BRAVE VENTURE LTD v. XINHUA NEWS MEDIA HOLDINGS LTD AND OTHERS

HCMP 1901/2017
and HCMP 2267/2017

[2020] HKCFI 2178

(Heard together)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1901 OF 2017

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IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2267 OF 2017

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________________________

________________________

(Heard together)

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REVIEWS OF TAXATION

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Application

1.  There are two reviews of taxation before this Court.

Background

2.  The plaintiff (“BVL”) was at all material times a shareholder, holding 11.97% of issued share capital, of the first defendant (the “Company”), a listed company in Hong Kong. 

3.  In August 2017, the Company announced, inter alia, that it would acquire a company (“Mighty Capital Group”) at $40 million. BVL found the transaction highly suspicious.  As the annual general meeting (“AGM”) of the Company was to be held on 29 September 2017, BVL took steps to try to nominate five individuals so that they could enter into the board to investigate into the transaction.  Parties disputed whether the steps taken by BVL were valid or not.   

4.  Time was short and BVL decided to resolve the disputes by legal means.  About three weeks before the AGM, on 7 September 2017, BVL commenced HCMP 1901/2017 (the “first action”) against the Company and 9 other directors/officers of it.  BVL sought, inter alia, reliefs from the court so that the five individuals were to be put for election at the AGM.  On the same date, a summons seeking interim measures was also issued.  

5.  On 12 September 2017, BVL appeared before the Hon Mimmie Chan J for the interim measures.  It was represented by one senior counsel and one junior.  The Company was represented by 3 counsels, including 2 leaders and one junior.  Some of the defendants appeared in person when some were absent.  After argument, the learned Judge granted the interim reliefs sought by BVL.  

6.  About a week later, on 18 September 2017, reasons for decision was handed down.  The Judge explained that the defendants had been in breach of Article 16 of the Company.  The nomination notice served by BVL contained all necessary information.  It was wrong for the Company to ask for more.  The Company was also incorrect to hold that the nomination by BVL was invalid.  BVL succeeded overall in the application and the Judge made an order nisi (subsequently becoming absolute) that the defendants jointly and severally were to pay BVL costs of the summons and of the Originating Summons, including costs on 12 September 2017, with certificate for 2 counsel, to be taxed, if not agreed.  

7.  It appeared that the Company and other defendants did not comply with the order of the Judge.  On 20 October 2017, BVL obtained leave from the Judge to commence committal proceedings[1].

8.  In the meantime, on 16 October 2017, BVL also issued HCMP 2267/2017 (the “second action”) against the Company and 11 directors/officers of it.  Briefly, BVL said that the Company and/or other defendants had wrongly issued adjournment/withdrawal notice for the AGM.  They, together with all related announcements, circulars, etc. should be held as invalid, void and/or of no effect.  Further, the court should also hold that the AGM had been validly convened and concluded.  The poll result thereof was to be published accordingly.  

9.  BVL managed to meet Deputy High Court Judge Kent Yee ex- parte on notice the next day on 17 October 2017 seeking interim reliefs.  However, the Judge refused the application by a written decision handed down on 18 October 2017.  He said, among others, that discretion should not be exercised to grant interim injunctions sought.  He also disapproved the way BVL had prosecuted the application.  Neither the court nor the defence was given proper time to prepare.  He dismissed the application with no order as to costs.  

10.  Notwithstanding it, BVL took up the matter in the same way to the Court of Appeal the next day on 19 October 2017 by CAMP 42/2017.  It was dismissed again.  By reasons for decision handed down on 31 October 2017, the Hon Lam VP explained, inter alia, that it was not a proper case for granting ex parte relief. The Court of Appeal did not make any order for costs.  

11.  On 28 December 2017, BVL filed a notice wholly discontinuing the second action. 

Taxations and reviews

12.  On 10 September 2018 and 12 October 2018, BVL and the Company filed their respective bills of costs in the two actions.  I dealt with them together for 2 days in November 2019.  The Company (as paying party in the bill of the first action and receiving party in the bill of the second action) applied for the present two reviews of taxation.  

13.  After hearing from the experienced law costs draftsmen (“LCDs”) acting for parties, Mr H Wu for the Company and Mr N Yu for BVL, I reserved my decisions to be handed down.  Here they are.  

