HONG KONG KAM LAN KOON LTD v. REALRAY INVESTMENTS LTD

CACV 79/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 79 OF 2008

(ON APPEAL FROM HCA NO. 15824 OF 1999)

_________________________

BETWEEN

_________________________

______________________

REVIEW OF TAXATION

______________________

1.  On 12 August 2009, I taxed down item 45 of the bill of costs (“the Bill”) of Realray Investments Limited (“Realray”) from $900,000 to $400,000 in relation to the brief fee of Realray’s leading counsel Mr Chan Chi Hung, SC for the hearing before the Court of Appeal.

2. This is Realray’sapplication to review my decision.

BACKGROUND

3.  Full background of this case has been set out in paragraphs 3-25 of the judgment of the Court of Appeal. I shall just highlight some of the more pertinent events below so as to put this review in context.

4.  Realray is the owner of certain pieces of land in Yuen Long(called “the disputed area” in the Court of Appeal judgment). In HCA 15824/1999, Hong Kong Kam Lan Koon Limited (“KLK”) claimed against Realrayfor possessory title over the disputed area based on adverse possession.

5.  On 11 October 2007, Lam J dismissed KLK’s claim after a 35-day trial. KLK appealed.

6.  On 18 February 2009, the Court of Appeal dismissed the appeal and granted costs to Realray.

7.  On 1 April 2009, Realray filed the Bill for taxation. The Bill was taxed by me on 12 August 2009. Realray is dissatisfied with my decision on item 45 and applied for review.

8.  On 24 September 2009, I gave directions for written submissions to be lodged and this review to be dealt with on the papers.

PARTIES’ CONTENTIONS

9.  Realray states in its written objections filed under Order 62, rule 33(3) that my decision to tax off more than 50% of the brief fee of its senior counsel is unreasonable and unjustified because:

(a)  of the seniorityof Mr Chan SC and his specialized knowledge and skill in litigation relating to land disputes;

(b)  the appeal was complicated in law and facts, and important to Realray;

(c)  another senior counsel (Mr Benjamin Yu, SC) quoted a brief fee of $3.5 million for the appeal;

(d)  Mr Chan SC has already reduced his brief fee from his initial quotation of $1 million to $900,000;

(e)  Mr Chan SC has now confirmed by letter that he spent “about a full month” on preparation;

(f)  KLK instructed 3 counsel to conduct the appeal including a very experienced senior counsel (Mr Anthony Neoh, SC) and a very experienced junior counsel (Mr KM Chong); and

(g)  of the general rule that every fee paid to counsel should be allowed in full on taxation unless the taxing master is satisfied that the same is excessive and unreasonable.

10.  In its written answers filed under Order 62, rule 33(4), KLK first reiterates its original objections to item 45 which can be summarized as follows:

(a)  Mr Chan SC is familiar with the case given his involvement since May 2003;

(b)  Realray is not entitled to charge for the costs of the Supplementary Respondent’s Notice;

(c)  no new issue was raised in the appeal;

(d)  the same sets of documents were relied on in the appeal;

(e)  the transcripts of the trial were available to Mr Chan SC during the course of the trial below;

(f)  the evidence at trial had already been summarized in the list of issues and synopses settled by Mr Chan SC for the trial below;

(g)  given the relatively short period of time between the trial and the appeal, the case should still be fresh in Mr Chan SC’s memory;

(h)  counsel who conducted the trial below should usually charge the same fee for the appeal; and

(i)  the fee charged by a hypothetical counsel.

11.  In addition, KLK contends that:

(j)  the argument at the appeal was mostly factual, and the legal arguments had mostly been rehearsed in the court below; and

(k)  the charges of Mr Yu SC and the counsel for KLK for the appeal are irrelevant; and

(l)  preparation time should have been shortened given the work done and charged for by Mr Chan SC in the trial below.

DISCUSSION

12.  The Bill was filed before the implementation of the civil justice reform and so the provisions in Order 62 as then in force should apply to both the taxation and this review: see the new Order 62, rule 37.

