CHENG NINGNING v. KING & WOOD (a firm)

HCMP 163/2012

[2018] HKCFI 278

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 163 OF 2012

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D E C I S I O N

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INTRODUCTION

1.  The defendant was a firm of solicitors formerly acting for the plaintiff in HCCW 322/2010 and incidental matters (the “PSG Matter”).  In these originating summons proceedings the plaintiff seeks to tax bills issued by the defendant to the plaintiff.

2.  By an order dated 10 April 2014, the court ordered six preliminary issues (the “Preliminary Issues”) in these proceedings to be heard before a Master.  The hearing of the Preliminary Issues took place before me.  On 21 March 2016, I handed down my decision on the Preliminary Issues (the “Decision”).  I made a costs order nisi that the plaintiff should pay 50% of the defendant’s costs for the application relating to determination of the Preliminary Issues, including costs previously reserved for that application, with certificate for two counsel, to be taxed if not agreed (the “Costs Order Nisi”).

3.  In view of my rulings on the Preliminary Issues, these proceedings do not need to proceed further and I have directed the parties to take out appropriate applications to deal with the residuary matters to conclude these proceedings.

4.  On 1 April 2016, the plaintiff took out a summons (the “P’s Summons”) to vary the Costs Order Nisi to become “costs of and incidental to the trial of the Preliminary Issues be in the cause of these proceedings”.  The plaintiff also seeks an order to conclude these proceedings in the following ways:

(1)   the 1^st, 2^nd and 3^rd Bills (as defined in the Decision) are allowed;

(2)   the whole of the 4^th Bill (as defined in the Decision) is struck out and disallowed;

(3)   costs of the taxation proceedings, including costs of and incidental to the trial of the Preliminary Issues with certificate for two counsel and costs previously reserved in relation to the taxation proceedings, be to the plaintiff to be taxed if not agreed.

5.  This is my decision on the P’s Summons.

BACKGROUND

6.  The plaintiff was the sole shareholder and a creditor of a company called “Pioneer Iron & Steel Group Company” (“PSG”). PSG was a company incorporated in the British Virgin Islands which had been placed into voluntary liquidation since about late June 2010.

7.  The defendant was at all material times a firm of solicitors practicing in Hong Kong which ceased practice on 1 March 2012 upon its merger with another firm of solicitors.

8.  Prior to October 2010, Messrs Deacons acted for the plaintiff in respect of the PSG Matter.  On 30 September 2010, the plaintiff met Ms Cindy Wong (“Ms Wong”), a consultant of the defendant at that time, to discuss whether the defendant could provide assistance to the plaintiff in the PSG Matter.

9.  On 6 October 2010, Ms Wong sent a copy of the defendant’s retainer letter (the “Retainer Letter”) to the plaintiff.  The plaintiff signed and returned the Retainer Letter to the defendant on 8 October 2010 without amendment.  The parties had disagreement on the exact date of commencement of the defendant’s retainer and the exact date of its termination.  However, such differences are immaterial to the matters before me.  Taking together the plaintiff’s case and the defendant’s case, the defendant’s retainer commenced no earlier than 28 September 2010 and terminated no later than 23 May 2011.

10.  By a bill numbered B2010K0242 dated 29 November 2010 (the “1^st Bill”) the defendant charged the plaintiff $3,900,000 as its profit costs and $1,358,373 as disbursements for the period from 28 September 2010 to 6 November 2010.

11.  By a bill numbered B2011D0610 dated 29 April 2011 (the “2^nd Bill”) the defendant charged the plaintiff $5,129,973.50 as disbursements.

12.  By a bill numbered B2011E0098 dated 16 May 2011 (the “3^rd Bill”) the defendant charged the plaintiff $2,200,000 as its profit costs (described as “Agreed Costs”) and $1,438,304 as disbursements covering the period from 7 November 2010 to 16 May 2011.

13.  Miss Wong left the defendant’s employment on 18 May 2011. 

14.  On 24 June 2011, the defendant wrote to Tang & So (“T&S”), the then solicitors acting for the plaintiff, alleging that there were balance fees payable by the plaintiff to the defendant.  The defendant said that such fees had been written off by Miss Wong without authority.  The defendant’s case was that Ms Wong had actual authority to agree with the plaintiff on costs as per the terms of the Retainer Letter but had no actual, apparent or ostensible authority to agree with the plaintiff on behalf of the defendant on matters relating to costs at variance with the terms of the Retainer Letter.

15.  On 29 December 2011, the plaintiff received a bill numbered B2011E0098(A) dated 17 June 2011 (the “4^th Bill”) from the defendant charging the plaintiff additional profit costs in the sum of $7,959,975 (the “Additional Costs”) for the period from 7 November 2010 to 16 May 2011 (ie the same period as covered by the 3^rd Bill).

16.  On 27 January 2012, the plaintiff commenced these proceedings seeking an order to refer the 1^st to 4^th Bills (the “Bills”) to taxation.  The plaintiff filed six affirmations in these proceedings.

PREPARATION OF THE TAXATION BILL

17.  On 28 February 2012 the court directed the defendant to prepare the bill of costs for taxation and the plaintiff to prepare list of objections.  However, no order for taxation has actually been granted by the court.

18.  On 25 September 2012, the defendant filed its itemized bill of costs (the “Taxation Bill”) in these proceedings pursuant to the aforesaid directions of the court.  In the Taxation Bill, the defendant stated that its time costs for the whole retainer period were $20,297,960 on top of disbursements of $7,801,657.50 (excluding costs of taxation).  The plaintiff filed the list of objections herein on 10 November 2012 (the “List of Objections”).

19.  On 5 June 2013, the court granted leave for the defendant to revise the Taxation Bill and for the plaintiff to make consequential revision to the List of Objections (the “Bill Order”).

20.  The defendant filed the revised Taxation Bill herein on 3 July 2013 (the “Revised Bill”).

21.  On 11 July 2013, the plaintiff took out a summons to strike out the Revised Bill on the ground that it failed to comply with the Bill Order (the “Striking Out Summons”).  The plaintiff seeks costs of and incidental to the Striking Out Summons and the Revised Bill on indemnity basis.

22.  On 20 August 2013, the defendant took out a summons to amend the Taxation Bill by means of the Revised Bill (the “Amendment Summons”).  The defendant proposed that costs of and incidental to the amendments to the Taxation Bill be to the plaintiff in any event.

23.  On 26 August 2013, the court adjourned the Striking Out Summons and the Amendment Summons with costs reserved.

24.  On 11 September 2013, the court further adjourned the Striking Out Summons and the Amendment Summons sine die with liberty to restore.

THE PRELIMINARY ISSUES

25.  On 13 November 2012, the plaintiff took out a summons to seek directions for determination of the following preliminary issues:

(a)   what were the appropriate hourly rates of the respective fee earners of the defendant; and

(b)   whether any duplication of work be allowed in the absence of any express consent from the plaintiff. 

26.  By a consent summons dated 23 May 2013, the parties identified the following five issues to be determined by the court as preliminary issues:

(a)   whether the defendant is entitled to rely on the hourly rates as set out in the Retainer Letter;

(b)   if the answer to the above is no, what should be the appropriate hourly rates of the respective fee earners of the defendant;

(c)   whether the plaintiff is entitled or permitted to rely on in these taxation proceedings the alleged agreement or assurance described in paragraphs 6(a) and (b) of the 6^th affirmation of the plaintiff filed herein on 26 March 2013;

(d)   if the answer to the above is yes, whether the alleged agreement or assurance described in paragraphs 6(a) and (b) of the said 6^th affirmation of the plaintiff were made as alleged or at all;

(e)   if the answer to the above is yes, whether such assurances or agreement is binding upon the defendant in these taxation proceedings and if so, to what extent and in what way. 

27.  Directions were given on 11 September 2013 for the parties to file and serve pleadings in respect of the preliminary issues.  The plaintiff filed the points of claim on 11 October 2013.  The defendant filed the points of defence and counterclaim on 27 November 2013.  The plaintiff filed the points of reply and defence to counterclaim on 10 January 2014.

28.  In the points of claim, the plaintiff pleaded that prior to her signing of the Retainer Letter, Ms Wong acting on behalf of the defendant had assured the plaintiff orally and agreed with the plaintiff certain terms (the “Pre-retainer Agreement”) and that shortly after the 1^st Bill was issued, Ms Wong acting on behalf the defendant made certain oral representations to the plaintiff (the “2^nd Set of Representations”).

29.  By a consent summons dated 4 April 2014, the parties agreed to vary the preliminary issues to read as follows:

(a)   whether the defendant is entitled to rely on the hourly rates as set out in the Retainer Letter (“Issue 1”);

(b)   if the answer to the above question is “no”, (i) whether the 1^st to 3^rd Bills (or as the case may be, the 1^st to 4^th Bills) should be taxed on the basis that the hourly rate of the handling solicitor, Ms Wong should be $5,200 or such other rate as the court deems appropriate and reasonable and (ii) what should be the appropriate hourly rates of the other fee earners of the defendant (“Issue 2”);

(c)   whether the Pre-retainer Agreement and the 2^nd Set of Representations as described in paras (6) and (14) of the plaintiff’s points of claim filed herein (similar to those described in paras 6(a) and (b) of the 6^th Affirmation of the plaintiff filed herein on 26 March 2013) were made between the plaintiff and Ms Wong (“Issue 3”);

(d)   if the answer to the preceding question is “yes”, whether the Pre-retainer Agreement and the 2^nd Set of Representations are binding on the defendant, and/or the plaintiff is entitled to rely on the Pre-retainer Agreement and the 2^nd Set of Representations in these taxation proceedings (“Issue 4”);

(e)   whether the defendant is entitled to issue the 4^th Bill or whether the 4^th Bill should be struck out (“Issue 5”); and

(f)   if the 4^th Bill should be stuck out, whether the plaintiff is entitled to tax the 1^st, 2^nd and 3^rd Bills in these taxation proceedings (“Issue 6”).

