CHINACHEM FINANCIAL SERVICES LTD v. CENTURY VENTURE HOLDINGS LTD

HCA 410/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 410 OF 2013

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HCMP 2299/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2299 OF 2013

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D E C I S I O N

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Introduction

1.  There are 2 reviews of taxation before this court..

Background

2.  The background of parties’ disputes can be located in four written decisions having handed down by two Judges in the present action.

(a) Deputy High Court Judge Ramanathan, SC dated 25 March 2014,

(b) Deputy High Court Judge Ramanathan, SC dated 7 May 2014,

(c) Deputy High Court Judge Marlene Ng dated 8 January 2015, and

(d) Deputy High Court Judge Marlene Ng dated 21 April 2015.

3.  For the present purpose, it suffices to set out the followings.

4.  The plaintiff was and is a Hong Kong company.  The defendant was and is a BVI company, specialising in providing service to handle claims and debt disputes in PRC.

5.  On 7 March 2013, the plaintiff commenced HCA 410/2013 in Hong Kong against the defendant for various declarations, including that the service agreement expired by effluxion of time or had been duly terminated, and as such, the plaintiff needed not pay any remuneration to the defendant.

6.  The defendant then issued a summons to apply to stay the HK action.  A director of the defendant prepared the supporting affirmation.

7.  The plaintiff took issues on the supporting affirmation, including that it contained privileged materials disclosed by its former CEO.  The plaintiff therefore applied, among others, to strike out those objectionable parts.

8.  Parties went before the Hon. G. Lam J. for the call‑over hearing of the striking out summons.  Upon consideration, the learned Judge directed, inter alia, a speedy trial for the hearing with 2 estimated days and that no affidavit evidence might be relied upon unless the deponents would be tendered for examination via video link.

9.  During the said hearing, the learned Judge raised a procedural point as to whether the relief sought was interim or final in nature.  Out of caution, the plaintiff issued HCMP 2299/2013 (the “MP action”) seeking in essence and in substance the same relief in HCA 410/2013 (the “HC action”).

10.  With these 2 proceedings, parties appeared before Deputy High Court Judge Ramanathan, SC. They were represented by 2 counsel, including one SC on each side. The hearing overran for 4 days and took a total of 6 days in October 2013. On 25 March 2014, the learned Deputy Judge handed down his detailed judgment. To cut short the long story, he agreed with the plaintiff and granted the relief sought, including an injunction against the defendant for any disclosure publication or dealing with in any way the privileged materials. A costs order nisi (together with certificate for 2 counsel) was awarded to the plaintiff.  

11.  On 7 May 2014, parties went back before the learned Deputy Judge and sought to clarify/vary the costs order nisi, asked for leave to appeal, so and so forth.  The Judge declined to vary his costs order nisi and it is indeed such costs order (having made absolute) the origin of the present taxation and review.

12.  Regarding the stay summons, parties later appeared before another Deputy High Court Judge Marlene Ng for one day in October 2014, with 2 counsel on each side, including one SC.  In the end, on 8 January 2015, the learned Deputy Judge dismissed the stay application with costs to the plaintiff with certificate for 2 counsel.

13.  Although there was no application for variation of the costs order nisi on this occasion, the defendant tried to seek leave to appeal the decision against it in the stay summons.  The learned Judge heard it in April 2015 and dismissed it within the same month by her written decision dated 21 April 2015.

14.  Pursuant to the said costs order made by Deputy High Court Judge Ramanathan, SC, the plaintiff filed 2 bills, one in the HC action and another one in the MP action. I dealt with the taxation of them on 6 September 2016. The defendant was not satisfied with the result and took out a review application.    

15.  On 27 October 2016, I dealt with the call‑over hearing of the reviews.  After hearing, I adjourned them to a date to be fixed before me with 3 hours reserved.  During the submissions, the solicitor acting for the defendant raised that 2 objections in the bill relating to the MP action had not been taxed and asked to do so then.  The LCD for the plaintiff disagreed.  Among others, including that there was even no formal summons before the court, I asked parties to see if anything could be agreed, failing which proper application should be issued.

16.  The defendant then issued another summons in MP action on 27 February 2017 seeking to restore the 2 “untaxed” items for taxation.  The summons was returnable before me at the substantive hearing of the present review.

17.  Parties appeared before me on 3 March 2017 for both the said summons and the taxation.  In the former matter, I had the assistance from 2 solicitors.  Mr. A. Mok acted for the plaintiff and Mr. Y.K. Leung represented the defendant.  As to the review, it was handled by 2 LCDs, Mr. A. Fung for the plaintiff, and Mr. A. Cheung, for the defendant.  Having heard from the parties, I adjourned my decision to be handed down.  Here it is.

The Summons

18.  Upon thought, I have decided to allow the summons and treat the 2 items as if they were brought before me by way of review. 

