A AND OTHERS v. X AND OTHERS

HCMP 1063/2020

[2022] HKCFI 3478

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1063 OF 2020

________________________

________________________

________________________

_________________________________

REVIEW  OF  TAXATION

_________________________________

1.  This is the application of the 1^st to 6^th Plaintiffs (“Paying Party”) to review my rulings made in the taxation of the costs claimed by the 2^nd and 3^rd Defendants (“Receiving Party”) in the bill of costs filed herein on 20 November 2020 (“Bill of Costs”).

2.  The Receiving Party commenced taxation pursuant to the order of The Honourable Mr Justice K Yeung dated 31 July 2020, with costs granted on an indemnity basis (“Order”).

Background

3.  The Plaintiffs took out application on 24 July 2020 for a Norwich Pharmacal Order against the Defendants (“NPO Application”). Shortly prior to the application, the Plaintiffs applied for gagging order, which was granted on 23 July 2020.

4.  The NPO Application was taken out for the purpose of obtaining information in order for the Plaintiffs to consider commencing legal action(s) against certain individuals and seeking further disclosure order(s) and/or discovery of assets and protection of their interests in a number of companies, of which the Defendants were service providers of the companies.

5.  The 2^nd Defendant is a limited company in the practice of certified public accounting. The 3^rd Defendant is a limited company in the business of providing company secretarial, accounting and tax advisory services. The 2^nd and 3^rd Defendants had provided services to a number of companies concerned and therefore in possession of pertinent information concerning the finance and assets of the companies.

6.  The NPO Application was allowed after the hearing on 31 July 2020, with the Order granted by The Honourable Mr Justice K Yeung, which stipulates the nature and scope of documents to be disclosed by the Defendants, as follows :-

“1. The Defendants shall, subject to paragraph 1(3) below :-

(1) Within three (3) working days of the service of the Order provide the Plaintiffs’ solicitors with the following information and documents in the Defendants’ respective possession, custody or power:-

(a) a list of bank accounts together with each of their balances and authorized signatories and mandate maintained and/or controlled by or on behalf of the following companies to the best of the Defendants’ knowledge and in accordance with the most updated information each of them has :-

(i) ......

(ii) ......

(iii) ......

(iv) ......

(v) ......

(vi) ......

(vii) any other company(ies) which are to the 1^st and/or 2^nd and/or 3^rd Defendants’ knowledge belonging to the XXXX family, or holding assets beneficially owned by the XXXX family and /or the companies listed in (i) to (vi) above (collectively, the “XXXX Companies”),

(b) copies of the latest monthly bank statements received from the relevant banks in respect of the bank accounts referred to in paragraph 1(1)(a) above, and if the Defendants do not have the monthly bank statement, any document proving the source of their knowledge about such bank accounts;

(c) a list of landed properties directly or indirectly held by any of the XXXX Companies, and their respective locations and identities of the legal owners;

(2) Within fourteen (14) days of the Order, or another date to be agreed with the Plaintiffs’ solicitors, provide the Plaintiffs’ solicitors with :-

(a) a list of documents and records, in their possession, custody or power, setting out its descriptions, dates and/or periods covered, and whereabouts in relation to, or produced by or on behalf of, any of the XXXX Companies;

(b) copies of the contract(s) between the 1^st or 2^nd or 3^rd Defendant on the one hand and any of the XXXX Companies on the other;

(c) copies of the following financial and management information and documents (including all consolidated and company level reports) in relation to the XXXX Companies in each of the Defendants’ possession, custody or power :-

(i) financial statements;

(ii) management accounts;

(iii) general ledgers (including but not limited to transaction details in all of the current accounts and receivables);

(iv) monthly operational reports;

(v) tax returns, correspondence with the Inland Revenue Department (“IRD”) and the assessment notices issued by the IRD;

(d) copies of the contract(s) in force (including but not limited to tenancy agreement, construction contracts, contracts with any other service provider) entered into by or on behalf of each of the XXXX Companies in each of the Defendants’ possession, custody or power;

(e) copies of the resolutions and minutes of board of directors or meetings of shareholders of all of the XXXX Companies;

(f) Subject to any privilege against disclosure which the Defendants can establish (the onus of establishing the same being on the Defendants asserting such), copies of all communications (be it in the form of electronic mail, instant messaging, attendance note or otherwise between the 1^st and/or 2^nd and/or 3^rd Defendants on the one hand, and Mr. X and/or Mr. X and/or Madam X and/or Messrs. X on the other in respect of the affairs of the XXXX Companies; and

(g) as for the 2^nd and/or 3^rd Defendants, information and communications about the identity of the new accountants, auditors and tax representatives of all of the XXXX Companies and the transfer of documents in relation to the XXXX Companies from the 2^nd and/or 3^rd Defendants to them.

