Black Bear Asset Management Pty Ltd and Another v. Luxotico HK Ltd and Another

HCIP 37/2019

[2024] HKCFI 1711

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

INTELLECTUAL PROPERTY PROCEEDINGS NO 37 OF 2019

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BETWEEN

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REVIEW OF TAXATION

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1.This is the application of the Plaintiffs, being the Paying Parties (“Paying Parties”), to review my ruling made in the taxation of the costs claimed by the Defendants (“Receiving Parties”) in the bill of costs filed herein on 20 November 2020 (“Bill of Costs”).

2.The Receiving Parties commenced taxation pursuant to the order of the Honourable Mr. Justice Lok dated 12 March 2020 (“Order”)

Background

3.The Plaintiffs claimed against the Defendants for conspiracy to injure in relation to the applications for trade mark in the Mainland, and also for disclosure and use of confidential business secrets.

4.The Defendants took out applications to strike out the Writ and the Plaintiffs’ Statement of Claim, and to stay the proceedings on the ground of forum non conveniens. The 2^nd Defendant also applied to set aside the leave granted for service of the Writ on him outside jurisdiction. After substantive argument hearing, the leave granted for service of the Writ against the 2^nd Defendant outside jurisdiction was set aside. The Plaintiffs’ Statement of Claim was struck out and the action against the 1^st Defendant was dismissed. Pursuant to the Order, the costs of the action including the costs of the applications were ordered to be paid by the Plaintiffs to the Defendants, to be taxed if not agreed.

5.The Receiving Parties commenced taxation and filed the bill of costs on 20 November 2020 (“Bill of Costs”).

6.The Bill of Costs had been unnecessarily drafted in dividing it into 2 parts (ie Part A and Part B for the respective costs of the 1^st Defendant and the 2^nd Defendant against the Plaintiffs, with apportionment of the time and costs respectively claimed indicated therein).

7.On 15 January 2021, the Plaintiffs took out a summons for striking out the Defendants’ Bill of Costs, which was heard by Registrar S Kwang on 12 March 2021 and the application was dismissed with costs to the Defendants.

8.The list of objections was filed on 9 April 2021 (“List of Objections”), with the Paying Parties raising a number of preliminaries issues therein, including, the following :-

(a) breach of indemnity principle and/or the Bill of Costs not properly drafted; and

(b) applying for orders that :-

(i) the Defendants’ Bill of Costs be struck out for breach of indemnity principle;

(ii) Alternatively, there be inspection by the Plaintiffs of the fee notes of the Defendants’ solicitors for comparison of the items to ensure that the indemnity principle has not been breached;

(iii) Alternatively, the fee notes of the Defendants’ solicitors be inspected by the Taxing Master at the taxation hearing for comparison on item-by-item basis.

9.Upon the Receiving Parties’ application to set the bill down for taxation, at the hearing on 26 October 2021, a Master gave directions that the preliminary arguments raised by the Paying Parties at pages 1 to 3 of the List of Objections be adjourned for substantive argument hearing.

10.At the argument hearing, the parties confirmed that the 3 issues for the court’s determination are listed in Part (B) of Page 3 of the preliminary arguments in the List of Objections (ie issues in paragraph 8(b)(i) to (iii) above). On 24 November 2022, I ruled that these 3 preliminary issues were disallowed. But I observed that the Plaintiffs were still entitled to raise issues relevant for the court’s consideration at the taxation hearing, if any, (including but not limited to challenging the breach of indemnity principle) and directed the parties to lodge submissions and such matters to be dealt with at the taxation hearing. I further gave directions for the taxation hearing, with 2 days reserved.

11.There was application for appeal by the Plaintiffs against my decision dated 24 November 2022 of disallowing the 3 preliminary issues. The appeal was subsequently dismissed with costs by Lok J. in the judgment dated 13 April 2023.

