MILLION DECADE LTD v. TUNG FAI also known as DONG HUI

HCA 1062/2013 &
HCA 1660/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1062 OF 2013

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HCA 1660/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1660 OF 2013

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DECISIONON COSTS

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Background

1.  On 20 April 2016, I handed down decision (“Decision”) in HCA1062/2013 in which Million Decade Limited (“Million Decade”) sued Tung Fai (or Dong Hui, “Tung”) (“MD Action”) and in HCA1660/2013 in which Tung sued Wei Dong (“Wei”) (“Tung Action”). These two actions were related to HCA1063/2013 in which Top Ample Limited sued Tung. For convenience, I adopt the abbreviations in the Decision.

2.  The Decision was in respect of 2 appeals: (a) the WS Appeal filed on 29 September 2015 by Million Decade in the MD Action against the Registrar’s WS Order dated 15 September 2015 inter alia dismissing Million Decade’s WS Amended Summons filed on 26 May 2015 for leave to file/serve the Weis’ 3^rd witness statements with 50% costs of the hearing to Tung, and (b) the FBP Appeal filed on 17 November 2015 by Wei in the Tung Action against the Registrar’s FBP Order dated 13 November 2015 dismissing inter alia Wei’s FBP Summons filed on 7 July 2015 for an order that Tung do file/serve FBP of the SoC with costs to Tung.

3.  In fact, apart from the FBP Appeal, Wei’s appeal in the Tung Action filed on 17 November 2015 (“TA Appeal”) also included (at least initially) an appeal against the Registrar’s order dated 13 November 2015 allowing Wei’s Interrogatories Summons filed on 20 July 2015 for an order that Wei’s interrogatories dated 6 July 2015 be withdrawn with costs to Tung (“Interrogatories Order”) (“Interrogatories Appeal”).

4.  The Registrar summarily assessed the combined costs payable to Tung under the FBP Order and the Interrogatories Order (ie the Assessed Costs) in the sum of $125,430.

5.  By the time of the Appeal Hearing, Wei no longer pursued the Interrogatories Appeal.

6.  As explained in paragraphs 5-6 of the Decision, Million Decade’s summons for leave to file/serve the Weis’ 3^rd witness statements had metamorphosed from the original summons filed on 26 May 2015 annexing original drafts of the Weis’ 3^rd witness statements to the WS Amended Summons annexing the Weis’ revised draft 3^rd witness statements. Since lodging the WS Appeal, Million Decade made further revisions to the Weis’ draft 3^rd witness statements (ie Weis’ Latest WS Drafts), and by summons filed on 12 November 2015 (“WS Amendment Summons”) Million Decade applied to for leave to amend the WS Appeal to seek an alternative order for leave to file/serve the Weis’ Latest WS Drafts, which leave was granted by this court at the Appeal Hearing with costs of and occasioned by such summons to be paid to Tung in any event.

7.  By the Decision, I granted the following order in the MD Action:

(a) the WS Amended Appeal be dismissed; and

(b) there be a costs order nisi that Million Decade shall pay costs of the WS Amended Appeal to Tung to be taxed if not agreed with certificate for two counsel.

8.  By the Decision, I granted the following order in the Tung Action:

(a) the FBP Appeal be allowed to the extent that Tung shall file/serve the FBP as per the 1^st Request for FBP in the Request filed on 29 June 2015 within 14 days from the date of the order;

(b) there be a costs order nisi that:

(i) there be no order as to costs in respect of the FBP Appeal;

(ii) there be no order as to costs in respect of the FBP Summons;

(iii) if (i)-(ii) above shall become absolute upon expiry of 14 days from the date of the order, the Registrar shall upon receipt of the Wei Notice referred to in (iv) below apportion the Assessed Costs of $125,430 between the FBP Assessed Costs and the Interrogatories Assessed Costs such that the Interrogatories Assessed Costs do stand and the FBP Assessed Costs shall be subject to (ii) above;

(iv) if (i)-(ii) above shall become absolute upon expiry of 14 days from the date of the order, Wei shall within 7 days thereafter give the Wei Notice to the Registrar (with copy to Tung) to (1) confirm (i)-(ii) above have become absolute, and (2) draw the Registrar’s attention to the Apportionment Direction in (iii) above; and

(v) if any party applies for variation of the costs order nisi, the Wei Notice and/or Apportionment Direction shall be stayed until further order of this court.

