PLUS LUCKY LTD v. CHIN YUK LUN FRANCIS AND ANOTHER

HCA 4645/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4645 OF 1998

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D E C I S I O N

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Background

1. This is an appeal by the Defendants from an order of Master Bharwaney made on 22 January 2003 adjourning the taxation proceedings pending the hearing and determination of the Respondent's appeal against the Order of Deputy High Court Judge Woolley dated 12 July 2002 ordering her to pay the Defendants' costs in this action, which was instituted by the Plaintiff.

2. The Plaintiff and the Defendants were respectively the purchaser and vendors of a residential property in Redhill. The Respondent was the solicitor acting for the Plaintiff in the sale and purchase. The facts of the case have been succinctly stated by Deputy High Court Judge Woolley in his judgment of 12 July 2002. The sale and purchase agreement was entered into at the peak of the property market in October 1997 for completion by 5 p.m. on 20 March 1998, by then property price has fallen significantly. Just four days before the scheduled completion day, the Plaintiff's solicitors gave notice to the Defendants' solicitors requiring a formal completion, rather than the usual completion by undertakings. The Plaintiff's representative, accompanied by the Respondent, arrived at the office of the solicitors of the Defendants at 4:23 p.m., but without the cashier order needed to complete the purchase. At 4:47 p.m., another director of the Plaintiff arrived with photocopies of the cashier orders. As Deputy High Court Judge Woolley found, there followed what can only be described as delaying tactic during which time the original cashier orders were never produced for the vendors' solicitors' inspection and at 5:15 p.m., the Respondent, on behalf of the Plaintiff, declared that the time for completion had expired and left with the Plaintiff's representatives. Following the aborted completion, the Respondent demanded return of the deposit to the Plaintiff. When that was refused, she commenced these proceedings on behalf of the Plaintiff. Two months later, the Respondent ceased to act for the Plaintiff and another firm of solicitors took over the litigation.

3. After three years, the action was tried before Deputy High Court Judge Woolley who dismissed the Plaintiff's claim. The Respondent gave evidence for the Plaintiff. She was disbelieved. Deputy High Court Judge Woolley found that the Respondent was a party to an arrangement to try to abort the completion so as to enable the Plaintiff to avoid a transaction which had become financially undesirable as a result of the dramatic fall in property price. The Plaintiff appealed but the appeal was dismissed by the Court of Appeal with costs.

4. The Defendants applied for an order that the Respondent, as solicitor acting for the Plaintiff in the transaction which gave rise to these proceedings, pay the costs of the Defendants personally under the provisions of Order 62 rule 8 of the Rules of the High Court. The application was heard before Deputy High Court Judge Woolley. On 12 July 2002, Deputy High Court Judge Woolley made an order that the Respondent pay the Defendants all solicitor and own client costs for which they are liable to their solicitors as a result of these proceedings, such costs to be taxed, giving credit for any sums recovered by them by way of party and party costs from the Plaintiff. Deputy High Court Judge Woolley also ordered the Respondent to pay the Defendants the costs of this application to be taxed on an indemnity basis.

5. On 2 August 2002, the Respondent sought leave to appeal against the orders of Deputy High Court Judge Woolley. On 26 September 2002, she took out another Summons applying for stay of execution. Both applications were heard before Deputy High Court Judge Woolley. He ruled that no leave was required for the appeal and dismissed the Respondent's application for stay with costs, but without prejudice to any further applications.

6. In the meantime, on 13 January 2003, a winding up order was made against the Plaintiff. The judgment debt of about $4.3 million and costs of about $2.2 million awarded to the Defendants remain unsatisfied.

7. On 9 October 2002, the Respondent duly filed Notice of Appeal against the decision of Deputy High Court Judge Woolley ordering her to pay the Defendants' costs. The appeal was scheduled for half day on 15 January 2003. In the meantime, taxation hearing was fixed for two days starting on 27 January 2003. Had matters progressed on that course, the appeal against the decision of Deputy High Court Judge Woolley would have been heard before taxation. If the appeal is dismissed, the Defendants could almost immediately proceed to execute on the taxed costs. If the appeal is allowed, the Defendants may not execute on the costs.

