Litigation Conduct: No Litigation by Correspondence – Well… What About Taxation by Correspondence?

“I think it is trite and good sense that the receiving party cannot force on the paying party, against his wish, to spend time and costs to undergo together a sort of “taxation on correspondence” to try to achieve an “agreed” sum”

- H. Hon. District Judge KC Chan

Litigation is confrontational but this does not mean that ‘tough is always better’. In the post-Civil Justice Reform era, tough litigation will often backfire – litigation is, after all, NOT a world wrestling championship match. The key attributes of a good litigator include good procedural knowledge and moreover, the ability to act reasonably and sensibly.

The consequences of not having these attributes are illustrated in PC Enterprises (HK) Limited and Anor v Chan Wai Ching [2020] HKDC 722 where the court reminded the parties to act sensibly and reasonably in line with the underlying objectives of the reform.

This case involved a trial that had overran, resulting in an additional hearing date.

At the time, the Defendant’s job required her to stay in Mainland China for extended periods. She was ordered to go to the Mainland after the adjourned hearing date had been fixed, resulting in a clash of schedule. The Defendant issued a summons (presumably after parties failed to reach an agreement) supported by an affirmation seeking the Court’s leave for a further adjournment with the date to be re-fixed (the “Adjournment Summons”).

However, before the Defendant’s Adjournment Summons could be argued (and before any opposition evidence was filed), the Defendant’s employment was terminated and she was able to attend the trial as originally scheduled.

The Defendant’s counsel promptly asked the Plaintiffs’ counsel to withhold all further work in relation to the Adjournment Summons and sought the Plaintiffs’ consent to withdraw the summons and indicating their willingness to pay the costs to be taxed if not agreed.

The Plaintiffs’ solicitors replied that they were agreeable to the withdrawal “on the condition that costs of and occasioned by the Application be assessed summarily for the sum of HK$124,000 and be paid forthwith” (the “Plaintiffs’ Demand”).

The parties did not agree to this demand and the matter was brought before the Court, which found:

“The Plaintiffs were not entitled to insist on the payment of costs in the sum of HK$124,000 as a condition for giving consent. Further, summary assessment is a process for the court to determine the amount, so the term ‘assessed summarily’ here is meaningless. In any event, the sum of HK$124,000 is grossly excessive.”

Interestingly, the Courts called the Plaintiffs’ actions an effort to initiate “taxation by correspondence”.

When the parties attempted to agree on an amount, the Plaintiffs “demanded” a substantive response to their statement of costs and the Defendant replied that the costs should be taxed and the parties should not spend further time and costs on arguing on costs matters.

In this regard, the Courts held that after the Civil Justice Reform, “parties should act sensibly and reasonably in line with the underlying objectives” and noted that the “receiving party cannot force the paying party to spend time and costs to undergo “taxation on correspondence” to try to achieve an agreed sum.”

The hardball negotiation adopted by the Plaintiffs would prove fatal as it was held that the “label of ‘assessed summarily’ in the condition was superfluous and meaningless” because a summary assessment is a process for the court to determine the amount. “Thus, the plaintiffs’ condition was in fact a simple out-right demand to agree and then for payment forthwith of costs in the sum of HK$124,000.”

The result: “Costs of and incidental to the Adjournment Summons incurred from 4 August 2020 onwards and costs of the Withdrawal Summons be paid by the plaintiffs to the defendant to be taxed if not agreed.”

Had the Plaintiffs acted more reasonably, they could have made away with costs. It is parties’ joint duty to limit the issues in dispute.

So the proper way of dealing with this matter was:

(i) Give consent for anything that can be agreed.

(ii) Where agreement on costs can be reached, properly label such costs as ‘agreed costs’.

(iii) Where agreement cannot be reached, make the proper application.

(iv) Tougher is not always better (especially in litigation).

(v) Promote harmony (it’s always better).

It is worth noting the underlying objectives are meant to promote changes of the civil litigation culture, and are not just abstract principles (Hong Kong Civil Procedures 2020 1A/0/3).

Application: Lawyers should not waste courts’ resources when a hearing could have been vacated or a summons could have been withdrawn. Lawyers should always act sensibly towards the opposing party’s proposal and should avoid incurring unnecessary costs by engaging in purposeless correspondence.

Jurisdictions

Head of Financial Crime, London, England, United Kingdom


Andrew Wheeler QC is head of the Financial Crime (Fraud, Financial Services and Regulatory) Team at 7BR Chambers, London, and is ranked in financial crime/fraud by the Legal 500 and by Chambers & Partners


Andrew has extensive experience in relation to the defence and prosecution of serious fraud, associated money laundering and proceeds of crime restraint/confiscation, and compliance/regulatory matters – and has a detailed knowledge of evidence gathering from, and asset tracing through, multiple jurisdictions. Andrew is regularly instructed by leading defence firms, by the UK Serious Fraud Office (SFO), Insolvency Service, Financial Conduct Authority  (FCA) and CPS Complex Casework/Specialist Fraud Division.


His experience extends in particular to Bribery & Corruption, Company Investigations, Insolvency and Tax fraud, and to issues of Insider Dealing. He regularly advises the UK and offshore & International sectors in respect of financial crime, anti-money laundering and associated regulatory & compliance issues.


Andrew has conducted seminars in respect of Money Laundering/AML – in the UK, including specifically for the UK Serious Fraud Office & UK Insolvency Service – and also for a number of offshore and international jurisdictions, including the Caribbean, Hong Kong, Cyprus, the Channel Islands & the Isle of Man. He has also conducted seminars in a number of jurisdictions in respect of key aspects of digital fraud investigations, cyber crime and cryptocurrency, and internal/corporate investigations.

Barrister, Central Chambers