30.  By an order dated 10 April 2014, the court directed the parties to exchange witness statements on the Preliminary Issues.

31.  The plaintiff had signed a witness statement dated 3 June 2014 and a supplemental witness statement dated 5 September 2014.

32.  The plaintiff also called Ms Wong as her witness at the trial of the Preliminary Issues.  Ms Wong signed a witness statement dated 25 June 2014 and a supplemental witness statement dated 11 September 2014.

33.  The defendant called Mr Yung Yun Sang Simon (“Mr Yung”) and Ms Barbara Chiu (“Ms Chiu”) as its witnesses at the trial of the Preliminary Issues.  Each of Mr Yung and Ms Chiu signed a witness statement dated 3 July 2014 and a supplemental witness statement dated 28 October 2014.

34.  The trial of the Preliminary Issues took place before me.  The hearing last for five days.  On 21 March 2016, I handed-down the Decision.  My rulings were as follows:

(1)   Issue 1: whether the defendant is entitled to rely on the hourly rates as set out in the Retainer Letter.

Ruling: Yes.

(2)   Issue 2: if the answer to the above question is no, (i) whether the 1^st to 3^rd Bills (or as the case may be, the 1^st to 4^th Bills) should be taxed on the basis that the hourly rate of the handling solicitors, Ms Wong should be $5,200 or such other rate as the court deems appropriate and reasonable and (ii) what should be the appropriate hourly rates of the other fee earners of the defendant.

Ruling: Not Applicable.

(3)   Issue 3: whether the Pre-retainer Agreement and the 2^nd Set of Representations were made between the plaintiff and Ms Wong.

Ruling: No.

(4)   Issue 4: if the answer to the preceding question is “yes”, whether the Pre-retainer Agreement and the 2^nd Set of Representations are binding on the defendant, and/or the plaintiff is entitled to rely on the Pre-retainer Agreement and the 2^nd Set of Representations in these taxation proceedings.

Ruling: Not Applicable.

(5)   Issue 5: whether the defendant is entitled to issue the 4^th Bill or whether the 4^th Bill should be struck out.

Ruling: The defendant is not entitled to issue the 4^th Bill and the 4^th Bill should be struck out.

(6)   Issue 6: if the 4^th Bill should be stuck out, whether the plaintiff is entitled to tax the 1^st, 2^nd and 3^rd Bills in these taxation proceedings.

Ruling: No.

THE P’S SUMMONS

35.  In the P’s Summons, the plaintiff seeks to vary the Costs Order Nisi and to dispose of the residuary matters of these proceedings.  The residuary matters include the costs for these proceedings which in turn include costs previously reserved on the Striking Out Summons and the Amendment Summons.

36.  By paragraph 2(1) of the P’s Summons, the plaintiff proposed that the 1^st, 2^nd and 3^rd Bills be allowed.  As I have pointed out at the hearing that I had ruled in the trial of the Preliminary Issues that the plaintiff was not entitled to tax the 1^st, 2^nd and 3^rd Bills on the grounds that the 1^st, 2^nd and 3^rd Bills had been fully settled and there were no special circumstances justifying an order for their taxation (see para 155 of the Decision), it is inappropriate for the court now by order allowing the 1^st, 2^nd and 3^rd Bills.  Mr Wong invited me to dismiss the originating summons.  As I shall strike out the 4^th Bills which is also one of the underlying objectives of the plaintiff in commencing these proceedings, I do not consider that dismissing the originating summons will accurately reflect the rulings of the court on the disputes between the parties in these proceedings.  I shall instead order that the application to tax the 1^st, 2^nd and 3^rd Bills be disallowed.

37.  Save as to the above, the defendant did not raise objection to the plaintiff’s proposed ways of disposing of these proceedings save and except the costs issues, ie costs for the Striking Out Summons and the Amendment Summons as well as costs for these proceedings.

38.  I have no problem with the plaintiff’s application by paragraph 2(2) of the P’s Summons to strike out the 4^th Bill but I do not consider that it is necessary for me to disallow the 4^th Bill as there is no taxation of the 4^th Bill.

39.  The remaining issues before me are only costs. They are:

(a)   costs order for the trial of the Preliminary Issues;

(b)   costs order for the Striking Out Summons and the Amendment Summons; and

(c)   costs order for these proceedings.

LEGAL PRINCIPLES ON COSTS 

40.  The starting point for discussion on legal principles on costs will certainly be the following often quoted passage of the judgment of Nourse LJ in Re Elgindata Ltd (No 2) [1993] 1 All ER 232 at 237f-g:

“… The principles are these. (1) Costs are in the discretion of the court. (2) They should follow the event, except when it appears to the court that in the circumstances of the case some other order should be made. (3) The general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or costs of the proceedings he may be deprived of the whole or a part of his costs. (4) Where the successful party raises issues or makes allegations improperly or unreasonably, the court may not only deprive him of his costs but order him to pay the whole or a part of the unsuccessful party’s costs.”

41.  The Civil Justice Reform (the “CJR”) has introduced some new elements to the issue of costs in civil litigation.  I set out below the Rules of the High Court (the “RHC”) relating to costs order which are relevant to matters before me:

“If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings (other than interlocutory proceedings) the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.” (Order 62, rule 3(2))

“If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any interlocutory proceedings, it may, subject to this Order, order the costs to follow the event or make such order as it sees fit.” (Order 62, rule 3(2A))

“(1) The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account –

(aa) the underlying objectives set out in Order 1A, rule 1;

… …

(e) the conduct of all parties;

(f) whether a party has succeeded on part of his case, even if he has not been wholly successful; and

… …

(2) For the purpose of paragraph (1)(e), the conduct of the parties includes-

(a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b) the manner in which a party has pursued or defend his case or a particular allegation or issue;

(c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and

(d) conduct before, as well as during, the proceedings.” (Order 62, rule 5)

“Where in any cause or matter any thing is done or omission is made improperly or unnecessarily by or on behalf of a party, the Court may direct that any costs to that party in respect of it shall not be allowed to him and that any costs occasioned by it to other parties shall be paid by him to them.” (order 62, rule 7(1))

“The underlying objectives of these rules are –

(a) to increase the costs-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;

(e) to facilitate the settlement of disputes; and

(f) to ensure that the resources of the Court are distributed fairly.” (Order 1A. rule 1)

42.  In KJ v KMLM (unrep., HCMC 4/2010, 21 May 2014) To J summarized the impact of the CJR on the issue of costs as follows:

“13.   The broad guidelines on costs have been set out by Nourse LJ in Re Elgindata (No 2)[1]. These guidelines were modified following the implementation of the Civil Justice Reform (“CJR”): see AEI Rediffusion Music Ltd v Phonographic Performance Ltd[2]in the United Kingdom and Wong Kam Tong v Tin Shing Court, Yuen Long (IO) (No 2)[3]; and Hung Fung Enterprises Holdings Ltd v Agricultural Bank of China[4] in Hong Kong.  The modified guidelines are as follows.

14.   First, costs are in the discretion of the court: Order 62, rule 2(4).

15.   Second, the principle that costs follow the event is no longer regarded as a general rule but a convenient starting point from which a court can readily depart.  It only operates to shift to the unsuccessful party the burden of showing why some different approach should be adopted on the facts of that particular case: Order 62, rule 3(2);

16.   … …

17.   Third, the starting point does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or costs of the proceedings he may be deprived of the whole or part of his costs. Since CJR, the court is more ready to take an issue-based approach.  It is no longer necessary for a party to have acted unreasonably or improperly to be deprived of his costs of a particular issue on which he has failed: see AEI Rediffusion Music Ltd[5]; Wong Kam Tong[6]; Chan Ching Kit, Katherine v Lam Sik Ying[7], Chan Mei Yiu Paddy v Secretary for Justice[8], Zhuhai International Container Terminals (Jiuzhou) Ltd v Lo Tong Hoi[9]. Nor is it necessary to show that the successful party has deliberately wasted time and costs: see Re Ricacorp Properties Limited[10]. For the purpose of this guideline, a significant increase in the length or costs of the proceedings means one that can be estimated as a more than trifling proportion of the total costs.  The costs need not be assessed with precision.  It suffices if the court can give an estimate of the proportion of these costs: see Chan Lan v Shing Kei[11].  A party may be deprived of part of his costs on the failed issues even if such costs overlap with those of the succeeded issues: see Zhuhai International[12].  

18.   Fourth, where the successful party raises issues or makes allegations improperly or unnecessarily (or unreasonably, in the United Kingdom), the court may not only deprive him of his costs but may order him to pay the whole or part of the unsuccessful party’s costs: Order 62, rule 7(1). By implication, a successful party who neither improperly nor unreasonably raises issues or makes allegations on which he fails ought not to be ordered to pay any part of the unsuccessful party’s costs.