13.  Of particular relevance is the provision in paragraph 2(5) in Part II of the First Schedule to Order 62 that:

“Every fee paid to counsel shall be allowed in full on taxation, unless the taxing master is satisfied that the same is excessive and unreasonable, in which event 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).”

14.  Paragraph 1(2) 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.”

15.  Based on the English decision of Simpsons Motor Sales (London) Ltd v Hendon Borough Council [1965] 1 WLR 112,the learned editors of Hong Kong Civil Procedure 2009 have observed (at paragraph 62/App/31) that:

“A proper measure for counsel’s fees was to estimate what fee a hypothetical counsel, capable of conducting the case effectively, but unable or unwilling to insist on the high fees sometimes demanded by counsel of pre-eminent reputation, would be content to take on the brief; but there was no precise standard of measurement, and the taxing master or the judge must, using their knowledge and experience, determine what was the proper figure.”

16.  In the local case of Re Greater Beijing Region Expressways Ltd (No.4) [2005] 2 HKC 185, Barma J said at paragraph 22 of his judgment that:

“I do not see any particular difficulty in adopting the comparative approach suggested by the Simpsons Motor Sales case in considering whether counsel’s fees in a given case are excessive and unreasonable, so long as in doing so, it is remembered that one is doing so on a more generous basis than that applicable to other items in a party and party taxation.”

17.  Parties do not dispute the above principles and I shall apply them to the taxation of item 45.

18.  At the review, Realray’s counsel attempts to justify the brief fee of Mr Chan SC of $900,000 by reference to 4 scenarios:

(a)  Mr Yu SC quoted a brief fee of $3.5 million for the appeal.

(b)  Mr Chan SC has confirmed in writing that he spent about a month on preparation, which is equivalent to about 22 working days.  A hypothetical counsel charging at $7,000 per hour would demand a brief fee of $1,288,000 for a case requiring 22 days of preparation (i.e. $7,000/hour x 8 hours x 23 days).

(c)  A brief fee of $900,000 would mean only 15 days of preparation for a hypothetical counsel charging at $7,000 per hour (i.e. $7,000/hour x 8 hours x 16 days = $896,000).

(d)  Mr Chan SC’s refresher for the appeal has been allowed at $90,000.  22 days of preparation plus the first day in court charging at $90,000 per day will mean a brief fee of $2,070,000.

19.  With respect, I do not find such analysis helpful.

20.  First, I do not think KLK may legitimately compare Mr Chan SC’s fees with that of Mr Yu SC because:

(a)  Mr Yu SC was not involved in this case before and would naturally demand more preparation time; and

(b)  Mr Yu SC is more senior in terms of standing as a senior counsel than Mr Chan SC.

21.  Secondly, the Bill is not being taxed on an indemnity basis. The fact that Mr Chanhas spent “about a full month” on preparationdoes not mean that the full costs of his preparation should be allowed on taxation.

22.  Thirdly, Realray’s counsel has apparently worked out the hourly rate ofa hypothetical counsel with reference to:

(a)  the Law Society’srecommended charge for a solicitor with 10 or more years of post-qualification experience engaged in High Court proceedings on a party and party basis;

(b)  the fact that item 45 should be taxed on a more generous basis than party and party basis; and

(c)  the seniority of Mr Chan SC.

23.  With respect, I do not think Realray’s counsel has given sufficient regard to the circumstances of the appeal. The suggested hourly rate of $7,000 happens to be the hourly rate quoted by Mr Chan SC for consultation or paper work not covered by the brief or refresher. There is a certain degree of artificiality in his fixing the hourly rate of the hypothetical counsel at $7,000. Realray’s counsel seems to have assumed Mr Chan SC to be the hypothetical counsel as he has relied on Mr Chan’s seniority as a yardstick in determining the appropriate hourly rate of the hypothetical counsel.

24.  Fourthly, it should be appreciated that different nature of work is covered by the brief fee and the refresher of counsel. I do not think Realray’s counsel may legitimately use Mr Chan’s refresher to justify a higher brief fee.

