THE EDUCATIONAL GROUP (HK) LTD v. DEACONS

HCMP 2138/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2138 OF 2008

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BETWEEN

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D E C I S I O N

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1.   This is an application by the Defendant to review my decision in a taxation of the two bills viz. Invoice Nos. 1208151 and 1213101 issued by the Defendant to its former client, the Plaintiff. The review covers all the items in the 1^st one and only the disbursement part of the 2^nd one.

2.   The bills have been taxed under the solicitor and client basis i.e. Order 62 rule 29. The first and principal objection raised by the Defendant in this review is that I should have taxed the bill under Order 62 rule 28 (4A): “all costs shall be allowed except insofar as they are of an unreasonable amount or have been unreasonably incurred and any doubts shall be resolved in favour of the receiving party; in this case the Defendant”. As I understand, rule 28(4A) relates to indemnity basis of taxation. There is no order made or agreement between parties that the Plaintiff has to pay the costs on that basis. I do not know why Mr. Shaw made such argument and he gave me no reason for it.

3.   Obviously, the present case is a dispute between the client and his solicitors: as far as I understand the District Court proceeding taken out by the Defendant for the two unpaid invoices is pending and the results of this taxation will affect its outcome. I see no reason that the taxation should be carried out on any basis other than solicitor and client basis. I find it surprising such submission is made in a review application for such proceeding should have been carefully considered before it has been issued.

4.   The Defendant has sought to review the whole of the 1^st bill. At the hearing Mr. Shaw has kindly categorized his objections under four different areas as follows:

(A) The hourly rate of Mr. Richardson;

(B) The new evidence introduced relating to item 5 of the 1^st bill;

(C) The extra costs for the transfer of file; and

(D) Disbursements.

I shall deal with them separately.

Hourly Rate

5.   Mr. Shaw of the Defendant considers that the hourly rate that I fix for a solicitor of 30 years’ post-qualification experience is very low. It should be significantly more than the rate of $4,400. The argument he puts forward is not at all easy to understand; he says:

“The hourly rate for a solicitor under the Legal Aid Scheme, taxed on a party and party basis, is only slightly less than the rate allowed for Mr. Richardson.”

6.   I do not think that the legal aid cases have different rates in taxation. I believe what Mr. Shaw refers to is the scale of costs suggested by the Law Society and adopted by the masters for reference. Such scale was first introduced in 1985. Since then it has been revised several times. The last revision took place in 1997. The Law Society re-confirmed its position by issuing a consolidated circular No. 08-213 in April last year. According to that scale for solicitors with experience of 10 years or over, the suggested rate in High Court cases ranges from $3,200 to $4,000. The scale is not binding on the taxing master and it can go higher or lower depending upon the circumstances of individual cases. I firmly believe that there is no separate scale for legal aid cases in civil litigation. I do not know how Mr. Shaw gets the impression that lawyers handling legal aid cases will get a lower rate.

7.   In assessing the rate, as mentioned in paragraph 24 of my decision, I have taken into account the 7 factors in exercising my discretion. I do not find the case is of any particular complexity or difficulty. It does not require any specialized knowledge or skill at the stage when Mr. Richardson handled the matter. Not many documents are involved. The case has been handled in normal circumstances and the amount involved is not significantly large. (If my memory serves me right as the taxation bundle was not given back to me at the time of review), I think if legal proceedings were taken against Hong Kong Export Credit Insurance Corporation, the claim might have fallen within the jurisdiction of District Court. In fact, I have considered the matter as if the High Court scale would apply.

8.   Mr. Shaw urges me to consider the general set-up, the reputation and the location of the Defendant firm. As compared to a firm in Mongkok, the Defendant firm has to pay more for rent and other overhead expenses. He argues that any client who retains the Defendant should have expected that he has to pay more than that if he retained a firm in Mongkok. I cannot say this is a factor I should ignore but it is not a significant factor. The suggested scale is $3,200 to $4,000 and I have gone higher than the highest recommended rate by 10%.

