LAM AND LAI SOLICITORS v. HO CHUN YAN ALBERT

CACV 172/2017

[2018] HKCA 711

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 172 OF 2017

(ON APPEAL FROM HCMP NO 555 OF 2015)

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J U D G M E N T

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Hon Kwan JA (giving the judgment of the court):

1.  This is the plaintiff’s application brought under Order 20 rule 11 of the Rules of the High Court to amend the order of the Court of Appeal to provide for post-judgment interest, pursuant to section 49 of the High Court Ordinance, Cap 4.

Background

2.  The relevant background matters for present purpose may be stated as follows.

3.  The plaintiff, a firm of solicitors, brought taxation proceedings (HCMP 555/2015) against its client under section 67 of the Legal Practitioners Ordinance, Cap 159 when legal fees could not be agreed.

4.  On 27 January 2016, after a taxation hearing, Master S Lo awarded the plaintiff the fees of two partners as claimed in respect of 64 items in the bill of costs.

5.  The defendant took out an application for review of the taxation of those 64 items.  As stated in his objection, his stance was that he had never given express or implied approval to deploy two partners; there was duplication of work; the use of two partners was unusual; all items of costs for two partners were “unreasonable and should be reduced at least by taxing off one of the two partners”.

6.  On 27 January 2017, the master dismissed the defendant’s application for review.

7.  The defendant applied for a further review of the master’s decision to a judge of the Court of First Instance.  He succeeded before Deputy High Court Judge Saunders, who reached a decision on 5 July 2017 in which the plaintiff’s bill was taxed down to entitle the time claimed for one partner only.

8.  The plaintiff appealed against the decision of DHCJ Saunders to the Court of Appeal (CACV 172/2017).  On 28 February 2018, this court gave judgment allowing the plaintiff’s appeal.  We ordered that the decision of the judge be varied and be replaced with an order that the costs of one partner and the costs of a notional junior solicitor equivalent to half of the costs of a partner be allowed on taxation in respect of those 64 items in the plaintiff’s bill.  Our order did not provide for post-judgment interest.

The plaintiff’s application

9.  The plaintiff, who did not make any claim for post-judgment interest in the proceedings in HCMP 555/2015 or CACV 172/2017, invoked the slip rule provision in Order 20 rule 11, which provides that “Clerical mistakes in judgments or orders, or errors arising therein from any accidental slip or omission, may at any time be corrected by the Court on summons without an appeal.”  Its counsel, Mr Byron Chiu, relied on these statements in the judgment of Ribeiro PJ in Man Ping Nam v Man Fong Hang (No 2) (2007) 10 HKCFAR 140, which were said in the context of interest not having been dealt with in the judgment owing to the accidental omission of the appellant’s legal representatives to ask for it:

“18. Such accidental omissions are understandable since the Court almost invariably reserves judgment so that the oral hearing terminates without the result of the appeal being known. The judgment is then handed down without any further oral hearing. The question of interest on monies paid to satisfy a lower court’s judgment naturally arises as a topic prompted by success on the appeal when an entitlement to repayment of those sums is established. It is not surprising that it is a topic that may not have been addressed before the result was known. Of course, the parties should ideally make it clear in their respective printed cases precisely what orders, including consequential orders, should be made if they should succeed on the appeal. However, this is sometimes understandably overlooked by a party intent on achieving success on the appeal in the first place.”

“20. It is clear that the failure of the court’s original order to cover a particular matter as a result of an accidental omission of counsel or solicitors or the party is capable of being corrected under this rule: Re Earl of Inchcape [1942] Ch 394, approved by the Privy Council in Tak Ming Co Ltd v Yee Sang Metal Supplies Co [1973] 1 WLR 300 at p.304 et seq. In the Court of Appeal, the rule has been applied in a case where there was an accidental omission to ask for costs and interest: Winston Camera & Radio Co Ltd v Combi (Singapore) Pte Ltd [1988] HKC 156. The correction can be made by the Court “at any time”, so the fact that correction is sought after the appellants had the Order sealed is not an obstacle.”

