TANG YING LOI v. TANG YING IP (or “YIP”), a Manager of TANG MO PUN TONG AND ANOTHER

HCMP 1747/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1747 OF 2009

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BETWEEN

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DECISION ON COSTS

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1.  This decision concerns summary assessment of costs arising out of my judgment dated 23 March 2012.

Some general observations

2.  Summary assessment is a procedure in lieu of taxation.  Like the taxing master, the court is entitled, in summary assessment, to take into account the same factors for allowing or disallowing items of costs.  For example, for costs awarded on party-and-party basis, only those costs as were necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being assessed shall be allowed: Order 62, rule 28(2).

3.  It is important to see what the costs order covers. By way of example, a beneficiary may have potential claims against an administrator, eg for accounts, for damages in negligence, damages for breach of trust, damages for failing to discharge statutory duties (eg in not paying tax, hence giving rise to penalties), for directions on distribution of estate, etc.  There might also be discussions between beneficiary and administrator that have no impact on litigation, eg those on renewal of leases or rental increase for tenants.  There might even be correspondence between parties on matters beyond inter parte proceedings, eg complaint against a professional administrator to his professional body or even to government authorities.  What costs can be recovered depends on the nature of the proceedings brought and the subject matter of an application.

4.  Where the court entertains doubt on reading a costs statement or grounds of objection, it may raise requisitions or even call for an oral hearing in order to attain the purpose of justice.

The costs claimed

5.  By my judgment, I have ordered summary assessment of costs in favour of the plaintiff with certificates for 2 counsel on a party-and-party basis.  The difference between the plaintiff’s costs on common fund and party-and-party basis shall be recouped from the Tong. 

6.  The plaintiff presented a statement of costs for summary assessment for the total of $3,288,060, of which $715,000 were counsel’s fees.  The originating summons was only for an order for the administrators to give information and accounts.  The proceedings involved 4 affirmations filed by the plaintiff and 3 by the defendants.  Although the exhibits were voluminous, the affirmations were not lengthy.  The total figure claimed for costs immediately struck me as exorbitant.

7.  I then asked for the bill of costs rendered by the plaintiff’s solicitors (“JHT”) to its client in proof.  8 invoices were given to me.  Having perused the same, I raised further requisitions which were answered by letters dated 21 and 28 May 2012 and by oral submission.

8.  After consideration of the submissions, only 4 sets of requisition (nos 1, 2(i), 2(ii), 3 and 5) require resolution.  I also asked JHT to calculate the amount of costs that fell within requisitions 1, 2 and 3.

Requisitions (1), 2(ii) and (3)

9.  As the originating summons was for the 1^st defendant to furnish accounts, information and documents relating to his administration of the Tang Mo Pun Tong, anything mentioned in the example in paragraph 3 above beyond the scope of this originating summons would be outside the ambit the costs order, however, reasonably or properly they were incurred.

10.  The bills of costs to the client (on which the costs statement was based) showed that costs were claimed for work done for over 2½ years before action.  The work investigated many aspects of the Tong’s assets.  It extended much beyond the scope of gathering and considering evidence for the purpose of issuing the originating summons itself.

11.  There was a distinct category of work on instructing valuers.  JHT’s letter dated 21 May 2012 stated that it was pre-action work involving tenancy affairs of the Tong.  Valuation from an independent surveyor was necessary because of the great discrepancy in market rental value.  If that was the case, it was to lay the foundation for a potential claim in, say, negligence against the administrators.  The valuation evidence was not used for the present originating summons. 

12.  There was also correspondence with the Law Society on professional negligence which should not form part of the costs of these proceedings.

13.  Much of the costs for items under these requisitions should be disallowed.

Requisition 2(i)

14.  This was another distinct category of work (first item under invoice no. 080614 and many related items of correspondence or attendances) which JHT has explained by a letter dated 28 May 2012 that, rightly, claimed privilege. Accepting its explanation to have stated the true position, the work done was clearly outside the scope of the present originating summons.  The information under this category of wok was never adduced in these proceedings.

Requisition 5

15.  I queried why the total amount stated under each invoice to the client was different from the corresponding amount under the explanatory notes to the court.  What happened was that in each of the 8 invoices to the client, JHT calculated a total sum containing profit costs and disbursements.  It then applied a certain percentage discount to the profit costs and added disbursements to come to “agreed costs”.  There was nothing stated in the invoices to show that the client would be charged the difference between the total sums and the agreed costs on a later date.  The 8^th invoice issued when the action was over purported to charge all those differences in the previous 7 invoices.  It was the sum total of the non-discounted profit costs and disbursements that the plaintiff now seeks to recover under the costs order.  I query whether the indemnity principle on taxation has been breached.

16.  JHT claimed that there has been an oral agreement with the client to pay the full amount on each invoice, not just the “agreed costs”.  I was shown the written agreement on costs in the present case and even in another case.  With respect, those written agreements properly stated the bases for charging fees but there was nothing to show that JHT would charge anything beyond the “agreed costs”.  As a matter of logic, if the client has to pay each invoice in full and any payment in the interim was just part payment, why need to “agree” costs with him?

Deductions

17.  Post-hearing, JHT stated by letter dated 28 May 2012 that the client has given costs on account close to the $3,288,060, showing the client’s intention to pay the invoices in full.  In the light of such evidence, I give the benefit of the doubt to JHT.  JHT also suggested that the costs covered by requisitions 1, 2 and 3 amounted to $478,000.

Assessment of costs

18.  A broad brush approach will be taken by the court in the summary assessment procedure.  The court will not embark on a mini-taxation.  Although the court may allow the full amount claimed by the receiving party, it will, so far as possible, ensure that the final figure is not disproportionate and/or unreasonable having regard to the nature and circumstances of the application or matter and the underlying objectives stated in Order 1A.  The court will retain this responsibility notwithstanding the absence of challenge to individual items in the make-up of the figure sought.  The fact that the paying party is not disputing the amount of costs can however be taken as some indication that the amount is proportionate and reasonable.  The court will therefore intervene only if satisfied the costs are so disproportionate that it is right to do so.  (see paras 13 and 14 of PD14.3)

19.  The grounds in objection merely proposed disallowing costs because of heavy reliance on counsel and that the matter was not complex.  Those grounds could have been more helpful in suggesting a total sum to be deducted if all the objections were accepted.  Even after JHT purported to answer my requisitions by letter dated 21 May 2012 which was copied to the 1^st defendant’s solicitors, the paying party has not seen fit to make submissions based on that letter.

20.  Credit must be given to JHT for having presented the affirmation evidence in a succinct and comprehensible way.  However, considering all circumstances, the costs as claimed less the $478,000 deduction as suggested by JHT were still disproportionately high having regard to the issues involved.  Therefore, notwithstanding the lack of challenge from the defendants’ side, I consider it appropriate to intervene and disallow a large part of the costs claimed.

21.  I allow the hourly rate of the fee earners, both on party-and-party and common fund bases. 

22.  Overall, I allow counsel’s fees in full on common fund basis, of which $650,000 shall be on party-and party basis.  I allow solicitors costs and other disbursements in the sum of $1,000,000, of which $850,000 shall be on party-and-party basis.

23.  The total costs allowed are thus $1,715,000.

24.  Much of the plaintiff’s costs have been deducted.  The defendants’ side has not put forth substantive grounds since its written grounds of objection.  I make no order as to costs arising from my requisitions and for the hearing.