THE JOINT AND SEVERAL TRUSTEE OF THE PROPERTY OF SO CHING WAN v. ASSEN LTD (IN LIQUIDATION) AND OTHERS

CACV 339/2024, [2025] HKCA 1107

On Appeal From [2024] HKCFI 1877

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 339 OF 2024

(ON APPEAL FROM HCB NO. 4475 OF 2002)

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JUDGMENT

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Hon Cheung JA (giving the Judgment of the Court) :

I.  The appeal

1.  This is an appeal by the Applicant against the judgment dated 18 July 2024 by Deputy High Court Judge Phoebe Man (‘DHCJ Man’) who dismissed the Applicant’s application for review of Master Lai’s Determination dated 14 June 2024 (‘the Determination’). By the Determination, Master Lai dismissed the Applicant’s application for review of his decision on taxation dated 16 October 2023.

II.  Background

1)  The proceedings

2.  We will refer to the background of the case summarised in the Determination and supplemented it by matters gleaned from the court documents :

(1)  Mr Alan Chung Wah Tang (‘Mr Tang’) and Mr Wong Kwok Man (‘Mr Wong’) were appointed as the joint and several trustees of the property of a bankrupt Mr So Ching Wan (‘the Bankrupt’) on 14 November 2002.

(2)  On 7 June 2016, Chung J made an order, pursuant to an application made by the Applicant under section 29(1) of the Bankruptcy Ordinance (Cap. 6), requiring the respondents to provide answers and documents as set out in Annex A and Annex B of that order (the ‘2016 Order’).

(3)  On 12 October 2018, the Applicant issued a summons (the ‘Enforcement Summons’) under section 29 of the Bankruptcy Ordinance and Order 45 of the Rules of the High Court (the ‘RHC’) against the respondents to enforce the 2016 Order. The 1^st Respondent by then was in liquidation and Mr Lau Siu Hung (‘SL’) and Mr Liang Yang Keng were appointed as liquidators of the 1^st Respondent on 2 November 2016. The Applicant also issued another summons dated 6 November 2018 seeking leave to continue these proceedings against the 1^st Respondent retrospectively given its liquidation (the ‘Leave Summons’).

(4)  The Enforcement Summons was supported by the 3^rd affirmation of Mr Tang filed on 12 October 2018 as ‘one of the joint and several trustees‑in‑bankruptcy of the property of the Bankrupt’. No supporting affidavit or affirmation had been filed in respect of the Leave Summons.

(5)  The Enforcement Summons was amended on 22 November 2018 (the ‘Amended Enforcement Summons’) and supported by the 5^th affirmation of Mr Tang on 7 March 2019.

3.  The matter came before Deputy High Court Judge William Wong SC (‘DHCJ William Wong’) on 27 May 2019. The 1^st Respondent was not legally represented. SL, one of its joint and several liquidators, conducted the proceedings on its behalf. On 6 June 2019, DHCJ William Wong dismissed the Amended Enforcement Summons and the Leave Summons and ordered the Applicant to pay the costs of the respondents for both summonses which costs order was varied on 2 July 2019 (the ‘Costs Order’) when he, on the 1^st Respondent’s application, ordered the Applicant to pay the 1^st Respondent the costs together with the reserved costs of the 2016 Order on an indemnity basis to be taxed if not agreed. The Applicant indicated that it would make no submission on the 1^st Respondent’s variation application. DHCJ William Wong ordered indemnity costs because

‘ 61. I am of the view that it is unreasonable and unnecessary to join the liquidators of the 1^st respondent to the present application. There is also no basis for the Leave Summons. Accordingly, it is proper that costs should be awarded to the 1^st respondent on an indemnity basis.’

4.  The Applicant appealed to this Court in CACV 306/2019 against the decisions of DHCJ William Wong. The Appeal was dismissed on 29 December 2020 with costs on indemnity basis to be paid by Mr Tang personally and not from the estate of the Bankrupt. This Court found that ‘the proceedings had all along been conducted by Mr Tang’.

2)  The Taxation

5.  On 30 June 2021, the 1^st Respondent commenced the taxation under the costs orders and filed his bill of costs. The Applicant, then represented by Stevenson Wong & Co, filed its list of objections to the bill.

6.  The taxation hearings for the bill took place before Master Lai on 16 June 2023 and 16 October 2023 (the ‘Taxation’). Master Lai described the objections by the Applicant as follows :

(1)  no basis for costs claims (‘Issue 1’);

(2)  litigant in person (‘Issue 2’);

(3)  presentation of time costs and grossly excessive time charges (‘Issue 3’); and

(4)  charging for work irrelevant to the proceedings (‘Issue 4’).

7.  Master Lai addressed these issues and taxed the 1^st Respondent’s costs at $835,722.

3)  The review by Master Lai

8.  After the Taxation, on 8 January 2024, the Applicant issued a summons to review the taxed costs (the ‘Review Application’). The hearing of the Review Application took place on 21 March 2024. The Applicant relied on the following four grounds to challenge the award of 43 items (‘the Review Items’) given by Master Lai :

(1)  Hourly rates of fee earners should be further reduced (‘Ground 1’);

(2)  SL being litigant in person (‘Ground 2’);

(3)  Excessive time charged/irrelevant works (‘Ground 3’); and

(4)  No leave had been obtained from the Court under sections 182 and 199 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) (the ‘Ordinance’) (‘Ground 4’).

9.  Master Lai stated that the Applicant relied on Grounds 1, 2 and 3 for review of all the Review Items. He further relied on Ground 4 for review of items 1‑4, 11‑18, 25.1‑25.9 of section A of the bill. Some of the grounds had been raised as the objections in the taxation hearing. Grounds 1 and 2 had been raised as Issue 2. Ground 3 had been raised as Issues 3 and 4.

