XCHRX S Y ENGINEERING CO. LTD. v. THE HONG KONG HOUSING AUTHORITY

HCMP 2609/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2609 OF 2000

____________

__________________________________

REASONS FOR DECISION

__________________________________

1. This is a rather unusual appeal against the order of Master Yuen on a taxation matter which is in fact still part heard.

2. It may be necessary to set out the background of the matter briefly.

3. The Plaintiff, S Y Engineering Co. Ltd (S Y Engineering), commenced arbitration proceedings against the Defendant (Hong Kong Housing Authority) under a Piling Contract No. 5 of 1992. S Y Engineering was unsuccessful in the arbitration proceedings and was ordered to pay Hong Kong Housing Authority costs, the majority of which was to be taxed on a common fund basis.

4. The solicitors for Hong Kong Housing Authority, Messrs Deacons, prepared and filed a bill of costs for an appointment to tax. The bill of costs consists of 298 pages and the amount of claim thereunder was over $25 million.

5. S Y Engineering through its solicitors Messrs Peter Mo instructed a law costs draftman to prepare a list of objections to the amount claimed. The list of objections running into a total of 66 pages, raises objections to almost 550 items.

6. The particulars of most items of objections do not specify the nature of the objections as such. Instead, the particulars of such objections are simply "subject to proof of reasonableness and necessity", or "subject to the production of attendance/conference notes".

7. Despite the nature of S Y Engineering's objections, no attempt was made from Messrs Peter Mo to inspect any attendance/conference notes. Messrs Deacons did not make the offer and Messrs Peter Mo did not ask for one.

8. There was a call-over hearing on 30 August 2000 and the Master then adjourned the matter to 23 November 2000 for a 11/2 day hearing. Again there was no attempt by Messrs Deacons to offer and no attempt by Messrs Peter Mo to ask for the inspection of any relevant bills or vouchers relating to the bill of costs.

9. Instead, Messrs Deacons simply served on the Taxing Master all the papers and vouchers in accordance with Order 62 Rule 23.

10. The matter then went before Master Yuen. Not surprisingly, the taxation could not be concluded within 11/2 days and had to be adjourned part-heard as Master Yuen found it necessary to go through each of the items objected to.

11. Messrs Deacons then asked for an order that the costs of the hearing be borned by Messrs Peter Mo personally as well as for an interim payment of costs of over $16 million.

12. Counsel for S Y Engineering then informed Master Yuen that security for costs in the sum of $10.5 million by way of a bank guarantee in favour of the Hong Kong Housing Authority was still valid and subsisting and hence interim payment was not justified.

13. Having heard counsel's submission, Master Yuen made the following orders:

"(1) there be an interim Certificate for Costs which has been taxed except item 15 and those items involving hourly rate that had not been taxed;

(2) the Plaintiff do approach the Defendant's solicitors for inspection and seek clarification of the contents of all the contentious documents relating to the taxation, and such inspection be completed by 18 December 2000;

(3) any additional list of objections to be filed on or before 16 January 2001;

(4) any submission on points of law and the reference to specific documents together with the chronology of events be submitted to Court 2 days before the hearing resumed;

(5) the taxation hearing adjourned to a date to be fixed with 5 days reserved;

(6) 2/3 of the costs of the hearing be borne by the Plaintiff's solicitors personally unless they have shown cause why the order should not be made within 10 days from the date hereof; and

(7) 1/3 of the costs be reserved."

14. The hearing to show cause in pursuance to the order of Master Yuen in fact took place on 6 December 2000 and having heard submissions from both parties, Master Yuen reserved her decision until the conclusion of the taxation hearing. An interim allocatur dated 10 January 2001 was issued for $166,031.00 under paragraph 1 of Master Yuen's order which sum was in fact paid on 7 February 2001.

15. Order 62 Rule 17 empowers a Taxing Master from time to time in the course of the taxation of any costs by him to issue an interim certificate for any part of those costs which have been taxed.

16. There was no dispute that when Master Yuen granted the interim certificate, the costs that had been taxed was $166,031.00. Order 62 Rule 17 clearly caters for situation whereby the Taxing Master before the completion of the taxation considers appropriate to order part payment of the costs claimed.

17. There was no suggestion by S Y Engineering that it was not liable for the amount of the interim certificate. Objection to the order is made by Miss Lan on behalf of S Y Engineering on the basis that Hong Kong Housing Authority in fact asked for interim payment of $16 million and that S Y Engineering had given a bond in the sum of $10,500,000.00 as security for costs.

18. The suggestion is that there is no basis for ordering the interim certificate.

19. Irrespective of the amount of costs sought by the party entitled to be paid, a Taxing Master should only order interim certificate for the part of the costs which had been taxed. The reason is obvious. Once part of the costs had been taxed, the party entitled to be paid should be paid.

20. As I have observed or commented in the course of counsel's submission, it is not S Y Engineering's case that its liability for costs could be less than the amount of the interim certificate. In other words, S Y Engineering would have to pay such an amount sooner or later. Indeed, a bill of costs once rendered should be paid as soon as possible subject to the determination of the amount by taxation.