(3) The 2^nd and/or 3^rd Defendants need not disclose any documents received after 31 December 2019.

2. Each Defendant do make and file an affidavit/affirmation by an officer duly authorized and serve a copy thereof on the Plaintiffs’ solicitors verifying that it has duly complied with paragraph 1 above within 7 days of its compliance with the Order.

3. ......

4. ......

5. The Plaintiffs shall bear the costs and expenses incurred by the Defendants in complying with paragraphs 1 to 2 of this Order on an indemnity basis to be taxed if not agreed;

6. ......

7. Subject to paragraph 5 above, the costs of this application be to the Defendants on an indemnity basis.”

[As the gagging order dated 23 July 2020 is still in force, some names of individuals and companies referred to in the Order had all been anonymised by using “X”, with the companies collectively referred to in paragraph 1(1)(a)(vii) of the Order using “XXXX Companies”]

7.  The documents requested were disclosed by the Defendants. It is not in dispute that in compliance with the Order, 34 boxes of documents were produced, containing a total of 59,741 pages of documents.

8.  The Receiving Party commenced taxation on 20 November 2020. The taxation hearing was heard on 26 August 2021 and 10 December 2021 (“Taxation Hearing”). Prior to the hearing on 26 August 2021, written submissions were lodged by the Paying Party on 23 August 2021. At the hearing, the Receiving Party asked for my recusal of the taxation hearing, as there were without prejudice information disclosed in the written submissions lodged by the Paying Party. After standing down the case for the Receiving Party to clarify their position and the basis of the application, the Receiving Party submitted that there were instructions not to proceed further with the oral application of recusal. Taxation hearing could not finish that day and was adjourned part-heard to 10 December 2021.

9.  After my rulings for the Taxation Hearing, solicitors for the Paying Party lodged the application for taxation review on 24 December 2021, with a call over hearing scheduled to be heard on 7 March 2022. Because of General Adjourned Period, the hearing was adjourned to 15 August 2022 for review of taxation hearing (“Review Hearing”). Directions had been given for the preparation of the Review hearing, including the lodging of bundles and submissions. At the Review Hearing, parties confirmed that they relied on the 4 bundles previously used at the taxation hearing.

10.  As the Receiving Party did not comply with the court’s directions to lodge written submissions with Lists of Authorities on time, there were wasted costs. Parties have agreed that the Receiving Party do pay the Paying Pay wasted costs in the agreed sum of HK$2,600.

Items for review

11.  The Paying Party applied to review the following items of the Bill of Costs :-

(a)  Section A: hourly rate of the Solicitor, Mr Chik

(b)  Section A: items 2, 3 and 5

(c)  Section B: disbursements

(d)  Section C: costs of Taxation Hearing

Discussion

12.  I have carefully assessed all the items involved subject to review in light of all the submissions, cases referred to and materials before me.

13.  I have reminded myself during the Taxation Hearing and the Review Hearing that the basis of taxation is on indemnity basis, which is defined in O.62, r.28(4A) of the Rules of the High Court, Cap. 4A :-

“On a taxation on the indemnity basis all costs shall be allowed except insofar as they are of an unreasonable amount or have been unreasonably incurred and any doubts which the taxing master may have as to whether the costs were reasonably incurred or were reasonable in amount shall be resolved in favour of the receiving party.”

14.  The legal principles as stated in the Court of Final Appeal case of David John Kennedy v Kelly Cheng and Robert Yip [2012] HKCFA 64 are not disputed, and I have reminded myself of the legal principles stated therein.

15.  In exercising my discretion as taxing master at the Taxation Hearing and the Review Hearing, when considering the items to be ruled, I have had regard to all relevant circumstances of the case, including the 7 matters as set out in paragraph 1(2) of Part II of First Schedule to O 62, the Rules of High Court, Cap 4A.