10.  Master Lai dismissed the review application. He addressed the grounds of review. In order to fully understand the arguments in this appeal, we will provide extracts of Master Lai’s decision on the grounds raised by the Applicant :

(1)  No basis to costs

11.  The 1^st Respondent was not represented by lawyers in the proceedings leading to the costs orders. It was represented by SL, one of the liquidators. Master Lai referred to Order 62, rule 28A of the RHC which deals with costs of a litigant in person and Cheuk Shu Yin v Law Yeuk Kam (No 2) [2018] 2 HKLRD 249 and held :

‘ 34. There is no dispute that SL is a professional accountant, not a practising solicitor. As such, when he conducted these court proceedings by himself as liquidator of the 1^st respondent, he would be treated as litigant in person.

....

36. SL based on the Standard Rates of Fees Approved by the Official Receiver in consultation with the Hong Kong Institute of Certified Public Accountants in 2012 (the “Standard Rates”) to claim $6,124 per hour for himself and NK. The Standard Rates are meant to be charging rates for liquidators doing liquidation works. SL and NK as professional accountants may charge $6,124 per hour to act as liquidators of a company. In conducting court proceedings, they are not conducting liquidation business and thus may not charge their fees at the usual rates payable for their professional liquidation works. However, I accept that as professional accountants and liquidators, they would be able to earn $6,124 per hour during their normal working hours but for engaging in these court proceedings. I am satisfied that SL and NK had suffered pecuniary loss to the extent of $6,124 per hour in handling these court proceedings to deal with the Summons, the Amended Summons and the Leave Summons.

37. SL was the liquidator of the 1^st respondent. He dealt with these court proceedings as liquidator of the 1^st respondent. The 1^st respondent would be liable to pay SL his professional fees for providing his service to the 1^st respondent. Whether the 1^st respondent has the ability to pay or whether the 1^st respondent may fully recover such fees from the Paying Party is neither here nor there.’

12.  He rejected the argument of the former counsel for the Applicant that the remuneration of the 1^st Respondent’s liquidator should be subject to ‘the taxation regime under HCCW 299/2016’, meaning the insolvency regime. He held that the Applicant had confused the liquidator’s remuneration in a liquidation with the costs of a party to liquidation :

‘ 39. ....SL had dealt with these court proceedings for the 1^st respondent, he was entitled to charge 1^st respondent for the works done. Whether SL’s such fees will be allowed as remuneration of liquidator under the statutory insolvency regime has no relevancy to the obligations of the Paying Party under the Costs Order.’

(2)  SL being a litigant in person

13.  The Applicant’s objection is that since the 1^st Respondent acted in person, SL had to prove for his pecuniary loss by affidavit evidence. Master Lai held :

‘ 46. In the Review Application, Mr Tang contended that the 1^st respondent acted in person and SL had the burden of proof for his pecuniary loss by affidavit evidence. In the Cheuk Shu Yin (No 2) case (supra), the Court of Appeal stated that if the litigant in person had no job but claimed to have suffered pecuniary loss, he would need to prove his claim by an affirmation. However, this is not the case before me. SL is a professional accountant and liquidator engaging full time in his professional works. Pursuant to the Standard Rates, he may charge $6,124 per hour for his professional works. I am satisfied that by engaging himself to deal with these court proceedings, SL lost the opportunity to earn professional fees at the rate of $6,124 per hour and thus suffered pecuniary loss. No affirmation on his pecuniary loss will be called for in the circumstances of this case.’

(3)  Excessive charges

14.  The Applicant sought to review Master Lai’s ruling of the 43 items. Master Lai in the taxation hearing had already taxed down the bill by 45%. In the review, he held :

‘ 62. ...For items in section A of the Bill, this has to be considered in the context of a taxation on indemnity basis, ie whether the costs claimed were of an unreasonable amount or had been unreasonably incurred and any doubts as to whether the costs were reasonably incurred or were reasonable in amount shall be resolved in favour of the Receiving Party. (Order 62 rule 28(4A) of the RHC).’

15.  After reviewing the 43 items, he held that :

‘ 194. I see no merits in Mr Tang’s review application for these items and maintain my previous rulings on these items made at the Taxation.’

(4)  Leave to proceed/sanction under section 186 and section 199 of the Companies Ordinance

16.  In respect of the leave to proceed, Master Lai held :

‘ 52. In referring to section 186 of the Ordinance, Mr Tang contended that:

“ The Leave Summons under s.186 CWUMP was dismissed, by DHCJ Wong in 2019. So R1 is not, and technically never has been, a party to the s29 Amended Summons. Its participation in the s29 Amended Summons thus was limited to locus standi to be sued. Due to A [ie the applicant] failed to pass the Leave Summons hurdle, R1 did not need to deal with the substantive part of the s29 Summons.” ([7] of the Review Submission)

53. In advancing the aforesaid contention, Mr Tang seemed to have forgotten the fact that the Amended Summons and the Leave Summons were substantially disposed of by the learned Deputy Judge at the same hearing. By the time the Leave Summons was dismissed, all costs incurred by the 1^st respondent for the Amended Summons had already been incurred.

54. After dismissing the Leave Summons, the learned Deputy Judge, in the Judgment dated 6 June 2019, not only awarded the costs of the Leave Summons, but also the costs of the Amended Summons, to the 1^st respondent. The learned Deputy Judge not only awarded costs to the 1^st respondent for both summonses but costs on indemnity basis. The Paying Party had applied to vary the Costs Order without success when the learned Deputy Judge affirmed the Costs Order on 2 July 2019.