The first action: Counsel fees for both senior and junior counsel

(Section B.1 Item nos 1 to 10)

14.  Within about 2 weeks’ time, from 30 August 2017 to 12 September 2017, the junior counsel perused the documents sent to her, conducted legal researches, met with and advise BVL in conferences, drafted/settled the Originating Summons, affirmations and other documents, liaised with her instructing solicitors and senior counsel, and appeared with her leader before the Judge on the interim measures application and finally, succeeded in the same.  She adopted an item-by-item approach to charge her fees.  There are altogether 9 items. 

15.  On the other hand, within similar time frame, the senior counsel adopted a conventional approach to levy one single brief, covering his fee for attending court before the Judge and all other incidental work done by him. 

16.  At the taxation, having considered the seniority and experience of both counsel as well as other relevant matters referred to by the parties, I agreed to allow the hourly rate charged by junior counsel at $5,500 per hour.  As to senior counsel, his hourly rate was not known.  Given his experience and work done in the matter, I adopted a hypothetical range of about $12,000 to $15,000 for him.  Further, upon perusal of the correspondence, telephone and conference notes, draft and revised documents, legal research and all papers prepared by Counsel, I made some deductions from 8 items, out of a total of 9, for the junior counsel.  As to the brief of the leader, I allowed it in full.  

“SECTION B: Disbursements

B.1: Counsel’s Fees

17.  By the present review, the Company, as paying party, challenged all the decision at the taxation over fees of both counsel. Mr Wu’s arguments can be summed up as follows. 

(1) The hourly rate allowed for junior counsel was excessive.  

(2) The proper test as indicated in Bond Speed Ltd v Goodwell Sam Cheong Grocery Co Ltd, CACV 90/2010 was not adopted.  

(3) Unnecessary or excessive time was claimed by junior counsel for drafting and reviewing the originating summons, injunction order, affirmation and Cayman Islands law opinion. 

(4) A total of 36 hours was allowed by the court for item nos 1 to 8.  A further 20 hours for the brief fee for junior counsel was excessive especially when she was instructed from the very beginning of the case.  Skeletons from both parties were not lengthy and the hearing time before the Judge only took 2 hours.  

(5) Brief fee for senior counsel was also excessive for, among others, the involvement of junior counsel. 

18.  BVL on the other hand disagreed. Mr Yu said that:

(1) The hourly rate of $5,500 was reasonable. 

(2) The court did not adopt the wrong test at taxation.  Paragraph (5) at paragraph 62/App/28 of Hong Kong Civil Procedure 2020 at p.1335 was referred to. 

(3) The time deployed by junior counsel in drafting/settling all court documents was reasonable.  As to the supporting affirmation, it was drafted by the instructing solicitor and then settled by junior.  After further thorough discussion, the document was re-drafted and further revised.  Junior counsel did not settle the Cayman Island law opinion, but only render her advice to BVL.  

(4) Appropriate deductions were made by the court at taxation, ranging from 20% to 50% off from the fees of the junior counsel.  In fact, the court taxed off the brief of junior counsel by 40%.  It was fair reasonable and justified. 

(5) No deduction should be made to the brief fee of senior counsel because deduction had been reflected by the same in those of the junior. 

19.  Upon thought, Mr Wu has not been able to persuade me to change my rulings made at taxation.  

(1) Junior counsel was called to bar in 2003.  At the material times, she had about 14 years post qualification experience (“PQE”).  At that time, a solicitor enjoying more than 10 years PQE would usually be allowed at an hourly rate of $4,000 at party and party taxation.  Having considered the matters in (2) below, I maintained my decision that $5,500 was appropriate in the present case. 

(2) The authority raised by Mr Wu is not something new to this court.  After Civil Justice Reform, it is trite that the principle regarding taxation of counsel fee has been changed.  It has also been referred to our White Book and is referred to as from time to time during taxation.  

“(5) Since the Civil Justice Reform amended the wording of paragraph 2(5) of Part II of the First Schedule to Order 62, counsel’s fees under party and party taxation is no different from taxation of other costs and expenses – the test of “necessary or proper” is applicable (Poon Shu Fan v Wong Tin Yan [2012] 5 HKLRD 512). In applying that test the taxing master shall exercise his discretion having regard to all the relevant circumstances and in particular to the matters set out in paragraph 1(2). They are:

(a) the complexity of the item or of the cause or matter in which it arises and the difficulty or novelty of the questions involved.

(b) the skill, specialized knowledge and responsibility required of, and the time and labour expended by, counsel;

(c) the number and importance of the documents (however brief) prepared or perused;

(d) the place and circumstances in which the business involved is transacted;

(e) the importance of the cause or matter to the client;

(f) where money or property is involved, its amount or value;

(g) any other fees and allowances payable to counsel in respect of other items in the same cause or matter, but only where work done in relation to those items has reduced the work which would otherwise have been necessary in relation to the item in question.”

