RIZHAO FENGZE INTERNATIONAL TRADE COMPANY LTD v. J TONG SHIPPING CO LTD

HCCW 121/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO 121 OF 2012

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D E C I S I O N S

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1.  I have before me a summons issued on 14 September 2012 seeking leave to appeal my summary assessment of the costs of the present proceedings on 3 September 2012. The Petition in these proceedings was for the Company to be wound up on the grounds of insolvency. It first came on before me on 22 June 2012. I made directions for filing evidence and adjourned the Petition to Monday 3 September 2012.

2.  On Wednesday 29 August 2012 the Company issued a summons for the dismissal of the Petition and the summary assessment pursuant to Order 62 rule 9 of its costs of the proceedings which included dealing with an ex parte application for appointment of provisional liquidators and security for costs.  The summons was supported by the 2^nd affidavit of Mr Steven Wise the thrust of which was that the Petitioner had agreed to the dismissal of the Petition, explaining for the purposes of the summary assessment the proceedings and exhibiting a statement of costs in the total sum of $734,395.  The schedule was in the form of Appendix A, Practice Direction 14.3.  The application for summary assessment complied generally with Practice Direction 14.3.

3.  On Friday 31 August 2012 the Company sent 2 hearing bundles to court.  On Sunday 2 September 2012 the Petitioner’s solicitors sent the 2^nd affirmation of Ms Brenda Chark to court.  The affirmation did not suggest that the Petitioner opposed the dismissal of its Petition with costs.  It contained the Petitioner’s grounds for opposing a summary assessment of the Company’s costs.  I do not need to repeat the contents of the affirmation.  In short Ms Chark argued that Order 62 rule 9(C)(l)(a) applied: no order for a summary assessment should be made because her affirmation set out substantial grounds for disputing the sum claimed which could not be dealt with summarily.

4.  As I understand it, the intention of the summary assessment regime is that Judges are to make assessments of costs themselves if practicable rather than refer costs to a taxing master.  This is echoed in the commentary at paragraph 62/9/10 of the Hong Kong Civil Procedure, which states “Judges are required to assess the costs of a case if practicable”.

5.  A summary assessment is not intended to be a mini-taxation. The court is intended to take a broad-brush approach. This is made clear in paragraphs 13 and 14 of Practice Direction 14.3:

“13. A broad-brush approach will be taken by the Court in the summary assessment procedure.. The Court will not embark on a mini-taxation. Prolixity in contents of a statement of costs is therefore not acceptable. Costs for gathering information and drafting of these statements will generally not be granted.

14. Although the court may allow the full amount claimed by the receiving party, it will, so far as possible, ensure that the final figure is not disproportionate and / or unreasonable having regard to the nature and circumstances of the application or matter and the underlying objectives stated in Order 1A.  The Court will retain this responsibility notwithstanding the absence of challenge to individual items in the make-up of the figure sought.  The fact that·the paying party is not disputing the amount of costs can however be taken as some indication that the amount is proportionate and reasonable.  The Court will therefore intervene only if satisfied the costs are so disproportionate that it is right to do so.”

6.  Where there is substantial dispute about the amount of costs claimed, the court may undertake a summary assessment if satisfied that the dispute can fairly be resolved by a procedure which is by·its nature broad-brush.  If the court is not satisfied of this, it should make a conventional costs order and leave the costs to be assessed by a taxing master.

7.  The Petition came on before me in the normal Monday Company’s Court list.  There was no dispute that the Petition should be dismissed with costs.  Ms Chark had not instructed counsel although I allowed her to address the court.  As can be seen from the transcript of the hearing, I was invited by the Company to deal with the assessment robustly and I understood the Company to accept, as Ms Connie Lee who appeared before me today confirmed it did, that this meant I would err in the Petitioner’s favour.

8.  My approach to the assessment was in brief this.  Prior·to the hearing, I had looked at the contents of the hearing bundles prepared by the Company’s solicitors to see what work had been undertaken, but I had only a cursory look at the contents of the documents.  I had also read Mr Wise and Ms Chark’s 2^nd affirmations. I took into account Ms Chark’s comments at the hearing, which largely echoed what she had said in her 2^nd affirmation.  I accepted that both the level of the solicitor’s fees and London counsel’s fees seemed excessive and taking a broad-brush approach reduced the sum claimed of $734,395 to $500,000, which was a reduction of $234,395 or 32% of the sum claimed.  I note that Ms Chark did not suggest what the sum claimed should be taxed down to.

