LAM AND LAI SOLICITORS v. HO CHUN YAN ALBERT

HCMP 555/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 555 OF 2015

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REVIEW OF TAXATION

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BACKGROUND

1.  The plaintiff is a firm of solicitors whilst the defendant was their former client who was an elected legislative councillor and the senior partner of Messrs. Ho, Tse & Wai & Partners. The plaintiff acted for the defendant in the judicial review and the election petition of the Chief Executive proceedings in HCAL84/2012, HCAL85/2012, FAMV 21/2012, FAMV 24‑26/2012 and FAMV 32‑34/2012.

2.  As the parties could not agree the legal fees in the said actions, these taxation proceedings were commenced by the plaintiff against the defendant under section 67 of the Legal Practitioners Ordinance Cap. 159.  The hearing for taxation of the plaintiff's bill of costs was fixed before me on 25 January 2016 with 3 days reserved and completed on 27 January 2016.

3.  As the defendant was dissatisfied with some of my rulings, he took out this application for taxation review of 64 items pursuant to Order 62 rule 33 RHC.

4.  The ground of review for each item, as stated in the table attached to the application, is mainly duplication of work in that 2 partners handled the same item of work without the express or implied consent of the defendant.

5.  It is the common ground that there was no written retainer or implied agreement as to the solicitors’ fees. Each of the contested items involved the 2 partners namely, Mr Lam Wai Chin Raymond ("RL" admitted in 1994) and Mr Lai Chi Chau Elden ("EL" admitted in 1995) doing the same piece of work including studying the submissions and authorities, and attending court.  They are each charging the same hourly rate at $4000, which are not challenged by the defendant.

LEGAL PRINCIPLES

6.  The relevant rules governing the taxation of a solicitor and his own client's bill are Order 62 rule 29 (1), (2) and (3) and rule 28 (2) RHC.  Order 62 rule 29 provides as follows:

“(1)  On the taxation of a solicitor's bill to his own client (except a bill to be paid out of funds provided by the Legislative Council pursuant to section 27 of the Legal Aid Ordinance (Cap 91), or a bill with respect to non‑contentious business) all costs shall be allowed except in so far as they are of an unreasonable amount or have been unreasonably incurred.

(2)  For the purposes of paragraph (1), all costs incurred with the express or implied approval of the client shall, subject to paragraph (3), be conclusively presumed to have been reasonably incurred and, where the amount thereof has been expressly or impliedly approved by the client, to have been reasonable in amount.

(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.”

7.  Order 62 rule 28 (2) states: 

“Subject to the following provisions of this rule, costs to which this rule applies shall be taxed on the party and party basis, and on a taxation on that basis there shall be allowed all such costs as were necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed.”

8.  It is not in dispute that the court shall also consider the 7 factors as set out in paragraph 1 (2) of Part II of the First Schedule to Order 62, which provides that:

“In exercising his discretion under this paragraph or under rule 32(2) in relation to any item, the taxing master shall have regard to all relevant circumstances, and in particular to-

(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, the solicitor or 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 the solicitor or 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.”

9.  General rules of taxation as stated in 62/App/21 of Hong Kong Civil Procedure 2017 Vol. 1 states:

“When dealing with these items, the taxing master will have regard to the basis of taxation, the applicable principles and the factors contained in para.1 (2) of Part II of the First Schedule. As a general rule, on taxation inter parties:

(1) ......

(2) ......

(3) Only one fee earner will be allowed for a particular item of work, e.g., drafting pleadings or attendance at court. When a junior solicitor did the work under supervision of a partner, the taxing master will bear in mind, inter alia, the possibilities of duplication of work, the time spent by the solicitor and the partner respectively, and the overall costs incurred as compared to those incurred by a single fee earner.  The costs attributable to the solicitor or partner may be reduced or taxed off where appropriate......”

10.  According to 1A/0/6 of Hong Kong Civil Procedure 2017 Vol. 1, the concept of proportionality is applicable in the assessment of costs, which states as follows:

“The concept of proportionality” was introduced as part of the overriding objective in CPR 1.1(2), which requires the court to deal with cases in ways which are proportionate to: (a) the amount of money involved; (b) the importance of the case; (c) the complexity of the issue; and (d) the financial position of each party.......

The concept of proportionality is of particular relevance in various areas.  One such area is costs.  The Court of Appeal in England has held that it is essential that courts should attach the appropriate significance to the requirement of proportionality when making orders for costs and when assessing costs......”      

