CJR Interim Report, Section K. Possible Reforms In Specific Areas, K14. Interlocutory applications

K14.4. Deterring unnecessary or abusive interlocutory applications

(a)	Summary assessment of costs

451.	An important feature of the Woolf reforms involves use of the court's power to make a summary assessment of costs after hearing an interlocutory application, with such costs ordered to be paid forthwith. This saves the effort and cost of a detailed taxation, but, more importantly, has become widely regarded as a general deterrent against making interlocutory applications that may not be necessary. It is certainly also an appropriate sanction to discourage abusive use of interlocutory applications.

452.	A similar power, referred to as a power to make a gross sum assessment of costs, existed previously in England and Wales and is presently provided for in Hong Kong by HCR O 62 r 9(4)(b). ^{(Note 395)} While that power is often used by Masters in this jurisdiction in relation to small items such as time summonses, ^{(Note 396)} its use is otherwise highly exceptional, with only a few judges being inclined to make such assessments. ^{(Note 397)} In contrast, summary assessments under the CPR are extensively made and widely regarded as a real deterrent against unnecessary and unmeritorious interlocutory applications.

453.	The relevant provisions include the following :-

453.1	CPR 43.3 defines "summary assessment" as "the procedure by which the court, when making an order about costs, orders payment of a sum of money instead of fixed costs or 'detailed assessment'."

453.2	CPR 44.7 gives the court a general option of ordering either a summary or detailed assessment. However, the associated practice direction provides that the court should, as a rule, make a summary assessment of the costs where the hearing has lasted not more than one day, unless there is good reason not to do so. ^{(Note 398)}

453.3	Accordingly, the parties, who are under a duty to help the judge make a summary assessment, must come to the hearing prepared with a signed schedule showing the costs he intends to claim and containing the prescribed details. ^{(Note 399)}

453.4	The rules seek to ensure that the client is made aware of any such order made. By CPR 44.2 :-

"Where -

		(a)	the court makes a costs order against a legally represented party; and

		(b)	the party is not present when the order is made,


	the party's solicitor must notify his client in writing of the costs order no later than 7 days after the solicitor receives notice of the order."


454.	The Practice Direction on Appeals indicates that summary assessment of costs is also likely to be used in the Court of Appeal in certain cases and requires the parties to be prepared to deal with such an assessment. ^{(Note 400)}

(b)	Moving away from "costs follow the event"

455.	In championing the widespread use of summary assessments, Lord Woolf consciously moved away from the principle, still pervasively applicable in Hong Kong, that the costs should generally follow the event.

455.1	Under that principle, the party who turns out to be the loser after trial is basically considered responsible for all the costs. It is considered fair that the costs should "follow the event" and be ordered against the losing party since he is, after all, the wrongdoer, whose wrongdoing made the action necessary.

455.2	In line with that principle, even where the ultimately victorious party misbehaves procedurally at an interlocutory stage, the court tends not to exact payment from him then and there, but allows the parties to settle their respective costs liabilities at the final taking of accounts. The winner is then able to set off what he owes in interlocutory costs against the trial award, including the overall costs award.

456.	While there is obviously logic in the abovementioned approach, the practice of allowing parties to defer until the end of the case payment of costs orders made against them in interlocutory applications can be criticised as lacking in realism and as doing little to curb interlocutory excesses. Lord Woolf reported that many respondents to his Interim Report asked for more effective costs sanctions against parties using interlocutory applications as tactics. ^{(Note 401)}

457.	Faced with an order to pay the costs of the interlocutory hearing "in any event", ie, whichever party ultimately wins, but payable only at the end of the case, the party or the legal advisers concerned are unlikely to be deterred from making similar interlocutory applications since the financial impact of the order may well never be felt. Liability "in any event" tends to look a long way off. Even if the case does not settle, the order may eventually be set off against other costs orders or may simply be aggregated with a larger liability. In either case, the costs order makes no impact as a specific financial sanction at the interlocutory stage.

458.	As the available figures demonstrate, the vast majority of cases do not go to trial but are disposed of at some earlier stage, by settlement or otherwise. Where the case settles, earlier costs orders tend to be swept up in the settlement and are again never felt as individual sanctions.

459.	Things take on a very different complexion if a speculative or ill-advised interlocutory application leads to an order immediately requiring the client (or, in a wasted costs situation, the adviser) to reach for his cheque book in order to pay a sum to the other side, whatever the ultimate outcome of the case.