8. However, the matters took a twist when the Respondent filed a Supplementary Notice of Appeal settled by Senior Counsel on 24 December 2002. Because of the more substantial grounds of appeal filed, the Defendants considered half a day inadequate for hearing the appeal and requested for an adjournment so that the appeal could be set down for two days. By consent, the appeal was adjourned to 11 June 2003, but the Defendants refused to consent to vacate the taxation hearing to a date after the determination of the appeal. On 17 January 2003, the Respondent took out a Summons seeking to vacate the taxation hearing to a date to be fixed after determination of the appeal. On 22 January 2003, Master Bharwaney granted the Respondent's application pursuant to Order 62, rule 26 of the Rules of the High Court and adjourned the taxation hearing pending the hearing and determination of the Respondent's appeal against the Order of Deputy High Court Judge Woolley dated 12 July 2002. The Defendants now appeal against the order of Master Bharwaney.

The law

9. There seems to be little authority as to the circumstances in which a taxing master will grant a stay of taxation of costs pending appeal. In Re an Arbitration between Schindler Lifts (Hong Kong) Ltd and Dickson Construction Co Ltd (unreported, 1992; HCMP 545 of 1992), Kaplan J held it would be an improper exercise of discretion for the master to adjourn taxation which in effect operated as a stay of execution. He allowed the appeal and overturned the master's decision to adjourn the taxation hearing on the basis of Schindler's undertakings not to enforce the costs order when taxed until after the determination of the appeal. In Lo Wo v Cheung Chan Ka Joseph (unreported, 2001; HCA 618 of 1997), Waung J dealing with a similar situation as in the present case took the view that a taxing master has no jurisdiction to grant a stay of execution by adjourning taxation hearing pending appeal, or if he has, it was a wrongful exercise of discretion. In Re HY & HT Lee Bros and Co Ltd (unreported, 2000: CACV 307 of 1999), Keith JA held that a stay of taxation of costs pending appeal can be granted when there are good grounds to do so.

10. In my view, like any exercise of judicial discretion, the taxing master must exercise the discretion given to him by Order 62, rule 26(2) in accordance with legal principles. The starting point is to consider what is the discretion given to the taxing master. Order 62, rule 26(2) of the Rules of the High Court provides:

"(2) The taxing master by whom any taxation proceedings are being conducted may, if he thinks it necessary to do so, adjourn those proceedings from time to time."

11. The taxing master's duty is to tax the bill of costs. His role is to assess the quantum of costs and not to determine liability which is a matter for the trial judge. The discretion to adjourn the taxation proceedings may only be exercised if he thinks it necessary to do so i.e. to do so for the expedient and efficient disposal of the taxation. Hence, to adjourn taxation proceedings pending appeal solely for the purpose that in the event that the appeal is allowed, the taxation proceedings can be dispensed with, clearly falls outside the realm of necessity within which the taxing master may exercise his discretion to adjourn the taxation proceedings. To hold otherwise would be to give the taxing master the jurisdiction to grant stay of execution, a power which has been reserved to the trial judge or the Court of Appeal under Order 59, rule 13 and which has never been intended to be delegated to a taxing master. For a taxing master to adjourn taxation proceedings pending appeal would amount to an usurpation of the trial judge's or the Court of Appeal's function to rule on applications for stay, if applied for; or would amount to a by-pass of the trial judge or the Court of Appeal, if no application has been made. Thus, in my view, a taxing master has no jurisdiction under Order 62, rule 26(2) to adjourn taxation proceedings which operates as a stay of execution pending appeal.