As at the taxation and/or at the present review, the following seven factors were and are noted. 

(a) The arguments among parties were not simple and straight forward.  They involved company law and application of them towards the Articles of the Company.  Laws of Cayman Island and some PRC matters were also involved.  

(b) Counsel demonstrated some skill and knowledge on company law as well as taking up the matter on an urgent basis.  

(c) Documents included underlying documents of the Company, Cayman Island legal opinion and report of investigation of the suspected transaction.  They filled up one box file.  

(d) Although it was primarily a local dispute, there were also some foreign elements as aforesaid.  

(e) The subject matter touched upon a suspected transaction of $40 million. 

(f) The 2 counsel adopted 2 different approaches to bill BVL.  Appropriate deductions were made in relation to junior counsel when she had been asked to assist before the commencement of the proceedings and throughout the same.  

(3) The supporting affirmation is the backbone of BVL in its application before the Hon. Mimmie Chan J. It consists of 22 pages in its body and 23 exhibits of 650 pages.  I went through them at taxation and did it again at the review.  The relevant correspondence was also produced before me to explain why the document needed to be revised.  With the deduction I made under items 3 and 8, I took the view that appropriate adjustment had been made in the circumstances.  I also take the opportunity to confirm that junior counsel did not advise on settling the Cayman law opinion but only advised her instructing solicitor and BVL on the same.  

(4) I am afraid that a mere repetition that counsel fees being excessive does not advance the argument of Mr Wu further.  

(5) In the present case, very briefly, the instructing solicitor and the junior counsel did all the ground work and brought in the expertise of the senior counsel only at the hearing before the Judge.  Although the senior counsel was only briefed to attend the hearing a few days before the same, evidence showed that he had been consulted on earlier occasions.  The senior counsel was called to bar in UK and HK in 1986 and 1991 respectively.  He further took silk in 2006.  At the material times, he had no less than 26 years PQE.  In my experience, depending on a number of different factors, an hourly rate from $12,000 to $15,000 was common for senior counsel with his standing.  Hence, by levying a brief of $300,000, it would take him to work for 20 to 25 hours.  To me, it must be within the reasonable range for him to read in, conduct further research, settle skeleton prepared by his junior, read those prepared by counsel for the Company, and prepare/attend hearing for 2 hours before a Judge.  There was no room to tax down the brief of the leader in the present case.  

The first action: Disbursements (Section B.2 Item nos 3 and 5)

20.  As the Company was incorporated in Cayman Island and the 2^nd to 10^th defendants were and are residing in PRC, a number of disbursements were spent in obtaining legal opinion on Cayman law and investigations done in the Mainland (as well translation of it).  Both necessity and quantum were challenged by the list of objection.  At the taxation, I ruled that they were necessary (as having been deployed in the supporting affidavit of BVL) and made some deduction of them.  

“B.2: Other disbursements

21.  At the present review, the Company argued that the allowed sums on 2 items were excessive.  Mr Wu submitted that:  

(a)     On item no 3, qualification of both translator and paralegal was not produced to justify their hourly rates.  Some time spent by the fee earners should be taxed off.  

(b)     As to item no 5, the 2 expert reports were short and in the form of letter only.  60 hours at the rate $3,900 was too much.  Fees from 25 August 2017 to 5 September 2017 should be taxed off because they should not be related to the 2 reports.  Printing and copying charges of US$1,876 (HK$14,727) was grossly excessive including duplication of US$125 in both of the 2 bills. 

22.  BVL disagreed.  Mr Yu argued that:

(a)     The amount charged was reasonable and fair, especially when it had included a voluntary discount of 25%.  One of the fee earners, Mr A Chan was the holders of Graduate Diploma of the HKU Space (1993) and of Master Degree of Sheffield University UK (1995).  As to Mr Jozel Jen Bage, he was a bachelor degree holder of the Beijing Language Institute (1995). 

(b)     The question of duplication was taken into account by the court at taxation.  The time taken to prepare the reports did not just base on the number of pages but actual and necessary work done.  Photocopying and printing charges in the fee notes were actual disbursements incurred.  

