KP FINANCIAL SERVICES LTD v. ETERNALUCK LTD AND ANOTHER

HCA 2525/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2525 OF 2015

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DECISION ON COSTS

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Background

1.  On 16 December 2016, I dismissed the 1^st defendant’s application by summons, dated 25 July 2016, to strike out the plaintiff’s claim against it and I made a costs order nisi that the 1^st defendant pay the plaintiff’s costs, which I assessed summarily at HK$516,596.00.

2.  By letter, dated 30 December 2016, the 1^st defendant’s solicitors wrote to the court advising that they were instructed to write to object to my costs order nisi and proposing directions for the filing of submissions and for disposal of the objection on paper.

3.  I am advised by the 1^st defendant’s solicitors that, on 17 January 2017, they wrote to the plaintiff’s solicitors drawing the latter’s attention to the Court of Appeal’s decision in AXA China Region Insurance Company Limited v Leong Fong Cheng (unreported, CACV 113/2016, 28 October 2016) in which the Court of Appeal expressed the view that it was only in very exceptional circumstances that a court will entertain an application by letter.  As Mimmie Chan J noted in Chan Shun Kei t/a Chan Shun Kei Construction WorksvHong Kong Construction(Hong Kong)Limited (formerly known as Hong Kong Construction(Holdings)Limited) (unreported, HCCT 2/2011, 21 August 2014), (referring to para 32/6/9A Hong Kong Civil Procedure) an application to vary a costs order nisi made under Order 42, rule 5B(6) of the Rules of the High Court should be made by summons.

4.  However, non-compliance with the prescribed mode of application is at most an irregularity and does not render the proceedings a nullity.  The court will not set aside the final costs order if the applicant has not suffered any prejudice by the mode of application that was adopted:  Hong Kong Civil Procedure 2017, Vol 1, para 32/6/9A.

5.  On 2 February 2017, the plaintiff filed an ex parte application applying for a Charging Order Nisi to enforce my costs order.  The plaintiff had taken the view that my costs order nisi had become absolute 14 days after it was pronounced since no proper application for its variation had been made.

6.  On 3 February 2017, the 1^st defendant filed and served a summons seeking an order to vary my costs order to reduce the sum assessed to $270,000 and an extension of time in which to apply.

7.  On 6 February 2017, the plaintiff filed an affirmation informing the court of the 1^st defendant’s summons.

8.  Master S Lo made a Charging Order Nisi in favour of the plaintiff on 6 February 2017.  Also, on 6 February 2017, I gave directions as to the filing of submissions in respect of the 1^st defendant’s application.  At that time, I was aware only of the letter, dated 30 December 2016 and a follow up letter from the 1^st defendant’s solicitors, dated 17 January 2017.  In accordance with my directions, the 1^st defendant filed its Grounds of Objection on 17 February 2017 and the plaintiff filed its Reply on 22 February 2017.

9.  On 9 February 2017, Master Roy Yu, after considering the plaintiff’s affirmation filed on 6 February 2017, directed that the Charging Order Nisi still stood.

10.  As the case now stands, there are three matters to be disposed of:

(a) The objection to my costs order made on 16 December 2016;

(b) The 1^st defendant’s summons, dated 3 February 2017; and

(c) The Charging Order Nisi, dated 6 February 2017.

11.  I am advised by the plaintiff’s solicitors that, subject to endorsement by the court, the parties have agreed to deal with the 1^st defendant’s summons as follows:

(a) Leave to the 1^st defendant to withdraw the summons; and

(b) There be no order as to costs of the summons and the intended consent application.

12.  As to the Charging Order Nisi, the plaintiff submits that it should stand if no variation to my costs order is made but that it should be discharged if a variation is made.  However, the plaintiff submits, in view of the history of the variation application, the costs of the Charging Order Nisi should be borne by the 1^st defendant in the event that it is discharged.

Variation application

13.  The plaintiff filed a Statement of Costs for Summary Assessment on 9 December 2016, the date of the hearing before me.

14.  The 1^st defendant objects to Item C2, “Attendance on other side:  5 hours and 25 minutes, $21,666”.  This item is for the charges of a solicitor at $4,000 per hour.  The 1^st defendant objects also to the amounts claimed in respect of the costs of Senior Counsel briefed by the plaintiff.

15.  Regarding Item C2, the 1^st defendant points out that the attendances comprise correspondence concerning inspection, request for extension of time and service of documents.  The plaintiff notes that the 1^st defendant’s application was filed on 25 July 2016 and the substantive hearing was not held until five months later, 9 December 2016 during which period there were two call-over hearings.

