ASM ASSEMBLY AUTOMATION LTD AND ANOTHER v. CHAN LO KWAN AND ANOTHER

HCA 7622 /1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7622 OF 1999

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DECISION

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Background

1. In this action, in essence the plaintiffs’ claim against the defendants is for breach of copyright of the plaintiffs’ design of a device known as an aluminium border.  It was alleged that 1^st Defendant and several other members of the dramatis personae were originally employed by the plaintiffs, and when they left, they took certain information and/or drawings with them.

2. The action commenced in 1999, and after a period of inactivity, the defendants took out an interlocutory Summons dated 25 August 2004 to strike out the plaintiffs’ action because of their inexcusable delay in proceeding with it, to the prejudice of the defendants.  That Summons was fixed for hearing before Deputy Judge Muttrie on 28 January 2005.  On that day, the plaintiffs’ counsel sought an adjournment.  The plaintiffs told the judge that an important witness had “surfaced”, and the plaintiffs wanted to put in another affirmation.

3. The adjournment was granted by the judge on terms.  The Order given was in the following terms:

“	1.	Leave be granted for the 1st and 2nd plaintiffs to file and serve further affidavit in opposition within 7 days from the date hereof;
	2.	Leave be granted for the 1st and 2nd defendants to file their affidavit in reply, if so advised by counsel within 14 days thereafter;
	3.	The hearing for the 1st and 2nd defendants’ Summons be adjourned to a date to be fixed in consultation with counsel’s diary with one day reserved;
	4.	Costs of and occasioned by this adjournment be to the 1st and 2nd Defendants with certificate for 2 Counsels and such to be taxed if not agreed and be paid forthwith.”

4. The taxation of that Order came before me on 17 February 2006.  The parties could not agree upon the meaning, definition or effect of the phrase “costs of and occasioned by”, even though this phrase is used practically every day in the courts.  Neither side thought it fit to provide me with any authority in support of their respective interpretations of the phrase “costs of and occasioned by”.  In order not to waste the hearing, I went on to tax as many items as possible in the circumstances.

5. I gave directions for the parties to supply me with authorities in support of their respective interpretations of the phrase “costs of and occasioned by” within 14 days.  I indicated that having considered their authorities, I would decide on Items 5, 6, 45 and 46 of the Bill and then hand down a written decision.  As the receiving party had argued that the skeleton submissions had to be substantially re-done for the adjourned, I asked the receiving party to “prepare a chart showing the differences, if any, in the skeleton submissions for 28 January 2005 and 28 September 2005.”

6. It should be recalled that in the action, the defendants alleged that no question of infringement arose as they had separately and independently developed their own project for the aluminium bonder.  Unfortunately, due to passage of time, 3 key members of the defendants’ development team would not now be available as witnesses.  These were : Mr Tan who passed away in 2003; Mr Yan (“Yan”) who had emigrated to Australia in 2001; and a Mr CC Chan whom the defendants had lost touch with since 1999.  The defendants argued that they were prejudiced as a consequence, and took out the Summons to Strike out the plaintiffs’ claim.  The Summons was scheduled to be heard before Deputy Judge Muttrie on 28 January 2005.  On that day, the plaintiffs applied for an adjournment on the basis that fresh information had come to light in relation to Yan, one of the so-called “missing witnesses”.  The adjournment which was granted, but the plaintiff was ordered to the bear costs I was called upon to tax.

7. After the adjournment, and in compliance with Judge Muttrie’s Order dated 28 January 2005 the paying party (the plaintiffs) filed the 2^nd Affirmation of Fung Shu Kan, the Financial Director of P1. In essence that affirmation said that Yan was previously employed by the plaintiff; Yan’s work did not involve the development of aluminium bonders; but records showed that Yan’s wife, another former employee of the plaintiff did have access to the technical drawings of the aluminium bonders.  The Affirmation concluded that it could not have been possible for the defendants to have independently developed their own aluminium bonders.  The other affirmation filed that day (of Ching Lit Mei Assistant solicitor of plaintiffs’ solicitors) was for the sole purpose of adducing the English translation of a document exhibited to Mr Fung Shu Kan’s 2^nd Affirmation.

8. On 7 March 2005 the receiving party (the defendants) filed the 3^rd affirmation of 1^st Defendant in response to Mr Fung Shu Kan’s 2^nd Affirmation.  After that the plaintiffs filed 2 more affirmations (Liu Chou Kee Peter 14 May 2005) and (Leung Wing Kin Simon 14 May 2005).  It is not readily apparent how the last 2 affirmations come within Deputy Judge Muttrie’s Order dated 28 January 2005 but that objection was not taken before me.

The phrase “costs of and occasioned by”

9. A pithy definition of the meaning of the phrase “costs of and occasioned by” was given by Hill J in The Lord Strathcona (No 2) [Probate, Divorce and Admiralty Division] [1926] P18.  His Lordship stated that ““costs of and occasioned by the intervention” means all plaintiff’s costs subsequent to the intervention except such as the plaintiffs would have incurred if there had been no intervention.”

