HONG LEE & CO (A FIRM) v. THE LAW SOCIETY OF HONG KONG

HCMP 2025/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2025 OF 2011

_________________________

_________________________

__________________________________

REASONS FOR REVIEW OF TAXATION

__________________________________

A. Background

1. This taxation arose from the defendant’s intervention in the legal practice of the plaintiff which was a firm of solicitors comprising a sole practitioner, Mr Hong Lee (“Mr Lee”).

2. Consequent to a bankruptcy order made against Mr Lee on 6 October 2008, the Council of the Law Society passed a resolution to intervene in Mr Lee’s practice on 8 October 2008 under s26A(1)(d) of the Legal Practitioners Ordinance (Cap 159), and appointed Mr Ludwig Ng (“the Agent”) of ONC Lawyers as the intervention agent.

3. On 5 November 2008, Mr Lee obtained an order for the annulment of his bankruptcy order.  On 25 November 2008, he was issued a new practicing certificate.  The intervention ceased on 5 January 2009 and the defendant’s bill of costs covered the period of the work incurred by the Agent for the period of 8 October 2008 to 5 January 2009.

4. The bill was taxed on an indemnity basis.  After the bill was taxed, Mr Lee on 2 December 2013 issued a summons for review.  Attached to the summons was a schedule containing 15 items of review together with Mr Lee’s objections. Review item 10 was withdrawn.  Thus, there were altogether 14 items in this review.

B. Reasons for Review

B. 1 Hourly Rates

Item 1

(Bill Item 3)

5. This item concerns the hourly rate of RY, a senior associate admitted to practice in 2001.  The hourly rate was charged at $2,700.  I allowed $2,200.

6. Mr Lee suggested that the hourly rate of 2,200 I allowed for RY was excessive on the ground that with the exception of only one particular item of work that was legal work, the rest of the work RY had done appeared to be routine, involving only clerical and administrative work.

7. I am unable to accept Mr Lee’s submission that the work RY had done was only administrative, as he was not able to show that the work done by RY was only administrative and routine.

8. The law costs draftsman (“LCD”) for the defendant had referred to bill items 23.15 and 23.16.3 that described RY as having written letters, which tasks, the LCD submitted, were not clerical but legal.

9. I agree with the LCD that the kind of letters RY wrote could not have been administrative, and that it was not correct to say that they should have been written by a clerk as Mr Lee seemed to suggest.  This bill was taxed on an indemnity basis, and I do not find it unreasonable for the Agent to have engaged a properly qualified solicitor to do such work as described in the bill.

10. Item 1 is dismissed.

Item 2

(Bill Item 4)

11. This item relates to the hourly rate of WSL, an associate who was admitted in 2007.  The hourly rate was claimed at $1,800 and I had allowed this rate in full at the taxation.

12. Mr Lee’s ground of review is substantially similar to Review Item 1 above in that it was suggested that the work WSL had only done was only administrative work which could have been competently performed by either an articled clerk or a solicitors’ clerk.

13. I disagree with Mr Lee’s submission.  According to the work descriptions set out in the bill, WSL had been assigned to assist the Agent. WSL was required to read the relevant documents before she was able to properly do the various tasks that included her attending a court hearing on a watching brief, communicating with the relevant parties, writing letters and making telephone calls.  Such work clearly is not administrative as Mr Lee had submitted, but rather it is legal work.

14. Accordingly, this item of review is rejected.

Item 3

(Bill Item 5)

15. This item concerns the hourly rate claimed at $1,100 of a trainee solicitor (“TS”).  I had allowed this item in full.

16. Mr Lee’s suggested that since TS was not a legally qualified person, the reasonable rate should be $600 per hour.

17. The hourly rate of $1,100 for TS had been the defendant’s suggested rate on a party and party taxation.  I am satisfied that this rate on an indemnity basis was reasonable.  I thus reject this item of review.

Item 4

(Bill Item 6)

18. This item relates to the hourly rates of legal executives and, paralegals, and I had allowed $800 per hour for this category of fee earners as claimed in the bill.

