INTERLEGO AG v. TYCO INDUSTRIES INC AND OTHERS

1984, No. 4231

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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REVIEW OF TAXATION

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1. On the 11th September 1989 I taxed the 1st and 2nd Defendants costs following their successful appeal to the Privy Council.

2. Previously, and perhaps somewhat prematurely, at the request of the Plaintiff, I had taxed its costs pursuant to its initial success in the Courts of Hong Kong.

3. I mention this by way of preamble because, by virtue of taxing both bills of costs, I have had perhaps a unique opportunity of acquainting myself with the approach of both parties to this action. Thus, I can say without fear of contradiction, that this was a particularly heavy case, which required the allocation of considerable legal resources by both parties. Indeed there were times when the legal teams, if I may call them that, of both parties were working full time on this case alone. However, having said that, I take it no further and I certainly do not intend to compare the resources allocated by one party and say that by hypothesis it was reasonable for the other party to allocate similar resources.

4. Finally, by way of opening, I should perhaps add that as companies become multi-national so do legal proceedings. The dispute between the parties in Hong Kong was mirrored in various other courts in the world. Clearly, it was important to both parties for there to he one firm of lawyers co-ordinating the various actions. In the case of the Plaintiff that firm was in Europe and so far as the Defendants were concerned it was in the U.S.A.

5. This brings me to the first objection.

Objection 1

6. This item relates to an air fare for a Mr. Bridge, the then solicitor for the Defendants, for $15,517.50 for a visit to the U.S. The Plaintiff maintains that it is not justifiable to allow the air fare when there is no evidence to show what the attendance relates to. It also observes that the fees for attendance the conference have not been claimed.

7. The Defendants' position is that Mr. Bridge visited the U.S. the very outset of this action for a strategy conference with the Defendants' co-ordinating lawyer. Just why Mr. Bridge did not see to claim fees is for attending the conference escapes me, because, if he had done so, I would have sympathetically considered such a claim. However, the mere fact that he did not so claim does not mean that his air fare should be disallowed, if I an satisfied that such a conference was necessary. I am so satisfied and accordingly reject this objection.

Objection 2

8. This objection is in respect of counsel's fee for a conference and inter-partes hearing. The fee charged by counsel, a senior member of the junior bar, was $2,500.00. The Plaintiff's position is that as I disallowed the costs of the instructing solicitor for attending the conference I should apportion counsel's fees. Upon reflection I consider this must be right. I know that at the time counsel charged $1,000.00 per hour for conferences. The conference Lasted one hour. Thus the fee allowed under this item will be reduced to $1,500.00.

Objection 3

9. This relates to counsel's fees for conference in the sum of $3,000.00. The Plaintiff submits that it is not justifiable to allow this amount since it relates purely to consultation between counsel for which there is no evidence of instructions from instructing solicitor. It is perhaps a pity that this point was not more fully canvassed before me at the original taxation when all the papers were available. However, I will deal with it. The Plaintiffs are wrong when they say that it relates purely to a conference between counsel. The fee includes a written advice given by counsel.

10. Insofar as the fee relates an inter-counsel conference for which I have no evidence of instruction I accept the Plaintiff's objection, but I propose to allow a fee for the advice. I will allow half i.e. $1,500.00. If the Plaintiff feels aggrieved with by this arbitrary decision it only has itself the blame for not raising the matter more fully earlier.

Objection 4

11. The Plaintiff claims that the whole of counsel's fees of $3,000.00 should be disallowed because it relates to consultation between counsel for which there have been no instructions from instructing solicitor. This is correct so far as it goes and that is why I taxed off $1,500.00, but the fee also included settling the defence in counterclaim and request for particulars. Clearly counsel did not draft this document without instructions and accordingly this objection is rejected.