11.  The defendant further relies on the Decision made by Master C Chan (as he then was) in Educational (HK) Group Ltd v Deacons[1], in which he said:

“38. I cannot say that obtaining the assistance of another solicitor is something of an unusual nature. This happens everyday in a solicitor firm. However, the fees of two‑earners are not allowed for both solicitors doing the same piece of work in a party‑and‑party taxation unless it is very complicated. ”

MAIN ISSUE

12.  The main issue at this review hearing narrows down to whether in the circumstances of the case, the 64 items in question which involve the participation of 2 fee earners charging $4,000 per hour each are of an unreasonable amount or have been unreasonably incurred. The quantum of these 64 items is not reviewed by the defendant.

13.  For the objections 7, 8, 25, 26, 28, 34, 42, 61 and 62 as stated in the application for review in relation to the respective items 68, 69, 155,156, 169, 211, 251, 525 and 526 of the bill, Ms Ng, Counsel for the defendant, confirmed that the defendant had not produced evidence concerning the attendances of RL in some hearings or conferences with counsel and that I do not need to deal with these objections regarding quantum.

DISCUSSION

14.  I shall bear in mind the above legal principles and applies them as well as the 7 factors as set out in paragraph 1 (2) of Part II of the First Schedule to Order 62, in so far as possible.  However, some of them may not need to be considered, such as the factors concerning the place and circumstances in which the business involved is transacted, amount of money and value of property involved, etc.

15.  As to the history of the various proceedings involved ie HCAL 84/2012, HCAL 85/2012, FAMV 21/2012, FAMV 24‑26/2012 and FAMV 32‑34/2012, it is succinctly set out at paragraphs 1 and 2 in the Determination of the Court of Final Appeal[2] as follows:

“A. These applications

1. These eight applications for leave to appeal arise out of three substantive judgments and one judgment on costs delivered by Lam JA in connection with the Chief Executive elections held on 25 March this year.

(a) In the first judgment, (as Lam J) he refused Mr Leung Kwok Hung (“Mr Leung”) and Mr Albert Ho Chun Yan (“Mr Ho”) leave to apply for judicial review (“the JR judgment”). He also ordered them to pay the costs.

(b) In the second judgment (“the striking out judgment”), he refused to strike out Mr Ho’s election petition in its entirety, striking out only that aspect of it which concerned the first statement discussed in Sections C.2 and C.3 below.

(c) In the third judgment (“the petition judgment”), he refused Mr Ho an extension of time and dismissed his election petition.

2. These applications relate to those three judgments (and the costs judgment) as follows:

(a) In FAMV 21 and FAMV 22, Mr Ho and Mr Leung seek to challenge the JR judgment and to overturn the award of costs.

(b) In FAMV 24 and FAMV 26, the Secretary for Justice and Mr Leung Chun Ying (“Mr C Y Leung”) seek to question Lam JA’s conclusion in the striking out judgment that the seven-day time limit for lodging election petitions is unconstitutional. Mr C Y Leung also seeks to challenge Lam JA’s refusal to strike out the election petition; while in FAMV 25, Mr Ho seeks to contest Lam JA’s refusal in that judgment to nullify the time limit altogether instead of reading in a judicial discretion to extend time.

(c) In FAMV 32 and FAMV 34, Mr C Y Leung and the Secretary renew their challenge to the finding of unconstitutionality which underpins the petition judgment; while in FAMV 33, Mr Ho seeks to challenge Lam JA’s refusal of an extension of time in that judgment on the footing that Mr Ho’s complaint has no real prospect of success. ”

16.  The various applications in HCAL 84/2012 and HCAL 85/2012 were taken out by the plaintiff as the solicitors for the defendant at the material time.  They were heard by the court as a matter of urgency since the results might have grave impact on the operation of the entire HKSAR government and must be dealt with expeditiously.  The judicial review in HCAL 84/2012 was first heard by Lam J (as he then) on 12 and 13 July 2012 and the judgment was handed down on 30 July 2012.  Written submissions on costs were lodged by the parties which led to another judgment handed down on 28 September 2012.  In HCAL 85/2012, there were also the intervening striking out judgment handed down on 12 September 2012 and the petition judgment handed down on 5 October 2012 both by Lam JA (as he then).  Written submissions on costs were lodged by the parties resulting in another judgment on costs handed down by the learned judge on 15 January 2013.

