RUSSELL PETER BROWN AND OTHERS v. EDWARD EUGENE LEHMAN

CACV 119/2012

[2020] HKCA 528

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 119 OF 2012

(ON APPEAL FROM HCA 959 OF 2010)

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JUDGMENT ON COSTS

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Hon Barma JA (giving the Judgment of the Court on Costs):

1.  This was an application by summons dated 26 August 2016 seeking to vary the costs order nisi in the judgment in this matter handed down by the court (Lunn VP, Barma JA & McWalters JA) on 29 July 2016, by which we allowed an appeal by the defendant against a judgment of Deputy Judge Louis Chan refusing to set aside a default judgment entered against him by the 1^st, 2^nd and 3^rd plaintiffs, on the ground that the default judgment was irregular, in that the court did not have jurisdiction to enter it for the reasons explained in our judgment. The defendant also sought the dismissal of the 3^rd plaintiff’s claim against him. The parties agreed that the application should be dealt with on paper, on the basis of their respective written submissions. We now hand down our decision on the application. The delay in handing down this decision is much regretted.

2.  The costs order nisi dealt with the costs of the appeal, including the costs of an adjournment of the appeal when it first came on for hearing, and ordered that these should be paid by the plaintiffs to the defendant, to be taxed on the party and party basis if not agreed (see paragraph 31 of our judgment).

3.  The defendant sought a variation of the costs order nisi in the following respects:

(1)  In place of a taxation of his costs, the defendant sought a gross sum assessment of his costs of the appeal, and provided a statement of costs for that purpose in which the costs sought to be recovered were quantified at HK$753,155.00.

(2)  To make provision for the costs of the hearing in the court below, by:

(a)  setting aside the costs order made in favour of the plaintiffs by the deputy judge and directing the repayment to the defendant of any sums he had paid to the plaintiffs pursuant to it;

(b)  ordering that the costs of and incidental to the defendant’s summons dated 14 December 2011 in HCA 959/2010 (i.e. the summons seeking the setting aside of the default judgment against him), including any reserved costs, be paid forthwith by the plaintiffs to the defendant, to be taxed if not agreed;

(c)  ordering that the general costs of the action in HCA 959/2010 (other than those in respect of which specific orders had been made) including and subsequent to the entry of the interlocutory judgment dated 3 December 2010, including all reserved costs, be paid forthwith by the plaintiffs to the defendant, to be taxed if not agreed; and

(3)  In the light of the 3^rd plaintiff’s acceptance that it had not in fact alleged that the plaintiff had defamed it, that the 3^rd plaintiff’s claims against the defendant should be dismissed, and the 3^rd plaintiff should pay the costs of its action to the defendant forthwith.

4.  The plaintiffs accepted that the costs of the defendant’s application to set aside the default judgment in the court below should be paid by the plaintiffs to the defendant on the party and party basis, to be taxed if not agreed.  They also accepted that the 3^rd plaintiff’s claim should be dismissed with costs to the defendant, to be taxed if not agreed.  We will therefore vary our order on the appeal to cover these matters.

5.  However, the plaintiffs opposed the other orders sought, contending that:

(1)  The costs of the appeal should not be made the subject of a gross sum assessment, but should be taxed in the normal way, because the defendant succeeded on the basis of grounds raised in its Amended Notice of Appeal filed on 22 May 2013, three weeks prior to the original date fixed for the hearing of the appeal.  The plaintiffs contended that in the light of this, the defendant should be regarded as having sought and obtained an indulgence, and that consequently the costs of and occasioned by the Amended Notice of Appeal should be paid by the defendant to the plaintiffs, or alternatively that the defendant’s costs attributable to the Amended Notice of Appeal should be disallowed.  As the defendant’s statement of costs did not differentiate between the costs of the “appeal proper” and those attributable to the Amended Notice of Appeal, such costs would need to be differentiated or apportioned, and this meant that it was not a suitable case for a gross sum assessment.

(2)  If, contrary to the plaintiffs’ submission, the court determined that a gross sum assessment was appropriate, the plaintiffs took a number of objections to the amounts claimed by the defendant and contended for a reduction of the costs to be allowed by about HK$240,000.00.

(3)  The suggestion that costs subsequent to the entry of the default judgment against the defendant should be paid by the plaintiffs to the defendant was inappropriate as the action remained on foot and would be proceeded with by the 1^st and 2^nd plaintiffs against the defendant.  There was therefore no basis for holding that the plaintiffs should be responsible for the defendant’s costs of the action generally when the action was continuing and had yet to be finally determined.

6.  In the light of the plaintiffs’ acceptance that the 3^rd plaintiff’s claim against the defendant should be dismissed with costs to the defendant, to be taxed on the party and party basis, the defendant was content to leave the question of costs subsequent to the entry of the default judgment to be determined in the action in HCA 959/2010.  In our view this was a sensible approach as, having conceded the costs of the application to set aside the default judgment in the costs below, the question of whether, and if so what, further costs should be paid by the 1^st and 2^nd plaintiffs to the defendant in respect of steps taken after the entry of the default judgment could at best relate only to such steps (if any) taken by the defendant that were rendered unnecessary and wasted as a result of the default judgment being set aside.  There is at present little or no information as to what such steps and the costs relating to them might be, and it would in our view be more sensible for these matters to be dealt with at the end of the day, in a taxation of the costs of the action as a whole after it has been concluded.

7.  That leaves as the only questions for determination the issue of whether or not there should be a gross sum assessment of the costs of the appeal before us, and if so, in what amount such costs should be assessed.