9.  On 5 May 2016, Tung filed a summons in the MD Action for variation of the costs order nisi made under the Decision (“MD Costs Summons”) to the effect that:

(a)   Million Decade shall pay Tung 60% of the costs of the WS Amended Appeal and the WS Amendment Summons in the MD Action and the TA Appeal (ie the FBP and Interrogatories Appeals) in the Tung Action to be summarily assessed with certificate for two counsel;

(b)   Tung do lodge and serve his Statement of Costs within 7 days from the date of the order to be made; and

(c)   Million Decade do lodge and serve its List of Objections (if any) within 7 days thereafter.

Tung also sought time extension (if necessary) for such application, and asked for costs of the application to be provided for and be summarily assessed.

10.  On 5 May 2016, Tung filed a summons in the Tung Action for variation of the costs order nisi made under the Decision (“Tung Costs Summons”) to the effect that:

(a)   Wei shall pay to Tung 10% of the costs of TA Appeal  (ie the FBP and Interrogatories Appeals) in the Tung Action and the WS Amended Appeal and WS Amendment Summons in the MD Action to be summarily assessed with certificate for two counsel;

(b)   Tung do lodge and serve his Statement of Costs within 7 days from the date of the order to be made;

(c)   Wei do lodge and serve his List of Objections (if any) within 7 days thereafter.

Tung also sought time extension (if necessary) for such application and asked for costs of the application to be provided for and be summarily assessed.

11.  On 17 May 2016, I granted inter alia the following directions:

(a)   the MD and Tung Costs Summonses be dealt with by way of paper disposal;

(b)   the letter from Tung’s solicitors to this court dated 4 May 2016 do stand as Tung’s written submissions in support of such summonses;

(c)   for the MD Action, Million Decade do lodge and serve written submissions not exceeding 2 pages in response (if any) on or before 27 May 2016, and Tung do lodge and serve written submissions not exceeding 1 page in reply (if any) within 7 days thereafter; and

(d)   for the Tung Action, Wei do lodge and serve written submissions not exceeding 2 pages in response (if any) on or before 27 May 2016, and Tung do lodge and serve written submissions not exceeding 1 page in reply (if any) within 7 days thereafter.

12.  Million Decade and Wei lodged the written submissions of their counsel Mr Yu in opposition on 27 May 2016. Tung lodged the written submissions of his solicitors in reply on 3 June 2016.

13.  In principle, Tung did not dispute that there be no order as to costs in respect of the FBP Summons and FBP Appeal. However, Tung claimed (a) he was entitled to some costs in respect of Wei’s abandoned Interrogatories Appeal in the Tung Action, (b) the costs of the WS Amended Appeal, FBP Appeal and Interrogatories Appeal should be apportioned in the ratios of 60%, 30% and 10% respectively, (c) the costs of the WS Amended Appeal and Interrogatories Appeal (ie 60% and 10% respectively of the overall costs of the overall appeals) should be summarily assessed, and (d) the Apportionment Direction in paragraph 8(b)(iii)-(iv) above shall remain undisturbed.

Costs of the Interrogatories Appeal

14.  Tung’s solicitors rightly reminded this court that the TA Appeal filed by Wei on 17 November 2015 in the Tung Action covered both the FBP Appeal and Interrogatories Appeal.

15.  Tung claimed it was only on 10 March 2016 (ie 3 clear days before the Appeal Hearing) that Wei formally and openly abandoned the Interrogatories Appeal by way of the written submissions by Wei’s senior counsel Mr Lam SC, but by then much advisory and preparatory work relating to the Interrogatories Appeal had already been done by Tung’s side (including but not limited to the preparation of draft skeleton submissions opposing the Interrogatories Appeal), hence associated costs had been wasted as a result of Wei’s late abandonment of the Interrogatories Appeal. Tung therefore argued he should be allowed some costs in respect of the abandoned Interrogatories Appeal.

16.  Mr Yu urged this court not to make any order for apportionment of costs for briefing counsel and for solicitors’ attendance at the Appeal Hearing in respect of the Interrogatories Appeal because:

(a)   by a without prejudice save as to costs letter dated 1 March 2016 (ie about 2 weeks before the Appeal Hearing) (“W/P Letter”), Million Decade’s and Wei’s solicitors proposed inter alia that the Interrogatories Appeal be withdrawn with costs up to 29 February 2016 to Tung;

(b)   although the W/P Letter foreshadowed Wei’s abandonment of the Interrogatories Appeal, Tung did not seek clarification as to whether Wei was pursuing the Interrogatories Appeal or make any counter-offer with a view to saving time and costs for preparing the Interrogatories Appeal;

(c)   although Tung accepted that the Interrogatories Appeal was not argued at the Appeal Hearing and time/effort spent on such appeal were relatively moderate, such submission ignored the fact that counsel would have to be briefed to argue the WS Amended Appeal, WS Amendment Summons and FBP Appeal in any event, and there was no indication as to how counsel’s brief fees would have been different (if at all) had the Interrogatories Appeal been abandoned earlier; and

(d)   it was relevant that parties should be encouraged to settle their disputes and make sensible concessions, and Wei made a sensible concession that saved a substantial amount of costs and the court’s time.

