XCHRX FENN KAR BAK LILY v. GOH KIM LAY AND ANOTHER

HCA 9177/1992

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9177 OF 1992

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D E C I S I O N

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1. This is the Plaintiff's appeal from the decision of a master who refused to strike out the Defendants' Bill of Costs dated 21 November 1994 ("the Bill").

2. Further, by a summons filed on 21 September 1999, the Plaintiff sought an alternative order that if this Court dismissed her appeal, that this Court perform a further review under Order 62 r.35 RHC of the master's review of taxation of the Bill.

History of proceedings

3. The following events in the history of this action are particularly relevant to the issues before me.

4. The action was started in December 1992.

5. In May 1994, the Plaintiff applied ex parte for, and obtained, a Mareva injunction against the Defendants.

6. In September 1994, the injunction was discharged by agreement of the parties. On 12 September 1994, Woo, J. ordered that the Plaintiff pay the Defendants all their costs arising out of the Plaintiff's application for Mareva relief on a full indemnity basis to be taxed and paid forthwith. It is these costs which is the subject-matter of the present appeal and summons.

7. The Defendants' then solicitors Van Langenberg & Lau prepared the Bill, which Master Jennings was to tax in January 1995. The taxation was adjourned pending the Plaintiff's appeal from Woo, J.'s order to the Court of Appeal, but the master ordered the Plaintiff to file and serve a List of Objections prior to the adjourned hearing.

8. In September 1995, the Plaintiff's appeal was dismissed by the Court of Appeal. In November 1995, the Court of Appeal refused the Plaintiff leave to appeal to the Judicial Committee of the Privy Council.

9. The taxation was restored for hearing on 11 January 1996. The Plaintiff applied for a further adjournment pending her petition to the Privy Council for special leave, but Master Jennings dismissed that application and allowed the Bill in full, the Plaintiff not having filed or served a List of Objections pursuant to his order in January 1995.

10. In January 1996, the Plaintiff presented a Petition to the Privy Council for special leave.

11. In the meantime, the Plaintiff appealed Master Jennings' decision to allow the Bill in full. In March 1996, Keith, J. (as he then was) ordered that the Plaintiff's appeal stand dismissed should special leave be refused, but directed that the Plaintiff be at liberty to apply, pursuant to O.62 r.33(1), to review the taxation of the Bill, and extended the time for making such application to 14 days after refusal of special leave.

12. On 28 March 1996, the Privy Council refused special leave.

13. On 10 April 1996, the Plaintiff applied to review the taxation and filed a List of Objections.

Review of taxation by master

14. The review was conducted on 29 June 1999 by Master Barnes, as Master Jennings had retired. Master Barnes refused the Plaintiff's application to strike out the Bill, conducted the review and on 8 July 1999, handed down her written decision on the review. The Defendants' costs for the Mareva proceedings were taxed and allowed at $324,632.

No certificate of taxed costs

15. On 28 July 1999, the Registry wrote to the Defendants' present solicitors (with a copy to the Plaintiff's solicitors) asking them to check the calculations of the costs allowed before submitting a draft allocatur.

16. The Defendants' solicitors submitted a draft allocatur in the said amount of $324,632 at the end of July 1999.

17. However, no certificate for these costs has been issued up to the date of the hearing before me. According to the Plaintiff's solicitor, the Registry had informed him that the certificate would be withheld pending the disposal of the present appeal (Affirmation of Jim Yiu Ming).

18. I am afraid I am unable to understand why an appeal should delay the issue of the certificate. Order 62 rule 34(4) RHC provides that a taxing master who has reviewed a decision in respect of any item shall issue his certificate accordingly.

19. There is nothing in the rules to the effect that an appeal acts as a stay of the issue of a certificate. There was no application made by any party for a stay. I do not see any grounds in law or in practice and procedure why the certificate should not have been issued.

Effect of absence of certificate

20. The lack of the master's certificate has a bearing on the Plaintiff's summons under O.62 r.35. This is because a review of a taxing master's certificate by a judge under this rule is predicated upon a certificate having been issued - O.62 r.35(2) provides that an application for review of a taxing master's decision in respect of any item may be made "at any time within 14 days after the taxing master's certificate in respect of that item is signed, or such longer time as the taxing master at the time when he signs the certificate, or the Court at any time, may allow"; further, O.62 r.35(6) provides that on an application under that rule, the judge may make such order as the circumstances require "and in particular may order the taxing master's certificate to be amended ..." .

