TANG CHUNG WAH aka ALAN CHUNG WAH TANG v. DENIS GARETH BROCK (as a partner of O’Melveny & Myers) AND ANOTHER

HCMP 214/2016 &
HCMP 381/2016

THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 214 & 381 OF 2016

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(Heard together)

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D E C I S I O N
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INTRODUCTION

1.  I have before me two summonses.

2.  The first is a summons taken out by the defendants on 17 February 2016 (“the Striking Out Application”) in HCMP 214/2016 (“MP214”), under which the defendants seek the following orders:-

(1)  the originating summons dated 27 January 2016 (“the 27 Jan OS”) initiating MP214 be struck out, and/or those proceedings be dismissed for want of prosecution, on the ground of the plaintiff’s failure to comply with Order 52, rules 2(1) and 3(2) of the Rules of the High Court, Cap 4A; and

(2)  the plaintiff shall pay the defendants the costs of the MP214, including the costs of the Striking Out Application, and the defendants’ costs incurred in respect of HCMP 81/2016 (“MP81”), such costs to be summarily assessed and paid forthwith.

3.  The second is a summons taken out by the defendants on 15 March 2016 (“the Stay Application”) in HCMP 381/2016 (“MP381”), under which the defendants seek the following orders:-

(1) MP381 be stayed forthwith until the plaintiff pays in full to the defendants their costs incurred in respect of the MP81 and MP214 in the sum that is summarily assessed or taxed by the court; and

(2) the ex parte originating summons dated 19 February 2016 and filed on 23 February 2016 (“the 19 Feb OS”) initiating MP381 be struck out, and/or those proceedings be dismissed, if the costs referred to in (1) above are not paid within 8 weeks of the date of their summary assessment or taxation.

4.  In relation to the Striking Out Application, the plaintiff’s position is as follows:-

(1) the application is academic or unnecessary as from 27 January 2016 upon the lapse of leave [1] granted by the court to the plaintiff to apply for an order of committal against the defendants, or at the latest as from 18 February 2016 upon the plaintiff’s discontinuance of MP81 and MP214, and in any event should fail on its merits;

(2) accordingly, the defendants are not entitled to the costs of the Striking Out Application; and

(3) although the defendants are otherwise entitled to the costs of the MP81 the MP214, those proceedings having been discontinued by the plaintiff without leave, the defendants’ costs should be taxed (on a party and party basis) instead of being summarily assessed.

5.  Subject to the question of whether the defendants’ costs ought to be taxed or summarily assessed, the plaintiff does not object to the relief sought by the defendants in the Stay Application.  The parties are also agreed that the costs of that application should be in the cause of MP381.

6.  In what follows, references to Orders and rules shall be references to the Rules of the High Court.

BRIEF BACKGROUND FACTS

7.  The plaintiff (“Mr Tang”) is a chartered accountant practising in Hong Kong. He is involved in a number of litigations in the High Court, including:-

(1) HCCL 17/2012 and HCCT 12/2012, in which he is one of the defendants, and

(2) HCA 1691/2011 (“the Partnership Action”), in which he is one of the plaintiffs.

8.  The defendants are practising solicitors in a firm known as O’Melveny & Myers (“OMM”) in Hong Kong.  The 1^st defendant (“Mr Brock”) is a partner of OMM, while the 2^nd defendant (“Mr Sin”) is an associate working under the supervision of Mr Brock.

9.  Mr Brock has been acting on behalf of the plaintiffs in HCCL 17/2012 and HCCT 12/2012, originally when he was a partner at King & Wood Mallesons and currently as the supervising partner at OMM.

10.  On 12 January 2016, Mr Tang made an ex parte application in MP81, by way of an originating summons dated 11 January 2016 (“the 11 Jan OS”), for leave to apply for an order of committal against Mr Brock and Mr Sin on the ground of their alleged interference with on‑going judicial proceedings, namely, instructing some trainee solicitors of OMM to serve a statutory demand on Mr Tang inside or in the vicinity of the High Court Building on 18 August 2015 during the time when Mr Tang was testifying as a witness in the Partnership Action.  The questions of what precisely happened on 18 August 2015, whether the conduct of the trainee solicitors should amount to a contempt of court, and whether Mr Brock and Mr Sin should be held responsible for the conduct of the trainee solicitors, are matters which do not have to be resolved now but may have to be determined in the future.

11.  On 13 January 2016, this court granted leave (“the Leave”) to Mr Tang to apply for an order of committal against Mr Brock and Mr Sin.