19.   Fifth, as a result of the CJR, amendments were introduced to Order 62, rule 5 which requires the court in exercising its discretion to take into account certain special matters in appropriate circumstances. … …”

43.  In Zhuhai International Container Terminals (Jiuzhou) Ltd v Lo Tong Hoi (unrep., CACV 181/2011, 31 July 2012) Kwan JA also observed at para 33 of the judgment that:

“33. … … On the established principles, it is not necessary to establish that a successful party has acted unreasonably or improperly in raising an issue for it to be deprived of the whole or part of its costs. The court may so order where the failed allegation of the successful party has caused a significant increase in the length or costs of the proceedings (Re Elgindata Ltd (No. 2) [1992] 1 WLR 1207 at 1214B to C). By the amendments introduced to Order 62 rule 5, litigants should bear in mind the possible costs implications. There is incentive to conduct litigation in a responsible way and be selective as to the issues raised.”

44.  Bearing the above general principles on costs in mind, I shall now deal with the various costs issues before me.

COSTS FOR THE TRIAL OF THE PRELIMINARY ISSUES

45.  The Costs Order Nisi which I had made was for the plaintiff to pay 50% of the defendant’s costs for the application relating to determination of the Preliminary Issues.

46.  In para 204 of the Decision I stated the reasons for the Costs Order Nisi as follows:

“Out of the six Preliminary Issues the plaintiff only succeeded on Issue 5 and the defendant had conceded on Issue 4. I am of the view that the plaintiff shall bear part of the defendant’s costs for the application relating to determination of the Preliminary Issues. The plaintiff is not liable to the defendant’s costs for Issues 4 and 5. Instead, the plaintiff is entitled to recover costs on these two Issues from the defendant. After taking into consideration the time spent on Issues 4 and 5 at the hearing, I am of the view that a fair costs order is for the plaintiff to bear 50% of the defendant’s costs for the application relating to determination of the Preliminary Issues.”

47.  In the P’s Summons, the plaintiff seeks to vary the Costs Order Nisi to make the costs of and occasioned to the trial of the Preliminary Issues be in the cause of these proceedings.

48.  In the plaintiff’s submissions, the plaintiff went further to submit that the defendant should pay the plaintiff’s costs relating to the Preliminary Issues and costs previously reserved in relation to the application without or alternatively with some percentage disallowances regarding part of the plaintiff’s costs of the Preliminary Issues.

49.  The defendant sought to have the Costs Order Nisi to be made absolute.

THE PLAINTIFF’S CASE

50.  Mr Chang SC representing the plaintiff submitted that the plaintiff was the overall winner of these proceedings including the Preliminary Issues taken as a whole.

51.  Mr Chang submitted that the Preliminary Issues were issues arose in the midst of and as part of these proceedings which was caused by the defendant’s assertion that Ms Wong had no authority to agree with the plaintiff on the fees at variance with the Retainer Letter and issuing the 4^th Bill.  He further submitted that upon the determination of the Preliminary Issues, these proceedings should be brought to a conclusion by disallowing and striking out the whole of the 4^th Bill, thereby letting the first three bills to stand.

52.  Mr Chang submitted that the defendant should be ordered to pay the plaintiff’s costs of these proceedings which would not have been brought but for the defendant’s issuance of the 4^th Bill and denial of Ms Wong’s authority as aforesaid.  Mr Chang further submitted that the plaintiff’s costs of the Preliminary Issues should also be included in the costs of these proceedings and paid by the defendant to the plaintiff under his aforesaid proposed costs order for the whole proceedings.

53.  Mr Chang contended that if a separate costs order was made by the court for the costs of the Preliminary Issues, it should be no less favourable than having the defendant paying the plaintiff’s costs. He submitted that even if such costs order was not asked for or had not been precisely formulated in the P’s Summons, the court in any event had power to make such order or other order relating to costs as was just and expedient in accordance with sound principles.  If necessary, the plaintiff would seek leave to add to the P’s Summons such alternative order to the aforesaid effect of having the defendant paying the plaintiff’s costs for the Preliminary Issues.

54.  Mr Chang submitted that the determination of the Preliminary Issues resulted in the entire 4^th Bill being effectively disallowed.  As such, more than one-sixth of the total amount of the Bills was disallowed with the striking out of the 4^th Bill and the refusal by the court to reopen the 1^st, 2^nd and 3^rd Bills and the plaintiff should be entitled to the costs of these proceedings.  For this contention, Mr. Chang referred to section 67 of the Legal Practitioners’ Ordinance (Cap 159) (the “LPO”).

55.  Section 67(5) of the LPO provides that subject to certain conditions which do not concern us in this case, the costs of taxation shall be paid according to the event of the taxation, that is to say, if one-sixth or more of the amount of the bill is taxed off, the solicitor shall pay the costs, but otherwise the party chargeable shall pay the costs unless the order for taxation otherwise provides.

56.  Mr Chang further submitted that the reality of this case was that the defendant tried to add at least $7,959,975 to the aggregate of the fees charged by Ms Wong on the defendant’s behalf but the defendant failed in its arguments.  On the other hand, the plaintiff was in effect seeking to have disallowed at least $7,959,975 which involved having the 4^th Bill being struck out and in this the plaintiff had succeeded.

57.  Mr Chang submitted that there was nothing on which the defendant could be said to have succeeded which entitled the defendant to a single cent more than what the plaintiff had been charged or paid under the 1^st, 2^nd and 3^rd Bills.

58.  Mr Chang contended that the failure to establish the Pre‑retainer Agreement or the 2^nd Set of Representations or to show any “special circumstances” stipulated in section 67(2) of the LPO only meant that the plaintiff would not be able to have disallowed more than $7,959,975 but she had made it clear that these proceedings would not have been brought had the 4^th Bill not been issued.  He submitted that overall, the plaintiff had succeeded in knocking out the entirety of what caused these proceedings, including the formulation and trial of the Preliminary Issues in the first place.

59.  Mr Chang submitted that in all the circumstances, if when making an order for costs in favour of the plaintiff, some costs relating to the Preliminary Issues should be disallowed, the percentage of costs disallowed should be much less than half.  He further submitted that there was no ground for awarding costs against the plaintiff as distinguished from disallowing some costs of the plaintiff.

60.  In support of his contention that the plaintiff should not be ordered to pay the defendant’s costs in this case, Mr Chang referred to The Kastor Too [2004] EWCA Civ 277 when the English Court of Appeal held that it was a case where the issue on which the successful party lost would not have been litigated if the unsuccessful party had conceded the issue on which the successful party won.  The English Court of Appeal allowed the appeal of the successful party against an order requiring the successful party to pay part of the costs of the unsuccessful party.

61.  In respect of the Striking Out Summons and the Amendment Summons, Mr Chang submitted that the two summonses arose out of the defendant’s non-compliance of the Bill Order.

62.  Mr Chang submitted that the Revised Bill was not in the practical format as directed by the court in the Bill Order resulting in the plaintiff being forced to waste huge time and costs to examine the voluminous Revised Bill with impractical lack of specifics contrary to an express order of the court.

63.  Mr Chang contended that the non‑compliance of the Bill Order requiring the defendant to set out the Revised Bill in a practical format amounted to an abuse of process on the part of the defendant.

64.  The plaintiff therefore sought an order for the defendant to pay the plaintiff’s costs for the Preliminary Issues, the Striking Out Summons, the Amendment Summons and these proceedings.

THE DEFENDANT’S CASE 

65.  Mr Wong SC for the defendant contended that the plaintiff was unsuccessful on most of the Preliminary Issues.

66.  Mr Wong submitted that the Costs Order Nisi should be confirmed in that it took into account the defendant’s overall success at the trial of the Preliminary Issues whilst reduced the costs payable by the plaintiff to the defendant proportionately in view of the plaintiff’s partial success.

67.  In respect of the costs for these proceedings, Mr Wong agreed that these proceedings would be concluded following the determination of the Preliminary Issues and there would be no further “event” for the purposes of costs.  He submitted that a fair costs order for these proceedings would be in line with the costs order for the Preliminary Issues, ie for the plaintiff to pay 50% of the defendant’s costs for these proceedings.

68.  Mr Wong refer to Surrey Heath Borough Council v Lovell Construction Ltd and Anor [1990] 48 BLR 108 to submit that if the judge who had tried preliminary issues wanted to make an immediate award of costs instead of reserving the costs to the trial or making them costs in the cause, he should be entitled to regard the trial of the preliminary issues as being a separate “event” on its own for the purposes of Order 62, rule 3(2) of the RHC and that it was not satisfactory to grant an order for “costs in the cause” in relation to the costs of the trial of preliminary issues if as a result of the defendant’s success on certain of the preliminary issues, very important parts of the claim would go out of the cause and would not be pursued at trial.

69.  He further contended that in a case where substantial time and costs had been expended in preparing and arguing the preliminary issues, it would not be an appropriate case for the court to make an order for costs in the cause.  For this contention, Mr Wong referred to Secretary for Justice v Hon Kam Wing (unrep., HCA 3377/2000, 13 March 2003) and Nineyou International Ltd and Ors v Messrs Troutman Sanders (a firm) (unrep., HCMP 697/2009, 3 September 2009).

