FIRST LASER LTD v. FUJIAN ENTERPRISES (HOLDINGS) CO LTD AND ANOTHER

HCA 4414/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 4414 OF 2001

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CACV 126/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIAL APPEAL NO 126 OF 2008

(ON APPEAL FROM HCA NO 4414 OF 2001) 

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BETWEEN

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TAXATION REVIEWS

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Introduction

1.  There are two reviews of taxation before this Court, both on fees of Counsel.

Background

2.  The facts of the parties’ disputes are complicated.

3.  For the present purpose, very briefly, the Plaintiff (the Respondent and paying Party) is a Macau Company and the Defendants (the Respondents and Receiving Parties) are window companies of Fujian Provincial People’s Government.

4.  In 1996, the Plaintiff entered into agreements with the 1^st Defendant to purchase, inter alia, 51% of shares in Fujian Casix Laser Inc. (福建華科光電有限公司).  It was said that the Plaintiff paid (or was deemed to have paid) the price in March 1998 but the 1^st Defendant failed to transfer the shares.  Approval was not obtained from the relevant PRC government authorities for the transfer. The 1^st Defendant further sold the shares to a third party for US$60 million, of which was received by the 2^nd Defendant.  

5.  Two pieces of litigation arose.

(a)    The Plaintiff commenced the present proceedings in Hong Kong against the Defendants for, among others, damages or account of profits.

(b)    The 1^st Defendant sued the Plaintiff and others in PRC for declaration that the agreements were of no effect. 

6.  The two set of proceedings went on simultaneously and the PRC proceedings concluded first in December 2004.  The 1^st Defendant won.

7.  Under the proceedings herein, parties raised a number of difficult issues of law, including whether HK or PRC law should apply, the legal effect of the PRC judgment on the HK proceedings, and so forth.

8.  After a trial for 10 days in February 2008, the trial judge entered judgment for the Plaintiff with costs.

9.  The Defendants took up the matter to the Court of Appeal.  

10.  In the meantime, the Plaintiff proceeded to have its costs taxed.  After taxation before a master for 3 days in January 2010, the sums of about $1.4 million and $3.2 million were taxed for the profit costs and disbursements respectively.

11.  However, the Defendants won their appeal in January 2011.  The judgment below was set aside and an issue of restitution under PRC law was remitted to the trial judge for determination.

12.  Although the Plaintiff further brought an appeal to CFA but the same was later dismissed.

13.  In the circumstances, the Plaintiff not only cannot recover any costs from the Defendants, but also has to pay for them in all three levels of the Court.  I dealt with both the bills of the Defendants in the Court of First Instance and in the Court of Appeal for 10 days.

14.  The Defendants thereafter brought review of 4 items of counsel fees under the two bills, particulars of which are as follows.

HCA 4414/2001

Item No.	Description	Fees Claimed	Fees Allowed
78	Counsel Brief	SC - $2,500,000 JC - $730,000	$1,575,000 $378,000
80	Preparation of Closing Submissions	SC - $900,000 JC - $168,000	No No

CACV 126/2008

Item No.	Description	Fees Claimed	Fees Allowed
20	Counsel Brief	SC - $2,500,000 JC - $730,000	$850,000 $297,500
80	Supplemental Brief	SC - 720,000 JC - $240,000	$170,000 $59,500

At the review, Mr. MC Law of Counsel acted for the Defendants and Mr. P Chu of LCD acted for the Plaintiff.  Upon hearing from them, I reserved my decisions to be handed down.  I now do so.

15.  In assessing counsel fee, as in the original taxation as well as in the present review, I asked myself to bear in mind of the relevant principles from the White Book 2014 at pages 1190 - 1194, in particular the followings general principles.

“

Part III – FEES TO COUNSEL
General

(5) Since the Civil Justice Reform amended the wording of paragraph 2 (5) of Part II of the First Schedule to Order 62, counsel’s fees under party and party taxation is no different from taxation of other costs and expenses – the test of “necessary or proper” is applicable… In applying that test 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). They are:

(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, 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 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.

     …

Specific Fees

 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…

 It is not a sound principle on party and party taxation to treat the fee paid by the other party as a yardstick…

 In assessing counsel’s fee 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 trial…

 Preparation by counsel of his examination-in-chief and cross-examination and of his final submissions is an ordinary part of his conduct of a trial on behalf of his client being all 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 tem 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 draft terms of collateral agreements…

 Counsel is not normally entitled to be remunerated separately for necessary work which is an incident of the proper representation of the client; …

What was necessary and incidental to the preparation for representation at trial, and hence not chargeable separately, depending on the circumstances of the case. Where counsel was duly instructed to perform other work, in other words, work which was quite separate from the preparation for representation at trial and which was “necessary or proper” within the meaning of O.62 r.28 (2), such work could be claimed as a separate and discrete item of counsels… ”  

16.  Mr. Law made a number of general observations. I agree with them and indeed they were accepted by me at the taxation.

