張新霖 v. 黎錦文及另十一人

CACV 252/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 252 OF 2004

(ON APPEAL FROM HCA NO. 4389 OF 2003)

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BETWEEN

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Before: Hon Fung J in Chambers

Date of Hearing: 8 March 2007

Date of Decision: 3 April 2007

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D E C I S I O N

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1.The 1^st to 12^th defendants/respondents are applying for:

(1)	review under O.62, r.35, RHC of the decision of the taxing master in disallowing the disbursement costs of Senior Counsel appearing before the Court of Appeal; and
(2)	the consequential order upon the review to tax the disbursement costs of Senior Counsel, or alternatively to refer for taxation by another master under O.62, r.35(6), RHC.

Background

2.The plaintiff/appellant applied for summary judgment before Chung J.  The judge gave unconditional leave to defend.  The plaintiff appealed to the Court of Appeal.  The appeal was dismissed.

3.Before the Court of Appeal, the defendants were represented by Mr. Anthony Neoh SC leading Mr. KM Chong and Mr. William Leung.  The plaintiff was represented by Mr. Derry Wong.

4.The Court of Appeal awarded costs of the appeal on a party and party basis after refusal of indemnity costs.

5.The taxing master ruled that the attendance of Mr. Chong and Mr. Leung was justified. 

6.Mr. Leung was pupil to Mr. Chong.  When Mr. Leung appeared before Chung J on 17 September 2004, that was the first day he commenced full practice.  On 4 March 2005, Mr. Leung appeared before the Court of Appeal on a complimentary basis.  The taxing master disallowed the fees of Mr. Neoh and allowed those for Mr. Chong.  As for Mr. Leung, no disbursement was allowed as no fee was charged.

Decision of the taxing master

7.Before the taxing master, Mr. Wong submitted that Mr. KW Yeung, solicitor for the defendants, was fraudulent in his written submissions that Mr. Leung was briefed on a complimentary basis before the Court of Appeal “as he was a pupil of Mr. Chong”.  The taxing master heard explanation from Mr. Yeung.  In his written decision, the master said he considered the wording was somewhat ambiguous, possibly misleading as suggesting Mr. Leung was pupil to Mr. Chong when the appeal was heard, a fact that was plainly incorrect on the evidence.  But Mr. Yeung has offered a satisfactory and adequate riposte in his oral submission.  The master was satisfied that there was plainly no intention to mislead the court.  No subterfuge of the kind meriting further investigation has occurred. 

8.On the issue of two counsel, the taxing master said at the oral hearing that looking at the importance and significance of the case to the defendants, the appeal clearly warranted the retention of two counsel.  The fact that the most junior counsel did not charge was completely irrelevant.  He allowed the retention of Mr. Chong and Mr. Leung, as Mr. Leung was eminently competently and more than sufficiently capable of dealing with the matter which was not particularly complex.

9.In the written decision, the taxing said that the mere fact that Mr. Leung was instructed on a complimentary basis did not itself warrant his attendance to be totally ignored for the purpose of taxation.  His role was no longer confined to devilling, observing and learning when he appeared as a fully-fledged member of the team on 4 March 2005.  Whilst Mr. Leung’s participation did not in any way increase the defendants’ costs, they would have benefited from his continued engagement on their behalf by way of his preparation and appearance as second junior at the hearing.  With the instruction of Mr. Neoh, that brought the number of counsel to 3.  It would rail against common sense to suggest the defendants had but 2 barristers to represent them in the interlocutory appeal simply because Mr. Leung did not charge.  The taxing master said that had Mr. Leung been issued with a brief other than a complimentary one, he would have assessed the cost of his involvement and proceeded to tax it in the usual way.

Defendants’ case

10.Mr. Chong’s submissions can be summarized as follows:

(1)	The taxing master has refuted any allegation of fraud.
(2)	In applying the indemnity principle in taxation, the taxing master is not assessing the remuneration of either solicitor or counsel but to determine how much the party recovering costs should be paid so as to reimburse him for the expenses incurred in the litigation, and taxation should be done on an item and item basis instead of a global basis.
(3)	The whole purpose of certificate for two counsel is to enable the respondents to be reimbursed in respect of the costs incurred by them in engaging a leading counsel and a junior counsel before the court.
(4)	Solicitors for the defendants only submitted the Bill of Costs for disbursements of one senior counsel and one junior, and there was no item of a second junior’s fee as disbursement as the second junior acted on a complimentary basis and no fee note was issued.
(5)	The taxing master was paying lip service to the indemnity principle and effectively revoked his decision to allow representation by two counsel.

