GOOD PROCESS LTD v. GRAND CHEST LTD AND ANOTHER

DCCJ448/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 448 OF 2004

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J U D G M E N T

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1.  In this action, the plaintiff is the registered owner of a property known as Shops 50-54, Ground Floor, Glorious Garden, 54 Lung Mun Road, Tuen Mun, New Territories (hereinafter referred to as “the suit property”).

2.  On 24 May 2000, the plaintiff entered into a tenancy agreement with the 1st defendant for a six-year lease of shops 50-53 on the ground floor of Glorious Garden commencing from 26 August 2000 to 25 August 2006 at a monthly rental of $155,000 between 26 August 2000 and 25 August 2003, and $186,000 rent per month between 26 August 2003 and 25 August 2006, not inclusive of rates, government rent and management fee, the monthly rental to be payable on the 26th day of each month  (hereinafter referred to as “the first lease agreement”).

3.  On 3 July 2000, the parties entered into a second tenancy agreement for Shop 54 of the suit property for an identical lease period of six years at a monthly rental of $18,300 between 6 August 2000 and 25 August 2003, and $22,000 monthly rental between 26 August 2003 and 25 August 2006 (hereinafter referred to as “the second lease agreement”). 

4.  The parties agreed in or about July 2001 that rental payments shall be adjusted and become payable on the 1st day of each month commencing from 1 August 2001.

5.  Under two letters of guarantee dated 25 April 2000 and 3 July 2000, the terms and conditions of which are identical, the 2nd defendant undertook and guaranteed the due payment by the 1st defendant to the plaintiff, the rental and the due performance and observance by the 1st defendant of all the terms, conditions and covenants in the two lease agreements.

6.  The 1st defendant surrendered the suit premises on 13 December 2002 upon service of a notice of termination on the plaintiff on 29 October 2002.  But upon surrender of the suit property to the plaintiff, the 1st defendant failed to pay outstanding rental, rates and government rent and management fees from June to December 2002 totalling $1,331,846.  After deducting the rental deposit and public meters deposit, the outstanding balance comes to $669,277, with interests.

The Issues In Dispute:

Set off and Estoppel

7.  The 2nd defendant disagreed that he is liable to the plaintiff.  It is the 2nd defendant’s pleaded case that he had a discussion with the plaintiff’s senior property officer, Mr Ng Hui-lam (PW1), regarding the outstanding rental in June 2002.  Mr Ng suggested to the 2nd defendant that if the 1st defendant surrendered the suit property together with the furniture, fixtures, fittings, decoration and the restaurant and liquor licences, the arrears of rental could be set off. 

8.  This suggestion was repeated, according to the 2nd defendant, Mr Leung, in December 2002 when the 2nd defendant made enquiry with Mr Ng concerning the status of the outstanding rental.  The 2nd defendant claimed Mr Ng had suggested to him that he should persuade the 1st defendant to deliver up vacant possession of the suit property but leaving behind all furniture, fixtures, fittings, decorations, and transfer the restaurant and liquor licences held by the 1st defendant’s shareholder, Mr Chow Sau-kuen, to a potential new tenant of the plaintiff.  It is the 2nd defendant’s pleaded case that it was on this basis that the 1st defendant’s shareholder, Mr Ng Kwong-yuen, acceded to the suggestion and requested Mr Chow to transfer the liquor and restaurant licences to a new tenant of the plaintiff at the suit property.  Consequently, the 2nd defendant claimed the arrears of rental, rates, government rent and management fees between June 2002 and December 2002 were fully set off.

9.  The 2nd defendant in his evidence in court and witness statement, supported the pleaded defence case.  In her final submission, Miss Lin, counsel for the 2nd defendant, however, made her submission on two further issues: first, the revocation of the guarantees by the 2nd defendant; second, the demand of the guarantor under the guarantee was made after the reasonable period following notice of termination had expired.

Revocation of Guarantee

10.  Miss Lin submitted that the two guarantees had been unilaterally revoked by a letter dated 3 October 2002 from the 2nd defendant to the plaintiff’s Mr Ng.  The letter purportedly notified the plaintiff that he had left the 1st defendant in August 2001 and that in September 2002 the 1st defendant had admitted a new shareholder and operated under a new restaurant name. 