(a) There is no doubt that the defendant intended to object these 2 items.  Objections can be located in the list of objection having filed.

(b) There is also no doubt that (at least on balance) these 2 items were left “untaxed” because of oversight on the part of the 2 LCDs as well as me at the taxation.

(c) Parties have not been able to produce any authority for or against their arguments.  We have also been unable to dig out any assistance from the HKCP 2017.

(d) However, allocator has not been issued and this court therefore retains jurisdiction to deal with the oversight and rectify the mistake.

(e) As parties have come before me for the purpose of review, it must be the most appropriate occasion to deal with these 2 items within the review.

(f) In the event that leave to amend the application for review and abridgment of time were needed, I see fit to allow them accordingly in order to put right the proper application. The plaintiff will not suffer from any real prejudice as it has been informed of such mistake long time ago.      

19.  Under items 1 and 3 of the MP bill, the plaintiff claimed time for preparing the Originating Summons and Notice of Appointment to hear Originating Summons.  In the former, it claimed the costs of 2 assistant solicitors, the senior asked for 1 hour 42 minutes and the junior, 48 minutes.  In the latter, only the senior assistance solicitor asked for 18 minutes.

20.  The defendant objected the engagement of 2 fee earners. Time was said to be excessive. Only 25 minutes and 5 minutes respectively for 1 fee earner should be allowed.

21.  I agree with the defendant that the preparation of the 2 documents needed only one solicitor but not two. As to the time for them, I have reviewed their contents, they were in substance the same of the relevant summons issued in the HC action. I would allow 45 minutes and 10 minutes respectively for the senior assistant solicitor (BR).

(I)  Hourly rate of the partner

22.  In the 2 bills before me, the partner was admitted in 1982 and claimed the charging rate of $6,500 per hour.  The defendant said that it was excessive and should only be allowed at $4,000.  Having heard from them, I decided to allow it at $5,000 throughout the relevant period.

23.  At the review, parties repeated more or less the same factors for me to consider again.  I am not persuaded that to change my ruling at the taxation.

24.  To decide on the appropriate hourly rate for each fee earners under a bill, the taxing master shall exercise his discretion judicially, having regard to all the relevant circumstances, and in particular the following 7 factors[1].

(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, specialised 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 it, is the amount or value;

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

25.  Further, useful reference can also be located in paragraph 62/App/22 of the HKCP 2017 at p.1254,

“Hourly rates - From time to time, the Law Society, after consulting with the Registrar, High Court, circulates to solicitors the hourly rates of solicitors with different seniority and unqualified staff that may be allowed on taxation. While the suggested hourly rates are of considerable use in taxation, they are not binding on the taxing masters... Taxing masters may adjust the hourly rates when necessary. Assessing the appropriate rate of taxation is a matter for the individual judgement of the master who has examined the court file and will have seen whether, for instance, great responsibility has been accepted by the solicitor, or whether he has been exercising specialist skill, so as to justify a higher than usual rate. Similarly, the taxing Master will consider whether there has been unusual reliance upon counsel or failure to delegate mechanical tasks to junior staff so as to attract a lower than normal hourly rate. The hourly rate so arrived at is what is considered fair and reasonable in all the circumstances...”

26.  With the above, I remain of the view that $5,000 is the appropriate hourly rate of the partner for the team of solicitors acting for the plaintiff for the purpose of party and party taxation in the present two proceedings.

(a) The defendant argued that it was an interlocutory application involving no great complexity from both legal and factual background.  I disagree. In my view, the striking out application is complex and difficult. Mixed questions of facts and law[2] were involved, including confidentiality, actual or ostensible authority to waive privilege, breach of fiduciary duty, material allegation in the litigation and delay.  The striking out application took a total of six days.  Four witnesses attended for the purpose of examinations.

(b) The defendant also argued that specialist skill had neither been demonstrated nor exercised and there was reliance on both senior and junior counsel throughout.  I disagree again.  With the evidence before me, the partner took a leading and supervisory role in the matter.  He delegated suitable tasks to his junior team members, the assistant solicitors (the “AS”) within the firm and briefed counsel when it was necessary to do so.  Three affirmations were prepared by the plaintiff for the application.  The second affirmation of Chan Kam Por was prepared by the AS, settled by counsel and finally considered by the partner-in-charge.  For the remaining two (the 1^st and 2^nd affidavit of David Charles Parker), they were simply drafted by the AS and then revised and approved by the partner.  No assistance from counsel was sought.  The partner did not attend the hearings and saw fit to delegate the job to the AS for the whole of the 6 hearing days.

(c) Hearing bundle consisted of about 2600 pages of documents.  It is not particularly voluminous.

(d) The underlying disputes between the parties involve providing services by the defendant in PRC to the plaintiff.

