Li Sin Man Seline and Lee Shu Hang (The Executors of the Estate of Lee Sai Nam, Deceased) v. Li Shu Chung and Another
Read the full judgment text of HCA 1711/2009 on BabelCite. This High Court CFI judgment was delivered on 19 June 2018.
1. Before the court are the appeals by Mr Li Shu Chung [1] and Li Joseph See Sun [2] (“Ken” and “Joseph” respectively and “Paying Parties” collectively) against 2 orders made by Master K Lo on 17 January 2017 for the issue of interim certificates in respect of parts of the costs claimed against the Paying Parties under various bills of costs (“Bills” collectively) issued by Mr Lee Sai Nam, [3] Allied Ever Holdings Limited, [4] Ms Lee Sin Man Seline [5] and Yuen Hing Enterprise Macao Commercial O
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HCA 1711/2009 [2018] HKCFI 1365 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 1711 OF 2009 ______________________
________________ D E C I S I O N ________________ Appeals before the court 1.Before the court are the appeals by Mr Li Shu Chung[1] and Li Joseph See Sun[2] (“Ken” and “Joseph” respectively and “Paying Parties” collectively) against 2 orders made by Master K Lo on 17 January 2017 for the issue of interim certificates in respect of parts of the costs claimed against the Paying Parties under various bills of costs (“Bills” collectively) issued by Mr Lee Sai Nam,[3] Allied Ever Holdings Limited,[4] Ms Lee Sin Man Seline[5] and Yuen Hing Enterprise Macao Commercial Offshore Limited[6] (“Mr Lee”, “Allied Ever”, “Seline” and “Yuen Hing” respectively and “Receiving Parties” collectively). Background 2.The Bills were issued pursuant to the following costs orders made in this action (“Costs Orders” collectively):
3.Dealing first with Yuen Hing, represented by Christine M Koo & Ip (“CMKI”):
4.As for the other Receiving Parties, represented by D S Cheung & Co (“DSC”), they filed notices of commencement of taxation and issued 4 bills of costs on 31 August 2016 to claim against the Paying Parties the costs awarded to them under the Costs Orders as follows:
5.On 6 December 2016, the Paying Parties filed and served lists of objections to the 2nd to 5th Bills (“2nd Objections” to “5th Objections” respectively) setting out objections which, if all upheld, would reduce the amounts of costs payable under the 2nd to 5th Bills as follows:
For the sake of completeness, regarding the 4th Bill, Ken also took 2 preliminary objections in the 4th Objections: (1) firstly that Allied Ever was precluded by Order 62, rule 22(7)(a) from commencing taxation proceedings because the 4th Bill was out of time having been filed and served more than 2 years after the 1st Costs Order; and (2) secondly that Ken should alternatively be given a global deduction of 45% off the taxed costs due to Allied Ever’s delay in proceeding with taxation under the 1st Costs Order. It will be seen that the second-mentioned objection would affect the quantum of the interim certificate issued in respect of the 2nd to 5th Bills. 6.On 3 January 2017, Mr Lee, Allied Ever and Seline applied to set the 2nd to 5th Bills down for taxation. Both they and the Paying Parties requested for taxation with an oral hearing, estimated to require 4 days. 7.By a letter dated 22 December 2016 from DSC to KLG, Mr Lee, Allied Ever and Seline demanded the Paying Parties to pay them $5,082,993 being the sum of the parts of the costs claimed by them under the 2nd to 5th Bills not objected to by the Paying Parties (i.e. $2,465,751.90 + $2,541,548.70 + $22,487.30 + $53,205.10). Such demand by letter was not met. By a summons filed on 11 January 2017 (“2nd Summons”), Mr Lee, Allied Ever and Seline applied for the issue of an interim certificate under Order 62 rule 17(1), or alternatively interim payment pursuant to the court’s inherent jurisdiction, of $5,082,993. 8.The applications by the 1st and 2nd Summonses (“Summonses”) rest upon the premise that even if the 1st to 5th Objections (“Objections” collectively) were all ultimately accepted by the court to the full extent, the Paying Parties would still have to pay the respective amounts sought in the Summonses so the court should now issue interim certificates for those amounts. 