70.  Mr Wong submitted that the trial of the Preliminary Issues ought to be treated as a distinct “event” from these proceedings as substantial time and costs had been spent on the trial of the Preliminary Issues and after conclusion of the Preliminary Issues, there was no longer any “cause” or “event” in these proceedings.  As such, it was neither appropriate nor meaningful for the plaintiff to seek in the P’s Summons an order for the costs for the trial of the Preliminary Issues be in the cause of these proceedings.

71.  Mr Wong criticized the plaintiff of making a fundamental change of stance at the eleventh hour to seek at the hearing to vary the Costs Order Nisi to an order ordering the defendant to pay the plaintiff’s costs for the Preliminary Issues. 

72.  In support of his stance to have the Costs Order Nisi made absolute, Mr Wong submitted that the defendant prevailed for most of the Preliminary Issues after trial.  The plaintiff only succeeded on one issue (ie Issue 5) while the defendant conceded on one issue (ie Issue 4) and succeeded on the remaining four issues.  He submitted that the defendant was the overall successful party of the trial of the Preliminary Issues and the court was entitled to find that the plaintiff ought to bear at least part of the defendant’s costs.

73.  Mr Wong further submitted that the six Preliminary Issues were separate and distinct and the court was entitled to take an “issue-based” approach as to costs and make a proportionate costs order in favour of the defendant.

74.  Mr Wong pointed out that at the trial of the Preliminary Issues, the parties devoted the vast majority of the time on Issues other than Issue 5 which included matters concerning the nature and background of the PSG Matter, the existence of the Pre-retainer Agreement and the 2^nd Set of Representations, the billing practice of the defendant’s firm and that of Ms Wong, etc.  Mr Wong contended that the plaintiff’s many unsuccessful issues had led to wastage of considerable amount of time and costs and the court had properly taken these considerations into account in assessing the appropriate costs order.

75.  Mr Wong submitted that the defendant’s dispute as to Ms Wong’s authority prior to these proceedings merely related to her “write-off” of billable costs.  The defendant did not raise any dispute as to Ms Wong’s authority in respect of the plaintiff’s previously settled fees, which were charged in the context of the Retainer Letter.  He submitted that the defendant’s dispute as to Ms Wong’s authority could not have reasonably caused the plaintiff’s commencement of proceedings in respect of the 1^st, 2^nd and 3^rd Bills.

76.  Mr Wong contended that even if the issuance of the 4^th Bill was the trigger of these proceedings, there was no reason for the plaintiff to raise or seek to argue any of Issues 1, 2, 3, 4 and 6 by way of preliminary issues.  He submitted that none of these five Issues had any relevance to question of the validity of the 4^th Bill which the plaintiff called the “main event” in the plaintiff’s skeleton submissions lodged for this hearing.  He further submitted that it was only fair that the plaintiff ought to bear the costs consequences for those issues which she had fully contested and lost after trial.

77.  Mr Wong criticized the plaintiff of trying to tie in the issue of Ms Wong’s authority with all the Preliminary Issues.  Mr Wong submitted that the defendant had never disputed Ms Wong’s actual authority to agree with the plaintiff on costs as per the terms of the Retainer Letter. The defendant’s dispute was only as to Ms Wong’s lack of authority to agree costs at variance with the terms of the Retainer Letter.  Mr Wong contended that this line of dispute had little bearing or impact on each of the Preliminary Issues.

78.  Mr Wong submitted that the defendant had succeeded in affirming the Retainer Letter which in turn had a determinative effect on the Preliminary Issues on hourly rates of the defendant’s fee earners and the non-existence of the Pre-retainer Agreement and the 2^nd Set of Representations as well as the fairness and reasonableness of the 1^st, 2^nd and 3^rd Bills.  As the defendant had succeeded on Issue 3 on the alleged Pre-retainer Agreement and the 2^nd Set of Representations, it was not necessary for the court to deal with Issue 4 on Ms Wong’s authority to bind the defendant which the defendant conceded in the trial of the Preliminary Issues.  Mr Wong contended that none of the Preliminary Issues could have been affected by or turned on the defendant’s dispute as to Ms Wong’s authority.

79.  Mr Wong submitted that at the most, the defendant had failed on the one issue as to Ms Wong’s authority, which was not significant to the outcome of the Preliminary Issues and the authority issue should only have limited impact on the question of costs.

80.  Mr Wong submitted that the plaintiff was ultimately disbelieved by the court in respect of the Pre-retainer Agreement and the 2^nd Set of Representations which she alleged to have been privy to.  Mr Wong contended that the plaintiff had advanced her case improperly and unreasonably which lead to substantial amount of time being spent on cross-examination and submissions on her case.

81.  Mr Wong submitted that The Kastor Too (supra) did not assist the plaintiff herein as this case was not a case which involved two separate bases for putting the successful party’s only claim.  He submitted that the defendant had at least a reasonable argument in relation to the issue on Ms Wong’s authority which involved hotly contested disputes between the parties on both fact and law.  It was not a case in which the defendant ought to have conceded the issue without trial of the matter.  He pointed out that in The Kastor Too, at the end of the day the English Court of Appeal only ordered that there be no order as to costs for that case.  As such, The Kastor Too provided no basis for the plaintiff’s submissions that the defendant ought to pay the plaintiff’s costs for the trial of the Preliminary Issues.

82.  Mr Wong submitted that following the determination of the Preliminary Issues, it was common ground that these proceedings could be fully disposed of and there would have no further “event” or “cause” in respect of these proceedings.  As such, a fair costs order would be for the costs of these proceedings to reflect that of the Preliminary Issues.  Mr Wong pointed out that the plaintiff also took the position that the costs of these proceedings should be no different to that of the Preliminary Issues although the plaintiff took a different position in relation to the incidence of costs.

83.  In respect of the costs for the Striking Out Summons and the Amendment Summons, Mr Wong submitted that those costs should be treated in line with the costs of these proceedings.

84.  Mr Wong disputed that the aforesaid summonses were arose out of the defendant’s non-compliance with the Bill Order of DHCJ Marlene Ng as Her Ladyship did not make any finding of non-compliance with the Bill Order against the defendant when the aforesaid summonses were returned before Her Ladyship on 26 August 2013.  At that hearing, the learned deputy judge proceeded to give directions for the summonses with costs reserved.

85.  Mr Wong submitted that the Bills were gross sum bills as opposed to itemised bills.  The taxation of the Bills would not be conducted on an itemised basis.  In such case, the Revised Bill would better serve the purpose of assisting the court to determine whether the gross sum bills were reasonable or otherwise.  The Revised Bill might contain additional items justifying a figure higher than the amount of the gross sum bills.  He referred to Cook on Costs 2016 para 3.17 and Chan Boon Ning John v Oldham Li & Nie (unrep., HCMP 2166/2005, 12 August 2008).  Mr Wong submitted that the defendant opposed the Striking Out Summons on a clear point of law and there was no basis for the plaintiff to seek costs against the defendant for the aforesaid two summonses.

86.  In respect of the “one-sixth” rule under section 67(5) of the LPO, Mr Wong submitted that as none of the Bills would be taxed, there was no “event” of taxation.  It could not be said that any part of the 4^th Bill had been “taxed off” for the purpose of section 67(5) of the LPO and that section was not engaged.

87.  Mr Wong asked this court to dismiss the plaintiff’s application to vary the Costs Order Nisi and to order the plaintiff to pay 50% of the defendant’s costs for these proceedings including costs previously reserved in relation to these proceedings which would cover the costs of the Striking Out Summons and the Amendment Summons.

DISCUSSION

Application to vary the Costss Order Nisi

88.  The Costs Order Nisi was a costs order made after the trial of the Preliminary Issues.  In the Surrey Heath case (supra) Dillon LJ stated at 121-122 that:

“It is not in dispute on this appeal that a judge who has decided preliminary issues has (unless he is going to make no order as to costs) three possible courses before him in relation to the costs of the trial of the preliminary issues, viz:

(i) he may make those costs costs in the cause; or

(ii) he may reserve the costs to the trial; or

(iii) … …, he may award the costs, or a proportion of the costs, to one or other party.”

89.  Both parties agree that following determination of the Preliminary Issues, these proceedings do not need to proceed further. In fact, paragraphs 2(1) and 2(2) of the P’s Summons are for orders to formally dispose of the Bills concerning us in these proceedings.  I shall make appropriate orders in respect of these applications as stated in paras 36 to 38 above to dispose of these proceedings.  In such case, there will not be any trial for these proceedings and it is inappropriate to reserve the costs of the trial of the Preliminary Issues to the trial of these proceedings.

90.  I awarded a portion of the costs of the trial of the Preliminary Issues to the defendant.  The plaintiff contended that a more appropriate costs order for the trial of the Preliminary Issues was costs in the cause or a costs order in favour of the plaintiff.  The plaintiff took the view that the aforesaid two proposed costs orders were of the same effect as the plaintiff contended that the plaintiff should have the costs for these proceedings.

91.  If it is more appropriate to order the costs for the trial of the Preliminary Issues to be in the cause of these proceedings, I shall so order.  Who will get the costs of the cause is a separate matter. Such order will not be made on condition or on the understanding that the plaintiff will get the costs of these proceedings. 