9.  It is not in dispute that the Court of Appeal will not interfere with a gross sum assessment unless it is shown to have been arrived at under a mistake of law or in disregard of principle; 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: Nam Chun Investment Co Ltd v Director of Lands (2007) 10 HKCFAR 523 at §7; David John Kennedy v Kelly Cheng & Anor FACV 30/2008(Unrep)12.10.2012per Chan PJ at §6; HKCP 2012 Vol 1 at §§59/0/54 &62/2/11.

10.  Section 14AA(4) of the High·Court Ordinance provides that leave shall not be granted unless the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard.  Only the first criterion is relevant to the present case.

11.  Mr Hingorani, who appeared for the Petitioner, says that my approach to the question of costs was wrong for the following reason.  The Court of Appeal explained in Poon Shu Fan v Wong·Tin Yan and Leung Yuk Lin CACV 81/2012 9 October 2012 how the court should approach a summary assessment.  Cheung CJHC says this at paragraphs 14 to 15 of his judgment:

“14. In this regard, it is helpful to remind ourselves that Order lA, rule 1 provides that the·underlying objectives of the rules are, amongst other things, to increase the costs effectiveness of any practice and procedure to be followed in relation to proceedings before the court; and to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings.

15. Whilst there are obvious differences·between our post Civil Justice Reform rules and the English rules under the Woolf’s Reform, the approach in England, as explained by Lord Woolf CJ in Lownds v Home Office [2002] 1 WLR 2450, nonetheless provides valuable·guidance in this area. In paragraph 3l, Lord Woolf spelt out a two-stage·approach:

‘In other words·what is required is a two-stage approach.  There has to be a global approach and an item by item approach.  The global approach will indicate whether the total sum claimed is or appears to be disproportionate having particular regard to the considerations which CPR r 44.5(3) states are relevant.  If the costs as a whole are not disproportionate according to that test then all that is normally required is that each item·should have been reasonably incurred and the cost for that item should be reasonable.  If on the other hand the costs as a whole appear disproportionate then the court will want to be satisfied that the work in relation to each item was necessary and, if necessary, that the cost of the item is reasonable.  If, because of lack of planning or due to other causes, the global costs are disproportionately high, then the requirement that the costs should be proportionate means that no more should be payable than would have been payable if the litigation had been conducted in a proportionate manner.  This [in] turn means that reasonable costs will only be recovered for the items which were necessary if the litigation had been conducted in a proportionate manner.’ ”

12.  Mr Hingorani submits that I should have asked myself the question at the outset, whether taking into account Ms Chark’s objections, the amount claimed was disproportionate.  I should have concluded that it was and then either undertaken the more detailed assessment that Lord Woolf describes, which I appear not to have done, or referred the matter to a taxing master.

13.  Mr Hingorani very fairly accepted that Ms Chark had not put the matter in this way before me.  In fairness to Ms Chark I would note that the Court of Appeal’s judgment in Poon Shu Fan was handed down after the hearing on 3 September 2012.  I accept that I did. not approach the matter by first asking if the amount claimed was disproportionate.  If I had, I accept that I would properly have found that it was, and in those circumstances either I should have undertaken a more detailed item by item assessment than I did do, or, as is more likely, referred the matter to taxation.

14.  Ms Lee submitted that the matter does not however end there. It is clear, she submitted, from paragraphs 13 and 20 of Cheung CJHC’s decision in Poon Shu Fan that the Court of Appeal will only interfere if it is satisfied that the court below ordered costs that are so disproportionate that it is right for it to interfere.  Mr Hingorani submitted that on the basis of the objections which are identified by Ms Chark in her 2^nd affirmation, I should be satisfied that there is a reasonable prospect of the Court of Appeal taking this view.  Whilst I accept that another Judge may take the view that my assessment was too generous, I am not satisfied on the basis of the information before me that there is reason to think that the Court of Appeal will consider that my assessment was so disproportionate, that it is appropriate for the Court of Appeal to interfere with it.  I, therefore, dismiss the application for leave to appeal.  So far as costs are concerned, there is no dispute that the Petitioner should pay the Company’s costs of this application.