12.  Apparently, Mr Brock and Mr Sin first became aware of MP81 and the Leave on 20 January 2016 when they were served with an affirmation sworn by Mr Tang in support of his application in HCSD 32/2015 to set aside the service of the statutory demand on 18 August 2015.

13.  On 26 January 2016, Mr Brock and Mr Sin’s solicitors (Davis Polk & Wardwell (“DPW”)) wrote to Mr Tang’s solicitors (ONC Lawyers) to inform the latter that DPW had authority to accept service of any committal application on behalf of Mr Brock and Mr Sin and requested for a complete set of all documents provided to the court in relation to the ex parte application.

14.  On 27 January 2016, Mr Tang issued the 27 Jan OS in MP214 pursuant to the Leave granted by the court.

15.  DPW, not having received any response from ONC Lawyers to their earlier letter of 26 January 2016 and having noted a report in a local newspaper that an application for an order of committal had been made against Mr Brock and Mr Sin, wrote to ONC Lawyers again on 29 January 2016 asking for the committal application and notice of appointment to hear the originating summons, together with a copy of all documents produced in the ex parte application, to be served on DPW urgently and in any event within 24 hours.

16.  On 29 January 2016, DPW received ONC Lawyers’ letter dated 28 January 2016.  Enclosed with that letter were:-

(1) Mr Tang’s affirmation dated 8 January 2016 filed in support of the 11 Jan OS seeking leave to apply for an order of committal against Mr Brock and Mr Sin;

(2) the 11 Jan OS;

(3) the court’s order dated 13 January 2016 granting the Leave; and

(4) the 27 Jan OS.

17.  By another letter, marked as the “Second letter”, dated 29 January 2016, DPW wrote to ONC Lawyers stating that there was no notice of appointment to hearing the originating summons (that being a reference to the 27 Jan OS) on the court file.  DPW referred to the requirement of Order 52, rule 3(2) that the originating summons should be entered for hearing within 14 days after the grant of leave, and this court’s decision in Secretary for Justice v Cheng Kam Mun [2015] 5 HKLRD 41 which DPW said clearly showed that “there is no jurisdiction to extend time or otherwise cure the non-compliance with Order 52 Rule 3(2)”.  DPW’s letter continued as follows:-

“If this requirement has not been complied with, we would encourage your client to discontinue with his effort to pursue a misconceived, tactical and inappropriate application…. Further, appropriate orders must now be agreed or made in respect of costs, specifically the summary assessment and payment of costs needlessly and unnecessarily incurred in HCMP 81/2016 and HCMP 214/2016 …”

18.  DPW did not receive any response to their Second letter, despite further letters sent on 2 February 2016 and 3 February 2016 respectively.

19.  On 17 February 2016, Mr Brock and Mr Sin took out the Striking Out Application.

20.  On 18 February 2016, Mr Tang filed notices of discontinuance of MP81 and MP214 without leave pursuant to Order 21, rule 2(3A).

21.  On 23 February 2016, Mr Tang applied, in MP381, for fresh leave to apply for an order of committal against Mr Brock and Mr Sin.

22.  On 25 February 2016, this court directed that Mr Tang’s fresh leave application shall be determined at an oral hearing with notice to Mr Brock and Mr Sin, who shall be at liberty to attend the hearing to oppose the application.  This application has now been fixed for hearing on 15 July 2016.

23.  On 15 March 216, Mr Brock and Mr Sin took out the Stay Application.

MR BROCK AND MR SIN ARE ENTITLED TO PURSUE THE STRIKING OUT APPLICATION

24.  Order 52, rule 3(1) provides that:-

“When leave has been granted to make an application for an order of committal, the application shall be made by originating summons to a judge …”

25.  Order 52, rule 3(2) further provides that:-

“Unless within 14 days after such leave was granted the originating summons is entered for hearing the leave shall lapse.”

26.  In the present case, the Leave was granted by the court on 13 January 2016.  It follows that the originating summons for making the application for an order of committal against Mr Brock and Mr Sin ought to have been entered for hearing on or before 27 January 2016.

27.  That was not done.  Accordingly, the Leave lapsed upon the expiry of 27 January 2016.  It does not follow, however, that the lapse of the Leave means that MP214, initiated by the 27 Jan OS, also came to an end upon the expiry of 27 January 2016, or that “it is not necessary for any party to do any further act to bring the matter to a close” as submitted by Mr Ludwig Ng[2].  This is because after the lapse of leave under Order 52, r3(2), it is still open to the applicant to apply for fresh leave in the existing proceedings: see Secretary for Justice v Chau Wan Ying, HCMP 774/2015 (8 March 2016), at paragraphs 31 to 40.