17.  The starting point is that costs of the Interrogatories Appeal were not limited to the costs of briefing counsel for the Appeal Hearing. Tung started to incur costs once the Interrogatories Appeal was served on him. If there were any costs incurred in relation to the Interrogatories Appeal (eg perusal and consideration of the TA Appeal insofar as it related to the Interrogatories Appeal, advice to client and taking client’s instructions on such appeal, etc), prima facie they should follow event, ie Wei should pay such costs to Tung.

18.  Even according to the W/P Letter, Wei offered to pay costs of the Interrogatories Appeal up to 29 February 2016. The relevant question is whether Wei should be liable for the costs of the Interrogatories Appeal on and after 1 March 2016. Wei put forward the W/P Letter as basis for not apportioning any costs for the Interrogatories Appeal after 29 February 2016. I am not persuaded this provided a sufficient answer.

19.  First, as Tung’s solicitors submitted, by 1 March 2016 it was just 2 weeks before the Appeal Hearing and brief fees for Tung’s counsel had been agreed with briefs delivered to counsel. They further explained that since Tung had not engaged senior counsel at the hearings below, it was reasonable for him to engage senior counsel in advance to ensure that senior counsel had ample opportunity to familiarise himself with the case and to prepare for the Appeal Hearing. In my view, it was not an unreasonable stance for Tung to adopt. Indeed, one would naturally expect Tung to have already committed on engaging senior counsel 2 weeks before the Appeal Hearing given the time required to get up to speed on the case and to prepare written submissions.

20.  Secondly, the W/P Letter referred to the WS Appeal, WS Amendment Summons, and the TA Appeal, and stated that “we, on behalf of our clients, hereby propose the following Orders” “[in] relation to the [WS Appeal] and the [WS Amendment Summons] (and the [WS Amended Appeal] annexed thereto)” in terms as set out in items 1.1-1.2 therein, and “[in] relation to the [TA Appeal]” in terms as set out in items 2.1- 2.2 therein. The last paragraph in the W/P Letter went on to say as follows:

“Please confirm in writing by 12:00 noon on Friday, 4^th March 2016 whether your client consents to the Orders proposed above. If yes, we shall send you the appropriate Consent Summonses for your signing on behalf of your client. If no, we shall, if thought fit, produce this letter to the Court as and when the question of costs arises.”

21.  Tung’s solicitors suggested that a fair reading of the W/P Letter gave the impression that Million Decade and Wei simply used the offered abandonment of the Interrogatories Appeal as leverage to induce Tung to fully concede on the WS Appeal (which eventually did not succeed) and FBP Appeal (which eventually was not entirely successful), which approach was a far cry from an outright concession on the Interrogatories Appeal. Tung argued it was disingenuous for Wei to now submit that the abandonment of the Interrogatories Appeal was foreshadowed in the W/P Letter, especially when there was nothing to prevent Wei from making such outright abandonment earlier on. 

22.  In my view, although the WS Appeal and WS Amendment Summons in the MD Action and the TA Appeal (ie the FBP and Interrogatories Appeals) in the Tung Action were heard together, they were separate appeals/application in two separate actions, and hence a fair reading of the W/P Letter would require focus on Wei’s proposal in respect of the “2^nd Notice of Appeal” (ie the TA Appeal), which proposal was set out in items 2.1-2.2 in the W/P Letter. I find that a fair reading of such proposal together with the last paragraph of the W/P Letter was that Wei’s proposal for abandoning the Interrogatories Appeal and for allowing the FBP Appeal with costs to Wei was a bundled proposal for overall disposal of the “2^nd Notice of Appeal” in the Tung Action.

23.  I accept that usually one would expect some engagement in further negotiation,[1] but was Tung’s failure to negotiate in the present case so unreasonable as to result in penalty on costs against him? It must be remembered that the Interrogatories Appeal was Wei’s appeal against the Interrogatories Order, and by 29 February 2016 Tung’s solicitors had delivered briefs to counsel that covered the Interrogatories Appeal. As far as Tung was concerned, almost all (if not indeed all) disbursements in respect of counsel’s fees in respect of the Interrogatories Appeal had been incurred. But in relation to solicitors’ costs, given the open abandonment of the Interrogatories Appeal on 10 March 2016, Tung in any event could not have claimed for costs of solicitors’ attendance at the Appeal Hearing in respect of such appeal since such appeal was no longer extant before this court at such hearing. In my view, the lack of further negotiation by Tung in response to the W/P Letter was not so unreasonable as to justify penalising Tung in costs for the Interrogatories Appeal when no practical savings could have been achieved. 

