Re A Civil Matter Now Pending in United States District Court for The Western District of Washington At Seattle Under No 2:13-cv-1034 Mjp

HCMP 1082/2017

[2019] HKCFI 2759

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1082 OF 2017

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Before: Madam Recorder Yvonne Cheng SC in Chambers

Date of Respondents’ Written Submission: 16 September 2019

Date of Applicant’s Written Submission: 8 October 2019

Date of Respondents’ Written Submission in Reply: 22 October 2019

Date of Ruling on Costs: 12 November 2019

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RULING ON COSTS

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1.In my judgment of 16 July 2019, I made an order nisi that the costs of and occasioned by the Individuals’[1] summons of 31 October 2018 be paid by the Kyko Companies to the Individuals, to be taxed if not agreed.

2.By summons of 29 July 2019, the Individuals applied to vary the costs order nisi, seeking (1) a certificate for two counsel and (2) summary assessment of costs to be paid forthwith. I directed that the application be dealt with by way of written submissions. I now give my ruling on that application.

Certificate for two counsel

3.The principles as to whether or not to grant certificate for two counsel were set out by Master Poon (as he then was) in Xinyuan Trading Co Ltd v NPH Petrochemical Ltd (unreported, HCA 18159/1998, 25 September 2000), at paragraphs 24 to 26.

4.In the present case, I consider it was appropriate for the Individuals to instruct leading counsel, given that the legal and factual issues which arose were not straightforward.

5.I further consider that it was appropriate for the Individuals to instruct junior counsel to assist with the proper preparation of the case, which involved a fair amount of evidence and research as to the law.

Whether to conduct summary assessment

6.The Kyko Companies say that the Individuals have referred to the wrong rule, but ultimately do not dispute that it is open to the court to conduct a summary assessment of costs. They say that however that they have shown substantial grounds for disputing the sum claimed which cannot be dealt with summarily, relying on O.62 r.9C(1)(a) of the Rules of the High Court.

7.However, the grounds relied on in this regard are essentially a complaint about excessive quantum. This is not a sufficient basis to oppose a summary assessment of costs. As Au-Yeung J said in K&L Gates (a firm) v Ding Yu & another HCMP 1569/2015, unreported, 27 June 2016 at [34]: “I see no justification for taxation just on questions of quantum”.

8.I therefore agree with the Individuals that it would be appropriate to conduct a summary assessment of the Individuals’ costs.

Summary assessment of costs

9.I proceed to conduct a summary assessment of the Individuals’ costs.

10.On a summary assessment of costs, the court will not embark on a mini-taxation, and will take a broad-brush approach. That said, the court seeks to ensure that the final figure is not disproportionate and/or unreasonable having regard to the nature and circumstances of the application or matter and the underlying objectives stated in O.1A. In doing this, the court follows a two-stage approach. The court first takes a global approach to see whether the total sum claimed appears to be disproportionate. If the costs as a whole are not disproportionate, then all that is normally required is that each item of costs should have been reasonably incurred, and the cost of that item be reasonable. If on the other hand the costs as a whole appear disproportionate, then the court will want to be satisfied that each item was necessary, and if so, that the cost of the item is reasonable. The standard of necessity is a “sensible standard of necessity”, taking fully into account the need to make allowances for the different judgments which those responsible for litigation can sensibly come to as to what is required;the danger of setting too high a standard with the benefit of hindsight has to be avoided. See Poon Shu Fan v Wong Tin Yan [2012] 5 HKLRD 512 at [12] to [18].

11.Taxation of counsel’s fees on a party-and-party basis is no different from taxation of other costs and expenses. The test of “necessary or proper” applies. The court must take into account the matters in paragraph 1(2) of Part II of the First Schedule to O.62 RHC, as well as the requirement of reasonable proportionality. See Poon Shu Fan at [28] to [31].