55. If Mr Tang contended that the learned Deputy Judge should not have awarded costs for the Amended Summons in favour of the 1^st respondent, the only venue was for the Paying Party to take the matter to the Court of Appeal which the Paying Party had done. However, the Appeal was dismissed, again with costs on indemnity basis in favour of the 1^st respondent. It is not opened to the Paying Party to have the second bite or third bite of cherry. In fact, I have no jurisdiction to overturn the Costs Order. (See Cope v United Dairies (London) Limited [1963] 2 QB 33)’

17.  In respect of the failure of the liquidators to obtain sanction under section 199, Master Lai held that retrospective leave had been obtained by SL. He further held :

‘ 57. In re A Debtor (No 26A of 1975) [1985] 1 WLR 6, it was held that the purpose of similar provision in the English Bankruptcy Act 1914 requiring the trustee-in-bankruptcy to obtain sanction of the committee of inspection to defend any legal proceedings was to protect the bankrupt’s estate. Scott J stated that: “The purpose of the section is not, however, to protect third parties and the absence of any requisite sanction does not confer a defence on third parties.” ([1985] 1 WLR 6 at 10)

58. The same equally apply to sanction required under section 199 of the Ordinance. If a solicitor had been engaged for the 1^st respondent, the lack of section 199 sanction would not prevent the recovery of fees by the solicitor for providing services to the 1^st respondent. I am of the view that without such sanction, SL might not recover his fees as liquidator for liquidation works but he should still be able to recover fees for his services rendered to the 1^st respondent as litigant in person in the legal proceedings. In any event, this is only of academic interest for this case as retrospective sanction under section 199 of the Ordinance had been granted to the liquidators of the 1^st respondent on 19 September 2022 to defend the Amended Summons and the Leave Summons, any irregularities would have been rectified. (See In re A Debtor (supra)).’

4)  The review before DHCJ Man

18.  The Applicant represented by his then counsel relied on the following five grounds in the review hearing before DHCJ Man :

‘(1)  The 1^st Respondent had been wound up. The liquidator of the 1^st Respondent did not seek leave to defend the summons heard before DHCJ William Wong and as such had no locus to appear before the Judge. It was submitted that Master Lai did not have jurisdiction to make the costs order in favour of the 1^st Respondent’s liquidators (the ‘Jurisdiction Complaint’).

(2)  Master Lai erroneously refused discovery sought by the Applicant on the items/documents for time allegedly spent by the 1^st Respondent for preparation of the hearing. There was thus no basis for the Master to arrive at the quantum of costs as he did (the ‘Discovery Complaint’).

(3)  The 1^st Respondent had no assets and the liquidator was effectively claiming their remuneration as liquidators of the 1^st Respondent from the Applicant. The Master was wrong to have ignored this fact and allowed the 1^st Respondent’s costs (the ‘Remuneration Complaint’).

(4)  The 1^st Respondent acted in person and should not have been able to claim professional charging rate (the ‘Charging Rate Complaint’).

(5)  The quantum allowed by the Master was in any event excessive (the ‘Quantum Complaint’).’

5)  DHCJ Man’s decision

19.  DHCJ Man dismissed the Applicant’s application and held that these grounds relied on by the Applicant was completely unmeritous. She ordered indemnity costs against the Applicant. In respect of the complaints,

(1)  Jurisdiction Complaint/Remuneration Complaint

20.  She held :

‘ 8. The learned Master’s task was only limited to taxing the [1^st respondent’s] bill of costs. He had no jurisdiction to determine, at the taxation stage, to disallow the taxation of [the 1^st respondent’s] costs, which would in effect overturn the costs order made by DHCJ William Wong S.C.

9. The Applicant had in fact applied to vary the costs orders before DHCJ William Wong S.C. and such application was dismissed.

10. If the Applicant had wished to object to the costs order granted by the Judge, he should have lodged an appeal against such costs orders, which he did and the appeal was dismissed.’

(2)  The Discovery Complaint

21.  She held there was no discovery application before Master Lai. In any event, it did not fall within a review of a decision on a taxation review.

(3)  The Charging Rate Complaint

22.  She held :

‘ 13. [The 1^st Respondent] clearly dealt with the proceedings before DHCJ William Wong S.C. as liquidator of the wound up company. He acted in a professional capacity offering his services to the wound up company. I do not understand on what basis Mr Chu could submit that the [1^st Respondent] acted in person in the sense that he had personal interest in the litigation. There is no merit in this ground.’

(4)  The Quantum Complaint

23.  She held that the Applicant did not point to any particular item that ought to be reviewed. Master Lai had taxed off 45% of the 1^st Respondent’s bill of costs. The taxation was on indemnity costs basis and the Applicant had not been able to point out what error Master Lai had committed.

III.  The principles

1)  Review of taxation

24.  Order 62, rule 33 and rule 34 of the RHC provide for the review by the taxing master of his decision on taxation of costs. Order 62, rule 35 further provides for the review by a judge of the review decision of the Master.

2)  The approach

25.  The correct approach on a review by a judge of the taxing master’s review decision is decided in Lam and Lai Solicitors v Ho Chun Yan Albert [2018] 2 HKLRD 127. After referring to two earlier line of authorities on what was the correct approach, and Bharwaney J’s judgment of Chan Yin Na v Union Medical Centre Ltd [2011] 5 HKC 158 who adopted the approach of the first line of authorities, namely, a review of taxation by a judge under Order 62, rule 35 is not a hearing de novo, and the judge should only interfere with the decision of the taxing master in limited circumstances: if it is shown to have been arrived at under a mistake of law, or in disregard of principles, or under a palpable misapprehension as to the facts, or plainly in reliance on irrelevant matters, or to be such as to fall outside the generous ambit within which reasonable disagreement is possible, Kwan VP held :

‘ 29. Insofar as there is any confusion as to the appropriate approach, I wish to state clearly that in my view the decision in Chan Yin Na is correct. As Bharwaney J rightly stated in [26], the parties to taxation already enjoy a right of review before the taxing master under O.62 rr.33 and 34, in which the master may “exercise all the powers he might exercise on an original taxation”. In applying for a second review before the judge, the aggrieved party must first request the master to state the reasons for his decision in respect of that item or part and any special facts or circumstances relevant to it. The taxing master is the primary decision maker under the statutory mechanism. The relevant provisions in O.62 rr.34(2), (4) and 35(1) support the conclusion that the judge, in the second review of the matters of complaint, does not conduct a taxation de novo and should not interfere with the taxation decision, which is essentially a matter for the discretion of the master, save on limited grounds.’

