LEUNG YIN LING v. THE INCORPORATED OWNERS OF NO. 165, WONG NAI CHUNG ROAD

LDBM 63/2000

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 63 OF 2000

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DECISION ON REVIEW OF TAXATION

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Background

1. In February 2000, the Applicant brought the action herein against the Respondent for, inter alia, supply of income and expenditure accounts and balance sheets of the Respondent under Section 27 of the Building Management Ordinance. While the Applicant was all along represented by a firm of solicitors, the Respondent acted by its duly authorised representative Mr. Lee Po Keung ("Mr. Lee"). After trial, his Honour Judge Chow, the Presiding Officer of the Tribunal, gave Judgment on 28 November 2000 dismissing part of the claims of the Applicant and ordered the Applicant to pay the Respondent 1/3 of its costs of the action to be taxed if not agreed.

2. Based on the said costs order, the Respondent engaged a firm of solicitors and instructed a law costs draftsman to lodge a bill of costs for provisional taxation in August 2001. The Tribunal notified the parties the outcome of the provisional taxation on or about 11 September 2001. The Applicant's solicitors wrote to the Tribunal on 19 September 2001 requesting for a formal taxation of the Respondent's bill of costs.

The Taxation

3. The Applicant raised a preliminary issue in her List of Objection filed on 25 February 2002 that the Respondent has to prove its compliance with the "indemnity principle" to the extent that the costs claimed in the bill was out of pocket expenses rather than making a profit on the litigation. It was also stated in the said List of Objection that without prejudice to the preliminary issue, the Applicant suggested the hourly rate of Mr. Lee at $200.

4. The Respondent's bill of costs was taxed before me on 3 May 2002. On the preliminary issue raised by the Applicant, I ruled that as the Respondent was at all material times acting in person, the "indemnity principle" was not applicable. Pursuant to Order 62 Rule 28A of the Rules of High Court, I allowed the hourly rate for work done by Mr. Lee for the Respondent at $200 which was also the sum proposed by the Applicant in her List of Objection.

Application for Review

5. The Applicant dissatisfied with my ruling on the preliminary issue. By way of a summons filed herein on 15 May 2002, the Applicant applied for a review of the taxation seeking to set aside my said ruling and contended that the Respondent was not entitled to any profit costs under the "indemnity principle".

6. The Applicant stated her grounds of review as follows:-

(a) the Tribunal erred in ruling that Order 62 rule 28A shall apply to the Respondent who at the material times acted in person;

(b) further or alternatively, the Tribunal erred in ruling that the "indemnity principle" shall not apply to the Respondent who at the material times acted in person;

(c) the said ruling produced an absurd result.

7. The Review was originally scheduled on 20 June 2002. For reasons that I shall deal with at the latter part of this Decision, the hearing was refixed on 17 June 2002. At the hearing, the Applicant's solicitors confirmed that subject to the grounds of review stated above, they had no dispute on the quantum of costs allowed at the taxation. Both parties agreed the quantum of costs allowed at the taxation were:

Profit costs:	$3,367
Disbursements:	$13,600
Taxing fee:	850
Total:	17,817

8. The Applicant was represented by her solicitors at the taxation review hearing while the Respondent was represented by its law costs draftsman. The Applicant's solicitors relied upon various legal authorities in the skeleton submission in particular the Court of Appeal decision in Australian Telephone Distributors Pty. Ltd. (in liquidation) v. Golden Always Ltd. & other [1996] 3HKC 401 in support their arguments. As an issue of law has been raised by the Applicant's solicitors, the Respondent's law costs draftsman asked for leave to allow the instructing solicitors to make submission in reply. Taking into the fact that the Respondent's law costs draftsman only received the Applicant's skeleton argument just before the hearing and the Australian Telephone case was not cited before at the taxation hearing, I considered it would be fair to afford the Respondent's sufficient opportunity to make submission in reply. Accordingly, I directed the Respondent to file and serve their written submission within 14 days and the Applicant to file and serve their written submission in reply within 14 days thereafter.