12. However, the court has a general duty to take a procedural course which avoids the expenditure of unnecessary time and costs. To perform that duty, the court has inherent jurisdiction to adjourn a taxation hearing, quite independently from the jurisdiction given to a taxing master under Order 62, rule 26. This jurisdiction has to be carefully exercised and only upon good cause being shown. The burden of showing good cause rests squarely on the shoulders of the party seeking to stay the taxation hearing. What constitutes a good cause has to be determined according to the particular circumstances of the case. There can be no hard and fast rule. Essentially, it involves balancing two principles: firstly, the principle that a successful litigant should not be deprived of the fruits of his litigation, and secondly, the principle that there must be justification for putting at risk the considerable time to be spent and the large amount of costs to be incurred on the taxation which would be wasted in the event that the appellant is successful on appeal.

13. As for the first principle, Order 59, rule 13(1) provides

"Except so far as the court below or the Court of Appeal or a single judge may otherwise direct -

(a) an appeal shall not operate as a stay of execution or of proceedings under the decision of the court below;

(b) no intermediate act or proceeding shall be invalidated by an appeal."

14. This rule is in favour of the successful litigant that he should not be deprived of the fruits of his success, despite that an appeal is pending. It is not the practice of the court to lock up funds to which prima facie a successful litigant is entitled. An intending appellant who wishes to escape from the application of this general rule or who does not wish to put at risk the costs of taxation which may be wasted in the event of his successful appeal should apply to the trial judge or to the Court of Appeal for stay of execution pending appeal pursuant to Order 59, rule 13. That rule gives the trial judge or the Court of Appeal the discretion to order a stay of execution and to impose terms on which a stay is ordered. That is the first machinery an appellant should invoke to protect his interest. The principles as to how the discretion is to be exercised in an application for stay of execution have been admirably set out in the well researched judgment of Ma J, as he then was, in Star Play Development Ltd v Bess Fashion Management Co Ltd (unreported, 2002; HCA 4726 of 2001). Basically, it is a balancing exercise, balancing merits, on the one hand, against prejudice, on the other. That involves the question of stay of execution pending appeal to be considered by the trial judge or the Court of Appeal and not stay of taxation pending appeal to be considered by the taxing matter.

15. As for the second principle, the courts have acknowledged the principle that it is important for the courts to take procedural steps which will avoid the expenditure of unnecessary time and expense involved in an unnecessary taxation of costs: see Roselodge Ltd v Castle [1966] Lloyd's Report 113, at 114. This principle is one of practicality, common sense and good case management. In my view, it must be subject to the first principle which is concerned with more substantive legal principles such as the taxing master's jurisdiction, the successful party's right to the fruits of his success and the importance that a taxing master should not be allowed to usurp the function of the higher court to rule on applications for a stay. Hence, in Re an Arbitration between Schindler Lifts (Hong Kong) Ltd and Dickson Construction Co Ltd, Kaplan J allowed the appeal on the undertakings of Schindler not to enforce their costs order when taxed until after the determination of the appeal.

16. In the light of these two principles, I now turn to consider what constitutes good cause. Many cases have stressed the need of at least taking a view as to the prospects of the appeal in the balancing exercise: per Wolf LJ (as he then was) in Malliez v Redland Plasterboard Overseas Ltd, (unreported, 22 September 1992). That view was rejected by Keith JA in Re HY & HT Lee Bros and Co Ltd (unreported, 2000: CACV 307 of 1999), as he thought it quite impracticable for him to form even a provisional view of the merits without turning the chamber hearing into a mini-trial of the appeal itself.

