RE MADAM TAN

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

Action Nos. HCA 6086/94, HCA 6646/94, HCA 6665/94

and District Court Civil Jurisdiction 14567/94

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Review of Taxation

REASONS FOR DECISION

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Background

1. The review was brought by Madam Tan Bo Bo Brenda, alias Tan Bo Bo ("Madam Tan") who was a party in all of these 4 actions. These actions are 3 High Court actions and a District Court action which had been transferred to the High Court by order of HH Judge CB Chan dated 30.8.95.

2. The plaintiffs in these 4 actions are various financial institutions claiming against Madam Tan in respect of credit card expenses. The plaintiffs in these cases obtained Charging Orders on a property owned by Madam Tan.

3. Madam Tan applied before Mr Registrar Betts for the Charging Orders to be discharged. The Registrar allowed her application, and on 15.2.96. ordered that the various Charging Orders be discharged, with costs to Madam Tan. Madam Tan's own costs were to be taxed in accordance with Legal Aid regulations. On the basis of the Registrar's order, Madam Tan became the receiving party and had carriage of the taxation orders.

4. At the taxation hearing on 26.2.99. the plaintiffs (the paying parties) argued that there should be a one third reduction in the Bill because of undue delay. Having heard submissions, I found that there had been undue delay, and ordered a global deduction of 8% on the taxed costs of the Bill, and also for the costs of taxation (items 90 to 119 in the Bills) to be taxed off. The receiving party applied for a Review. The Review was heard on 2.7.99.

The receiving party's arguments on Review

5. Counsel for the receiving party Mr Tse submitted that the court was wrong to rule that there had been "undue" delay. The receiving party had lodged the draft orders with the Registry sometime in March 1996. The Registry had mislaid the draft orders. The receiving party's solicitors had to write a letter dated 23.7.96. to chase up the matter. New draft orders had to be submitted for the Registry's approval. Therefore, the receiving party should not be penalized because the fault lay with the Registry staff who mislaid the draft orders. This was the cause of the delay.

6. Mr Tse contended that the receiving party was forced to wait because one had to obtain a perfected order before one could proceed to the Land Office to discharge the Charging Orders. In practice law costs draftsman work out a Bill on the basis of a perfected order. This procedure of working on a perfected order promotes accuracy. The law costs draftsman can reflect the exact wording of the order in the Bill of costs. If a Bill were to be drafted before the law costs draftsman was in possession of a perfected order from the count, "costs may be wasted if the perceived order turned out to be wrong".

7. It was argued that in all the circumstances the receiving party's actions were not "inexcusable" and there was no "undue" delay.

8. It might be easier to understand the arguments put forward with the help of a chronology.

Chronology of events

The arguments of the paying parties

9. They had originally sought a global reduction of one third of the amount claimed in the bill on the basis that delay was beyond dispute. Counsel for the paying parties argued that the delay in the circumstances was inordinate and inexcusable because these applications were simple and related merely to the setting aside of Charging Orders. The order discharging the Charging Orders was made on 15.2.96. It spoke for itself that a total of 11 months elapsed before the Notice of Appointment to tax was filed on 2.1.97.

10. Mr Yeung contended that once a costs order has been made, the receiving party is entitled to instruct a law costs draftsman to prepare a Bill. Nothing in RHC O62 r21 requires that a sealed costs order is necessary before one commences the process of taxation.

11. Mr Yeung pointed out that the letter to the Registry was not written until July 1996, some 5 months after the costs order was made. This fact alone would show the receiving party did not act with promptitude. It was the case of the plaintiffs that because of the delay by the receiving party the court was entitled to make the orders it did pursuant to O62 r33(3).

