Cyberland (China) Ltd v. Zhang Wei Bing and Another
Read the full judgment text of HCCL 3/2014 on BabelCite. This HCCL judgment was delivered on 26 September 2017.
1. The 1 st Defendant commenced taxation proceedings on 19 April 2016 for costs awarded in his favour by the order of Hon Chow J dated 14 December 2015 (“Order”). The Order was made pursuant to the joint application of the Plaintiff and the 1 st Defendant by way of a Consent Summons filed on 14 December 2015. By the Order, the 1 st Defendant is, inter alia, entitled to costs of the action, on a party and party basis up to 12 February 2014, and thereafter on an indemnity basis, to be taxed if not
Cited by 4 cases · Cites 1 case
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HCCL 3/2014 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMMERCIAL ACTION NO. 3 OF 2014 _________________________
_________________________ Before: Master Chow of the High Court in Chambers (open to public) Date of Hearing: 14 September 2017 Date of Judgment: 26 September 2017 ___________________________________ REASONS FOR REVIEW OF TAXATION ___________________________________ 1.The 1st Defendant commenced taxation proceedings on 19 April 2016 for costs awarded in his favour by the order of Hon Chow J dated 14 December 2015 (“Order”). The Order was made pursuant to the joint application of the Plaintiff and the 1st Defendant by way of a Consent Summons filed on 14 December 2015. By the Order, the 1st Defendant is, inter alia, entitled to costs of the action, on a party and party basis up to 12 February 2014, and thereafter on an indemnity basis, to be taxed if not agreed, with certificate for two counsel. 2.Notice of Commencement of Taxation was filed by the 1st Defendant on 19 April 2016 together with a Bill of Costs (“Bill”). The Plaintiff’s List of Objections (“LOO”) was filed on 24 May 2016. Taxation of the Bill took place before me on 13 and 14 March 2017. 3.The Plaintiff (“PP”) filed an application for review of taxation on 27 March 2017, seeking to review the taxation of items 27.1, 27.3, 32, 46, 49, 70.1 to 70.7 of Section A and item 14 of Section B1. The 1st Defendant (“RP”) filed an application for review on 28 March 2017, seeking to review the taxation of items 27.1, 73.1.7, 73.1.8 and 76 of Section A and items 16 and 18 of Section B1 and items 14 and 16 of Section B2. The nature and grounds of the objections are stipulated in these applications. 4.Neither party filed any answers in writing to the objections of the other party in the respective application for review of taxation pursuant to Order 62 rule 33(4). The hearing for review of taxation was attended by law costs draftsman on both sides and they made oral submissions on the items in dispute. I will deal with them in the order they were discussed at the review hearing. BACKGROUND 5.This action was tried before Hon Chow J from 6‑14 October 2015, and it concerned the beneficial ownership of a convertible bond issued by the 2nd Defendant to the 1st Defendant. The factual matrix of the case can be found in the judgment of the learned judge dated 10 November 2015 (“Judgment”). I will not repeat them here. GENERAL PRINCIPLES 6.Order 62 rule 28(4A) of the Rules of High Court reads as follows:
REVIEW 7.All the items under review relate to the period when the RP was awarded costs on indemnity basis. The fee earner of the solicitors’ firm in question was in all cases a Mr Tse Wai Suen, Owen, who was admitted in 2008. Mr Tse was qualified for about 5-7 years when the work charged under the Bill was performed. The hourly rate for Mr Tse was allowed at $4,300/hour and there is no challenge to this rate as allowed. Items 27.1 and 27.3 of Section A 8.Both parties seek to review the taxation of item 27.1 which relates to the witness statement of Zhang Wei Bing dated 22 May 2014 (“Zhang Statement”). 30 hours were claimed by the RP for work done in considering the affirmations filed in the injunction application, drafting the witness statement, and considering and revising the drafts settled by counsel. I allowed 20 hours for this item at the taxation hearing. 9.Item 27.3 is a claim for the time spent in considering the documents exhibited to the Zhang Statement. 8 hours were claimed and I allowed 3 hours at the taxation hearing. Review of this item is sought by the PP only. 10.Mr Lui submitted that time should not be allowed for considering the affirmations in the injunction application since the PP was awarded costs for that application; and if any time is to be allowed, the RP should only be allowed minimal time for so doing. According to him, the drafting of a witness statement is a simple matter of following the instructions of client. Mr Lui also put it to me that the time claimed by the fee earner did not reflect his seniority, especially when he already had the assistance of two counsel. 