92.  These proceedings were commenced by the plaintiff for an order that all the Bills issued by the defendant to the plaintiff be referred to taxation.  The plaintiff in these proceedings seeks the court’s adjudication on the amount of costs which the defendant is entitled to charge the plaintiff.  This is the “cause” or “event” of these proceedings. In the originating summons issued herein on 27 January 2012, the plaintiff does not seek an order to strike out the 4^th Bill or a declaration that the defendant was not entitled to issue the 4^th Bill.

93.  Preliminary issues were first raised by the plaintiff in the summons taken out on 13 November 2012.  At that time there were only two preliminary issues raised in respect of hourly rates of the defendant’s fee earners and whether duplication of work would be allowed.

94.  With the development of the case, the number of preliminary issues increased to six and their ambit went beyond matters for preparation for taxation of the Bills.  They went to the fundamental question as to whether any of the Bills should be taxed at all.  Mr Wong rightly pointed out that in the pleadings filed by the parties for the Preliminary Issues, the relief sought by the parties were separate and distinct issues different from the relief sought in the originating summons herein.

95.  Four of the Preliminary Issues were on terms upon which the taxation should proceed with; namely hour rates (ie Issues 1 and 2) and agreed contractual terms (ie Issues 3 and 4).  Two of the Preliminary Issues (ie Issues 5 and 6) were on how many of the Bills would go to taxation.

96.  The court considered that the Preliminary Issues raised were distinct and separate from the aforesaid “cause” or “event” of these proceedings.  As such, pleadings confining only to the Preliminary Issues were directed.  Witness statements confining only to the Preliminary Issues were ordered.

97.  The hearing for the Preliminary Issues last for 5 days.  I do not know the exact amount of costs being incurred but expect that substantial costs had been incurred by the parties for the trial of the Preliminary Issues.

98.  As Dillon LJ pointed out in the Surrey Heath case (supra) at 122 that:

“To make the costs [of the preliminary issues] costs in the cause is not, however, satisfactory to a defendant if as a result of the defendant’s success on certain of the preliminary issues, very important parts of the claim will go out of the cause and will not be pursued to trial.”

99.  As aforesaid, the “cause” or “event” of these proceedings was to determine the amount of costs the defendant was entitled to charge against the plaintiff.  As a result of the determination of Issues 5 and 6, not only very important parts of the claim but the whole claim herein will go out of the cause.  It is now unnecessary for the court to further assess the amount of costs which the defendant is entitled to charge the plaintiff.  Each party succeeded in one issue which together dispose of the whole proceedings. However, substantial costs had been incurred by the parties to prepare and deal with the Taxation Bill, the Revised Bill and the List of Objections in these proceedings.  Which party should bear those costs?

100.  Determination on Issues 1 to 4 of the Preliminary Issues did not lead to conclusion of the main proceedings and should have no bearing on who should bear the costs of the main proceedings. In such case, it is not fair to require the party liable for the costs in the main proceedings also to pay the costs of the Preliminary Issues if it is the successful party in the trial of the Preliminary Issues.

101.  In the circumstances of this case, I am of the view that it is inappropriate to make the costs of the trial of the Preliminary Issues in the cause of these proceedings.

102.  I am left with the remaining option which I had chosen in making the Costs Order Nisi.  The next question is: Shall I vary the Costs Order Nisi?

103.  In the P’s Summons, the plaintiff seeks to vary the Costs Order Nisi to make it become costs in the cause of these proceedings which I have declined for reasons discussed above.  Can the plaintiff pursue for an order to vary the Costs Order Nisi to the effect of ordering the defendant paying the plaintiff’s costs?

104.  The plaintiff had applied to vary the Costs Order Nisi within time.  The effect of such application is to render costs remain live issues between the parties.  When I made the Costs Order Nisi, I had not yet had the opportunity of hearing the parties’ submissions on costs. At the hearing of the variation application, my hands were not tied by the costs orders proposed by the parties, be it made in the variation summons (ie P’s Summons) or at the hearing.  The first principle stated by Nourse LJ in Re Elgindata (supra) is that: “Costs are in the discretion of the court”. I am of the view that in a hearing for variation of costs order nisi, I may make the order nisi absolute or make such other appropriate costs order after hearing the parties’ submissions on costs including an order different from the order nisi or orders proposed by the parties.

105.  I shall now turn to whether I shall vary the Costs Order Nisi.

106.  The Costs Order Nisi is not an issued-based costs order but a proportionate costs order.  From para 204 of the Decision cited in para 46 above, it can be seen that in making the Costs Order Nisi I adopted the issue-based approach.  I am of the view that adopting such approach in making a proportionate costs order will better serve the underlying objectives of CJR.  As Kwan JA pointed out in the Zhuhai International Container Terminals case (supra), the CJR had amended Order 62 rule 5 of the RHC to give incentive to litigant to conduct litigation in a responsible way and be selective as to the issues raised.  To J had also pointed out in KJ v KMLM (supra) that since the CJR, the court was more ready to take an issue-based approach.  As pointed out by Lord Woolf MR in A E I Rediffusion Music Ltd v Phonograph Performance Ltd [1999] 1 WLR 1507 at 1522-1523 that:

“The most significant change of emphasis of the new Rules [ie the English Civil Procedure Rules 1998] is to require courts to be more ready to make separate orders which reflect the outcome of different issues. In doing this the new Rules are reflecting a change of practice which has already started. It is now clear that too robust an application of the “follow the event principle” encourages litigants to increase the costs of litigation, since it discourages litigants from being selective as to the points they take. If you recover all your costs as long as you win, you are encouraged to leave no stone unturned in your effort to do so.”

107.  A proportionate costs order avoids multiple‑taxation of issue‑based costs order and promotes procedural economy in the conduct of proceedings.  The issue-based approach helps to discourage litigants from raising issues devoid of merits which in turn will help to increase the cost‑effectiveness of the proceedings, ensure the case to be dealt with expeditiously and promote a sense of reasonable proportion and procedural economy in the conduct of proceedings.

108.  Principles 3 and 4 of Re Elgindata (supra) are engaged in issue-based approach which provide that the general rule (ie costs should follow the event) does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or costs of the proceedings he may be deprived of the whole or a part of his costs and where the successful party raises issues or makes allegation improperly or unreasonably, the court may not only deprive him of his costs but order him to pay the whole or a part of the unsuccessful party’s costs.

109.  To put into effect these principles of Re Elgindata (supra), the court has to find out who is the successful party. A successful party in an interlocutory application may not necessarily be the successful party at trial.  A party may succeed in a contested interlocutory application for discovery yet fail at the trial.  In such case, I am of the view that in considering who is the successful party in an interlocutory application, the subject matters of the interlocutory application are the events for the purposes of costs.  For this view, I find support in the Surrey Heath case (supra) at 124 when Dillion LJ stated that:

“Moreover if the judge who has tried preliminary issues wants to make an immediate award of costs (under alternative (iii) above) [see para 88 above] instead of reserving the costs to the trial or making them costs in the cause, he should be entitled, in my judgment, to regard the trial of the preliminary issues as being a separate “event” on its own for the purposes of Order 62, Rule 3(3) [similar to Order 62, rule 3(2) of the RHC].”

110.  In the trial of the Preliminary Issues, both the plaintiff and the defendant claimed to be the overall successful party.  This is not surprising, as the Preliminary Issues touch on more than one subject matter and it so happen each party was successful in some.  Both parties put their successful issues under a magnifying glass and each of them comes to the inevitable conclusion that it/she is the successful party.

111.  I faced a similar situation in Union Knopf (HK) Limited v Marcel Sossnowski [2014] HKEC 553.  I approached that situation in the following way:

“55. I maintain the view that the plaintiff is entitled to costs for those claims which I had ordered the defendants to account for profits made by them but the plaintiff is liable to the defendants’ costs for those claims which the plaintiff failed to prove as well as costs for the claim on which only nominal damages were awarded. This of course is also subjected to the general rule that a successful party might be deprived of part of his costs in recognition of his having failed on issues raised or allegations made in the successful claims which had taken up a substantial part of the trial.

56. One of course cannot put each claim on a scale to weigh its costs. Time and costs incurred by the parties on each claim differ from one to another. To make a costs order in this case is not to do an arithmetical calculation to divide the total costs by the number of claims and award each party its costs on proportion of the number of claims succeeded or failed. It is also not possible to apportion the exact time and costs which the parties had incurred for each claim. The English Court of Appeal faced similar difficulties in the Re Elgindata case (supra). The way Nourse LJ proposed to deal with such difficulties at 239c-d was that:

“In my judgment the only fair basis for deciding the part of their costs of which the petitioners should be deprived is to ask how much time and expense was taken up in dealing only with the allegations on which they failed.  I acknowledge the difficulties with which we are confronted in answering that question.  An apportionment made by us is bound to be even more rough and ready than one made by the judge.  But we must do the best we can.”

57. I am of the view that a practical and pragmatic approach is for me to assess the plaintiff’s costs entitlements and liabilities in a broadly rough and ready way.  … …”

112.  I adopted the same approach in this case.  The plaintiff failed on four Issues (ie Issues 1, 2, 3 and 6).  As I have pointed out in para 28 of the Decision that: “The existence or non-existence of the Pre-retainer Agreement and/or the 2^nd Set of Representations is the main area of dispute between the parties for the Preliminary Issues.”  The aforesaid failed Issues on the part of the plaintiff had occupied the bulk of the time of the trial of the Preliminary Issues and the preparation for that trial including the preparation of pleadings and witness statements. 

