AU SIU FOO v. THE SECRETARY FOR TRANSPORT

HCMP 235/2005

in the high court of the

hong kong special administrative region

court of appeal

MISCELLANEOUS PROCEEDINGS NO. 235 of 2005

(ON APPEAL FROM LDRW no. 49 of 2003)

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REASONS FOR JUDGMENT

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Hon Le Pichon JA:

1.  This was a renewed application for leave to appeal the costs order made by HH Judge Chow (“the Presiding Officer”) in an application by the applicant to vary the costs order nisi made by the Tribunal on 27 August 2004 to the effect that the parties bear their respective legal costs.  At the conclusion of the hearing, leave was refused with written reasons to be handed down later which we now do.

2.  The applicant had filed an originating summons for leave on 3 February 2005.  Rogers VP dealt with that application by giving the following directions on the same day:

“Costs are in the discretion of the Lands Tribunal.

The order of costs was not outside the range of orders open to the Tribunal.  It cannot be said that the order was wrong in principle.”

Notwithstanding those directions, the applicant decided to renew his application for leave to appeal.

3.  The applicant was the owner of property resumed by Government in 1999.  The compensation claim was settled for $740,000.  The applicant claimed professional fees pursuant to section 10(2)(e)(ii) of the Lands Resumption Ordinance.  The legal fees were settled, leaving outstanding a claim of $375,900 (excluding disbursements of $1,500) in respect of the surveyor’s fees.  The respondent denied liability and, in the alternative, effectively put the applicant to proof that the fees claimed were reasonable and not excessive.  The claim comprised 63 items and was made on a time charge basis for 125 hours of work.  Just before the trial, the applicant reduced the time spent to 51 hours.  This represented an astonishing reduction of approximately 60% of time allegedly spent.  The trial to determine the surveyor’s fees proceeded and took no less than 6 days.  The Tribunal allowed fees of $37,800 only, based on 18.9 hours at $2,000 per hour and ordered nisi that the parties bear their own legal costs. 

4.  The Presiding Officer made the costs order absolute after hearing the application to vary, stating (on page 3 of the judgment) as follows:

“The amount claimed was $377,400 (including $1500 cost of reimbursement).  The amount awarded was $37,800, which was about 10% of the amount claimed ….  It is clear that the Applicant grossly inflated his claim.  Because of this inflation, the Tribunal had to spend a lot of time to examine in detail each item of work done, in order to decide whether it was reasonably incurred.  This Tribunal finds that the Applicant conducted his claim in an (sic) grossly unreasonable way.”

The Presiding Officer then added the following observations:

“The Applicant in its within submission claimed that the time spent on unsuccessful items is 2.5 to 3 hours, but this allegation is not supported by particulars.  No doubt such estimation is on the very conservative side.

The Tribunal finds that there is no good reason to disturb the order nisi; therefore this Tribunal makes it absolute forthwith.” 

5.  For leave to appeal on costs to be granted, the applicant has to show that, in making the order that he did, the judge failed to exercise his discretion, or exercised it on a false principle, or did not exercise it judicially or that the exercise of the discretion was demonstrably flawed.  In my view, the applicant has not remotely shown that to be the case. 

6.  The applicant’s handling solicitor, Mr Tsu, filed an affirmation dated 17 June 2005 in support of the application.  The main purpose of the affirmation was apparently to demonstrate that the Tribunal was wrong in casting doubt on the claim that only 2.5 to 3 hours had been spent on the unsuccessful items.  It was thought fit, for that purpose, to obtain the tapes of the six-day hearing.  At paragraph 17 of his affirmation, Mr Tsu said this:

“I listened to, studied and analysed each of the tape, I used a stopwatch to note the time and I marked down the time used in each of the item and the issue.  I classified the items and matters into failed items, successful items and other matters.  If the time awarded by the Tribunal was more than the time assessed by the Respondent, I regarded the item was successful.  I considered the item was successful if the Respondent only agreed to an amount of time on the condition that the Tribunal ruled that the item could be claimed.”

