Tai Shun Investment Co Ltd v. Commissioner of Inland Reveneue

HCIA000002A/1967

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

INLAND REVENUE APPEAL NO. 2 OF 1967

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Coram: J.R. Oliver, Deputy Registrar

Date of Judgment: 14th December 1968.

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JUDGMENT

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1. The Appellants in this case appealed to the Full Court from the decision of the Board of Review dated the 4th of January 1967: and the Full Court by a judgment dated the 29th of January 1968 allowed the appeal with costs.

2. I taxed the Appellants' bill of costs against the Respondents on the 7th and 14th of August 1968, and I taxed off certain items, in particular all the items concerning the payment of fees to Mr. H.H. Monroe Q.C. and the incidental expenses of bringing him and his clerk to Hong Kong from London.

3. In accordance with the practice laid down in paragraphs (3) and (4) of Rule 33 to Order 62 after the usual Objections and Answers had been filed the solicitors for both parties attended before me on the 21st of October 1969 and I listened to further submissions.

4. I will now deal with each of the objections seriatim :-

Objection No.1

Items No.34 to 54 inclusive and 57 to 60 inclusive.

5. I am now of the opinion that I misdirected myself on these items. No order for costs was made by the Chief Justice when he made the order on the 31st of August 1967 that this case should be heard before the Full Court. It would seem that the solicitors for the Respondent were served with a copy of the summons and they did not ask for the costs of this summons to be disallowed.

6. In the judgment of the Full Court of the 29th of January 1968 the appeal was allowed with costs. Such a direction to my mind covers the Appellants' cost of issuing the summons of the 31st of August 1967 because to do so was a reasonable act to take; it would also cover the incidental costs of the affidavit of the same day, and the drawing up of the Order of the 31st of August 1967. All these charges I now consider to be reasonable.

7. On the other hand I agree with the Respondents that Items 37, 38, 39, 41, 44, 50, 56 and 60 should continue to be disallowed as they are in my opinion neither necessary nor proper (Order 62, rule 28(2)).

Objection No. 2.

Item 76.

8. I will deal with the objection raised to this item with Objection No. 3. I now turn to consider the main objections to my taxation which concern :-

Objection No. 3 and Mr. Litton's fees (Objection No.2): that is to say;

Items 77, 78, 79, 87 and 88, and Item 76.

9. The operative words of Order 62 rule 28(2) under which I am taxing this bill read :- "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 to be taxed."

10. The Crown Solicitor drew to my attention the well know observations uttered by Vice Chancellor Malins in 1875 in the case of Smith v. Buller (1) :-

11. In my opinion however the last 90 years have resulted in a considerable erosion of this definition. Modern case law permits the Taxing Master to construe these words more liberally in favour of a person who obtains an order for costs.

12. The law on this change is in my opinion conveniently stated at page 57 of "The New Superme Court Costs" by Albery and Essayan.

"It will be noted that the important words are 'necessary or proper,' and that 'proper' may cover matters which, though not absolutely necessary, are nevertheless reasonable in the circumstances. 'It is a rule which is intended to give the successful litigant a full indemnity for all costs reasonably incurred by him in relieve to the action' (per Atkin, L.J., in Pecheries Ostendaises (Soc. Anon.) v. Merchants' Marine Insurance Co. (1928) 1 K.B. 750, at p.762). 'When considering whether or not an item in a bill of costs is 'proper' the correct view point to be adopted by a taxing officer is that of a sensible solicitor sitting in his chair and considering what in the light of his then knowledge is reasonable in the interests of his lay client' (per Sachs, J., in Francis v. Francis and Dickerson (1956) P. 87, at p. 95). In the light of these more modern observations, it is thought that the dictum of Malins, V.C., in Smith v. Buller (1875), L.R. 19 Eq. 473, cited as to the principles of party and party taxation in the Annual Practice, 1960, at pp. 1936 and 1937, puts the matter a little strictly."