28.  Hence, in order to finally dispose of MP214, Mr Brock and Mr Sin were entitled to apply to strike out the 27 Jan OS or dismiss those proceedings, which they did by making the Striking Out Application on 17 February 2016.  The fact that Mr Tang subsequently, on 18 February 2016, discontinued MP214 (and MP81) may be relevant to the issue of costs, but cannot affect the validity or propriety of the Striking Out Application.  I should mention that neither Mr Wadham nor Mr Ng has addressed the court on the issue of whether the provisions in Order 21 relating to withdrawal and discontinuance have application to proceedings for criminal contempt, although that issue was mentioned in correspondence between the parties (see paragraph 33 below).  It is not necessary for me to come to any conclusion on this issue for the purpose of this decision, and I shall leave it for future consideration when it becomes necessary to do so.

29.  Mr Ng argues that the Striking Out Application is bound to fail in reliance upon the decision of the Court of Final Appeal in Wing Fai Construction Co Ltd v Yip Kwong Robert (2011) 14 HKCFAR 935.  It seems to me that this argument is based on a misunderstanding of the basis of the application.  The Striking Out Application is not based on the general principles relating to want of prosecution which were discussed by the Court of Final Appeal in Wing Fai Construction Co Ltd, but on Mr Tang’s failure to enter the originating summons for hearing within 14 days after the grant of the Leave as required by Order 52, rule 3(2).

COSTS OF MP81, MP214 AND THE STRIKING OUT APPLICATION

30.  Mr Tang does not dispute that the Mr Brock and Mr Sin are entitled to the costs of MP81 and MP214.

31.  For reasons mentioned above, I consider that Mr Brock and Mr Sin were entitled to take out the Striking Out Application.  They should therefore be entitled to the costs of that application as well.

32.  Mr Ng submits, nevertheless, that Mr Tang should be entitled to the costs of the hearing on 18 March 2016 (in so far as they are attributable to the Striking Out Application) on the ground that on 8 March 2016 Mr Tang (through ONC Lawyers) had made an offer to DPW (on behalf of Mr Brock and Mr Sin) to:-

(1) pay the latter’s costs of the Striking Out Application to be summarily assessed on paper if not agreed; and

(2) vacate the hearing of the Striking Out Application on 18 March 2016.

A draft consent summons to that effect was attached to ONC Lawyers’ letter to DPW dated 8 March 2016.

33.  That offer was rejected by DPW by letter dated 11 March 2016 on the ground that this court had already directed, on 3 March 2016, that certain issues raised in DPW’s letter to the court dated 3 March 2016 should be dealt with at the hearing fixed on 18 March 2016.  The issues raised by DPW included:-

(1) whether the provisions in Order 21 relating to withdrawal and discontinuance have application to proceedings for criminal contempt;

(2) whether Order 62, rule 10 relating to the entitlement of a defendant to tax his costs without order where the plaintiff discontinues his action or withdraws a particular claim without leave has application to proceedings for criminal contempt;

(3) whether Mr Brock and Mr Sin’s costs should be assessed summarily and paid forthwith; and

(4) finally, whether a direction should be given by the court that any application by Mr Tang for a renewed grant of leave could only be made on notice.

34.  In DPW’s letter dated 11 March 2016, it was further said that the outstanding issue for determination was the quantum of the summary assessment, in view of ONC Lawyers’ agreement that Mr Brock and Mr Sin should be entitled to costs and such costs should be dealt with summarily.

35.  As it was, at the hearing before this court on 18 March 2016, Mr Tang took the position that the Striking Out Application was “wholly misconceived and should be dismissed with costs”[3], a position which I do not accept.  As a matter of fact, ONC Lawyers never agreed that the 27 Jan OS should be struck out or the proceedings in MP214 should be dismissed.  ONC Lawyers’ draft consent summons only provided for vacating the hearing date of the Striking Out Application on 18 March 2016.

36.  In these circumstances, I consider that Mr Brock and Mr Sin should be entitled to the costs of the hearing of the Striking Out Application on 18 March 2016.

MR BROCK AND MR SIN’S COSTS SHOULD BE TAXED

37.  But for the amount of the costs claimed and a number of features in relation to those costs which I shall explain below, I would have no hesitation in accepting Mr Wadham’s submission that this is a proper case to assess Mr Brock and Mr Sin’s costs summarily.