9.Both the Summonses were made returnable before Master K Lo on 17 January 2017 for a 3-minute hearing. It is fair to say that all the parties treated or were prepared to treat this first hearing as a call-over hearing. I say so because, before the hearing, the parties’ solicitors exchanged correspondence, which culminated in an agreement for the adjournment of the Summonses for substantive argument to be heard together and for the Paying Parties to file and serve affidavits in opposition to be followed by affidavits in reply by the Receiving Parties, if any, after which there should be no further affidavit without leave of the court. The only matter on which the parties could not reach consensus was the length of the adjourned hearing, with the Receiving Parties asking for 3 hours and the Paying Parties asking for 1 day. 10.However, when the Summonses came before Master K Lo on 17 January 2017, she refused to adjourn them for argument and allowed the Summonses there and then by ordering the issuance of the following interim certificates (“Interim Certificates”):
11.It can be seen that while the Master allowed the 1st Summons to the full extent, the amounts she granted under the 2nd Summons were arrived at after applying a 45% discount to the amounts of costs not objected to in the 2nd to 5th Objections. The Paying Parties have obtained the transcript of the hearing on 17 January 2017 (“Transcript”). Insofar as I can work out from the Transcript, such discount was applied because of Ken’s claim in the 4th Objections for a 45% global deduction off the costs taxed under the 4th Bill. It is, however, unclear why the amounts claimed in respect of the 2nd, 3rd and 5th Bills to which the Paying Parties have not made the same preliminary objection were subject to the same discount save that the representative of DSC agreed to such deductions for the purposes of the 2nd Summons. See page 28F-G. 12.Mr Wilson Leung, counsel for the Paying Parties, has summarised the Master’s reasons in paragraph 13 of his skeleton submissions dated 20 March 2017 as follows:
Having reviewed the Transcript, I consider this to be a fair summary of the views expressed by the Master in the course of the hearing on 17 January 2017. To ensure that the costs for which interim certificates were issued would not be re-opened by another master (i.e. sub-paragraph (3) hereof), Master K Lo directed that the taxation of the Bills should be conducted before herself. Interim certificates 13.The power to issue an interim certificate for taxed costs before the conclusion of taxation is derived from Order 62, rule 17(1). I set out the whole rule for the full context:
14.There is no dispute that the Interim Certificates were issued in the course of the taxation of the Bills, the same having been commenced by the Receiving Parties’ notices of commencement of taxation in June and August 2016. 15.Nor is there any dispute that an interim certificate can be issued only for costs which has been taxed. 16.In this regard, my attention has been drawn to SY Engineering Co Ltd v Hong Kong Housing Authority [2001] 2 HKC 226. In that case, the taxing master had begun taxing the receiving party’s bill of costs which ran to 298 pages and claimed for over $25 million, to which the paying party had lodged a 66 page list of objections challenging 550 items. The taxation could not be finished within the 1½ days allocated and had to be adjourned part-heard. Before adjourning, the master granted an interim certificate in respect of those costs which had been taxed which amounted to $166,031. The paying party appealed on the ground that it had already given a $10.5 million bond as security for costs so that there was no basis for ordering the interim certificate. 17.In dismissing the appeal, Yeung J (as the Vice President then was) explained at 229D-H:
18.SY Engineering Co Ltd v Hong Kong Housing Authority is representative of the typical situation in which the court would exercise the power to issue an interim certificate under Order 62, rule 17(1), i.e. where the taxing master has taxed some but not all items of the costs claimed in the receiving party’s bill of costs and has to adjourn the taxation part-heard. 19.The instant case clearly does not fall within such situation. The debate before me is whether the Master had taxed any part of the costs claimed under the Bills by the process she went through at the hearing on 17 January 2017. 