16.  I will consider each of the items for review in turn. For convenience, I will consider Section B first.

Section B: disbursements

17.  There is only one item under Section B: disbursements, which is described as “Costs and expenses incurred by the 2^nd and 3^rd Defendants pursuant to paragraph 5 of the Order dated 31.7.2020”. The Receiving Party claimed for HK$908,551. At the Taxation Hearing, I allowed HK$331,671. The Paying Party sought to review this item.

18.  At the Taxation Hearing, in support of the amount of HK$908,551 claimed under Section B, the Receiving Party had produced a one-page “Summary of costs” of the 2^nd and 3^rd Defendants, which is a breakdown for the total sum claimed (“Summary”), with description of various items and time spent for each item. For convenience and easier reference, at the Taxation Hearing, I had labelled the items in the Summary as Items 1 to 26.

19.  For Items 1 to 24 of the Summary, they are costs charged by a chartered accountant, who is the sole director of the Receiving Party, charging an hourly rate of HK$6,800. For Item 25 of the Summary in the sum of HK$59,741, it is the photocopying charges of the 59,741 pages of documents disclosed. For Item 26 of the Summary in the sum of HK$1,530, it is the delivery costs of the 34 boxes for the provision of the documents disclosed.

20.  In reaching my ruling allowing HK$331,671 for Section B at the Taxation Hearing, I have considered the following :-

(a)  The background of the case, including the relationship between the parties (refer to paragraph 5 above).

(b)  The nature and scope of documents to be disclosed as stipulated in the Order. With reference to the wording of the Order, the scope of the documents to be provided is quite wide, comparing to the usual NPO against a bank. In particular, considering paragraph 1(1)(c) where some landed properties are “directly or indirectly held by any of the XXXX Companies” and paragraph 1(2)(f) where the disclosure is “subject to any privilege against disclosure which the Defendants can establish (the onus of establishing the same being on the Defendants asserting such)”, which requires more thoughts as to the documents involved, making it not as simple as, if not more complicated than, the usual NPO against a bank.

(c)  In compliance with the Order, 34 boxes of documents containing a total of 59,741 pages of documents, were produced.

(d)  Out of Items 1 to 26 of the Summary, Item 25 in the sum of HK$59,741 (being photocopying charges of the 59,741 pages of documents) and Item 26 in the sum of HK$1,530 (being delivery costs of the 34 boxes) are not disputed subject to provision of document in support.

(e)  For the remaining Items 1 to 24, I had focused on whether the items of costs were incurred in compliance with the Order :-

(i)  For Items 1 to 8, as they are work done prior to the date of the Order, I am of the view that they are clearly outside the scope of “in complying with the Order” and therefore unreasonable to be allowed.

(ii)  For Items 9 to 10, they concern time spent on e-mail and phone call communication after the date of the Order. As no further explanation or documents in support were provided, I have doubt whether they are reasonable. As the benefit of doubt should be given to the Receiving Party, I allow the 2 items.

(iii)  For Item 12, it is for the preparation of the list of time costs, which are not costs of compliance of the Order and therefore, I disallowed that item.

(iv)  For Items 11, 13 to 24, by reading the description, they are in line with complying with the Order. Although there are no other documents in support or further explanation for them, I remind myself that even I have doubt as to whether they are reasonable, any benefit of doubt should be given to the Receiving Party. These items were allowed.

(f)  Having accepted that Items 9, 10, 11, 13 to 24 are not unreasonable to be allowed by the item, the next step is to consider whether the amount claimed is reasonable. For each of the items, I have considered the number of hours as described in the Summary. Considering paragraph 20(b) and (c) above, even if they may be on the high side and I have doubt, the benefit of doubt should be given to the Receiving Party. The total number of 84.5 hours claimed for these items in total are accepted.

(g)  In view of the hourly rate, I am of the view that it is unreasonable to charge HK$6,800 per hour. During the Taxation Hearing, Mr. Leung submitted that apart from the director who did the work and charged HK$6,800 per hour, there were 5 junior staff in his firm. I am of the view that some of the work involved can be delegated to a more junior staff. Having considered the background and circumstances of this case, I am of the view that compared to a solicitor of about 2 to 4 years of experience (ie. with an hourly rate of HK$3,200) is reasonable to be engaged in the work.