9. The Respondent's solicitors filed their written submission on 2 July 2002 and the Applicant's solicitors' written submission in response was filed on 16 July 2002.

Litigant in Person- Order 62 Rule 28A of the Rules of High Court ("the Rule")

10. It is not in dispute by the parties that by virtue of Section 12(2) of the Lands Tribunal Ordinance, Order 62 of the Rules of High Court applies to the taxation of the Respondent's bill of costs.

11. The Applicant's argument against the applicability of the Rule was never raised in her List of Objection or at the formal taxation hearing. Such issue was only raised in the review.

12. In the List of Objection which the Applicant should put all her grounds of objection to the Respondent's bill, the Applicant only raised the preliminary issue of the "Indemnity Principle". It further stated there that without prejudice to the preliminary issue, the Applicant had various other general objections. Under Item 1 of the List, the Applicant objected the hourly rate of Mr. Lee claimed at $460 and suggested the rate of $200.00. The Applicant did not raise the argument on the Rule as a preliminary issue nor as one of the items under the general objections for determination.

13. Further, when I ruled against the Applicant on the preliminary issue, Mr. Cheung, the law costs draftsman who appeared for the Applicant at the taxation hearing, did not argue at all that despite my said ruling, the Respondent was not entitled to charge any profit costs for the work done by Mr. Lee under the Rule. In fact, they themselves suggested to allow the hourly rate of Mr. Lee at $200 in the List. Such sum coincides with the amount that the Court can allow a litigant in person to recover under Sub-rule (3) of the Rule if the taxing master is in the opinion that the litigant has not suffered any pecuniary loss in doing the work in which the costs relate. As such, I allowed the hourly rate of Mr. Lee at $200 without much resistance from those representing the Applicant.

14. The Applicant was all along legally represented in this action. I must take that the Applicant's legal representatives are fully aware of the provisions of the Rule and they chose not to raise the issue of the applicability of the Rule to this case in the List of Objection. More importantly, the Applicant herself conceded the sum of $200. She must be bound by the concession made and is not entitled to re-open the issue at the review.

15. To argue against the said concession made in the List, the Applicant's solicitors tried to explain the suggestion of $200 for the hourly rate of Mr. Lee as being an alternative ground in the general objection if they failed in the arguments on the preliminary issue. Such explanation does not convince me at all why I should allow the Applicant to re-open the issue at the review and to retract the concession made. The preliminary issue of "Indemnity Principle" and the argument on the applicability of the Rule to this case are separate and distinct legal issues. If the Applicant wishes to argue the latter, she should raise it specifically in the List of Objection. Failing so, I take that once I ruled against the Applicant on the preliminary issue, she herself conceded to pay the costs of Mr. Lee at $200 per hour. For reasons stated, I conclude that the Applicant's review on this ground must fail.

16. Because of my said conclusion, there is no need for me to go further to deal with the Applicant's contention on the applicability of the Rule to the present case in reliance of the Court of Appeal judgment in the Australian Telephone case. However, for sake of completeness in case my said ruling was wrong, I would also give my ruling on the Applicant's contention. For reasons stated below, I hold that the Applicant's contention on this ground of review also fails.

17. The Applicant relied solely on the Australian Telephone case to support her arguments the meaning of "litigant in person" under the Rule does not include a limited company represented by one of its director. The Hong Kong Civil Procedure 2002 Volume 1 at para. 62/App/57 also contains a passage to that effect. Mr. Chan for the Applicant submitted that the case shall equally apply to the Respondent which is an owners incorporation formed under the Building Management Ordinance since under Section 8, it provides that an owners incorporation is a body corporate capable of suing and being sued. Mr. Chan argued that if he succeeded on this issue, the Respondent was not entitled to recover any profit costs from his clients but can only recover out of pocket expenses such as travelling and photocopying expenses.

