Sun Hung Kai Investment Services Ltd v. Quality Prince Ltd and Others

HCA 1995/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1995 OF 2008

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BETWEEN

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AND BETWEEN

(By Order to carry on proceedings dated 7^th January 2009)

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Coram : Before Master C. Chan in Chambers

Date of Hearing : 29 May 2009

Date of Decision : 12 August 2009

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D E C I S I O N

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1.On 25 May 2009 I entered judgment for the Plaintiff and made an order nisi as to costs in the following term:

“42. I make an order nisi as to costs that the Defendants pay the Plaintiff’s costs of the whole action including all costs reserved and the costs of the Order 14 application together with certificate for one counsel comparable to the experience, seniority and standing of Mr. K.M. Chong.”

2.At the hearing of the assessment, both parties applied to me by consent to vary the above order and asked that the costs be taxed instead. I refused the application and informed the parties that I would give my reasons later. For that purpose I now give my reasons.

3.The primary objective of the Civil Justice Reform is to increase the cost effectiveness of the practice and procedure of the Court and to ensure that its resources are distributed evenly.

4.Taxation has taken up a lot of the masters’ time. The cost incurred in carrying out a taxation is often not in proportion with the claim in the subject matter of the litigation itself. Sometimes, a million dollar claim will have a taxation costs over $100,000. Hence, the Civil Justice Reform has made amendment to the Rules encouraging assessment. Assessment has the advantages of the hearing master doing the assessment while the case is still fresh in his mind and he can easily decide what is necessary and proper. Assessment hearing will usually last no more than an hour.

5.The parties submitted that taxation could provide a full opportunity to the parties to examine each item of work in greater detail. It would be much fairer. I disagree. In an itemized bill, the same event will appear in different parts of the bill: the costs relating to the same matter are so fragmented and scattered in different parts that the taxing master could easily lose sight of the general picutre.

6.The Civil Justice Reform has made it as a rule that appears in Order 62 rule 9C which states:

“9C. When summary assessment not allowed (O.62, r.9C)

(1) No direction or order may be made under rule 9(4)(b) or 9A(1)(a) or (b) for the payment of a sum of money if –

(a) the paying party shows substantial grounds for disputing the sum claimed for costs that cannot be dealt with summarily;

(b) the receiving party is an aided person, and the legal representative acting for the receiving party has not waived the right to any further sum of money in respect of the costs of the interlocutory application; or

(c) the receiving party is a person under disability as defined in Order 80, rule 1, and the legal representative (or the next friend or guardian and litem) acting for the person under disability has not waived the right to any further sum of money in respect of the costs of the interlocutory application.”

7.Order 14 is an interlocutory application. No one disputes that I have the power to make the assessment of costs order. Neither side has advanced any ground to show that the costs cannot be dealt with summarily.

8.I consider that it is a relatively simple straightforward case. Though it has quite a number of affidavits filed, the facts in issue are not complicated at all. At the hearing I proceeded with the assessment notwithstanding the joint effort to object the method of assessment.

Indemnity Costs

9.The Plaintiff also applied for variation of my order and requested the assessment be made on indemnity basis. Mr. Tang for the Plaintiff pointed out that according to the contractual term the Plaintiff was entitled to costs on an indemnity basis.

10.It is trite to say that cost is a matter of discretion. We respect what has been agreed between parties. However, we should consider the circumstances of the case including the issue whether the Defendants had acted so unreasonably that indemnity costs should be awarded. The Defendants in this case were exercising their statutory rights to defend. The way that they conducted the case was reasonable and fair.

11.I do not accept that the power of the court in awarding costs has been abrogated because of the parties’ agreement. I bear in mind the agreement as a factor but it is not such a decisive factor that I have to ignore the other circumstances of the case. The Defendants have sensibly and reasonably present their cases and there is no factor that makes me feel it is right to grant indemnity costs. I maintain that the costs be assessed on party and party basis.

Assessment

12.I am very surprised by the claim of over $1.5 million as the Plaintiff’s legal costs for a proceeding which was relatively simple and lasted only for about 7 months.

13.As it is an assessment on a party and party basis, I will only allow what is proper or necessary in prosecuting the claim.

14.I cannot say this is complexed or complicated case. The Plaintiff is a stock brokering firm claiming against its clients and their guarantors for a sum of about $36 million. The grounds of defense are nothing more than those usual ones of bad faith and sale of shares at a under value while the wife and the employee being guarantors alleged that under undue influence they signed the guarantees. The legal issues are those familiar ones found in Royal Bank of Scotland plc v Etridge (No. 2).

15.The legal process is slightly complicated as it involves service out of jurisdiction and appointment of the 4^th Defendant to represent the estate of the 3^rd Defendant. I hasten to add such applications should not be regarded as difficult or unusual. The Order 14 summons lasts for only one and half days, the first half day of which was used for hearing a last minute application for admission of the new evidence. Again this often happens in any interlocutory application hearing.