11.Mr Leung stressed that only one counsel was involved in the settlement of the witness statement in question. He pointed also to the very different factual backgrounds put forward by the respective parties and hence the need for very careful consideration of the affirmations used in the injunction application. 12.The various drafts of the Zhang Statement can be found in the taxation bundle. Client had provided input on three occasions. There is of course a further round of taking instructions from client after counsel had provided his comments. The eventual product is a 34-page document. 13.The comments from client and counsel are clearly not cosmetic changes, but matters that require some intellectual exercise to sort out. In the Judgment, the learned judge has indeed referred to the divergent versions of the parties’ factual background, in terms of the meetings that were held, the identity of the people who were at the meetings, the matters discussed among the people involved, what was said by whom at such meetings and the representative capacity, if any, in which the different individuals acted on various occasions. The level of details to be covered by the Zhang Statement would therefore be demanding. 14.The fee earner Mr Tse was qualified in 2008 and he had about 6 years post qualification experience when he worked on this witness statement. He is not someone on the top rank of seniority in terms of the charging rates in the Law Society guide, but there is no challenge to the charging rate of HK$4,300/hr that I allowed for the fee earner. The absolute figure of costs allowed for this item is substantial partly because of this higher charging rate allowed on indemnity basis. 15.This Mr Tse had to work on the document a few times before it was eventually finalized. I do not find that unreasonable given the complicated factual matrix to be presented. Although I accept Mr Lui’s submission that the time allowed for the fee earner to go through the affidavits used in the injunction application should not be substantial, for the purpose of a taxation on indemnity basis, it is not unreasonable for him to consider them since the level of details required entail some combing through of what had been said in previous documents and also because they were filed about a year ago. 16.As regards the exhibits that were considered by the fee earner, there were a total of 129 pages. I can see that a few of the documents do not require a lot of time for perusal, but there are quite a number that are in Chinese small prints and not the larger size used in usual court documents. More time will have to invested in their perusal to ensure that they are consistent with what is set out in the body of the Zhang Statement. 17.Having considered the above matters, I find the allowance of 20 hours for the work done under item 27.1 and 3 hours for the work done under item 27.3 to be appropriate. Items 32 of Section A 18.This item is for considering the witness statement of Jing Quan Ying Zi dated 23 June 2014 (“Jing Statement”) together with its enclosures of 393 pages. 20 hours were claimed and I allowed 13 hours at the taxation hearing. Review is sought by the PP only. 19.According to their Appointment for Taxation, the PP objects to the time allowed on the ground that less time should be allowed for considering than for drafting of documents. The PP considers 2 hours to be appropriate for the review of this 19-page witness statement. Further, since the enclosures to the Jing Statement are about 3 times the documents considered under item 27.3, Mr Lui submitted that the time allowed should be 9 hours, 3 times of that allowed under item 27.3. The total time allowed should therefore be 11 hours. 20.In the first place, while the Zhang Statement was in English with the letters printed out in the usual font 14 size, the Jing Statement was printed in a smaller Chinese font size. I do not know the actual font size of the Chinese characters but the fact that they were smaller is visually discernible. I need to bear this in mind in assessing the time to be allowed for its consideration. 21.I also do not find the approach of simply comparing the number of pages of exhibits, as advocated by Mr Lui, to be appropriate. The contents of the documents reviewed do have an effect on the time taken to consider them. The purpose for which the review of the documents was conducted also matters, since a draftsman of a witness statement may have to invest more time in their review than a mere reader. 22.With the above in mind, I have gone through all the exhibits to the Jing Statement. I find that there are fewer long Chinese documents in small prints and some documents do not require very detailed review. For example, the announcement of China Chief Cable TV Group Limited (former name of Code Agriculture (Holdings) Limited) relating to the purchase of the shares in Kang Yuan Universal Investment Limited, although the bulkiest among the various exhibits, was exhibited to show the particulars of that sale and purchase and it would not be reasonable to consider the information set forth for compliance purpose in great detail. 