Indah, Veby Mega v. Owt Asia Ltd

CACV 322 /2021, [2025] HKCA 720

On appeal from [2021] HKDC 617

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 322 OF 2021

(ON APPEAL FROM DCEC NO 1264 OF 2020)

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J U D G M E N T

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Hon Kwan VP (giving the Judgment of the Court):

Introduction

1.This is an appeal by the applicant’s solicitors, Ip, Kwan & Co (“IKC”), against a costs order which inter alia disallowed legal aid taxation of certain costs in the action below made by Her Honour Judge Levy (“Judge”) dated 28 May 2021 ([2021] HKDC 617) (“Decision”).  IKC indicated that they will waive their claim for their professional fees in respect of the costs that are disallowed legal aid taxation, irrespective of the outcome of the present appeal.  IKC sought disposal of this appeal on paper.  The respondent’s solicitors, Boase Cohen & Collins (“BCC”), have no objection to this.

2.On 15 May 2025, the Court of Appeal directed that the hearing date of this appeal on 18 July 2025 be vacated and that the appeal be dealt with on paper.  BCC have adopted a neutral stance and have not made submissions, they only proposed that a fair costs order for this appeal would be no order as to costs.

3.IKC have accepted that irrespective of the outcome of this appeal, there should be no order as to costs.

The proceedings below

4.These proceedings claiming employees’ compensation were filed on 8 July 2020 and were settled on 13 November 2020 for the sum of $1,246,549.79, as per the applicant’s sanctioned offer made on 9 October 2020.  However, the parties were at loggerheads over two costs disputes despite the lower court’s directions urging them to make endeavours to settle. Hence, the consent summons of 13 November 2020 did not contain an agreed order as to costs.

5.The first costs dispute related to the applicant’s request for indemnity costs for the interim payment summons filed on 24 September 2020, which had been agreed to be withdrawn with costs to be paid by the respondent, following the settlement of the action below (“First Costs Dispute”).

6.The second costs dispute related to the applicant’s request for the costs of these proceedings, when the respondent objected on the ground that the costs for liability had been fixed at “$6,500 on liability issue” pursuant to the interlocutory judgment dated 24 September 2020 (“Second Costs Dispute”).

7.A hearing was held before the Judge on 27 January 2021 to resolve the above two disputes.  As noted by the Judge, the contentions were confined to narrow issues.  However, much evidence was filed. BCC filed one affirmation.  The applicant made one affidavit and the handling solicitor of IKC^[1] made two affirmations, one being an affirmation in reply which ran to 31 pages with a 334-page exhibit.  Solicitors on both sides served lengthy submissions.  This was done before and after the hearing.  BCC made one supplemental submission after the hearing.  IKC lodged a total of four submissions, running into 36 pages and citing 34 authorities in all, and most of cases cited were irrelevant.  This led the Judge to remark in the Decision that this style of submissions “is certainly out of step with the requirements of succinctness and proportionality under the Civil Justice Reform”^[2].

The Decision

8.On 28 May 2021, the Judge handed down the Decision and awarded the applicant (i) the costs of the interim payment summons on a party and party basis, to be taxed if not agreed (ie relating to First Costs Dispute); and (ii) the costs of these proceedings up to 30 October 2020 (including the consent summons filed on 13 November 2020) on a party and party basis, to be taxed if not agreed (ie relating to Second Costs Dispute), while disallowing the costs in relation to the Order 22 rule 21(1) issue after 30 October 2020 or legal aid taxation of the same (“No Legal Aid Taxation Order” or “NLATO”)[3]. The NLATO is the subject of the present appeal.

9.Regarding the applicant’s request for indemnity costs on the interim payment summons, the Judge took note of the fact that this summons was issued when the respondent stopped making periodical payments on 12 August 2020, around the time when the respondent paid into court $870,000 on 4 September 2020 as the sanctioned payment.  In addition, the parties could not agree on one of the conditions proposed by the respondent for the release of an interim payment of $200,000 from the sanctioned payment.  The Judge also noted that the interim payment summons was overtaken by the consent summons, by which the respondent accepted the applicant’s sanctioned offer and paid the interim payment of $200,000 on 6 November 2020 in addition to the sanctioned payment.