(h)  As a result, the sum of HK$331,671, ie. HK$270,400 (HK$3,200 x 84.5 hours) + HK$61,271 (Item 25 and Item 26), was allowed during Taxation Hearing.

21.  At the Review Hearing, the Receiving Party agreed to my rulings at the Taxation Hearing and asked for upholding them. They are of the view that as time and effort had been spent in compliance with the Order which is not unreasonable, the Receiving Party, being an innocent party ordered to comply with NPO, should be reimbursed of the costs accordingly.

22.  The Paying Party disagreed. They confirmed at the Review Hearing that out of this item of HK$331,671, they do not oppose to Item 25 (in the sum of HK$59,741 for the photocopying charges) and Item 26 (in the sum of HK$1,530 for delivery costs), which means the sum of HK$61,271 in total is agreed, leaving the remaining sum of HK$270,400 in dispute (“Disputed Amount”).

23.  The main argument by Mr. Wong for the Paying Party is that the Disputed Amount is not out of pocket expenses, but are time costs or profit costs to be charged. In the compliance of the Order, the Receiving Party should only be reimbursed costs and expenses which are not unreasonable. By charging the time costs or profit costs, the Receiving Party is making a profit, which is unreasonable and should not be allowed as a matter of principle.

24.  Further, Mr. Wong submitted that there are no supporting documents other than the one-page Summary. Simply offering to inspect the 34 boxes of raw documents is neither here nor there. The Summary does not involve any actual costs or expenses paid, or loss of profit, business or clientele arising from the compliance of the Order for the compensation of time. Therefore, the Paying Party submitted that it is unreasonable to allow the Disputed Amount.

25.  I have considered carefully parties’ submissions and the cases they relied on, include local cases and UK cases, in particular, the cases relied on by Mr. Lee, counsel for the Receiving Party. It is trite that for NPO cases, the costs and expenses that are incurred by it in relation to the discovery exercise should be reimbursed by the plaintiff on an indemnity basis. The defendant should not be made out-of-pocket in this exercise.

26.  At the same time, I also have to consider whether the items claimed by the Receiving Party are unreasonable or not, considering the legal principles in the case David John Kennedy, governing indemnity costs. I have reminded myself of the useful principles laid out therein :-

“21. First, an award of costs on an indemnity basis is intended to allow for the payment of costs on a more generous level as compared to the case of costs awarded on a party and party or common fund basis. The object of such an order is to reimburse the winning party (the receiving party) “all (his) costs” and to give him “a complete indemnity” and “everything”, “shorn only of” or “except the unreasonable” or “anything that is seen to be unreasonable”. However, as the Registrar rightly observed, this is not giving a blank cheque to the receiving party to recover all his costs without proper scrutiny by the court. This would defeat the very object of having a taxation.

22. Secondly, the receiving party is prima facie entitled to be paid all his costs, provided that they are “costs of and incidental to the proceedings”, subject only to the qualification that any particular item which has been unreasonably incurred or any particular amount which is unreasonable must be excluded. This means that all items incurred for the purpose of the litigation are included except that those items or amounts which the taxing master considers to be unreasonable would be taxed off. The receiving party does not have to show that his costs had been reasonably incurred or were of a reasonable amount, only that they are not unreasonable.

23. Thirdly, there is no question of the paying party having any burden of proof since there are relevant materials including client’s instructions which are not available or discoverable to the paying party. So long as there are materials available to the taxing master, they can be considered by him. If necessary, he can ask the receiving party to produce them for the purpose of taxation.

24. Fourthly, the court only considers whether the costs were unreasonably incurred or of an unreasonable amount. (See Lord Woolf in Petrotrade.) The approach of the taxing master is to decide whether a particular item or particular amount which is being challenged is unreasonable. He is not required to go through the items and decide whether they are reasonable. He is required only to adjudicate on items or amounts which are said to be so unreasonable as to be excluded.

25. Fifthly, in the great majority of cases, this should not be difficult. The unreasonable items or unreasonable amounts would be easily identified or readily identifiable. It is only when it is not clear whether a particular item or amount is unreasonable, that is, where there is a doubt as to whether it is unreasonable, that the benefit of the doubt should be given to the receiving party.”