25.  InMariner International Hotels Limited v Atlas Limited, FACV 3/2006, 9 August 2008 (Registrar Au Yeung), the learned Registrar of the Court of Final Appeal commented that she would usually allow brief fee of $250,000-$500,000 for appeals lasting 1-2 days presumably before the Court of Final Appeal.

26.  The present appeal was set down for a 3-day hearing before the Court of Appeal and it actually took 2 days. Whilst I am not suggesting that the range set out by the learned Registrar should apply to all appeals as a matter of straitjacket, her commentdoes provide a helpful glimpse into the knowledge and experience oftaxing masterson counsel’s brief fee for appeals.

27.  Notwithstanding the effort of Realray’s counsel, I remain of the view that item 45 is excessive and unreasonable. Consequently, I will exercise my discretion to assess the proper brief fee in accordance with paragraph 2(5).

(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.

28.  I should start by recognizing the complexity of this case.

(a)  The original trial lasted 35 days, involving issues of both facts and law.

(b)  Substantial documentary evidence was adduced.

(c)  15 witnesses were called.

(d)  Lam J’s judgment is 47 pages long.

29.  Whilst it is not wrong for KLK to observe that the appeal mainly turned on facts which had all been canvassed at the first instance trial, the complexity of the appeal cannot be underrated.

(a)  KLK’s notice of appeal is 21 pages long containing 21 grounds of appeal, many of which have sub-divisions and sub-points.

(b)  Realray put in a respondent’s notice, which was subsequently revised to a 10-page long Supplementary Respondent’s Notice with 13 grounds in support of Lam J’s judgment.

(c)  There were 15 appeal bundles.

(d)  The appeal was set down for a 3-day hearing before the Court of Appeal, although the actual appeal took 2 days.

(e)  The appeal sought to challenge all aspects of Lam J’s findings.

(f)  The judgment of the Court of Appeal is 32 pages long.

30.  The law on adverse possession is quite settled. No novelty argument is involved. The appeal was mainly on facts. All the key findings were re-examined on appeal.

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

31.  In my view, this appeal called for a counsel who would carefully go through the papers and comb through the evidence with reference to KLK’s grounds of appeal. The hypothetical counsel should be familiar with land law generally, and the law on adverse possession in particular. The counsel should also be capable in terms of advocacy before the Court of Appeal to deal with the arguments advanced by KLK.

32.  KLK’s grounds of appeal were settled by Mr Neoh SC, a very senior and eminent senior counsel. It was not unreasonable for Realray to expect KLKto be represented by Mr Neoh SC at the appeal. As such, it would be appropriate for Realray to consider instructing a senior counsel.

33.  Mr Chan SC was called to the Hong Kong bar in 1984 and to the inner bar in 2005. At the time of the appeal, he had about 4 years of experience as a senior counsel. In my view, the hypothetical counsel who would appropriately represent Realray at the appeal should be a senior counsel with Mr Chan SC’s standing or less.

34.  It is always relevant in assessing counsel’s fee to take into account the nature of work covered by such fee. According to the particulars provided in the Bill and Mr Chan SC’s letter, item 45 should cover the following work:

(a)  preparation in terms of going through the papers, advice in conference (see item 13 of the Bill) and communication (see item 54(A)(3) of the Bill);

(b)  settling the Supplementary Respondent’s Notice;

(c)  preparing skeleton submission, list of authorities and chronology for the appeal; and

(d)  attendance on 14 January 2009 before the Court of Appeal.

35.  Mr Chan SC has said that he spent “about a full month” on preparation. I understand this to be an estimation only, as Realray’s counsel has used 22 days in his calculation.

36.  One of the main points advanced by KLK at this review is that Mr Chan SC should not have spent much time on preparationgiven his involvement in the trial below. There were 15 appeal bundles comprising the relevant court documents, 424 pages of witness statements, and 1691 pages of transcripts. Lam J’s judgment is 47 pages long. Although Mr Chan SC was the trial counsel below and might have charged for perusal of these documents before, some 1.5 years had elapsed since the conclusion of the trial and it would be unreasonable to expect him (or any counsel) to rely on his memory to substantially deal with the appeal. This is all the more so as KLK sought to challenge many aspects of Lam J’s judgment on grounds such as that the finding was not supported by the evidence. In my view, it was necessary for Mr Chan SC to spend time in going through the papers againfor the purpose of the appeal.

