XCHRX SY ENGINEERING CO. LTD. v. BINNIE CONSULTANTS LTD. AND OTHERS

HCCT 49/1996

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION & ARBITRATION LIST NO. 49 OF 1996

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REVIEW OF TAXATION

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INTRODUCTION

1. This review of taxation is brought by the 6th defendant against my decision to tax off certain items in its bill of costs. For present purposes, it is necessary to set out the main procedural steps taken by the parties in both the court proceedings and the parallel arbitration proceedings.

2. It is convenient to first deal with the arbitration proceedings. The plaintiff and the 6th defendant entered into a piling contract dated 19th October 1994 ("the piling contract"). Certain disputes thereunder subsequently arose. Pursuant to an arbitration clause contained in the piling contract, the plaintiff referred the disputes to arbitration on 15th and 16th February 1996. The notice of arbitration was then served on the 6th defendant on or about 8th May. The 6th defendant confirmed its agreement to arbitrate on 3rd June. The arbitrator accepted the appointment on 29th August and duly gave directions to the parties regarding the conduct of the arbitration proceedings. The arbitration then proceeded.

3. The court proceedings began shortly before the appointment of the arbitrator when on 19th August 1996, the plaintiff issued a generally endorsed writ against the 6th defendant and other defendants involved in the work done under the piling contract. The claim, allegedly arising from breach of contract and breach of duty in tort, exceeded HK$183 million. However, the writ was not immediately served on the defendants.

4. The 6th defendant soon became aware of the issue of the writ from a newspaper report. Subsequently, by a letter dated 5th October 1996, its solicitors informed the plaintiff's solicitors that all differences and disputes between the parties including those in the court proceedings should be referred to arbitration and that it would not take any steps in the court proceedings.

5. The writ was eventually served on the 6th defendant. It then filed an acknowledgement of service on 21st January 1997. By a summons filed on 24th January and returnable on 18th February, the plaintiff applied to extend the time for filing the statement of claim. On 14th February, the 6th defendant took out another summons returnable on 21st February for a stay of proceedings. The plaintiff's application was heard by Findlay J. who ordered that the plaintiff was to file and serve the statement of claim by 17th March 1997.

6. On 21st February, the parties filed a consent summons to adjourn the 6th defendant's application to a date to be fixed. After service of pleadings, the plaintiff withdrew its action against the 1st to 5th defendants on 4th June 1997. Three months later on 5th September, the proceedings against the 6th defendant were by consent stayed with costs of the action against the plaintiff, to be taxed if not agreed. The 6th defendant's bill of costs was submitted for taxation on 16th March 1999.

CONDUCT OF PROCEEDINGS

7. The court proceedings on behalf of the 6th defendant were conducted by a team of solicitors including Mr. Bernard Fleming, Mr. Glenn Haley and Mr. Geoffrey Shaw. Mr. Fleming was admitted in New Zealand in 1977, later served in the then Attorney General's Chambers of Hong Kong from 1985 to 1991 and was admitted as a solicitor in Hong Kong in 1993. Mr. Haley was admitted in Australia in 1984 and in Hong Kong in 1990. Mr. Shaw was admitted in Australia in 1982 and later in Hong Kong in 1988. At the taxing hearing, it was submitted by Mr. Shaw that they have considerable experience and expertise in construction cases. That was accepted by me and solicitors' profit costs generated by their work were taxed on that footing.

8. Despite the strength of the representation, both senior and junior counsel were instructed. Mr. Shaw who appears before me for this review refers to the provisions in the 1st Schedule of Order 62 on counsel's fees and seeks to justify the instruction of counsel on various grounds:

(1) The amount of claim was very substantial.

(2) The case was of great importance to the 6th defendant.

(3) The case involved complicated factual and legal issues.

(4) The plaintiff itself had engaged leading counsel from the early stage of the proceedings.

(5) The parallel arbitration proceedings had complicated the matters. The 6th defendant had to be careful before it did anything in connection with the court proceedings, lest its act might constitute "a step taken in the action", giving rise to a waiver of its right to seek a stay for arbitration. I will refer to this ground as the "taking a step in the action" ground.