The table thus compiled summarizing that analysis and exhibited to the affirmation ran to some 27 pages.

7.  At the outset of the hearing, counsel was asked to take instructions as to the time spent by Mr Tsu in preparing the affirmation.  The court was told that it was about 15 to 18 hours.  It is to be noted that the 6-day hearing took approximately 13 hours in total.  I pause to observe that whilst Mr Tsu was meticulous in analysing and recording the time spent on each item considered by the Tribunal, it would appear that he was less meticulous when it came to his own timekeeping.  Given the length of the hearing, it would be very surprising if the exercise undertaken by Mr Tsu could have been accomplished in the time allegedly taken.  Realistically, it could easily have taken him as much again as the length of the trial.  I make these observations as there are significant cost implications for the lay client if he has to foot the bill.  I will return to this issue in due course.

8.  In essence, the submissions of Mr Lam, counsel for the applicant, may be summarized as follows: the applicant had to come to court order to secure the judgment in his favour albeit the amount awarded represented only approximately 10% of his claim; the applicant succeeded on the liability issue which had been contested throughout by the respondent; the analysis carried out by Mr Tsu confirmed that only 2.5 to 3 hours had been devoted to the unsuccessful items; adopting an arithmetical approach, having won on 48 out of 63 items, he should be awarded at least 76% of his costs and in terms of wasted time of say 3 out of a total of 13 hearing hours, he should be awarded 77% of his costs.

9.  In my view, Mr Lam had misunderstood the reasons given by the Tribunal for making no order as to costs.  Time wasted on unsuccessful items was but one element that was taken into account.  It is clear from the passage quoted above that the Tribunal’s disapproval of the way in which the applicant had conducted his claim was expressed in trenchant terms.  The Tribunal was perfectly entitled to take an extremely dim view of the manner in which the applicant had conducted his claim when the claim for fees based on a time charge had been inflated by a factor of 660, leaving aside the rate at which the charge was sought to be made.  Whilst Mr Lam put his argument on the basis that his client was ‘successful’ in respect of 48 out of 63 items, time spent in respect of the 15 items that had to be assessed downwards could, on one view, be considered wasteful of the court’s time.  There is therefore nothing of significance in the point that the Tribunal had overestimated the time spent on ‘unsuccessful’ items.  If the manner in which the case had been conducted was such that the Tribunal considered that it ought to be deprecated in the strongest terms, the Tribunal could legitimately reflect that view in its order for costs and making no order as to costs was well within the Tribunal’s discretion.

10.  I am concerned that very significant costs have been run up in the preparation of the affirmation in support of this application which is devoid of merit.  The exercise that was undertaken was absurd, unnecessary and a total waste of time.  It served no purpose whatsoever other than generating legal fees.  I do not see why the lay client should be charged for this item of work.  Accordingly, unless Mr Tsu is prepared to give this court an undertaking within 14 days of the handing down of the Reasons for Judgment that the lay client will not be charged for this item of work, an application to show cause should be taken out by Mr Tsu as to why the charge should be allowed.  It should be mentioned that since preparing these Reasons for Judgment, the applicant’s solicitors have voluntarily proffered the undertaking sought.

Hon Burrell J:

11.  I agree.  The statistics in this case are a cause for considerable concern.  The original time claimed for a report on a $740,000 compensation order was 125 hours.  This represents 3 weeks solid work.  Both the time spent and the amount claimed ($375,000) were plainly disproportionate to the value and nature of the claim.  Worse was to follow.  The fee was argued in court for 6 days; the costs order nisi was later argued on another court day; 2 applications followed to the Court of Appeal.  In the interim the applicant’s solicitors must have spent many days listening to the trial tapes armed with a stop watch.  His purpose was no more than to challenge the accuracy of the Presiding Officer’s realistic estimate of time spent on certain issues.  Bearing in mind his comment that the matter had been conducted in a “grossly unreasonable way” it was plainly a waste of time and money.

12.  The entire saga reflects badly on both professions.