HAU WUN FAI AND OTHERS v. KAN WAI CHUNG AND OTHERS

HCMP 1925/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 1925 OF 2015

(ON AN INTENDED APPEAL FROM HCSD 31/2014)

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DECISION ON AND
GROSS SUM ASSESSMENT OF COSTS

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Hon Barma JA (giving the Decision and Assessment of the Court):

1. This is our Decision and Assessment in relation to the costs of an application by the 1^st to 5^th respondents for an extension of time for them to comply with RHC Order 59 rule 1(a) in respect of their intended appeal against the judgment of Deputy High Court Judge Manzoni SC dated 18 June 2015, by which he set aside the statutory demand served by the respondents on the 1^st to 4^th applicants. Although the notice of appeal was duly issued and served, the respondents failed to set down their intended appeal within seven days after service of the notice of appeal on the applicants, because they were unable to lodge a sealed copy of the order to be appealed against, as sealing of the order had been withheld pending an application by the applicants to vary the costs order nisi made by the judge.

2. The matters for the court’s determination are first, the basis on which costs should be assessed (the respondents contend that they should be assessed on an indemnity basis, while the applicants contend that the appropriate basis is the party and party basis), and second, the amount of costs to be awarded by way of a gross sum assessment in the light of the decision as to the appropriate basis for assessment.

3. The relevant history of this application can be summarised as follows:

(1)  The judge handed down his judgment on 18 June 2015.

(2)  The respondents filed their notice of appeal on 8 July 2015, and apparently sought to set down the appeal the same day.  This was refused as they were not able to lodge the sealed order from the court below, as that had not been finalised.

(3)  On 15 July 2015, having unsuccessfully sought to lodge draft orders instead of the sealed order (which still was not available), the respondents’ solicitors asked the applicants’ solicitors to consent to an extension of time for setting down the intended appeal until such time as the sealed order became available.

(4)  Despite requests being made, such consent was not forthcoming, as the applicants were contending that an extension should be refused as the intended appeal was lacking in merit.  That stance was taken notwithstanding the respondents’ solicitors having drawn the applicants’ solicitors attention to the decision of this court in Keen Lloyd Holdings v Commissioner of Customs and Excise [2015] 2 HKLRD 909, also a case in which an extension of time was sought for compliance with Order 59 rule 1(a) in circumstances materially identical to the present case.  In our judgment, we emphasised (at paragraph 31) that applications of this nature should not be turned into a platform for pre-running the substantive arguments in the appeal proper.  We also sounded a warning (at paragraph 34) that unmeritorious resistance to extensions of time would likely be visited by adverse costs orders against the opposing party.

(5)  Not having received the applicants’ consent to the extension of time sought, on 10 August 2015, the respondents took out a summons seeking the necessary time extension.  The respondents subsequently indicated in correspondence that they would be opposing the application, but did not intend to file any evidence.

(6)  On 13 August 2015, the application was fixed to be heard on 17 September 2015.  On the same day, Master Au-Yeung gave directions for the filing of affidavits and lodging of skeleton arguments.  The next day, the applicants asked for the hearing to be re-fixed to accommodate their counsel.

(7)  On 18 August 2015, the respondents instructed counsel to appear at the hearing on 17 September 2015.

(8)  On 19 August 2015, the applicants’ solicitors wrote to the respondents’ solicitors indicating that the applicants would be prepared to consent to the extension sought, and suggesting that the hearing on 17 September 2015 should be vacated, with costs of the application being in the cause of the appeal.

(9)  On 21 August 2015, the respondents’ solicitors rejected this proposal, pointing out that substantial costs had already been incurred by the respondents, including the instructing of counsel in the light of the applicants’ stated intention to oppose the granting of the extension of time sought.  They indicated that the respondents would be prepared to vacate the hearing if the applicants’ solicitors agreed to pay their costs on an indemnity basis, and requested clarification as to whether the extension application would still be opposed, or whether the only matter to be argued on 17 September would be the question of costs.

(10)  On 25 August 2015, the applicants’ solicitors wrote with an offer that their clients would pay the respondents’ costs on the party and party basis, and suggested that the hearing could be vacated.  This offer was rejected on 27 August 2015.  Thereafter there was correspondence debating whether the argument as to costs should be dealt with on 17 September 2015, or at some other time.

(11)  On 4 September 2015, the respondents lodged a full hearing bundle for the 17 September 2015 hearing, including in it documents that were relevant to the question whether any extension of time should be granted.  Then, on 7 September 2015, the respondents lodged their counsel’s skeleton argument, which made submissions as to the merits of the time extension application.

(12)  On 9 and 10 September 2015, the parties wrote to the court to set out their respective positions as to whether or not the 17 September 2015 hearing should go ahead.  As it was clear from the correspondence that there was no longer any opposition to the time extension being granted, the court granted the extension and directed the filing of written submissions and a statement of the respondents’ costs, to enable the issue of costs to be resolved on paper.  The statement of costs and each party’s submissions were duly lodged thereafter.