20.The challenge by the Paying Parties is one as to jurisdiction, not exercise of discretion. It is their case that the Master had no power to issue the Interim Certificates as she had not yet taxed any part of the costs under any of the Bills. She erred in regarding the amounts to be stated in the Interim Certificates as “taxed”. Although such amounts were equivalent to the amount of claimed costs to which the Paying Parties had not objected, this did not mean that those costs had been “taxed”. To “tax” essentially means: (1) considering the items of costs claimed by the receiving party; (2) considering the objections raised by the paying party in respect of each item of costs; and then (3) deciding, for each item of costs, the amount which should be allowed. At the hearing on 17 January 2017, the Master had not started the process of considering the items of costs claimed by the Receiving Parties, and the objections raised thereto by the Paying Parties. She had not decided, for any item of costs, the amount of costs which should be allowed. Indeed, the Master accepted that, at the end of the day, she might allow more costs than the amount granted in the interim certificates. 21.In support, Mr Leung refers to and relies on the following statement by Farwell J (as he then was) in Re Grant, Bulcraig & Co [1906] 1 Ch 124 at 128:
22.Mr Leung also seeks to derive support from the judgment of Registrar Au-Yeung (as her Ladyship then was) in Tsang Sau Hing Beatrice v Yeung Man Loong Maxly [2009] 5 HKC 154 at [1], [2], [7] and [19], which concerned an application made by the receiving parties at the call-over stage of taxation for interim certificates in respect of items of costs in their bills of costs filed for taxation and not objected to in the paying parties’ lists of objections:
23.Mr Alan Kwong (with him Miss Stephanie Wong) for Mr Lee, Allied Ever and Seline and Miss Frances Lok for Yuen Hing, on the other hand, see no reason why an item of partially disputed costs cannot be taxed more than once in stages, firstly at an early stage of taxation for the purpose of Order 62, rule 17(1) based on the extent to which the item is unopposed and then finally at the formal taxation hearing.
24.The issue raised is essentially one of the proper construction of Order 62, rule 17(1). 25.I have not been shown any definitions of “taxation” or “taxed” in the RHC. 26.In the absence of any such statutory definitions, given that taxation of costs has been taking place daily in our courts since their establishment, it is in my view reasonable to presume that rule 17(1) was drafted in light of the actual manner in which costs is taxed by the courts. 27.In this regard, taxation is to be contrasted with summary assessment, where the court takes a “broad-brush approach” and should “not embark on a mini-taxation”: see paragraph 13 of Practice Direction 14.3 on Costs. 28.As I understand it, at a taxation hearing, the taxing master would have before him the receiving party’s bill of costs and the paying party’s list of objections as well as their respective materials in support or opposition. As submitted by Mr Leung, the taxing master would (1) review the items of costs claimed by the receiving party; (2) consider the objections raised by the paying party in respect of each item of costs; and then (3) deciding, for each item of costs, the amount which should be allowed. In short, he would go through the bill of costs and the list of objections and resolve each claim and the objections thereto (if any), item by item. Taxation can therefore be summarised as an item-by-item process whereby the court reaches a decision on what amount of costs to allow on each item of the costs claimed by the receiving party. An item of costs is taxed when the taxing master decides the amount that should be allowed on it. The notion subscribed to by Mr Kwong and Miss Lok that an item of costs could be taxed more than once in stages appears to me to be necessitated by their attempts to bring their case within rule 17(1) and therefore begging the question. 29.I am therefore not with Mr Kwong and Miss Lok in how they seek to distinguish Farwell J’s statement on the nature of taxation in Re Grant, Bulcraig & Co. While the case was dated and arose from taxation in a different context, it is not suggested that the taxation under s 37 of the Solicitors Act 1843 and directed under the order dated 9 December 1904 was a different process from a taxation under Order 62 as we know it. 30.That the requirement in rule 17(1) for taxation of the costs for which an interim certificate is issued should be understood as an item-by-item process whereby the court reaches a decision on the amount of costs to be allowed on each item of costs claimed by the receiving party is reinforced by the contrast with rule 17(2). Under rule 17(2), an interim certificate may be granted in the course of the taxation of a solicitor’s bill to his own client in favour of the client if it appears to the taxing master that in any event the solicitor will be liable in connection with the bill to pay money to the client and if he is able to form an opinion as to amount which he thinks is payable by the solicitor to the client. 