YANTAI CHANG YU GROUP CO LTD v. SHANDONG MEDICINES AND HEALTH PRODUCTS IMPORT AND EXPORT CORPORATION

HCMP 2721/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2721 OF 2003

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REASONS FOR DECISION

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Introduction

1.  This is the hearing of the respondent’s application dated 8 September 2004 under the Rules of High Court (“RHC”) Order 62 rule 16 seeking 8 weeks’ time extension within which to commence taxation proceedings in respect of the costs order granted by Mr Justice Chung on 3November 2005 (“the Costs Order”).

2.  On 12 January 2012, I have granted order in terms of paragraph 1 of the application with costs of the application to the applicant, the same to be taxed if not agreed.  I then reserved reasons for my decision which I now hand down.

3.  The applicant here applied for rectification of the Trade Marks Registry by removal of the Suit Marks.  The same was dismissed by the Registrar of Trade Marks with costs to the respondent.  The Registrar’s costs was taxed and allowed in sum of $405,473.40.  The same remained unpaid.

4.  Meanwhile, the applicant appealed against the decision of the Registrar, the same was dismissed by Mr Justice Chung on 3 November 2005 with costs of the appeal to the respondent (“the Costs Order”).

5.  Being dissatisfied, the applicant filed Notice of Appeal and Notice of Setting Down of Appeal both on 24 November 2005 but until the date of hearing of the present summons, the applicant had not yet fixed the date for the Appeal.

Discussion

6.  RHC Order 62 rule 22(7), (8) and (9) are set out as follows: -

“ (7) A party is not entitled to commence taxation proceedings under rule 21—

(a) after the expiry of 2 years from the completion date; or

(b) where the Court has extended the period specified in sub-paragraph (a), after the expiry of the period as extended, whichever is the later.

(8) Where the completion date is before the commencement of this rule, paragraph (7)(a) has effect as if for the words “completion date”, there were substituted the words “commencement of this rule”.

(9) In this rule, “completion date” (完成日期) means—

(a) in relation to a costs order made by the Court of First Instance—

(i) the date of the judgment or order of the Court of First Instance which disposes of the action;

(ii) the date on which the Court of First Instance makes the costs order, or if the order is an order nisi, the date on which the order is made absolute or varied (as the case may be);

(iii) the date on which the taxing master orders under rule 9D(4) the person entitled to payment of the costs of any interlocutory proceedings in the Court of First Instance to commence taxation proceedings; or

(iv) where the person entitled to payment of costs is entitled to tax those costs without an order of the Court of First Instance directing the taxation of them, the date on which he becomes entitled to tax those costs,

whichever is the later; and

(b) in relation to a costs order made by the Court of Appeal—

(i) the date of the judgment or order of the Court of Appeal which disposes of the appeal;

(ii) the date on which the Court of Appeal makes the costs order, or if the order is an order nisi, the date on which the order is made absolute or varied (as the case may be);

(iii) the date on which the taxing master orders under rule 9D(4) the person entitled to payment of the costs of any interlocutory proceedings in the Court of Appeal to commence taxation proceedings; or

(iv) where the person entitled to payment of costs is entitled to tax those costs without an order of the Court of Appeal directing the taxation of them, the date on which he becomes entitled to tax those costs, whichever is the later.”

7.  RHC Order 62 rule 16(1)(a) and (3) reads: -

“16.—(1) A taxing master may—

(a)  extend the period within which a party is required by or under this Order to begin proceedings for taxation or to do anything in or in connection with proceedings before that master.”

8.  Here, since the Costs Order was made on 3 November 2005, completion date is 3 November 2005 and 2 years from the completion date would bring the respondent to 3 November 2007 which was before the commencement date of Order 62 rule 21(8) i.e. 1 April 2009.  Order 62 rule 21(8) stipulated that in such case, reference to completion date be substituted with the commencement of the rule, i.e. 1 April 2009 and so pursuant to Order 62 rule 21(7), the respondent has to commence taxation on or before 1 April 2011.

9.  There was previously no application by the respondent to extend the period within which respondent can commence taxation.

10.  Accordingly, in the circumstances of this case, the respondent is out of time to commence taxation proceedings in respect of a Costs Order.  It is not in dispute that this court does have jurisdiction to extend the time in which the respondent may commence taxation.  This is why the respondent has sought the extension under this rule.