Objection 5

12. The basis of this objection is that it is unjustifiable to allow two conferences with counsel on the same day. In the normal course of events, this must be right, but, as indicated in the opening to this review this was not an ordinary action and there were occasions when both counsel and solicitors were quite legitimately working full time on the case. In my judgment, Taxing Masters must take account of the practical realities of maintaining an action of this magnitude and not allow their discretion to be unnecessarily fettered. The necessity of this conference was canvassed at the taxation. I was satisfied that it was necessary and allowed it. I see no reason to change my mind now and this objection is rejected.

Objections 6, 8 and 11

13. These objections may ho dealt with together. The Plaintiff now says that it was not justifiable to allow fees of a leading counsel for drafting amendments to affidavits, pleadings and the like, for such work should more properly be done by junior counsel. I do not recall this objection having been taken it at the taxation, but even if it had, given the nature of this case, I would not have taxed these items off merely for that reason. As the Plaintiff has advanced no other objection to these items and because I was satisfied that they were properly incurred these objections are disallowed.

Objection 7

14. The basis of this objection is that leading counsel's fees for advising are too high for an oral advice on the telephone. At the taxation I must have been satisfied that this fee was reasonable given the nature of the advice liven and the length of time taken to deliver such advice. It entirely escapes me why advice in writing, or given orally in conference, should he chargeable at a premium as against advice given over the telephone. There is, in my judgment, no merit in this objection and it is disallowed.

Objection 9

15. The basis of the Plaintiff's objection is that counsel's fees for drafting an Order 14 Summons are not justifiable, since such should be more properly done by solicitors. Again in my judgment, each case should he determined on its merits and not according to some stereo-typed formula, which may be adopted in other jurisdictions. On the taxation I was satisfied that it was reasonable for counsel to be instructed to draft this summons. Nothing has been said at the review which persuades me to change my mind and accordingly this objection is disallowed.

Objection 10

16. The basis of this objection is that there are no notes on the contents of the conference and no corresponding charge from counsel. There being no specific argument to the contrary, this objection is allowed and the sum of $150.00 is taxed off.

Objection 12

17. Whilst this objection relates solely to the allowance of leading counsel's fee for travelling to Hong Kong, it does have wider implications in connection with this review. Hence I propose to canvass the arguments in detail at this stage and determine future objections by reference back to my ruling here.

18. Basically the Defendants position, insofar as it relates to leading counsel from London, is that in addition to his brief fee, and excluding the first day of the trial, counsel should be entitled to receive a fee equal to his daily refresher for each day he spent out of London. This includes the day upon which he travels, public holidays and other non-court sitting days.

19. The Plaintiff objects to this for two reasons. The first being that it offends against one of the principles in Tai Hing Cotton Mill Ltd. v. Liu Chong Hing Bank Ltd. & Others (1982) HKLR 387 and secondly that this is not the normal practice for London counsel to charge on this basis.

20. I may deal with the latter submission very shortly. It is based on the premise that one of the Plaintiff's leading counsel, who came from London, only charged a brief fee plus refreshers on the days upon which the court sat.

21. It is a clearly established principle of taxation that one does not compare the fees of counsel A with counsel B to determine whether the fees of counsel B are reasonable or not. Secondly, one cannot establish "a normal practice" on the basis of just one example. It is my experience, based upon a large number of taxations, that the norm is for counsel to charge for the whole of the time they are away from London. I will consider the rationale for this and why it has been accepted by myself and my brother masters, in my consideration of the principle in Tai Hing Cotton Mill upon which the Plaintiff now relies.

22. Miss Choi based her submissions on the hypothesis that a hypothetical Hong Kong leader would not he able to charge refreshers for non-court sitting days and that, accordingly, to allow such items would be to take them outside the range of what it would cost for hypothetical counsel in Hong Kong.

23. I accept that a Hong. Kong leader would not be able to charge refreshers for non-court sitting days. However, a local leader could undertake other work when the court was not sitting. Similarly, successful local leaders do not work a five-day week. I know many wish that it were so.

