BEATRICE TSANG SAU HING AND ANOTHER v. YEUNG MAN LOONG MAXLY AND OTHERS

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J U D G M E N T

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1.  In respect of items of bills of costs where the paying party has not raised objections in the list of objections, is the receiving party entitled to interim certificates?

The Power to Grant Interim Certificates

2. I have no hesitation in answering the question in the affirmative.  Under Order 62, rule 17(1) of the Rules of the High Court (“Rule 17”),

“ A taxing master may from time to time in the course of the taxation of any costs by him issue an interim certificate for any part of those costs which has been taxed.”

In view of the existence of Rule 17, the Receiving Parties should not rely on the inherent jurisdiction of the Court, as they do in the summons.

3. This power under Rule 17 is discretionary in that the taxing master may issue or refuse to issue an interim certificate as well as decide upon the quantum thereunder.

The Objections of the Paying Parties

4. The Paying Parties do not dispute the existence of the taxing master’s power but they oppose its exercise on, broadly, the following grounds:

(i)  The summonses on this issue do not form part of the taxation process as item-by-item taxation (“formal taxation”) has not commenced on any of the 8 bills.

(ii)  It is against rules of reason and justice to grant interim certificates in these cases.

(iii)    A discount of up to 60% should be given in the event interim certificates are granted in view of the injection of funds made by the Paying Parties into a joint venture, which act benefits the Receiving Parties.

(iv) The Paying Parties should be allowed to pay the sums under the interim certificates by 2 instalments.

(i) Is the Application for Interim Certificates Part of the Taxation Process?

5. The present application was clearly made in the course of taxation.  Proceedings for taxation has commenced by filing of a bill of costs and obtaining an appointment to tax: Order 62, rule 21(1).  The application for interim certificates was made orally at the appointment to tax (“call-over hearing”).  I directed a summons to be issued so that the Receiving Parties could make clear the legal basis for their application.

6. In SY Engineering Co. Ltd. v. Hong Kong Housing Authority [2001] 2 HKC 226, Yeung J (as he then was) was of the view that,

“ 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. … Indeed, a bill of costs once rendered should be paid as soon as possible subject to the determination of the amount by taxation.”

7. Although in SY Engineering Co Ltd v. Hong Kong Housing Authority, the interim certificate was granted pursuant to formal taxation which had gone part-heard, there is no reason why the words of Yeung J are not applicable to the situation where taxation is still at the stage of call-over hearing.  This is because Paragraph 1 of PD 14.3 provides that a call-over hearing is to dispose finally of matters where it is apparent that the paying party is no longer interested in or opposing the taxation.  The taxing master can therefore immediately tax and grant an interim certificate for the unopposed items of costs.

8. By way of passing, the Receiving Parties base their application on the “admission” of the Paying Parties.  The Paying Parties, on the other hand, categorically deny that they have made any “offer” (see their lists of objection).  In my view, this quibble over terminology serves no useful purpose.  Sooner or later the Paying Parties have to pay.  They have not suggested that they will be liable for less than the amounts claimed for the interim certificates.  From the first call-over hearing to today, the Paying Parties keep saying that they will put in supplement lists of objections.  Three months have elapsed by now and they have not done so.

9. I am satisfied that the application was made in the course of taxation.

(ii)    Is it Against Rules of Reason and Justice to Grant Interim Certificates in These Cases?

10. The Paying Parties have not made clear what rules of reason and justice might be breached.  There is also no question of any “private opinion” held or “benevolence” shown by this Court as suggested by the Paying Parties in their written submission.  My whole decision is based on legal principles and evidence.

11. The trial of the petitions lasted for 17 days in 2007.  On 21 December 2007, an order for winding-up of the companies was made.  The last costs order that formed the subject of this taxation was made about a year ago in March 2008.  Both companies had engaged senior and junior counsel at the trial.  Surely substantial costs would have been incurred even on the Paying Parties’ side also.  The Paying Parties have been served with the bills of costs for about 5 months.  They have been alerted to this application for interim certificates for about 2 months.

12. This ground of opposition is unsustainable.  I see no reason why the Receiving Parties should not be paid in part.

(iii)   Discount of 60%

13. The reasons for seeking a discount is that the Paying Parties have been providing temporary funding to the extent of $7.5 million to save the company for the benefit of shareholders (including the Receiving and Paying Parties) and creditors.  It is said to be unreasonable for the Receiving Parties to press for interim certificates but simultaneously enjoy the fruits of the profits generated from the funding at the expense of the Paying Parties.

