RE HAWKINS DEVELOPMENT LTD

HCCW 215/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 215 OF 2007

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DECISION

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1.  This is a summons issued by Hawkins Development Limited (“the Company”) for an order that the amount the petitioner paid into court as security for costs be paid out to the Company in part satisfaction of the costs payable under the order dismissing the winding-up petition.

2.  I will first state the relevant facts in chronological order.

3.  On 17 October 2007, an order was made requiring the petitioner to pay into court $200,000 as security for the Company’s costs in the petition. On 16 December 2008, the court made a further order for security for costs in the Company’s favour of $500,000. The petitioner, which is a company incorporated in the British Virgin Islands, had complied with those orders.

4.  The petition was heard in August 2009 and it was dismissed on 21 August 2009. The petitioner was ordered to pay costs to the Company on an indemnity basis with certificate for two counsel.

5.  On 26 August 2009, the Company’s solicitors wrote to the petitioner’s solicitors asking if the petitioner would consent to an order for payment out of $700,000 in part satisfaction of the Company’s costs. The petitioner’s solicitors replied on 29 August 2009 stating that the petitioner was obtaining counsel’s opinion in respect of an appeal against the judgment dismissing the petition.

6.  No notice of appeal was filed by the petitioner subsequently against the judgment.

7.  On 8 September 2009, the Company issued the present summons, purportedly under Order 62 rule 9A of the Rules of the High Court. That rule was repealed and substituted by a new provision as part of the Civil Justice Reform. The Company’s solicitors informed the court by letter on 10 September 2009 it would invoke the inherent jurisdiction of the court in seeking the order. The hearing date of 11 September was vacated and the application was adjourned to today for argument.

8.  In the meantime, on 18 September 2009, the Company filed a bill of costs prepared by a law costs draftsman. The total amount of fees and disbursements amounted to $1,312,812.

9.  On 16 October 2009, the law costs draftsman engaged by the petitioner filed a list of objections to the Company’s bill of costs. The total amount objected to came up to $544,000. Assuming all the objections were upheld on taxation, the petitioner would still be liable to pay the Company $768,812, in excess of the total amount paid into court of $700,000.

10.  On 16 November 2009, the Company filed an application to set down its bill of costs for taxation. This was placed before the Registrar on 1 December 2009, for a direction to be made if there should be a provisional taxation without a hearing under Order 62 rule 21B(1), or an oral taxation hearing under rule 21C(1). The Registrar directed there should be a provisional taxation. Accordingly, a notice of setting down was issued on 1 December 2009 that the bill of costs was set down for provisional taxation before a Master on 3 February 2010 at 10 a.m. with 1 day reserved.

11.  The petitioner’s stance is that it should not have to make any payment towards costs until the taxation process is completed, with the provisional taxation before the taxing master in February 2010 or at a subsequent oral taxation hearing if one is applied for by a party under rule 21B(3), notwithstanding the amount of costs not in dispute exceeds the amount paid into court for security for costs, and there is ready cash to make a substantial part payment to avoid further accrual of interest at judgment rate.

12.  The only reason given by the petitioner for taking that position is that the court has no inherent jurisdiction to order it to do so, it being common ground there is no provision in the Rules of the High Court giving power to the court to make an order for interim payment of costs in proceedings that are not an interlocutory application.

13.  Leaving aside the question whether the court has power to make the order, I see no good reason to deprive the Company of the settlement in part of its costs until completion of the taxation process, when it is clear the undisputed amount would exceed the sums paid into court to meet the liability for costs.

14.  Mr Enzo Chow, who appeared for the petitioner in this application, submitted the court should have no inherent jurisdiction to make the order sought because:

(1)  inherent jurisdiction of the court is confined to making good procedural lacunae, there is no lacuna under the new provisions in Order 62 rules 21 to 21C of the Rules of the High Court; and

(2)  inherent jurisdiction may supplement but cannot be used to lay down procedure which is contrary to or inconsistent with a valid rule of the High Court, to order interim payment in the present circumstances is contrary to the express terms of Order 62 rules 21 to 21C.

15.  I do not understand Miss Elizabeth Cheung, who appeared for the Company, to have disputed the general principles embodied in Mr Chow’s submissions in (1) and (2). Of course, the Company does not accept there is no lacuna in the provisions of the Rules of the High Court or that the order sought is contrary to express provisions in the Rules.