10. The case of The “Nyland” Admiralty Division [1964] 1 Lloyd’s Rep 319 contains a lengthy and useful discussion between court and counsel on the meaning of the scope of “costs of and occasioned by”.  I shall endeavour to give a summary of that case, as the discussion therein is very helpful in the application of the phrase “costs of and occasioned by” in our present taxation.

11. The “Nyland” concerned a claim for collision damage. The tanker Tectus was damaged due to the Nyland’s negligence.  During the hearing, and after many witnesses had given evidence, the defendant sought to amend its pleadings in relation to damages.  Having heard counsel, the judge Hewson J allowed the defendant’s application to amend, but on terms. Hewson J first made an order that the plaintiff was to pay the costs of the action generally. The judge then ordered the defendant to “pay the plaintiff the costs of and occasioned by the amendment” (of the defendant’s particulars of disputed damage.)  The matter then went to taxation.  The taxing Master took the view that “costs of and occasioned by” included the costs of determining the issues raised by the amendment.  It came back before the judge. Hewson J declared that the taxing master was wrong, as “costs of and occasioned by” did not include the costs of determining the issues raised by the amendment.  He explained that, although the plaintiff had been ordered to pay defendant’s costs of the action generally, the plaintiff should not be responsible for certain costs.  For convenience I have summarized them below.  According to Hewson J. the plaintiff (in his action) would not be responsible for:

	The costs of the defendant’s amendments or the plaintiff’s consequential amendments;
	Any costs due to the amendments being raised late;
	Any costs due to having to deal with the amendments separately instead of concurrently with other matters;
	Consultation with counsel as to the future conduct of the case in the light of the amendments;
	Enquiries of witnesses who had already given evidence at trial; and
	Additional expenses in consultation with experts because of amended matters.

12. Hewson J then stated that it was not possible to foresee or catalogue all the additional expenses that might arise incidental to such a situation, but that the plaintiffs are “entitled to such additional costs as would not have been incurred if the defendant had delivered their pleadings originally in the amended form”.

The test to be applied

13. Guided by the principles elucidated from the cases above, I have formulated a test to decide whether an item can be regarded “costs of and occasioned by” the adjournment.  The test is in the following terms: “Would this item of costs have been incurred by the receiving party irrespective of whether there was an adjournment on 28.1.05?  If the answer is “Yes”, then the paying party would not be liable for that item of costs, as that item of costs cannot be regarded as “costs of and occasioned by” the adjournment.  But if the answer is “No”, that item of costs will be regarded as “costs of and occasioned by” the adjournment, and the paying party would be liable for it.

Items 5 & 6

14. Item 5 is described in the Bill as “6 December 2004 Attending conference with junior counsel Mr Edward Shum and the client to prepare for the hearing (1 hour-PM)”.  Item 6 relates to payment of counsel’s fees of that conference.

15. Applying the test formulated in paragraph 13 above, the paying party would not be liable for Items 5 & 6 because a conference with junior counsel would have taken place in any event on 6 December 2004.  These costs are not “costs of and occasioned by” the adjournment on 28 January 2005.

Items 45 and 46

16. These relate to the fees of Senior Counsel for the receiving party, Mr Andrew Liao SC, and for junior counsel for attending the hearing on 28 January 2005.  The fees cannot be regarded as “costs of the adjournment and occasioned by the adjournment”.  The short answer is that both counsels would have attended the hearing on 28 January 2005 in any event. Counsels’ fees would have been incurred irrespective of whether there was an adjournment.  It must be noted that the application for the adjournment was made on the day of the hearing itself, and there is nothing before me to indicate that the receiving party knew in advance that the plaintiffs would be seeking an adjournment before Deputy Judge Muttrie on 28.1.05.

The fresh skeleton Submissions for 28.9.05

17. Applying the test formulated in paragraph 13 above, “Would this item of costs have been incurred by the receiving party irrespective of whether there was an adjournment on 28.1.05?  The answer must be “No”, because there would not have been any need to attend again in September 2005.  The arguments would have concluded in January 2005.  Could the paying party argue that there should be an apportionment, in the sense that some parts of the January skeleton could be re-used in September?  In my view it would not be appropriate to allow such an argument.  The skeleton submissions of counsel are the outlines of the arguments they intend to advance at the hearing.  They represent the fruits of counsel’s deliberations and strategy.  Skeleton submissions are not analogous to a piece of handicraft and susceptible to “cut and paste” technique, and therefore it would be wrong in principle to compare the skeleton submissions to see whether there are “new” parts.  An adjournment must necessitate a re-assessment of the receiving party’s position by c1ounsel in the light of new information.  Therefore it will be irrelevant if some matters have already been mentioned in the January skeletons.

18. I do not think that it would be appropriate of me to award any costs for the “research” done after the hearing on 17 February 2006 in relation to authorities on the meaning of, or decided cases on the phrase “costs of and occasioned by”.  The work should have been done in preparation for the hearing on 17 February 2006.  Furthermore, the material sent into the court by both sides subsequent to the taxation hearing was not useful.

19. The parties should now be in a position to calculate the remaining items in the Bill and proceed to the issuance of an Allocatur. Out of an abundance of caution, I give liberty to apply within 14 days if necessary.  Parties are reminded of the importance of adhering to paragraph 3 of Practice Direction 4.3.