26.  This approach was applied in the judgment of Deputy High Court Judge Reyes SC (‘DHCJ Reyes’) in [2024] HKCFI dealing with the Applicant’s review application of the 2^nd, 3^rd and 4^th Respondents’ costs taxed by Master Lai and reviewed by him in the same proceedings as the present one. DHCJ Reyes stated :

‘ 10. What must be shown is that Master Lai erred on the law, disregarded operative principles, misapprehended the facts, or plainly relied on irrelevant matters. That means that an applicant has a high threshold to meet on a judge’s review of a master’s taxation.’

27.  In Lam and Lai Solicitors, Kwan VP went on to deal with the approach of the Court of Appeal in hearing an appeal from the judge who has dealt with the review of the taxing master’s review decision. It is of note in that case, the judge disagreed with the taxing master and taxed off part of the costs. On this basis, Kwan VP accepted the submission of the appellant that the focus should first be on the decision of the taxing master :

‘ 32. I think that is correct. On our scrutiny of the Master’s decision, if there is no ground to interfere with his decision, the Judge’s decision must be set aside and the Master’s decision restored. If, however, the Judge is correct in holding that the Master has erred for one reason or other, the Judge would be entitled to exercise his discretion in the taxation afresh. It would then be for this Court to examine if there is any basis to interfere with the fresh exercise of discretion by the Judge, applying the familiar orthodox principles as mentioned in Poon Shu Fan v Wong Tin Yan and Chan Man Pan v Fu Fung Yan Cafornia.’

28.  In the present case, the Judge affirmed the decision of the Master. Hence, the focus of this Court must be on the decision of the Judge, as in the case of an appeal to this Court from a judge’s decision, and the threshold for interference of her exercise of discretion by this Court is whether it has been arrived at under a mistake of law, or in disregard of principle, or if she has taken into account some matter she should not have, or if the decision was plainly wrong. In so doing, reference must also be made to Master Lai’s Determination.

3)  Costs for litigants in person

29.  Order 62, rule 28A provide that :

‘ (1) On a taxation of the costs of a litigant in person there may, subject to the provisions of this rule, be allowed such costs as would have been allowed if the work and disbursements to which the costs relate had been done or made by a solicitor on the litigant’s behalf.

(2) The amount allowed in respect of any item shall be such sum as the taxing master thinks fit not exceeding, except in the case of a disbursement, two‑thirds of the sum which in the opinion of the taxing master would have been allowed in respect of that item if the litigant had been represented by a solicitor.

(3) Where in the opinion of the taxing master the litigant has not suffered any pecuniary loss in doing any work to which the costs relate, he shall not be allowed in respect of the time reasonably spent by him on the work more than $200 an hour.

(4) A litigant who is allowed costs in respect of attending Court to conduct his own case shall not be entitled to a witness allowance in addition.

(5) Nothing in Order 6, rule 2(1)(b), or rule 32(4) of this Order or the Second Schedule to this Order shall, unless otherwise specified therein, apply to the costs of a litigant in person.

(6) For the purposes of this rule a litigant in person does not include a litigant who is a practicing solicitor but includes a company or other corporation which is acting without a legal representative.

(7) This rule applies, with the necessary modifications, to a summary assessment under rules 9(4)(b), 9A(1)(a) and (b) and 11A(4), as it applies to the taxation of the costs of a litigant in person, if the party entitled to the sum is a litigant in person.’

30.  In respect of the costs for litigants in person under Order 62, rule 28A, Chu JA stated in Cheuk Shu Yin v Law Yeuk Kan (No 2) [2018] 2 HKLRD 249 as follow :

‘ 4. As to the legal principles applicable, since the two defendants are not represented, the provisions in O.62 r.28A of the Rules of the High Court (Cap. 4A, Sub.Leg.) apply. The Court of Appeal gave a clear explanation on the amount of costs a litigant in person may be awarded in FOK Siu Wing (transliteration) v Independent Commission Against Corruption (CACV 341/2005, [2006] CHKEC 746, 27 April 2006):

(1) If a litigant in person, who is gainfully employed, needs to do the work in relation to the litigation during his working hours, the maximum costs allowed is two-thirds of the sum which would have been allowed to a solicitor for doing that work.

(2) If the litigant in person has no job or could handle the work in relation to the litigation at his spare time, he has not suffered any actual pecuniary loss and hence shall not be awarded costs under the indemnity principle of the common law. However, pursuant to O.62 r.28A(3), he may be allowed costs of not more than $200 per hour. The number of hours allowed in O.62 r.28A(2) is the time a solicitor would have spent on that item, not the time the litigant in person has actually taken.

(3) If the litigant in person has no job but claims to have suffered pecuniary loss, he will need to prove his claim by an affirmation, which would include providing proof of his academic qualifications, working experience, loss of income etc.’

IV.  Grounds of appeal

1)  The Applicant’s arguments

31.  The Applicant relies on ten grounds of appeal which Ms Kwok for the Applicant in her submissions grouped them under two heads, namely, (1) Error of law: Recoverability of Liquidators’ Costs and (2) The Judge’s Failure to Exercise Discretion Afresh. The relief sought by the Applicant in this appeal are :

(1)  The Applicant’s review application pursuant to Order 62, rule 35 of the RHC (Cap. 4A, Laws of Hong Kong) be allowed; and

(2)  The 1^st Respondent do pay the costs of this appeal and below.