10.  By the present summons issued on 12 July 2018 as amended on 17 August 2018, the plaintiff sought to amend the order of this court dated 28 February 2018 and sealed on 28 March 2018 to include the following paragraphs:

“4. The Defendant do forthwith pay to the Plaintiff interest on the costs of a notional junior solicitor equivalent to half of the costs of a partner allowed on taxation in respect of the 64 times objected to in the Review:

(i) At the judgment rate for the period from 27 January 2016 [date of the master’s taxation] to 4 July 2017 [day before the decision of DHCJ Saunders];

(ii) At the rate of 1% over the HSBC best lending rate for the period from 5 July 2017 [date of the decision of DHCJ Saunders] to 27 February 2018 [day before the judgment of the Court of Appeal];

(iii) At the judgment rate from 28 February 2018 [date of the judgment of the Court of Appeal] until the date of payment.

5. The Defendant do forthwith pay to the Plaintiff interest on the costs of one partner allowed on taxation in respect of the 64 items objected to in the Review at the judgment rate for the period from 27 January 2016 until the date of payment.”

11.  The plaintiff’s reasoning for seeking the above orders is as follows:

(1) The plaintiff is entitled to post-judgment interest on one partner’s fees at the judgment rate from 27 January 2016 (the date of the master’s award on taxation prior to any review) until the date of payment.  The review to the master, the further review to DHCJ Saunders and the judgment of the Court of Appeal do not affect this part of the award of the master.  Judgment rate should apply throughout.  This is reflected in §5 of the proposed order.

(2) In the award of the master and his review decision, he had allowed the fees of two partners.  It could be said that on the master’s decision, as the plaintiff was allowed the fees of more than one partner, the plaintiff was entitled, at the very least, to the fees of one partner and one notional junior solicitor equivalent to half of the costs of a partner (“1.5 partner’s fees”).

(3) It was when the master’s decision was further reviewed by DHCJ Saunders that only one partner’s fees were allowed.  But the judgment of the Court of Appeal restored the plaintiff’s entitlement to 1.5 partner’s fees.  This is not a situation in which it was held for the first time by the Court of Appeal that the plaintiff was entitled to 1.5 partner’s fees.

(4) Hence, between 27 January 2016 (date of the master’s taxation) to 4 July 2017 (day before the decision of DHCJ Saunders), as the plaintiff was entitled to at least 1.5 partner’s fees by the master’s decision, judgment rate should apply for this period.  See §4(i) of the proposed order.

(5) Between the period of 5 July 2017 (date of the decision of DHCJ Saunders) to 27 February 2018 (day before the judgment of the Court of Appeal), there was no order for the payment of the fees of a notional junior solicitor but only for the fees of one partner.  Judgment rate should not apply to the non‑existent award for this period in respect of the fees of a notional junior solicitor.  Instead, the plaintiff, who is eventually successful on appeal, should be compensated for being deprived of the fees of a notional junior solicitor during this period, at a rate of interest which reflects its costs of borrowing.  See §4(ii) of the proposed order.  For this approach, reliance is placed on Hongkong Electric Co Ltd v Commissioner of Rating and Valuation (No 2) [2012] 3 HKC 212 at §§6 to 8.

(6) As from 28 February 2018, being the date of the judgment of the Court of Appeal, the plaintiff is entitled to 1.5 partner’s fees pursuant to a court order.  So the judgment rate should apply to the fees of a notional junior solicitor from 28 February 2018 until payment.  See §4(iii) of the proposed order.

The defendant’s opposition

12.  The defendant’s stance is that this application should be dismissed with costs.  His counsel, Mr Leonard Chow, submitted that the slip rule in Order 20 rule 11 is not applicable in this instance for a number of reasons.