11.  At the same time, the 2nd defendant had transferred his shareholdings in the 1st defendant to another shareholder and he had resigned from the 1st defendant’s board of directors in September 2002.  He further requested the plaintiff’s Mr Ng to negotiate with the new board of directors for a replacement guarantor to the lease and that he would no longer accept the validity of the letters of guarantee, he ended the letter by requesting Mr Ng to give him a reply.

12.  At this juncture, for the sake of record, I will read this particular letter of the 2nd defendant to Mr Ng dated 3 October 2002.  This is in Chinese and reads as follows:

“敬啟者，本人梁志洪係洪昌(譯音)有限公司前任董事，代表洪昌有限公司與貴公司簽署租約位於屯門龍門道四十五號富健(譯音)花園五十一至五十四號商舖，開設家富(譯音)海鮮酒家之租約，當時本人曾簽一份以兩個月租金的私人擔保，本人已於二零零一年八月離開家富海鮮酒家，該酒家於二零零二年九月份加入了新股東，重新裝修，並改名為源興(譯音)海鮮酒家，本人也於二零零二年九月份將持有洪昌有限公司之股份全部轉售給他人，並退出了洪昌有限公司董事局，該公司與本人再沒有任何關係，故此，當年本人簽署租約擔保，請與該公司董事商議由那位董事做擔保人，現在開始本人不會承認當年簽署之擔保書，希望貴公司盡快處理此事及盡快回覆本人，此致，騰寶(譯音)有限公司吳許能先生，梁志洪，二零零二年十月三日。”

Demand on Guarantee

13.  The other issue raised in the submission of Miss Lin is on the basis that the said two guarantees are guarantees on demand, that the liability of the guarantor to pay is contingent upon demand and that the creditor has no cause of action until such time the demand is made.  Miss Lin submitted that the notice of termination of guarantee expired within 15 days, the period of the landlord’s right to re-enter the premises upon default of payment of rental.  Alternatively, the period of two months, referring to clause 6 of the tenancy agreement at page 47 of the documents bundle that the lease is terminable by the giving of written notice from either party to the lease.

14.  Clause 6 of the lease on page 47 of the bundle is as follows: 

“

6.

Notwithstanding anything herein contained, the tenant may terminate this agreement by giving two months’ prior notice in writing to the landlord or paying two months’ rent in lieu of notice.  The tenant shall not withdraw the said notice once given.  Upon expiration of the said notice, this agreement shall be terminated but such termination shall not affect nor prejudice the tenant’s liability for breaches, if any, of the terms and conditions of this agreement committed prior to such termination.”

15.  On the two letter issues raised by Miss Lin, the plaintiff’s counsel, Mr Gidwani, submitted that the 2nd defendant had failed to plead the guarantee had terminated or that the demand was served after the notice of termination of guarantee had expired in any of the 2nd defendant’s pleadings.  The 2nd defendant had also failed in his evidence to give evidence on these matters or that he had revoked the two letters of guarantee or that the notice of termination had expired by the time the plaintiff served a demand on the guarantee on the 2nd defendant.

16.  Mr Gidwani submitted that when the 2nd defendant signed the two letters of guarantee, they were witnessed by the 2nd defendant’s solicitors.  He alleged the letters of guarantee were drafted by the defendant’s solicitor while the 2nd defendant’s counsel, Miss Lin, denied that it was drafted by the defendant’s solicitor.  There was no evidence adduced on this point as to who drafted the letters of guarantee.  On the face of the two documents, they were identical letters of guarantee from the 2nd defendant to the plaintiff witnessed by his then solicitor.

Findings

17.  It is apparent that the 1st defendant had been in arrears of payment of rental since 2001.  The evidence revealed that the plaintiff had taken out proceedings against the 1st and 2nd defendants for payment of rental outstanding in July 2001 for the payment of rental from 1 May 2001 to 31 July 2001.  This High Court action was settled on 4 October 2001 and the plaintiff’s then legal representatives filed a notice of discontinuance on 18 January 2002 in the High Court.

18.  In pursuance to the negotiation leading to the settlement of the High Court action for rental in 2001, the parties had reached agreement on certain rental adjustment provided that the 1st defendant would pay the monthly rental upon which the plaintiff would make a rental adjustment to $20,000 a month.  Presumably, there was a guarantee that the 1st defendant would pay the outstanding rental before the advantage of an adjustment of the rental would be extended to the 1st defendant.