4. The first matter for consideration is whether the respondents’ costs should be assessed on the party and party basis, or the indemnity basis.  As to this, the respondents contend that the indemnity basis is appropriate (although they no longer seek an order against the applicants’ solicitors personally) because:

(1)  the applicants’ opposition to the extension sought was both unmeritorious and persistent, and had caused costs to be incurred by the respondents;

(2)  the applicants were practicing solicitors, and should have formed an independent view as to the matter, regardless of what advice they may have been given by their legal advisers;

(3)  the opposition to the application was a tactic to stifle the respondents’ claims against the applicants in other proceedings;

(4)  unreasonable opposition to an application for an extension of time, as was the case here, should be discouraged by the court; and

(5)  the eventual concession that an extension of time should be granted was “too little, too late”.

5. As a fall back position, Mr Yip (counsel for the respondents) submitted that at the very least counsel’s fees should be paid by the applicants, as these had been incurred as a result of the persistent opposition to the respondents’ application.

6. Mr Chong, for the applicants, submitted that the appropriate basis for assessment was the party and party basis.  He contended that:

(1)  There were no unusual features, such as an abuse of process or improper purpose in the initial resistance to the extension application, such as to justify the making of an order for indemnity costs.

(2)  The respondents’ suggestion (in their skeleton argument lodged on 7 September 2015 for the purposes of the extension application) that the need for an extension was not due to any fault on the respondents’ part, but was of the applicants’ own making, was not a fair criticism, as the respondents could have put in a draft order for approval, and the applicants could not be said to be at fault in respect of the delay in finalisation of the draft order.

(3)  While the applicants accepted that they should not have opposed the extension application on technical grounds, they had dropped their opposition some four weeks prior to the hearing, which could not be said to be too late.  Moreover, they had shortly thereafter offered to bear the costs, on a party and party basis, in order to avoid the waste of further costs.

(4)  Finally, Mr Chong submitted that the costs of instructing counsel, and preparation of the hearing bundle should be disallowed.  In respect of counsel’s fees, Mr Chong complained that the respondents had never, prior to 19 August 2015 (when the applicants first indicated that they would not oppose the grant of an extension) warned the applicants that they were going to engage counsel if the application was not consented to, and had suggested (when the applicants sought to have the hearing fixed to suit his diary) that counsel need not be instructed.  As to the preparation of the hearing bundle which was lodged on 4 September 2015, Mr Chong submitted that this was simply unnecessary, given that the applicants had dropped their opposition to the application some two weeks earlier.  Mr Chong also submitted that the provision of a full skeleton argument was also quite unnecessary.

7. So far as the basis of assessment of the costs of this application is concerned, we have come to the view that it would be appropriate to assess such costs on the party and party basis.  In coming to this view, we do not overlook the fact that it was inappropriate for the applicants to resist the extension on the basis of the alleged lack of merits in the proposed appeal.  However, it seems to us that while it could have come earlier, the applicants did resile from that position well before the date fixed for the hearing of the application.  That being the case, we are not inclined to characterise their opposition to the application as vexatious or so improper as to merit the imposition of a sanction beyond a standard costs order.  Nor do we think that the fact that the applicants are themselves solicitors is a reason to penalise them with a higher level of assessment of costs.  As for the suggestion that the resistance was for an improper purpose of stifling other proceedings, we do not think that the suggestion is made out.

8. Before considering the quantum of costs to be allowed, we shall deal briefly with Mr Chong’s objections to counsel’s brief and the cost of preparing hearing bundles.

9. We do not think that there is any merit in the objection regarding counsel’s brief.  Although we have accepted that the applicants’ concession was made in reasonably good time before the hearing, this does not mean that it was unreasonable for the respondents to have instructed counsel by then.  The fact is that the applicants had up to that point consistently indicated that they would oppose the extension being granted.  A hearing date had been fixed and directions for the hearing given on 13 August 2015.  It was, we think, to be expected that counsel would be instructed soon thereafter, and there was no reason for the respondents to give the applicants one last chance to reconsider their stance before briefing counsel for the hearing.  We therefore see no reason to disallow counsel’s brief.  Although the skeleton argument was unnecessary insofar as it dealt with the substantive merits of the application, it does not seem that any additional costs were incurred in its preparation, as it would have formed part of the work included in counsels’ brief.

10. However, the position in relation to preparation of bundles is different.  By 25 August at the latest, it was clear that there would be no opposition to the extension application, and that the only possible matter remaining for argument would be the question of costs.  That being so, it seems to us that it was quite unnecessary to prepare full bundles for the hearing, and the costs of doing so should, in our view, be disallowed.

11. Having considered the statement of costs submitted by the respondents, we are of the view that some reduction is called for.  As we have indicated, the costs of preparing the bundle should be disallowed.  In addition, the amount of time spent on communications with various parties, and preparation of documents seems to be very high for what was a simple and straightforward application.  In our view, a total of around HK$40,000 in respect of communications and professional work would be a reasonable amount.  Together with counsel’s brief and the items of manual work, we think that an overall figure of HK$75,000 should be allowed.  We therefore order the applicants to pay the respondents’ costs of this application, assessed on a gross sum basis in the amount of HK$75,000.