16.  I have been referred by the parties to the influential article of Sir Jack I.H. Jacobs entitled “The Inherent Jurisdiction of the Court” [1970] CLP 23. Mr. Chow also cited the subsequent article of M.S. Dockray entitled “The Inherent Jurisdiction to Regulate Civil Proceedings” (1997) 113 LQR 120.

17.  It is not necessary to set out extracts cited by counsel from these articles, as the general principles on the nature of inherent jurisdiction and the limits of inherent jurisdiction are not in dispute. Inherent jurisdiction may be exercised to control the process of the court when it is just and equitable to do so, even in respect of matters which are regulated by statute or by rules of court, so long as this could be done without contravening any statutory provision.

18.  The old Order 62 rule 9A provided for the power of the court to make an interim payment of costs where the application or resistance to the application is frivolous or vexatious, or for any other reason the court in the circumstances of the case considers just. This provision was repealed and replaced by a new provision. Three changes were made. Firstly, this power applies to interlocutory applications only. Secondly, the power to make provisional summary assessments was widened and made more general, to enable the court to make such assessments where appropriate, for instance, where this is likely to save costs. Thirdly, the old provision was on the assumption there will be a full taxation at the end. Under the new provision, provisional summary assessments are made on the basis a taxation should not follow unless a significant difference of award is thought likely to result, with costs sanctions to discourage challenges unless they are likely to yield proportionate benefit to the challenger (Final Report of the Chief Justice’s Working Party on Civil Justice Reform, para. 545).

19.  The new Order 62 rule 21 provides for the mode of commencing proceedings for taxation. The party who has commenced taxation proceedings may apply to the taxing master to set down the taxation under rule 21A. Under rule 21B, the taxing master is given the discretion and power to tax the bill of costs without a hearing and make an order nisi as to the amount of costs allowed, unless the taxation is set down for hearing. Any party dissatisfied with the award is entitled to require an oral taxation hearing, but subject to possible costs sanctions if he fails to do materially better at the hearing. Under rule 21C, the taxing master also has power to set down for hearing the taxation of the whole or part of the bill of costs, if he is satisfied there is good reason to do so.

20.  In this situation, the Registrar has directed there should be a provisional taxation by a taxing master under rule 21B(1).

21.  I should also mention provisions are made in rule 22 to deal with delay in the service of a notice of commencement of taxation or in proceeding with taxation.

22.  Mr Chow submitted the provisions in Order 62 rules 21 to 21C are designed to tackle delay in taxation, that the procedure on taxation would be expedited, and there is no procedural lacuna for which inherent jurisdiction has to be exercised.

23.  I do not agree with the submission there is no procedural lacuna.

24.  There is a procedural lacuna in that the power to make provisional summary assessments under rule 9A applies only to interlocutory applications, and there is no power under rules 21 to 21C to make an interim payment of costs which in the opinion of the court approximates the costs that would be allowed on taxation at the provisional taxation or at a taxation hearing.

25.  I also do not agree with Mr Chow’s submission the order sought is contrary to the express terms in Order 62 rules 21 to 21C. I have come to the view there is a lacuna. I am satisfied the order sought by the Company does not contravene the provisions made in Order 62 in wording or in spirit.

26.  I do not think the limits to the exercise of inherent jurisdiction are made out as submitted by Mr. Chow. I do not however wish it to be thought that this inherent power may be exercised without restriction to order interim payment of costs in a broad range of situations. In my view, the court should act with circumspection in the exercise of this inherent power, as detailed and precise provisions have been made to deal with taxation of costs in Order 62. The inherent jurisdiction should only be exercised to deal with cases that genuinely come within a procedural lacuna, and that the circumstances are such that would merit intervention of the court to do justice between the parties or prevent abuse.

27.  In the present case, I am satisfied the criteria for the exercise of inherent jurisdiction are met. I order the total amount paid into court by the petitioner as security for costs, with all the accrued interest, be paid out to the Company in part satisfaction of the costs payable under the order of this court made on 21 August 2009.

28.  I order the petitioner to pay the Company the costs of this application, assessed on a gross sum basis at $27,000.