32.  At the beginning of the appeal, Ms Kwok informed the Court that she would not ask for the first relief. The reason for this is that Mr Wong, the other joint and several trustees of the Bankrupt, had on 17 March 2025 settled with the 1^st Respondent by paying the taxed costs and interest of $821,628.96 to the 1^st Respondent. However, Ms Kwok stated that her instruction is that the Applicant would still ask for the second relief by challenging the indemnity costs order and in her arguments on costs she would still advance her grounds of appeal relating to the merits of the appeal.

(1)  Error of law: Recoverability of Liquidators’ Costs

33.  Ms Kwok’s submissions under this heading consist of four aspects :

i)  Liquidators’ remuneration and not legal costs

34.  Ms Kwok submitted that DHCJ Man erred in failing to appreciate that the costs of the liquidators of the 1^st Respondent (‘the Liquidators’) should not be recoverable under the Costs Order when it was ‘effectively seeking remuneration from [the Applicant]’. The Liquidators were acting in person. The starting point is that ‘[a] non-solicitor litigant in person, even if a professional, cannot recover costs in respect of his time spent, other than in respect of time spent on matters within his own professional expertise and requiring the attention of an expert. The position of an office‑holder (liquidator/administrator) is no different. Even if the office‑holder had to bring or defend litigation, that did not mean that it was part of his profession to conduct litigation, in the way that it was part of the profession of a solicitor to do so’: Civil Costs, by Hurst (6^th Edn.), [20]‑[31]. She referred to In the Matter of Legend International Resorts Ltd (Company No. 278606) (In Liquidation) (HCCW 1139/2004, 12 April 2011), where Fok JA (as he then was) held that :

‘14. ... In my view, [the Liquidators’ own fees and non-legal expenses] should be paid from the assets of the Company…

15. The Liquidators’ submission that these should form part of the taxable costs as between themselves and the Applicant would make the Applicant an underwriter for the Liquidators’ conduct of the liquidation. I do not think that would be right. Similarly, I do not consider that the risk that these fees and non-legal expenses would have to be borne by the Liquidators themselves if the estate of the Company were insufficient to meet them, or that the Company would be prejudiced even if it had sufficient funds, is a good reason to make the Applicant liable for them

16. ....The Liquidators’ fees and non-legal expenses from resisting the Applicant’s summons arose from their acting in the course of the liquidation. To the extent that they were properly incurred, the Liquidators should be entitled, in my view, to look to the Company’s assets for payment of them’

35.  She submitted that the time and expenses incurred by the Liquidators in their capacity as office‑holders of the 1^st Respondent in liquidation, cannot be recovered against the Applicant as costs payable by an adverse litigant, even if the time was spent on fending off the litigation. Claims for such remuneration are governed by the Procedural Guide for Taxation/Determination of Bills of Provisional Liquidators or Liquidators. In particular, when it comes to professional litigant in person ‘the office-holder’s remuneration is controlled by the court under the insolvency regime’: Sisu Capital Fund Ltd and others v Tucker and others [2006] 2 Costs L.R. 262, [32]. It was erroneous for Master Lai to assert that ‘[39] ...[w]hether SL’s such fees will be allowed as remuneration of liquidator under the statutory insolvency regime has no relevance to the obligations of the Paying Party under the Costs Order.’

ii)  No leave to defend

36.  Ms Kwok submitted that neither Master Lai nor DHCJ Man contemplated the possibility that the estate of the 1^st Respondent might not be liable to pay the Liquidators’ fees. For the Liquidators to ‘defend any action or other legal proceedings in the name and on behalf of the company’, sanction from the Court is required: section 199(2) and Schedule 25 Part 2(1) Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) (‘CWUMPO’). ‘The liquidator will always obtain sanction as this will protect him from potential personal liability’: Annotated Ordinance [199.04]. The Applicant’s Leave Summons was however dismissed when it was placed before DHCJ William Wong such that the Applicant did not have leave to proceed against the 1^st Respondent, nor did the Liquidators have leave to defend for the 1^st Respondent: [2019] HKCFI 1491 [55]. She accepted that retrospective leave was however granted by Master J Wong on 19 September 2022 for the Liquidators to defend. This places the 1^st Respondent’s liability to the Liquidators in doubt ‘since the 1^st Respondent never obtained prior leave to defend the section 29 Summons’ when the Costs Order was made in 2019 such that the 1^st Respondent ‘has not actually paid or even became liable to pay’ the Liquidators. Master Lai’s assertion that the 1^st Respondent ‘would be liable to pay SL his professional fees for providing his service to [the 1^st Respondent]’ failed to appreciate properly this lacuna.

iii)  Indemnity principle/indemnity costs

37.  Ms Kwok submitted that the indemnity principle entails that ‘an order for indemnity costs does not enable a claimant to receive more costs than he has incurred, its practical effect is to avoid the costs being assessed at a lesser figure. Even on the indemnity basis the receiving party is restricted to recovering only the amount of costs which have been incurred’: Hong Kong Civil Procedure 2025 (‘HKCP’) [62/28/2]. The gist is to look at whether the litigant has been made liable for the costs/expenses by reference, for example, to cases on whether liabilities were contingent on recovery: Wakeling v Harrington (Liquidator of Chelmsford City Football Club (1980) Ltd) [2007] 5 Costs L.R. 710, [8]‑[14]. As such, the Applicant shall not be ordered to pay costs beyond what the 1^st Respondent is liable for.

iv)  Challenges to DHCJ Man’s judgment

38.  Ms Kwok submitted that DHCJ Man mischaracterised the issues in relation to the Jurisdiction Complaint and the Remuneration Complaint as ones which seek to ‘disallow the taxation of the 1^st Respondent’s costs, which would in effect overturn the costs order made by DHCJ William Wong’, and dismissed those grounds of review without proper consideration of the above. Master Lai’s role extends to determining what are the recoverable costs for the 1^st Respondent. Thus, the proper application of the indemnity principle is within the realm of the Master Lai’s power in the process of taxation: e.g. HKCP [62/App/2], so is the recoverability of the heads of costs. Understanding the Remuneration Complaint and the Jurisdiction Complaint in the proper light, the gist of the complaints actually lies in the fact that i) remuneration of Liquidators ought not to be recoverable as costs under Order 62, and ii) the 1^st Respondent might not be liable for such costs to its Liquidators absent sanction from the Court such that the costs should not be allowed against the Applicant under the indemnity principle. They are clearly relevant matters to be considered by a Taxing Master.