14. The reasons relied on by the Paying Parties to ask for a discount contain factual assertions not contained in affidavits.  There is dispute as to whether those facts had been laid before the trial judge.  It is impossible for me to resolve the conflict without the benefit of evidence.

15. More importantly, however, is that these assertions are irrelevant.  A distinction must be made between the parties’ rights in different capacities.  In this taxation, the Receiving Parties are petitioners/respondents to whom the trial judge has awarded costs.  Their recourse (as litigants) is against the Paying Parties (also as litigants).  On the other hand, if the Paying Parties as shareholders have injected capital to save the company, it is a matter for the company to keep proper accounts.  If it does not (e.g. by preferring the Receiving Parties to another) the recourse of the Paying Parties will be against the company or the Receiving Parties (in a different capacity as shareholder).  That will not be a factor in favour of granting a discount on the interim certificates.  I will of course add that the basis for picking 60% has never been stated.  This ground of objection is thus unsustainable.

(iv)   Payment by Two Instalments

16. The Paying Parties request for payment by 2 instalments, to be paid in 3 and 4 months’ time respectively.  However, there is no evidence in support of any financial difficulties on the part of the Paying Parties.  The usual rule that upon pronouncement of the amount of costs payment should be made forthwith is not displaced.  This request is thus declined.

Quantum of Costs for the Interim Certificates

17. The Receiving Parties have removed all the disputed amounts from the scope of the interim certificates sought.  A summary is as follows:

Case No.	Costs claimed by RP	Proposed deduction by PP	Sum sought for interim certificate
HCCW49/2006	$7,627,172	$3,639,096	$3,514,872
HCCW50/2006	$175,829	$83,170	$92,659
HCCW51/2006	$160,513	$77,291	$83,222
HCCW52/2006	$186,397	$89,463	$96,934
HCCW130/2007	$3,055,486	$1,852,168	$1,527,284
HCCW131/2007	$19,164	$8,675	$10,489
HCCW132/2007	$18,497	$8,500	$9,997
HCCW133/2007	$18,497	$8,500	$9,997
	$11,261,555	$5,766,863	$5,345,454

18. I have pointed out a difference in calculation of the proposed deduction for the bill in HCCW 130/2007 prepared by Ms. Fong for the Receiving Parties and my clerk.  Ms. Fong has no objection to my deducting a higher figure for the purpose of issuing interim certificates.  Therefore, save for adjusting the amount to $1,203,318 in HCCW 130/2007, the Paying Parties shall pay the sums in the last column in the preceding paragraph.

Conclusion

19. In summary, a taxing master has power under Order 62, rule 17 of the Rules of the High Court to grant interim certificates for unopposed items in a bill of costs even on the day of the call-over hearing.  The Paying Parties have failed to satisfy me that the discretion should not be exercised against them.  There is no basis for giving a discount or ordering instalment payments.  I therefore order as follows:

(i)  Interim certificates be issued for the amounts set out in paragraph 16 subject to the adjustment in paragraph 17, payable forthwith.

(ii)  On a nisi basis, costs of the summonses be to the Receiving Parties to be assessed on a gross sum basis.

(iii)    In the absence of agreement as to the gross sum costs, the Receiving Parties are to file and serve a costs statement within 14 days from the date of handing down of this decision.

(iv)    The Paying Parties are to file and serve grounds of objection within 7 days thereafter.

(v)  Gross sum assessment shall take place before me on 14 April 2009 at 12 noon with 15 minutes reserved.  Attendance is required.

Other Matters

20. When preliminary issues have been disclosed in a list of objections, they should be disposed of as early as possible with a view to saving costs and time in taxation.  In appropriate cases, the taxing master may direct the parties to seek clarification of a costs order from a trial judge.  Alternatively, he/she may direct the taking out of a summons.  The purpose is to have an issue properly defined if the list of objections has not done so.  As with any summons, in the absence of agreement as to the factual basis, parties should consider whether or not it is necessary to file affidavits or obtain transcript of proceedings.  It is not appropriate to introduce disputed evidence by way of skeleton submission.