27.  At the Review Hearing, both parties agreed that there is no hard and fast rule as to the types and amounts of costs and expenses allowed for NPO cases, with reference to the local and UK cases they relied on. In particular, there are no cases covering the scenario of this case on whether time costs or profit costs charged by the director of the Receiving Party, which are not paid out but claimed under disbursements, should be allowed.

28.  For this Review Hearing, I have reminded myself to focus not only on whether the item of the Disputed Amount is in compliance with the Order, but also whether the item of the Disputed Amount is unreasonable to be allowed or not. I am concerned whether the item of the Disputed Amount in this case involves costs and expenses out-of-pocket which the Receiving Party should be reimbursed.

29.  In this regard, the Receiving Party confirmed that the Disputed Amount out of the total sum of HK$908,551 that they claimed are time costs or profit costs calculated, based on the actual time spent and the hourly rate of HK$6,800. As the person charging for time costs is the sole director of both the 2^nd and 3^rd Defendants, there is no actual payment made. There are also no documents in support showing any loss incurred in terms of profit, business or clientele in the compliance of the Order.

30.  With the particular facts and background of this case as I explained above, I have also considered the following :-

(a)  The Receiving Party claiming for the Disputed Amount out of HK$908,551 under Section B of the Bill of Costs for disbursements, but there is no actual payment made to be reimbursed.

(b)  There was no engagement of other third parties or other companies in the compliance of the Order, with expenses actually spent or paid.

(c)  For the one-page Summary claiming for the disbursements in Section B, upon the inquiry I made at the Taxation Hearing about whether there are other documents in support, the answer was negative.

(d)  For the Disputed Amount claimed, they are time costs or profit costs of the Receiving Party for the time spent, but there are no documents showing the loss of business or profit or clientele in the compliance of the Order.

(e)  The calculation of the Disputed Amount claimed was based on time costs or profit costs calculated from the time spent by the sole director of both the 2^nd and 3^rd Defendants, who had 5 junior staff in his firm.

31.  In the circumstances, even considering the Receiving Party’s submissions that time and effort had been spent in complying with the Order, with the reasons aforesaid, there were no actual out-of-pocket expenses to be reimbursed. It is unreasonable to allow the Disputed Amount in this case, as there was no actual financial loss or expenses incurred. Allowing the Disputed Amount would mean allowing the Receiving Party under NPO to make a profit in the compliance of the Order.

32.  The consideration would be different if there were actual out-of-pockets expenses incurred to be reimbursed, eg. administrative charges or office expenses in the compliance of the Order; alternatively, if it could be shown that the time spent in compliance of Order had resulted in loss of business or profit or clientele, it may well be reimbursed.

33.  I remind myself that taxation on indemnity basis is “not giving a blank cheque to the receiving party to recover all his costs without proper scrutiny by the court”. On reflection at the Review Hearing, I am of the view that this is the scruntiny that should be in place in this case.

34.  With the reasons aforesaid, I am of the view that the item of the Disputed Amount claimed in Section B is unreasonable. The review of this item is therefore allowed.

Section A: Hourly rate

35.  For the hourly rate of the solicitor, Mr. Chik, the Receiving Party claimed HK$6,500, which the Paying Party objected and suggested HK$5,200. I allowed HK$6,500 at the Taxation Hearing. At the Review Hearing, the Paying Party sought to review this item.

36.  It is trite that for NPO, as the party ordered to make discovery takes a neutral stance, the costs involved are generally not substantial, even if costs are ordered on an indemnity basis.

37.  At the same time, I have to consider the legal principles in paragraphs 26 and 34 of the case David John Kennedy for the consideration of hourly rate of a solicitor under indemnity basis :-

“26. I should also add that in assessing what is unreasonable (as opposed to assessing what is reasonable), the court should bear in mind the practical reality that there are litigants who, being understandably more anxious than others to pursue or defend their rights, are willing to pay more than the normal average fees of counsel and solicitors. How much more such a litigant is prepared to pay over and above the normal average fees depends on a variety of factors including in particular, the complexity of the case and the importance of the case to him. In my view, it is not uncommon and certainly cannot be considered as unreasonable for a concerned litigant to adopt such an attitude. On a party and party taxation, it is likely that anything over and above the normal average fees would not be regarded by the court as reasonable and will be taxed off and the receiving party will have to shoulder the shortfall. But if the court, for good reasons, saw fit to award him his costs on a more generous basis (i.e. on an indemnity basis), I do not think it should be regarded as unreasonable to allow him to recover more than the normal average fees so long as they are not clearly excessive or, to use Megarry VC’s words, absurd or extravagant.”