113.  The plaintiff tried to tie all the Preliminary Issues to the issue relating to Ms Wong’s authority and contended that:

“This assertion of D [ie the position that Ms Wong had no authority to agree with the plaintiff fees that vary from the Retainer Letter] not only precipitated the commencement of these proceedings, but also led to a myriad of disputes such as the hourly rates of fee earners (leading to Issues 1 and 2), whether and what representations were made and the effect of these representations (leading to Issues 3 and 4), and whether any or all of the 4 Bills were properly prepared and issued (leading to Issues 5 and 6).” (See para 35 of the Appendix to Plaintiff’s Skeleton Submissions (the “Appendix”))

“None of the Preliminary Issues will remain relevant for these proceedings if Cindy Wong’s authority to agree fees on behalf of D was not in question.” (See para 38 of the Appendix)

114.  With respect, I disagree.  I am of the view that Issues 1 to 4 were raised not because the defendant denied that Ms Wong had authority to agree with the plaintiff on fees at variance with the Retainer Letter but were attempts of the plaintiff trying to gain a more advantageous position in the taxation by reopen the terms of the Retainer Letter which the plaintiff failed at the trial of the Preliminary Issues.

115.  Issue 6 clearly had nothing to do with the issue on Ms Wong’s authority.  It also had nothing to do with the defendant issuing the 4^th Bill.  It was put forward by the plaintiff on the basis that the 4^th Bill would be struck out.  Issue 6 was an attempt of the plaintiff to clawback part of the fees previously paid by her to the defendant by reopen the 1^st, 2^nd and 3^rd Bills which the plaintiff again failed at the trial of the Preliminary Issues. 

116.  I agree with Mr Wong that The Kastor Too (supra) did not assist the plaintiff.  The paragraph of the judgment of Rix LJ relied on by the plaintiff stated that:

“151 This is not a case where the issue on which the successful party lost was a separate head of claim: it was a separate basis for putting the successful party’s only claim. Accordingly, unlike in many cases involving issue based orders for costs, this was a case where the issue on which the successful party would not have been litigated if the unsuccessful party had conceded the issue on which the successful party won.”

117.  Even if the defendant had not taken issue on the authority of Ms Wong, I do not see that the plaintiff would not pursue the Preliminary Issues which were for the purpose of reopen the terms of the Retainer Letter to gain an advantageous position in the taxation or for the purpose of clawback previous payments as aforesaid.  In fact, Mr Dawes, counsel for the plaintiff at the trial of Preliminary Issues, in answering a point raised by the court expressly confirmed that the plaintiff would still seek taxation of the 1^st, 2^nd and 3^rd Bills even if the 4^th Bill was struck out.  This is not a case where the issue on which the plaintiff would not have been litigated if the defendant had conceded the issue on which the plaintiff won.

118.  Furthermore, in The Kastor Too, there was a very special feature which is lacking in the case before me.  In The Kastor Too, the claimant had made a sanctioned offer to the defendant and achieved a better result at the trial.  The presence of a sanctioned offer in a litigation will certainly have bearing in the consideration of the issue of costs but there was no such sanctioned offer in the case before me. 

119.  Mr Chang contended that the plaintiff was not the failing party on Issue 6 as the defendant was also precluded from taxing the 1^st, 2^nd and 3^rd Bills by my determination on Issue 6.  I do not see that it was the intention of the defendant to have the 1^st, 2^nd and 3^rd Bills be referred to taxation if the 4^th was struck out.  As pointed out in para 15 above, the 4^th Bill covered the same period of the 3^rd Bill.  The defendant only intended to have the 3^rd Bill referred to taxation by means of taxing the 4^th Bill.  If the 4^th Bill was struck out, the defendant did not ask for taxation of the 1^st, 2^nd and 3^rd Bills.  Mr Wong rightly pointed out at the hearing that in the point of defence and counterclaim filed herein by the defendant on the Preliminary Issues, the defendant prayed that: “In the event of this Court declaring that the 4^th Bill is liable to be struck out, a declaration that the Plaintiff is not entitled to tax the 1^st, 2^nd and 3^rd Bills in these proceedings”.

120.  These proceedings are brought to a conclusion not only because the plaintiff succeeded on Issue 5 and the defendant conceded on Issue 4 but also because the plaintiff failed on Issue 6.  Taking into account the fact that the plaintiff had also failed on Issues 1 to 3, if a single party has to be identified as the overall successful party in the trial of the Preliminary Issues, I am of the view that the defendant is more successful than the plaintiff.

121.  In Summit Property Ltd v Pitmans [2001] EWCA Civ 2020, Chadwick LJ explained issue-based approach to costs as follows:

“An issue based approach requires a judge to consider, issue by issue in relation to those issues to which that approach is to be applied, where the costs on each distinct or discrete issue should fall. If, in relation to any issue in the case before it the court considers that it should adopt an issue based approach to costs, the court must ask itself which party has been successful on that issue. Then, if the costs are to follow the event on that issue, the party who has been unsuccessful on that issue must expect to pay the cost of that issue to the party who has succeeded on that issue. That is the effect of applying the general principle on an issue by issue based approach to costs.” (Para 27 of the judgment)

122.  Adopting the aforesaid approach and engaging principle 3 of Re Elgindata (supra), I have deprived part of the defendant’s costs for the trial of the Preliminary Issues and order the plaintiff to pay 50% of the defendant’s costs for the trial of the Preliminary Issues.

123.  I maintain the view that this is a fair costs order for the trial of the Preliminary Issues.  I make the Costs Order Nisi absolute.

Costs for the Striking Out Summons and the Amendment Summons

124.  The Striking Out Summons was taken out on the ground that the Revised Bill failed to comply with paragraph 1 of the Bill Order.

125.  Para 1 of the Bill Order ordered that:

“Leave to the Defendant to revise the taxation bill of costs filed on 25 September 2012 by identifying in respect of each item of costs and disbursement in respect of such taxation bill of costs

a. whether it is partly or wholly covered by any of the 4 bills referred to in paragraph (1)(a) – (d) of the Originating Summons;

b. if so, which of such 4 bills is such item partly or wholly covered;

c. if the item is partly covered by any of such 4 Bills, which part or to what extent it is so covered.

and to add a summary at the end with breakdown of profit costs and disbursement under the items in respect of each of such 4 bills and for unbilled items if any.”

126.  The Bill Order is very specific.  The defendant filed the Revised Bill on 3 July 2013 in purport compliance of the Bill Order.

127.  The plaintiff’s complaint against the Revised Bill was set out in para 23 of the plaintiff’s reply submissions lodged for this hearing as follows (omitting reference to hearing bundles):

“23. D filed revised taxation bill of costs on 3 July 2013. It features 694 costs items that refer to the 4 bills. In none of these 694 costs items does the revised taxation bill make an attempt to comply with the above order [ie the Bill Order] by stating whether any of the items is wholly or partly covered by the relevant bill, and if so which part or to what extent it is so covered. The summary at the end does not include any breakdown in respect of any of the 4 bills or any unbilled items if any, contrary to the court order. The revised taxation bill clearly does not comply with the court order set out above.”

128.  After the plaintiff took out the Striking Out Summons, the defendant took out the Amendment Summons on 20 August 2013 seeking leave to amend the Taxation Bill by means of the Revised Bill with costs to the plaintiff.

129.  The defendant’s stance in relation to the costs reserved in respect of the Striking Out Summons and the Amendment Summons was that those costs should be treated in line with the costs of these proceedings.  The defendant relied on the fact that DHCJ Marlene Ng who made the Bill Order did not make any finding of non-compliance with the Bill Order when the aforesaid two summonses were returned before Her Ladyship on 26 August 2013 but simply adjourned both summonses to another directions hearing with costs reserved.

130.  The defendant’s answer to the Striking Out Summons can be found in para 31.2 of the defendant’s submissions lodged for this hearing as follows:

“31.2 At that hearing [ie hearing on 26 August 2013], D opposed P’s application to strike-out the Revised Bill of Costs on a clear point of law. As the Bills in question were gross sum bills (as opposed to itemised bills), the taxation of those Bills would not be conducted on an itemised basis. In such a case, the Revised Bill of Costs would serve the purpose of assisting the Court as to whether the gross sum bills were reasonable or otherwise, and it may contain additional items justifying a figure higher than the amount of the gross sum bills.”

131.  From the above, it can be seen that the defendant did not seek to argue that the Revised Bill was in compliance with the Bill Order.  The defendant only contended that the Revised Bill (though might not be in compliance with the Bill Order) would assist the court better in the taxation of the four gross sum bills in these proceedings.  In fact, at the hearing, Mr Wong submitted that the Bills were gross sum bills and it was not possible to prepare an itemized bill for these gross sum bills in the specific ways as directed in the Bill Order.

132.  The fact that the learned deputy judge did not make any finding of non-compliance of the Bill Order was not because Her Ladyship found no non-compliance of the Bill Order but because Her Ladyship had decided not to deal with the striking out application for the time being.

133.  The defendant might consider that the Revised Bill would be more useful to the court than a revised bill prepared in accordance with the Bill Order for the taxation of the Bills.  However, this is no ground for non-compliance of the Bill Order.  If the defendant considered that the directions contained in the Bill Order had been wrongly given or had become inappropriate for whatever reasons, the defendant should have applied to the court to set aside or vary the Bill Order but should not have simply ignored the court order and conducted the proceedings in a way which the defendant considered suitable.  Such approach to say the least should be discouraged.