9.   I do not accept the argument that as Mr. Hudson who has only about 10 years’ standing could charge $4,400 then Mr. Richardson with experience more than 30 years should have gone much higher. It is wrong for us to rely on one factor to decide on the rate. We have to look at all the circumstances of the case before a decision is made. What Mr. Richardson had done was to give some elementary and preliminary commonplace advice. He even had some hesitation in writing the formal letter of demand. I really doubt whether Mr. Richardson should have handled the case in the first place. Even he did as it is now, I do not think he is in any way better than Mr. Hudson. There is no justification for me to give a higher rate just simply because of his seniority.

10.   I reject the application for review on this ground of objection and maintain the hourly rate of $4,400 for Mr. Richardson.

New evidence under Item 5

11.   The work that has been done under item 5 of the 1^st bill is described as follows: “Discussing Robert Clark and Richard Hudson Email Tarek Hamawy”. My ruling on this is found in paragraph 59 of my decision:

“In this case, the reason for the discussion was that Mr. Richardson wanted to seek assistance from a partner in the litigation department. He had internal communication with Mr. Clark and most probably with Mr. Hudson as well. Unfortunately, he was told that they were going on holidays for 3 weeks and 2 weeks respectively. This kind of internal communication and consultation was not something I would allow. I delete the costs for this item.”

I still maintain that such internal discussion is purely internal administrative arrangement of work within a firm. It should not charge client for it.

12.   Mr. Shaw raises another issue for the review. Apart from the internal discussion, this item 5 also covers another aspect i.e. e-mail to client in which some legal advice has been given. In support of this, the e-mail was produced as fresh evidence. Mr. Morley for the Plaintiff very fairly did not object to it. I have considered its contents and accepted that some time should be allocated for preparing and sending this e-mail. Of the 18 minutes claimed under this item, I allow 12 minutes for the e-mail but I do not allow the 6 minutes for the internal discussion mentioned above.

Extra costs for the transfer

13.   The Plaintiff does not dispute the fact that he had agreed that the file be transferred from Mr. Richardson to a litigation partner in the firm. What he is not happy about the whole matter is that he is charged by the litigation partner (i.e. Mr. Hudson) for reading the papers that had been studied by Mr. Richardson and for having internal communications and meetings with Mr. Richardson as well as with the Plaintiff. He objects to the extra costs incurred. For the reasons stated in paragraphs 26 to 44 of my decision, I do not allow items 10 to 14 and allow part of item 15.

14.   In the review application Mr. Shaw has raised various issues as set out in objection 10 of the review application which can be briefly summarized as follows:

(a) It is proper to refer the matter to Mr. Hudson for assistance and so the costs incurred are reasonable;

(b) His attack on the use by me of an analogy of briefing counsel.

15.   I regret to say that Mr. Shaw does not fully understand the true meaning of my decision as contained in 26 to 44. I never doubt that it is appropriate to refer the matter to Mr. Hudson. The analogy of briefing counsel is for the purpose of illustrating the application of Rule 29(3). I will endeavour to explain again in the following paragraphs how I apply the presumption in that rule to this case.

16.   First of all, we must bear in mind that solicitor and client have a fiduciary relationship. We have to be very careful in considering the costs charged by the solicitor. However, the statute has laid down certain presumptions in Rule 29 to facilitate taxation. One of them is Rule 29(3) that states:

“(3) For the purposes of paragraph (1), any costs which in the circumstances of the case are of an unusual nature and such that they would not be allowed on a taxation of costs in a case to which rule 28(2) applies, shall, unless the solicitor expressly informed his client before they were incurred that they might not be so allowed, be presumed, until the contrary is shown, to have been unreasonably incurred.”