13.  First, the order sought by the plaintiff is not an error resulting from an accidental slip or omission by the court.  The slip rule is only applicable to errors which are rectifiable in order to give effect to the manifest intention of the court.  Man Ping Nam is distinguishable on the facts (in that the unsuccessful respondent was ordered to repay and restore to the appellant the amount that had been paid by the latter pursuant to the first instance judgment) and the plaintiff’s reliance on it is misconceived.  He cited Godfrey JA in Skink Ltd (in liquidation) v Comtowell Ltd [1998] 1 HKLRD 542 at p 543G:

“The court has an inherent power to vary its own orders so as to carry out its own meaning and to make that meaning plain; and an express power (under R.H.C. O.20 r.11) to correct any error in any order resulting from an accidental slip or omission. But these powers extend only to the correction of errors in expressing the court’s intention.The court has no power to correct mistakes of its own; even where it is satisfied that it has indeed made such a mistake.”

14.  Second, the proposed orders cannot be said to reflect the intention of the court.  They are not simple and straightforward computations of interest.  The date when interest should start to run and the rates of interest in the proposed orders are controversial.

15.  The defendant took the position that even if the plaintiff is entitled to interest, this should run from the date of the Court of Appeal judgment (28 February 2018), and not the date of the master’s award (27 January 2016).  The master’s decision was set aside by DHCJ Saunders.  The Court of Appeal upheld the judge’s decision to interfere with the master’s decision, holding that the master’s decision was rightly set aside and the judge was entitled to exercise the discretion on taxation afresh.  When the appeal from the judge’s decision was allowed, the master’s decision could not be regarded to have been restored as alleged.

16.  The defendant took issue with imposing judgment rate for any part of the period prior to the Court of Appeal judgment.  As the master’s decision was in effect set aside and not restored by the Court of Appeal, there was no judgment debt upon which the judgment rate of interest could hang.

17.  Furthermore, the proposed order has failed to take into account the defendant’s part payment to the plaintiff on 23 March 2016 in the sum of $1.2 million and the defendant’s sanctioned payment into court on 24 November 2016 of $305,000.

18.  Third, it is open to argument whether the plaintiff is entitled to interest at all in these taxation proceedings involving disputed costs between solicitor and own client.  Mr Chow submitted that the plaintiff is not entitled to any interest at all.  Unlike the taxation of party and party costs, where it has been held that an order for costs to be taxed is a judgment debt for the purpose of section 49 of Cap 4 (Hotung v Ho Yuen Ki & Ors (No 3) [2009] 2 HKC 378 at §§7 to 8), no judgment is pronounced in respect of taxation proceedings under section 67 of Cap 159, so there is no judgment debt on which interest may run.  Section 64(3) of Cap 159[1], which provides for the award of interest by the taxing master, does not apply in this situation.  And the plaintiff has not cited any authority to show that the court has allowed interest on taxed costs in proceedings regarding disputed costs between solicitor and own client.

Discussion

19.  We do not agree with Mr Chow that the statements of Ribeiro PJ in Man Ping Nam should be confined to the situation where the successful appellant had satisfied the judgment below and the unsuccessful respondent was ordered to repay the amount that had been paid by the appellant.  As explained by Ribeiro PJ, it is understandable that post-judgment interest was not sought by a successful appellant before the outcome of its appeal was known.  We also reject Mr Chow’s contention that the plaintiff’s failure to seek interest in this appeal was not an accidental slip or omission.  There is nothing of substance to indicate that it was a deliberate omission not to claim interest.  Nor do we agree with him that the slip rule in Order 20 rule 11 may not be invoked where the failure of the judgment to deal with interest was due to the omission of the plaintiff to make a claim for this.

20.  It is clear from the cases cited in §20 of Man Ping Nam that Order 20 rule 11 may be invoked where the failure of the court’s original order to provide for costs or interest was due to the accidental slip or omission of the party’s legal representative to ask for costs or interest, and where the court is satisfied that it should have made the order as sought if it had been asked to do so before giving judgment.  In allowing the original order to be varied, the court is giving effect to the order which it would have made but did not make due to the accidental slip or omission of the party’s legal representative.  This is to correct an error in expressing the court’s intention.  There is no deviation from the statements of principle in Skink Ltd (in liquidation) v Comtowell Ltd.  The Court of Appeal in that case declined to apply the slip rule because, among other reasons, if the point had been raised timeously, it “might have” not that it would or should have, made the varied order as proposed (at 544C).