18. The Australian Telephone case was decided by Nazareth VP sitting as a single Judge of the Court of Appeal and one of the parties was not legally represented. Nazareth VP referred extensively in his Judgment the English Court of Appeal case of Jonathan Alexander Ltd. V. Proctor [1996] I WLR 518 and adopted the reasoning of Peter Gibson LJ and Buxton J and held that "litigant in person" under the Rule does not include a company represented by a director.

19. The Jonathan Alexander case turns on the interpretation of the meaning of "litigant in person" under the English Litigants in Person (Costs and Expenses) Act 1975 which does not have any counterpart in Hong Kong. Peter Gibson LJ said in his Judgment :

"A company is a persona ficta. As has been said of a company: 'It does not have a soul to be damned or a body to be kicked.' ... The crucial question is whether it can be said of the company so acting and appearing that it is a litigant in person for the purposes of the Act of 1975. ... In agreement with Mr. Lord, I would unhesitatingly answer that question in the negative. I do so for the following reasons (1) A litigant in person in ordinary parlance is party to litigation who represents himself by appearing in court himself. If someone other than himself represents him, then notwithstanding that that other person is his agent, that party is not a litigant in person. ... The company appears by a representative, its director, and hence it is not a litigant in person. ..."

20. The Rule itself does not define the meaning of "litigant in person". In fact, no part in the Rules of High Court contains any definition of "litigant in person". It is therefore doubtful whether the interpretation of meaning of "litigant in person" under the English 1975 Act in the Jonathan Alexander case applies equally to the interpretation of meaning of "litigant in person" under the Rule. In my view, in order to construe the meaning of "litigant in person", we should interpret it according to the context of the particular legal proceedings. In England, under Order 5 of their Rules of Supreme Court and according to established case laws, a company cannot appear in person unless there are special circumstances to justify and the Court can exercise its discretion to allow the directors of company to appear at trial. Otherwise, a limited company must be represented by a solicitor. That may explain why the English Court of Appeal attributed a restrictive definition of "litigant in person" to exclude limited company being represented by one of its directors.

21. Hong Kong has a different position. Under Order 5 Rule 6(2) of the Rules of High Court, an application can be made by a body corporate for leave to be represented by one of its directors. Upon good reasons shown by an affidavit, the court may grant leave for the director to represent the body corporate in the proceedings. In the District Court, the requirement is more relax. With the implementation of the new Rules of District Court in September 2000, a limited company can be represented by one of its directors once the director files an affidavit in compliance with the requirements under Order 5A. No leave is required. As such, a limited company has the right to be represented by one of its directors.

22. The Lands Tribunal does not have any rules to govern corporate representation. Under Section 10(5) of the Lands Tribunal Ordinance, the proceedings of the Tribunal shall be conducted with as much informality as is consistent with attaining justice. The current practice of the Tribunal does not have any procedural requirement for representation of a limited company by its director. A limited company or an owners incorporation can appear in the Tribunal by their representatives so long they can produce letters of authorisation from the company or the owners incorporation. In this case, the Presiding Officer all along allowed the Respondent to act in person by its authorised representative.

23. I am of the view that facts of the Australian Telephone case are distinguishable from those of the present case so that the decision will not be applicable to actions commenced in the Lands Tribunal. The Judgment of Nazareth VP causes injustice to those litigants who are body corporate without legal representation as opposed to those who are natural persons. A substantial number of the actions in the Lands Tribunal are commenced by or against owners incorporation who may have no legal representation. Adopting the Judgment of the Australian Telephone case in the Lands Tribunal means that those who can afford to engage lawyers can recover costs while those companies who have no means to engage lawyers cannot even recover their costs in preparing the case themselves. It clearly runs against the spirit of the Tribunal for informality. Thus, I decide not to follow it. Considering the above, I conclude that the Respondent was a litigant in person for the purpose of the action and the Rule.

24. My conclusion finds support from the Court of Appeal. In course of writing this Decision, coincidentally, the full bench of the Court of Appeal has the opportunity recently to consider the Judgment of Nazareth VP in the Australian Telephone case in the recent case of Typhoon 8 Research Ltd. v. Seapower Resources International Ltd. & others (CACV 2980/2001). The Judgment was handed down on 30 July 2002.