21. The Defendants' counsel submitted that the master's written decision should stand as the certificate, and on that basis, he submitted that the summons under O.62 r.35 was out of time. I cannot accept that submission. The master's written decision is of a completely different nature from the certificate.

22. No certificate having yet been issued, the summons is, if anything, premature because O.62 r.35 does not apply until after the master has issued the certificate.

23. However as it appears that the only reason for the absence of the certificate was simply an administrative misunderstanding of the effect of an appeal on the issue of the certificate, the parties have argued the review before me de bene esse, and my decision in respect of the summons takes effect from (and is conditional upon) the issue of the certificate by the master in terms of the draft allocatur.

Application to strike out the Bill

24. I turn first to the Plaintiff's appeal against the master's refusal to strike out the Bill. As a preliminary point, I would note that the master on review did have jurisdiction to strike out the Bill if the circumstances warranted it, because O.62 r.34(2) gives a reviewing master all the powers which he might exercise on an original taxation.

25. The question is whether the facts warranted a strike-out. The ground submitted by Mr Yin, counsel for the Plaintiff, is not that the Bill contains scandalous material and is thus an abuse of the process of the Court (cf Re Miller (1885) 54 LJ Ch 205), but that it is an abuse of the process because the Bill is, in Mr Yin's words, "so unreliable it is indicative of fraud", and thus frivolous, vexatious or otherwise an abuse of the process. This is a very serious allegation.

Debit Note No.4947

26. The first matter relied upon by the Plaintiff as "indicative of fraud" was that Van Langenberg & Lau's Debit Note No.4947 dated 29 October 1994 had not been referred to in two actions instituted by Van Langenberg & Lau against their clients, the Defendants, for non-payment of their fees.

27. The first of these two actions, HCA No.11076/1995 was instituted on 30 October 1995 when Van Langenberg & Lau's Debit Note No.6054 dated 17 October 1995 was not paid by the Defendants. Judgment was entered in default. The second of these two actions, HCA No.7160/1996 was instituted when there was no full payment of two further Debit Notes, No.6431 and No.6787.

28. The Plaintiff relies on the fact that Debit Note No.6054 was referred to in the Statement of Claim in HCA No.7160/1996 as "the 1st bill". Therefore the Plaintiff says that shows that Debit Note No.4947 was "not in existence" and "fabricated".

29. I have to say that that allegation is quite irresponsibly made, and to his credit, Mr. Yin, the Plaintiff's counsel, did not pursue it once I pointed out to him that (i) the claim in HCA No.11076/1995 was for the balance shown on Debit Note No.6054 and (ii) that Debit Note (which had been supplied to the Plaintiff in these taxation proceedings) explicitly included "balance due to us [Van Langenberg & Lau] in our previous bill No.4947", showing clearly that Debit Note No.4947 indeed existed before the issue of Debit Note No. 6054 and HCA No.11076/1995.

30. Further it had been clearly stated in paragraph 4 of the Statement of Claim in HCA No.11076/1995 that Debit Note No.6054 had set out particulars of professional services rendered to the Defendants at the Defendants' request "since 29th October 1994". Since the Plaintiff knew that Van Langenberg & Lau had been the Defendants' solicitors since before that date, it should have been clear to the Plaintiff that Debit Note No.6054 was only the "1st bill" for purposes of identification in the pleadings in the two actions.

31. Thus for the Plaintiff to say that Debit Note No.4947 did not exist at the time of the two actions was not only erroneous, but reckless, and it certainly does not provide any ground for striking out the Bill.

Discrepancies in charges in District Court actions

32. As another example of the "unreliability" of the Bill, the Plaintiff referred in paragraphs 13 and 14 of her 11th Affirmation to Van Langenberg & Lau's fees for an application in District Court actions No.10183/1993 and 16458/1993.

The District Court actions

33. In these District Court actions, the 1st Defendant in this present action ("Miss Goh") was the plaintiff, and a company called Versatile Advertising Co. Ltd. was the defendant. The Plaintiff in this present action ("Miss Fenn") was associated with Versatile, and her firm T.L. Ip & Co acted as Versatile's solicitors.

Application for return of security money and Costs Order

34. The application made in the District Court was by Miss Goh for the return of security money by T.L. Ip & Co. Miss Goh succeeded and was awarded costs on a solicitors and client basis. (This was not part of the Mareva application, which was of course in the present High Court action, with Miss Fenn as plaintiff and Miss Goh and her husband as defendants).