19.  However, in June 2001 the 1st defendant’s business was again in trouble so much so that the 2nd defendant considered the possibility of terminating the tenancy prematurely. 

20.  It is not in dispute that the 1st defendant had surrendered the suit property back the plaintiff, the landlord, on 30 December 2002.  It is also not in dispute that when the 1st defendant quit the suit property, the 1st defendant had left behind the furniture, fixtures and fittings.  Mr Ng admitted that the plaintiff had to send in cleaners to clear the suit property of debris and garbage and to clear away the bad smell left behind at the suit property. 

21.  What is in dispute is whether the plaintiff’s property officer, Mr Ng, had represented to the 2nd defendant in June and December 2002 that the plaintiff would accept the surrender of the tenancy by the 1st defendant and that the plaintiff would accept the further surrender of the fixture, furniture, fittings, decoration and the transfer of the restaurant and liquor licences as a sufficient setoff for the rent in arrears.

22.  According to the evidence of the 2nd defendant in paragraph 10 of his witness statement, he said that at the June 2002 meeting with Mr Ng over the outstanding rental, Mr Ng suggested to him that the 1st defendant could transfer the furniture, fittings, fixtures, decorations, the restaurant and liquor licences of the restaurant to the plaintiff or the plaintiff’s new tenant as a setoff of the outstanding rental. 

23.  Mr Ng, on the other hand, in his evidence denied he had ever made any such suggestion of setting-off of the outstanding rental by the surrender of the defendant’s furnitures, fittings and fixtures or restaurant licences on the occasion when the 2nd defendant talked to him about early surrender and termination of the tenancy in June 2002.  So far as he knew, according to Mr Ng, the plaintiff had never accepted any setting-off of rental from any of the tenants by means of their surrender of furniture, fixtures, fittings or restaurant and liquor licences.

24.  Mr Ng claimed that he had a number of telephone conversations with the 2nd defendant in June 2002 and he had reminded the 2nd defendant that if the 1st defendant failed to pay up outstanding rental, the 2nd defendant would be liable to pay the rental outstanding under the two guarantees.  He said the 2nd defendant had not made any suggestions to him about setting-off of the rental with the furnitures, fittings, fixtures at the suit property.

25.  Mr Ng further denied he had ever asked the 2nd defendant to try to persuade Mr Ng Kwong-yuen, who had by September 2002 become the major shareholder of the 1st defendant, to an early surrender of their tenancy or to apply the furnitures, fixtures, fittings and decorations, restaurant and liquor licences to the plaintiff as a setoff for outstanding rental.  Neither had he ever asked the 2nd defendant to ask Mr Chow Sau-kuen about the transfer of the restaurant and liquor licences.  In fact, Mr Ng Kwong-yuen in his letter of surrender dated 30 December 2002 stated that all chattels left at the suit property by the 1st defendant upon the 1st defendant’s surrender of the tenancy to the plaintiff were chattels abandoned by the 1st defendant, and the plaintiff was free to deal with them as the plaintiff deemed fit.

26.  His letter is as follows:

“	致騰寶有限公司 Good Process Limited
	關於：新界屯門富健花園地下五十一至五十四號商舖該物業
	本人吳廣源(身分證號碼E708340(1))現代表洪昌有限公司(Grand Chess Limited)(洪昌)將該物業之全部地方交回給業主騰寶有限公司 (Good Process Limited)。並特此聲明，一切洪昌遺留該物業之物品均屬遺棄，業主得任意自行處理。
	洪昌及本人清楚明白，交回該物業給與業主是不會影響業主現正向洪昌追索洪昌所欠下的租金、利息、損失、律師費及堂費。
		2002年12月30日
		for and on behalf of
		Yuen Hing Seafood Restaurant,
		Grand Chess Limited
		吳廣源
		authorised signature.”

27.  Based on the 1st defendant’s admitted terms of surrender under 29 October 2000 and 30 December 2000 letters from the 1st defendant, the plaintiff accepted the early surrender, and in January found a new tenant to take up a new lease on the suit property for a monthly rental of $120,000 for a term of three years.  The commencement date of the new lease was 1 March 2003.  The new tenant was given a rent-free period from January 2003 to 1 March 2003.