24. This contrasts remarkably with the position of a leader who comes to Hong Kong from London. He is admitted on a limited basis i.e. to appear in a particular case or advise on it. He cannot undertake other work, work which is available to a local leader and which would be available to him if he had remained in England.

25. When Rhind J. delivered his decision in Tai Hing Cotton Mill in 1982 the Hong Kong Courts were readily accessible to leaders from London. However, within a year or two of that decision it became increasingly difficult for London leaders to gain admission to appear in the Hong Kong Courts and that is the situation which prevails today.

26. Simultaneously with this the financial rewards available to specialist London leaders have improved immeasurably. Hence, the simple fact of the matter is that if, in respect of an action being maintained in the Hong Kong Courts, a specialist London leader is required the Hong Kong solicitors must be able to put an attractive financial. proposition to the leader's clerk otherwise they will he unable to persuade the leader to come.

27. One of two formulae can he adopted. The leader can demand a very high brief fee, to include compensation for non-court sitting days, or in the alternative adopt the practice, which I hold to he the usual practice, of being paid a fairly standard of brief fee plus refreshers for each day out of London.

28. In my judgment the latter course is by far the better of the two, because, in the first option, one has to anticipate all possible delays in the proceedings in fixing upon a brief fee. This must be some time before the actual day of hearing so it is almost inevitable that there trust be a degree of over estimation. No clerk in a good set of chambers worth his salt would do otherwise.

29. Thus, in the round and since counsel is expected to leave Hong Kong within a day or two at the conclusion of a case, the adoption of the London - Hong Kong - London fee basis is more likely to produce an equitable result at the end of the day.

30. It is for these reasons that I allowed counsel one day's refresher for travelling to Hong Kong. That decision stands and this objection is disallowed.

Objection 13

31. It is perhaps misleading for this item to be described as "leading counsel's fees for advising". He may or may not have given advice on that day. The refresher was allowed on the basis outlined in my reply to Objection 12 and accordingly this objection is disallowed.

Objection 14

32. This relates to junior counsel's fees. I have no note nor any recollection of these fees being challenged on the original taxation. In those circumstances it really does seem to me to be too late to challenge than now. I accept that the fees do seem to he on the high side but they are the fees of a specialist junior counsel. Furthermore, the mere fact that a hearing was subsequently adjourned is no reason for reducing the brief fee. The brief fee is payable when it is delivered to counsel and the fee agreed. I am unpersuaded that the allowance of this item was wrong and I decline to review of my decision thereon.

Objection 15

33. On the taxation I was satisfied that the conference with counsel had taken place and Mr. Bridge's profit costs of $600.00 were entirely justified. Nothing has been said on the review which changes my mind on that point. The objection is disallowed.

Objections 16 & 17

34. These objections are disallowed for the reasons stated in my reply to Objection 12.

Objection 18

35. This objection is made on the basis that there is no note of the contents of the conference. If the drafter of the objection had looked at the bill he would have seen that this was a conference with counsel on directions. In my judgment this is an adequate explanation. The objection is disallowed.

Objection 19

36. The Plaintiff is complaining that the number of conferences with counsel. This has already been dealt within some detail in this review and was certainly carefully considered at the time. I am satisfied that this conference was necessary and reasonable. This objection is disallowed.

Objection 20

37. This item was the subject of a significant argument on the original taxation. Originally the fee claimed by counsel for conferences was in the sum of $25,312.50. At the taxation I taxed off $15,000.00. I consider that to he right at the time and still do so. This objection is disallowed.

Objection 21

38. This is disallowed for the reasons stated in my reply to Objection 19.

Objection 22

39. I see nothing, wrong in counsel drafting affidavits and summonses in this matter. The fee charged by counsel is eminently reasonable and is allowed.