39.  Ms Kwok submitted that in any event, the brief reasoning in the Judgment is inadequate in discharging the Judge’s duties to give reasons: GLAS SAS (London Branch) v European Topsoho Sarl et al [2025] EWCA Civ 933, [20]‑[26].

(2)  The Judge’s Failure to Exercise Discretion Afresh

40.  Ms Kwok submitted that once it is established that Master Lai had made error which DHCJ Man ought to have intervened, she should have exercised her discretion afresh. In particular, she is required to form her own view on whether some of the items claimed in the bills are unreasonable. A failure to adduce evidence to show unreasonableness of costs does not automatically mean that all the costs are recoverable even for costs on indemnity basis. She referred to David John Kennedy v Kelly Cheng (2011) 14 HKCFAR 713, [16] which held that ‘The mere fact that the Respondents did not adduce positive evidence to show the unreasonableness of the costs does not mean that the Appellant can recover all the costs claimed in the bills as of course. Unless the receiving party is willing to allow the paying party to inspect all the available documents in the taxation bundles before the taxation hearing (which is quite unusual), it is difficult to expect that in normal case, the paying party can adduce any positive evidence to show the unreasonableness of the item in question’. It is erroneous for DHCJ Man to brush aside the Discovery Complaint. Reference is made to Bailey v IBC Vehicles Ltd [1998] 3 All ER 570 which held ‘The [costs] officer is exercising a judicial function with substantial financial consequences for the parties. To perform them he is trusted properly to consider material which would normally be protected from disclosure under the rules of legal professional privilege. If, after reflecting on the material available to him, some feature of the case alerts him to the need to make further investigation or causes him to wonder if the information with which he is being provided is full and accurate, he may seek further information’.

41.  She submitted that even though the Costs Order awarded costs on indemnity basis, Master Lai saw fit to tax off about 45% of 1^st Respondent’s bill of costs. The unreasonableness of the Liquidators’ bills casts doubt on whether the costs as claimed by the Liquidators had actually been incurred – which would impact upon the application of the indemnity principle. In particular, there was a recognised and established practice in the field of insolvency litigation against estates where there were few or no assets of value that the parties would operate recoveries-only liability: see the argument at Stevensdrake Ltd v Hunt (No.2) [2016] EWHC 342 (Ch) [4]. Hence, the Judge erroneously fettered her own discretion in, inter alia, refusing to form an independent view on the reasonableness of the costs claimed by the Liquidators, including the rate and the excessiveness.

(3)  Indemnity Costs Order by DHCJ Man

42.  Ms Kwok submitted that it is trite that ‘[t]axation of a successful party’s costs on an indemnity basis may be ordered where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously or for an ulterior motive or in an oppressive manner’ (HKCP [62/28/2]).

43.  In making the Indemnity Costs Order, DHCJ Man assumed ‘[t]he lack of conviction and the lack of any merit’ of the Review. In light of the reasons stated hereinabove, the Applicant’s position for the Review before DHCJ Man cannot be said to have been wholly unmeritorious. She in fact did not have any evidence to assert that the Review ‘is just a try-on by [A] to delay the inevitable result of payment of costs ordered’.

V.  Our view

1)  Liquidator’s remuneration and not legal costs

44.  The Applicant’s argument that DHCJ Man confused the costs of SL as liquidator’s remuneration which is taxable under different provisions in the insolvency regime and therefore not recoverable has no merits. The 1^st Respondent is a company under liquidation. SL, as its liquidator, is entitled to bring or defend any action in the name and on behalf of the 1^st Respondent with the sanction of the Court : section 199(2) and Schedule 25, Part 2 of the CWUMPO. Ms Kwok has not raised any objection based on the requirement of Order 5, rule 6(2) of the RHC which provides that :

‘ A body corporate may not begin or carry on any such proceedings in the Court otherwise than by a solicitor except-

(a) as expressly provided by or under any enactment; or

(b) where leave is given under paragraph (3) for it to be represented by one of its directors.’

45.  Since the former counsel of the applicant in the hearing below and also Ms Kwok had not taken any point based on Order 5, rule 6(2), we shall proceed on the assumption that SL was entitled to act for the 1^st Respondent without a solicitor.

46.  In this case, retrospective sanction to defend was obtained. The 1^st Respondent was not legally represented and the defence was carried out by SL himself. On the assumption that SL was entitled to defend the proceedings on behalf of the 1^st Respondent other than by a solicitor, the 1^st Respondent would be a litigant in person as Order 62, rule 28A(6) specifically provided that a litigant in person includes a company which is acting without a legal representative, the claim for costs by the 1^st Respondent falls within Order 62, rule 28A(1) and (2) and the statement of Chu JA in [4(1)] of Cheuk Shu Yin applies, namely, SL, being gainfully employed as a liquidator, needed to do the work in relation to the litigation brought by the Applicant on behalf of the 1^st Respondent during his working hours, and hence is entitled to seek costs on that basis. The maximum costs is two‑thirds which would have been allowed to a solicitor for doing that work. As can be seen in the extract of Master Lai’s Determination, this is precisely what Master Lai, who was a former solicitor and an experienced master, had decided.