Consideration of matters put forward

12. The receiving party has carriage of the costs order, and should proceed without undue delay. Our RHC Order 62 rule 21 does not specify when a bill of costs must be filed. Even if no particular period is specified, there must not be unreasonable delay. Section 70 of the Interpretation and General Clauses Ordinance (Cap 1) states that "where no time is prescribed or allowed within which anything shall be done, such thing shall be done without unreasonable delay". In contrast the English RSC r29(1) requires that proceedings for taxation be commenced within 3 months. Whatever the jurisdiction, courts have a duty to ensure that civil proceedings progress at a sensible pace, see in Re K (a minor) (1988) 138 NLJ 262.

13. These costs related to the discharge of Charging Orders. The steps that must be taken for discharging Charging Orders must be fairly standard. Any competent solicitor would have knowledge of the approximate expenses of such standard procedures. It is always open to the receiving party to try to agree the costs with the paying parties immediately after the costs orders are made. There was a lapse of about 11 months from the making of the costs order to the filing of the Bills in all 4 cases.

14. Not a word of explanation was put forward about the period between the lodging of the draft orders in March and the letter in July. Why were no enquirtes made with the Registry in those months? A letter was eventually written dated 23.7.96. but that letter only related to actions HCA 6665/94 and CJ 14569/94. The perfected orders relating to HCA 6086/94 and HCA 6646/94 had only been obtained shortly before 23.7.96.

15. Notwithstanding this sequence of events, the receiving party sought to bring the other two cases HCA 6086/94 and HCA 6646/94 under the same umbrella, and argued as if the Registry had been accused of losing the draft orders in all 4 actions. The fact is there was no explanation or excuse at all why the applications in HCA 6068/94 and HCA 6646/94 took from March to July 1996. If the draft orders in all 4 cases were submitted to the Registry together sometime in March 1996, why did the solicitors not alert the Registry earlier than July? Once it was alerted by the letter dated 23.7.96, it can be seen from the chronology the Registry reacted very quickly indeed, and the last perfected orders were filed on 1.8.96.

16. I considered all the points raised. Having done so. I found that the contentions of the receiving party as to the causes of delay did not stand up to scrutiny. All the information adduced tends to show that the receiving party did not act with reasonable speed. If the receiving party had acted with promptitude, the Registry's lapse could have been addressed quickly, and the perfected orders could have been obtained within a reasonable period say within two or three weeks from the time of the lodging of the drafts. Even allowing for reasonable periods of time for matters to be processed, there was a period of approximately 4 or 5 months (from March 1996 to the end of July 1996 unaccounted for) in obtaining the perfected costs orders.

17. Once the perfected orders were to hand, the discharging of the Charging Orders at the Land Registry should have taken no more than 2 weeks. The drafting of these simple Bills should have taken no more than 2 weeks. Even if the law costs draftsman had waited for the sealed orders before he started drafting the Bill, there is still no explanation why the receiving party took another 4 months to lodge these Bills for taxation.

18. The receiving party to a bill of costs has an obligation to prepare the bill, lodge it, and obtain an appointment to tax it with due diligence. If the receiving party fails to act with due diligence, RHC O62 rules 22(3) and 7(5) gives the taxing master a discretionary power to reduce the bill. The relevant provisions are O62 r22(3) and O62 r7(5). For ease of reference the rules are listed below.

RHC O62r22 provides :

22. Delay in filing of Bill of costs (O.62, r.22)

RHC O62 r 7 provides :

Costs arising from misconduct or neglect (O.62.r7)

Reasons for Decision

19. Having considered all the circumstances, the chronology of events and the submissions advanced, I found that even after reasonable allowances have been made for procedural requirements, months of time had not been accounted for. The total period of about 8 to 9 months unaccounted for must be regarded as undue or inexcusable delay.

20. In coming to this conclusion, I have not lost sight of the fact that in Hong Kong there is a procedure available to the paying party under RHC rule 22(1) to obtain an order from the taxing master that the receiving party shall proceed to taxation within such period as the taxing master may order. That provision would not have assisted the receiving party here because of the nature of the arguments advanced. In any event the obligation to proceed to taxation in reasonable time still rests with the receiving party.