REVIEW

9. Most of the items under review relate to counsel's fees. I accept that the factors listed above are relevant and I will take them into account when deciding this review. I also bear in mind the relevant provisions in the 1st Schedule of Order 62.

10. Mr. Shaw relies on the "taking a step in the action" ground virtually in connection with all the items of counsel's fee under review. It is therefore convenient to deal with this ground before turning to the specific items. Mr. Shaw refers to a passage in Mustill & Boyd on Commercial Arbitration at p. 472 and submits that the authorities give no clear guidance on the nature of a step in the proceedings. Counsel's advice was therefore necessary. However, in the same passage, the learned editors say:

"The circumstances which accompany an act may be looked at to see whether the act amounts to an election to give up the right to a stay. Thus, an application to the Court which might otherwise amount to a step in the proceedings is deprived of this characteristic if the applicant makes it clear - by stating that his application is without prejudice to a subsequent request for a stay, or by simultaneously taking out a summons to stay - that he intends to insist on a reference to arbitration."

11. In my view, with this clear proposition of law, the handling solicitors, armed with their considerable experience and expertise, should generally have no difficulty in addressing the "taking a step in the action" ground, advising the 6th defendant what to do and taking the appropriate action accordingly, without resorting to counsel's advice. The position would be altogether different if the handling solicitors did not possess such experience and expertise.

12. With this note, I now turn to the items one by one.

ITEM 3: SENIOR COUNSEL'S FEES FOR CONFERENCE ON 12TH SEPTEMBER 1996 ~ $9,000

13. Half of this one hour conference was spent on discussing the present action. I have inspected the attendance notes kept by Mr. Fleming. The rest of the conference concerned the arbitration proceedings. Counsel's fees claimed for this part of the conference were $9,000.

14. It should be noted that at this stage, the arbitration proceedings were still going on and that the writ, though issued, had yet been served on the 6th defendant. The question of whether any act taken by the 6th defendant would constitute a step in the action had plainly not arisen yet.

15. Mr. Shaw, however, submits that the court proceedings gave the 6th defendant an option: (1) it could either seek a stay for arbitration or; (2) it could defend the proceedings together with other defendants and there would be no arbitration. Deciding which step was most advantageous for the 6th defendant was obviously an important tactical question. It was therefore not unreasonable to seek advice from senior counsel.

16. I accept this submission. Given the size of the claim and the implications that might follow from the choice to arbitrate or litigate, it was reasonable to seek senior counsel's advice. I am therefore prepared to review my decision and allow this item. But the fees claimed were clearly excessive and unreasonable. I will only allow a fee of HK$4,000.

ITEM 5: SENIOR COUNSEL'S FEES FOR CONFERENCE ON 29TH NOVEMBER 1996 ~ $6,000

17. At this stage, the writ had not been served yet. Further, by the letter of 5th October 1996, the 6th defendant's solicitors had already emphatically stated that all differences and disputes between the parties including those in the action should be referred to arbitration, and that the 6th defendant would not take any step in the court proceedings. Mr. Shaw says that this conference was held to review the matter and nothing particular had happened since the last conference with senior counsel. In the circumstances, I do not consider it justified to seek senior counsel's advice in conference. This item is not allowed.

ITEM 14: JUNIOR COUNSEL'S FEES FOR CONSULTATION WITH SENIOR COUNSEL ~ $1,100

18. On 30th January 1997, junior counsel consulted senior counsel regarding the plaintiff's application for extension of time to file the statement of claim. There was no separate charge by senior counsel for this consultation.

19. Mr. Shaw seeks to rely on the "taking a step in the action" ground. But given the clear proposition of law as stated above, I do not accept that the joint consultation between counsel was justified on a taxation under the party and party basis. Review on this item fails.