21. The fact that there is a bond as security is no justification for delaying the payment.

22. Master Yuen had already taxed part of the costs payable to Hong Kong Housing Authority at $166,031.00. She is perfectly entitled to order the immediate payment of such taxed costs. S Y Engineering can have no legitimate complaint, particularly in the present case when its liability for the total costs must far exceed the amount of $166,031.00 that have been paid.

23. The suggestion by Miss Lan that Hong Kong Housing Authority should repay this amount to S Y Engineering first would only lead to further unnecessary delay and complication as it would mean S Y Engineering would have to pay such an amount over to Hong Kong Housing Authority again at some stage in the future.

24. Miss Lan on behalf of S Y Engineering also complains that Master Yuen had no justification to order inspection and filing of the further list of objections.

25. Order 62 of the Rules of the High Court may not have made special provision for the inspection of documents and the filing of further list of objections, but a court, including the Taxing Master must be entitled to give such direction as may be necessary, in order to facilitate the disposal of matters in issue. As I have observed, the directions given by Master Yuen are administrative and supervisory in nature.

26. Practice directions paragraph 14 states the following under sub-paragraph 1(c).

"Solicitors for the parties will appear before the Master, to whom the bill has been assigned for that appointment, and will be expected to have discussed and negotiated the bill and reduce the items in dispute as far as possible".

27. If solicitors for the parties, in the opinion of Taxing Master have failed to comply with the aforesaid Practice Directions, the Taxing Master must be entitled to give such Directions as may be necessary in the hope that the solicitors will discharge their duties properly.

28. I must not ignore the fact that many items in the objections were raised on the basis: "Subject to production of attendance/conference notes".

29. If Messrs Peter Mo has the opportunity to inspect such attendance/conference notes, it is possible that the scope of the objection can be reduced or eliminated.

30. Indeed the order by Master Yuen was clearly made with a view to limit or reduce the scope of the dispute between the parties.

31. It having had the opportunity to inspect the relevant documents, Messrs Peter Mo found it possible to reduce the scope of the dispute, a further amended list of objections should be filed in the proper discharge of his duty under Practice Directions 14.3.

32. Miss Lan suggests that the paying party is not entitled to inspect the receiving party's documents as such documents may be privileged documents. It was clearly not intended by Master Yuen that Messrs Peter Mo is to be entitled to inspect privileged documents from Messrs Deacons. Master Yuen's order is carefully worded "to refer or to require the Plaintiff to approach the Defendant's solicitors for inspection and seek clarification of the contents of all the contentious documents relating to the taxation". If Messrs Deacons objects to the inspection of privileged documents, Master Yuen's order certainly does not have the effect of over-riding such privilege.

33. Miss Lan also suggests that the preparation of an amended list of objections would inevitably attract expenses. I have no doubt it would. But such expenses would have the effect of saving a lot more unnecessary expenses as well as significant hearing time.

34. Under Practice Directions 14.3, solicitors for the parties are expected to have discussed and negotiated the bill and reduced the items in dispute as far as possible. The duty to discuss and negotiate must include taking such steps as may be necessary, including the inspection of documents. Regrettably the duty had not been discharged in this case and when the Taxing Master made an order directing the solicitors for the parties to comply with such duty, Messrs Peter Mo should not find such directions objectionable.

35. In one of the affirmations of the law costs draftman for S Y Engineering, it was suggested that Messrs Peter Mo had no instruction from S Y Engineering to negotiate the bill with Hong Kong Housing Authority.

36. In the affirmation of Mr Shaw of Messrs Deacons, it was suggested that the Taxing Master had in fact asked Messrs Peter Mo if they had informed S Y Engineering of the requirement of the Practice Directions and had received instructions not to attempt negotiating the bill of costs and the response was an affirmative one.

37. I do not wish to get into such disputes as facts. I only need to remind Messrs Peter Mo that they have a paramount duty towards the court and such duty, in a taxation matter expresssly includes the duty to discuss and negotiate the bill, in order to reduce the items in dispute as far as possible, whatever instruction they may have from their lay clients.

38. On the order nisi that Messrs Peter Mo is to bear two-thirds of the costs of the hearing personally, Miss Lan complains that the Taxing Master had not decided which party should bear the costs and therefore the order by her for the solicitors to show cause was made immaturely. The Taxing Master had not decided which of the parties should bear the costs although the nature of her order could give rise and should give rise to a reasonable inference that S Y Engineering should be responsible. The Learned Master formed the tentative view that Messrs Peter Mo was at fault and had to bear the costs of the hearing personally.

39. It is, of course, not appropriate for me at this stage to decide if the order was justified. It was an order to show cause only and the parties had made their respective submissions to Master Yuen who had reserved her decision until the conclusion of the taxation hearing. Until an affirmative order had been made by Master Yuen, it is, in my view, immature and an abuse of the court's process to seek to appeal against the order nisi.

40. I have considered the various matters raised by Miss Lan. In my view, the appeal is completely without merit and must be dismissed.

41. Master Yuen had given reasonable and sensible directions pertaining to the further conduct of the taxation in issue. If such directions are not complied with and if either party were to behave in an unreasonable manner and as a result, unnecessary costs are incurred, the taxing Master of course is entitled to take such matters into consideration when she decides on the question of costs, including costs against the parties' solicitors personally at an appropriate stage. But this is not a matter that I need to be concerned with at this stage.