134.  I do not accept that the defendant’s opposition to the Striking Out Summons involved “a clear point of law” as put by Mr Wong in his skeleton submissions.  The striking out application was premised on non‑compliance of court order.  It was not an application asserting that the defendant was not entitled legally to refer to additional items to justify its gross sum bills. Whether the Revised Bill failed to comply with the Bill Order is a factual matter.

135.  I agree with the following submissions of the plaintiff stated in the plaintiff’s reply submissions:

“25. D does not need leave to file the revised taxation bill [ie the Revised Bill] pursuant to court order [dated] 5 June 2013 [ie the Bill Order] because leave is already given for the filing of the revised taxation bill by the same court order.

26. Despite that D has leave to file a revised taxation bill, it issued summons on 20 August 2013 for leave again, offering costs to the P for costs of and incidental to the amendments made in the revised taxation bill.  The only reasonable explanation for D to (i) ask for leave when leave is already given by court order and (ii) offer costs to P for the amendments, is that D’s revised taxation bill is not done according to the court order (ie non- compliance).”

136.  Mr Wong contended that the Bill Order only granted “leave” for the defendant to revise the Taxation Bill and it was not mandatory that the defendant had to revise the Taxation Bill.  Thus, there was no non‑compliance of the Bill Order.  With respect, I disagree.  As I have pointed out above, the Bill Order was very specific.  The court was of the view that the Taxation Bill prepared by the defendant was not good enough for the purpose of taxation and directed the defendant to revise the Taxation Bill in a specific way.  In the context of these proceedings, I am of the view that the word “leave” used in the Bill Order meant to allow the defendant an opportunity to make necessary revision to the Taxation Bill as specifically directed by the court so as to make the Taxation Bill suitable for taxation.  It was not meant to grant liberty to the defendant to decide whether it would like to amend the Taxation Bill.

137.  These proceedings will now be concluded.  It is not necessary for the court to adjudicate on the Striking Out Summons and the Amendment Summons.  However, in view of the above discussion, I am of the view that the costs of and occasioned by the Striking Out Summons shall be paid by the defendant to the plaintiff, to be taxed if not agreed.  In the Striking Out Summons, the plaintiff seeks costs on indemnity basis.  To J had summarized the principles applicable to indemnity costs in KJ v KMLM (supra) as follows:

“21. The principles applicable to indemnity costs are well settled. The starting point for taxation in hostile litigation is that costs should be taxed between party and party: see Town Planning Board v Society for Protection of the Harbour Ltd (No 2)[13]and Overseas Trust Bank Ltd v Coopers & Lybrand (a firm)[14]. To qualify for costs on an indemnity basis, the successful party should show some special or unusual feature in the case. The proceedings must be instituted or prosecuted in circumstances as to constitute an affront to the court. Usually there must be something disgraceful in the conduct of the losing party or his legal representatives such as to cause the court to feel a proper sense of indignation. Normal litigious hostility would not suffice: see Town Planning Board v Society for Protection of the Harbour Ltd (No 2)[15]; Overseas Trust Bank Ltd v Coopers & Lybrand (a firm)[16] and Man Fong Hang v Man Ping Nam[17]. In exercising its discretion as to costs, the court must take into account the conduct of both the successful and losing parties before, as well as during the proceedings: see Order 1A, rule 1(1) and Order 62, rule 5 of the Rules of the High Court (“RHC”).

22. If unreasonable conduct is relied on, the losing party’s conduct would need to be unreasonable to a high degree.  In this context, “unreasonableness” does not mean merely wrong or misguided in hindsight: see Kiam v MGN Ltd (No 2)[18]. Advancing a case which is difficult, unlikely to succeed or which in fact fails, or without any foundation in law or fact, or devoid of merits, is not necessarily in itself a sufficient reason for an award of indemnity costs: see Overseas Trust Bank[19]; Shaina Investment Corporation v Standard Bank London Ltd[20]; Golden Sand Marble Ltd v Hsin Chong Construction Co Ltd[21]; Kao, Lee & Yip (a firm) v Midland Realty International Limited[22].  The court’s finding that the claim or the ground of defence is plainly and obviously incredible on the fact, or that the evidence has been deliberately untruthful will not necessarily in itself warrant an order for indemnity costs.  The conduct of the losing party must be of a more venal kind and the conduct of the litigation has in some sense been wicked: see Choy Yee Chun v Bond Star Development Ltd[23]; and Kao, Lee & Yip[24].

23. The court may also mark its disapproval of the conduct pertaining to part only of a party’s case by ordering costs of that part only to be assessed on an indemnity basis, with the rest assessed on party-and-party basis: see Man Fong Hang[25].”

138.  Applying the aforesaid principles to the Striking Out Summons, I do not consider that the circumstances for the defendant filing the Revised Bill herein justified a costs order on indemnity basis as sought by the plaintiff.  I order such costs to be taxed on usual party-and-party basis.

139.  In respect of the Amendment Summons, the defendant prayed in the summons for costs of and incidental to the amendments to the Taxation Bill be to the plaintiff in any event.  The defendant had in fact already amended the Taxation Bill by the Revised Bill.  The Amendment Summons was in effect seeking a court order to affirm what had already happened.  Not granting a costs order in terms of the costs order proposed in the Amendment Summons will not be doing fairness to the plaintiff.  I grant a costs order in terms of paragraph 3 of the Amendment Summons ordering costs of and incidental to the amendment to the Taxation Bill by means of the Revised Bill be to the plaintiff in any event to be taxed if not agreed.

Costs of these proceedings

140.  These proceedings will now be concluded by disallowing application for taxation of the 1^st, 2^nd and 3^rd Bills and striking out of the 4^th Bill.

141.  The remaining issue is who should get the costs for these proceedings.

142.  The plaintiff submitted that she was the successful party.  The plaintiff contended that these proceedings were caused by the defendant disputing the authority of Ms Wong in dealing with the plaintiff on costs and issuing the 4^th Bill seeking to the charge the Additional Costs against the plaintiff on top of the sum of $14,026,650.50 already paid by the plaintiff to the defendant under the 1^st, 2^nd and 3^rd Bills.  The plaintiff submitted that as the defendant did not get a single cent more than the costs already paid by the plaintiff out of these proceedings, the plaintiff is the successful party.

143.  The plaintiff also referred to the so called “one-sixth” rule stipulated in section 67(5) of the LPO.  Section 67(5) of the LPO refers to “the costs of the taxation shall be paid according to the event of the taxation”.  There is no taxation in these proceedings.  I agree with Mr Wong that section 67(5) of the LPO is simply not engaged. 

144.  As I have pointed out in para 92 above, in the originating summons issued herein, the plaintiff does not seek to declare that the defendant was not entitled to issue the 4^th Bill or to strike out the 4^th Bill.  In the originating summons, the plaintiff seeks taxation of the Bills.  None of the Bills will now be taxed.  Strictly speaking, the plaintiff’s application by the originating summons has failed. However, I am of the view that this is too dogmatic an approach to do justice or fairness to the parties in the circumstances of this case.  If it is the defendant who has come to this court to seek taxation of the 4^th Bill to compel the plaintiff to pay the Additional Costs, the defendant will meet the same fate.

145.  I have made the following findings in the Decision:

“However, these taxation proceedings were caused by the defendant asserting that Ms Wong had no authority to issue the 3^rd Bill as the final bill. The plaintiff’s act in commencing these proceedings was logical response to such assertion. If Ms Wong had no authority to issue the 3^rd Bill as the final bill and the defendant had issued a further bill (or a draft note of fees as the defendant called it), the plaintiff had to seek taxation for all of the defendant’s bills.” (Para 128 of the Decision)

“These proceedings were commenced in response to the defendant’s assertion that Ms Wong had no authority to agree with the plaintiff on the fees. If the defendant’s aforesaid assertion was correct, all fee agreements entered into by Ms Wong with the plaintiff and the 1^st to 3^rd Bills issued by the defendant to the plaintiff would be of no legal effect. The plaintiff would have no alternative but to resort to taxation to determine her obligations under the law for the defendant’s fees.” (Para 132 of the Decision)

146.  The initial purpose of the plaintiff in commencing these proceedings was to stop the defendant from charging her the Additional Costs.  She has successfully achieved this goal.  To such extent, the plaintiff is the successful party.

147.  However, the plaintiff did not stop at there. The plaintiff wished to clawback part of the payments which she had previously paid to the defendant under the 1^st, 2^nd and 3^rd Bills.  In the originating summons the plaintiff also seeks an order for the defendant to refund to the plaintiff such sums of money as may on such taxation appeared to have been overpaid.  The plaintiff asserted that she had overpaid the defendant and sought taxation of the 1^st, 2^nd and 3^rd Bills in these proceedings with a view to clawback part of her previous payments.  To such extent, the plaintiff fails.