13. I will now deal with the point taken by the Appellants Solicitors that I am bound to allow all Counsel's fees in full unless I find them excessive and unreasonable by virtue of the words found in paragraph 2(5) of Part II to the Schedule of Order 62. That is to say:-

14. I dealt with this very point in a Review of Taxation which I heard in O.J. Action No. 936 of 1964 [Pfizer Corporation v. T.W. Wu and Company (H.K.) Ltd.] In that case I said:-

15. I wish now to add a further point. Order 62 applies to all forms of taxation that is to say from the lowest "party and party" type of order to a taxation by a solicitor on a "solicitor and own client" basis.

16. It is for this latter type of taxation that the words of paragraph 2(5) of Part II to the Schedule are directed. This is not a "solicitor and own client taxation" and it is for that reason that the Appellants' solicitors submission on this point fails.

17. I now come to the main question. Was it reasonable for the Appellants to brief London Counsel?

18. I would think that the primary justification for allowing what must undoubtedly be the high fees of bringing counsel to Hong Kong from outside the Colony would be the need to redress any imbalance which might come about by one side giving notice to the other side of its intention to bring into the Colony a specialised counsel, who by reason of his expertise forces the other side to place itself upon level terms by bringing in a counsel of equal standing, once it is accepted that there is no counsel of that standing at the Hong Kong Bar.

19. This was not such a case.

20. I am therefore thrown back to consider the dilemma which faced the solicitor for the appellants when he came to decide when he would brief on the appeal.

21. Placing myself in the hypothetical chair envisaged by Mr. Justice Sachs and having the advantage of reading the decision of the Board of Review, the case stated by the Board of Review, the various instructions to Counsel to advise, the opinions of Mr. C.W. Reece, Mr. H. Litton, and Mr. H.H. Monroe Q.C. and the briefs to Counsel. I am of the opinion that by reason of the facts and the law and by reason of the implication paragraph 1(2) of Part II to the Schedule of Order 62 it would be reason for the appellants' solicitor in the interests of his client to instructed a counsel who specialised more in tax law than would be found in barrister practising at the Hong Kong Bar.

22. In this regard I have no evidence to suggest that counsel could have been obtained in Singapore or Australia or any place other that and I therefore allow in principle the cost of briefing a barrister in practice in England.

23. As I have allowed English Counsel's fees in principle I have now to consider whether these undoubted high fees must be borne by the Respondents within the ambit of the order made by the Full Court.

24. I am of the opinion that the Respondents should not be called upon to pay all of Mr. Monroe's fees although my mind is not free from doubt on this point.

25. A party may choose to indulge in many forms of luxury which he obviously will not be able to recover against the loosing party on a party and party order. Such examples are to be found at Items 79 and 88 in this Bill namely the expensed of providing accommodation in the Mandarin Hotel for Mr. Monroe's Clerk, Mr. Griffin, and his passage by aeroplane from London to Hong Kong and back. These items were disallowed on taxation and in their Objections brought in on review the Appellants' solicitors indicated that the Respondents could not be charged with these costs relating to Mr. Griffin.

26. By a similar argument I am of the opinion that a loosing party faced with an order to pay costs on a party and party basis is only liable for those costs of counsel which can be described as necessary or proper or to put it in another form to pay the reasonable costs of employing counsel of average ability for the work which has been performed. Subject however to the proviso that if a case is of quite exceptional complexity or importance as opposed to average complexity or importance it might in those circumstances be reasonable to employ a counsel right at the summit of his profession. In my opinion whilst this was a complex case it was not really a case of such savage complexity as to justify the employment of any counsel other that one of average standing specialising in tax law.

27. To translate into practice the principles which a Taxing Master should apply to a party and party order so that a reasonable sum for counsel's fees are allowed is not easy.