(e) The monetary disputes between the parties was in the region of RMB 950 million.

(f) The MP action was instituted because of the procedural risks raised by the Judge handling the call‑over of the striking out application.  Such additional proceedings should not increase in any respect substantially the costs and effort spent by the plaintiff.

27.  With the above in mind, including of course the following comments made by Patrick Chan PJ in FACV 30 of 2008, I saw fit and still takes the view that the usual hourly rate of $4,000 for a solicitor with 10 years post qualification experience should be adjusted upwards in our case to reflect the role and work done by the partner.

“31. Since 1985, the Law Society, after consulting the Judiciary, started to issue circulars to its members from time to time informing them of the hourly rates which would be allowable by taxing masters on taxation.  These rates represent the amounts of fees per hour charged by solicitors of different seniority and experience and those charged by trainee solicitors and paralegal personnel.  The last circular was issued by the Law Society in 1997 as a result of a letter received from the then High Court Registrar dated 14 July 1997.  The rates contained in the Law Society circulars are of considerable use for taxing masters but are obviously not binding (see Wharf Properties & Another v Eric Cumine Associates & Others [1992] 2 HKLR 273).  They may be varied according to the circumstances of each case.

32. In relation to these hourly rates, two matters arise for consideration.  First, it is submitted that these rates are out of date.  As the Registrar noted, the “current” level of applicable hourly rates of fee earners was last revised in 1997 and has not been updated since then, although I understand that in April 2011, the Law Society started a survey on the level of solicitors’ fees but the results are still pending.  Meanwhile, taxing masters have adjusted the 1997 rates “upwards or downwards according to the special circumstances of the case” (Registrar’s decision, para. 35).  The Registrar considered it “speculative” for the Liquidator to suggest that these rates were outdated so that little weight should be attached to them.  However, in my view, while Hong Kong had undergone periods of inflation and recession since 1997, it is unrealistic to suggest that our financial and economical conditions have remained static in the last 15 years.  That is certainly not true with regard to the levels of office rentals and salaries for supporting staff.  These changes clearly have a consequential effect on the hourly rates charged by solicitors (and also counsel’s fees).  So while one should not completely ignore the 1997 rates, I think taxing masters should not feel constrained to start with figures higher than those rates.  How much higher depends on the taxing masters’ “knowledge and experience” of the current situation of the average solicitor or executive employed by the average firm (See Kerr J (sitting with assessors) in Leopold Lazarus Ltd v Secretary of State for Trade and Industry, unreported, The Times, 8^th April 1976.)”

(II)  More than one fee earners

28.  At the taxation, as the Judge hearing the striking out application allowing certificate for 2 counsel, I also allowed the solicitors acting for the plaintiff to adopt a team work and as such, sometimes, it would be inevitable that 2 fee earners would spend time on the same job, for example, both the partner and the AS would spend reading the affirmation in opposition because the former drafted the affidavits in reply and the latter approved the same.  The situation would also happen for some important conferences and documents which required the attendances and effort of 2 fee earners.  However, when the “team work” extended to more than 2, I taxed off the extra fee earners on the ground that they could not be necessary or proper within the party and party taxation. Further, as a matter of quantum, as I allowed the partner and the AS at the respective hourly rates of $5,000 and $4,000^[3], I generally took the view that less time ought to be spent by the more experienced fee earner.

29.  There are a total of 11 items for review under this heading, 6 in the HC bill and 5 in the MP bill.

(a) Drafting revising and finalizing the 2^nd affidavit of David Charles Parker (HC bill item 13)

(b) Considering skeleton and list of authorities of counsel (HC bill item 15.2 and MP bill item 4.2)

(c) Reviewing transcript (HC bill item 15.7 and MP bill item 4.7)

(d) Considering speaking note for closing submission of counsel (HC bill item 15.9 and MP bill item 4.9)  

(e) Conference with client (HC bill item 20.1.1 and MP bill item 9.1.1)

(f) Conference with counsel (HC bill item 20.2.2 and MP bill item 9.2.2)

30.  To sum up the reasons of objection under review, the defendant said that I should not have allowed the work to be undertaken by more than one fee earner.  There was duplication of work.  It was not demonstrated that each fee earner had made significant and tangible contributions.  Further or alternatively, the total costs exceeded those whose would have been incurred if there had been no delegation.

31.  At the review, the defendant further referred me to the decision of Master C. Chan (as he then was) in HCMP 2138/2008 (unreported) on 11 May 2009. Paragraph 38 of the decision states that:

“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 fee-earners are not allowed for both solicitors doing the same piece of work in a party and party taxation unless it is very complicated.”

32.  On the other hand, the plaintiff disagreed and reminded me that this court had followed one of the general rules of taxation as per item 2 of paragraph 62/App/21 in HKCP 2017 at p.1254.