31.As I see it, the process undertaken by the Master at the hearing on 17 January 2017 was more akin to that provided for in rule 17(2) or the consideration whether to order interim payment on account of costs pending taxation in exercise of the court’s inherent jurisdiction. It was certainly not taxation in the sense of an item-by-item adjudication on the amount of costs to be allowed on each item of the costs claimed. She did not refer specifically to any single item of costs, not to mention making any decision on any such item. Her approach would necessarily entail the taxing master revisiting all the items of the Bills to which the Paying Parties have raised objections at the taxation hearing. She expressly stated that she might revise any or all of the items upward at the substantive taxation hearing. All she did at that stage was to indicate a minimum amount which she would probably allow when she eventually taxed the Bills. 32.Indeed, as submitted by Mr Leung, there is no reason in principle why a taxing master could not, at the end of the day, reduce the costs further than the extent of the paying party’s objections (e.g. where the paying party is acting in person and has difficulty in formulating proper objections, but it is obvious to the taxing master that a particular item of costs is grossly excessive). Costs are always in the court’s discretion, not bound by the parties’ positions. What is being decided here is a point of principle potentially affecting other cases. It is thus not an answer to say that, in this case, Master K Lo ensured that this would not happen by reserving the taxation of the Bills to herself. 33.I have not overlooked the parties’ conflicting readings of Tsang Sau Hing, supra. 34.It is accepted by counsel for all parties that, based on Tsang Sau Hing, where there are items of costs that are wholly unopposed, the taxing master is clearly entitled to immediately tax such items as drawn and issue an interim certificate for the amounts of the same under rule 17(1) at the taxation call-over hearing. 35.However, what we have here are mostly items of costs that are partially opposed (such as a claim for costs for 10 hours of work by a partner of the receiving party’s solicitors is met with an objection that the work should be done by an assistant solicitor who should take just 5 hours). 36.On one hand, the paragraphs cited in paragraph 22 above, especially the words underlined, tend to support Mr Leung’s submission that the taxing master cannot partially “tax” all disputed items up to the extent that they are not opposed and issue an interim certificate under rule 17(1) for the total amount of the unopposed costs or otherwise based on such amount. 37.However, as noted by Mr Kwong and Miss Lok, it appears from paragraph 17 of Registrar Au-Yeung’s judgment that she might have taxed the receiving parties’ bills of costs by deducting from the costs claimed thereby the deductions proposed by the paying parties and issued interim certificates for the differences so arrived at. 38.I have read Tsang Sau Hing a number of times. The ambiguity does exist and cannot be resolved on the basis of what is disclosed in the judgment. If the interim certificates issued in that case did cover the difference between the costs claimed by the receiving parties and the costs objected to by the paying parties across the board, for the reasons stated above, I respectfully depart from Tsang Sau Hing. I note that the Registrar did not appear to have been addressed on the proper construction of Order 62, rule 17(1), at least not to the same extent as I have been in this case. Indeed, I note from paragraph 4 of the judgment that the paying parties in Tsang Sau Hing raised no such question of construction. 39.As for the argument based on the underlying objectives in Order 1A, rule 1, it would have more force if a receiving party could not otherwise obtain early payment of unopposed costs in advance of the conclusion of taxation. This is, however, not the case, as shown under the next heading. 