12.The Individuals claim a total of $2,659,021 in their statement of costs of 13 September 2019.[2]  This appears to me to be disproportionate for an application which was set down for a one-day hearing.

13.I will set out my general observations in respect of section of the statement of costs before making a broad-brush assessment of quantum.

14.In respect of section A, the Kyko Companies complain that there was no need to engage three senior solicitors (and no junior solicitor) to handle the matter and that there was significant duplication of work. One of the solicitors (GL) specialises in finance rather than in litigation. I would disallow the costs of the latter. In respect of the other two solicitors (RT and AL), it does not appear that there was significant duplication of work, with most matters handled principally by one or the other of the solicitors.

15.In respect of section B, the time taken by RT and AL in communications with the clients, whether in conference or otherwise, was over 18 hours, which is on the high side. Similarly, the time taken by RT and AL in communications with counsel was more than 8 hours and again on the high side. Overall, I would allow $167,000 for this section.

16.In respect of section C, the time taken by RT in preparation of documents (almost 6 hours), when a legal executive spent 7 hours on the same, is on the high side. Also, given the heavy involvement of counsel in advising and settling documents, almost 45 hours for perusal of documents by RT is excessive. As to the hearing, this lasted 5.5 hours rather than 7. Overall, I would allow $182,600 for this section.

17.I have indicated my view that it was appropriate for the Individuals to instruct two counsel. Nevertheless, the total claimed—over $1.3 million—is on the high side, having regard to the issues involved and the affidavits requiring settlement. I note the Individuals’ submission that the underlying claim by the Kyko Companies exceeds US$100 million. At the same time, however, whilst the Individuals may have had an interest in the SSG Group entities, and such entities would have had an interest in preventing potential actions from the Kyko Companies relying on evidence obtained from the Individuals, it should be borne in mind that the present application concerned the issue of whether the Individuals should provide testimony, and not whether they personally had any liability to the Kyko Companies. In the circumstances, and without any disrespect to counsel, the Individuals could have instructed counsel of lesser seniority (who would have commanded lower fees).  Furthermore, having advised and settled documents, counsel would have had a fair degree of familiarity with the papers and issues, and this should be reflected in the fee allowed for the brief. I would allow $950,000 for section D.

18.The amount claimed in respect of disbursements to the Individuals’ expert on US law (TLF) is $688,799. TLF made two affirmations for the Individuals. At the time, he would already have been very familiar with the background of the case, given that he had been acting for SSG HK in its application to set aside the 1^st and 2^nd Collection Orders in Washington. No breakdown is given as to what work TLF did or what his hourly rate was. Applying the Hong Kong taxation hourly rate for a senior solicitor with over 15 years’ experience ($5,800) would suggest that TLF spent over 118 hours on the matter, which is excessive. The amount claimed for photocopying ($26,158) is disproportionate to the size of the hearing bundle (even allowing for 4 sets of 1,600-page bundles).  The amount claimed for filing/delivering and service/obtaining endorsement of consent also appears excessive having regard to the number of documents filed in court. Overall, I would allow $147,000 for section E.

19.I would therefore allow $1,446,600 in total.

Disposition

20.Accordingly, I would vary the costs order of 16 July 2019 in terms of paragraph 1 of the Individuals’ summons of 29 July 2019, and assess the Individuals’ costs at HK$1,446,600.

21.As the Individuals have succeeded on their application to vary the costs order nisi, the costs of this application should follow the event. I make an order nisi that the costs of this application be paid by the Kyko Companies to the Individuals to be assessed summarily if not agreed. For such purpose, the Individuals are at liberty to file and serve a statement of costs within 14 days from the date of this decision; the Kyko Companies shall file and serve their statement of objections within 14 days thereafter; unless within 7 days thereafter either of the parties requests an oral hearing, giving reasons for the same, the court will conduct the summary assessment on paper without a hearing.

Written submissions from Eversheds Sutherland, for the applicants

Written submissions from Jones Day, for the respondents