28.  Miss Lin relied on the principle of promissory estoppel and she referred me to Halsbury’s of Hong Kong, volume 11, 2003 edition, chapter 170.120:

“	Promissory Estoppel
	When one party has by his words or conduct made to the other a clear and unequivocal promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, then, once the other party has taken him at his word and acted on it, the one who gave the promise or assurance cannot afterwards be allowed to revert to their previous legal relations as if no such promise or assurance had been made by him but he must accept their legal relations subject to the qualifications which he himself has so introduced...
	The doctrine cannot create any new cause of action when none existed before, and it is subject to the qualifications that:
	(1)	the other party has altered his position;
	(2)	the promissor can resile from his promise on giving reasonable notice which need not be a formal notice, giving the promissee a reasonable opportunity of resuming his position;
	(3)	the promise becomes final and irrevocable only if the promissee cannot resume his position.”

29.  Mr Gidwani submitted that it is unlikely for the plaintiff’s property officer, Mr Ng, to make such a promise to the 2nd defendant or to ask the 2nd defendant to persuade the 1st defendant to do so particularly when the 1st defendant had already been in rental arrears for a number of months by June 2002.  Further, the 2nd defendant had not altered his position even if there was such a representation from the plaintiff.

30.  I agree with Mr Gidwani that it is quite unlikely for Mr Ng to make such an offer of setoff to the 2nd defendant.  It is one thing for the 1st defendant to find a new tenant to take over the tenancy and transfer to this tenant the 1st defendant’s furnitures, fixtures and fittings.  It is entirely a different consideration for the plaintiff as the landlord to take over the 1st defendant’s furnitures and fixtures and fittings, thereby restricting its choice of tenants at the suit property.  There is simply no advantage shown that the plaintiff would have anything to gain by agreeing to set off the rental against the furniture, fittings, etc. 

31.  Furthermore, the plaintiff is a property company.  Its business is renting out premises for rental.  There is no evidence that the plaintiff has ever been a restaurant owner.  It is unlikely that the plaintiff would agree to have the liquor and restaurant licences transferred to the plaintiff. It does not make good business sense for the plaintiff to do so.

32.  The 2nd defendant’s evidence is also against the evidence of Mr Ng Kwong-yuen of the 1st defendant’s.  The 1st defendant’s letter of surrender stated clearly that the chattels, including furnitures, fixtures and fittings were abandoned or regarded as abandoned by the 1st defendant.  The 2nd defendant, on the other hand, by then had no further interest in the 1st defendant, having sold all his shares to Mr Ng in September 2002.  He could not have altered his position under the circumstances or suffered any prejudice because of it.  With reference to his suffering any prejudice, I am not referring to the fact that it is over and above any prejudice he had already suffered, being the guarantor to the two leases.

33.  The 2nd defendant failed to plead the defence of the revocation of the guarantee or that the plaintiff’s demand on the guarantee was not made within a reasonable period of his service of notice of termination.  In spite of that, Miss Lin based the 2nd defendant’s case on these two additional grounds of defence.  I cannot agree with Miss Lin that they are issues of law and therefore not required to be pleaded in the defence. 

34.  It is unfortunate that these two matters in issue were  not put to the plaintiff’s witness, Mr Ng, during his cross-examination, consequently the 2nd defendant cannot raise these two issues as his defence.  Even if these two issues were pleaded and the 2nd defendant were allowed to raise such a defence based on the unilateral revocation of the guarantee, I do not consider the 2nd defendant had made out a case in support of this defence.

35.  I have considered the authorities on the law referred to me by Miss Lin, Halsbury’s Laws of Hong Kong, volume 13, 2, 2003 edition, chapter 200.142:

“	Revocation of Continuing Guarantees
	When a guarantee does not provide expressly for its revocation by notice, whether it can be so determined depends mainly on whether the consideration for the guarantor’s promise is entire or divisible.
	If the consideration is entire, the guarantor cannot terminate the guarantee by notice without the creditor’s agreement.”