40.Likewise, the risk of temptation to abuse the process of taxation by raising some objections to each and every item of costs that is said to arise from the above interpretation of Order 62, rule 17(1) would be neutralised by the existence of means outside such rule for a receiving party to obtain early payment of unopposed costs in advance of the conclusion of taxation. 41.On these notes, I turn to Mr Lee, Allied Ever and Seline’s alternative application for interim payment. Interim payment 42.Mr Leung accepts that the court, under its inherent jurisdiction, can order an interim payment of costs: see Re Hawkins Development Ltd [2010] 1 HKLRD 535 at [17]-[19], [24]-[26] per Kwan JA (sitting as an additional judge of the Court of First Instance; and Lau Yue Kui v Philip Chan & Co (a firm), CACV 75/2014, unreported, 29 December 2014, [28(1)-(4)] per Cheung JA. 43.In support of his submission that this court should itself exercise such jurisdiction by ordering interim payment in the same amount as the 2nd Interim Certificate, Mr Kwong has drawn my attention to and/or highlighted the following:
44.These are compelling factors favouring interim payment. 45.However, I have been referred to a number of authorities decided by the courts of England and Wales (where the power to order interim payment of costs has been made statutory) before the introduction of a statutory rebuttable presumption in favour of interim payment in 2013: Mars UK Ltd v Teknowledge Ltd [2000] FSR 138; Dyson Ltd v Hoover Ltd (No 4) [2004] 1 WLR 1264; and Blakemore v Cummings Practice Note [2010] 1 WLR 983 (CA). 46.It is unnecessary for me to go into these cases in any detail save to observe that the discretion to grant or refuse an application for an order for interim payment should be exercised on merits having regard to all the circumstances of the particular case. Even where the court considers that it could with some certainty fix an appropriate sum, there may still be good reason why it is inappropriate to order interim payment: per Elias LJ in Blakemore at [24]. 47.I have not been shown any cases in which the court dealt with an application for an order for interim payment of costs without reference to evidence from both sides. 48.In this regard, insofar as the Paying Parties are concerned, the parties did, before the hearing on 17 January 2017, agree on directions for the filing and service of affidavits in opposition by the Paying Parties. Due to the proximity of the dates of the Summonses and the date of the hearing before Master K Lo and the unexpected turn in which the hearing took, the Paying Parties did not have any or any proper opportunity to place before the court in evidence what they consider to be circumstances material to whether interim payment of parts of the costs claimed in the 2nd to 5th Bills should be ordered or not. 49.In these circumstances, while I have considerable sympathy with Mr Kwong’s clients, in the interest of procedural fairness, I am not comfortable with shutting out the Paying Parties. I have not overlooked the fact that Mr Kwong appears to have some answers to the few considerations that Mr Leung has managed to raise in his supplemental skeleton submissions in the short time available to him. However, I do not feel able to assume that the Paying Parties, if given a proper chance to prepare evidence in opposition, would have nothing else to say. I agree with Mr Leung that the proper course is to remit Mr Lee, Allied Ever and Seline’s alternative application for an order for interim payment back to the Master. Dispositions 50.For the reasons stated above, I allow the Paying Parties’ appeals and set aside the Interim Certificates. I further remit paragraph 2 of the 2nd Summons back to the Master. 51.I also make an order nisi that
Mr Alan Kwong and Miss Stephanie Wong, instructed by D S Cheung & Co., for the plaintiff by original action and the 1st to 3rd defendants by counterclaim Mr Wilson Leung, instructed by K & L Gates, for the defendants by original action and the plaintiff by counterclaim Miss Frances Lok, instructed by Christine M Koo & Ip, for the 4th defendant by counterclaim [1] The 1st defendant (by original action) and the plaintiff (by counterclaim). [2] The 2nd defendant (by original action). [3] Who was the plaintiff by original action and the 1st defendant by counterclaim and who has since passed away and now represented by the executors of his estate. [4] The 2nd defendant by counterclaim. [5] The 3rd defendant by counterclaim. [6] The 4th defendant by counterclaim. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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