17. I agree with the view of Keith JA. It is impracticable for a taxing master sitting on a taxation hearing to consider merits of a pending appeal. Nor is it practicable for a judge hearing an appeal from the master's order to embark on such an exercise. I am not over emphasizing the superiority of the judge to the master. Putting the situation to the extreme, assuming that an appellant was unsuccessful in the Court of Appeal and he obtained leave to appeal to the Court of Final Appeal in view of the amount of claim involved, it is not up to the taxing master to refuse to proceed with taxation because in his view the appellant has a strong and arguable case, that it is likely that the Court of Appeal has erred, that the taxation proceedings involve excessive complexity and that it is likely that these costs of taxation will be wasted. These are matters which should be properly ventilated before the Court of Appeal on an application for stay of execution. If the appellant does not see fit to apply for stay of execution, it is not for the taxing master to rush to his rescue. Based on the limited jurisdiction of a taxing master in a taxation hearing, merits of the appeal should be ignored by the master in considering whether to stay taxation hearing.

18. As this involves balancing the wasted costs on the one hand and the delay to the successful litigant being kept out of his money on the other, the conduct of the parties, in particular the delay on the part of the appellant in prosecuting the appeal, is a critical consideration. In Re HY & HT Lee Bros and Co Ltd, Keith JA indeed considered delay on the part of the appellant in prosecuting his appeal a critical factor. Given the limited jurisdiction a taxing master has in adjourning a taxation hearing as opposed to the wider jurisdiction of the trial judge or the Court of Appeal in granting a stay of execution, I think the complexity of the taxation, the amount of time and costs involved in the taxation and the opposing party's ability to pay the wasted costs are factors which may also be taken into account in the balancing exercise. The list of factors is not exhaustive. Much depends on the facts of the individual case. But merits of the appeal is clearly irrelevant. That should be ventilated before a judge on an application for stay of execution.

Respondent's grounds for the adjournment or stay of taxation

19. The order sought by the Respondent's summons dated 17 January 2003 was for the hearing scheduled on 27 and 28 January 2003 be vacated and the taxation hearing be adjourned to a date to be fixed after determination of the Respondent's appeal against the Order of Deputy High Court Judge Woolley. In her affirmation filed in support of the application, the Respondent referred to the history leading to the adjournment of the hearing of the appeal as a result of which she argued that the taxation hearing should be likewise adjourned. She said in her affirmation that as advised by Senior Counsel, she thought she has good grounds of appeal and if her appeal shall succeed, the costs of taxation will be wasted. Obviously, this is an application for a stay of taxation pending appeal and not an adjournment for the expedient and efficient disposal of the taxation. I wholly reject her submission that the adjournment was not in effect an application for stay of execution. The taxing master has no jurisdiction to adjourn the taxation hearing pending appeal under Order 62, rule 26(2). In order to invoke the court's inherent jurisdiction, the Respondent has the burden of showing good cause for the stay.

20. The Respondent submitted that as advised by Senior Counsel, she has strong and arguable case on appeal and referred me to the six- page Supplementary Notice of Appeal. The Supplementary Notice of Appeal demonstrates that this is not the appropriate venue for consideration of merits. I wholly ignore merits of appeal.

21. Another ground advanced by the Respondent is the complexity of the taxation and the time and costs such taxation would incur. She was not a party to the litigation nor the handling solicitor for the Plaintiff, except during the first two months. She has no knowledge or conduct of the litigation and hence has tremendous difficulties in preparing for the taxation as she is now asked to pay the costs incurred during this three-year litigation. I appreciate this would be a cumbersome and onerous task but fail to see how this could not be handled either by herself or a competent law costs draughtsman. But for her deliberate delay in trying to seek an adjournment of the taxation hearing, she has ample time to prepare for the taxation. Any difficulty she faces is her own making and she cannot rely on her own default as a good cause for keeping the Defendants out of their money.

22. The Respondent argued that the adjournment was occasioned by the Defendants' application for adjournment of the appeal hearing, as a result of which taxation would have been heard before the appeal. If the merits of the appeal cannot in any event constitute a good cause, I fail to see how the adjournment of the appeal hearing, albeit initiated by the Defendants is at all relevant.