12.The taxation hearing (“Taxation Hearing”) was commenced on 14 June 2023 and continued on 15 Jun 2023. After taxing all the items in the Bill of Costs, the Taxation Hearing was adjourned to 31 July 2023 hearing the Paying Parties’ submissions and the Receiving Parties’ submissions in opposition. Ruling was made by me on 31 August 2023.

Consideration at the Taxation Hearing

13.In gist, the Paying Parties were of the view that there was misconduct of the Receiving Parties and invited the court to apply O 62, r 32C(1)(b) and r 32C(3) of the Rules of High Court to disallow all or part of the costs taxed, which was opposed by the Receiving Parties.

14.The salient facts of the case include the consideration of 2 letters written by the Receiving Parties to the Paying Parties, both dated 28 October 2020, one open letter (“28 Oct Open Letter”) and one without prejudice letter (“28 Oct WP Letter”) (collectively “the 2 Letters”).

15.In the 28 Oct Open Letter,:-

(a) the Receiving Parties attached a Draft Bill of costs for taxation in the amount of HK$2,802,691.22 (“HK$2.8 Million”);

(b) the amount of solicitor’s costs stated therein is HK$1,821,411 (“HK$1.8 Million”);

(c) the Receiving Parties demanded payment of the HK$2.8 Million forthwith; and

(d) the Receiving Parties stated that “the costs order in relation to your clients’ Appeal, dated 9 Oct 2020, will be deal with separately”.

16.In the 28 Oct WP Letter, the Receiving Parties invited the Paying Parties to pay “the sum of HK$2,600,000 as agreed costs of the HCIP action up to date”.

17.No agreement was reached and the Receiving Parties commenced taxation. In the Bill of Costs filed on 20 November 2020 (also referred to as the “Final Bill”) :-

(a) the total amount claimed is HK$2,164,957 (“HK$2.1 Million”);

(b) the amount of solicitor’s costs claimed is HK$1,821,441 (“HK$1.8 Million”), but the solicitors had capped the amount at HK$1,195,370 (“HK$1.1 Million”); and

(c) the certification that the amount claimed in the Bill of Costs does not exceed the liability for costs to be paid to the solicitors, as required by Practice Direction 14.3 at paragraph 17(7), has been included therein.

18.During the Taxation Hearing, the Paying Parties submitted the following and submitted that there was misconduct of the Receiving Parties and their solicitors :-

(a) The amount of solicitors’ costs was dramatically reduced from HK$1.8 Million (per the Draft Bill) to HK$1.1 Million (per the Final Bill as capped);

(b) The total sum claimed in the Final Bill was also substantially reduced from HK$2.8 Million (per the Draft Bill) to HK$2.1 Million (per the Final Bill);

(c) On 7 January 2021, the Paying Parties wrote to the Receiving Parties bringing to their attention that the Final Bill was in breach of the indemnity principle and invited the Receiving Parties to re-cast the Final Bill.

(d) In the open correspondence dated 13 January 2021, the Receiving Parties explained that :- (i) the Final Bill complied with the indemnity principle and that the Draft Bill in the 28 Oct Open Letter was in draft only; and (ii) the 28 Oct WP Letter was intended to cover costs of the HCIP Proceedings and of the CACV Proceedings.

(e) The Paying Parties are of the view that the solicitors for the Receiving Parties have been plainly dishonest as their position has been entirely inconsistent with (i) the 28 Oct Open Letter, which stated that the costs of the CACV Proceedings will be dealt with separately; and (ii) the Draft Bill, which only contained entries relevant to the HCIP Proceedings.

(f) The Paying Parties further submitted that the solicitors had not acted in good faith and had been in breach of The Hong Kong Solicitors’ Guide to Professional Conduct on “Relations with Other Solicitors”.

19.The Receiving Parties denied that there is such misconduct as alleged and submitted that O 62, r 32C is not applicable.

