SECURITIES AND FUTURES COMMISSION v. MAN LUNG HONG SECURITIES LTD

HCMP 1677/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1677 OF 2007

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R U L I N G

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1.  On 21 September 2007, I indicated that the court is minded to make an order under Order 62 Rule 9A for interim payment of costs. To facilitate that, I directed parties to file skeleton bills and gave leave to the Administrator to file Lists of Objections.

2.  The Defendant’s solicitors filed what purported to be a Skeleton Bill of Costs on 22 October 2007. In response, the Administrator filed a List of Objections on 5 November 2007. The Defendant’s solicitors saw fit to write a letter on 18 December 2007 to comment on the List of Objections.

3.  Further, by a letter of 18 December 2007, the Defendant’s solicitor requested the court to assess costs on a gross sum basis in lieu of taxation. That request is misconceived. An interim costs order under Rule 9A is different from a gross sum order under Rule 9(4)(b).

4.  This court has clearly indicated that what it had in mind was an interim payment of costs order pursuant to Order 62 Rule 9A.

5.  If one has paid some attention to Rule 9A, one would no doubt understand the procedure for fixing the interim costs under Rule 9A is not a taxation. The court is to fix an amount which in the opinion of the court approximates the costs that would be allowed on taxation, see Rule 9A(1).

6.  After the interim costs order, both the paying party and the receiving party are at liberty to apply for taxation in the usual manner. The taxation would be undertaken by the taxing master. If the amount taxed is different from the amount fixed under the interim costs order, adjustments can be made in accordance with Rule 9A(2). Further, the taxing master will, amongst other things, take into account of the difference in deciding on the costs of the taxation.

7.  Hence, when parties were directed to file skeleton bills to facilitate the court to make an interim costs order, the skeleton bills should not be as detail as that produced for the purpose of taxation. In the context of gross sum order under Order 62 Rule 9(4)(b), the court has stressed repeatedly that the exercise is not a mini-taxation. I am of the view that the same must be true for an interim costs order, perhaps more so since the parties will have the opportunity to adjust on taxation.

8.  I wish to say emphatically that it is not the intention of Order 62 Rule 9(4)(b) or Order 62 Rule 9A (1) to have a taxation by a judge instead of a taxing master.

9.  Against such background, the Skeleton Bills of Costs prepared by the Defendant’s solicitors is not too helpful. It is a document which is more suitable for the taxation procedure.  The Registrar issued a Note to the professions on procedure for Order 62 Rule 9(4)(b) assessment in January 2006.  In my view, the skeleton bills for Order 62 Rule 9A(1) purposes should follow the same guidance.

10.  One of the purposes of an interim costs order is to give the parties the benefit of a summary but interim assessment of costs. After that the parties can decide whether it is worthwhile to have a full-blown taxation and to incur the costs for that exercise. That objective will be defeated if the parties have to produce skeleton bill and list of objections in the same manner as in a taxation hearing.

11.  Unfortunately, the Defendant’s solicitor and the solicitor for the Administrator have acted as if the Rule 9A(1) exercise is a full- blown taxation. This might due to certain exchanges in the course of hearing as regards “provisional taxation”.

12.  Since the matter has developed in a manner which is not conducive to a Rule 9A(1) exercise as far as the Defendant’s costs is concerned, and this court has no intention to undertake what in substance is a full-blown taxation, I can only try the best I can under the circumstances.

13.  The Defendant seeks $331,287 whilst the Administrator estimates $156,628.

14.  The Defendant was represented by counsel and counsel only charged a total sum of $35,000. The solicitors charged $279,557 by way of profit costs. Bearing in mind that it is for a one day hearing at which the Defendant did not really oppose the appointment of Administrator but only focused on the terms of the order, even taking into account of the complexity of the matter, I am of the view that the figures claimed by the Defendant are excessive.

15.  I do not agree with the Defendant’s submission that it is entitled to costs on solicitor and client basis at this stage. When I indicated that I would make an interim costs order, I did so as a provision for such costs payable out of the asset held by the Administrator as part of the necessary costs of the administration, as such can be paid out of the asset even before the final determination of the solvency and the real financial position of the Defendant. It has to be remembered that a lot of the assets held by the Defendant are held on trust for its customers. Against such background, it would not be right to order such costs to be paid on a solicitor and client basis. The costs provided for under the interim costs order should be on party-to-party basis. That would be without prejudice to the Defendant’s solicitor right to recover additional costs on solicitor and client basis after the completion of the administration if the Defendant remains solvent. 

16.  I have some doubts whether all the works set out in the Defendant’s Skeleton Bill relates to preparation for the hearing on 21 September 2007. 

17.  Given the reasonable extent of works involved for that hearing, I am of the view the figure accepted by the Administrator is already a very generous one as far as the Defendant’s costs for that hearing is concerned.

18.  Hence, I will make an interim costs order under Order 62 Rule 9A for costs in the sum of $156,628 and direct that such costs be paid out of the asset of the Defendant as part of the costs of the administration.