23.Although there are more pages in the exhibits of the Jing Statement that those in the Zhang Statement, not as many of them require detailed consideration. Having taken into account all the above matters, I find that the time allowed for this item should be revised to 11 hours. Item 46 of Section A 24.This is the Supplemental Witness Statement of Zhang Wei Bing dated 3 November 2014 (“Zhang Supplemental Statement”). 6 hours were claimed for the drafting of this document, including considering and revising the draft settled by counsel. I allowed 3 hours at the taxation hearing. Review is sought by the PP. In the LOO, the suggestion of the PP was that 3.5 hours should be taxed off from this item. 25.Mr Lui stressed that the Zhang Supplemental Statement has only 4 pages. In response to the submission of Mr Lui that any need to rebut the allegations in the Jing Statement could have been addressed by the various conferences with counsel, Mr Leung tried to convince me that there were no conferences held with counsel for the Zhang Supplemental Statement since the conferences (listed under item 47.1 of Section A) were from March to September 2014 only. 26.Since no review of the taxation of item 47.1 of Section A has been sought, the attendance notes of those conferences are not included in the hearing bundles. Nevertheless, I have already pointed out at the hearing of the review that the corresponding counsel’s fees in Section B recorded the work as being done in September 2014 although the Zhang Supplemental Statement was only filed in November 2014. Mr Leung then submitted that those conferences were very short ones anyway. 27.The Zhang Supplemental Statement may only have four pages to it, it clarified that the 1st Defendant was not claiming a role in the acquisition of a shell of a listed company in Hong Kong. There is also clarification about the nature and extent of the expenses alleged by the 1st Defendant to have been incurred in the rendering of Consultancy Services by him to Shan Xiaochang (“Shan”). In addition, it stated the reason for mentioning the company and the new partner of the 1st Defendant in a particular email. These matters might have an effect on whether the Plaintiff’s version of the convertible bond being lent to the 1st Defendant to assist him in raising funds for the Plaintiff or the 1st Defendant’s version that the bond was for payment of the consultancy services provided by him to the Plaintiff and/or Shan was to be believed. 28.Two counsel had worked on the Zhang Supplemental Statement, but the solicitor was the one who came up with the first draft. The PP has not challenged item 5 of Section B.1 under which I allowed the fees of senior counsel for using 2 hours in commenting on the draft Zhang Supplemental Statement and discussion over the phone. That was on 3 September 2014 according to the description of item 5 of Section B.1. As for junior counsel, she separately claimed 1 hour for revising the draft amended defence and the Zhang Supplemental Statement under item 5 of Section B.2. There is no breakdown of the time for working on the Zhang Supplemental Statement alone by junior counsel. I allowed her 1 hour for that item which is also not challenged by the PP. 29.Although there is also no breakdown of senior counsel’s fees for commenting on the draft Zhang Supplemental Statement alone, the solicitor charged 45 minutes on 3 September 2014 for a telephone conference with counsel, presumably the same telephone discussion billed by senior counsel. I therefore assume that senior counsel spent 1 hour 15 minutes to comment on this draft statement. Noting that the fee earner in question was qualified for about 6 years at the time he worked on this statement, it is reasonable for him to have used more time in the drafting of the document than the time spent by senior counsel in commenting on it. In addition to coming up with a first draft, he also had to revise it after considering two separate sets of comments from counsel. With the various aforesaid factors in mind, I revise the allowance of this item to 2.5 hours; effectively accepting the suggestion of the PP in the LOO of taxing off 3.5 hours from this item. Item 49 of Section A 30.The RP claims 20 hours for perusing 119 documents listed under item 49 of Section A. I allowed 15 hours at the taxation hearing. The PP seeks to review this item on the basis that the allowance is unreasonably excessive. 31.Mr Lui submitted that most of the documents were simple ones and some of them were used in the other winding up action in respect of which the same firm was acting on behalf of the RP. Mr Leung disputed that, saying that those instructing him only took over the case in December 2013. He again stressed the importance of going through the documents in detail in view of the divergent factual accounts given by the parties. 