25. In the Typhoon 8 case, after the Court of Appeal decided to allow the appeal of the Plaintiff who was a limited company represented by its director, it has to decide how to make the costs order. Madam Justice Le Pichon commented that Nazareth VP had adopted a construction of 'litigant in person' which "made it inherently impossible for a company who is a party to a litigation and not legally represented from recovering costs." She further stated: "the injustice that arises from the interpretation adopted in the Australian Telephone case is such that unless constrained to do so, I would not follow it." Madam Justice Le Pichon find no basis for confining the Rule to litigants who are natural persons only and discriminating against corporations which are legal persons. In conclusion, the Court of Appeal held that when a director appears for a company as of right in the District Court and when he appears with leave in the High Court, in each case, he appears as the company. For the purposes of the Rule under the Rules of District Court and the Rules of High Court, the company is a "litigant in person".

26. In light of the recent Court of Appeal decision in the Typhoon 8 case, the Applicant must fail on her argument on the Rule.

The "Indemnity Principle"

27. The Applicant's solicitors argued that since as a matter of facts, I found that there was no agreement reached between the Respondent and Mr. Lee for payment of any fees for work carried out in the action, under the "Indemnity Principle", the Respondent should have no claim for profit costs against the Applicant. In support, the Applicant relied upon on Order 62 Rule 28A(1) which provides:

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

It was the contention of the Applicant's solicitors that on such wordings of the Rule, all legal principles applicable to costs of taxation to solicitors' costs shall also apply to the litigant in person.

28. The Applicant's contention is, in my view, totally misconceived. Sub-rule (1) has nothing to relate to the "Indemnity Principle". It only provides how the Court should assess the costs of a litigant in person so that a litigant in person can recover such costs for work done as if the same was done by a solicitor. For example, while a winning party can recover costs in drafting and mechanical preparation of a defence if it is represented by lawyers, a litigant in person can also recover such costs.

29. The annotation to para. 62/App/2 of the Hong Kong Civil Procedure 2002 states the "Indemnity Principle" as follows:-

"An overriding principle in all taxations inter partes is the indemnity principle: an order for costs between parties allow the receiving party to claim from the paying party only an indemnity in respect of costs recovered by the order. Receiving parties cannot therefore recover a sum in excess of their liability to their own solicitors. (Gundry v. Sainbury [1910] 1 KB 645) ..."

30. In Gundry v. Sanibury, the solicitors for the Plaintiff agreed verbally not to charge any costs. The English Court of Appeal held that the Plaintiff could not recover from the Defendant more costs than he was liable to pay his solicitor, inasmuch as party and party costs were awarded as an indemnity only. Fletcher Moulton LJ in his Judgment stated that the client who has entered into such an agreement shall not recover from the person liable to pay to him the costs a greater sum than he himself is under the agreement liable to pay to the solicitor. In the premises, it is quite clear that the "Indemnity Principle" applies to cases where parties are represented by lawyers seeking to recover costs against the losing party and has no application to cases where litigants are acting in person.

31. The Applicant's argument is against common sense. Further, it goes against the intention of Order 62 Rule 28A(3) which allows the litigant in person to recover no more than $200 per hour for work done in relation to the action if in the opinion of the taxing master, the litigant has not suffered any pecuniary loss in doing the work.

32. Accordingly, I maintain my ruling at the taxation hearing and this ground of the Applicant's review also fails.

Absurb Result?

33. The Applicant's solicitors argued that if the Respondent was allowed to recover profit costs, it would produce absurd result. Their concern is who can retain the profit costs. In my view, the Applicant's liability to pay the Respondent's costs is quite clear under the Order of the Tribunal dated 28 November 2000. The costs allowed by the Tribunal will be paid to the Respondent. Naturally, it should be the Respondent who will receive the taxed costs and the Tribunal has no duty to inquire into the eventual recipient and it should neither be the concern of the Applicant nor as a ground of review of the taxation.