16.  I am not assisted by the length of time between application and hearing.  Taking a broad-brush approach, I agree with the 1^st defendant that the claim is excessive but I shall not reduce Item C2 by as much as requested by the 1^st defendant.  For Item C2, I allow three hours, ie $12,000.

17.  Regarding Senior Counsel’s fees, there was no dispute as to principle.  The test is whether such fees were necessary or proper and a non-exhaustive set of relevant facts are set out in Hong Kong Civil Procedure 2017, Vol 1, para 62/App/48.

18.  The plaintiff briefed Senior Counsel and junior counsel, the latter with 17 years call, although only Senior Counsel appeared at the hearing before me.  The 1^st defendant briefed a junior counsel with eight years call.

19.  The 1^st defendant submitted:

(a) The strike out application was straightforward and did not present any lengthy or complex set of facts or legal issues.  The arguments focused on facts.

(b) The consequences of striking out were not draconian because the plaintiff could still sue the 2^nd defendant and the third party.

(c) The plaintiff’s junior counsel had the experience and competence to handle the case.

(d) It was disproportionate to brief Senior Counsel when the 1^st defendant briefed a junior counsel with eight years call.

20.  The plaintiff’s solicitors stated in the Reply that, at the invitation of the parties, Master S Lo directed that the substantive hearing be fixed before a Judge in Chambers because the parties recognized that difficult questions of law or complex or difficult issues were involved.  The solicitors stated that they were under the impression that the 1^st defendant may have obtained advice from Senior Counsel.

21.  The plaintiff’s solicitors also stated that, upon further consideration of the matters, including the nature of the application, difficult questions of law, complexity, difficult issues involved, the amount of money involved ($5,400,000) and the importance of the matter to the client, junior counsel suggested that the plaintiff brief Senior Counsel to attend the hearing before me.

22.  The plaintiff submitted:

(a) The application, if successful, would have had the effect of disposing of the entire action.

(b) Both parties had recognized that the application involved complicated issues.

(c) Suing the 2^nd defendant and the third party would give rise to a multiplicity of proceedings and the risk of inconsistent findings of fact.  Hence, the application was important.

(d) Instructing Senior Counsel was justified in view of the matter’s procedural history.

23.  That the application was listed before a Judge in Chambers because the parties apparently considered it to be complex or difficult is not determinative.  That the plaintiff thought that the 1^st defendant had been advised by Senior Counsel is irrelevant.  That junior counsel suggested that senior counsel attend the hearing is not determinative.  An objection to costs has been taken and I must determine whether the application was actually complex or difficult.

24.  I accept that the application was important but any contested strike out application would be important because, if successful, it brings to an end a plaintiff’s claim against a defendant.  The primary considerations in respect of this application are the difficulty and complexity of the legal and factual issues.

25.  In my view, neither the legal nor the factual issues were complex or difficult and were not such that it was necessary to brief Senior Counsel.  Notwithstanding the amount of money involved, I consider the application was one within the experience and competency of the plaintiff’s junior counsel.  Accordingly, I shall not allow the claim for Senior Counsel’s fees.  Accordingly, I do not allow Items E4, E5 and E6 of the Statement of Costs for Summary Assessment.

26.  Regarding Item E2, “Attending the Plaintiff’s office for document inspection on 29.08.2016 and attending instructing solicitor on telephone on the conduct of the case: [junior counsel] — $3,500”, the 1^st defendant asserts that the inspection took only 10 minutes such that the amount allowed should be $600.  However, this ignores the attendance on the instructing solicitor.  I allow the full amount claimed, ie $3,500.

27.  As to Item E3, Senior Counsel’s perusal of documents, I shall allow junior counsel’s fees for that item — $3,500/hour — and I allow three hours.  In all, $10,500.

28.  As for Item E7, Senior Counsel’s perusal of further documents and settling affirmation in opposition, I allow junior counsel’s fees for that item and I allow $28,000.

29.  As for the brief to appear, Item E8, I allow a fee for junior counsel, which I fix at $150,000.

30.  Taking into consideration the variations I have made above, I assess the plaintiff’s costs at $269,430.

31.  I grant leave to the 1^st defendant to withdraw its summons, dated 3 February 2017 with no order as to costs of either the summons or the consent application.

32.  I discharge the Charging Order Nisi.  In light of the fact that the 1^st defendant initially proceeded irregularly by letter and then took out a summons only after the plaintiff’s application for a Charging Order Nisi, I make a costs order nisi that the 1^st defendant pay the costs of the Charging Order Nisi.

33.  As the 1^st defendant has been successful in its objection to costs, I make an order nisi that the plaintiff is to pay the 1^st defendant’s costs to be taxed if not agreed.