10.Applying the undisputed legal principles governing the award of indemnity costs, the Judge found that the respondent did not act unreasonably or oppressively, because there was a “wholly reasonable excuse” for the respondent ceasing to make periodic payments after the sanctioned payment had been made.  The respondent was justifiably concerned with the possibility of overpayment of periodical payments, as the applicant had refused to disclose relevant medical reports before the issuance of the interim payment summons.  The Judge took the view that IKC’s insistence on not accepting the condition in dispute served no useful purpose, as the amount of payment out from the sanctioned payment would have to be taken into consideration when considering the costs consequence under Order 22.  The Judge found that the respondent had been the more reasonable party and criticised IKC for being “very combative” when dealing with BCC, in particular the lodging of a complaint to the Labour Department against the respondent for non-payment of periodical payments whilst omitting “a lot of background facts”, which the Judge regarded as presenting “a biased and misleading version of events”.  The Labour Department took no action after receiving the explanation from BCC.

11.Based on the foregoing, the Judge ordered the costs of the interim payment summons payable to the applicant be taxed on a party and party basis and the applicant was to pay the respondent’s costs of and occasioned by the arguments relating to the indemnity costs issue.

12.As regards the applicant’s request for the costs of these proceedings, the Judge found that the applicant’s sanctioned offer and the respondent’s acceptance were made and accepted within the Order 22 regime. Having considered the main authorities on the costs consequence under the Order 22 regime (Etratech Asia-Pacific Ltd v Leader Printed Circuit Boards Ltd [2013] 2 HKLRD 1184, followed in RBA Far East Ltd v Yuen Chak Hang Edward & Ors [2013] 6 HKC 573) and the characteristics of the statutory procedure under the Order 22 regime, the Judge concluded that the express costs consequences stated in rule 21(1) should be strictly complied with unless displaced by the “otherwise” proviso.  Despite her sympathy for the respondent’s reason as to why it had wanted to limit costs to quantum, the Judge was not persuaded by the respondent’s reason as sufficient in constituting exceptional circumstances so as to displace the prima facie position.  She concluded that the “otherwise” proviso could not be applied and ordered the respondent to pay the applicant the costs of these proceedings until 30 October 2020.

13.As to the costs in relation to the Order 22 rule 21(1) issue after 30 October 2020 (when the Second Costs Dispute crystallised), the Judge was disinclined to award such costs to the applicant, despite having ruled in the applicant’s favour for the costs up to 30 October 2020.  This was because the Judge took the view that the costs dispute was “substantially due to the Applicant’s insistence on her entitlement to costs beyond the Fixed Costs [in the interlocutory judgment]”, and kept stating that her costs entitlement was not bound by the Fixed Costs instead of allaying the respondent’s “wholly justified concern”.

14.The Judge noted that on 30 October 2020 when BCC proposed to amend the draft consent summons (to replace “the Respondent do pay the Applicant the costs of these proceedings” with “the Respondent do pay the Applicant the costs on the issue of quantum”), IKC had responded on the same day as follows:

“There is no order on costs in relation to issue of liability having been made. The fixed costs awarded on the interlocutory judgment does not refer to costs of liability at all. The scope of the said costs will be a matter for taxation. Your limiting our costs entitlement to the issue of quantum is red-herring.”

15.The Judge pointed out the above averment of IKC that no costs on liability had been made is plainly wrong.  She was inclined to think that the above stance of IKC had been “the root cause” of the ensuing disputes.  She noted further that notwithstanding IKC’s subsequent acknowledgment of the fixed costs in the interlocutory judgment, IKC continued to allude to costs not covered by the fixed costs by a second letter on the same day:

“Our position has all along been that for whatever has been covered by way of fixed costs in the interlocutory judgment, it should be a matter for taxation and the Taxing Master will tax thee [sic] costs of proceedings having regard to the scope of the interlocutory costs orders already made. …

We have never said that we are entitled to costs of the proceedings overriding the costs orders already made in these proceedings.