Difference between fees charged to client and fees claimed on taxation

35. In a breakdown of the fees covered by Debit Note No.4947 rendered by Van Langenberg & Lau to Miss Goh and dated 29 October 1994, Miss Yung (a solicitor with Van Langenberg & Lau) was said to have spent 26 hrs. 30 mins., and law clerks 16 hrs. 20 mins, on the application for return of security money, for which Van Langenberg & Lau billed Miss Goh a total amount of $79,316.67.

36. However in an earlier Bill of Costs prepared by Van Langenberg & Lau in June 1994 for taxation in the District Court of the costs of that application, the costs sought from Versatile was only $37,500 based on 17 hrs. 15 mins. work by Miss Yung and 3 hrs. 45 mins. work by a law clerk.

37. Put briefly, the point made by the Plaintiff here is that there was a discrepancy of some 9.25 hrs of Miss Yung's billing time and a little more than 12 hrs of law clerks' billing time between (i) Van Langenberg & Lau's Debit Note rendered to Miss Goh, their client, in October 1994 and (ii) the smaller amount sought on Miss Goh's behalf from Versatile in their bill of costs submitted for taxation in June 1994.

Material considerations

38. It is true that Van Langenberg & Lau has not proffered an explanation for this difference. But it is important to note that the Bill of Costs in the District Court actions claimed a smaller, not a larger, sum from Versatile in respect of the application for which Versatile was ordered to pay costs to Miss Goh.

39. Nor was there any advantage to Van Langenberg & Lau or the Defendants, vis-a-vis the Plaintiff, in "padding" the fees for the application in the Debit Note. These fees were for an application for return of security money in the District Court actions. They were never part of the Mareva application in the High Court action, and they were not recoverable from the Plaintiff here.

Application to vary and Costs Order

40. As the second example of "unreliability", the Plaintiff referred in paragraphs 18 an 19 of her 11th Affirmation to Van Langenberg & Lau's fees in respect of an application made by T.L. Ip & Co. to vary an order in the District Court actions (by then transferred to the High Court as Action No.8090/1994). This application was dismissed with costs awarded to Miss Goh on a solicitor and client basis.

Difference between fees debited to client and fees claimed on taxation

41. In a breakdown of the fees covered by Debit Note No.4947, Miss Van Langenberg was said to have spent 8 hrs 40 mins, Miss Yung 12 hrs. 10 mins., and law clerks 7 hrs. 30 mins, on the application, for which Van Langenberg & Lau billed Miss Goh a total amount of $62,416.67.

42. However in the Bill of Costs prepared by Van Langenberg & Lau in November 1994 for taxation of the costs of that application, the costs sought was based on 4 hrs 35 mins by Miss Van Langenberg, 7 hrs. 5 mins. work by Miss Yung and 1 hr. work by a law clerk, for a total of $32,458.00.

43. So, again, there was a difference between (i) the larger amount charged by Van Langenberg & Lau in their Debit Note rendered to client and (ii) the smaller amount sought on Miss Goh's behalf from T.L. Ip & Co. in the bill of costs submitted for taxation.

Similar considerations

44. Again, the same points arise. Van Langenberg & Lau was charging their client more than the costs claimed on taxation, but the application had absolutely nothing to do with the Mareva application, and the balance of costs was not recoverable, or sought, from the Plaintiff.

Conclusion

45. I find this matter of the difference in fees quite irrelevant to the issue of the costs claimed for the Mareva injunction here.

46. If Van Langenberg & Lau were charging their clients, the Defendants, more than they could prove or justify on taxation, that may be a matter of complaint by the clients, the Defendants, who could of course ask their solicitors to submit the Debit Note for taxation. But since the Defendants are not asking the Plaintiff to indemnify them in respect of those fees, it is in my view officious for the Plaintiff to complain that the Defendants have been paying Van Langenberg & Lau possibly more than they had to. It might have been otherwise if Van Langenberg & Lau were charging their client less than what was claimed on taxation, but that is not the case.

47. Alternatively, the inference is that Van Langenberg & Lau were more cautious when claiming costs on a taxation exercise than when rendering a fee note to their client, an inference which does not assist the Plaintiff here.

48. In conclusion, I do not see any ground for the Plaintiff's allegation that the differences in fees are "indicative of fraud"on the part of Van Langenberg & Lau or the Defendants, such as to justify the striking-out of the Bill of Costs.