(a) At the taxation, the LCD acting for the Plaintiff had on more than one occasion informed that the Defendants’ bill in HCA 4414/2001 was blatantly excessive, totaling over $15,000,000. i.e. 3 times of the costs taxed at the Plaintiff’s bill. However, I could only refer him and reiterate that it was not a sound principle on party and party taxation to treat the fee paid by the other party as a yardstick.

(b) The action contained complicated facts and law issues. In fact, when I dealt with the brief of counsel at the taxation, I informed parties that:

(i) This was a case touching on complicated facts and difficult law, including dispute on PRC law.

(ii) The subject matter involved claims of over US$ 60 million.

(iii) The consequences of the litigation had important impact on both parties.

   However, at the same time, I also noted:

(iv) The Defendants took the matter very seriously. Without any undue respect to the team of legal advisers for the Defendants, quite some costs spent had been taxed off by me on the ground that they did not fall within party and party costs. 

(v) Counsel, both Senior and Junior, was engaged throughout the whole proceedings.  From time to time, Counsel’s assistance was obtained to assist on pleadings, discovery, expert evidence, witness statements and advices.

(vi) Even I taxed off certain counsel’s fees, both Counsel had received quite some remuneration in the proceedings.

17.  With the above in mind, despite the diligence of Mr. Law, I am afraid that he has not been able to persuade me to change my views at the taxation.

Brief for Trial and Preparation of Closing Submissions

18.  Senior Counsel was called to HK bar in the year of 1978, and Junior Counsel, in 1997.  At the material times, their respective hourly rates were about $15,000 and $2,800.  I took the view that they fell within the usual ranges though the one with Senior Counsel was at the high end and that of his Junior, the low one.  By the time when the case went before the trial judge, SC and JC had been allowed fees by me for over $1,000,000 and $300,000 respectively (out of fees charged for over $2,000,000 and $1,000,000).

19.  The case was set down for hearing of 20 days.  12 trial bundles consisting pleadings, 8 witness statements (1 for the Plaintiff and 7 for the Defendants), documents and expert reports on PRC law and handwriting. Counsel on both sides prepared, inter alia, detailed skeletons with substantial authorities.

20.  The trial eventually only lasted for 10 days.  The Plaintiff’s counsel spent the first 3 days for opening submissions, followed by 5 days for 3 witnesses and then, 2 days for closing submissions of both parties.

21.  At the taxation, I adopted a hypothetical approach, i.e. under party and party taxation, Counsel should have spent the following hours and levied their brief fees accordingly.

Jobs undertaken	Senior Counsel (hours)	Junior Counsel (hours)
Reading/revising papers	15	15
Preparation of skeleton, etc.	25	30
Reading skeleton, etc. of the other side	10	15
Legal research	5	25
Discussion	10	10
Final Submissions	25	25
Conferences during trial	10	10
Day 1	5	5
Total	105	135
Brief	$15,000 x 105 hours = $1,575,000	$2,800 x 135 hours = $378,000

I further allowed both Counsel a refresher based on 7 hours of work each day (i.e. 5 hours of court hearing and 2 hours for preparation, discussion, and so forth).

22.  As I had allowed time for Counsel to prepare final skeleton submissions in the brief fees, I did not allow any extra fees for preparation of closing submissions.

Brief for Appeal and Supplemental Brief thereof

23.  When the Defendants took the matter to the Court of Appeal, the Senior Counsel at the trial below was about to retire.  It necessarily caused a change of leader. Two new Senior Counsel were brought into the picture, charging hourly rates of $6,000 and $10,000 respectively.  The Junior Counsel was retained. However, though they won the appeal, only certificate for two Counsel was allowed.

24.  The appeal was scheduled to be heard for 5 days in June 2010.  The Defendant’s Senior Counsel took up half of the time for his oral submissions.  Then, in the middle of submissions by the Plaintiff’s Senior Counsel, he sought to amend its Respondent’s Notice.  The Defendants also asked for leave to file Rejoinder.

25.  Upon consideration, the Count of Appeal eventually allowed the applications but the appeal was left part-heard and had to be re-fixed for another 3 extra days in August 2010.  Counsel for the Defendants then charged a supplemental brief for the resumed hearing.