Even if the fixed costs is to cover the issue of liability, it does not affect our client’s rights to be paid costs of these proceedings pursuant to Order 22.”

16.In light of the above comments of IKC, the Judge took the view that the respondent was justified in expressing its concern that the applicant might get around the fixed costs in seeking costs on liability if the applicant were to be allowed “costs of the proceedings”.  This was supported by the continued suggestions in the supplemental submissions of IKC that the applicant was entitled to “more costs” despite their later recognition of the existence of the fixed costs, such as “(a) court fees in issuing the present Employees’ Compensation proceedings; (b) costs of ‘General Care and Conduct’; and (c) ‘costs incurred in handling and attending other background issues in conducting the proceedings’ ”. 

17.For the above reasons, the Judge did not think it just to award costs to the applicant after 30 October 2020, and made an order there be no order as to costs after that date in relation to the Order 22 rule 21(1) issue.

18.As for the NLATO, the Judge had regard to “the circumstances giving rise to the present costs arguments”, and did not think “this is a suitable case in giving the usual direction for Legal Aid Taxation”. She therefore directed that the applicant’s own costs relating to the “costs of the proceedings” arguments after 30 October 2020 (ie the Second Costs Dispute) shall not be taxed in accordance with the Legal Aid Regulations.

Related proceedings

19.The applicant filed a summons on 10 June 2021 for leave to appeal against the Decision in respect of the costs orders concerning the First Costs Dispute (on party and party basis) and the Second Costs Dispute (no order as to costs after 30 October 2020).  On 14 September 2021, the Judge handed down the decision ([2021] HKDC 1137) (“Leave Decision”), dismissing the applicant’s summons.  The Judge found the submissions made by the applicant’s counsel were mostly a rehashing of background facts with the advantages of hindsight and was not persuaded that reasonable merits were shown in the intended appeal.

20.On 16 December 2022, the Court of Appeal (Kwan VP and Yuen JA) handed down the judgment in CAMP 504/2021 ([2022] HKCA 1860) dismissing the applicant’s renewed application for leave to appeal. 

The present appeal

21.IKC as the appellant filed a notice of appeal on 24 June 2021 as of right^[4] to appeal to the Court of Appeal to set aside the NLATO in the Decision and replace this with a direction for the applicant’s own costs to be taxed.

22.The impact of the possible outcomes of the present appeal by IKC was discussed by the Judge in the Leave Decision when she considered whether there was some other reason in the interests of justice that leave to appeal should be granted for the applicant’s intended appeal.  She reasoned that if the present appeal is successful and the NLATO is replaced with the direction as sought, since she had ordered there be no order as to costs after 30 October 2020 in relation to the Order 22 rule 21(1) issue, the applicant’s own costs having been incurred by the Director of Legal Aid, including the costs of IKC, will be taxed and paid from the compensation she had received, and there may be adverse financial effect on the applicant.  Conversely, if this appeal fails and the NLATO stands, the statutory route that enables IKC to tax their costs is not available and IKC will suffer financially.

23.It is clear from the above that the effect of the NLATO was to disallow or order IKC to meet the applicant’s own costs after 30 October 2020 in relation to the Order 22 rule 21(1) issue.  That the Director of Legal Aid has power, under section 5 of Legal Aid (Scale of Fees) Regulations, to fix the amount of fees payable to a solicitor in default of taxation does not alter the effect of the NLATO.  It seems to us that IKC is entitled to bring this appeal as of right.  

24.The Judge took the view that the bringing of this appeal would appear to have been more for the benefit of the assigned solicitors IKC than for the preservation of the applicant’s compensation^[5]. We are inclined to agree.  Be that as it may, the legal aid certificate issued to the applicant was amended on 8 July 2021 for this appeal to be brought.

