COBALT INDUSTRIAL CO. LTD. v. KIN SUN ELECTRONICS LTD.

IN THE COURT OF APPEAL

1996, No. 253

(Civil)

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J U D G M E N T

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Godfrey, J.A. :

1. This is an appeal from a decision of P. Chan, J., before whom there came on 8 November 1996 a review of taxation. The question he had to resolve concerned an order for costs made in proceedings under Order 14 of the Rules of the Supreme Court in an action instituted by Colbalt Industrial Company Limited ("the plaintiff") against Kin Sun Electronics Limited ("the defendant").

2. By its writ, dated 24 June 1995, the plaintiff had claimed payment of the sum of $173,260 (with interest) for the balance of the price of goods sold and delivered. By its summons under Order 14, dated 11 August 1995, it applied for summary judgment. On 4 September 1995, before the hearing on 11 September 1995 of the plaintiff's application for summary judgment, the defendant paid $165,470.65 into court. This was by far the greater part of the plaintiff's claim. There remained therefore, on 11 September 1995, a dispute between the plaintiff and the defendant only as to a sum which I hope I may be forgiven for characterising as trivial; certainly, a trivial sum in proportion to the costs which will have been generated by the present application. One hopes that the lay clients on both sides have been properly advised as to the costs that each of them will have incurred in resolving that dispute.

3. The judgment of the master, as drawn up, is expressed as follows:

"part Judgment be entered for the Plaintiff against the Defendant for the sum of HK$165,470.65 and interest thereon at judgment rate from 24th July 1995 to 4th September 1995 and costs."

The two words "and costs" are the words which lie at the heart of the present dispute between the parties. Do they mean "fixed costs" or "taxed costs"?

4. At the hearing before the master, the plaintiff had asked for its costs. The master endorsed the summons with the words "with costs". There had been no argument, or even discussion, before the master as to whether his order was intended to refer to fixed costs or to taxed costs. The order as drawn up is silent on the point. It gives no indication as to whether the master meant fixed costs or taxed costs.

5. The contest, then, is whether the order as drawn up entitles the plaintiff to taxed costs or fixed costs. It would of course have been much better if, before the taxation, one or other of the parties would have had the sense to go back before the master for resolution of the difference between them on this point. Order 20 rule 11 ("the slip rule") would have provided a sufficient justification for such an application, because the parties could have invited the master to clarify what he had intended by his order, either by correcting it so as to make it clear that he meant fixed costs, the fixed figure which could be immediately inserted in the order, or that he meant taxed costs, a figure which would be inserted in the order after completion of the taxation. But that was not the course the parties took.

6. We now have to face up to the fact that much time and money has already been spent, indeed, I have to say, wasted, on this dispute. I, for my part, do not think it would be appropriate to send the parties away with a flea in the ear, and instructions to go back to the master to start again from scratch, tempting though I find that course. It would involve yet more waste of the lay clients' money. And it is not necessary; for there can be only one sensible answer to the question raised.

7. That sensible answer is the one arrived at by the judge, that the order provided for fixed costs, not taxed costs. While it is possible, under O.14 proceedings, for the master to make an order for costs to be taxed, instead of the usual order for fixed costs, that is a course which the master should and will take only in exceptional circumstances. There is nothing exceptional about this case; and although on the face of it the master's order is ambiguous, it is in my opinion possible to resolve that ambiguity only in one way, as the judge did, in favour of the view that fixed costs must have been what the master intended to order. Had he meant something else, he would have said costs "costs to be taxed". I quite appreciate that the words "to be taxed" do not normally add anything to the words "with costs". But they would, in my judgment, add something in this case, where there is a clear dichotomy between the usual, fixed, sum to be awarded by way of costs on the one hand, and some sum yet to be assessed which is, exceptionally, to be awarded when costs are to be taxed on the other hand.

8. I would wish to pay respectful tribute to the succinct and clear argument addressed to us by Mr. Reyes in support of the appeal, but, as it seems to me, no other sensible conclusion is possible.

9. For these reasons, I would, for my part, affirm the decision of the judge and dismiss this appeal.

Cheung, J. :

10. I also agree that the appeal should be dismissed. I agree with the construction of O.62, r.32(4) by the learned judge. To put it simply, in an O.14 application, the Plaintiff, if successful, is only entitled to the fixed costs unless an order for taxation of costs is expressly made.

11. There have been changes to the English O.62. But the former O.62, r.32 of the English Rules is almost identical to our O.62, r.32. I find considerable assistance from a passage in the 1976 edition of the Supreme Court Practice in which at Note 14/7/7 it was stated that :

"If the judgment is for, or includes, a debt or liquidated amount for a sum of (100 and upwards, or where the costs are otherwise on the High Court scale, the plaintiff is generally awarded the Fixed Costs (popularly called 'Scale Costs') as provided by App.3, to O.62. Even in such cases, however, if the circumstances warrant it, e.g., where a certificate for counsel is allowed or the case has called for more than the usual steps in its preparation or presentation, the order should be for costs to be taxed and added to the judgment."

The current English O.62, r.17(3) is similar to our O.62, r.32(4). There is a similar comment in Note 14/7/9 of the current edition of the White Book on fixed costs in O.14 judgments.

12. When the Master gave judgment with costs, it did not follow that he was making an order under O.62, r.32(4) for the costs to be taxed, not in accordance with the 2nd Schedule, but in accordance with the 1st Schedule. I think the starting point is that a costs order was required whether it was for fixed costs or taxed costs before the Plaintiff could recover costs. The same applies to Paragraph 2(a) of Part I of the 2nd Schedule. It only repeats in effect what is already provided in O.62, r.32(4).

13. Reliance on O.62, r.28(1) and (2) is also misconceived. The rules apply in situations where the fixed costs provisions do not apply. All that they mean is that the Court does not need to spell out in a costs order that it is to be taxed on a party and party basis. Likewise O.62, r.11(1) does not assist the Plaintiff because it is a general provision applicable in situations other than where the rules provide for fixed costs. In such situations, the costs order does not need to provide specifically that the costs are to be taxed.

Mortimer, J.A. :

14. For reasons given here and below, I also agree.