XCHRX THE SECRETARY FOR JUSTICE v. WEMBLEY INTERNATIONAL (HK) LTD. AND ANOTHER

HCA 8518/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 8518 OF 1998

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REASONS FOR DECISION

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Introduction

1. This is the Defendants' appeal against the Order of Mr Registrar C Chan dated 26 May 2000 whereby he ordered that:-

(a) the costs of and occasioned and thrown away by the Plaintiff's re-amendments to its Amended Statement of Claim be to the Defendants in any event;

(b) there be no order as to costs of the hearing of that application.

2. The Defendants argue that:-

(1) the costs under sub-paragraph (a) above ought to be taxable and payable forthwith;

(2) they ought to be awarded the costs of the hearing before the learned Registrar.

3. At the end of the hearing on 5 September 2000, I dismissed the Defendants' appeal and allowed the Plaintiff's cross appeal. The following are the reasons for the decision.

The Defendants' Appeal

4. Mr G Lam for the Defendants does not dispute the usual rule that costs of interlocutory proceedings (including costs of an application for amendment of pleadings) should be taxed in any event: see, for example,

(1) ADS v. Wheelock Modern, 1988, MP 2625 & 1989, No. A 1670, 4 July 1994, pg. 3 of the transcript;

(2) ADS v. Wheelock Modern [1994] 1 HKC 607, 611F;

(3) Lessy SARL v. Pacific Star Development Ltd [1996] 2 HKC 326, 327C;

(4) The Supreme Court Practice 1999, Vol. 1, para. 62/6/9 at p. 1132.

He submits that the Court's discretion should be exercised differently in this case because of the following reasons.

5. First, the Plaintiff's re-amendment consisted of deleting substantial and discrete parts of the Amended Statement of Claim and abandoning a number of allegations made therein. As a result, substantial time, effort and expenses were incurred by the Defendants in relation to their own pleadings, discovery of documents and other matters, including draft witness statements. There is no valid reason why the Defendants should be kept out of those costs until the end of this action (which may be quite some time later).

6. Secondly, the learned Registrar did not have the benefit of the draft bill of costs lodged in the appeal. He therefore did not take into account a relevant matter.

7. The third point is related to the second point above. The Defendants filed evidence stating that the learned Registrar said in his decision that the present trend was that orders awarding costs to be paid forthwith are more common. The learned Registrar opined that it was inappropriate in this instance to order immediate taxation because he considered it would be difficult for a taxing master to tax such costs before the conclusion of this action. The Defendants contend that there is either no such difficulty in this case or, if there is such difficulty, the taxing master could be faced with the same difficulty even after this action was concluded.

8. I shall deal with these arguments globally instead of dealing with each individually. I commence by setting out the usual reasons why immediate taxation is not ordered for the costs of interlocutory proceedings:-

(a) the related costs may not be easy to ascertain at an interlocutory stage;

(b) the amount of the related costs may be minute in relation to the overall costs;

(c) immediate taxation is regarded as "penal" in the sense that the court regards such to be unusual and is only warranted by conduct which amounts to an affront to the court: see, for example, Hitchison Asia Ltd v. Asia Television Ltd, A6757/1992.

9. While the costs of and occasioned and thrown away by the re-amendments herein may be substantial (the draft bill of costs alleges they amount to about $520,000.00), I do not find it justifies immediate taxation in the context of this action.

10. Regarding the 2 errors allegedly made by the learned Registrar:-

(1) the argument that the learned Registrar failed to take into account a relevant matter is misconceived. This ground only arises when the learned Registrar has failed to consider a matter which was present at the time of the hearing before him and which was relied upon by one or both of the parties. He could not be faulted for not considering something which has not been placed before him;

(2) the Defendants' evidence alleges a "present trend" of ordering immediate taxation was referred to by the learned Registrar. As I am not aware as a fact that such a trend (which applies generally to all interlocutory costs) exists, I enquired with the learned Registrar whether such a trend had been adopted. What he told me accords with my understanding, namely, the "present trend" is only adopted in relation to "time" summonses when prescribed time (whether by the rules or an earlier order) is extended by the Court.

11. Taking into account all the matters put before me (including the Defendants' draft bill of costs), I do not find that the learned Registrar has erred in ordering costs to be taxed in any event. In fact, I agree with him, in particular as regards the difficulties in taxing the costs at this stage. For example, it is uncertain whether some of the documents now considered to be unnecessary would become relevant at a later stage and hence how much costs should be allowed cannot properly be ascertained. The same applies to the contents of the witness statements. I also do not find that there is any other reason which should justify immediate taxation of costs to be ordered.

12. For the above reasons, the Defendants' appeal relating to the costs of and occasioned and thrown away by the Plaintiff's re-amendment is dismissed.

13. The test to be adopted in an appeal against a costs order made by the Master (or, in the present case, the Registrar) to a Judge in chambers is disputed. The Plaintiff submits the proper test is that the appeal should not be allowed unless it can be shown that the Master's costs order was unreasonable or erred in law, that is, he either failed to take into account relevant matters or took into account irrelevant matters: see the cases referred to at p. 6 of the transcript of Paul Y-ITC Construction v. Kin Shing Co. Ltd HCA 2220/1998. The Defendants argue this test is inapplicable when the decision of the Master on costs is the only issue raised at the hearing before him. I disagree with the Defendants' argument for the following reasons:-

(a) the said test is appropriate because costs are a matter of discretion;

(b) if the Plaintiff's argument is accepted, it can equally be argued that the test is also inapplicable when a costs order is made after lengthy submissions (even if costs are not the only issue raised). The reason underlying the said test (see (a) above) will be undermined because this kind of argument (that the judge should re-consider the matter afresh) may be raised in increasingly more cases.

14. There is a further consideration of relatively less importance in relation to whether costs ought to be taxed immediately. Already too much judicial time has been taken up by taxation hearings. Ordering interlocutory costs to be taxed in any event would have the additional advantage of lessening judicial time which has to be spent for such purposes: parties may agree to set off one set of costs against another, litigation may be settled at some later stage.

The Plaintiff's Cross Appeal

15. The remaining issue is the learned Registrar's Order that there be no order as to costs of the hearing. This is also the subject-matter of the Plaintiff's cross appeal. Mr G Lam agues (correctly) that the burden is on the Plaintiff to show that this part of the learned Registrar's Order is unreasonable or wrong. The Defendants' evidence is that the Plaintiff did not raise the argument that there would be difficulties in ordering immediate taxation in this case and this point was only raised by the learned Registrar. Further, the learned Registrar was sympathetic to the Defendant's application. I understand from Mr P Lam for the Plaintiff that the Plaintiff argued before the learned Registrar that the usual rule was that interlocutory costs are only payable in any event.

16. One of the underlying reasons for such a usual rule is the difficulties inherent in immediate taxation. Thus, although the ground was not expressly raised by the Plaintiff, it must have been raised by implication when the Plaintiff relied on the said usual rule. The learned Registrar has in effect found in the Plaintiff's favour in concluding that immediate taxation should not be ordered by reason of the potential difficulties in such a taxation. As regards the question of the court's sympathy, I do not consider that it should justify a departure from the usual rule that costs should follow the event. I therefore find that the learned Registrar has erred in refusing the Plaintiff its costs of the hearing before him. The Defendants' appeal is dismissed in this regard as well and the Plaintiff's cross appeal is allowed. Costs of the hearing below should be paid by Defendants in any event.