20.O 62, r 32C of the Rules of High Court states :-

“(1) The Court may make an order under this rule where—

(a) a party or his legal representative, in connection with a summary assessment or taxation of costs, fails to comply with a rule, practice direction or an order of the Court; or

(b) it appears to the Court that the conduct of a party or his legal representative, before or during the proceedings which gave rise to the summary assessment or taxation, was unreasonable or improper.

(2) For the purpose of paragraph (1), the conduct of a party or his legal representative does not include any conduct before the commencement of the action.

(3) Where paragraph (1) applies, the Court may—

(a) by order disallow all or part of the costs being summarily assessed or taxed; or

(b) order the party at fault or his legal representative, to pay costs that he has caused any other party to incur.

……”

21.After consideration, I agree that r 32C(1)(b) is not applicable. I ruled that the 2 Letters and the related conducted of the Receiving Parties’ solicitors do not amount to misconduct, or being unreasonable or improper before or during the proceedings which gave rise to the taxation. They were letters after the proceedings which gave rise to the taxation, but before the taxation proceedings. Further, there is no forged or false documents involved and the allegation of misconduct, unlike the scenarios in the cases cited by the Paying Parties, has not been made out in this case.

22.However, I have expressed concern as to whether the Receiving Parties have performed the duty as expected by the Court in trying to reach an amicable settlement. I refer to paragraphs 4 of PD 14.3, which states :-

“4. The parties have a duty to discuss the items of costs objected to and to try to reach an amicable settlement, narrow down the items in dispute and consider making offers pursuant to Order 62A.”

23.The Receiving Parties had indicated HK$2.8 Million and offered a lessor sum of HK$2.6 Million on the same day, but having capped the solicitors’ costs to HK$1.1 Million. Even with the including of other items, claiming a total of HK$2.1 Million in total, there is still a shortfall of about HK$400,000 difference to make up to the amount offered. The Receiving Parties suggested that the higher amount offered include costs of the appeal, interest and costs etc, which is hardly convincing.

24.I am of the view that the issuing of the 2 Letters offering HK$2.8 Million or the lessor sum of HK$2.6 Million do not seem to be justified, with knowing full well that the solicitors charge their clients at most of HK$2.1 Million and the solicitors’ costs capped at HK$1.1 Million. Clearly, what the Receiving Parties did has shown the failure to perform the duty to “try to reach an amicable settlement”.

25.Relying on r 32C(1)(a), I ruled that the Receiving Parties in connection with taxation of costs, have failed to comply with paragraph 4 of PD 14.3, and therefore I am entitled to consider applying r 32C(3).

26.The next question is to what extent I should apply r 32C(3). First, I have considered the extent of the non-compliance, which was explained in paragraphs 23 to 24 above.

27.Next, I have to consider the effect of such non-compliance. I am of the view that there is hardly any prejudice caused to the Paying Parties, as they did not take the offer of either HK$2.8 Million or HK$2.6 Million. When the Bill of Costs was filed on 20 November 2020, the Paying Parties immediately knew that they would not be required to pay for more than HK$2.1 Million in total.

28.Further, I have to consider what is fair and just in the circumstances. The offer of HK$2.6 Million was not accepted. The Paying Parties had neither asked for clarification or justification of the sum offered, nor counter-proposed or made any sanctioned payment.

29.In the circumstances, it is not fair to disallow all or part of the taxed costs, or to have a global reduction of a percentage of the taxed costs in view of the period of time involved is short and no evidence that much costs had been wasted during that period (ie between the 2 Letters dated 28 October 2020 and the Bill of Costs dated 20 November 2020). As explained above, once the Bill of Costs was filed, the Paying Parties were well aware of the situation and the maximum amounts the Receiving Parties should pay their solicitors and there is hardly any prejudice caused to the Paying Parties. Therefore, I will only disallow or reduce related item of costs in that regard. After careful consideration of the items in the Bill of Costs, the only relevant item is Item 7 of Section C “Communication with the Plaintiffs’ Solicitors to try and agree on costs (SK: 30 mins) apportioned time costs” (by adding Part A and Part B of Item 7 of Section C, the total is SK: 60 min).