23. On the contrary, looking at the events leading to the Defendants' application for adjournment of the appeal hearing, the Respondent is to blame and she left me with a doubt if in fact the Respondent was trying to delay the Defendants from recovering their costs. She filed her notice of appeal consisting of 6 paragraphs on 9 October 2002 and obtained a hearing day for half a day on 15 January 2003. It was not until more than two months after the filing of the notice and three weeks before the hearing that she filed the Supplementary Notice of Appeal. I understand it is not unusual that an appellant's solicitor would file a notice of appeal stating some brief grounds for the purpose of meeting the time limits for lodging the appeal. Deputy High Court Judge Woolley handed down his written judgment on 12 July 2002. Though through no fault on her part, she could not file her notice of appeal until Deputy High Court Judge Woolley ruled on 2 October 2002 that no leave was required. However, the fact remains that she had almost three months since 12 July 2002 to settle proper grounds of appeal. If she was led to the belief that leave was required, then she had all the more incentive to have her grounds of appeal properly settled by counsel. Yet, she took more than five months. The amendment was substantial. It expanded the Notice of Appeal from 6 paragraphs to 17 paragraphs. That necessitated the Defendants' application for adjournment of the appeal hearing. Speaking of causation, the Respondent rather than the Defendants is to blame. Thus, even on the issue of delay, the balance is against her. She cannot complain about the risk of wasted time and costs of taxation when that risk arose out of her failure to settle proper grounds of appeal.

24. In addition, if the Respondent is really concerned about staying execution pending appeal, she is also to blame for not taking out proper application for stay under Order 59, rule 13 but to try her luck by attempting to stay taxation. She said in her affirmation that Deputy High Court Judge Woolley dismissed her application for stay on the suggestion by the Defendants' counsel that the taxation hearing would not be scheduled before the hearing of the appeal and it was on that basis Deputy High Court Judge Woolley ordered that the dismissal was without prejudice to further application. If that was what was in the mind of Deputy High Court Judge Woolley, he would have granted the stay rather than refused it. The "without prejudice" rider is just a safety valve in case some unforeseen events occur. If indeed the Respondent is right, then the proper course was for her to apply for a stay pursuant to that liberty and not to attempt to by-pass the trial judge or the Court of Appeal in the way she did. The inference to be drawn from what she did is that she knew she had no merits in an application for stay.

25. There is nothing to suggest the Defendants were not good for the wasted costs and the costs of their action against the Respondent. In the end, none of the issues is resolved in the Respondent's favour. In my view, she has utterly failed to discharge her burden of showing good cause.

Conclusion

26. This is a clear case where the Respondent was in effect seeking a stay of execution. The taxing master has no jurisdiction under Order 62, rule 26(2) to grant the adjournment as the application is outside the realm of necessity within which he may exercise his discretion. Even if he has as part of the court's inherent jurisdiction, the discretion should not have been exercised as the Respondent has utterly failed to show good cause. The taxing master should have refused the application and proceeded with the taxation on 27 and 28 January 2003. This appeal would be a nugatory unless an early date for taxation could be fixed. Fortunately, I am able to reserve two consecutive days on 16 and 17 April 2003 for the taxation hearing before another taxing master.

27. The Defendants sought an order that the Respondent be ordered to pay the taxed costs into court and for the payment to be released to the Defendants upon dismissal of the Respondent's appeal. I do not consider that appropriate at this stage. Nor do I think I ought to insist on an undertaking from the Defendants not to execute the costs order when taxed as Kaplan J did in Re an Arbitration between Schindler Lifts (Hong Kong) Ltd and Dickson Construction Co Ltd. That could be left to be resolved between the parties and if necessary by an application for stay of execution.

28. Accordingly, I allow the appeal and set aside the Order of Master Bharwaney of 22 January 2003. The costs of this appeal and the costs of the hearing before the master, including costs thrown away by the adjournment, if any, shall be in the costs of the Appeal in CACV 382 of 2002. I adjourn the taxation hearing to 16 April 2003 with 17 April 2003 reserved.