16.The documents involved like margin account agreement and guarantees are the standard documents commonly used in the trade. Solicitors with 7 or 8 years’ experience who have handled similar cases before should not have found them difficult at all. The number of witnesses who have filed their evidence are not many: two from each side making 14 affirmations between them.

17.Three counsel have been retained by the Plaintiff: one senior and two junior. Among the three, it is quite clear Mr. Michael Lui did the main drafting work e.g. the affidavits and statement of claim. Counsel fees alone amount to about $750,000 that accounts for nearly half of the legal fees claimed. Against such background I have allowed only the fee of one counsel.

18.The case was handled by Mr. Tang himself. He had more than 18 years of practicing experience, first in England and then in 1998 in Hong Kong. I note that during the course of proceeding nearly every step had been advised by counsel. I doubt it was necessary to take such precaution for the attainment of justice or for enforcing the Plaintiff’s right. The usual rate for a solicitor of over 10 years’ experience is $4,000. There is no reason or justification for me to go higher than that in this case.

19.The trainee solicitor rate as suggested by the Law Society of Hong Kong ranges from $1,033 to $1,300. I do not find it reasonable for this case to go to the highest end of the scale. I allow only $1,200.

20.The rate for litigation clerk in the suggested scale ranges from $800 to $1,000. I allow $900 for this case.

21.I have no comment for items B1 and B2 and allow them.

22.For attendance on client, a total of 75 hours between the 3 fee-earners has spent and I consider it as excessive. The Plaintiff is a corporate client and everything is well-documented. The persons involved and giving evidence or instructions are well-educated senior staff of the corporation. There should not be much difficulty.

23.As I understand from the verbal submission, much time had been spent in considering whether to apply for a Mareva injunction because of the fear that the defendants would dissipate their assets. The idea was dropped. Such part of costs should not be allowed. Further, with Mr. Tang’s experience the time for taking instruction should be much shortened.

24.As to C2, I really doubt the role that the litigation clerk could play relating to attendance on client.

25.For C3, my comment is trainee solicitors could have assisted Mr. Tang in many ways but do we require two persons to do the same job? For example, the trainee solicitor had been attending court together with Mr. Tang in the one and half day’s hearing. The general rule is that one fee-earner is allowed to do the same piece of work.

26.For C4, Mr. Ho for the 4^th and 5^th Defendants submitted that he did not find that there was such extensive correspondence and communication justifying the claim. I agree with his view. I consider a case of this nature should require much less time for correspondence and communication.

27.I do not know what role litigation clerks could play in respect of attendance on the other side. Usually they contact the other side to attend court to make appointments for hearing and to effect service of documents. Both types of work should have been covered by B2.

28.Mr. Tang spent 14 hours for attendance on counsel. As I have stated earlier, time has been spent on the abandoned plan of taking out a Mareva injunction. Further, quite a number of works should have been handled by solicitors himself without consulting counsel. Mr. Tang’s time on this should be greatly reduced.

29.Again, I see no role of a litigation clerk serving counsel except service of documents which should have been covered by B2.

30.As I have mentioned earlier, no two fee-earners are allowed in doing the same job. In this case the trainee solicitor usually accompanied his principal to attend conferences. This should not be allowed in this case. I reckon that he has other duties to perform relating to counsel but not much.

31.For D1, I accept that there are quite a number of documents prepared by the solicitors that include statement of claim, application for service out of jurisdiction, application of appointment of the 4^th Defendant to represent the estate of the 3^rd Defendant, the Order 14 application and the different affidavits. Most of them are not complicated or unusual.

32.For D2, the different affidavits are factual and the different agreements and guarantees are rather standard. Perusal should not take so much time as suggested in D2.

33.I do not see the necessity of a solicitor requiring 12.6 hours as claimed in D3 for preparation for hearing. The time for hearing is excessive: the time for call over is less than 30 minutes each and the hearing of Order 14 application lasted for one and half days only.

34.I see no reason for litigation clerk to attend the call-over or the hearing of Order 14 application proper in D5.

35.On counsel fee, I have three comments to make:

(a) It is not necessary for the solicitor to consult counsel on every step he takes or for counsel to settle nearly every document the solicitor has drafted;

(b) I allow only one counsel for the hearing; and

(c) The fee for counsel will be that of counsel comparable to the experience, seniority and standing of Mr. K.M. Chong, counsel for some of the defendants.

36.Having considered the different aspects of the costs claimed as set out in the Statement of Costs, I have made an assessment and find that the proper amount for the Plaintiff’s cost is $650,000.00.

Mr. Simon Tang of Messrs. P.C. Woo for Plaintiff.

Mr. W.F. Ho of Messrs. K.C. Ho & Fong for 4^th and 5^th Defendant.

1^st, 2^nd and 3^rd Defendants, being absent.