Objection 23

40. The basis of this objection is that the fee charged was solely as a result of a change of solicitors.

41. This matter was fully canvassed at the original taxation and I was satisfies that this was not the sole reason for the conference. I trust that the Plaintiff has not overlooked the fact that the conference which is directly attributable to the change of solicitors was taxed off. Thus this objection fails as do Objections 24 and 25 which are postulated on the sane basis.

Objection 26

42. I accept that there is no detailed attendance note of the conference with counsel. Thus the sum of $150.00 is taxed off.

Objections 27 & 28

43. Whilst I can recall no objection being taken to these items at the taxation it may be that there was but the item concerned was so small in overall context of this bill that I did not note it. I accept that there are no attendance notes before me in respect of these conferences and accordingly both items are taxed off i.e. $600.00 and $150.00 respectively.

Objection 29

44. This is objected to on the basis that this is the third conference within 3 days. I have already made my position quite clear on this point. I do not propose to repeat it. This item is allowed.

Objection 30

45. This objection is disallowed for the reason set out in my reply to Objection 29.

Objection 31

46. This objection is disallowed for the reasons stated in my reply to Objection 12.

Objections 32, 34, 36, 38, 40, 42 & 44

47. All these objections relate to the attendance of Miss Cordelia Chung - a young solicitor and an assistant to Mr. Thorne in this action.

48. Basically the objection is that the costs of her attendance should not he allowed there is no separate attendance note as to her contribution. This was canvassed some length on the original taxation. I was satisfied then, and still am, that where I have allowed the fees of Miss Chung, she was performing a useful role. She was not merely an onlooker but became an expert on the voluminous exhibits. These objections are disallowed.

Objections 33, 35, 37, 39, 41 & 43

49. These objections are all on the same basis as that in Objection 12. My ruling is the same i.e. they are disallowed.

Objection 45

50. This objection relates to the attendance of both Mr. Thorne and Miss Chung at a pre-trial conference with counsel. For reasons which entirely escape me the Plaintiff seeks to have this item taxed off on the basis that counsels fees for the conference were taxed off the original bill. This shows a misunderstanding of the basis upon which counsel's fees were taxed off. The conference was the pre-trial conference on the day before the trial. Counsel's brief fee includes one pre-trial conference. This is the reason why counsel's fees were taxed off. It cannot conceivably follow that such a conference was either unnecessary or that the solicitors should not be paid for attending it. This objection is disallowed.

Objections 46, 47 & 48

51. Both Mr. Thorne and Miss Chung attended the trial with counsel and both sought to recover their charges for so doing.

52. As I have already mentioned I am satisfied that Miss Chung had by this time, become an expert on the exhibits and had a role to play in the court proceedings other than that of interested observer. I thought that I had made that clear on the taxation but the Plaintiff still claims that to allow Miss Chung's fees, even at the reduced rate of an articled clerk, is unreasonable and extravagant, particularly where there were Verbatim Reporters recording the proceedings, in which case, so the Plaintiff says no notes need be taken during the proceedings.

53. I would be the first to accept the valuable role played by Verbatim Reporters, but their transcripts are 24 hour transcript and anyone who has been involved in litigation of this magnitude should know that it is necessary to a review the manner in which the day's business has gone on the evening of each day of the hearing. Thus notes have to be taken.

54. In my judgment therefore it was perfectly reasonable for two fee-earners to attend in the context of this particular case. Upon reflection, if I were to change my mind at all it would be to incline towards allowing Miss Chung to recover the full rate of her costs, rather than taxing them off in their entirety. I have not been asked to do the former and decline to do the latter.

Objection 49

55. On the taxation Mr. Thorne satisfied me that he did attend such a conference. Further, the number of hours allowed for the conference were allowed after argument and I was similarly satisfied that they were reasonable. Perhaps they were a little arbitrary, but one must take account of the realities of the situation which prevails during a trial of this magnitude.

Objections 50, 52, 57, 59, 61, 63, 65, 71, 73, 75, 77, 79, 89, 91, 92 & 94

56. These objections are made on precisely the same basis as those made in Objection 46. The objections are rejected for the reasons stated in my reply thereto.