17.  The appeal from HCAL 84/2012 to the CFA was first fixed on 9 November 2012.  The Appeal Committee of the CFA handed down the Determination on 11 November 2012 and Judgment on Costs on 10 January 2013 respectively.

18.  The appeal from HCAL 85/2012 to the CFA was heard on 10 and 11 June 2013.  The Appeal Committee of the CFA handed down the Judgment on 11 July 2013.

19.  In my view, the subject matter and the issues involved in these proceedings are undoubtedly complicated, unprecedented and of great political importance to the HKSAR and of great public interest.  The various applications were all heard in the utmost urgency, no matter in the first instance or the CFA. 

20.  In most (but not all) of the hearings before Lam J/JA (as he then was and as the case may be) and in the CFA, the defendant agreed to instruct Mr Martin Lee SC, Mr Hectar Pun[3], Mr Jeffrey Tam and Mr Carter Chim as counsel team to represent him.  According to the 4^th affirmation of the defendant filed 6 May 2016, he said that in fact, RL was first introduced by Mr Hectar Pun and that the first time the defendant met RL was in a joint conference with his counsel team in around June 2012. The defendant believed that a good relationship between counsel and solicitors would reduce the solicitors’ costs.

21.  At the taxation hearing before me on 25 January 2016, Ms Linda Wong, Counsel for the defendant at that time, submitted in her skeleton submissions that the team of counsel acted for the defendant in the various proceedings involved on pro bono basis.  However, Ms Ng, Counsel for the defendant, confirmed at the review hearing before me on 2 December 2016 that instead of acting on pro bono basis, Mr Martin Lee SC and Mr Hectar Pun just waived their counsel fees some time before the taxation hearing whereas Mr Jeffrey Tam and Mr Carter Chim still charged their fees against the defendant.  As agreed by the parties in the table attached to the letter jointly signed and dated 23 December 2016, the original total fees of Mr Martin Lee SC, Mr Hectar Pun, Mr Jeffrey Tam and Mr Carter Chim are $2,550,000, $1,270,000, $795,000 and $540,000 respectively making the total sum of $5,155,000.  In my view, it must be justified for me to assume that the defendant had accepted and agreed these huge amounts of Counsel fees at the time of instructing them by the plaintiff.  As a matter of usual practice, a solicitor has to confirm instruction from his client first before sending the agreed written brief to counsel.  As told by Ms Ng for the defendant, only Mr Martin Lee SC and Mr Hectar Pun agreed to waive their counsel fees but the defendant still has to pay the fees to Mr Jeffrey Tam and Mr Carter Chim in the total sum of about $850,000.

22.  According to the supporting affirmation of EL filed 11 March 2015, the plaintiff is claiming about $2,558,000 in these taxation proceedings for the solicitors’ costs excluding Counsel fees.  Hence, the solicitors’ costs claimed are roughly half of the total Counsel fees which had been accepted by the defendant at the material time.  As to the financial position of the defendant, I consider that he shall be at least able to afford the Counsel fees in the total sum of $5,155,000 since he should not expect Mr Martin Lee SC and Mr Hectar Pun would subsequently agree to waive their fees. 

23.  In gist, Ms Ng, Counsel for the defendant, submitted that it is of an unusual nature for RL and EL doing exactly the same piece of work such as studying the same authorities and submissions, and attendance of court.  In my view, if the defendant had already accepted that these 4 Counsel were instructed, they should be allowed to do exactly the same or substantially the same piece of work such as studying the same authorities and submissions, attendance of court etc.  In that case, I fail to see why it is unreasonable to expect the defendant to also accept 2 solicitors to do exactly the same or substantially the same studying the authorities and submissions, attendance of court.  Needless to say, the various applications in HCAL 84/2012 and HCAL 85/2012 including their appeals to the CFA must be extremely important to the defendant who is not only a politician but also a candidate in the 2012 Chief Executive Election.

24.  Even as to the question of costs, I am of the view that it must be very complicated since the costs order made by Lam JA in HCAL 84/2012 against the defendant with certificate for 2 counsel was indeed overturned by the Appeal Committee of the CFA[4] by replacing with “no order as to costs” eventually.