37.  Having said all these, however, Mr Chan SC’sprevious involvement with case and the assistance rendered by his junior should have given him some advantage on preparation. All in all, I estimate that it would take a hypothetical counsel with experience of the trial below and the assistance of a junior counsel about 12full days to prepare the appeal inclusive of conference and correspondence.

38.  Speaking of the respondent’s notice, I should record the fact that KLK withdrew its objection to Realray’s entitlement to charge for drafting the respondent’s notice under item 3 of the Bill at the taxation hearing. Given the concession, there is no reason for KLK now to object to Mr Chan SC charging for settling the Supplementary Respondent’s Notice at this review.

(c) & (d)  The number and importance of the documents (however brief) prepared or perused.  The place and circumstances in which the business involved is transacted.

39.  These have been dealt with in the above discussion.

(e) & (f)  The importance of the cause or matter to the client.  Where money or property is involved, its amount or value.

40.  Realray’s counsel has submitted that the disputed areais about 3,570 square meters and is valuable after development. Although I have not been shown any evidence on valuation, it would not be difficult to appreciate that the value involved is substantial and the outcome of the appeal is important to Realray.

(g)  Any other fees and allowances payable to the 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.

41.  Mr Chan SC has only charged his brief fee and refresher for the appeal.

(h)  Other relevant considerations

42.  Mr Chan SC was assisted by junior counsel Ms Christine Tam in the appeal. I have allowed in full Ms Tam’s claim of $6,000 for drafting the respondent’s notice, $70,000 as the brief fee and $10,000 as the refresher for the appeal.

43.  Realray’s counsel has submitted that Ms Tam was relatively junior and so Mr Chan SC had to do the preparation himself. I note that Ms Tam was also involved in the trial below. There werealso substantial communication between her and solicitor for the appeal (see item 54(A)(3)(ii) of the Bill). She also assisted Mr Chan SC in preparing the Supplementary Respondent’s Notice, as well as the skeleton argument and the list of authorities for the appeal (see item 46 of the Bill). Notwithstanding Ms Tam’s seniority, I have to take into account the work done by her which has the effect of reducing the work of Mr Chan SC.

44.  At the taxation hearing, KLK’s law costs draftsman argued that on an appeal the same fees should be allowed to counsel as were allowed in the court below. He cited Wegmann v Corcoran 41 LT 792 in support.

45.  In that case, the taxing master allowed counsel the same fees for the appeal as had been allowed in the court below. Although Fry J did not see fit to alter the taxing master’s decision on quantum on appeal, he did so expressly “without laying down a hard and fast rule that the court will allow only the same fees in appeal as in the court below”. So, the case cited does not support KLK’s contention. In my view, such a contention confuses the work done by counsel for the trial with that done for the appeal.

46.  Having regard to all the relevant circumstances including the matters set out in paragraph 1(2), I have decided to adopt an hourly rate of $6,000 for the hypothetical counsel who would be capable of conducting the appeal effectively. I estimate that it would take about 12 days to prepare for the appeal inclusive of conference and correspondence and I also need to provide for the attendance on the first day of the appeal. The proper brief fee for the hypothetical counsel is therefore $624,000 (i.e. $6,000 x 8 x (12 + 1)).

CONCLUSION

47.  I have reconsidered item 45 in the light of the further evidence and submissions of the parties. For the above reasons, I agree that I should set aside my previous decision. Item 45 is now taxed and allowed at $624,000.

48.  Costs normally follow the event. I make an order nisi under O.62, r.5B that KLK do pay Realray the costs of this review. I direct the parties to fix a 30 minutes hearing before me for such costs to be summarily assessed if they cannot agree on the quantum.