Objections 51, 53, 56, 58, 60, 62, 64, 66, 70, 72, 74, 76, 78, 80, 82, 84, 86, 88, 90 & 93

57. These objections are made on the same basis as those set out in Objection 49 and are rejected for the reasons contained in my reply thereto.

Objections 54, 55, 67, 69, 81, 83, 85 & 87

58. These objections are made on the same basis as those contained in Objection 12 and are rejected for the reasons stated in my reply thereto.

Objection 68

59. If I disallowed item 799 on the basis that there was nothing to support the conference alleged to have been held, it follows that counsel's fees under this item should also be disallowed. I allow this objection and tax off counsel's fees in the sun of $5,540.00.

Objection 95

60. Mr. Thorne was asked to go to see the trial judge along with a representative of the solicitors for the Plaintiff. I an advised, and accept, that he was not entirely sure what the judge required of him Sensibly he took Miss Chung with him, who was the expert on the exhibits. In my view he had no option but to attend and in those circumstances he is entitled to charge for his attendance. This item is allowed.

Objection 96

61. This item relates to the allowance for attendance upon the Defendants co-ordinating lawyer in the U.S. The Plaintiff submits that the total time allowed under this item is too high and not justified. It also claims that much of the correspondence is in the nature of solicitor and client correspondence and should not have been taken into account. It proposes that an overall reduction of 20% of the total time alleged to have been spent be made.

62. As with other major items in this bill the arguments were dell canvassed at the original taxation. Just how the Plaintiff now says that much of the correspondence is in the nature of solicitor and client correspondence escapes me and similarly it is wrong to say that no allowance has been made upon taxation for the element of solicitor and own client costs which were disclosed at the taxation.

63. This item was substantially reduced upon taxation. I feel that reduction correctly reflects the state of affairs and accordingly this objection is disallowed.

Objection 97

64. This relates to the time claimed for attendance of expert witnesses. The Plaintiff maintains that it is unreasonable and not justifiable to allow for time incurred in respect of attendances on persons who are subsequently not called as expert witnesses in the trial. In this objection the Plaintiff raises this as a matter of principle and does not challenge the amount of time actually expended on such attendances.

65. With respect to the Plaintiff this objection is doomed to failure in the terms in which it is stated. I consider that attendances upon witnesses is very much in the nature of research. Not all research bears fruit. The mere fact that it does not mean it was not necessary. Similarly it is not being suggested that the attendances upon the various expert witnesses, who were subsequently not called, was as a result of the mere whim or flight of fancy by Mr. Thorne. I accept that there were sound reasons for seeing them and equally good reasons for not calling them. This objection is disallowed.

Objection 98

66. This item relates to discovery. The Plaintiff's position is that there was duplication as a result of the Defendants changing solicitors.

67. This issue was argued quite strenuously upon the taxation. Miss Choi challenged it in general terms, but was unable to specify precisely where there had been the alleged duplication. In effect she asked me to make a guesstimate.

68. Mr. Thorne's position was that the case had chanced considerably during the pre-trial period and that there was no duplication, or, if there were, it had already been taken into account by the Defendants.

69. I found for Mr. Thorne and nothing has been said during the hearing of this review which to persuade me to change my mind. This objection is disallowed.

Objection 99

70. The basis of this objection is the same as that in the previous objection. My findings are the same and this objection is disallowed.

Objection 100

71. On the taxation I allowed care and conduct to be charged at 65% of the hourly rate for work done prior to February 1985. The rate allowed on taxation ryas $800.00 per hour. The Plaintiff has submitted that as the Defendants solicitors placed heavy reliance upon counsel it was unjustifiable to allow a care and conduct element upon taxation.

72. I would hope that by now it would be clear that I accept this was a heavy case for both counsel and solicitors. I consider that a care and conduct element of 65% is perfectly reasonable for work done prior to February 1985. Accordingly this objection is disallowed.