Waiver of part of fees by Van Langenberg & Lau

49. Finally, the Plaintiff also relied on the receipt given by Van Langenberg & Lau to the Defendants' present solicitors dated 1 December 1997 for the sum of $962,000 "by agreed sum payable by clients". The Defendants' evidence was that by November 1997, they owed more than $1.3m. in outstanding legal costs and disbursements to Van Langenberg & Lau. The Defendants sold their home, and settled their liability to Van Langenberg & Lau by making payment of $962,000, with Van Langenberg & Lau waiving the balance of their fees.

50. The Plaintiff's submission was that the part of the fees waived might be the costs of the Mareva application; or looking at it another way, they seek to take the benefit of Van Langenberg & Lau's waiver of part of the outstanding fees.

51. However, it should be noted that the Mareva application the subject-matter of the taxation took place in 1994, and the evidence of Miss Van Langenberg was that "by virtue of costs on account, the Defendants had basically paid and settled all the costs and disbursements relating to the Mareva Injunction proceedings and any residue was paid in or about the end of 1996" (paragraph 4, Van Langenberg's Affidavit, 10 March 1999). Thus, what was waived in 1997 was not part of the Mareva application costs.

52. Mr Yin sought to argue that since the word "basically" was used, that shows that the Mareva application costs had not been paid with costs on account. But that ignores what Miss Van Langenberg carried on to say in her Affidavit - that the residue of the Mareva application costs was paid by the Defendants by the end of 1996.

53. It is to be noted that in Van Langenberg & Lau's Debit Note No.4947, the costs referable to the Mareva application was $480,000 odd. Since $780,330 had been paid by the Defendants as costs on account under that Debit Note, these costs on account would be more than adequate to include the costs of the Mareva application.

54. It is well-established law that it is for the creditor (the creditor on the Debit Note being Van Langenberg & Lau) to attribute payment by his debtor (the Defendants) to such part of the debt as the creditor chooses. On Miss Van Langenberg's evidence, on any account, the costs of the Mareva application had been paid in full by the Defendants by 1996. There was no evidence to contradict that evidence.

55. Accordingly, there is nothing in this point that warrants a striking out of the Bill either.

Order on the appeal

56. Since an appeal from the master to a judge in chambers is by way of re-hearing, in the light of my conclusions above, I would dismiss the appeal.

Summons under O.62 r.35

57. I then turn to the Plaintiff's alternative summons under O.62 r.35. I have earlier analysed the position relating to the Plaintiff's summons in the light of the fact that the master's certificate had yet to be issued.

58. Since the parties had argued the review de bene esse, and since the delay in the issue was due to an administrative misunderstanding of the effect of an appeal on the issue of the certificate, I have proceeded to dispose of the summons on the basis that my order will take effect from (and is conditional upon) the issue of the certificate by the master in terms of the draft allocatur.

Review

59. The Plaintiff's application for a further review of Master Barnes' review of taxation of the Bill is based on (i) the matters relied on above for the Plaintiff's application to strike out the Bill and (ii) the apportionment of costs for two Affirmations.

60. The burden for an application to strike out the Bill and for an application to review the taxation of a bill of costs are of course different. The burden in the first type of application is on the applicant, and it is a heavy burden. In contradistinction to that, Mr Yin has submitted in reliance on Gundry v Sainsbury [1910] 1 KB 645 (which Mr Chung did not challenge) that where a party has been awarded costs, the burden is on him to prove his liability to his solicitors.

61. Having taken the above into account, it is clear to me that given the reasons I have given in the earlier part of my decision, none of the matters relied upon on the appeal would lead me, on review, to disallow any part of the costs on the Mareva application. The Plaintiff also sought in the summons an order for directions that Miss Van Langenberg, Miss Yung and the Defendants attend to give viva voce evidence. Mr Yin did not expand on this application and I did not any grounds in requiring such an exercise on a review of taxation.

62. As for the apportionment of costs for the two Affirmations, I have read the two Affirmations in question (the 1st Defendant's 2nd Affirmation and Miss Yung's 1st Affirmation). I have paid attention in particular to those paragraphs referred to by Mr Yin which he says are referable only to consolidation. In my view, those parts narrate the history of the proceedings with a view towards showing the oppressive nature of the Mareva application. Such references as there were to consolidation were brief, and in my view, so minimal that there could be no meaningful apportionment.

Order on the summons

63. I would therefore also dismiss the summons, this order to take effect from (and is conditional upon) the issue of the certificate by the master in terms of the draft allocatur.

Costs

64. I would make an order nisi that the costs of the appeal, the summons to amend the Notice of Appeal, and the summons under O.62 r.35 be paid by the Plaintiff to the Defendants to be taxed if not agreed.