Plaintiff’s case

11.Mr. Wong’s submissions can be summarized as follows:

(1)	The application for review to a judge was premature as the taxing master has not signed the certificate in respect of that item under review before him, hence, the application for review before a judge ought to be dismissed with costs.
(2)	Mr. Yeung, solicitor for the defendants, misled the court when he referred to Mr. Leung as a pupil of Mr. Chong as at the date of the appeal and was not credible in his oral explanation and the taxing master did not explain why he accepted his explanation.
(3)	Mr. Neoh was instructed only 6 days before the hearing of the appeal and it was unnecessary, improper and a pure luxury.
(4)	The factual staring point is that Mr. Leung was briefed (despite charging no fee) and participated in preparing for the appeal and appeared before the Court of Appeal as a junior.  The fact that he did not charge is irrelevant.
(5)	If disbursement were not incurred because a particular counsel chose to act on a complimentary basis, that would be a waiver voluntarily made by the individual counsel.

12.At the hearing, after hearing the arguments on the absence of the certificate signed by the taxing master, I proceeded with the consent of the parties to hear the arguments on the substantive review de bene esse subject to my ruling on jurisdiction and discretion to deal with the review in the absence of a certificate.

Absence of certificate

13.On the absence of the certificate signed by the taxing master, Mr. Wong pointed out that under O.62, r.35(2), RHC:

“An application under this rule for review of a taxing master’s decision in respect of any item may be made at any time within 14 days after the taxing master’s certificate in respect of that item is signed, or such longer time as the taxing master at the time when he signs the certificate, or the Court at any time, may allow.”

14.He referred to Fenn Kar Bak Lily v. Goh Kim Lay & anor HCA 9177/1992 (date of decision 4 October 1999).  There, the plaintiff appealed from the decision of a master who refused to strike out the defendant’s bill of costs, or alternatively, applied for review before a judge of the master’s review of taxation under O.62, r.35, RHC.  The master handed down a written decision refusing to strike out the bill of costs, but taxed down the amount.  The Registry wrote to the defendant’s solicitors asking them to check the calculations of costs allowed before submitting a draft allocatur.  The defendant’s solicitors submitted a draft allocatur, but no certificate for those costs had been signed by the master up to the hearing before the judge.  The plaintiff’s solicitor said the Registry informed him that the certificate would be withheld pending the disposal of the appeal.  Yuen J (as she then was) held as follows:

“	20.	The lack of the master’s certificate has a bearing on the plaintiff’s summons under O.62, r.35.  This is because a review of a taxing master’s certificate by a judge under this rule is predicated upon a certificate having been issued – O.62, r.35(2) provides that an application for review of a taxing master’s decision in respect of any item may be made “at any time within 14 days after the taxing master’s certificate in respect of that item is signed, or such longer time as the taxing master at the time when he signs the certificate, or the Court at any time, may allow”; further, O.62, r.35(6) provides that on an application under that rule, the judge may make such order as the circumstances require “and in particular may order the taxing master’s certificate to be amended …”.
	21.	The defendant’s counsel submitted that the master’s written decision should stand as the certificate, and on that basis, he submitted that the summons under O.62, r.35 was out of time.  I cannot accept the submission.  The master’s written decision is of a completely different nature from the certificate.
	22.	No certificate having yet been issued, the summons is, if anything, premature because O.62, r.35 does not apply until after the master has issued the certificate.
	23.	However as it appears that the only reason for the absence of the certificate was simply an administrative misunderstanding of the effect of an appeal on the issue of the certificate, the parties have argued the review before me de bene esse, and my decision in respect of the summons takes effect from (and is conditional upon) the issue of the certificate by the master in terms of the draft allocatur.”

15.Mr. Wong submitted that notwithstanding Yuen J’s decision in the Lily Fenn case, the court has no jurisdiction, be it statutory or inherent, to hear the review de bene esse, and asked this court not to follow suit in the Lily Fenn case.

16.Alternatively, Mr. Wong submitted that even if the court has jurisdiction to hear the review de bene esse, that course should not be adopted in the exercise of the discretion.  The situation in the Lily Fenn case was special.  The receiving party has submitted the draft allocatur upon the review by the master, and the withholding of the certificate was due to an administrative misunderstanding of the Registry.  The failure lied at the instance of the Registry and not in the receiving party whatsoever.  In this case, it is common ground that after the review by the taxing master, the respondents never submitted a draft allocatur and certificate to the taxing master for signature.  Under the practice note contained in the Law Society circular 06-634 (PA) dated 31 October 2006, the party lodging the bill should lodge copies of the allocatur for sealing.  Hence, the summons should be dismissed with costs.