Objection 101

73. Initially Professor Height submitted a fee for attending court in the sum of $47,040.00. After hearing argument I considered that he was riot entitled to the charge for travelling time but that his charge for attending court was neither exorbitant nor unreasonable given his professional standing. Thus I adjusted his fees and reduced them by $8,960.00. The balance of his fees, including item 893, which is the subject to Objection 102, I found to he reasonable. I adhere to that view and these objections are disallowed.

Objection 103

74. This item relates to the co-ordinating lawyer's fees in the U.S. Initially they claimed $1.6 million. After hearing substantial argument on the matter, and after Mr. Thorne had consulted with his American counterparts, the total fees claimed were reduced from a little over $1.6 million to $602,000.00.

75. Whoever drafted the grounds of objection overlooked the fact that the Defendants obtained an analysis of the American lawyer's fees which were put before me. It is true that these fees were not taxed in the manner in which the Defendants' bill was taxed, but I would certainly not accept that the proportion adopted was allowed by me was either arbitrary or unsupported. The attitude of the Plaintiff seems to be one of "do as I say and not as I do" because they strongly argued in favour of their co-ordinating lawyer's fees upon the taxation of their bill.

76. A substantial reduction has been made in respect of these fee and I am wholly unpersuaded that any further reduction is called for. Accordingly, this objection is disallowed.

Objection 104

77. In my judgment the Plaintiff is estopped from objecting to this item. On the original taxation Mr. Thorne submitted that it was an informed guesstimate. Miss Choi offered to accept it if it were reduced by 10%. In point of fact, by reducing this item from $45,000.00 to $40,000.00 I have reduced it by more than 10% and that is an end of the matter. This objection is disallowed.

Objection 105

78. This relates to the law cost draftsman's fee. The law cost draftsman estimated that he spent 250 hours in drafting his bill. It is a hill of some 900 odd items and for a sum of approximately $8.5 million. Hence it is substantial on any basis. I agreed with the Plaintiff, to the extent that I considered that 250 hours were too much, but in my judgment, given the importance of this matter to the client 125 hours were not unreasonable. I allow that sum and do not propose to alter it now.

Objection 106

79. This relates to Mr. Thorne's charges for supervising the preparation and approval of the bill of costs as well as preparation for attending upon taxation before me. The objection is a general one and unspecific. It also ignores the point that upon taxation Mr. Thorne produced his time sheets and that I taxed this item after reviewing the papers produced by him. This was not an arbitrary taxing off but a considered one and it stands.

Objection 107

80. After the conclusion of the hearing Mr. Thorne returned to London. He returned to Hong Kong for the purpose of conducting this taxation and sought to recover his air fare. I allowed this and the Plaintiff seeks to review this allowance on the basis that it is akin to a change of solicitor's situation and is not properly chargeable on a party and party basis.

81. I accept entirely that it is wholly unusual to allow travelling expenses to attend upon taxation. Indeed, I would go further than that and say I cannot remember a previous occasion upon which I have done so. However, having said that, I am quite unrepentant at having allowed Mr. Thorne's air fare. The simple fact of the matter is that this is a very complicated action and no one in the Defendants' solicitors was better versed in it than Mr. Thorne. The Defendants solicitors had two options when they were unable to agree their bill of costs with the Plaintiff's solicitors. They could ask Mr. Thorne to come out anti undertake the taxation or alternatively they could instruct one of their resident solicitors to undertake the task.

82. It would have had to have been a senior solicitor, who would he able to charge $1,500.00 per hour on a party and party basis. I fail to see how such a solicitor could have conceivably mastered such a brief in less than 25 hours.

83. Thus, in my judgment the Defendants solicitors took the sensible step of bringing out Mr. Thorne and thereby ensuring that not only were they well represented but the costs to the paying party, namely the Plaintiff were kept to a minimum. Thus this objection is also disallowed.