] HKCFI 3373 at §5. However, nothing about a rehearing appears in the passage cited.

17.  In Ming Lee, all that was said was that the application should not be allowed unless it can be shown that the order made by the master was unreasonable or the master erred in law, citing inter alia HKCP 2022 at §58/1/6.

This appeal

18.  P1’s position is set out his written submissions. He adopted the principles set out in the Poon Shu Fan case. The items challenged are to time spent (and consequently the amounts chargeable) by the Defendants’ solicitors set out in Section C (Communications including Emails, Telephone Calls and Letters) and Section D (Professional Work), of the Defendants’ Statement of Costs.

19.  Mr Liu submitted that the P1’s appeal is based on the global approach. The criticism levelled at P1’s submissions is that they lacked any meaningful analysis.

20.  Mr Liu then proceeded to highlight 3 matters directed at justifying the fees charged, namely: (1) complexity of the application and, specifically, complexity of Si 4^th that had to be filed in response to P 3^rd; (2) the overall magnitude of the Plaintiffs’ claim of US $3.5 million; and (3) the uncooperative conduct of the Plaintiffs.

21.  The hearing bundles are not before this court.

22.  Insofar as complexity is concerned, I accept that this is an appropriate matter for retaining counsel. The Defendants retained experienced counsel[2] not only to settle the summons and affirmation in support, to render advise (by email) but also to consider and revise Si 4^th. A different counsel[3] was briefed to attend the hearing before the Master. In all, Counsel’s fees totalled $71,350, an amount that I accept is reasonable.

23.  I now turn to the 3 matters said to justify the fees charged.

24.  I am not impressed by the submissions relating to the complexity of the case given counsel’s involvement at all stages. The Defendants’ affidavits (14 pages and 7 pages respectively) are hardly of exceptional length or complexity. It has to be borne in mind that Counsel was instructed to settle Si 3^rd and 4^th. While much was made of P 3^rd (6 pages), necessitating Si 4^th, the main legal issue arising from P 3^rd was legal professional privilege claimed over 4 of the categories of documents.

25.  While the 5^th category concerned a broad category of documents relating to the settlement and/or release of a specific guarantee, it was said that only 3 such documents were mentioned in P 3^rd. I cannot see how those matters could have caused many hours of work in preparing a response when the response made in Si 4^th consisted of 3 paragraphs taking up but half a page.

26.  As regards the overall magnitude of the claim, the fact that the amount involved is US $3.5 million, of itself, does not have any bearing on the number of hours required when dealing with specific discovery. In that regard, the Defendants made reference to §20 of the Poon Shu Fan case where the court referred to the freezing order being of only up to HK$3.8 million. However, I do not read that statement as implying that a claim of a greater magnitude must necessarily attract/require more hours of work.

27.  So far as it is suggested that the P1 was uncooperative, the only instance mentioned was his attempt to obtain an adjournment upon realising that the Plaintiffs may not have legal representation a few days prior to the hearing. Any litigant finding himself in that predicament would try to find a solution. In any case, I cannot see how that could have required the Defendants to undertake substantially more hours of work.

28.  Taking a global approach to the Statement of Costs and the amount awarded, I have no hesitation in concluding that it is glaringly obvious that the costs order is wholly disproportionate.

29.  By way of example, to give a flavour of the fees involved, it is noted that

(a)  time spent by the 2 fee earners from WL (admitted in 1999 and 2020 at rates of $5800 and $3500 respectively) together clocked up 46.5 hours involving fees of $189,200 for attendance on client, the other side and counsel; and

(b)  under the rubric “Professional Work”

(i)  for the preparation of documents, the same 2 fee earners together clocked up 28 hours, generating fees of $117,550. Perusing the 9 items listed, the main items that would have required their attention comprise the Summons and Si 3^rd and 4^th. However, those items were settled by counsel. In addition, a trainee solicitor spent 25 hours (at the rate of $2500 per hour) presumably in respect of the remaining items that were of a clerical nature; and

(ii)  for perusal of documents (essentially P 3^rd and Defendants’ skeleton submissions), the same 2 fee earners together clocked up 12 hours involving fees of $53,500.

30.  Bearing in mind that the costs awarded are on a party and party basis, doing the best I can based on the material before the Court, I consider HK $150,000 (inclusive of Counsel’s fees) to be reasonable costs occasioned by the Summons.

Order

31.  Accordingly, P1’s appeal is allowed and paragraph 2 of the Master’s order dated 18 September 2023 is set aside. The Defendants’ costs are re-assessed at HK$150,000 (inclusive of Counsel’s fees).

32.  The Plaintiffs’ costs of this appeal follow the event and are to be summarily assessed.

33.  The provisions of Order 62, rule 28A govern the costs of a litigant in person. Accordingly, it is directed that

(1)  P1 do lodge his statement of costs within 21 days;

(2)  the Defendants do lodge their statement of objections (not exceeding 2 pages) within 14 days thereafter; and

(3)  P1 do lodge his reply (if any) within 7 days thereafter.