32.At the taxation hearing, I had already taken note of the possible duplication referred to by Mr Lui. I had marked on the Bill that three documents (items 49.40, 49.49 and 49.53) were identified as having been included in the Plaintiff’s List of Documents while ten others (items 49.60, 49.65-49.69, 49.71 and 49.73-49.75) were identified as having been used in the said winding up proceedings. With these excluded, there were still 106 items considered by the RP and they occupy one and a half box files of the bundles. The actual documents considered by the fee earner are found in the bundles, with post-it pads, labels, highlights and notes showing the efforts that had been put into their review still visible. 33.There are simple documents and there are less simple ones. Most of them were in existence when the current solicitors were engaged but some came into being later. Hence, it is not necessarily the case that the fee earner could have reviewed them in one go and consider their inter-relationship at the same time. I also bear in mind that this fee earner only had about 6 years’ post-qualification experience and he could not be expected to be as efficient as a solicitor with say over 10 years’ experience. Furthermore, this being a taxation on indemnity basis, I do not find the allowance of 15 hours to be unreasonable. Item 70.1 to 70.7 of Section A 34.The solicitor claims a few hours (ranging from 4 hours to 6 hours 15 minutes) after each day of the trial hearing for preparing transcript of that day’s hearing, making up a total of 36.5 hours. I allowed 50% of the time claimed at the taxation hearing. Review is now sought by the PP. 35.Mr Lui pointed out that there was no request from counsel for such transcripts and it could not be demonstrated that the transcripts were useful. Although it was the duty of the solicitor to take notes, Mr Lui submitted that the solicitor should not charge further when he had already charged for his attendance at court. Mr Leung stressed that the transcripts were prepared for assisting counsel to prepare for the examination and cross-examination of witnesses and to prepare the closing submissions, and this being team work, it was reasonable for time to be spent on preparing the transcripts. That the closing submissions did refer to what the witnesses said is something that he specifically drew my attention to. 36.I do not find the absence of any specific request from counsel for the transcripts to be fatal. Annexed to the closing submissions of the RP was a 13-page particulars which counsel relied on to show that the evidence of the PP was not credible. A number of references were indeed made in the closing submissions to what the witnesses said during the trial. 37.Nevertheless, almost gone are the days when handwritten notes were taken. It is common nowadays for a member of the team to simultaneously record what is happening at trial on a laptop. Having taken a look at the actual transcripts produced, this should be the way how the records were taken in this action; and even if not done this way, it should have been done in this manner. The time allowed should therefore be what would be reasonable for carrying out some editing and not the time for typing the entire records out or going through them in great detail. 38.Having considered all the above factors, I find that 1-2 hours a day would be a reasonable amount of time for the purpose. Applying the average of 1.5 hours a day for the 7 days of trial, I find the appropriate costs to be allowed is 10.5 hours for this item. Item 73.1.7 of Section A and Items 1.16 and 2.14 of Section B 39.The three items relate to a conference among the solicitor, senior counsel and junior counsel after attending court on the second day of trial. The solicitor claims 1 hour 50 minutes while both counsel claim 2 hours. At the taxation hearing, I allowed 1 hour to the solicitor and taxed off 50% of the amount claimed by each counsel, effectively allowing each counsel also one hour of their time. Review is sought by the RP. 40.According to the Application for Review of the RP, the main purpose of the meeting is to go through the affirmations and witness statement of the key and only witness of the 1st Defendant before he began to testify in court. Furthermore, additional documents were disclosed by both parties during the course of the trial and instructions had to be taken from client. At the hearing of the review, Mr Leung submitted that, after the second day of trial, they had this conference to take instructions on whether the evidence given by the Plaintiff was believable. A note prepared by counsel on the matters on which such instructions were taken can be found in the review bundles. 