Re C.A. Pacific Finance Ltd (in Liquidation)
Read the full judgment text of HCCW 36/1998 on BabelCite. This High Court CFI judgment was delivered on 9 August 2006.
2. The 8 bills are for work done by the solicitor firm in the periods mentioned below:
Cites 1 case
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HCCW 36/98, 37/98 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMPANIES WINDING-UP PROCEEDINGS NOS. 36 AND 37 OF 1998 ____________________
____________________ Coram: Mr. Registrar C. Chan in Chambers Dates of Hearings: 11 January 2006, 22 February 2006 and 19 July 2006 Date of Handing Down: 9 August 2006 ___________________________________ Decision on Review Applications ___________________________________ Before me there are 4 applications to review my decisions on the different items in the 8 bills relating to the costs incurred by the solicitor firm Heller Ehrman for work done in the liquidation process in the above two cases. I heard them on two different occasions i.e. 11 January 2006 and 22 February 2006 and the firm also submitted to me different letters containing detail arguments. Mr. Karliner who is the solicitor in charge has no objection that I deal with the 8 bills under review in one judgment. 2.The 8 bills are for work done by the solicitor firm in the periods mentioned below:
3.The amounts I have deducted from the bills ranging from 18% to 32%, mostly around the region of 30%. For each bill, the solicitor firm prepared and produced a bundle of documents for taxation. To a certain extent, it gives me an impression that the solicitor or solicitor firm does not fully understand how the Masters conduct taxation of the bills in this type of cases. I take this opportunity to pass my remarks on the procedure and practice generally. 4.The Companies (Winding-Up) Rules (Cap. 32H) provides an outline of how the bills of agents employed by the liquidators should be taxed. In April 2004, pursuant to the direction of Madam Justice Kwan, the Registry published two Procedural Guides for determination of the liquidators’ bills and taxation of the agents’ bills respectively. The idea is to streamline the procedure and to facilitate the taxation process. I accept that practitioners give different interpretations to the contents of the Guides and have produced different bill formats and documents. We do not intend to set any prescribed form to be used as each firm has different practice and method of keeping accounts records. They have different ways of preparing the bills. In the present case I have a number of comments on the bundle submitted because it fails to give me the relevant materials and information. These comments are restricted to solicitors’ bills of costs and they may not be applicable to liquidators’ bills. 5.It is necessary to understand that when the Master carries out a taxation, he does not have any material or information except the bill about the subject which it covers. The Master needs to be informed what is the subject matter, to which the bill is related. The materials have to be as informative as possible but must avoid duplication. 6.For each taxation, Mr. Karliner prepared and produced a bundle of documents divided into sections as follows:
If my above suggestions are adopted, it will make taxation much easier and definitely it will save a lot of paper. General Principles 7.In respect of bills submitted by solicitors in connection with liquidation, there are two kinds of bills: (a) as between solicitor and client and (b) as disbursement of the liquidator (see Re Peregrine Investments Holding Ltd [1998] 2 HKLRD 670). The first kind is taxed on solicitor and client basis. In this case I am not concerned with it. The bills are submitted for the purpose of obtaining payment out of the estate: the costs of the solicitors are treated as disbursements of the liquidators. 8.For the latter type of taxation, in my decision in the case of Pro KTA Limited dated 1 September 2004 I have decided in paragraph 25 that it should be taxed on common fund basis. In taxing those bills I have to ask the following questions:
9.As stated in my earlier judgment in Pro KTA the claimant carries the burden to justify its claim as decided by Mrs. Justice Le Pichon’s in her judgment in Re Peregrine Investments Ltd, [1998] 2 HKLRD 670 at 684. I have repeated it in paragraph 29 of my said judgment as follows:
The Review 10.Having set out the general principles I proceed to review my decision in connection with the items raised in the 8 bills. They can be briefly classified into 2 main areas: (A) charge-out rates of different fee earners and (B) the individual items. The Charge-out Rates 11.The charge-out rates under review are (a) Mr. Doron Karliner, (b) Mr. Sam Tung, (c) Mr. Sunny Ho, (d) Mr. Donnelly Chan and (e) Ms. Chloe Wang. 12.Mr. Karliner has been handling these cases from the days when he was with Messrs. Richard Butler. At first, he worked under the supervision of Mr. Rogers but later on his own. On the previous occasions I had approved the rate of $3,300. He has moved to Messrs. Heller Ehrman and has become a consultant. In my earlier comment when I made the decision, I thought he was a partner and took up more responsibility. In fact, he is not a partner. Is there any difference in responsibility between consultant and assistant solicitor? I do not know: it varies from firm to firm. I do not want to speculate on this. Mr. Karliner submits he is entitled to more than $3,300: he now works more independently. I have no doubt that with more experience gained after working on the case for several years he can work more efficiently and independently. But, his hard earned experience has been well remunerated by the same client. Should the client also take advantage of this and benefit from it? 13.He claims that a discount has been given by agreeing at the rate of $3,600. As a taxing master I should not blindly follow the agreement between the liquidator and the solicitor firm. The agreement is good for solicitor and client taxation but not on common fund basis. I have to assess the work that has been performed and also the different factors set out in paragraph 2 of Part II of the First Schedule to Order 62. 