25.The notice of appeal contains 3 grounds of appeal (respectively “Ground 1” to “Ground 3”), which may be summarised as follows:

(a)  Ground 1 – In making the NLATO, the Judge erred in law in failing to adhere to the procedural requirements set out in Order 62, rules 8 to 8E of the Rules of the District Court (Cap 336H), Practice Direction 14.5 and Cheung Shui Han v Luk Ka Ling [2012] 4 HKLRD 536, [22] to [33].

(b)  Ground 2 – Even if the procedural requirements had been complied with, the Judge erred in law in failing to apply the correct test and/or directing her mind to the relevant considerations, contrary to Ma So So Josephine v Chin Yuk Lun Francis and Chan Mee Yee (2004) 7 HKCFAR 300 and other relevant authorities as well as Practice Direction 14.5, [8].  Various factual findings of the Judge on the available evidence were “unreasonably” made.

(c)  Ground 3 – The Judge had been unreasonable in the exercise of her discretion on costs.

26.In the written submissions filed on behalf of IKC dated 9 May 2025 (revised on 13 June 2025), Mr So argued that the NLATO amounted to a wasted costs order against the applicant’s solicitors, which formed the basis for Grounds 1 and 2.  He called Ground 1 the “Procedural Ground” and Ground 2 the “Substantive Ground”.  Mr So stressed that in a departure from the usual costs order which adopted the wordings in Order 22 rule 21(1), the respondent’s proposed amendment instigated the Second Costs Dispute and constituted the root cause of the dispute, rather than the stance adopted by IKC as the Judge had held.

27.After the Court of Appeal refused leave on 16 December 2022 for the applicant’s intended appeal, no steps were taken in the present appeal until IKC filed a notice of intention to proceed on 11 November 2024.  On 28 January 2025, the Registrar of Civil Appeals gave directions that unless the Court of Appeal directed that this appeal be dealt with on paper, the hearing date of the appeal should be fixed.  On 11 February 2025, the appeal was fixed to be heard on 18 July 2025.  On 15 May 2025, the Court of Appeal directed that this appeal be dealt with on paper and the hearing date be vacated.

28.We turn to consider Grounds 1 to 3 in detail.

Ground 1

29.Mr So contended that the NLATO is “as a matter of law” equivalent to a wasted costs order, citing Cheung Shui Han v Luk Ka Ling [2012] 4 HKLRD 536 at [22].  This must be correct.  Section 53(3) of the District Court Ordinance provides that in any civil proceedings the court may, “in accordance with rules of court”, make an order to “disallow, or order the legal representative concerned to meet, the whole or any part of any wasted costs”.  “Wasted costs” is defined in section 53(5) to mean any costs incurred by a party as a result of “(a) an improper or unreasonable act or omission; or (b) any undue delay or other misconduct or default, on the part of any legal representative…”.  As mentioned earlier, by the NLATO, the statutory route that enables IKC to tax their costs is not available and the effect of the order is to disallow or order IKC to meet the applicant’s own costs after 30 October 2020 in relation to the Order 22 rule 21(1) issue.  It is in effect a wasted costs order.

30.The “rules of court” referred to in section 53(3) are the Rules of the District Court, Order 62 rules 8 to 8E.  Under rule 8A(1), the court may make a wasted costs order against a legal representative on its own motion.  Practice Direction 14.5 sets out the guidance given by the Court of Final Appeal in Ma So So Josephine.  Importantly, Order 62 rule 8B(1) provides:

“(1) The Court shall consider whether to make a wasted costs order in 2 stages:

(a) in the first stage, the Court must be satisfied that—

(i)  it has before it evidence or other material which, if unanswered, would be likely to lead to a wasted costs order being made; and

(ii) the wasted costs proceedings are justified notwithstanding the likely costs involved; and

(b) in the second stage (even if the Court is satisfied under subparagraph (a)), the Court shall consider, after giving the legal representative an opportunity to give reasons why the Court should not make a wasted costs order, whether it is appropriate to make the order in accordance with rule 8.”