17.   In paragraph 38 of my decision, I come to the conclusion that transferring the file to another solicitor within a firm is not a matter of unusual nature. But the extra costs incurred for the transfer are of an unusual nature. Client does not expect that he has to pay extra costs for the transfer. Client would have thought that he has instructed the firm to do the job and he expects the whole firm would work as a team. The rule puts it as a condition that if the firm wants to charge for that part of costs it has to expressly tell client of it. Neither Mr. Richardson or Mr. Hudson had told the Plaintiff of this.

18.   I have also decided that these costs are of unusual nature on another ground by applying the test in Rule 29(3): “they (i.e. the costs) would not be allowed on a taxation of costs in a case to which rule 28(2) (i.e. party and party basis) applies”. I use the counsel analogy to illustrate why I consider that such costs would not be allowed in a party and party taxation.

19.   I find that the criticisms on that part of my decision are not justified and I do not allow the review on that ground.

Disbursements

20.   Mr. Shaw in the review hearing explaining to us that the description in the bill “Document production” means nothing more than photocopying charges. He is charging it according to Rule 4 and the Third Schedule to the Solicitors (General Costs) Rules. I do not want to unnecessarily lengthen this decision by elaborating why I did not understand what was said in the supporting documents produced in the taxation. Mr. Morley very fairly conceded to that item. I allow the disbursements $411 and $75 in the 1^st and 2^nd bills respectively.

21.   As to Miscellaneous Costs Mr. Shaw still failed to explain what they are or to give me any example of such expenses for me to form any opinion. As no explanation is given I do not see why I have to concede to the request for review in respect of Miscellaneous Costs of $100 and $50 in the two bills respectively. I have stressed more than once that the Defendant and the Plaintiff are in a fiduciary relation; the Defendant has to give an account for every cent it spends or at least gives a satisfactory explanation what it is. It is not acceptable to use the term of “Miscellaneous Costs” to cover the small items without giving a clue what they are.

Costs

22.   Costs incurred in respect of this review proceeding can be divided into two parts: the costs of this review itself and the costs relating to the extension of time.

23.   To decide on the cost of this review is simple: I can make reference to the result. I apply the rule that costs follow the event. Generally, the Defendant was not successful except on item 5 and on part of the disbursement items. The review of those two items is successful as a result of submitting further evidence and giving further explanation which the Defendant should have done in the taxation. For these reasons costs must be awarded against the Defendant. I have seriously considered whether I should award indemnity costs to the Plaintiff in view of what I have said in the last few paragraphs of my earlier decision about the true meaning of Civil Justice Reform and its application. However, I have to balance it with the statutory right of review. At last I come to the view that a more appropriate one is the party and party basis. I make an order nisi that the costs of the Plaintiff be paid by the Defendant on a party and party basis and I assess it in the sum of $18,000.

Costs for extension of time

24.   I now come to the more difficult part of the costs order relating to the extension of time for lodging an application for this review. The facts of the incident as I gather from the evidence filed could be briefly summarized as follows. On 25 May 2009 at about 4.00 p.m. a clerk from Messrs. Deacons came before the Listing Clerk with a notice of appointment to fix a date for hearing the review. He was given a slot at 9.30 a.m. on 27 May 2009 for half an hour. The clerk immediately called back to his office on phone and decided not to issue the application.

25.   The Listing Officer told me the reasons for giving such an early date were as follows:

(a) My tenure as a temporary deputy registrar would end on 31 May 2009 and that was the only available slot during the time left. She hoped that I could clear all my hearing work before my term expired.

(b) It is the practice of the masters that for every taxation review we have a short call-over first to examine whether the concise grounds of objection that has been filed under Order 62 rule 33(3) are sufficient and whether further particulars need to be supplied. (I must say it is quite unusual that such detail grounds of objections as those prepared by the Plaintiff are filed at the initial stage of the review proceeding.) Another reason for having a short call-over first is that sometimes the review is for a few items and the grounds of objections are so obvious that the other side finds it not necessary to file any answer and that the review application can be dealt with summarily at the call-over hearing.