30.On 31 August 2023, I had disallowed the application for global reduction of costs. Instead, I have reduced some time in Item 7, and taxed Item 7 with 15 mins SK.

Item for review

31.On 14 September 2023, the Paying Parties applied to review :-

“the Defendants’ bill of costs dated 20 November 2020 (a) which had been taxed by Master Rita So on 14 and 15 June 2023 and (b) in respect of which Master Rita So ordered on 31 August 2023, inter alia, further disallowance in respect of (i) item 7 of Part A – Section C (Costs of Taxation) and (ii) item 7 of Part B – Section C (Costs of Taxation) therein”

32.The Paying Parties were asked to clarify their position for review of taxation during the call over hearing on 19 October 2023, as to the item(s) for review, as they indicated “inter alia” in the application. The Paying Parties confirmed that they applied to review only one item, ie. item 7 of Section C of the BOC (“Item 7”).

Discussion

33.At the review of taxation hearing on 8 March 2024 (“Review Hearing”), the Paying Parties asked for review of Item 7 and a global reduction of assessed costs for the taxation of the Bill of Costs. Mr Chiu acting for the Paying Parties submitted that the ruling at the Taxation Hearing refusing a global reduction of costs is part and partial to the ruling of reduction of some costs under Item 7 of Section C.

34.The Receiving Parties opposed. They are of the view that the Paying Parties are only entitled to review Item 7. Any suggestion asking the Court to review the decision of not allowing global reduction of assessed costs is out of the scope of review. The Paying Parties should apply for appeal instead.

35.Further, Mr Alder acting for the Receiving Parties submitted that the Court has no jurisdiction to reduce the amount for Item 7, as that had been previously agreed by the parties. He asked the Court to review Item 7 to the extent of reinstating the previous agreement between the parties, ie SK 45 minutes, instead of SK 15 minutes as taxed by Master at the Taxation Hearing.

36.Both Counsel made reference to the previous submissions lodged for the Taxation Hearing and adopted those submissions. After consideration of all the documents before me and the written and oral submissions, with the consideration of the review of Item 7, the following issues have to be considered first :-

(1) 1^st issue: Whether the Receiving Parties are entitled to review the Court’s refusal to a global reduction of assessed costs at the Review Hearing.

(2) 2^nd issue: Whether the Court has jurisdiction to tax down Item 7, with the parties having agreed on the amount for that item.

37.For the 1^st issue, ie whether the Receiving Parties are entitled to review, instead of appeal, the Court’s refusal to a global deduction of assessed costs, I have considered the special circumstances of this case, as explained in paragraphs 14 to 30 above. I have also considered the Paying Parties’ confirmation at the review call over hearing that the only item sought to be reviewed is Item 7. With the reasons explained in those paragraphs and with the special circumstances of this case, I ruled that the only relevant item that may be affected will be the time for communication between the parties, ie Item 7. I agree with Mr Chiu that my ruling of refusing a global deduction of assessed costs is part and partial to my ruling of taxing down Item 7.

38.Pursuant to O 62, r 33 “any party to any taxation proceedings who is dissatisfied with the allowance or disallowance in whole or in part of any item by a taxing master….. may apply to the taxing master to review his decision in respect of that item”. The Paying Parties’ request that there be global reduction of taxed costs are not technically under any single item listed out in the Bill of Costs, but it was an item disputed and argued at the Taxation Hearing that I disallowed. I am of the view that my ruling of not allowing a global reduction of taxed costs should be covered under O 62, r 33 and subject to review, not appeal.

39.To consider afresh whether I should adopt a global reduction of all or some of the assessed costs, I review all the documents before me and all counsel’s submissions, including the newly lodged submissions and those they had adopted for the Taxation Hearing. I find it appropriate to adopt my view and ruling on 31 August 2023 and I emphasise the following :-

(a) I find that there was no misconduct, no forged or false documents involved with the Receiving Parties.