31.Procedural fairness in proceedings for wasted costs is particularly important.  Where the court has been satisfied at the first stage and allows the wasted costs proceedings to proceed, “it should give directions aimed at ensuring procedural fairness for both the solicitor and the complainant.  It is in particular necessary to ensure that the requirements of natural justice are satisfied.” (Ma So So Josephine at [79])  See also Order 62 rule 8(5), which provides that the court may give directions about the procedure in each case to ensure that “the issues are dealt with in a way that is fair and is as simple and summary as the circumstances permit”.

32.In Cheung Shui Han, the master made a wasted costs order without intimating to the plaintiff’s legal representative^[6] her intention to make the order, whether in the form of a NLATO or otherwise.  Hence, the legal representative was not given the opportunity to address the master before the NLATO was made.  The Court of Appeal expressed the view at [34] and [35] that the NLATO should not have been made by the master, as the procedural safeguards in the Rules or Practice Direction had not been observed.

33.On the plaintiff’s appeal to a judge, the defendant gave notice that they intended to make an oral application at the resumed hearing for a wasted costs order.  At the resumed hearing, the plaintiff’s legal representative sought leave to file an affirmation in response.  This was refused by the judge who took the view that an affirmation could not possibly assist as the matter was so “clear-cut”.  The judge then made a NLATO.  The Court of Appeal allowed the appeal against the NLATO made by the judge, as a wasted costs order should not have been made without complying with Order 62 rule 8.  The appeal court did not think the matter should have been disposed of so summarily, nor did it think that no affirmation could help. Further, the legal representative was entitled to consider whether they should be represented in the wasted costs proceedings. (at [62] to [66])

34.In the present case, the Judge did not give any prior intimation to IKC of her intention to make the NLATO^[7].  IKC was entitled to but did not have the full protection of the rules of court.  Pursuant to Order 62 rule 8(3), the court shall give the legal representative a reasonable opportunity to attend a hearing “to give reasons why it should not make the order”.  See also Practice Direction 14.5 paras 25 and 26, which provide that the legal representative is to be afforded “a reasonable opportunity to show cause why a wasted costs order should not be made”.

35.Although two affirmations were made by the handling solicitor of IKC including a lengthy affirmation in reply which ran to 31 pages exhibiting all the correspondence which took up 334 pages, and the handling solicitor had made lengthy submissions to the Judge in four written submissions totalling 36 pages, her affirmations and submissions were not directed towards the material question whether her litigation conduct might be regarded as “improper or unreasonable act or omission” on her part or “other misconduct or default” within section 53(5) so as to justify a wasted costs order against IKC.  Order 62 rule 8B(3) provides that on an application for a wasted costs order, any evidence in support must identify “(a) what the legal representative is alleged to have done or failed to do; and (b) the costs that he may be ordered to pay or which are sought against him.”  Where the court is minded to make such an order on its own motion instead of on the application of a party, we see no reason why similar information should not be provided to the legal representative for him or her to give a proper response.

36.Furthermore, the handling solicitor did not have the opportunity to deal with one of the relevant circumstances she may ask the Judge to take into account in determining whether to make a wasted costs order, which is provided in section 53(4) (“the Court shall, in addition to all other relevant circumstances, take into account the interest that there be fearless advocacy under the adversarial system of justice”).

37.The requirements of natural justice are plainly not met.  For this reason alone, the appeal must be allowed and the NLATO be set aside. 

38.In the appeal in Cheung Shui Han, the legal representative had placed before the appeal court the evidence she might have adduced in an affirmation (with documents in a sealed envelope which contained privileged material) had she been granted leave by the judge to do so. The Court of Appeal had apparently considered this affirmation in disagreeing with the judge that no affirmation or evidence could help.  In allowing the appeal, the NLATO would have been set aside.  No mention however was made in the reported decision whether the Court of Appeal had made an order that the plaintiff’s own costs be taxed in accordance with the Legal Aid Regulations.

39.In the notice of appeal, IKC seeks an order that on setting aside the NLATO, the applicant’s own costs shall be taxed in accordance with the Legal Aid Regulations.  We decline to make such an order for the following reasons.