(c)	Reaction to summary assessment of costs

460.	Publication of Lord Woolf's proposal for use of summary assessment as a sanction against unjustified interlocutory applications met with a favourable response in Hong Kong. Professor Wilkinson thought this would be a good idea, ^{(Note 402)} as did Mr Justice Waung. ^{(Note 403)} Mr Ronny Tong SC, when chairman of the Bar Association, stated :-

		"In our view, our rules can be easily amended and updated in such a way as to encourage more 'fixed costs' orders and to facilitate more immediate enforcement and payment of such orders. Our courts should also be given a flexible power to order immediate taxation and payment of costs orders in complicated and lengthy applications. We do not see great difficulties in modelling our new rules in this regard upon the Civil Procedure Rules in England supplemented perhaps by a provision or Practice Direction that the parties do reveal their costs in their skeleton submissions to the Court." ^{(Note 404)}

461.	After a period of operation, the reaction to summary assessment of costs in England and Wales has been more mixed.

461.1	In the personal injury context, Mr Geoffrey Reed expressed the view last year that summary assessment of costs was not working well :-

		"Preparation of costs schedules is not a simple and straightforward task. It is often quite time consuming. So very often the costs orders made at the hearing render the costs schedule inappropriate regardless of the outcome of the application. It is often very difficult to separate the costs of the application from the costs of the Action generally." ^{(Note 405)}

461.2	Also looking at the first year's operation, Freshfields reported some initial complaints of an inconsistent judicial approach, ^{(Note 406)} but went on to state :-

		"Preliminary indications from the courts (including the specialist lists) are that the summary assessment provisions have discouraged litigants and their lawyers from making obstructive or time-wasting applications, and that this is one of the most productive areas of the reforms in terms of its immediate effect on litigants' behaviour. It is also popular with many litigants, who are opting for summary assessment in order to recover some proportion of their costs immediately even though in some cases they might obtain a greater sum if they proceeded to detailed assessment." ^{(Note 407)}

461.3	Reviewing two years' experience of the Woolf reforms, Mr Harry Anderson concluded that summary assessment is a qualified success. It has had a salutary effect on spurious applications but the operation of the rule has not been consistent. ^{(Note 408)}

461.4	The Lord Chancellor's Department's evaluation of the first two years acknowledges that these rules have provoked controversy, commenting :-

		"Commentators are unsure as to whether the costs are fair and how difficult it is for judges to make an informed assessment."^(Note 409)

	However, it expresses the view that "it is likely that [the controversy] will decrease over time as judges and practitioners become more familiar with the new rules." ^{(Note 410)}

462.	Problems of inconsistency are encountered in every context in which costs are awarded. This may be exacerbated in the context of summary assessment of costs first, because the judge, at least initially, will lack expertise in assessing costs; and secondly because the procedure is a summary one, requiring a rough and ready approach. Nonetheless, initial inconsistencies do not appear to be a good reason for rejecting summary assessment, which has otherwise proved an effective deterrent to unjustified interlocutory applications.

462.1	As discussed later, one response to the problem of inconsistency is, if possible, to prepare and publish a periodically revised table of benchmark costs for the guidance of all concerned. This has encountered delays in England and Wales due to difficulty in getting reliable information as to costs.^{(Note 411)} However, assuming that such figures can be produced, less inconsistency can be expected.

462.2	Even without benchmark costs, the development of consistency in judicial decisions (whether as to levels of sentencing, of costs awards or otherwise) is achievable over time through judicial conferences and other forms of continuing judicial education.

Notes

395	"The Court in awarding costs to any person may direct that, instead of taxed costs, that person shall be entitled ...... to a gross sum so specified in lieu of taxed costs [with special provisions in respect of litigants in person]." <back>

396	In July 2001, a list of proposed awards by way of "lump sum assessment" was issued by the Masters for adoption on a voluntary and experimental basis. They cover costs for such matters as simple charging orders nisi and absolute, mortgagee actions and garnishee proceedings. Parties are invited to adopt the figures and so avoid any taxation, or to agree to a summary assessment putting forward alternative figures. They may otherwise opt for a full taxation. <back>

397	HKCP 2001, 62/9/10. <back>

398	44PD §13.2. <back>

399	44PD §13.5. <back>

400	52PD §14.1. <back>

401	WFR, p 83, §23. <back>

402	W&B, pp 32-34. <back>

403	W&B, p 203. <back>

404	W&B, p 192. <back>

405	Geoffrey Reed, Review of the Civil Procedure Rules from the Perspective of a Defendant Personal Injury Lawyer [2000] JPIL 13, 18. <back>

406	"The Civil Justice Reforms One Year On - Freshfields Assess their Progress" M Bramley & A Gouge (Butterworths, London 2000), p 153. <back>

407	Ibid, p 154. <back>

408	Harry Anderson, Conference on "Civil Procedure: Latest Developments and Prospects of Change" Hong Kong on 8 June 2001. <back>

409	EF, §7.9. <back>

410	EF, §7.3. <back>

411	EF §7.8 <back>