41.Mr Lui disputed the relevance of the conference. It is his submission that even if the conference was relevant, there was no need to go through the documents with client since the 1st Defendant understands and can speak English. Any clarification sought from client should have been done before the documents were filed into court, unless there were mistakes on the part of the solicitors. He stressed that it was not for the lawyers to decide whether the Plaintiff was to be believed. Thus, Mr Lui submitted that such costs are luxurious costs that cannot be allowed even on indemnity basis. 42.What Mr Leung was saying should be understood to mean that the legal team was checking with client on whether any weaknesses in the Plaintiff’s case had been unearthed by the oral evidence that had been given by the Plaintiff up to that point of time. If any such weaknesses could be identified, counsel might be able to put further questions to the witnesses, which opportunity would not be available if the witnesses in question had finished giving evidence. Such course of action is reasonable and is to be expected in litigation. I therefore do not find the holding of such a meeting to be unreasonable. 43.That said, I accept the point made by Mr Lui that there was no reason to go through the affirmations and witness statements with the 1st Defendant for one more time, especially when he is conversant with English. There were already a few other conferences billed under item 73 of Section A. These were held in August, September and as late as 2 October 2014, at which the witness could have been walked through the documents already filed. It would not be reasonable to allow duplication of the time spent for such purpose. 44.The note in the bundles show that there were a few items that were discussed at the meeting. I note that they were all related and could have been discussed as a whole. In the circumstances, I still consider allowing only 1 hour out of the time claimed to be appropriate. Item 73.1.8 of Section A and Items 1.18 and 2.16 of Section B 45.This is similar to the situation of item 73.1.7 of Section A and the corresponding counsel’s fees in Section B. The reasons given by the RP for seeking review are the same. These three items relate to the conference held with counsel on 8 October 2014, after attending court on the third day of trial. The solicitor claims 2 hours 50 minutes for this item while both counsel claim 3 hours. I allowed 1 hour to the solicitor and each counsel. 46.Mr Leung and Mr Lui made similar submissions as before. Mr Lui added though that there was no justification for this conference when one had already been held the day before. 47.Similar considerations apply here. With this conference, there is no note showing the matters of concern to counsel. The attendance note of the solicitor does not show that there had been extensive discussions. Nevertheless, although a meeting was held the day before, the Plaintiff was still giving evidence on this third day of trial and the legal team had been at court for about the same amount of time as on the day before. The new matters arising from this fresh day of trial would be more or less the same as the day before. I therefore allowed 1 hour. I see no reason to revise my ruling. Item 76 of Section A 48.This item is for legal research conducted by the solicitors. 20 hours are claimed for the 5 cases that are listed under this item. I taxed off this item at the taxation hearing. Review is sought by the RP. 49.Mr Leung produced an extract from the transcript of the trial hearing showing that counsel relied on the case of Big Island Construction (HK) Ltd v Wu Yi Development Company Limited FACV 1 of 2015, with acknowledgement that it was drawn to his attention by the solicitors. Mr Leung also pointed to paragraphs 99 and 100 of the Judgment where the learned judge referred to this Big Island case. Mr Leung submitted that legal research had in fact been conducted by the solicitors from time to time and not only for the trial. Mr Lui objected to this item because it was counsel’s job to carry out research. He expressed his agreement to the ruling at the taxation hearing when there had been no request from counsel for the research to be done by the solicitor. 50.As noted in sub-paragraph (8) of the commentary in para 62/App/21 of Hong Kong Civil Procedure 2017, as a general rule, on taxation inter partes – “Solicitors are expected to be conversant with the general law, practice and procedure. No costs for doing research on these areas will be allowed.” 51.Counsel, being the specialists, are generally relied on for the legal research required. That however is not an inflexible rule. The Big Island case was included in the 2nd List of Authorities for the 1st Defendant that was filed on 14 October 2015, in support of the closing submissions to be made. It would not be unreasonable for the solicitor to help out with the research when the whole team had to work together and concentrate on the task of drawing up the closing submissions. 