148.  In A L Barnes Ltd v Time Talk (UK) Ltd [2003] EWCA Civ 402, Longmore LJ explained who would be considered as a successful party in a commercial litigation as follows:

“In what may generally be called commercial litigation … the disputes are ultimately about money. In deciding who is the successful party the most important thing is to identify the party who is to pay money to the other. That is the surest indication of success and failure.” (Para 28 of the judgment)

149.  The defendant wanted the plaintiff to pay the Additional Costs but failed.  The plaintiff wanted to clawback part of the fees which she had previously paid to the defendant but also failed.  The defendant does not get a single cent more from the plaintiff and the plaintiff also does not get a single cent back from the defendant. 

150.  The major part of the costs in these proceedings, other than costs for the trial of the Preliminary Issues which have been dealt with separately in this decision, will be the substantial costs incurred by the parties to deal with the Taxation Bill and the Revised Bill which include the costs for the List of Objections.

151.  In para 144 of the Decision, I had noted the following submissions of Mr Wong made at the trial of the Preliminary Issues:

“Mr Wong submitted that the plaintiff’s position had always been that taxation of the 1^st, 2^nd and 3^rd Bill[s] would not be necessary if there was not the 4^th Bill. This was confirmed in the letter of T&S dated 21 November 2011 and by the plaintiff during her cross-examination. The plaintiff had also confirmed that she did not dispute items charged in the defendant’s bills and the 2^nd Bill was only concerned with disbursement items.”

152.  Mr Wong criticized the plaintiff of not adhering to her such position and confining the issue in these proceedings to whether the defendant was entitled to issue the 4^th Bill.  If so, all the substantial costs for preparing the Taxation Bill, the Revised Bill and the List of Objections would be saved.

153.  Although the plaintiff alleged that if the defendant had not issued the 4^th Bill, she would not have commenced these proceedings.  However, as I have pointed out in para 92 above, the plaintiff did not seek to strike out the 4^th Bill or to declare that the defendant was not entitled to issue the 4^th Bill.  Instead, the plaintiff sought taxation of all the Bills (including the 2^nd Bill) and went further to try to seek taxation of the 1^st, 2^nd and 3^rd Bills even after the 4^th Bill had been struck out.  The plaintiff contended that when she commenced these proceedings, she was not aware of her right to claim that the defendant was estopped from issuing the 4^th Bill.  I had rejected such contention of the plaintiff. (See para 123 of the Decision)

154.  In para 153 of the Decision, I noted that (omitting page reference to hearing bundles):

“T&S had repeatedly asserted on behalf of the plaintiff that there were agreements between the plaintiff and the defendant (through Ms Wong) for full and final settlement of the defendant’s costs and disbursements for the whole engagement of the defendant. In their letter dated 21 November 2011, T&S stated that:

‘Nevertheless, if you [the defendant] confirm that upon the issue of your Bill dated 16 May 2011 [ie the 3^rd Bill] (followed by our client’s full payment on 22 June 2011), there is already full and final settlement of all your costs and disbursements for the said engagement, then we will advise our client that the taxation of your said bills is not necessary.’”

155.  Despite such clear stance taken by the plaintiff just two months prior to her commencing these proceedings, the plaintiff pursued the course of action of seeking taxation of the 1^st, 2^nd and 3^rd Bills despite the 4^th Bill being struck out.  The plaintiff relying on the 4^th Bill to asserted that she was entitled to tax the Bills under section 67 of the LPO as of right, yet in the trial of the Preliminary Issues, the plaintiff sought to strike out the 4^th Bill.  I note that in the Decision, I expressed the view that the plaintiff commenced these proceedings as a logical response to the defendant’s issuing of the 4^th Bill and denial of Ms Wong’s authority to charge fees at variance with the Retainer Letter (see para 128 of the Decision).  However, the plaintiff took the matter further.  In the course of these proceedings, the plaintiff changed her stance with a view to get the best of both worlds but failed.  I do not see this as a reasonable way to tackle the dispute as to whether the defendant was entitled to issue the 4^th Bill or whether Ms Wong had the authority to deal with costs charged to the plaintiff at variance with the Retainer Letter.

156.  I found in para 151 of the Decision that the plaintiff accepted the final figure of the defendant’s costs proposed by Ms Wong and duly settled the same on 22 June 2011 and that both Ms Wong and the plaintiff agreed that the total fees charged by the defendant in the 1^st and 3^rd Bills were reasonable charges for the PSG Matter.  Yet, the plaintiff in these proceedings had tried to alleged that there were misrepresentations on the hourly rates of the defendant’s fee earners and that the hourly rates charged by the defendant’s fee earners against her were unreasonable.  All these assertions were rejected by this court in the trial of the Preliminary Issues.

157.  Of course, I shall not lose sight of the defendant issuing the 4^th Bill after it had issued the 3^rd Bill as “Final Bill” and denying the authority of Ms Wong to charge fees at variance with the Retainer Letter until the 4^th day of the trial of the Preliminary Issues. 

158.  If the defendant did not issue the 4^th Bill and dispute the authority of Ms Wong to agree fees with the plaintiff, the plaintiff might not have commenced these proceedings.

159.  If the plaintiff had adhered to her pre-action position of only disputing the defendant’s entitlement to issue the 4^th Bill in these proceedings whether as the only claim or as an alternative claim, the court will certainly deal with this fundamental issue before directing the parties to incur the very substantial costs to prepare the Taxation Bill, the Revised Bill and the List of Objections.

160.  The taxation of all the Bills will require an itemized bill cover the whole period of retainer of the defendant.   As I have pointed out in para 15 above, the period covered by the 4^th Bill was the same as the period covered by the 3^rd Bill.  In such case, the taxation of the 1^st, 2^nd and 3^rd Bills will also require an itemized bill cover the whole period of retainer of the defendant.  Whether it is a taxation of all the Bills as contended by the defendant or taxation of the 1^st, 2^nd and 3^rd Bills as contended by the plaintiff, costs for preparing the Taxation Bill and the List of Objections will have to be incurred.

161.  The plaintiff’s change of stance to try to clawback part of her previous payments paid to the defendant and the defendant’s taking advantages of this change of stance of the plaintiff by agreeing to a taxation of all the Bills with a view to legitimatize the 4^th Bill have contributed equally to causing the substantial costs for preparing the Taxation Bill and the List of Objections.

162.  In view of above, I find that there is no overall successful party in these proceedings.  I take into account the matters stated in Order 62, rule 5(1)(e) and (f) of the RHC, ie the conduct of all parties and whether a party has succeeded on part of his case and the matters stated in Order 62, rule 5(2) of the RHC especially the matters stated in sub-paragraphs (a), (b) and (d).  I am of the view that a fair costs order for these proceedings is no order as to costs.  I so order.

COSTS OF THE P’S SUMMONS

163.  The plaintiff fails in her application to vary the Costs Order Nisi but succeeds in getting the costs for the Striking Out Summons and the Amendment Summons.  Both parties fail to get the costs for these proceedings.  A small part of the costs for the P’s Summons was to deal with residuary matters to conclude these proceedings.  The parties have no dispute to the order to dispose of the 4^th Bill.  The proposed orders to dispose of the 1^st, 2^nd and 3^rd Bills put forward by both parties do not find favour with this court.  There should be no order as to costs for the application disposing of the residuary issues of these proceedings. 

164.  The plaintiff shall pay the defendant’s costs for her failed application to vary the Costs Order Nisi but shall get the costs for application relating to the costs of the Striking Out Summons and the Amendment Summons.  The parties’ cases in the variation application mingle with their cases for the costs of the main proceedings.  As pointed out by To J in KJ v KMLM (supra) at para 17 of the judgment that: “A party may be deprived of part of his costs on the failed issues even if such costs overlap with those of the succeeded issues.”   Doing my best to make a rough apportionment of the costs incurred for various matters raised in the P’s Summons and to assess the setting-off effect of the aforesaid costs orders, I am of the view that the plaintiff shall pay 30% of the defendant’s costs for the P’s Summons including costs previously reserved in respect of the P’s Summons.

165.  I agree that the issues raised by the P’s Summons concern legal issues warranted involvement of counsel and both parties were represented by two counsel at the hearing.  I grant counsel certificate for two counsel for the hearing of 14 December 2016.

166.  The parties had at the hearing addressed the court on costs for the P’s Summons preliminarily.  However, their submissions were made in the context that they would be the successful parties in all the issues raised at the hearing.  In such case, I shall afford an opportunity for the parties to address this court on costs for the P’s Summons in the context of my rulings in this decision if they so wish.  I make the aforesaid costs order for the P’s Summons an order nisi.

CONCLUSION

167.  To summarize, I dismiss the plaintiff’s application to vary the Costs Order Nisi and make the Costs Order Nisi absolute.  I order that the 4^th Bill be struck out and the application to tax the 1^st, 2^nd and 3^rd Bills be disallowed.  The defendant shall pay the plaintiff’s costs of the Striking Out Summons and costs of and incidental to amendment to the Taxation Bill by means of the Revised Bill including costs previously reserved in respect of the Striking Out Summons and the Amendment Summons.  There be no order as to costs for the main proceedings including costs previously reserved in the main proceedings.

168.  I make a costs order nisi that the plaintiff shall pay 30% of the defendant’s costs for the P’s Summons including costs previously reserved in respect of the P’s Summons with certificate for two counsel.  This order nisi shall become absolute 14 days after the date of this decision unless application is received from either party within this 14‑day period to vary the same.

169.  The only thing remains is for me to thank counsel from both sides for their helpful assistance to this court in dealing with all the issues raised at the hearing before me.