21. At the nearing on 26.2.99. it was argued that, even if there had been delay. the paying could not have suffered any prejudice. It was contended that because they were all financial institutions, they would have continued to enjoy interest on the sums they would otherwise have had to pay to the receiving party. At the hearing of the Review, Counsel for the receiving party did not attempt to rehearse that previous argument. Counsel for the receiving party argued that proof of prejudice to the paying parties is still required, or at least be an important factor when the court considers the exercise of its discretion under O62 r22(3) and O62 r7(5).

22. Master Cannon considered the question of prejudice in Lim Ho Kwan v Urban Council MP 1662 of 1988. She found that the Hong Kong rule 22(3) is similar to the English rule 28(4), and that proof of prejudice is not a prerequisite for the exercise of the master's discretion under rule 22(3). I am also of the view that proof of prejudice is not necessary for the exercise of the master's discretion to reduce the Bill where there has been undue delay.

23. I find that any delay must cause prejudice to the paying party because interest runs from the date of the costs order until payment thereon, see Caltex Oil Hong Kong v Director of Buildings and Lands [1994] HKDCLR 31, (following Hunt v RM Douglas (Roofing) Ltd [1990] AC 398).

24. As this is a Review of Taxation, I did not consider myself bound by any previous decision. I looked at the whole matter afresh. I considered the submissions of Counsel for the parties, and the provisions they referred me to. I considered all the authorities put forward. The authorities were helpful but at the end of the day each case must be decided on its own facts.

25. I noted that the receiving party had made Pauls Agriculture Ltd v Smith [1993] AER 123 one of his authorities. By doing so, Mr Tse must be aware that the taxing master has jurisdiction to "fine" a successful party by disallowing costs where the delay in lodging a bill has been inordinate or inexcusable, or had been shown to be prejudicial to the unsuccessful party to the action.

26. Mr Tse argued that the taxing off of the costs of taxation should have been alternative to the global reduction of 8%. In ordering both, the result was unreasonably penal to the receiving party. He quoted a passage at paragraph 62/28/3 of the White Book. That passage states : " Where a taxing master proposes to disallow the whole or part of a successful party's costs on account of delay, having taken additional interest payable into account, the master needs to be aware of the taxed costs on which that interest was accruing otherwise the final result could not be known, and that final sum could be either excessive or insufficient." (That passage actually appears at paragraph 62/28/4 of the 1999 edition).

27. Having considered the matter, I was persuaded by Mr Tse that a case could be made out for construing the previous order as having the effect of a "double penalty". I was persuaded that the intention of O62 r22(3) and O62 r7(5) exists for the protection of the paying party in circumstances of delay. In all the circumstances I find that justice would be served by an order that the costs of taxation be taxed off, or, alternatively that an order for a global reduction of 8% be made to the Bill.

28. Taking all the circumstances into consideration, I have decided that there should only be a global reduction of 8% of the taxed Bill of costs in each of these 4 Bills. All the items relating to costs of taxation in the Bills previously taxed off will be re-instated.

29. I decided that an 8% global reduction off the taxed costs would be appropriate in these circumstances after considering again the case of Attorney General v Commodore Electronics Ltd [1994] 1HKC 660. In that case Master Gould allowed a global reduction of 20% to mark the court's displeasure at undue delay of one year. Although the present circumstances are quite different from those in Commodore, the principles to be applied remain valid. I was satisfied that the circumstances of these 4 cases warranted global reductions of 8%.

30. This decision I have made necessitates another hearing because the parties must be given an opportunity to argue the re-instated items. As the parties may wish to send their respective law costs draftsmen to address me on those re-instated items, I propose the hearing to be on Saturday the 31^st of July 1999 at 10 am. If my proposed hearing time is inconvenient, please make alternative arrangements with my clerk (Miss Wong at 2825 0387) for the matter to be dealt with on another Saturday morning.

Costs

31. It was resolved that I would make a Costs order nisi when I handed down these written Reasons. Since my decision necessitates a further hearing, I will hear submissions before making the appropriate Costs order at the adjourned hearing.