34. The Applicant contended that the Respondent would be unjustly enriched as the costs would be paid to the Respondent. I cannot see any legal ground of such contention at all. It is clear from the court's records that Mr. Lee, the authorised representative and probably, other officers of the Respondent had spent considerable amount of their own time in preparing for the defence and eventually the trial. The whole purpose of the costs order is to compensate the Respondent for its work done in this case.

35. Further, leaving aside the provisions under the Rule and the "Indemnity Principle", as the Taxing Master, I have to give effect to the Order of the Presiding Officer that the Applicant has to pay 1/3 of the Respondent's costs of this action to be taxed if not agreed. While the Presiding Officer has wide discretion to award costs under Section 12 of the Lands Tribunal Ordinance, there is nothing in his Order which limits the Respondent's right to recover out of pocket expenses only. Costs as defined under Order 62 Rule 1 include fees, charges, disbursements, expenses and remuneration. In the premises, I cannot see any reason why the Respondent cannot recover both profit costs and disbursements from the Applicant under the terms of the said Order especially in view of the recent Judgment of the Court of Appeal in the Typhoon 8 case.

Conclusion

36. For reasons stated above, the Applicant's application for review fails in its entirety and is dismissed accordingly.

Costs

37. Costs should follow event. At the end of the taxation hearing, as the Applicant's law costs draftsman indicated a Calderbank offer was made prior to the taxation hearing, I made a costs order nisi for the costs of taxation. It now transpires that the Applicant's Calderbank offer was beaten. I therefore order that the Applicant do pay the costs of the taxation and the costs of the review to the Respondent. I have already taxed the Respondent's costs of taxation. Regarding the costs of the taxation review, I am in mind to assess gross sum if parties cannot agree the amount within the next 14 days. If necessary, parties can arrange a 15-minute appointment before me for such purpose.

38. One last matter is the costs of the adjournment of the original taxation review hearing on 20 June 2002 which include the costs of the short hearing before me on 4 June 2002. The Applicant asked for such costs in any event. The dispute arose when the Applicant's solicitors filed an Appointment for Review of Taxation with an estimated length of 1 hour. The Tribunal gave a date for the review hearing on 20 June 2002. After the Appointment was served on the Respondent's solicitors, it turned out that the Respondent's law costs draftsman was unable to attend the hearing on 20 June 2002. The Respondent's solicitors then wrote seeking to re-fix another date for the hearing. The Applicant's solicitors adopted an uncompromising attitude and maintained that they had no duty to consult the diary of the Respondent's solicitors before fixing the date. Eventually, the Respondent wrote to the Tribunal seeking directions. I therefore asked both parties to appear before me on 4 June 2002 for directions.

39. Before I heard the matter that day, both parties could finally agree to vacate the original date and re-fix the hearing on 17 June 2002 and I made the order accordingly with costs reserved. In my view, this kind of hearing is totally unnecessary if the parties are sensible enough to deal with the matter. Though there is no Practice Direction to require parties to consult each other when fixing a long hearing in the Lands Tribunal, it would be reasonable and sensible for the Applicant's solicitors to ask the other side to send their representative to attend the Tribunal to fix the hearing together. In fact, for summonses to be heard by Masters in the High Court and the District Court, under Practice Direction 14.2, if parties wish to list a hearing for more than 30 minutes, the summons should be brought first either on the Chambers List or to the Practice Master for an estimated length of the hearing and other directions. This will give parties a chance to consult each other on the estimated length of the hearing. On the other hand, the Respondent's solicitors after being served with the Appointment with hearing date that is inconvenient to them should, instead of just seeking to vacate the original hearing, propose other dates which are convenient to them. In the circumstances, I do not make any order for costs of and incidental to the application for adjournment of the original review hearing including the short hearing before me on 4 June 2002.

40. Finally, I have the parties' consent to circulate this Decision.