24.  There was also no merit in Mr Yu’s suggestion that counsel’s brief fees should not be apportioned for the purpose of the Interrogatories Appeal because there was no indication how such brief fees would have been different (if at all) had the Interrogatories Appeal been abandoned earlier. The reality was that the Interrogatories Appeal was not abandoned earlier, and Tung should not be penalised for not being able to say what would have happened in a hypothetical position. In fact, counsel were briefed for various appeals/application including the Interrogatories Appeal, and apportionment would have been a necessary exercise in any assessment/taxation of costs in respect of the Interrogatories Appeal. Such exercise would not be unfamiliar to any taxing master.

25.  In the circumstances, I hold that Tung is entitled to costs of the Interrogatories Appeal.

Apportionment of costs

26.  Tung urged for a broad brush apportionment of costs in respect of the WS Amended Appeal, FBP Appeal and Interrogatories Appeal (including costs of the Appeal Hearing) since this court presided over the Appeal Hearing and would be familiar with the relevant documents and submissions. Even if this court were not minded to grant summary assessment of costs, Tung considered an indication as to the apportionment of costs of all appeals would certainly be helpful in reducing the time and costs to be incurred over the taxation of costs.

27.  Tung went on to say that since the WS Amended Appeal (which involved going through a number of tedious and long-winded witness statements) occupied most time and effort, and the Interrogatories Appeal (which was eventually abandoned and not argued at the Appeal Hearing) required relatively moderate time and effort, an appropriate apportionment of costs amongst the WS Amended Appeal, FBP Appeal and Interrogatories Appeal should be 60%, 30% and 10% respectively.

28.  However, the starting point is that the MD and Tung Actions were separate legal actions involving different parties. The MD and Tung Actions had not been consolidated into one single legal action. Their only interaction for the purpose of the Appeal Hearing was that the WS Amended Appeal and WS Amendment Summons in the MD Action and the FBP Appeal in the Tung Action were heard together at the same hearing. Nevertheless, they remained separate applications in separate actions.

29.  In considering the MD and Tung Costs Summonses, given that the MD and Tung Actions were separate actions involving different parties, it is difficult to understand why (as proposed in the MD and Tung Costs Summonses):

(a)   Million Decade should pay Tung 60% of inter alia the costs of the TA Appeal  in the Tung Action with certificate for two counsel; and

(b)   Wei should pay to Tung 10% of inter alia the costs of the WS Amended Appeal and WS Amendment Summons in the MD Action with certificate for two counsel.

After all, Million Decade was a non-party to the Tung Action, and Wei was a non-party to the MD Action. No cogent grounds had been put forward to justify why such non-parties should be liable to costs in terms as formulated in the MD and Tung Costs Summonses.

30.  I agree with Mr Yu that it is in principle incorrect to lump together the costs of the WS Amended Appeal, WS Amendment Summons and Interrogatories Appeal. It must be remembered that such costs were not limited to counsel’s brief fees and solicitor’s attendance for the Appeal Hearing, but cover overall costs of those appeals/application. Mr Yu also rightly reminded that this court has granted a final costs order in respect of the WS Amendment Summons.

31.  However, it is useful for this court seized with the WS Amended and TA Appeals to apportion counsel’s brief fees and costs of solicitors’ attendance at the Appeal Hearing. Insofar as counsel’s brief fees were concerned, I find that in all the circumstances the appropriate and reasonable apportionment amongst the WS Amended Appeal, WS Amendment Summons, FBP Appeal and Interrogatories Appeal would be 55%, 5%, 30% and 10% respectively. Insofar as solicitors’ attendance at the Appeal Hearing, I find that in all the circumstances the appropriate and reasonable apportionment amongst the WS Amended Appeal, WS Amendment Summons and FBP Appeal to be 60%, 5%, 35% respectively. I bear in mind that the Interrogatories Appeal did not feature in relation to solicitors’ attendance at the Appeal Hearing.