26.   In the present case the clerk of Messrs. Deacons simply walked away. When the letter dated 26 May 2009 from Messrs. Deacons came to my knowledge the application was already out of time and I commented that “formal application be made” as I was not in a position to grant leave to issue the application without hearing the other side. Hence, it was followed by the application for extension of time, the hearing before Master Levy, the consequential order and the filing of the application.

27.   Mr. Shaw of Messrs. Deacons maintained that he did not accept the 27^th day for the reasons as set out in paragraph 5 of his affidavit of 2 June 2009:

“ (a) Order 32 rule 3 requires the respondent to be given at least 2 clear days’ notice before the hearing; and

(b) Order 62 rule 33(4) requires that, within 14 days after service of the application, the respondent is to deliver its answer in writing to the objections, setting out its position as to each of them.”

28.   After hearing the review I looked further into the file. I found a copy of the court record endorsed on the letter of 26^th from Deacons by the Listing Clerk. It indicated that a clerk from Messrs. Haldanes was present throughout the period. It was the clerk from Deacons after making the telephone call withdrew the application. According to the record the clerk from Messrs. Haldanes made no comment. At the hearing of the review the parties have agreed that there was some confusion and I should not place any significance to the fact whether the clerk from Messrs. Haldanes was present. Therefore, I make no comment on this fact. I write this paragraph for the sake of record and in case this review goes further.

29.   For ground (b), I believe that Mr. Shaw at that time was not aware of the practice I mentioned in earlier paragraph or of the provision in rule 33(4) that the master can abridge the period for filing an answer by the other side.

30.   There is an additional reason given by Mr. Shaw in his letter of 26^th for not accepting the hearing on 27^th that he had another appointment at that time. That might be the true reason. In fact, he could have sent his colleague to attend the hearing as it would have been a matter of call-over.

31.   I do not exactly know why he asked the clerk to withdraw the application without filing the application or fixing another date. The parties were there and if he was not available on 27^th, another date could easily be fixed. Instead, he asked the clerk to withdraw the filing and to go back to the office. He should have realized that it was the last day for filing and after that he had to apply for extension of time.

32.   The reason for Mr. Shaw asking his clerk not to issue the application, I believe, is the one I find in paragraph 4 of his affidavit on 2 June 2009: “Yeung (i.e. the clerk) informed me that the High Court Registry would only issue the application if it were to be heard at 9.30 am on Wednesday, 27 May 2009.” It is difficult for me to believe (a) that the Listing Clerk would refuse to give another date for hearing if for different reasons the date given was not suitable and (b) that she simply refused to allow the issue of the application if parties do not accept that date, as she simply had no power to make such refusal.

33.   In the letter of 26^th from the Defendant a slightly different version was given: “Our clerk was told that the only available time for the Master to review was 9.30 am tomorrow.” Most probably what the Listing Clerk meant was that it was the only available slot left during the residue of my term as temporary deputy registrar. Definitely, it did not mean that I would or could not do the review after that time.

34.   The main cause of the delay in filing, as I find it, was that the person handling the review was not familiar with the practice and there was some misunderstanding on the part of the Defendant in the conversation between the filing clerk and the Listing Clerk on the 25^th.

35.   I find that Haldanes has done nothing wrong and has been most co-operative. I cannot say that Haldanes was wrong in refusing to sign the consent summons because the costs for the summons had not been agreed. It is legitimate for them to ask for the costs of the extension of time.

36.   For the above reasons I also make an order nisi that the costs of the extension time should be borne by the Defendant and that I assess it in the sum of $3,000.

Orders made

37.   I allow review part of item 5 of Invoice No. 1208151 by allowing 12 minutes and also the disbursement item described as “Document Production” in both bills by allowing $411 and $75 respectively.

38.   I also make two costs orders nisi as set out in paragraphs 23 and 36 respectively which will be made absolute after 14 days from the date of this decision unless application for variation is made during the said 14 days’ period.