47.  The authorities cited by Ms Kwok are not dealing with the costs of a litigant in person and its entitlement under Order 62, rule 28A like the present one. The statement in Civil Costs (6th Edn.) must be understood in its proper context. It is not concerned with Order 62, rule 28A. It cited Re Nossen’s Letter Patent [1969] 1 W.L.R. 683 and Sisu Capital Fund Ltd in support of its proposition. The former is a case decided before the enactment of the English equivalent of Order 62, rule 28A. It is concerned with the recovery of in‑house expert services carried out by experts doing work which was such as to require that particular expertise (‘the Nossen principle’). As to Sisu Capital Fund Ltd, the discussion by Warren J must be properly understood in the context of the case. The respondents were the liquidators of companies in liquidation or in administration (see [2005] EWHC 2321 (Ch)). They were described as the office‑holders of KPMG in the judgment and were legally represented. These office‑holders and their colleagues in KPMG spent much time in defending the proceedings brought against them. They sought costs which Warren J described as follows :

‘ 3. The KPMG costs relate to a variety of tasks some of which may have called for special expertise, for instance, the financial modelling, or at least some aspects of it, undertaken during the course of the proceedings. But the KPMG costs relate also to time spent on some matters which, if undertaken by a litigant (or his employees) who instructs solicitors and counsel, would not ordinarily give rise to a liability to a paying party under a costs order, for instance, time spent in reviewing documents for disclosure, in assisting in the preparation of witness statements and in attending court hearings.’

48.  Warren J held that only those parts of the KPMG costs which fall within the Nossen principle can be brought into account. He rejected the Liquidators’ argument that their expenditure on time which is money is recoverable. Although there are references to litigants in person in the judgment, they are not concerned with a situation like the present one. The case does not assist the Applicant.

49.  In In the Matter of Legend International Resorts Ltd, the liquidators were legally represented by a firm of solicitors and the liquidators’ fees and non‑legal expenses incurred in resisting the other party’s summons arose from their acting in the course of the liquidation. By their nature, these fees and non‑legal expenses are clearly not recoverable in addition to the legal costs incurred by the company represented by lawyers.

2)  No leave to defend

50.  The Applicant’s argument that, in the Court below, the estate of the 1^st Respondent might not be able to pay the Liquidators’ fees due to leave not having been granted to SL to defend the proceedings again is unmeritous. As Ms Kwok recognised Master J Wong had on 19 September 2022 (before Master Lai’s taxation on 16 June and 16 October 2023) granted the Joint and Several Liquidators of the 1^st Respondent retrospective leave to defend both the Amended Enforcement Summons and the Leave Summons as well as the Applicant’s appeal in the Court of Appeal. The leave that was granted must cover both the section 199 sanction and section 186 leave which provided that :

‘ Actions stayed on winding-up order

When a winding-up order has been made, or a provisional liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the company except by leave of the court, and subject to such terms as the court may impose.’

51.  The Court’s power to grant retrospective leave is recognized in In re A Debtor (No. 26A of 1975) [1985] 1 W.L.R. 6 where Scott J at pages 9 and 10 also explained that the purpose of obtaining the sanction is to protect the bankrupt’s estate and not to protect third parties. A trustee who proceeds without obtaining the requisite sanction cannot (subject to retrospective leave being given) cast upon the estate his costs in so doing. He stated at page 10 that :

‘ .....The purpose of the section is not, however, to protect third parties and the absence of any requisite sanction does not confer a defence on third parties. ..

So, if a trustee commences or continues an action without the requisite sanction and incurs any costs in so doing, he cannot charge those costs to the bankrupt’s estate. But he becomes liable to the solicitor who acts for him in the action in exactly the same way as any other client of the solicitor, and he incurs a potential liability in costs to the other party to the litigation in exactly the same manner as any other litigant. The only difference between the position where the trustee does, and the position where he does not, have a section 56 sanction, is that in the former case he can, but in the latter case he cannot, charge his costs against the estate.’

52.  This is a point that Master Lai had specifically addressed as well. The indemnity principle was not breached.

53.  As to the Applicant’s disingenuous argument that since his leave summons was dismissed, he did not have to pay for the costs of the Amended Enforcement Summons, Master Lai had again addressed this point at [54] of the Determination. The fact that the Applicant did not have leave to proceed does not mean it is not liable for the 1^st Respondent’s costs.

3)  Indemnity principle/indemnity costs

54.  Ms Kwok seemed to have confused ‘Indemnity principle’ with ‘Indemnity costs’ in her submission. The former is explained by Mann J in Wakeling v Harrington (Liquidator of Chelmsford City Football Club (1980) Ltd) [2007] 5 Costs L.R. 710 as follows :

‘ 8. The indemnity principle can usefully be summarised as follows:

“Subject to any statutory exceptions, an award of costs can only be made in order to indemnify a litigant against legal costs and expenses that he has paid, or become liable to pay.” (per Lord Phillips MR in Thornley v Lang [2004] 1 WLR 378 at [5].)’

55.  The Court there was construing an agreement whether the solicitor and his client had agreed to determine the client’s liability to pay the solicitor any further sum. By the operation of the indemnity principle, there will be a cap on the client’s liability. The case or the principle stated in the case is not relevant to this case.

56.  Further, there is no evidence to support the Applicant’s allegation that SL had pursued the proceedings for his personal gain or that the costs as claimed by the Liquidator had not actually occurred. Master Lai’s reduction of 45% of the claimed costs confirmed that he had scrutinized the bill of costs with meticulous care .

57.  The passage in the HKCP is dealing with indemnity costs. Master Lai was cognizant of the principle and fully addressed the point.