36.  The terms of the letter of guarantee are clear.  No provisions have been made to terminate the guarantee by notice other than under clause 4.  I shall now refer to the body of the letter of guarantee.  Both letters of guarantee are identical.  It is as follows:

“	Letter of Guarantee
	To:	Good Process Limited, 22nd Floor, Chevalier Commercial Centre, 8 Wan Hoi Road, Kowloon, Hong Kong.
	Re:	Lease agreement of the property known as Shop Nos. 51, 52 and 53, Ground Floor, Glorious Garden, 45 Lung Mun Road, Tuen Mun, New Territories, Kowloon, Hong Kong.
	In consideration of your agreeing to enter into a lease agreement dated 24 May 2000 (the lease agreement) with Grand Chess Limited, (洪昌有限公司), whose registered office is situated at flat D on the 4th floor of Koon Hing Building, Nos. 28-38 Heung Sze Wui Road, Tuen Mun, New Territories, Hong Kong (the company),
	I, Leung Chi-hung, a director of the company hereby undertake and guarantee the due payment of the company to you after rent and the due performance and observance by the company of all the terms, conditions and covenants contained in the lease agreement and any other documents renewing, replacing or varying the same in a manner hereinafter appearing:
	(1)	If a company shall make default in the payment of rent and other outgoings in a manner stipulated in the lease agreement or any other documents renewing, replacing or varying the same, I shall on demand forthwith pay you the amount of rent and other payments which shall be so in arrear.
	(2)	If a company shall make default in the performance or observance of any of the terms, conditions or covenants on its part contained in the lease agreement or any other documents renewing, replacing or varying the same, I shall keep you indemnified against all losses, damages, expenses and costs which you shall be entitled to recover against the company by reason of such default.
	(3)	A statement prepared and signed by you and sent to me stating the amount due from the company to you under the lease agreement shall be conclusive as to the liability in the amount thereof and shall be binding on me and I shall not raise any objection thereto.
	(4)	This letter of guarantee shall remain valid and in full force and effect until the expiration of the lease agreement and any other documents renewing, replacing or varying the same provided that if the lease agreement shall be terminated by mutual agreement, all future liability on my part shall then cease but such termination shall not affect or prejudice any liability incurred prior to the termination.
	(5)	My liability under the letter of guarantee shall not be discharged or affected in any way by your giving the company time in which to meet the payment of rent and other outgoings and other indulgence in respect of the company’s obligation under the lease agreement and any other documents renewing, replacing or varying the same.
	Dated 25th day of April 2000.
	Signed, sealed and delivered by Leung Chi-hung, holder of Hong Kong ID card No. G230236(A) in the presence of Wong Chi-yan, clerk to Messrs Ng, Tam, Ko & Chan, Solicitors, Hong Kong SAR.
	I hereby verify the signature of Wong Chi-yan.
	Signed, Chan Yin-kai
	Solicitor, Messrs Ng, Tam, Ko & Chan, Solicitors, Hong Kong SAR.”

37.  It is clear that under clause 4 of the letter of guarantee, the two letters of guarantee being identical (the second one was signed on 3 July in the same year, guaranteeing Shop 54 of the suit property).  The guarantee remained valid and in force until the expiration of the lease agreement. 

38.  I refer also to clause 7 of the two tenancy agreements which specified the following:

“As a condition to the landlord entering into this agreement, the tenant shall procure its director, Leung Chi-hung (梁志洪) to personally guarantee the due observance and performance of all the terms and conditions of this agreement, including but not limited to the payment of rent and other outgoings during the term of this agreement.”

39.  It is quite clear that the guarantees were, as it is so-called, an entire guarantee for the whole of the tenancy.  The entirety of the tenancy period was six years which may be cut short by either party giving two months’ notice in writing under clause 6 of the tenancy agreement.  That was why clause 4 of the guarantee had referred to variation of the lease agreement or termination by mutual agreement.  It was only under those circumstances that the guarantor’s liability could be discharged under the guarantee.  Consequently, it is clear that under the two letters of guarantee, it is an entire guarantee which cannot be terminated unilaterally by notice.

40.  No doubt the 2nd defendant had been fully advised by his then solicitor when he signed the two letters of guarantee.  It is of particular importance that the solicitor’s clerk witnessed the 2nd defendant’s signature.  The solicitor himself, a Mr Chan, also witnessed and verified the 2nd defendant’s signature.  The same firm of solicitors represented the 1st defendant when the two leases were signed.  It must have been in the 1st and 2nd defendants’ consideration then that it was not necessary for the 2nd defendant to have separate representation.  The 2nd defendant was then the major shareholder of the 1st defendant, having been in the restaurant business for over 23 years.  Mr Leung, with the benefit of solicitors advising him, must know what his liability was under the two letters of guarantee.