38.  There are two preliminary points that I should first get out of the way.  First, neither party has suggested that the provisions in Order 62 relating to summary assessment of costs have no application to proceedings for criminal contempt.  In Cheng Kam Mun, although I came to the conclusion that the Rules of the High Court do not have general application to proceedings for criminal contempt, I also expressed the view that some of the provisions would have application, including those which are expressly mentioned in Order 52 and those which have a direct bearing on, or application or relevance to, Order 52 (see paragraphs 34 to 36 of that judgment).  The question of which particular provisions in the Rules of the High Court should have application to proceedings for criminal contempt is not something that I have to decide in the present case, and will have to await further consideration in appropriate future cases. Nevertheless, I consider it to be clear that the provisions relating to costs in Order 62 are applicable to proceedings for criminal contempt.

39.  Second, I agree with Mr Ng that this is not a case where costs should be assessed on an indemnity basis.  In my view, Mr Tang’s failure to enter the 27 Jan OS for hearing within 14 days after the grant of the Leave was a procedural mistake for which he now has to pay the costs arising from such mistake.  There is no basis, however, to find that this failure was for any ulterior purpose, or is so serious as would justify the court ordering him to pay indemnity costs to Mr Brock and Mr Sin.

40.  In the Statement of Costs dated 15 March 2016 prepared for the purpose of summary assessment annexed to Mr Wadham’s Skeleton Submissions also dated 15 March 2016, the total amount of the costs claimed comes to HK$650,334.56.  The following matters appearing in the Statement of Costs are of note:-

(1) A total of 5 fee earners are named, including 3 lawyers admitted to practise in Hong Kong, 1 lawyer (“ZR”) admitted to practise in Canada and New York, and a trainee solicitor.  The hourly rates charged by the 3 lawyers admitted to practise in Hong Kong range from HK$6,493.50 to HK$9,547.20, and the rate charged by ZR is HK$6,493.50.

(2) The costs claimed for “Communications Including Conferences, Telephones Calls and Letters” come to the total of HK$143,969.67.  These include costs for:-

(a) attendance on client in relation to the committal proceedings, including meetings and correspondence with client;

(b) attendance on Mr Tang, including correspondence with his lawyers and the High Court; and

(c) attendance on client in relation to the strike-out of the committal application, including correspondence with client.

(3) The costs claimed for “Professional Work” come to the total of HK$506,364.89. These include costs for:-

(a) preparation and attendance of witness interviews for fact finding purpose, review of notes post interviews and preparation of key findings;

(b) perusal of documents including previous related judgments, supporting evidence, letters from the High Court, documents received from Mr Tang’s lawyers and client, and documents filed by Mr Tang’s lawyers;

(c) analysis and preparation for the committal proceedings, including research on related procedures, case laws and issues, and preparation of chronology of events;

(d) preparation and drafting of documents in relation to the strike-out of the committal application, including affidavit and summons; and

(e) analysis and preparation for the strike-out of the committal application, including research on related procedures, case laws and issues.

41.  Under each of the items mentioned above, there was a breakdown of the number of hours spent by each of the relevant fee earners, but there was no breakdown of the dates on which the relevant work was carried out.  Nevertheless, Mr Wadham informed the court at the hearing on 18 March 2016 that the Statement of Costs related only to costs incurred up to the filing of Mr Tang’s notices of discontinuance of MP81 and MP214 on 18 February 2016.

42.  Mr Ng objects to summary assessment of Mr Brock and Mr Ng’s costs on a number of grounds, including the following:-

(1) The costs claimed are wholly disproportional to the subject matters.

(2) There is a very significant overlap between work covered by the present cost order (MP 81 and MP214), and work not covered by the present cost order (MP381), and there has not been any attempt to apportion costs between the different matters.

(3) There are many items of dubious relevance to the case but with substantial hours of work claimed, the reasonableness of which can only be assessed with the benefit of contemporaneous documents before a taxing master.

(4) DPW has claimed fees of ZR, an unqualified person in Hong Kong who is not a registered foreign lawyer under the Foreign Lawyers Registration Rules (Cap 159S), in the sum of HK$231,168.60 at the hourly rate of $6,493.50 (representing 35.6 hours of work).  It is said that ZR is apparently the main handler of the case, and DPW has apparently treated and utilised him as a solicitor in Hong Kong. It is further said that his fees are not recoverable by virtue of section 50 of the Legal Practitioners Ordinance (Cap 159).