“34. On a party and party taxation, it would not be considered reasonable for the receiving party to have instructed solicitors who charged more than the average hourly rates and any excess would be taxed off. But on an indemnity taxation, it would not be considered unreasonable for the receiving party to have engaged solicitors who charged more than the average hourly rates unless they are clearly excessive. What is clearly excessive depends on the circumstances of each case.”

38.  Whether the hourly rate is clearly excessive and unreasonable depends on the circumstances of each case. At the Taxation Hearing, when I allowed the hourly rate of HK$6,500, I have considered a number of factors, including the background and circumstances of this case (which I reiterate paragraph 20(a) and (b) above). This is not a usual NPO against a bank.

39.  Although the NPO Application is not contentious, with the nature and scope of documents ordered for discovery, I accept that the Receiving party is justified to be more concerned to adopt a cautious attitude in this case to engage a solicitor as experienced as Mr. Chik having about 27 years of experience at the time of the NPO Application.

40.  The basis of the Receiving Party’s concern of the NPO Application is evidenced by the affirmation filed by the 2^nd and 3^rd Defendants on 31 July 2022 before the hearing for the NPO Application. Although the said affirmation was not referred to by Yeung J. in the Order, the concern of the necessity of the NPO Application and the scope of the orders to be granted which may affect the 2^nd and 3^rd Defendants had been explained therein, which includes but not limited to the scope of disclosure, disclosure against duty of confidentiality owed to their clients and costs consequence.

41.  With careful comparison of the orders the Plaintiffs sought with the wording of the Order actually granted, 3 areas of concern of the Receiving Party had been shown in the Order actually granted, as follows :-

(a)  In paragraph 1(2)(f) of the Order “Subject to any privilege against disclosure which the Defendants can establish (the onus of establishing the same being on the Defendants asserting such)” had been inserted, showing the concern about the duty of confidentiality owed to the clients of the Receiving Party.

(b)  Paragraph 1(3) of the Order “The 2^nd and/or 3^rd Defendants need not disclose any documents received after 31 December 2019” had been inserted, showing the concern about the limit and scope of the NPO Application.

(c)  In the NPO Application, the Plaintiffs asked for “Subject to paragraph 5 above, the costs of this application be reserved.”, which was replaced by “Subject to paragraph 5 above, the costs of this application be to the Defendants on an indemnity basis.”, showing the concern about costs.

42.  Given the nature and scope of the documents ordered for discovery, which I had cited the relevant paragraphs of the Order in paragraph 6 above, and considering the Receiving Party being the service providers and the concern I summarised above, I am of the view that in the circumstances, the Receiving Party is justified to be more anxious and concerned to engage an experienced solicitor and paying more than the normal average fees.

43.  With the reasons aforesaid, I am of the view that the hourly rate of HK$6,500 is justified. The review of this item is not allowed.

Section A: Items 2, 3 and 5

44.  The Paying Party sought to review item 2 (ie. considering the Plaintiff’s Skeleton Submissions), item 3 (ie. considering the Plaintiffs’ List of Authorities) and item 5 (ie. considering the Affirmation filed for the NPO Application).

45.  For item 2, the Receiving Party claimed 3 hours for considering the Skeleton Submissions, which I allowed 2 hours during the Taxation Hearing. The Skeleton Submissions consisted of 26 pages of content with 3 pages of enclosures included therein. The 3 pages of enclosures include a family tree, with some of the Plaintiffs and some of the persons named in paragraph 1(2)(f) of the Order included therein, and 2 pages of corporate chart.

46.  Even if the NPO Application is not contested, given my consideration of the background of the case (refer to paragraph 20(a) and (b) above), the Receiving Party’s concern (as summarised in paragraphs 40 and 41 above) and the nature and scope of the Orders granted, which is wider than the usual NPO against a bank, I am of the view that 2 hours is not unreasonable. I disallow review for this item.

