R.A. STEGEMANN v. WISE POWER FAR EAST LTD AND OTHERS

HCA 282/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 282 OF 2005

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D E C I S I O N

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Background

On 7 July 2006 I made an order nisi in respect of the 3 applications before me which states as follows:

“(A)   In HCA No. 282 of 2005

(1)     The Plaintiff pays the costs of the 3rd Defendant for the whole action including the costs of the application to strike out and all costs reserved, if not agreed, to be assessed by me;

(2)     The directions I give for the assessment mentioned in subparagraph (1) above are:

(a)     A date for hearing be fixed for assessment with 1 hour reserved;

(b)     The 3rd Defendant shall at least 21 days before hearing file and serve a Statement of Costs in the form annexed; and

(c)     The Plaintiff shall within 14 days thereafter file and serve a list of objections to the Statement.

(3)     As between the Plaintiff and the other two defendants, each party pays its own costs in respect of the applications to strike out and for security for costs respectively.

(B)     In HCA No. 283 of 2005 I make no order as to costs for the application to strike out.

(C)    This order nisi will become absolute 14 days after the date of this judgment unless an application in writing to vary the order nisi is filed and served within the said 14 days.”

2. No application has been made by any party to vary the order nisi.  The order nisi has become absolute.  Unfortunate as it is, the 3^rd Defendant has not observed the direction I gave under Clause A(2)(b).  It did not give a Statement of Costs until 3 days before the hearing.  Inevitably the Plaintiff could not answer earlier except on the spot at the hearing.  I do not intend to adjourn the hearing.  I just accept such irregularities without raising any issue on it.  This is an example how Mr. Ho Chun Hung, the representative of the 3^rd Defendant, has treated the court’s order.

The Plaintiff’s Argument

3.  Mr. Stegemann, the Plaintiff, concedes that he accepts the consequence and responsibility for bringing in the 3^rd Defendant as a party in the High Court.  He gives many excuses and reasons to minimize his responsibility.  One of which is the learned adjudicator in the Labour Tribunal did not tell him the reason for dismissing his claim against the 3^rd Defendant so he tried again in High Court.  I must say that it is not for the court to give legal advice.

4. He also elaborates how he got confused by the correspondence, e-mail, receipts etc.  This is no longer relevant.  I have decided he has to bear the costs.  The order for costs has been made absolute.  Further, he has appealed and his appeal is not successful: he is also ordered to pay the costs of $1,000 for the appeal.

Assessment

5. Mr. Ho of the 3^rd Defendant gave very detail explanation to justify each item he claims.  I must make a distinction between assessment and taxation.  For taxation, I have to consider item by item in a bill of costs that easily runs into 30 or 40 pages.  For assessment, the individual items are grouped together under one main item.  I assess the main items to see whether the claims are justified.

Item D1 and D2: Application to act in person

6. Since the assessment is on party and party basis, the criteria can be found in Order 62 rule 28(2) i.e. I will allow “all such costs as were necessary or proper for the attainment of justice or for enforcing or defending the rights of the party”.  Applying the criteria, any costs attributable to the holding of directors’ meetings and applications to court authorizing Mr. Ho to act on behalf of the company will not be allowed.  These things are matters which a company must do in their normal course of business.  They can be regarded as administrative or overhead costs for running a business.  A company is expected to be represented by a lawyer.  Mr. Ho may argue that a lawyer will cost more.  It has saved Mr. Stegemann money by acting in person.  Such argument is not acceptable in respect of costs.  The application to act in person is regarded as unnecessary and unusual.  Because the 3^rd Defendant wants to take advantage of being a limited company, they should observe the law and engage lawyer.  Holding directors’ meeting when circumstances arise is part and parcel of its normal course of business.  I accept the directors’ time has been used but the directors are not entitled to the costs: it is the 3^rd Defendant I have awarded costs.

7. I do not allow items D1 and D2.

Item B: Lawyers’ Charges

8. This is an item relating to Solicitor and Counsel fee engaged by all 3 Defendants for the period from 12 May to 8 December 2005.  I understand from the documents produced: counsel charged $18,000 (i.e. $10,000 + $8,000) and solicitor’s fee is $32,750 ($5,000 + $27,750).  The two sums together with other disbursements come up to $52,432.00 as shown in the bill.

9. I have not certified that this is a case fit for counsel.  I will not allow it.  From the correspondence, I note that the solicitor firm accept $30,000 in full settlement of the bill for the services rendered during the period.  The three defendants have paid the said sum of $30,000.  The 3^rd Defendant claims the costs on the basis of $29,000 because $1,000 has been used in respect of amending the Statement of Claim in HCA 283/2005 which does not concern the 3^rd Defendant.

10. I have to consider how much of this $29,000 is used for defending the 3^rd Defendant.  The easiest way is to divide it by three as there are 3 defendants.  But, such division is not fair and does not really represent the amount of effort and time used attributable to the 3^rd Defendant.

11. Ms. Kitty Tsang, counsel for all the defendants prepared its case for the 3^rd Defendant on only one point: no privity of contract.  She might have to examine the evidence produced by the Plaintiff and this could have been done in the course of preparation.  I would consider the proportion of 1/5 of the total amount of time and effort spent for the 3^rd Defendant in respect in action HCA 283/2005 is the right share.