40.IKC have indicated that they will waive their claim for their professional fees in respect of the costs that are disallowed legal aid taxation, irrespective of the outcome of this appeal.  An order that the applicant’s own costs be taxed in accordance with the Legal Aid Regulations will not be enforced and would serve no practical purpose.

41.If the purpose for seeking this order is to vindicate IKC of the Judge’s findings and criticism of their litigation conduct, we do not think it appropriate to make this order as we do not have sufficient material.  IKC should be very familiar with what transpired in the Court of Appeal in Cheung Shui Han, and yet they chose not to place before this court (or seek leave to do so) any additional evidence they might have relied on if they had been given the opportunity to respond to the relevant findings and criticism in the Decision, and to show cause why the NLATO should not be made against them.  Instead, they chose to challenge the findings by counsel’s submissions.  For the reasons given when we consider Ground 2, we are not persuaded they have valid grounds for doing so.

42.The NLATO should not have been made when the procedural requirements were not complied with.  IKC succeed on Ground 1.

Ground 2

43.Mr So made three contentions in the notice of appeal regarding Ground 2, arguing that the Judge further erred in law even if the procedural requirements for a wasted costs order had been complied with.

44.First, the Judge failed to apply the correct test for a wasted costs order (the NLATO in this instance).  She was required to find fault which was “very serious” and “akin to an abuse of process” and that IKC had conducted the litigation in a way that does not “permit of a reasonable explanation” and/or they had been guilty of professional negligence.  Merely advancing a hopeless case will not of itself normally justify a wasted costs order, something more is required such as advancing a case that is so poor as to be an abuse of process.  In support of this, he cited Ma So So Josephine at [6]; Persaud v Persaud [2004] 1 Costs LR 1 at [23]; Ridehalgh v Horsefield [1994] Ch 205 at 232F; and Friston on Costs (3^rd ed), §9.154.

45.Second, the Judge failed to apply the test that the court must be satisfied there was a “clear case” for a wasted costs order, citing Practice Direction 14.5 para 8. 

46.Third, these findings in the Decision were “unreasonably” made:

(i)    the “stance [IKC] adopted has been the root cause of the ensuing disputes” (at [63]) – the Judge has failed to interpret IKC’s letters dated 30 October 2020 reasonably;

(ii)   that IKC “continued making suggestions that the Applicant was entitled to more costs” (at [65]) – this was made without evidential basis; the Judge failed to pay any or any sufficient regard to the draft consent summons attached to IKC’s letter to BCC dated 28 October 2020; the Judge misunderstood certain parts of the supplemental submissions of IKC and failed to give any or any sufficient regard to the fact that those submissions were filed when the issue was already before the Judge;

(iii)  that IKC had filed “voluminous submissions” which are “excessive in the circumstances” (at [76]) – the Judge failed to have regard to the fact that the supplemental submissions of IKC were filed pursuant to her directions at the hearing on 27 January 2021.

47.In Mr So’s submissions, he made a further complaint that the Judge did not give reasons for the making of the wasted costs order (citing Friston on Costs, §9.141).  He contended that [71] to [73] of the Decision failed to satisfy the requirement to give reasons.

48.In our view, [71] to [73] set out adequately the reasons why the Judge was disinclined to award to the applicant the costs incurred after 30 October 2020 in relation to the Order 22 rule 21(1) issue and why IKC should not be allowed to have legal aid taxation for that part of the costs.  That IKC disagree with those reasons (reiterated in Mr So’s submissions that the Judge only focused on their mistake in the first 30 October 2020 letter; that BCC was held to be wrong on the Order 22 rule 21(1) issue and the applicant was awarded costs of the proceedings up to 30 October 2020 including the consent summons) is beside the point.  The complaint that no reasons or inadequate reasons were given for the orders made must be rejected.

49.We turn to the challenge that various findings were “unreasonably” made.  These findings supported not just the NLATO but also the order depriving the applicant her costs after 30 October 2020 in relation to the Order 22 rule 21(1) issue, for which leave to appeal was refused by the Court of Appeal.  In the leave application, the applicant’s counsel (not Mr So) relied on excerpts from the correspondence between the solicitors (as Mr So has done before this court) to support the submission that the Judge failed to take into account matters therein which the applicant (and IKC) considered to be in her favour, or that the Judge was wrong not to find that the Second Costs Dispute was attributable to BCC’s attitude to the wording of the draft consent summons.