26.  Again, I adopted the hypothetical approach in assessing Counsel’s brief.

Jobs undertaken	Senior Counsel (hours)	Junior Counsel (hours)
Reading/revising papers	25	25
Preparation of skeleton, etc.	25	25
Reading skeleton, etc. of the other side	20	20
Conferences/ Discussion	10	10
Day 1	5	5
Total	85	85
Brief	$10,000 x 85 hours = $850,000	$3,500 x 85 hours = $297,500

As to refreshers, I also allowed them on 7 hours of work each day and as such, the sums of $70,000 and $24,500 respectively for both Senior and Junior Counsel.

27.  In allowing the above brief fees and refreshers, I asked myself to bear in mind the fees having charged and allowed by me for Counsel at the trial.  And of course, further fees were spent by Counsel to take up the matter to the Court of Appeal, including perusal of papers, advising in conferences, preparing affirmations, joint note of advice and (supplemental) notice of appeal as well as attendance before the trial judge for one day.  Under the relevant CA bill, before it came to the brief, Senior Counsel claimed over $500,000 and Junior Counsel, about $450,000.  After taxation, I allowed them at about $400,000 and $100,000 respectively.

28.  Supplemental brief is unusual as applications to amend notice of appeal, respondent notice, etc. at the substantive hearing are probably not uncommon even though they are highly discouraged especially after CJR.  However, I was persuaded at the taxation that the “changes” in the middle of the appeal fell outside the original scope of work anticipated by Counsel when they agreed with their brief fees.  Upon going through the new skeletons as submitted by both sides, I allowed an extra 10 hours of work to be spent by both Counsel.  Hence, the supplemental Briefs were allowed at $170,000 ($10,000 x 10 + refresher at $70,000) and $59,500 ($3,500 x 10 + refresher at $24,500).

The Review

29.  At the Review, I had the assistance from the junior counsel who conducted the trial and appeal.  Mr. Law also prepared a short skeleton explaining to me how complex the issues were with highlights at the number of trial bundles and authorities having deposed at different stages of the proceedings.

30.  Mr. Law had an uphill battle.

31.  As pointed out by Mr. Chu, LCD for the Plaintiff, there was no new material before me at the review.  There was also no allegation that discretion of this Court was exercised wrongfully at the taxation.  Those matters mentioned by Mr. Law had been fully ventilated before the Court at the taxation for 10 days.

32.  It is undisputable that the facts and law involved is complex.

33.  Mr. Law specifically suggested that the trial was shortened by 10 days because of the reasonable stance taken by his clients and word done by Counsel.  However, the Court of Appeal apparently took quite a different view when they deprived the Defendants for 45% of the costs in the action below by their Decision on costs handed down on 14 June 2011.  Paragraph 5 thereof states that:

“5. However, we are of the view that the defendants should be deprived of part of their costs below by reason of two matters. First, it had unnecessarily prolonged the trial by relying (which was later abandoned) on the defence of the lack of authority of the persons who signed the contract on their behalf. The plaintiff had to open its case and called evidence with its main witness being cross-examined on this issue. The abandonment only came when counsel for the defendants opened the case. Counsel informed the court that the defendants would not be calling evidence. Witness statements were exchanged. Substantial costs had been incurred and wasted. Second, the defendants failed in their defence that they had not agreed to transfer 51% of FCL to the plaintiff. They also failed in their defence on the issue of the uncertainty of the subject matter of the contract…”

34.  It is also indisputable that the team of counsel acting for the Defendants did an excellent job.  However, when it comes to taxation on party and party basis, one has to bear in mind paragraph 62/App/6 at p.1186 of HKCP 2014:

“Party and party basis … On a taxation of such a 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… the costs chargeable under a taxation between party and party are all that are necessary or proper to enable the adverse party to conduct the litigation, and no more. Any charges merely for conducting litigation more conveniently may be called luxuries, and must be paid by the party incurring them…”

At the end of both the taxation and the review, I remained of the same view that the team of counsel for the Defendants, in respond to the highly demanding clients, had provided luxurious services accordingly.  They therefore should be fully remunerated, but only on solicitor and own client scale, but not party and party scale.

35.  In the circumstances, the Reviews are dismissed. Parties agreed that costs of the review should follow the event and had no objection for a gross sum assessment by me in the form of order nisi.  To wrap up the matter, I therefore allow the sum of $12,900 to the Plaintiff.

Hearings:	5 March 2014 (15 minutes by LCD)	400
	7 July 2014 (2 hours by LCD)	3,200
Preparation:	LCD (3 hours)	4,800
	Solicitor (1 hour at $4,000)	4,000
Miscellaneous		500
		12,900
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Such costs order nisi will become absolute within 14 days from the date hereof.