25.  Ms Ng for the defendant submitted that the legal complexity was a matter for counsel.  With respect, I disagree.  

26.  In Gotland Enterprises Ltd v Kwok Chi Yau & ors[5], Lam VP expressed the court's expectation of a solicitor's understanding of and involvement in a case even when counsel have been instructed and said:

“68. With regret, we believe such wastage is a manifestation of those preparing bundles not addressing their mind to the purpose of the exercise. Solicitors are paid at professional rates for their works in relation to an appeal, including the perusal of the notice of appeal and conferring with their clients and counsel on matters related to the appeal. Thus, it is not unreasonable to expect a solicitor to have a proper understanding as to the issues involved in an appeal when he prepares the appeal bundles. It is no excuse for a solicitor to say that he did not have any idea as to how counsel would conduct the appeal. A reasonably competent solicitor should be able to gather from the grounds set out in a notice of appeal and his discussion with counsel as to what documents should be included in appeal bundles.

....

79.As we have said, even if there were a change of solicitor, the new solicitor should have read the papers properly before he takes on the conduct of an appeal.  He is remunerated for reading into the case and he owes a duty to his client as well as the court to be familiar with the case.  It is no excuse that he failed in the discharge of that duty.”

27.  I also accept the evidence in the affidavit of RL filed 20 May 2016 that in every court hearing, instructing solicitors are expected to render assistance to counsel and the court, and to take instructions from client as and when necessary, especially in view of this extremely important and complicated case.  Hence, to enable the instructing solicitors to follow the proceedings and assist the counsel team, they were obliged to go through the submissions and legal authorities. Although Ms Ng for the defendant submitted that such purpose should not have required the extravagant number of hours.  However, in this application for review, the defendant never raises the objections as to the quantum which was allowed by me at the taxation.  I therefore disagree with her submission in this regard.    

28.  After having carefully considered all relevant factors, I accept the submission of the plaintiff’s Counsel, Ms Lan, that the circumstances of the case justified every assistance from 2 fee earners namely RL and EL to the 4 Counsel involved.  It is also necessary for the 2 solicitors to be fully conversant with and proper understanding of the various applications, their backgrounds and the relevant legal principles in order to discharge their professional duties. 

29.  Further, it is not a strict rule that whenever an item of work involves participation of more than one fee earner would as a matter of principle be taxed off on a party-party basis.  Even according to the Decision of Master C Chan (as he then was) Educational (HK) Group Ltd v Deacons, which is relied upon by the defendant and strictly not binding on me, the exception is that unless it is very complicated, the fees of two‑earners are not allowed for both solicitors doing the same piece of work in a party‑and‑party taxation.  In my view, these judicial review and election petition are so complicated as to justify the participation of 2 fee earners. 

30.  Last but not least, it is well known that the defendant himself is a very experienced litigation solicitor who was entitled to and could impose a limit on costs against the plaintiff when instructing them in the concerned litigation according to the Hong Kong Solicitors’ Guide to Professional Conduct, which provides:

“4.05  Limit on costs may be set

Commentary

1.  A solicitors must not exceed any limit without the authority of his client. Further, a solicitor must, as soon as possible, inform his client where the limit imposed on the expenditure is insufficient and obtain the client’s instructions as to whether he wishes the solicitor to continue with the matter.

2.  Where a solicitor continues to act after the costs have exceeded the limit which his client has fixed and then presents a bill for a sum which substantially exceeds that limit he may be guilty of professional misconduct.  The excess may also be disallowed on taxation in which case the solicitor may be liable for the costs of the taxation.”

31.  There is certainly no evidence before me that the defendant had ever imposed such a limit on costs against the plaintiff.  In other words, if the defendant did set such limit and the plaintiff’s costs did substantially exceed the same, it is highly likely for me to disallow them in these taxation proceedings even though it may be arguable that the Law Society’s commentary is strictly speaking not binding on this court[6].

CONCLUSION

32.  To conclude, I am not of the view that the 64 items in question which involve the participation of 2 fee earners charging $4,000 per hour each are of an unreasonable amount or have been unreasonably incurred.  The defendant’s application for review must be dismissed.  I see no reason why the costs shall not follow the event.  I make an order nisi that the defendant do pay costs of the review application including all costs reserved with certificate for counsel, which shall become absolute unless any parties applies to vary it within 14 days from the date of this decision.  I further direct that if no application for variation was made within the prescribed time, such costs be summarily assessed by me on papers without oral hearing, the plaintiff do lodge and serve his statement of costs within 21 days from the date of this decision and the defendant do lodge and serve his statement of objection within 5 days thereafter.

33.  I shall take this opportunity to thank both counsel, Ms Ng and Ms Lan, for their helpful assistance to me.