32.  In coming to the above apportionments, I have taken into account the overlap in background matters for the WS Amended and FBP Appeals. However, for the purpose of the WS Amended Appeal at the Appeal Hearing, both Mr Lam SC for Million Decade and Mr Tong SC for Tung had laboriously gone through the Weis’ Latest WS Drafts in some detail with cross-references to the Weis’ 1^st and 2^nd witness statements, and at times Mr Tong SC referred to earlier drafts of the Weis’ 3^rd witness statements in order to make his points. I am not persuaded this detailed wide-ranging exercise was necessary for the FBP Appeal which was more narrowly focused. Although Million Decade only relied on the Weis’ Latest WS Drafts for the purpose of the WS Amended Appeal, it did not preclude Mr Tong SC from making references to the earlier drafts in order to establish his contentions in opposing such appeal, which he eventually succeeded. In all the circumstances, more time was spent on the WS Amended Appeal than on the other appeals/application.

Summary assessment or taxation of costs

33.  Tung submitted that much time/costs as well as the court’s resources could be saved if the costs of the WS Amended Appeal could be summarily assessed in lieu of full taxation. Since the WS Amended Appeal, FBP Appeal and Interrogatories Appeal (subsequently abandoned) were all heard together, if the costs of the WS Amended Appeal were to be taxed, it was likely that all the works concerning the other appeals would be brought out and taken into account by the taxing master when taxing the costs of the WS Amended Appeal, which would be inefficient in terms of time and costs, especially when there was no order as to costs in respect of the FBP Appeal.

34.  Mr Yu submitted that summary assessment was not appropriate because (a) the costs of the WS Amendment Summons would have to be taxed if not agreed in any event so it would be undesirable to have 1 set of related costs taxed after trial and another set of related costs summarily assessed forthwith, and (b) it was likely that counsel’s brief fees would be significant given the involvement of senior counsel and relatively senior junior counsel so Million Decade and Wei should be given a fuller opportunity to be heard on quantum in the course of taxation.

35.  Whilst this court has taken the opportunity to make apportionment in respect of counsel’s brief fees and cost of solicitors’ attendance at the Appeal Hearing, there would be a host of other costs items in relation to the WS Amended Appeal and Interrogatories Appeal which are presently unknown but which might be intertwined between them and also with the FBP Appeal. Related works and apportionment of costs in relation to those works would be inevitable whether the relevant costs were taxed or assessed.  But given the need for this exercise, it is more suitable for taxation rather than summary assessment. However, I see the force in Tung’s submissions that taxation could proceed forthwith as these interlocutory matters would not turn on the ultimate merits of the case at trial. Further, Million Decade’s concern over the interaction between costs of the WS Amendment Summons (which were to be taxed in any event) and costs of the WS Amended and FBP Appeals (which I am now persuaded should be taxed forthwith) had been largely overcome by the aforesaid apportionments which would aid the taxing master in assessing quantum in the course of taxation. In any event, costs of the WS Amendment Summons would be minor compared with the other costs.

Conclusion

36.  In the circumstances, in respect of the Tung Costs Summons, I grant the following costs order absolute:

(a)   there be no order as to costs in respect of the FBP Appeal;

(b)   there be no order as to costs in respect of the FBP Summons;

(c)   Wei do pay Tung costs of the Interrogatories Appeal (including all costs reserved if any) to be taxed forthwith if not agreed with certificate for two counsel;

(d)   the Registrar shall upon receipt of the Wei Notice referred to in (e) below apportion the Assessed Costs of $125,430 between the FBP Assessed Costs and the Interrogatories Assessed Costs such that the Interrogatories Assessed Costs do stand and the FBP Assessed Costs shall be subject to (b) above (ie the Apportionment Direction);

(e)   Wei shall within 7 days from the date hereof write to the Registrar (with copy to Tung) to draw the Registrar’s attention to the Apportionment Direction in (d) above;

(f)   to assist the taxing master, counsel’s brief fees for the Appeal Hearing are apportioned as to 30% and 10% for the FBP Appeal and Interrogatories Appeal respectively; and

(g)   to assist the taxing master, cost of solicitors’ attendance for the Appeal Hearing are apportioned as to 35% for the FBP Appeal.

37.  In the circumstances, in respect of the MD Costs Summons, I grant the following costs order absolute:

(a)   Million Decade shall pay costs of the WS Amended Appeal to Tung (including all costs reserved if any) to be taxed forthwith if not agreed with certificate for two counsel;

(b)   to assist the taxing master, counsel’s brief fees for the Appeal Hearing are apportioned as to 55% and 5% for the WS Amended Appeal and WS Amendment Summons respectively; and

(c)   to assist the taxing master, cost of solicitors’ attendance for the Appeal Hearing are apportioned as to 60% and 5% for the WS Amended Appeal and WS Amendment Summons respectively.

38.  As for costs of the Tung and MD Costs Summonses, neither Million Decade and Wei on the one hand nor Tung on the other hand succeeded entirely on their respective contentions. I consider the appropriate costs order to be no order as to costs in respect of both summonses.