17.In reply, Mr. Chong submitted that the signing of the certificate by the master is not a precondition of an application for review before the judge, as O.62, r.35(2), RHC only stipulates that the review of a taxing master’s decision in respect of any item may be made at any time within 14 days after the taxing master’s certificate in respect of that item is signed.  He contrasted it with the mandatory provision under O.62, r.34(4) that a request for the reasons of decision on the review by the taxing master must be made within 14 days after the review or such shorter period as may be fixed by the taxing master.

18.Mr. Chong submitted that the review before the taxing master is limited to only one item in the bill of costs, i.e. the disbursement of the fees of Mr. Neoh, and no other item is relevant.  There is no issue as to quantum either.  The master is bound to sign the certificate in respect of that item by disallowing it. 

19.Further, he submitted that in this case the certificate is to be issued in respect of the only item under review.  The master has given a written decision.  The certificate is a matter of form rather than substance.  Hence, the written decision of the master is substance and in effect the certificate.  

20.Mr. Chong referred to O.2, r.1(1), RHC:

“Where, in beginning or purporting to begin any proceedings or at any stage in the course of or in connection with any proceedings, there has, by reason of any thing done or left undone, been a failure to comply with the requirements of these rules, whether in respect of time, place, manner, form or content or in any other respect, the failure shall be treated as an irregularity and shall not nullify the proceedings, any step taken in the proceedings, or any document, judgment or order therein.”

Hence, he submitted that the non-compliance of O.62, r.35(4), RHC will not deny the court of jurisdiction.

21.As to the exercise of the discretion, Mr. Chong submitted that as the defendants would have the certificate issued as of right, there is no prejudice to the plaintiff if the court were to hear the appeal de bene esse and to give the decision to take effect from and conditional upon the issue of the certificate.

22.The Lily Fenn case is not strictly binding on me.  In The Building Authority v. Business Rights Ltd CACV 212/93 (date of decision: 28 April 1999), Burrell J referred to Minister of Pensions v. Higham [1948] 2 KB 153 where Denning J (as he then was) had this to say in respect of pervious decisions of the same level of court at p. 155:

“[The decisions of the Superior Courts (the High Court in England, the Court of Session in Scotland and the Supreme Court in Northern Ireland)] are not absolutely binding on the Superior Court itself or on the courts of co-ordinate jurisdiction but will be followed in the absence of strong reason to the contrary.”

And in R v. Central Criminal Court ex p Francis & Francis (a firm) [1988] 2 WLR 627, Lloyd LJ said p. 633:

“This court is always reluctant not to follow its previous decisions.  But if we are persuaded that a previous decision is clearly wrong, we are bound to say so: see R v. Greater Manchester Coroner, Ex parte Tal [1985] QB 67.”

23.With due deference, I agree with Yuen J that the master’s written decision is of a completely different nature from the certificate.  O.62, r.34(4), RHC provides that the taxing master’s reasons of decision on the review may be stated in the certificate itself or otherwise (presumably in a written decision).  This shows that the two are not the same.  I disagree with Mr. Chong that in the present case, because the review before the master was concerned with only one item, the written decision is in substance and effect the certificate.

24.I agree with Yuen J that she had the jurisdiction to hear the review de bene esse and ordered her decision to take effect from and conditional upon the issue of the certificate by the master.  In the present case, I find that as the taxing master has given his decision in writing, the absence of the certificate is a want of form rather than substance, and the application for review before the judge is not a nullity.

25.As to the exercise of the discretion, it is true that in the present case, the failure lies in the defendants to obtain a certificate in respect of the item under review by the taxing master.  However, I have considered the nature and seriousness of the breach, and matters of costs and prejudice, and I am satisfied that I should hear the review de bene esse and to give my decision subject to and conditional upon the issue of the certificate in respect of that item under review before him.

Fraud

26.Much has to be said about confirming the facts before submitting them to the court, a fundamental duty owed by advocates to and ever expected of by the court.  However, when this case was in preparation, Mr. Leung was Mr. Chong’s pupil.  When Mr. Leung appeared with Mr. Chong before Chung J, that was first day he progressed from pupil to full practice.  It is not inconceivable that he was mistaken to be still a pupil of Mr. Chong, as he appeared on a complimentary basis, and likewise when he appeared before the Court of Appeal also on a complimentary basis, though having entered practice for about half a year.  The factual scenario did not point squarely to fraud, which is not to be founded unless upon strong proof or otherwise inexplicable circumstances.  Mr. Yeung might have been inarticulate in his oral explanation before the taxing master, but he did emphasize the complimentary basis.  Hence, I see nothing wrong in the master in accepting Mr. Yeung’s explanation, and I have no cause to conclude otherwise.