ITEM 15: SENIOUR COUNSEL'S FEES FOR ADVICE ON DARFT SUMMONS ~ $9,000

20. The draft summons was for an application to stay the proceedings for arbitration. Mr. Shaw again tries to justify this item on the "taking a step in the action" ground. I repeat my earlier observation in this regard. Further, I have considered the summons and am of the view that the handling solicitors should have no difficulty to prepare the summons without the assistance of counsel. I do not see the necessity to instruct senior counsel to advise on the draft summons.

ITEM 17 & 18: SOLICITOR'S ATTENDING CONFERENCE WITH COUNSEL FOR ADVICE AND COUNSEL'S FEES THEREFOR ~ $9,600 AND $10,000 RESPECTIVELY

21. The advice rendered in the conference on 10th February 1997 was in connection with the plaintiff's application for extension of time to file the statement of clam. Similar justification by the "taking a step in the action" ground is advanced. I am of the view that the handling solicitors themselves should be able to give the proper advice. Accordingly, I do not consider it necessary to seek counsel's advice on the plaintiff's summons.

22. I have considered the affidavit filed in opposition and in my view, it clearly falls within the expertise of the handling solicitors to prepare and to give advice on. Counsel's fees are therefore not allowed.

23. Having said this, I note that there is no separate charge claimed by Mr. Fleming for advising the 6th defendant on the plaintiff's summons and the affidavit to be filed in opposition. I will therefore allow a charge for the work done by Mr. Fleming in this respect. Having considered the matter, I take the view that the time spent (3 hours) was excessive. I will only allow 2 hours. My decision on item 17 is therefore varied to the extent that a sum of $6,400 is recoverable.

ITEM 19: JUNIOR COUNSEL'S FEES FOR CONSULTATION WITH SENIOR COUNSEL ON STAY APPLICATION

24. By the reason stated under item 14, the consultation was, in my view, not justified on a party and party taxation.

ITEM 21: COUNSEL'S FEES FOR SETTING THE AFFIDAVIT OF SIMON LEE ~ $2,475

25. Mr. Simon Lee was a deputy principal crown counsel when he made this affidavit. It set out the grounds in support of the stay application, including the prejudice, expenses and inconvenience caused by the parallel proceedings. These grounds are common in similar applications for stay for arbitration. Preparing the affidavit is clearly within the expertise of the handling solicitors. A separate fee for counsel to settle it is thus not allowed.

ITEM C1 & C2: ATTENDANCE ON COUNSEL REGARDING ADVICE

26. Attendance on counsel will not be allowed if no fee is payable to counsel: Singsby v. AG [1918] P 276 at p. 241, C.A. Having gone through the materials pertaining to item C1 & C2, I will allow the following items:

	Item		Time allowed		Amount allowed after adjustment of hourly rate, if any
(a)	1 letter dated 4/9/96 written by Mr. Fleming to senior counsel		5 min		$267
(b)	1 letter dated 22/8/97 written by Mr. Haley to junior counsel		10 min		$500
(c)	1 letter dated 25/8/97 written by Mr. Haley to junior counsel		5 min		$317
(d)	3 telephone calls with junior counsel on 22, 25 and 26/8/97		5 min each, totalling 15 min		$950

27. Item (a) is in connection with the conference with senior counsel on 12th September 1996. Item (b) to (d) are the correspondence with junior counsel on her advice given on 22nd and 25th August 1997.

ITEM G1: CONSIDERING O.12 RULE 8A

28. Mr. Fleming spent 20 minutes considering Order 12 rule 8A in the light of the plaintiff withholding serving the writ. As noted, Mr. Fleming is a very experienced solicitor in this field. He should be conversant with the effect of the rule. Charging a particular fee on considering something he is expected to have sufficient knowledge is, in my view, not permissible on a party and party taxation. Nor is he entitled to charge for the time spent on revising his knowledge of the rule either.

CONCLUSION

29. By the foregoing reasons, I review my decision on items 3, 17, C1 and C2 to the extent as stated above. The balance of the review fails and is dismissed accordingly. Upon the parties' request, I will not make any order on the costs of the taxation and of the review. If necessary, they should make the application on those costs within 14 days from the date of handing down.