12. Another factor that affects my decision on item B is that the solicitors were asked to handle two cases together.  The facts relied on were the same set of facts.  It is difficult to say which part is attributable to HCA 282/2005 and which to HCA 283/2005.  It cannot be denied that the main purpose of the whole process from the Defendants’ point is to defend the claim by the Plaintiff in HCA 282/2005.  The Defendant’s claim in HCA 283/2005 can be regarded as a counterclaim and is ancillary to HCA 282/2005.

13. Taking all these factors together I would consider 1/5 of the total time and work should be allocated to the 3^rd Defendant.  I allow a sum of $5,800, i.e. 1/5 x $29,000.00.

Item C: Handing over materials

14. I have great hesitation in allowing this item relating to the process of hand-over of documents and materials to Mr. Ho for the 3^rd Defendant.  The same argument I have given relating to items D1 and D2 applies.  Had the solicitors continued to act for the 3^rd Defendant this would not have happened.

15. The 1^st and 2^nd Defendants are individuals.  They are free to decide whether to be represented by lawyers or not.  This is a matter of their own choice.  The process of handing over the materials by the solicitors when they cease to act is not something necessary in the defending the case.

16. I do not allow this item.

Item E1: Waiting Time

17. All the waiting time has been billed by the solicitors in Item B.  The 3^rd Defendant cannot separately charge for it.

18. I do not allow item E1.

Item E2: Hearings

19. It composes of two points: (a) hearing in Labour Tribunal and (b) hearing at High Court when the Defendants acting in person.  The total time spent is 19.5 hours.  I consider 1/5 of the total time spent as the right proportion.

20. I allow 3.9 hours for the 3^rd Defendant.  For those acting in person, the usual rate is $200 per hour.  I allow a sum of $780.00.

Item F: Perusal of Documents

21. I agree that many documents have been filed with court.  I have not counted the number but many of them are the same documents being filed more than once.  The rest are the grounds or reasons for claims submitted by the Plaintiff at different time.  They are nothing more than elaboration of the same points again and again.  One can easily recognize and consider them.  The claim of 200 hours is grossly exaggerated and excessive.  I allow 15 hours.  The 3^rd Defendant is entitled to only 1/5 of the time.

22. For Item F, I allow 3 hours i.e. $600.00.

Item G: Preparation of Documents

23. It consists of letters to the Court, Chronology of facts, Chart of 3 Defendants’ relationship, Index of exhibits and “Flow of suing respective companies and abusing different claims”.  They are not pleadings or any part of them.  I find most of them are not necessary or helpful at all.  I allow 6 hours in total for the whole exercise.

24. As the proportion I have decided for the 3^rd Defendant is 1/5, the time and costs allowed for the 3^rd Defendant is 1.2 hours i.e. $240.00.

Item H: Perusal of Correspondence

25. Most of the letters are from Court and the Plaintiff resulting from complaints which have no relevance to the defence of the action.  I allow 1 hour in total.

26. I apply the formula of 1/5.  I allow 0.2 hour i.e. $40.00.

Item I: Preparation for 3 hearings

27. I allow 5 hours as preparation for each hearing as appropriate instead of 40 hours (i.e. 120 hours/3) as claimed.

28. I apply the same 1/5 ratio.  I allow 3 hours (5 hours x 3 hearings ¸ 5) i.e. $600.

Item J: Costs of Appeal

29. Costs of Appeal has been awarded by the Mr. Justice Burrell.  The costs for enforcing it is not something I have power to deal with in this hearing.  I disallow it.

Item K: Photocopying charges and postage

30. The Defendants claim $2,000 for photocopying charges at 50 cents per page i.e. 4,000 pages.  I do not find so many photocopies have been made for Court and the Plaintiff.  My estimate is 1,500 pages for the two.  I allow $750 in total.

31. Applying the 1/5 formula, I allow $150.

32. Postage is regarded as the overhead and the operation costs of a company and it is not claimable.

Item L: Preparation of the Statement of Costs

33. I do not consider using 8 hours to prepare the Statement is proper or necessary.  I allow 2 hours i.e. $400.

Summary

34. My assessment of the costs of the 3^rd Defendant in respect of the whole proceeding including the strike out application is $8,210.00 made up as follows:

B:	Lawyers’ Charges (paras. 8 to 13)	$5,800.00
C:	Handing over materials (paras. 14 to 16)	NIL
D1 & D2:	Application to act in person (paras. 6 to 7)	NIL
E1:	Waiting time (paras. 17 to 18)	NIL
E2:	Hearings (paras. 19 to 20)	$780.00
F:	Perusal of Documents (paras. 21 to 22)	$600.00
G:	Preparation of Documents (paras. 23 to 24)	$240.00
H:	Perusal of Correspondence (paras. 25 to 26)	$40.00
I:	Preparation for 3 hearings (paras. 27 to 28)	$600.00
J:	Costs of Appeal (para. 29)	NIL
K:	Photocopying charges and postage (paras. 30 to 32)	$150.00

Order

35. I must not forget the costs of the hearing of the assessment which has lasted for 2½ hours.  There is no reason for me to depart from the general principle that costs follow the event.  I should allow the full costs for it i.e. 2½ hours x $200 = $500.00.

36. I order that the Plaintiff i.e. Mr. R.A. Stegemann pay the 3^rd Defendant a sum of $8,710.00, being the 3^rd Defendant’s costs of this action.