21.  So the question is whether we can be satisfied that the orders proposed in the plaintiff’s summons are the orders we should have made, if our attention had been drawn to them before judgment was handed down.

22.  First and foremost, post-judgment interest is provided for in section 49 of Cap 4[2]. It is not required to be pleaded, as the award of post-judgment interest is mandatory, not discretionary (Hong Kong Civil Procedure 2018, vol 1, §18/8/18).

23.  As a matter of principle, we see no reason why costs allowed on taxation in respect of solicitor and own client costs pursuant to an order of taxation on the application of “the party chargeable to taxation” or the solicitor under section 67(1) or (2) of Cap 159 should not attract post-judgment interest, so that the party chargeable to taxation can continue to deprive the solicitor of the costs without any adverse consequence even though the solicitor’s bill has been taxed by the taxing master.  Where there is an application for taxation under section 67(1) or (2), as opposed to the situation when an action is brought to recover costs on a solicitor’s bill without invoking this taxation procedure, there is no valid reason why a judgment debt for the purpose of section 49 of Cap 4 would only arise when an action is commenced on a solicitor’s bill after it has been taxed and judgment is given in that action.

24.  It is correct that for party and party taxation, the entitlement to costs would flow from a judgment or order for payment of costs, and it has been held that interest on costs should run from the date upon which the judgment or order is pronounced (the incipitur rule), not from the date of the certificate of taxation (the allocatur rule), see Hunt v R M Douglas (Roofing) Ltd [1990] 1 AC 398, followed in Hong Kong in Caltex Oil Hong Kong v Director of Buildings and Lands [1994] HKDCLR 31 and Wong Wai Chun & Anr v Lewin [2000] 2 HKC 271.  It is also correct that there is no judgment or order for payment of a solicitor’s bill prior to taxation of the bill under section 67.  However, that section does provide for an order for taxation of the solicitor’s bill under section 67(1) or (2), and the taxing master is required under section 67(3) to issue a certificate certifying what is due to or by the solicitor in respect of the bill and in respect of the costs of the taxation.

25.  There being no judgment or order for payment of a solicitor’s bill prior to taxation under section 67, interest cannot run from a date prior to the certificate of taxation[3], unlike the situation of party and party taxation.  But that is not to say there is no judgment debt on which interest will run when a certificate is issued by the taxing master under section 67(3).

26.  As for section 64(3) of Cap 159 cited by Mr Chow, this does not purport to govern the only instances in which interest may be allowed for costs between solicitor and own client.  Besides, as pointed out by Mr Chiu, section 64(3) is concerned with “moneys disbursed by the solicitor for the client” and “moneys of the client in the hands of, and improperly retained by the solicitor for the client”.  They would appear to pertain to matters arising before taxation, and have little bearing to post-judgment interest on a judgment debt.

27.  There being a judgment debt in respect of the costs allowed on taxation, the next question is when interest should start to run.

28.  The total amount of taxed costs, made up of 1.5 partner’s fees, came up to $1,877,851.33.  The plaintiff confirmed that it has received full payment of the taxed costs by these payments: $1.2 million was paid on 23 March 2016 after the master gave his award on 27 January 2016, and, after the judgment of the Court of Appeal on 28 February 2018, the amount paid into court of $305,000 was paid out to the plaintiff on 2 May 2018 and the balance of $372,851.33 was paid by the defendant on 8 May 2018[4].