23.  I decline to tax off or further tax off both items of disbursements.  

(a)     The investigation report, albeit not lengthy, contained 10 pages for the original Chinese version and 9 pages for the English translation. It was an important document before the court showing that the suspicion of BVL over the acquisition of Mighty Capacity Group was real.  It contained both legal and commercial terms.  Both fee earners were charging at about $2,700.  It would be something like a junior solicitor practicing in Hong Kong.  They spent 14.1 hours together.  That took us to $38,448.  Further, they voluntarily offered a 20% discount.  To me, it was a very good deal obtained by BVL indeed.  I saw and see no reason to make any deduction at all. 

(b)     For the Cayman law opinion, it cost BVL US$40,476.  It comprised of 2 bills and a voluntary discount of 7.5% had been offered.  There were 3 fee earners involved, with hourly rates charged at US$850, US$675 and US$500.  In Hong Kong dollars, they would be about $6,630, $5,265 and $3,900.  Within the 2 bills, there were over 50 detailed time entries recorded by different fee earners.  The arguments raised by Mr Wu were indeed raised at taxation.  I, instead of went through the items one by one, adopted a hypothetical approach, i.e. I look at the end products and see how much time ought to have been spent by a fee earner (earning about an hourly rate of $4,000 in Hong Kong).  I took the view that 60 hours was appropriate and so ordered accordingly.  On top of it, I deduct the disbursement by about 10% to cater for the query raised to make it US$2,000 from US$2,211 (US$2,086 + US$125).  Mr Wu has not been able to persuade to change my ruling. 

The second action: Fees for the solicitor

(Section A, Item nos 2, 3 to 6 and 28a)

24.  In the second action, the Company is the receiving party.  It was entitled to claim costs against BVL from 16 October 2017 to 28 December 2017, i.e. commencement of the second action to filing of notice of withdrawal. Within about these 2.5 months, apart from the unsuccessful ex-parte application by BVL, parties did not take any substantive step therein.  BVL did not even file its statement of claim.  The Company complained it as “hit and run” approach.  

25.  In the Company’s bill, the solicitors asked their costs for the sum of about $450,000.  Six fee earners were involved and they claimed the office hourly rates.  At the taxation, probably rightfully conceded by Mr Wu, the hourly rates were reduced as follows. 

26.  At the taxation, I made 3 rulings which are now being reviewed. 

(a)     On item no 2, the solicitor claimed 4 hours in perusing and considering the supporting affirmation for the Originating Summons and interim injunction.  I allowed 2 hours for the purpose of the second action generally.  I did not allow any time for perusal and consideration for the ex-parte hearing because the Deputy Judge made “no order as to costs”.  Without any blessing from the court on the application, it is trite that no costs can be recovered.  

(b)     For the same reason, I also taxed off completely item nos 3 to 6, namely a total of 6 hours and 10 minutes for costs concerning for papers of the said ex-parte hearing.  

(c)     Last but not least, on item no 28 a (1 to 5), I taxed off them totally at taxation.  The solicitor claimed a total of 4 hours for perusing and considering documents relating to the appeal by BVL to Court of Appeal under CAMP 42/2017.  However, it was again an ex-parte on notice application.  The Company did not take part in it.  Similarly, no order for costs was made. 

27.  During the review, Mr Wu largely repeated what he had submitted at taxation.  He complained the conduct of BVL, including that papers were only served upon the Company in very short notice.  On the other hand, Mr Yu also reiterated, inter alia, under Order 62 rule 5 of the Rules of High Court (Cap 4A), no party should be entitled to recover any costs of or incidental to any proceedings except under an order of the court. 

28.  I am afraid that Mr Wu was not able to persuade to accept that the Company should be able to recover costs without the relevant costs order. 

Costs

29.  As to costs of the reviews, parties did make their submissions at the end of the hearing.  Costs generally follows event.  There is no reason to depart from this general rule herein.  I also agree to wrap up the matter by lump sum assessment of costs.  Here are them. 

First action:

	$
(a) Preparation for answers and taxation bundle (LCD – 4 hours)	7,200
(b) Hearing and preparation (LCD – 1 hour and 15 minutes)	2,250
(c) Costs of solicitors (solicitor at $5,000 per hour for 1 hour)	5,000
	14,450

Second action:

	$
(a) Preparation for answers (LCD – 1 hour)	1,800
(b) Hearing and preparation (LCD – 1 hour)	1,800
(c) Costs of solicitors (solicitor at $5,000 per hour for 0.5 hour)	2,500
	6,100

Disposal

30.  To sum up, I dismiss both reviews by the Company.  It will pay BVL costs of the two reviews summarily assessed at the respective sums of $14,450 and $6,100.