DAVID JOHN KENNEDY v. KELLY CHENG AND ANOTHER

FACV No. 30 of 2008

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 30 OF 2008 (CIVIL)

(ON APPEAL FROM CACV NO. 244 OF 2004)

_____________________

_____________________

_____________________

JUDGMENT ON COSTS

_____________________

Mr Justice Bokhary PJ :

1.  This is our judgment on costs.  It is to be read together with the judgment which we handed down on 20 October 2009.  By that judgment we allowed Mr Kennedy’s appeal, set aside the Court of Appeal’s judgment, dismissed Ms Cheng and Mr Yip’s motion to have Mr Kennedy committed for contempt of court and called for written submissions on costs.  We have now received and considered such submissions prepared on behalf of the parties.  By “the parties”, we mean : (i) the appellant Mr Kennedy; (ii) the respondents Ms Cheng and Mr Yip; and (iii) the Official Receiver.

2.  The costs concerned are those at first instance, in the Court of Appeal and in this Court.  Mr Kennedy asks that the costs payable to him be taxed on an indemnity basis.  The Official Receiver asks for his costs on an indemnity basis by way of gross sum assessment.  Ms Cheng and Mr Yip submit that the costs payable by them should be taxed on a party and party basis.

3.  Any gross sum assessment would have to be made by the judges concerned at each level.  Such a course is wholly impracticable in the present circumstances.  There will be no gross sum assessment.

4.  As far as the costs at first instance are concerned, Kwan J (as she then was) ordered as follows on 23 September 2004 :

 “1. [Mr Kennedy] is entitled to recover any shortfall in his costs of this committal application out of the assets of Wing Fai Construction Company Limited.

2. [Ms Cheng and Mr Yip] do pay to [Mr Kennedy] forthwith the costs of and occasioned by their application for committal, including the costs of and occasioned by today’s hearing on costs, such costs to be taxed if not agreed on the indemnity basis.

3. [Ms Cheng and Mr Yip] do pay to [Mr Kennedy] forthwith an interim payment in respect of the costs ordered at paragraph 2 above in the sum of HK$1,330,644.84 pursuant to Order 62 rule 9A of the Rules of the High Court.

4. [Ms Cheng and Mr Yip] do pay to the Official Receiver the costs of and occasioned by their application for committal, including the costs of and occasioned by today’s hearing on costs, such costs to be taxed if not agreed on the party and party basis.”

5.  That was followed by a taxation of Mr Kennedy’s costs at first instance, the result of which taxation is set out in an allocatur dated 21 July 2005.  By that allocatur, it was certified that Mr Kennedy’s costs have been taxed by a master of the High Court on 14 April 2005 pursuant to the orders of Kwan J dated 23 September and 14 October 2004 and an Order of Reyes J dated 30 September 2004 and allowed at as follows :

“Party and Party
Profit costs (indemnity basis)	$971,481.21
Profit costs (party and party basis)	$69,434.96
Costs of taxation	$66,765.00
Disbursements	$904,596.21
Taxing fee	$34,623.00
	$2,046,900.38”

6.  Ms Cheng and Mr Yip chose to take a very strong course against Mr Kennedy when they moved to have him committed for contempt.  Not only have they failed but they failed on the basis, as this Court has held, that he had no case to answer.  Such a situation is one in which indemnity costs can be appropriate.  And in all the circumstances of the present case, we are of the view that such costs as Ms Cheng and Mr Yip should be ordered to pay Mr Kennedy and to the Official Receiver ought to be taxed on an indemnity basis.

7.  What costs should Ms Cheng and Mr Yip be ordered to pay Mr Kennedy and the Official Receiver?  There can be no doubt that as far as the costs at first instance, of the leave applications made to the Court of Appeal and to the Appeal Committee and of the appeal to this Court are concerned, Mr Kennedy and the Official Receiver are entitled to their costs against Ms Cheng and Mr Yip.

At first instance

8.  As to the costs at first instance, we (i) reinstate the orders made in favour of Mr Kennedy and the Official Receiver, (ii) order that the allocatur dated 21 July 2005 in respect of Mr Kennedy’s costs do stand and (iii) order that the Official Receiver’s costs be taxed on an indemnity basis if not agreed.

In the Court of Appeal

9.  And as to the costs of the leave applications made to the Court of Appeal and to the Appeal Committee and of the appeal to this Court, we order that Ms Cheng and Mr Yip pay Mr Kennedy and the Official Receiver’s costs to be taxed on an indemnity basis if not agreed.

10.  What about the costs in the Court of Appeal (meaning the costs in that court apart from those of the application to them for leave to appeal to us)?  From the record of proceedings and the written submissions, the position appears to be as follows.  When the Court of Appeal initially decided in favour of Mr Kennedy, they did so under the impression that disclosure of the transcripts concerned were covered by the order which Barma J made on 8 June 2004. 

11.  Unfortunately, that impression was mistaken.  Ms Cheng and Mr Yip sought to have the matter re-opened in the Court of Appeal on the basis that that court had proceeded on a mistaken impression.  We accept of course that neither Mr Kennedy nor his legal advisers set out to mislead the Court of Appeal or to be less than frank with them.  The fact remains, however, that the way in which Mr Kennedy sought to resist such re-opening added unnecessarily to the costs in the Court of Appeal. 

12.  Various arguments having been put forward as to how that fact may be reflected in costs.  We think it appropriate to take the Court of Appeal proceedings together as a whole and to make an order reflecting both the fact that the Court of Appeal’s decision was ultimately reversed by us and the fact that the costs of the initial hearing before them were thrown away.  On a broad brush basis, we order that Ms Cheng and Mr Yip pay (i) the Official Receiver’s costs in the Court of Appeal to be taxed on an indemnity basis if not agreed and (ii) 50% of Mr Kennedy’s costs in the Court of Appeal to be taxed on an indemnity basis if not agreed.

And in this Court

13.  As far as the costs in this Court are concerned, we order them against Ms Cheng and Mr Yip pay and in favour of Mr Kennedy and the Official Receiver to be taxed an indemnity basis if not agreed.

Interest

14.  Finally there is the question of interest.  After considering the arguments and counter-arguments on interest, we order as follows.  Interest on the costs payable by Ms Cheng and Mr Yip to Mr Kennedy and the Official Receiver should be at the judgment rate.  As far as the first instance costs are concerned, interest should run from 23 September 2004 until payment.  And as for the rest of the interest (ie the interest on the costs of the leave applications, the Court of Appeal costs and the costs here), the same should run from the date of this judgment on costs until payment.