29.  The defendant took the position that the plaintiff is entitled to recover the taxed costs of $1,877,851.33 only on the strength of the Court of Appeal judgment.  Hence, any post-judgment interest should accrue from the date of the Court of Appeal judgment, not from the date of the master’s award.  On this basis, the defendant has made an open offer to pay $10,013.67 in full and final settlement of the plaintiff’s claim for post-judgment interest.[5]

30.  Mr Chow pointed out it is clear from the Court of Appeal judgment that this court considered the master’s decision was wrong in principle and sufficient grounds had been made out for the judge to interfere with the master’s decision, and it was the judge’s error in failing to exercise his discretion on taxation afresh that we decided to interfere with his decision and to exercise the discretion afresh.  Mr Chow submitted that the order we made on allowing the appeal that 1.5 partner’s fees should be allowed on taxation is to give effect to the judge’s observation about the circumstances in which a junior solicitor may justifiably be engaged to assist the partner[6], it was not to restore the master’s decision to allow the fees of two partners as sought by the plaintiff on appeal.  The master’s decision had been set aside and could not be regarded as restored.

31.  Mr Chow further relied on this passage in §42/3/2 of Hong Kong Civil Procedure 2018, vol 1: “Where a judgment is set aside by the Court of Appeal and another judgment ordered to be entered in its place, the practice is to date the second judgment as of the date of the order of the Court of Appeal, and interest upon the debt or damages to be recovered runs from that date unless the Court of Appeal should make an order under this rule, antedating its judgment.”  In this instance, the Court of Appeal did not make any order antedating its judgment.

32.  We do not think it is correct that the entitlement to 1.5 partner’s fees only arose from the Court of Appeal judgment. We think it is right to break this down into one partner’s fees and another sum equivalent to 0.5 partner’s fees, as submitted by Mr Chiu.  It is clear from the defendant’s objection filed in support of his application for review that it was accepted he should bear the fees of one partner.  Plainly, this part of the taxed costs awarded on 27 January 2016 had survived the two reviews and the appeal, notwithstanding that the master’s decision was set aside and the discretion in taxation was exercised afresh, first by the judge and later by the appeal court.  Post-judgment interest on the fees of one partner should run from 27 January 2016, not the date of the Court of Appeal judgment.  §5 of the proposed order gives effect to the intention of the court in this regard, subject to one qualification.  The defendant had paid $1.2 million to the plaintiff on 23 March 2016, it would appear that he has paid the bulk, if not the entirety[7], of the taxed fees of one partner.  The plaintiff must give credit for the payment received and interest is payable only in respect of any amount outstanding during the period commencing from 27 January 2016.

33.  As for 0.5 partner’s fees, we think it is correct to say that notwithstanding the master’s award of the fees of two partners was set aside and the discretion in taxation was exercised afresh by the judge on review and later on appeal, looking at the substance of the master’s decision and the judgment of the Court of Appeal, the plaintiff was entitled to at least 0.5 partner’s fees from the date of the master’s award.  This is different from the situation in which a successful party on appeal is held to be entitled to a sum of money for the first time.  The passage in §42/3/2 of Hong Kong Civil Procedure 2018 cited by Mr Chow does not apply to this kind of situation.  Interest should run from the date of the master’s award on 27 January 2016 at the judgment rate, except for the period from 5 July 2017 to 27 February 2018, in which interest at the rate of 1% over the HSBC best lending rate is substituted, for the reasons submitted by the plaintiff as mentioned earlier.

34.  We are satisfied that §§4(i) to (iii) do give effect to the intention of the court, subject to the same qualification that the plaintiff should give credit for the payments made by the defendant in the amounts of $305,000 on 2 May 2018 and $372,851.33 on 8 May 2018, and that interest is payable only in respect of the outstanding amount at the specified interest rate during the relevant period.

Conclusion and orders

35.  For the above reasons, we make an order in terms of the proposed §§4 and 5 in the plaintiff’s amended summons, save that each of §§4 and 5 is qualified by the insertion of these words at the beginning of each paragraph: “Insofar as any amount was outstanding on the costs allowed on taxation as stipulated below in the relevant period,”.

36.  We make an order nisi as to costs with gross sum assessment.

37.  There is no reason why costs of this application should not follow the event.  We order the defendant to pay the plaintiff’s costs.  We reduce the fees in the statement of costs lodged by the plaintiff to $111,664.  Any party wishing to vary the costs order nisi or gross sum assessment should apply within 14 days of the handing down of this judgment.