50.The Court of Appeal said this in rejecting the submission:

“25. However, it is apparent from some of IKC’s letters after 30 October 2020 (eg 23 November 2020, 26 November 2020, and 10 December 2020) that the language used was evidence on which the judge was entitled to find that it was still insisting on costs beyond the Fixed Costs in respect of liability. The judge concluded that both sides were to blame for the Costs Disputes. We do not see any palpable error to justify an appellate court interfering with the judge’s conclusion and the exercise of discretion to make no order as to costs.”

51.The findings in the Decision, which are not subject to appeal, are final and conclusive as between the applicant and the respondent.  IKC conducted the litigation as the applicant’s solicitors but were not a party.  It is not necessary to come to a view whether there was privity of interest between IKC and the applicant to give rise to estoppel in respect of the findings in the Decision.  We consider it would be an abuse of process to allow IKC to mount a renewed attack on the findings in their own appeal.  They have raised the arguments they wished to raise to challenge the findings in the leave applications before the Judge and the Court of Appeal. They had participated fully as the applicant’s solicitors in the judicial process which led to the Decision, the Leave Decision and the Court of Appeal leave decision.  This re-litigation of issues to undermine the findings of the Judge constitutes a collateral attack on the Decision, which is a final decision.  It may bring the administration of justice into disrepute if there should be an inconsistency between the findings in the Decision and the decision of the appeal court if contrary findings should be made (Hunter v Chief Constable of the West Midlands Police [1982] AC 529 at 541B to C). It is an abuse of process and should not be permitted.

52.In any event, on established principles we do not see any palpable error to justify interfering with the findings of fact. So for this reason as well, we reject the challenge on the findings of the Judge.

53.This leaves the contentions that the Judge failed to apply the correct test in making the NLATO.  It is not strictly necessary to deal with this as we have ruled that IKC should succeed on the procedural ground.  Nor do we think it appropriate to deal with these contentions as the evidence before the Judge was somewhat incomplete in that she did not have IKC’s response to what IKC had done or omitted to do which drew the Judge’s criticism, due to the failure to comply with the procedural safeguards in the rules of court and the Practice Direction.  We find it difficult to gauge what IKC’s response might be, as the main theme of counsel’s submissions is that IKC’s conduct was not improper or unreasonable and that the Judge’s findings that IKC’s stance or conduct was the “root cause” of the ensuing disputes was “unreasonably” made.

54.It is not necessary to deal with other contentions of Mr So under this ground regarding the lack of causal link that IKC did not cause costs to be incurred or wasted or engage in an exercise to assess whether a single piece of submission or correspondence was causally linked with unnecessary or wasted costs.

55.Based on the above, we reject Ground 2.

Ground 3

56.Mr So did not advance any argument expressly dedicated to Ground 3 in his skeleton submissions.  This ground attacks the Judge’s exercise of discretion in making the NLATO as unreasonable and repeats some of the earlier contentions relied on.  As it does not appear to add anything of significance, it is not necessary to deal with it separately except to say we reject this ground as well.

Conclusion and costs

57.We allow the appeal of IKC on Ground 1 and set aside the NLATO.  We make an order there be no order as to costs of this appeal. 

Postscript

58.We cannot leave this without saying something about this Pyrrhic victory.

59.This is the second time that the Court of Appeal was asked to consider a NLATO made against IKC.  The apparent reason that these orders were made by the courts below on both occasions was due to the litigation conduct of the handling solicitor, which the lower courts regarded as unreasonable or improper.  As the setting aside of the NLATO on both occasions is due to procedural grounds, it has not been necessary for the appeal court to express any views whether the NLATO would have been upheld had the required procedures been followed.  It should not be lost on the solicitors that they should avoid repetition of occasions that may lead to a wasted costs order against them.