14.Mr. Karliner was admitted in Hong Kong in 2000. In 2004 when he handled those matters he was qualified as a Hong Kong solicitor for 4 years. Of course, I must not ignore his experience in another jurisdiction and his specialization in that area. I accept that the normal rate for a 4-year solicitor does not apply to Mr. Karliner. In the past I awarded $3,300 for the works that he had done. 15.I must acknowledge that the cases as those before us are usually handled by a partner of at least 7 to 8 years’ standing. Whether that person is a partner may be a relevant factor; but a more important factor is the manner how the work is performed and the responsibility carries with it. Mr. Karliner works very independently and takes up full responsibility. He also supervises his colleagues in performing their work. The point I have to decide is what level of solicitor I should allow to handle such matters. Is the decision of $3,300 unreasonably low? Is the hourly rate of $3,600 not justifiable? 16.By looking at the type work that was done by Mr. Karliner, I have some hesitation to award that rate of $3,600. Take an example from Bill No. 4 on 27 August 2004 he updated the draft writ against the debtor Shit Wai Ying. It was a claim instituted in the District Court. In that matter he was throughout assisted by Mr. Tung who was also admitted in 2000. What Mr. Karliner had done was to review the revised schedule of interest calculations etc. Does it require a person of such calibre to do such work? There are other instances of this type that do not justify a claim of $3,600 or not even $3,300. 17.However, there are other works done which are much more complicated and require more skill than those illustrated in the example given. I must take all the works done by Mr. Karliner as a whole. He is practically all on his own without supervision. He takes up full responsibility and do the supervision work as well. I find my former decision of the rate is on the low side. For this reason, I am prepared to revise his rate from $3,300 to $3,600 per hour. 18.Mr. Sam Tung claims $2,400 and was admitted in 2000 as Mr. Karliner in Hong Kong. But, the nature of the work carried out by Mr. Tung and his responsibility are quite different. The bills are related to works done in 2004. He was admitted for about 4 years. He could not do any work independently. He was under the close supervision by Mr. Karliner, even for drafting a statement of claim to be instituted in the District Court. Nearly all steps taken by him had to be scrutinized by Mr. Karliner. Unless there is any special reason to justify it, only one fee earner will be allowed for a particular item of work. The scale suggested by the Law Society for solicitors with 2 to 4 years’ standing range from $2,000 to $2,500 for High Court and from $1,350 to $1,650 for District Court. I see no reason for awarding the top rate of $2,500 or near the top rate at $2,400. When I look into the cases further I find that a number of claims fall within the District Court and I have to resist the temptation of reducing the rate I have already fixed at $2,300. I do not intend to revise the rate. 19.Mr. Sunny Ho is a senior paralegal as described in the bills; I was told he is a legal and litigation executive with 20 years experience. The firm’s standard rate for him is $2,000. As I have stated earlier, the firm’s standard rate is not relevant in this taxation. Neither is the rate of $1,500 agreed by the Liquidator relevant. I have to consider what is reasonable. He is a supporting staff: we understand the type of work carried out by him is hardly more than clerical. In considering the charge-out rate of a paralegal carrying out such clerical work, I doubt long experience can be regarded as an important factor. What he did were preparing some standard forms of documents like inserting names and addresses of the parties, arranging issue of writs etc. It is generally expected that the work is properly done. Experience does not add much to it. I fix it at $1,200 which is already higher than usual litigation clerk of $800 to $1,000. 20.Mr. Donnelly Chan and Ms. Chloe Wang, both were trainee solicitors I gave the rate of $1,200. In the letters submitted, I find no argument why I have to review the rates except a bare submission as follows:
The rate for trainee solicitors as suggested by the Law Society is from $1,066 to $1,300. I have given a rate higher than the average. I refuse to review it. Individual Items 21.Having dealt with the charge-out rates I come to the individual items. Majority of the grounds for objection can be broadly classified into two types: (a) that I made arbitrary reductions and (b) that I overlooked the fact that the several matters are included in one item. Classification 22.For the first kind of objections, I can find them in the following items in the bills referred to below:
23.For the second kind of objections, I can find them in the following items in the bills referred to below:
24.Apart from the above, there are applications for review that do not fall within those standard objections: they are related to Bills Nos. 3 and 5. I deal with them first. Bills Nos. 3 & 5 in HCCW 37/98 25.Relating to Bill No. 3 Mr. Karliner raised two objections in respect of items, from which I had deducted substantial amounts. He gave detail explanation of how he spent the time of 3.40 hours and 1.60 hours. There are no reasons I do not believe what he said. Accordingly I allow the original sums and I add back 1 hour and 0.60 hour respectively. 26.As to Bill No. 5, the items where I had deducted were mainly related to Mr. Goh’s works. I have given my comment on them in point 3 of the letter of 9 December 1995 where I stated as follows:
27.Instead of replying to my comment, the grounds for review emphasize the “complexity”, the voluminous documents that Mr. Goh reviewed and the necessity of the researches. I must say that this case had gone on for quite some time and Mr. Goh was familiar with the issues. He should have prepared notes for use. Take the example of objection 6 on page 2 of the Bill No. 5. He claimed that he needed to review the various files re Inviting. In the bill it did not mention for what purpose the review was made. In the objection it was stated that the files are files of background and transactional documents. I doubted such explanation. He had been working on the case for months, if not years, and should be most familiar with the files. I do not allow reviewing the files without specific purpose. 28.As to objections 7 and 8 the solicitors have demonstrated why the time of 1.2 hours and 2 hours are necessary: I re-instate the amounts I have deducted i.e. 0.6 hour and 1 hour respectively. 29.As to objection 9, no research papers or other evidence has been produced. I am not shown why the research required 5.5 hours. I maintain that 3 hours is sufficient. I disallow the review in objection 9. Arbitrary reduction 30.The items which I classify under this category are set out in paragraph 21. The objections are rather similar in each case. In respect of those items in Bills 1 and 2 in HCCW 37/98, the objection is simple as follows:
31.I must say that these objections are totally unfounded. I have considered every item before I make any reduction. It is not arbitrary at all. I dismiss all the applications for review under this category in Bills Nos. 1 & 2. 32.In the other 4 bills, the objections are almost identical to each other and give more reasons for their objections; they refer me to Section 2 of the two letters dated 23 December 2005 (in respect of Bills Nos. 4 & 6 in HCCW 36/98) and dated 8 February 2006 (in respect of Bills Nos. 8 & 9 in HCCW 37/98) respectively. The two Sections 2 are again almost identical. The reasons given can be briefly summarized as follows:
33.At the time of hearing the review Mr. Karliner supplied me with no further information or material. I do not consider point (a) brings the objections any further. 34.As to point (b) above, I had taken into account the individual circumstances of each item before I made any reduction. I refuse the application for review in respect of the items classified under this category in Bills Nos. 4, 6, 8 and 9 in HCCW 36/98. Several matters under one item 35.The solicitor raised these objections only in Bills Nos. 4, 6, 8 and 9 in HCCW 36/98. He asked me to refer to Section 3 of the two letters referred to in paragraph 32 above. His main submission is that “there should be an examination and assessment of the individual items or sub-items of work done rather than an arbitrary approach and reduction of the time set out in the entire entry.” 36.As I have stated earlier in paragraph 4 above, the court does not wish to lay down the format how the bills are prepared. Each individual firm has its own ways of preparing its own bill. In the present case, the bills in question put several items or sub-items in one entry; I find that the several items or sub-items in one entry are closely related and I believe it is the intention of the drafter of the bill to ask me to make a global assessment of each entry. I am of the view that I entitled so to do. 37.Take the example of S.K. Tung on 17 September 2004. There are two entries as set out in page 11 of Bill No. 4. The drafter of the bill deliberately group the items into two entries. I have to assess each entry as one whole item for the purpose of taxation. I do not see what is wrong with it. I dismiss all those objections. Burden of Proof 38.As clearly stated in the judgment of Madam Justice Le Pichon in Re Peregrine Investments Holdings Limited [1998] 2 HKLRD 670 at 679E: “It is for the office-holder who wishes to be remunerated at a particular level to justify his claim.” The solicitor has the burden to show that the amount claimed is reasonable. He should give full particulars and produce proper contemporaneous records. In case of any doubt, the benefit goes to the paying party as mentioned in paragraph 8 above. 39.I do not find that the solicitor raising the objections in respect of the items as classified under the 2 categories and described by me as standard has discharged the burden of proof. I dismiss them all. Conclusion 40.Under paragraph 17 I allow the charge-out rate of Mr. Karliner to be revised in respect of the items that I have allowed to $3,600 per hour. 41.Under paragraph 25 I re-instate 3.40 hours and 1.60 hours of Mr. Karliner’s time in Bill No. 3. 42.Under paragraph 28 I re-instate O.60 hour and 1 hour of Mr. Goh’s time in Bill No. 5. 43.Other than those mentioned in paragraphs 40 to 42, I dismiss the application for review. I would like to receive written submission as to costs for the review.
Mr. D. Karliner of Messrs. Heller Ehrman on 11 January 2006 and 22 February 2006. Messrs. Heller Ehrman, excused from attendance on 17 July 2006. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under HCCW 36/1998