28. The remarks of Mr. Justice Pennycuick in the case of Simpsons Motor Sales (London), Ltd. v. Hendon Corporation at page 838 have a bearing upon the way a Taxing Master should approach this problem. (1)

"          Counsel for the plaintiff company contended that the proper measure for counsel's fees is such a fee as counsel, competent in the field concerned, would be content to take on the brief. Counsel for the defendant corporation contended that the proper measure is such a fee as counsel appropriate to the brief would be content to take on the brief. As used by counsel in argument these expressions come, I think, to much the same thing. In other words, one must envisage an hypothetical counsel capable of conducting the particular case effectively but unable or unwilling to insist on the particularly hgih fee sometimes demanded by counsel of pre-eminent repurtation. Then one must estimate what fee this hypothetical character would be content to take on the brief. I am prenared to apply this measure as a test in the present case, but it is necessary to emphasise that the rule itself uses the words "necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed" and that the same measure may not always be applicable in the infinite variety of cases which can arise. There is, in the nature of things, no precise standard of measurement. The taxing master, employing his knowledge and experience, determines what he considers the right figure. The judge in his turn must, I think, consider whether, on his own knowledge and experience, the figure adopted by the taxing master falls above the upper or below the lower limit of the range within which in his view the proper figure would come. If, and only if, it does fall above or below those Limits, he should substitute his own figure. Counsel for the plaintiff company adumbrated the contention that every leading counsel practising in a particular field should be regarded as competent to conduct a case in that field however heavy and difficult. The contention is, I think, for obvious reasons which it would be invidious to elaborate, untenable, and counsel for the plaintiff company did not seriously seek to maintain it. What he did maintain with force and truth is that in any field there may be, and generally are, a number of counsel outside the best known names who are perfectly competent to conduct a heavy and difficult case in that field."

29. Objection has been taken to Counsel's plane fare, hotel expenses, and tax being separated. In taxations of this kind I consider such a layout in a bill of costs is a sensible plan of arrangement although the practice is different from that which takes place when counsel appears in England at Assizes.

30. Whether these expenses should be allowed is another matter. Mr. Griffin's fare and hotel expenses are not being pursued and I propose to allow Mr. Monroe's fare but only at economy class level and his expenses of staying at the Mandarin Hotel.

Objection No. 2.

Item 76.

31. Mr. Litton conducted the hearing of this case at first instance before the Board of Review, and he was also briefed as junior on the appeal. In all he charged (Item 76) a fee of $13,440.00 for his brief and two refreshers. On taxation I reduced the brief fee to $3000.00 and the refreshers at $1,000.00 each for two days.

32. The standard refresher fee in Hong Kong allowed on taxation on a party and party basis varies between $600.00. and $1,000.00. I incline to the view that for the reasons set out in paragraph 1(2) of Part II of the Schedule to Order 62 measured against the facts, intricacy and responsibilities thrown up by this case a brief fee of $5000.00 should have been allowed to Mr. Litton; and if refreshers of $1000.00 a day are added to this fee the total will therefore amount to $7,000.00.

33. I now turn to consider Mr. Moncoe's fees :-

34. For the reasons which I have given I consider that whilst a case did exist for bringing in aspecialist the facts did not call for briefing a leader whose services command fees as high as those charged by Mr. Monroe.

35. I am of the opinion that the Respondents liability for counsel's fees (Items 77 and 78) should and at what an average counsel specialising in tax matters in England would charge for appearing in this case before the Full Court in Hong Kong. I am in the obvious difficulty of having little information of what is the market rate for an average counsel, not necessaril a O.C.

36. This case was set down for three days only and the question of exceptional fees to cover a long hearing does not therefore arise.

37. I incline to the view that if I were to assess the fees of such a counsel at twice those which I have allowed to Mr. Litton this will be the figure which I consider the Respondents should pay under the terms of the Order as necessary or proper : For these reasons I propose to allow for these two items the sum of $14,000.00.

38. I do not propose to allow Item 78, Mr. Monroe's tax liability of $5,441.00.

39. Each party will be responsible for their own costs of this review.

14th December 1968.

Representation:

...(illegible)

(1) Smith v. Buller L. R. Eg. P. 457.

(1) Simpsons Motor Sales (London), Ltd. v. Hendon Corporation. 1964. 3 A.E.R. 833.