“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 the 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 a partner respectively, and the overall costs incurred as compared to those incurred by a single fee earner. The costs attributable of the solicitor or the partner may be reduced or taxed off where appropriate.”

Further, the court only allowed 2 fee earners and taxed off the 3^rd and 4^th fee earners, if there was any.  The team work system was accepted.  With a view to save costs, the use of a supervising partner and assistant solicitors was appropriate.

33.  Parties were more or less repeating their arguments at the original taxation.  During the review, I took a further look at the relevant documents within the review of taxation bundles and remained of the same view that there was no duplication of work in principle.  Even if there were in some of the items, it would have to be case because of the team working system.  However, the overall costs (after reducing some of the time spent by the two fee earners and taxing off all the time of other fee earners) would be lower than those without delegation.

(III)  Brief fee for SC

34.  At the taxation, I adopted a hypothetical approach to assess the counsel fee. The respective hourly rates of $15,000 and $5,000 were adopted for the senior and junior counsel. I further assessed their brief fee and refresher in the followings.

		SC	JC
		(hours of work)
(a)	Preparation work	2	2
(b)	Opening skeleton, etc.	5	10
(c)	Consultations	2	2
(d)	Reading and research	2	5
(e)	Preparation for cross-examination and closing skeleton, etc.	10	10
(f)	First hearing day	5	5
		-----------	-----------
		26	34
		========	========

Further, with the same approach, I also allowed the refresher fee at $100,000 and $50,000 for the 2 counsel respectively.

35.  The defendant took issue at the review on the brief fee of the senior counsel only.  It was said that the current practice adopted by the majority of both senior and junior counsel was that refreshers would be based on 10 hours of work per day.  As such, since the senior counsel charged $100,000 in the present case, I should have allowed $10,000 per hour for the senior counsel.  In any event, the brief for the senior counsel was excessive because the application was interlocutory, there had been change of the leader, he was assisted by an experience junior and the hearing was only fixed for 2 days only.

36.  The plaintiff reminded me that all the matters had been raised in the original taxation and considered by me.  The said 7 factors in the present case were also repeated.

37.  To start with, I reminded myself again of the general principles for brief fee under paragraph 62/App/31 of HKCP 2017 at p.1256.

“Brief fee - 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...

In assessing counsel’s fes it is always relevant to take into account what work the fee, together with any refreshers, has to cover. The brief fee covers all the work done by way of preparation for representation at the trial and attendance on the first day of the trial...

Preparation by counsel of his examination-in-chief and cross examinations and of his final submissions is an ordinary part of his conduct of a trial on behalf of his client being or part of the work which counsel accepts an obligation to perform by accepting the brief and for which he is remunerated by the brief and refreshers. They also cover:

(a) Preparation work before the delivery of the brief on the faith of a solicitor’s statement that it will be delivered;

(b) Preparatory work in counsel satisfying himself that he should accept the brief;

(c) Evening preparation;

(d) Any consultations between members of the team of counsel;

(e) Advising experts at weekends;

(f) Conferring with experts without separate instructions;

(g) Lost opportunities;

(h) Chronologies, etc.;

(i) Skeleton arguments;

(j) Dramatis personae;

(k) Opportunities to prepare further when the court is not sitting;

(l) Preparation of the draft terms of collateral agreements.

...”

38.  I also remind myself of the factors as per paragraph 26 above.

39.  I disagreed with the defendant in his submissions. I do not accept the so called “current practice” accepted by the majority of counsel. There is no evidence adduced to show such practice. Further, from my experience in dealing with taxation, the hourly rate of a senior counsel may range from $8,000 to $20,000, depending on a number of different factors. In any event, I adopted a hypothetical approach and there was and is also no evidence before me that such assessment on the hourly rate on the senior counsel having breached the indemnity principle.

40.  Further, I do not accept that the sum of $390,000 was excessive in the circumstances. All the factors mentioned by the defendant were duly taken into account by me. One of course does not forget that there was examination of 4 witnesses within the interlocutory application. It made the substance of hearing akin to a trial.

Conclusion

41.  To conclude, subject to deductions made in the 2 items as per paragraph 21 above, the reviews are dismissed.

Costs

42.  In essence, I have refused the reviews. Although I have taxed down items 1 and 3 in the MP bill, it was the indulgence of this court sought by the defendant.  I therefore make an order nisi (to be made absolute within 14 days from the date hereof) that the defendant do pay costs of the reviews and the summons, including the hearing before me on 3 March 2016 and all costs reserved.  To further assess the costs by way of summary assessment:

(a) The plaintiff do serve and lodge its statement of costs within 21 days.

(b) The defendant do serve and lodge its comments within 7 days thereafter.

(c) The plaintiff do also serve and lodge its reply within a further 7 days thereafter.