47.  For item 3, the Receiving Party claimed 4 hours for considering the List of Authorities, which I allowed 3 hours during the Taxation Hearing. The List of Authorities consisted of 9 authorities of a total of 182 pages. The first 2 authorities are Section 21L of the High Court Ordinance and Practice Directions 25.1 and 25.2, which Mr. Chik, with his level of experience, should be well familiar of. Item 8 is the case Norwich Pharmacal Co. and Others v Customs and Excise Commissions [1974] AC 133 of 75 pages, which is the authority for NPO application. With the seniority of Mr. Chik, he should be well aware of the case and should not need much time to consider. For other authorities, they are no more than the usual cases in support of the NPO Application. Given that this case is not contentious, on reflection, I am of the view that 3 hours for considering them is excessive and unreasonable. To review my ruling, I am of the view that 2 hours should be allowed.

48.  For item 5, the Receiving Party claimed 24 hours for considering the Affirmation in support for the NPO Application, which I allowed 10 hours during the Taxation Hearing. The said Affirmation, together with the exhibits runs to 856 pages.

49.  Mr. Wong submitted that most of the content in the said Affirmation does not concern the Receiving Party, and it is excessive to allow 10 hours. He proposed 3 hours for this item.

50.  I have considered the said Affirmation and the exhibits enclosed thereto. I agree that with the NPO Application not being contentious, the solicitor for the Receiving Party does not have to consider the said Affirmation in great detail. However, with my observation of the background and circumstances of this case (which I repeat paragraph 46 above), I am of the view that reasonable time has to be allowed in the circumstances.

51.  Further, I notice that the said Affirmation only consists of 3 pages, but in the first exhibit, a signed but unaffirmed affirmation of the 1^st Plaintiff had been included thereto, which consists of 31 pages. Attached to it is a schedule of properties that were or are held by the XXXX Companies (as subsequently defined in paragraph 1(2)(f) of the Order). In the other exhibits enclosed, there are various types of documents included, including the family tree, company documents and accounting documents of various companies. Being the service provider of accounting and secretarial services, and with the scope of documents requested to be disclosed, even if the NPO Application is not contested, some reasonable time is needed to consider these documents.

52.  With the reasons aforesaid, I am of the view that allowing 10 hours is not unreasonable. The review for this item is not allowed.

Section C: costs of the Taxation Hearing

53.  At the Taxation Hearing, I have allowed costs in the usual way, ie. Paying Party to pay the Receiving Party all costs of taxation.

54.  The Paying Party now seeks to review that ruling. Mr Wong relied on O. 62, r.32A of the Rules of the High Court and submitted that in this case, the court should depart from the usual order that the Paying Party do pay the Receiving Party’s costs, in view of :-

(a)  the conduct of all the parties in relation to the Taxation Hearing;

(b)  the amount, by which the Bill of Costs has been reduced; and

(c)  whether it was reasonable for the Receiving Party to claim the costs of a particular item.

He asked the court to review and to order the Receiving Party to pay the Paying Party costs of the Taxation Hearing.

55.  Mr. Wong’s submissions includes but not limited to the following main points :-

(a)  Before the Taxation Hearing, the Receiving Party had not responded promptly to the Paying Party’s counter-offer, which was a genuine attempt to settle the case to avoid taxation.

(b)  The Receiving Party completely ignored the Paying Party’s counter-offer without reasons. They only replied shortly before Taxation Hearing about narrowing down the items in dispute.

(c)  At the Taxation Hearing, the Receiving Party was not helpful in making submissions on the first day of Taxation Hearing in relation to the arguments raised by the Paying Party in their written skeleton submissions lodged on 23 August 2021. Instead, during the Taxation hearing, the Receiving Party asked for the recusal of taxing master in hearing the taxation.

(d)  According to paragraph 58 of Mr. Wong’s written submissions for the Review Hearing, the amount allowed at the Taxation Hearing represents a 58% reduction of the amount claimed in the Bill of Costs.

(e)  The conduct of the Receiving Party had been unreasonable all along.

56.  With careful consideration of the conduct of the Receiving Party and all the documents before me, I am not convinced that the conduct of the Receiving Party has been so unreasonable to justify departure of the usual costs order and for the Court to order the Paying Party gets their costs for the Taxation Hearing.