11.  In the judgment dated 3 November 2005, Mr Justice Chung granted the Costs Order in favour of the respondent.

12.  When the applicant filed Notice of Appeal on 24 November 2005, there was no application for stay of execution pending appeal.

13.  Since then and until the issue of the present application, the respondent has not commenced taxation proceedings.  Pursuant to Order 62 rule 22(7)(b) of the RHC unless this court granted a time extension, the respondent was not entitled to commence taxation proceedings.

14.  Parties agree that the deadline to commence taxation proceedings by the respondent already expired on 1 April 2011.

15.  It is the applicant’s contention that the respondent was at all times fully aware of the outstanding costs order.  In fact, on 10 December 2010, the Registrar of High Court wrote to the parties requesting them to deal with outstanding issue of security for costs.  The respondent’s solicitors then replied on 23 December 2010 that they had not yet commenced taxation of the Costs Order.  In reply, the Registrar wrote on 18 January 2011: -

“The matter be adjourned for 3 months for the parties to take instructions, sort out their differences and take appropriate actions. Parties shall report to the Court by 18.4.2011 and keep the Court informed of the development of the matter.” (emphasis added)

16.  It was said that the respondent did nothing in response towards taxation of their bill.

17.  Shortly after the deadline for commencement of taxation expired, on 18 April 2011, the applicant reported to the Registrar, copied to the respondent, stating, inter alia, that the time for the respondent to commence taxation has expired and that the money previously paid in court as security for costs together with interests shall be released to the applicant.

18.  The respondent’s solicitors replied the Registrar on 20 April 2011 stating that they would consider, inter alia, seeking an extension of time to tax the costs.

19.  On 27 April 2011, the Registrar directed that the matter be adjourned for another 3 months.

20.  On 27 July 2011, the respondent notified the applicant that he intended to make an application for extension of time to tax the costs within the next 14 days.

21.  The respondent waited until 8 September 2011 when he made the application.  The same was not served on the applicant’s solicitors until 20 September 2011.

22.  In paragraph 3 of the 1^st affidavit of Brenda Sin Yan Lui (“Lui”), solicitors for the respondent explained that the primary reason for the delay of the respondent in commencing taxation proceedings was that they did not wish to incur further costs pending appeal proceedings filed by the applicant which may potentially reverse the Costs Order made.  The respondent was aware that they were entitled to tax the CFI Costs Order pending an appeal of the same. However, as the applicant already owed $405,473.40, being taxed costs of the Registrar, a significant sum of money to the respondent under a previous costs order, the respondent did not wish to incur extra costs towards taxation of the Cost Order.

23.  Lui said further that their delay was partly also due to the fact that they had intended to wait for the outcome of the pending appeal by the applicant but the date for hearing of the appeal was never fixed in the last 6½ years.

24.  Lui said it is now clear that the applicant had no genuine intention to proceed with the appeal.  It was respondent’s belief that if applicant was successful in the appeal, then possibly there would be a reversal of the Costs Order and the respondent might have to pay costs to the applicant in which case the costs spent on taxation would be a waste.

25.  At the same time, Lui said there had been negotiations between the parties with a view to settle the whole matter since year 2005 until about 5 January 2011.

26.  It was said that at the time, the respondent considered a real likelihood of settlement and so they withheld incurring further costs.  Lui further said that it might also be for the same reason that the applicant failed to proceed to fix the date for hearing of the appeal in the Court of Appeal.

27.  Lui said respondent were dragged in the present proceedings incurring substantial costs and despite the costs order against the applicant, nothing was actually paid by the applicant.

28.  Lui further claimed therefore it would be wholly unjust that the applicant made use of the good intention of the respondent in making genuine attempts to settle as the reason for depriving the respondent the right to commence taxation of the Costs Order that they were entitled in the present proceedings.

29.  Lui further stated that no prejudice would be caused to the applicant by reason of such delay and that even on reading the affidavit filed in opposition of the application by Ambrose Ng (“Ng”), solicitor for the applicant, there was no alleged prejudice caused to the applicant.

30.  She therefore urged this court to grant the time extension for the respondent to commence taxation.

31.  Mr Ng (“Ng”), solicitor for the Applicant on the other hand disagreed that respondent could use their pending appeal as a valid excuse for the delay. He said that as there was no application for stay of execution on part of the applicant, the respondent could have proceeded with the taxation without reference to the appeal.