41.  It is particularly of note that Mr Leung wrote to Mr Ng of the plaintiff and requested him to liaise with the 1st defendant to obtain another director to replace him, and this letter was dated 3 October 2002.  He had asked Mr Ng for a reply at the end of that letter.  I am satisfied that this was why he did not, in his 11 February 2003 letter to the plaintiff’s solicitor demanding payment on the guarantee, reject his liability as the guarantor.  If he really believed he had no liability under the guarantee because the guarantee had been terminated, he would have said so right at the very beginning upon receipt of the letter of demand from the plaintiff’s solicitor.

42.  As the guarantee was not a divisible guarantee, the issue of reasonable notice of demand does not arise.  The letter of guarantee clearly provided for it under clause 5 which stated:

“My liability under the letter of guarantee shall not be discharged or affected in any way by your giving the company time in which to meet the payment of rent and other outgoings or other indulgence in respect of the company’s obligation under the lease agreement and any other documents renewing, replacing or varying the same.”

43.  Even if the demand is required, it need not be in writing, and I refer to clause 1 of the letter of guarantee which stated as follows:

“If a company shall make default in the payment of rent and other outgoings in a manner stipulated in the lease agreement or any other documents renewing, replacing or varying the same, I shall on demand forthwith pay you the amount of rent and other payments which shall be so in arrear.”

44.  Halsbury’s Laws of Hong Kong, volume 13, paragraph 200.060 provides as follows:

“	Demand on the Guarantor
	The creditor need not request the principal debtor to pay unless that demand is an express or implied condition of the guarantee or is otherwise necessary to establish the principal debtor’s liability.  If the guarantee requires the guarantor to pay on demand, a valid demand is a necessary ingredient of the creditor’s cause of action against the guarantor.  If the guarantee provides that the guarantor is liable as the principal debtor, such a demand may not be necessary.”
“	The demand must comply with any requirements in the guarantee as to its form and manner but otherwise may be oral and in any words which make it clear that payment or other performance is required.  It is sufficient that the demand makes it clear to the guarantor that the creditor requires payment of a stated sum which is in fact due.”

45.  Because of the communication between the plaintiff’s Mr Ng and the 2nd defendant on a number of occasions in June 2002 and also in December 2002, the demands by the plaintiff on the guarantor, the 2nd defendant, were apparent although they may be oral.  Furthermore, the letter of demand from the plaintiff’s solicitor in February 2003 is a valid demand on the guarantee in writing. 

Conclusion

46.  Based on the aforesaid reasons, I find the 2nd defendant to be liable to the plaintiff as the guarantor for the tenancy of the suit property.  The 2nd defendant knew his liability did not end with his retirement from the board of the 1st defendant or his transfer of shares to Mr Ng Kwong-yuen in September 2002.  The so-called setoff defence was not supported by the facts.  In any event, any transfer of the chattels at the 1st defendant’s restaurant should have been negotiated by the 1st defendant and the new tenant, not involving the plaintiff. 

47.  For all we know, there might have been such a transfer, but no such evidence was called from the 1st defendant’s Mr Ng or anyone from the 1st defendant, neither was the new tenant called to give evidence on whether there was any consideration as to the transfer of the chattels left by the 1st defendant in the suit property. 

48.  I give judgment to the plaintiff on the plaintiff’s claim of $669,277 which is derived from seven months of rental outstanding at $173,300 per month, totalling $1,213,100, plus rates and government rent between 1 July 2002 to 31 December 2002 at $76,482, management fees between October 2002 to December 2002 at $42,264, less rent deposit of $603,756, and meter deposit of $58,813.  The net total comes to $669,277.

Interest

49.  I allow interest at half judgment rate from 31 December 2002 to the date of judgment and thereafter at judgment rate until full payment.  Costs to follow the event, and the plaintiff shall be paid his costs, the 2nd defendant to bear the costs, costs to be taxed if not agreed with certificate for counsel.  Costs of this action up to 14 January 2004 be taxed on the High Court scale and those costs incurred thereafter be taxed on the District Court scale.