57.  The Court was informed that some of the items in the Bill of Costs had been agreed. I accept that it is not the case that there was no attempt of the Receiving Party to discuss and narrow down the items in dispute.

58.  The Receiving Party applied orally for recusal of taxing master at the Taxation Hearing on 26 August 2021, which was withdrawn after standing down and confirming client’s instructions. But it should be pointed out that this had already been taken into account in disallowing the relevant time spent for that application under the costs of taxation. If one looks closer to the reasons of their application, it was caused by the Paying Party disclosing some “without prejudice save as to costs” offer of costs in the written submissions lodged with the Court. There was a reason for the Receiving Party to be concerned. Besides, the time spent on such withdrawn application had already been disallowed for the costs claimed.

59.  However, having considered the amounts allowed at the Taxation Hearing and also my ruling for the review of taxation, I notice that a large amount claimed is not allowed. I will take that into consideration.

60.  According to paragraph 55 of the Paying Party’s written submissions for the Review Hearing, the Court was informed by Mr. Wong that the counter-offer made by the Paying Party earlier was a sum lower than the total sum allowed by my rulings at the Taxation Hearing. In other words, the counter-offer by the Paying Party could not beat the amount allowed by the Court. Even though Mr. Wong claimed that the counter-offer was a genuine attempt to engage the Receiving Party in settlement discussions, the fact that it could not beat the amount allowed by the Court is a strong basis for me not to depart from the usual costs order and not to order the Receiving Party to pay the Paying Party the costs of the Taxation Hearing.

61.  Further, I am not of the view that it was unreasonable for the Receiving Party to claim the costs in Section B, with most of them now disallowed by the Court. Although claiming the time costs under Section B was not allowed in this Review Hearing, I am of the view that it is at least an arguable point and I was convinced at the Taxation Hearing. It was on reflection and with the consideration of further local and UK authorities that I disallow the time costs claimed under Section B at the Review Hearing.

62.  But it remains the fact that the amount claimed in the Bill of Costs is huge. Other than the one-page Summary, there are no other documents in support. Out of the total sum of HK$908,551, HK$576,880 was disallowed at the Taxation Hearing, which was further increased to HK$847,280 being disallowed after the Review Hearing.

63.  Costs is in the discretion of taxing master. In view of the amount claimed, which had been substantially reduced, I am of the view that the Receiving Party should be disallowed a proportion of the amount of costs of taxation to be received. I am of the view that disallowing 20% of the costs of taxation is appropriate in view of not only the amount involved that has been reduced, but also the time spent for those items allowed compared to the total number of items claimed in the Bill of Costs.

64.  To summarise, only the following items are allowed for this Review of Taxation :-

(a)  For item 3 of Section A, 2 hours allowed

(b)  For Section B, HK$61,271 allowed

(c)  For Section C, partially allowed. For the costs of the Taxation Hearing, the Receiving Party be allowed 80% of the total costs of taxation.

Costs of Review of Taxation

65.  In relation to costs of this Review of Taxation, I am of the view that costs should follow the event. With my ruling above, the Paying Party wins some and loses some, but considering the substance of the amounts allowed at the Review Hearing, especially for Section B, they should be regarded as the winning party. However, the Paying Party did not win on the hourly rate, and items 2 and 5 of Section A. In view of costs of the Taxation Hearing, the Paying Party did not get the costs of the Taxation Hearing as claimed.

66.  Considering all these matters as a whole, I am of the view that the Paying Party should only be awarded half of the costs for this Review of Taxation.

67.  At the Review Hearing, the parties had made submissions in relation to costs of the review of taxation to be summarily assessed by the Court. Considering Mr. Wong’s submissions that counsel had been involved in the fixed sum of HK$6,000, time spent by him for the preparation and the hearing of the Review Hearing and the time spent by his partner in ensuring the overall handling of this case, I accept that they are reasonable and I summarily assess the total costs of the Review of Taxation to be HK$51,500, of which the Receiving Party should pay the Paying Party half of the amount, ie. HK$25,750. This is a costs order nisi, which should be made absolute within 14 days from the date hereof.

68.  At the beginning of the Review Hearing, because of the late lodging of submissions by the Receiving Party, wasted costs had been incurred. By consent, parties have agreed that the Receiving Party do pay the Paying Party wasted costs in the agreed sum of HK$2,600. I so ordered.