32.  Applicant however did not explain reason for their non-payment of the taxed cost of the Registrar nor reason for their inaction in fixing the hearing date for the appeal.

33.  Ng contended further that from the affidavit of Lui, one could be reasonably certain that the respondent had intentionally withheld the taxation process, that the respondent totally disregarded the time limit in RHC Order 62 rule 22(7).

34.  It was pointed out by Ng further that when the court alerted the parties of the “costs” issue, the respondent on 23 December 2010 already replied that they had yet to commence taxation of costs and even when directed by the Registrar on 18 January 2011 to take appropriate actions within 3 months, the respondent did nothing.  It was only after applicant wrote to the Registry on 18 April 2011 seeking to have the payment in court released to him that the respondent on 20 April 2011 replied that they intended to seek time extension to commence taxation of their bill.

35.  The applicant criticized the respondent for not acted promptly even in such situation but only waited until 8 September 2011 before making the application.

36.  In the present case, the respondent took out the application to extend the time limit within which to commence taxation of the Costs Order 5 months after the expiry of the time limit.

37.  I accept, as submitted by the applicant, that the delay was not due to omission or negligence of the respondent, rather, it was a conscious one.

38.  I also agree that the respondent, even when reminded of the “costs” issue did not act promptly to apply for extension of time before the time limit within which to commence taxation expired.  Respondent had given their explanations why but the court does not accept these as good enough reasons. In my view, the respondent should have taken out the application much earlier.

39.  The wait for the settlement/result of appeal had simply taken too long.

40.  Having said that, I also find that in this case, no prejudice would be caused to the applicant should the application for extension of time be allowed.  The Applicant admitted the taking place of negotiations as alleged by the respondent.  This confirmed the truthfulness of respondent’s explanation that in the hope of settlement, they had withheld the commencement of taxation, of course, this was again not a sufficient reason for delay.

41.  Mr Lui referred me to the case of Wing Ming Garment Factory Ltd v The Incorporated Owners of Wing Ming Industrial Centre New Gas & Company (a firm) and Essman Construction Company Ltd (unreported), CACV 27/2008 (an appeal from HCA 8805/1993), 29 December 2011, where Recorder Jat SC heard the appeal from a master’s decision and exercised his discretion to grant the application to extend time within which to commence taxation.  There, the respondent only seeked to commence taxation proceedings after 3 years counting from the issue of the relevant cost order.  The learned Recorder considered in the circumstances of that case, that refusal to extend would be a disproportionate penalty to the receiving party’s delay.  In reaching this conclusion, he considered the delay in that case as substantial but the same was not due to any deliberate conduct or fault of the receiving party.  He also found in that case that the delay did not cause prejudice to the other party. In arriving at the decision, the learned Recorder considered the two English Court of Appeal cases of Toniello v Top Deck Ski Ltd, The Times 7 December 1998 and London Borough of Southwark v Nejad [1999] 1 Costs LR 62 (CA).

42.  Coming to our case here, the respondent here lodged the present application 5 months after the deadline for them to commence taxation.  They did give explanation as to why they did not commence taxation earlier.  I accept these explanations were true.  I suspect these might also be reasons, as said by the respondent, why the applicant had yet failed to fix the appeal hearing date.

43.  If no time extension was granted to the respondent in this case, they would be disallowed their costs altogether.  Is this penalty proportionate to their delay?

44.  I bear in mind that there is sufficient flexibility given to the taxing master under Order 62 rule 22(5) to impose whatever penalty that the master may consider to be appropriate in the circumstances of the case.  Such would include the power to deprive the receiving party of part of the costs of taxation, part of the costs to be taxed pursuant to the costs order, part or all of the interest or reduce the interest period or interest rate.  In short, the taxing master can make use of this built-in mechanism in the particular circumstances of each case to achieve a just and fair result.

45.  Having considered the above and following the approach of Recorder Jat SC in the Wing Ming case, bearing in mind the underlying objectives of Civil Justice Reform, in particular the sense of fairness between the parties, I exercise my discretion to extend time for a period of 8 weeks for the respondent to commence taxation proceedings.  The penalty, in my view, would be wholly disproportionate if I should refuse the application, and deny the respondent of their entitlement to costs under the Costs Order.

Costs

46.  As the present application was necessitated due to the delay of the respondent in commencing its taxation, respondent should pay the applicant costs of this application, the same to be taxed if not agreed.