8.  We will deal first with the issue of whether there should be a gross sum assessment at all.

9.  The basis on which the plaintiffs resist a gross sum assessment of the costs of the appeal is their contention that the defendant should be ordered to pay part of the plaintiffs’ costs of the appeal (or at least deprived of part of its own costs) arising from what was said to be a late indulgence sought and obtained by the defendant in respect of his late amendment of his Notice of Appeal, to introduce new grounds of appeal on which he ultimately succeeded.  It is suggested that the apportionment of costs that would be necessary is something that would be better dealt with by taxation rather than by way of a gross sum assessment, particularly when no breakdown had been provided by the defendant as to the costs of the appeal prior to and after the amendment to the Notice of Appeal.

10.  However, as the defendant rightly points out, his Amended Notice of Appeal was served three weeks before the hearing in accordance with RHC Order 59 rule 7(1)(b) (as it then stood), so that leave to amend was not required.  In other words, the defendant was entitled to make the amendment, and was not seeking any indulgence.  The defendant goes on to point out, correctly, that the adjournment of the appeal was due, not to the defendant’s amendments to his Notice of Appeal, but because of a pending application in the court below to determine whether or not the substitution of the 3^rd plaintiff by Lehman Brown Limited, should stand or be disallowed.  Moreover, the defendant has in his statement of costs omitted to claim for any costs in relation to the preparation of the original Notice of Appeal, recognizing that it was superseded by the Amended Notice of Appeal on the basis of which he succeeded in his appeal.  In these circumstances, we can see no reason for depriving the defendant of any of his costs relating to the Amended Notice of Appeal or of the appeal prosecuted on the basis of it.  Still less can we see any basis for requiring the defendant to pay any part of the 1^st and 2^nd plaintiffs’ costs of the appeal.

11.  In the circumstances, there can be no question of any apportionment of the costs of the appeal, and there is thus no impediment to the defendant’s costs of the appeal being quantified by way of a gross sum assessment.  We shall therefore conduct a gross sum assessment, and consider the objections raised by the plaintiffs to the costs claimed in the defendant’s statement of costs.

12.  Dealing with such objections in turn:

(1)  Under item D1, it is suggested that the time taken to prepare the draft order (for which 1 hour was claimed at HK$2,400 per hour) was excessive, and should be reduced (to 20 minutes). However, as the defendant notes, there were in fact two orders to be prepared (one in respect of each hearing).  We do not think the amount claimed is excessive, and allow it without reduction.

(2)  Under item D2, it is suggested that the time spent on perusal and/or approval of various documents related to the appeal is excessive.  The claim is for 4 hours at HK$4,000 per hour and 12 hours at HK$2,400 per hour.  Bearing in mind that senior counsel was instructed, and notwithstanding that we would accept that solicitors must be involved in finalizing the documents to be lodged, we consider the amount claimed to be on the high side and would reduce it to 3 hours at HK$4,000 per hour, and 6 hours at HK$2,400 per hour, resulting in a reduction of HK$18,400.

(3)  Under item D3, it is suggested that nothing should be allowed to the solicitors for legal research.  We consider that some allowance should be made for this item, but would reduce it slightly, by HK$2,400.

(4)  Under item D4, it is suggested that the time allowed for preparation for each hearing should be 1 hour, rather than the 2 hours claimed.  We think this is reasonable, and accordingly reduce the amount under this item by HK$6,400.

(5)  Under item D5, the plaintiffs suggest that the costs of attending the hearings before this court should be based on the actual time in court, and that the attendance of one junior solicitor only should be allowed.  The defendant has no objection to basing the claim on the time spent in court (including short breaks) but suggests that costs should be allowed on the basis of the attendance of a senior solicitor.  We think that it was appropriate for the hearing to be attended by a senior solicitor and shall therefore allow attendance at the hearing at the rate of HK$4,000 per hour. According to the court’s records, the first hearing on 13 June 2013 lasted just under 45 minutes, while the second hearing on 22 June 2014 lasted slightly over 4 hours (not including the lunch break).  Accordingly, the amount allowed for this item will be HK$19,000, a reduction of HK$19,400.

(6)  Under item E1, it is contended that the costs of preparation of the Amended Notice of Appeal should be disallowed. For the reasons explained in paragraph 10 above, we do not think this would be correct, and we propose to allow this item in full.

(7)  Under item E1, it is also contended that the amount claimed for a supplementary submission and preparation by senior counsel prior to the adjourned hearing should be disallowed, either on the basis that this should be covered by the refresher claimed in respect of the adjourned hearing, or on the basis that it is plainly excessive.  We think that having regard to the long gap between the original and adjourned hearing dates, some preparation time and the provision of a supplemental skeleton (a short document of some 4 pages) in order to update the court as to what had happened in the interim period, was reasonable.  However, we think that the amount claimed is too high, and would instead allow HK$70,000 for this item, thus reducing it by HK$30,000.

13.  For the reasons explained above, we would reduce the amount claimed in the statement of costs by HK$76,600, to HK$676,555.

14.  We shall therefore vary the costs order nisi to provide for a gross sum assessment of the costs of the appeal before us (including the costs of the adjournment), and assess the defendant’s costs in the amount of HK$676,555.  We shall also order that the plaintiffs are to pay the defendant’s costs of the application to set aside the default judgment in the court below, to be taxed on the party and party basis if not agreed, and that any costs paid by the defendant to the plaintiffs in respect of that application are to be repaid to the defendant.  Having regard to the parties’ agreement that this should be done, we also make an order dismissing the 3^rd plaintiff’s claim against the defendant, with costs to the defendant to be taxed if not agreed.

15.  Finally, the defendant seeks an award of costs in respect of this application.  Having regard to the fact that the defendant has largely succeeded in obtaining what he sought, we think it appropriate to make an order that the costs of this application to vary the costs order nisi be paid by the plaintiffs to the defendant, and we assess such costs on a gross sum basis in the amount of HK$12,000.