52.With the specific mention by counsel at the trial hearing of the Big Island case found by the instructing solicitors and the reference to it in the Judgment, there can be no doubt of the relevance of this part of the research work done by the solicitor. In respect of the other cases claimed under this item, I cannot be similarly satisfied. There is also the risk of duplication as I do not know whether the research done by counsel covered those cases as well. 53.In the circumstances, I find it appropriate to award costs for the time for this Big Island case. The 20 hours claimed was for five cases with 386 pages in total. I would allow 2 hours for this one case which has 40 pages. Item 1.14 of Section B 54.The last item of review is the brief fee of senior counsel, claimed in the amount of $330,000. It was allowed in full at the taxation hearing. Review is sought by the PP. 55.Mr Lui submitted that the fees claimed under items 1.9-1.13 of Section B, being fees for consultation on various occasions and their preparation, should be deducted from this item because brief fees should be inclusive of such work. He pointed to the commentary in para 62/App/31 of Hong Kong Civil Procedure 2017 in support. Mr Lui asked me to take into account the fact that senior counsel was assisted by a junior who could relieve his load to a great extent. 56.Mr Leung submitted that items 1.9-1.11 of Section B cover work done before the Pre Trial Review and should not be regarded as work done for the trial. As for items 1.12 and 1.13 of Section B, Mr Leung handed over the relevant email exchange showing the basis on which the brief fees of counsel were quoted. The brief fees were first proposed in October 2014, and quoted as the equivalent to 6 refreshers, when the estimate was that the trial would be fixed for 5 days. Although the trial was eventually fixed for 7 days, counsel agreed, in September 2015, to stick to the proposed brief fees out of goodwill. When quoting their fees back in 2014, counsel were very specific that the brief would not include any further written work (such as drafting and settling further statements), consultations or conferences. 57.The following is extracted from para 62/App/31 of Hong Kong Civil Procedure 2017–
58.It is therefore my task to determine, based on my knowledge and experience, what the hypothetical counsel would be content to accept as the brief for this case. 59.Counsel chose to quote their fees exclusive of drafting or settling of further documents, consultation or conference. When they quoted their fees, the Zhang Supplemental Statement had not been filed yet. The Pre-Trial Review had yet to be held and the case had not been set down for trial. It was not unreasonable for them to so quote their fees when there could be no telling whether additional work beyond their contemplation would arise. In fact, the number of days for the trial was revised from 5 to 7 days. Had counsel been asked to quote a brief fee that would include all consultation and conferences, it would only be a much higher figure than the amount now claimed. For this reason, I do not find it appropriate to deduct the amounts allowed under items 1.9-1.13 of Section B from the brief fee. In respect of items 1.9-1.11 of Section B, I would add that they should not be deducted anyway when they were incurred before counsel confirmed their brief fees. 60.Fees for the two counsel were quoted at the same time. They were quoted on the basis that the senior counsel would have the assistance of junior counsel. I bear in mind the complexity of the case, especially in terms of the contrasting factual versions relied on by the parties, as well as the value of the convertible bond and the importance of the case to the 1st Defendant. The absolute figure claimed is, in my experience, not unreasonable even though it was exclusive of further drafting or settling of documents, consultations and conferences. I will stick to my original ruling. SUMMARY 61.I have only revised my ruling in respect of items 32, 46, 70.1-70.7 and 76 of Section A. The net result is to deduct a further 8.25 hours from the time costs of Mr Tse, at the rate of $4,300/hour. COSTS OF THE REVIEW 62.Both sides have succeeded partly in their applications for review. Although there have been revisions in respect of the costs allowed for the aforesaid four sets of items, the change in the overall position is not substantial when compared to the size of the Bill. I therefore order, on a nisi basis, that there be no order as to costs for the two applications for review.
Mr S Lui, Law Costs Draftsman, instructed by Tse Yuen Ting Wong, for the Plaintiff Mr Barry Leung, Law Costs Draftsman, instructed by Vivien Chan & Co, for the 1st Defendant | |||||||||||||||||||
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