(b) The solicitors for the Receiving Parties are at liberty to charge their clients with a rate agreed, and later capped at a much lower fee.

(c) Before initiating taxation proceedings, the parties are at liberty to offer a sum they see fit for negotiation of settlement, but there can be costs consequence.

(d) The Paying Parties are at liberty to make any offer or sanctioned payment to protect themselves for costs consequence. No such offer or sanctioned payment were made by the Paying Parties.

40.Even considering the application afresh, with the reasons aforesaid, I am not of the view that a global reduction of all or part of the assessed costs should be allowed.

41.For the 2^nd issue, ie whether the Court has jurisdiction to tax Item 7, with the parties having agreed on the amount for that item, I am not convinced by Mr Alder’s submissions.

42.For Item 7, the Receiving Parties claimed a total of SK 60 minutes (for Part A and Part B) with the hourly rate of SK ruled to be HK$5,800 per hour, ie HK$5,800. During the taxation hearing, the parties have agreed SK 45 minutes, ie HK$4,350. With the reasons aforesaid, as Item 7 is the only item I find relevant for reduction of costs, I reduce it from SK 45 minutes to SK 15 minutes, ie HK$1,450. Mr Alder argued that as parties had reached agreement, the Court has no jurisdiction to upset the agreement made between the parties, which is like a contract already made between them. He submitted that the court can only review by correcting the mistake, by either reinstating the amount agreed by the parties (ie SK 45 mins of HK$4,350) or allowing the full amount claimed in the Bill of Costs (ie SK 60 mins of HK$5,800).

43.I cannot agree with Mr Alder’s submissions. Any agreed items reached for Taxation Hearing has to be endorsed and approved by the Court. Before approving that item, the item is still subject to be taxed by Master.

44.As a passing remark, Mr Alder complained that the Court did not give the parties chance to consider and make submissions, as I relied on PD 14.3 which no parties raised during the argument of the Taxation Hearing. That is not true. Before I made my ruling disallowing global reduction of costs and reducing the amount claimed under Item 7, I have inquired with both counsel about what other avenues by which the Court can impose sanctions on the relevant conduct, which included the Court’s inherent jurisdiction over costs. I did invite both Counsel for submissions, if any, in that regard.

45.In relation to Item 7, in this Review Hearing, I now consider this item afresh. I repeat paragraphs 14 to 30 above. Further considering the agreed items reached by the parties, the communication and correspondence between the parties and the circumstances of the case, I am of the view that it is proper or necessary for 15 minutes SK to be allowed for Item 7.

Conclusion and costs

46.With the reasons aforesaid, the review must be dismissed. As the Paying Parties’ application fails, costs should follow the event.

47.I make a costs order nisi that the Paying Parties shall pay the Receiving Parties costs of the review application on party and party basis, with counsel certificate.

48.The parties had agreed costs of the Review of Taxation be dealt with by summary assessment and by way of paper disposal. Statements of Costs had been lodged by the parties prior to the Review Hearing. I will consider the Statements of Costs of the Receiving Parties dated 29 August 2023 and lodged on 7 March 2024. I allow the Paying Parties to lodge written objection to the Receiving Parties’ Statements of Costs within 7 days after the aforesaid costs order nisi shall become absolute. The costs will be dealt with by paper disposal and summary assessment.

49.It is ordered that :-

(1) The Review of Taxation application be dismissed.

(2) The costs of the Review of Taxation application be paid by the Paying Parties to the Receiving Parties on party and party basis, to be summarily assessed by way of paper disposal.

(3) The Paying Parties do lodge and serve the written objection to the Statements of Costs within 7 days after the aforesaid costs order nisi shall become absolute.

Mr Chiu, instructed by Eric Chow & Co, for the 1^st and 2^nd plaintiffs (paying parties)

Mr Edward Alder, instructed by King & Wood Mallesons, for the 1^st and 2^nd defendants (receiving parties)