4)  Challenges to DHCJ Man’s judgment

58.  DHCJ Man provides a succinct judgment on her review of Master Lai’s review of taxation. She agreed with the Determination of Master Lai. In respect of her view on the absence of leave to defend by the 1^st Respondent under the Jurisdiction Complaint, it is of note that in the Applicant’s appeal to this Court in CACV 306/2019, it had not advanced any argument on the lack of leave by the 1^st Respondent. In our view, DHCJ Man was clearly right in saying that the complaint ‘would in effect overturn the costs order made by DHCJ William Wong’. As to her view on the remuneration complaint, the fact that the 1^st Respondent was represented by one of its liquidators was apparent in the proceedings before DHCJ William Wong. This point could have been but not raised before him. We do not consider that DHCJ Man could be criticized by taking such a view. With Master Lai’s taxation of the bill and his review, we do not consider DHCJ Man was required to scrutinize the reasonableness of costs again. In any event, we do not consider that she had erred in principle that would require us to exercise the discretion afresh.

59.  We disagree with the complaint about the inadequacy of the judgment below. DHCJ Man was dealing with a second review of Master Lai’s taxation where he had in his Determination fully ruled on the points advanced before him which were repeated before her. In such a situation, she was not required to traverse the same grounds again.

5)  DHCJ Man’s failure to exercise the discretion afresh

60.  This point is no longer valid as we have held that there was no error in Master Lai’s Determination.

6)  Indemnity costs order by DHCJ Man

61.  There is no merit in the Applicant’s complaint against the order on indemnity costs. DHCJ Man in ordering indemnity costs against the Applicant stated :

‘ 20. As noted above, the majority of the grounds of review were only provided by way of written submissions the day before the hearing. Mr Chu argued that there was nothing improper as those grounds are essentially legal arguments and need not be disclosed or informed to the other side anytime earlier than when written submissions were served.

21. I reject such submission. It is essential for all grounds of review to be provided in good time before the hearing so that the other side can properly consider and seek advice on whether to contest to such review.

22. I am of the view that the failure on the part of the Applicant to set out all the grounds of review in good time before the hearing indicates a lack of conviction in his application for review.

23. As to the merits in the grounds of review put forward by Mr Chu, it can be seen from the above that they are completely devoid of merit. The Applicant is not a stranger to taxation proceedings. After the many taxation hearings before the taxing Master and the review application before DHCJ Reyes S.C., it is inconceivable that the Applicant is not aware if what the applicable principles are and whether there is any merit in his application for review in the present case.

24. The lack of conviction and the lack of any merit strongly indicate that the review is just a try-on by the Applicant to delay the inevitable result of payment of costs ordered. In such circumstances, I agree that the Applicant should be liable for costs on an indemnity basis.’

62.  Costs are in the discretion of the Judge. As this Court held in Industrial and Commercial Bank of China (Asia) Ltd v. Tse Ching [2022] HKCA 1342 :

‘ 27. It is trite that costs are generally in the discretion of the first instance judge. The Court of Appeal will not disturb an exercise of discretion by the judge as to costs unless the decision of the judge is either wrong in principle or is plainly wrong. Unless it can be shown that the judge has committed a palpable error in the exercise of the discretion on costs, the mere fact that the Court of Appeal would not have exercised the discretion in the same manner as the judge is not a sufficient ground to warrant interference with the decision of the judge (see Chan Shun Kei v Hong Kong Construction (Hong Kong) Ltd (CACV 192/2014, [2016] HKEC 540, 7 March 2016), [22]; Poon Ching Man v Lam Hoi Pun [2016] 3 HKLRD 815, [34]).’

63.  In our view, the grounds relied by DHCJ Man clearly justified the making of an indemnity costs order.

VI.  Conclusion

64.  Accordingly, the appeal is dismissed.

65.  We need to comment on the approach taken by the Applicant’s lawyers in this appeal. As indicated earlier, the Applicant abandoned its appeal for the Determination to be overturned and only pursued its appeal on costs. The indemnity costs ordered by DHCJ Man was based on two grounds. First, the lack of conviction of the Applicant in pursuing the review and second, the lack of merits of the review. The review by the Applicant of the 43 items was based on the four grounds identified by Master Lai. Plainly, they touched on the merits of his Determination. By not seeking to overturn the Determination, the Applicant had clearly abandoned its challenge to the merits of Master Lai’s decision. On that basis, in order to succeed on its appeal on costs, the Applicant had to show something extraneous to the merits of the Determination that it had decided not to challenge. We allowed the applicant’s lawyers to pursue the appeal in the way counsel had indicated in order to ensure that full arguments were presented. However, as it turned out, there was nothing new to the arguments and no extraneous grounds had been shown. We would like to remind lawyers that they owe a duty to the Court not to pursue unmeritous arguments. It is not acceptable that they should make such submissions said to be based on the insistence of their client’s instructions no matter how unmeritous or unreasonable these instructions are. In appropriate cases, wasted costs order will be imposed for such an approach.

VII.  Costs of the Appeal

66.  As the Applicant fails in the appeal, the 1^st Respondent is entitled to the costs of the appeal.

67.  Mr Ng for the 1^st Respondent asked for the costs of the appeal to be taxed on indemnity basis. Apart from the total lack of merits of the appeal, he referred to two open offers made by the 1^st Respondent to the Applicant, which stated that in view of the payment by Mr Wong (the other joint and several liquidator of the Bankrupt), the 1^st Respondent would not claim any other costs from the Applicant and was agreeable to the dismissal of the appeal with no order as to costs. The offers were not accepted and now the appeal failed. Mr Wong through his solicitors’ letter dated 28 October 2025 had stated that he would not seek recovery from the 1^st Respondent the costs that he had paid to the 1^st Respondent. He further stated that he would not authorise Mr Tang to recover the ‘HCB costs’. Mr Wong further stated that he is not a party to proceedings and had no prior knowledge and involvement of the proceedings.

68.  We agree that in the circumstances indemnity costs are justified and we will order indemnity costs against the Applicant. As we have done in CACV 306/2019, the costs order is against Mr Tang personally and not from the estate of the Bankrupt. We will summarily assess the 1^st Respondent’s costs at $129,000.