43.  The validity of these objections can only be determined after further investigation.  At this stage, I would merely state the following:-

(1) The amount of the costs claimed appears to me to be obviously disproportional to the work which may be thought to have been necessary and proper to be done up to 18 February 2016.

(2) By the time that Mr Brock and Mr Sin (through DPW) came to be served with the papers relating to MP81 and MP214 on 29 January 2016, DPW was already aware that the Leave had lapsed.  There was nothing much that they need to do to formally dispose of the proceedings in MP81 and MP214.  A simple summons, supported by a brief affidavit (if so advised), to strike out the 27 Jan OS and dismiss MP214, would be all that was necessary.  Any further substantial costs incurred by Mr Brock and Mr Sin after 29 January 2016 would not, in my view, be justifiable on a party and party taxation.

(3) There appears to be substantial overlap between the “Professional Work” claimed in the Statement of Costs and work properly to be carried out in MP381. While I accept that Mr Tang’s allegations against Mr Brock and Mr Sin are serious with potentially grave consequences to them, I do not consider that they are entitled to front load the relevant costs and hold Mr Tang liable for those costs in the abortive proceedings in MP81 and MP214.  Put in another way, while some initial preparatory work might justifiably have been carried out by DPW before Mr Brock and Mr Sin were formally served with the papers in MP81 and MP214, it would not be reasonable to allow substantial costs to be recovered in a party and party taxation for detailed work which would only be properly and necessarily carried out for the purpose of the substantive contempt proceedings.

(4) The hourly rates charged by the 3 lawyers and ZR are much higher than what would normally be allowed on a party and party taxation in Hong Kong.

44.  I accept that in a summary assessment, the court should adopt a broad-brush approach.  This does not mean, however, that the court should arbitrarily fix a sum in circumstances where the statement of costs produced by the receiving party does not even provide a reasonable starting point for the court to carry out any meaningful assessment.  Had I decided to assess Mr Brock and Mr Sin’s costs summarily, I would probably have allowed only a small fraction of the amount claimed in the Statement of Costs.

45.  I also take note of the fact that ONC Lawyers once accepted that Mr Brock and Mr Sin’s costs should be assessed summarily.  However, as mentioned by Mr Ng, that was before they had sight of DPW’s Statement of Costs and it was then thought that the amount of costs claimed would be a modest sum.  Anyhow, ONC Lawyers’ proposal as contained in their draft consent summons was not accepted by DPW. The issue of whether Mr Brock and Mr Sin’s costs should be assessed summarily therefore falls to be considered by the court.

46.  Order 62, rule 9C(1) provides that:-

“No direction or order may be made under rule 9(4)(b) or 9A(1)(a) or (b) for the payment of a sum of money if –

(a) the paying party shows substantial grounds for disputing the sum claimed for costs that cannot be dealt with summarily.”

47.  In my view, this is such a case.

48.  In all, I do not consider this to be an appropriate case to order summary assessment of Mr Brock and Mr Ng’s costs.  Accordingly, in the absence of agreement, their costs have to be assessed by taxation on a party and party basis.

DISPOSITION

49.  In relation to the defendants’ summons dated 17 February 2016, I make an order that:-

(1) the originating summons dated 27 January 2016 initiating HCMP 214/2016 be struck out, and those proceedings be dismissed, on the ground that the plaintiff failed to comply with Order 52, rule 3(2) of the Rules of the High Court, without prejudice to the plaintiff’s application in HCMP 381/2016; and

(2) the plaintiff shall pay –

(a) the defendants’ costs of HCMP 214/2016, including the costs of the summons dated 17 February 2016 and the costs of the hearing on 18 March 2016 (in so far as they are attributable to that summons); and

(b) the defendants’ costs incurred in respect of HCMP 81/2016,

to be taxed on a party and party basis if not agreed.

50.  In relation to the defendant’s summons dated 15 March 2016, I make an order that:-

(1) HCMP 381/2016 be stayed forthwith until the plaintiff pays in full to the defendants their costs incurred in respect of the HCMP 81/2016 and HCMP 214/2016 in the sum that is taxed by the court;

(2) the ex parte originating summons dated 19 February 2016 and filed on 23 February 2016 initiating HCMP 381/2016 be struck out, and those proceedings be dismissed, if the costs referred to in (1) above are not paid within 8 weeks of the date of their taxation; and

(3) costs (including the costs of the hearing on 18 March 2016 in so far as they are attributable to that summons) are to be in the cause of HCMP 381/2016.