Certificate for two counsel

27.The taxing master ruled that by reason of the complexities of the case and the importance to the respondents, the representation by two counsel was justified.

28.On a taxation on the party and party basis, there shall be allowed all such costs as were necessary or proper for the attainment of justice or for enforcing or defending the right of the party whose costs are being taxed (see O.62, r.28(2), RHC).

29.Looking at the judgments of the Court of Appeal and of Chung J, and the submissions of counsel, I agree that representation by two counsel at the appeal was proper.  However, with respect, I differ with the master on the conclusion that whether Mr. Leung was paid or not, he fulfilled the task of the second counsel, and no disbursement is allowed as he has charged no fee.

Indemnity principle

30.In the Hong Kong Civil Procedure 2007 at para. 62/App/2, the indemnity principle is stated:

“An overriding principle in taxation inter partes — An overriding principle in all taxations inter partes is the indemnity principle: an order for costs between the parties allow the receiving party to claim from the paying party only an indemnity in respect of costs recovered by the order.  Receiving parties cannot therefore recover a sum in excess of their liability to their own solicitors (Gundry v. Sainsbury [1910] 1 KB 645, The Practice Note (Taxation: Indemnity Principle) reproduced in 1998 Weekly Law Reports: followed in AG v. Leung Ka Kit [1997] 1 HKLRD 52, Sears J.  See The Building Authority v. Business Rights Ltd unreported Burrell J, CACV No. 212 of 1993, April 28, 1999.

…

On all taxation inter partes the taxing master is not assessing the remuneration of either solicitor or counsel or of an expert witness, but is determining how much should be paid to the party recovering costs to reimburse him for the expense which he has properly incurred in carrying on the proceedings.”

31.In Lam Lai Wah Susanna v. Pacific Century Insurance Co Ltd CACV 385/2002 (date of judgment 4 March 2003), Rogers VP said at para. 8:

“	8.	It is well established that the principle upon which costs as between party and party are allowed is that the costs are awarded to the claiming party as an indemnity.  If the claiming party is not liable to solicitors for their costs, then he would not be in a position to claim to be indemnified by the other party.
		…
	10.	In determining whether a claiming party (“the winning party”) can recover costs against the other party (“the losing party”), the steps for consideration can be summarized as follows:-
		(1)	The first question to be asked is:- did the winning party employ the solicitors in the action? In answering this question, it matters not that the solicitors were chosen or appointed for the winning party by a third party on his behalf, so long as they acted for him with his knowledge and assent.
		(2)	If the answer is “Yes”, it is presumed that the winning party had a prime facie obligation to remunerate the solicitors, because that would be the ordinary basis on which a professional person is employed to represent a party.
		(3)	It is for the losing party to rebut that presumption.  The presumption is not rebutted simply by evidence that a third party had also undertaken to pay the solicitors’ costs.  However, the presumption would be rebutted if there is evidence of an agreement made by the solicitors with the winning party, or with the third party, that under no circumstances would the winning party be liable to them for the costs of the litigation incurred on his behalf.”

32.The situation facing the taxing master was this: a total of three counsel appeared before the Court of Appeal, two of whom had charged fees, one had not, and the appeal was ruled as fit for two counsel.  In applying the indemnity principle, or a corollary of the principle as stated in para. 8 of Lam Lai Wah Susanna v. Pacific Century Insurance Co Ltd, if the claiming party is liable to two counsel for their fees, he would be in a position to claim to be indemnified in respect of two counsel by the other party upon the ruling of fitness for two counsel.  Hence, the taxing master should have approached the taxation this way:

(1)	To assess the appropriate notional fee for the hypothetical leading counsel, having regard to the complexity of the issues and arguments of the appeal and the commensurate level of seniority required of counsel;
(2)	To assess the appropriate notional fee for the hypothetical junior counsel, having regard to the requirement of assistance to leading counsel; and
(3)	To take into account only the fees of counsel who have appeared on a fee charging basis, and to tax their fees accordingly.

33.With the above observations, I remit the matter to the same taxing master for further assessment.  I note that the defendants have asked for the remission of the matter to another master.  However, I cannot see any reason, be it bias or prejudice or otherwise, that the same taxing master should not continue with the assessment.

34.My decision in respect of the summons shall take effect from and is conditional upon the issue of the certificate by the taxing master.

Costs

35.I make an order nisi that the plaintiff do pay the costs of the review herein and before the taxing master to the defendants, to be taxed if not agreed, and to be made absolute in 14 days with liberty to apply.

Mr. Derry Wong, instructed by Messrs Ha & Ho, for the Plaintiff

Mr. K M Chong, instructed by Messrs Peter Mo & Co., for all Defendants