19. Mr Lee contended not all fee earners who had claimed $800 an hour in the bill were legal executives.  He said that according to the ONC Lawyers’ office bill he had previously received, there were in fact two paralegals, one legal executive and a clerk who had been subsumed under this category in the bill.  Mr Lee therefore submitted that paralegals should only be remunerated in the same rate as clerks.  He thus suggested that an hourly rate of $500 and $300 should only be allowed respectively for a legal executive and a paralegal.

20. I am unable to agree with Mr Lee’s objections.  First, Mr Lee was not able to provide any basis to support his suggested rates of $500 and $300 per hour respectively for a legal executive and a paralegal. Secondly, the hourly rate of $800 was the rate the defendant had agreed to remunerate the Agent.  I also believe that the description “paralegal” has been used loosely by the defendant to include paralegals, clerks and legal executives who had been assigned to generally assist with the intervention work of the Agent.

21. For these reasons, this item of review is dismissed.

Item 5

(Bill Item 4)

22. In this item, the defendant claimed the cost of one hour for a conference it held with the Agent. The conference was attended by the Agent’s three fee earners of LN, AL (a senior consultant) and RY.  I allowed the one hour as claimed by all three fee earners.

23. Mr Lee’s submitted that I should not have allowed any costs for this item as the conference was no more than an internal discussion.  Alternatively, he suggested that I should only allow 30 minutes for LN, and tax off the costs of the other two fee earners.

24. The LCD had produced a report that recorded the content of the conference as well as time sheets recording the time having been spent for the conference.  I am therefore satisfied that it was reasonable for the conference to have been held, and that the time claimed by the Agent had also been reasonably incurred.  This item of review is accordingly dismissed.

Item 6

(Bill Item 5)

25. In this item, the defendant claimed the costs of 4 fee earners, LN, AL, RY and TS, for the 2 hours and 30 minutes having been spent by the Agent on 9 October 2008 in attending Mr Lee’s office.  I allowed the costs of all 4 fee earners claimed in the bill.

26. Mr Lee contended that I should not have allowed the fees of 4 fee earners.  He alleged that on that day the four fee earners from the Agent’s office only walked around his office and that they had nothing to do with intervention.  He suggested that 1/2 hour be allowed for LN, but no time for the other 3 fee earners.

27. 9 October 2008 was the first time the Agent attended Mr Lee’s office after he had been instructed by the defendant to conduct intervention on 8 October 2008.  Since it was the Agent’s first attendance on Mr Lee’s office, it was reasonable in my view for him to have brought other colleagues with him so that they could familiarize themselves with the extent of the work to be carried out to enable the Agent to conduct the intervention with efficiency.

28. The defendant had produced the Agent’s a report setting out the work he had done on that day.  The report showed that the Agent had held discussion with Mr Lee concerning office files, accounts and bookkeeping.  The Agent’s colleagues also indexed all the active and completed files of Mr Lee’s firm. Judging from the description of the work from the report, I believe that the Agent knew that he would be required to carry out a number of tasks in connection with the intervention.  The Agent, in order to be able to do the work efficiently and competently, would need to be, in my view, assisted by his colleagues who specialized in different areas.  For example, AL, according to the LCD, had been assigned to handle conveyance files and RY to assist LN.  It is true that the report made no reference to any specific task assigned to TS.  I am however of the view that it would have been reasonable to involve a TS at such an early stage of intervention so as to allow himself to be familiarized with the nature of the work and assist the Agent with more routine tasks  such as the indexing of files (as referred to in the report).

29. For the reasons above, I respectfully disagree with Mr Lee that it was unreasonable or excessive to have allowed the fees of the 4 fee earners .

30. This item of review is therefore rejected.

Item 7

(Bill Item 7)

31. This item is concerned with the fees of two legal executives, a Mr Wong, and a Mr Kwan, for indexing Mr Lee’s office files.  According to the bill, they had worked for 2 days and respectively spent 24 hours and 8 hours 30 minutes. At the taxation, I had allowed the time claimed in full.

32. Mr Lee, according to his objections stated in the schedule attached to the summons, wanted to review the time claimed by both of the legal executives. At the hearing, Mr Lee clarified that he only wished me to review the 24 hours that I had allowed for Mr Wong.  Mr Lee submitted that the time that I had allowed was excessive.  It was contended that for Mr Wong to have claimed 24 hours for the 2 days’ work, he would have worked on average 12 hours a day, which length of time was unusually long.  He submitted that 8 hours a day would have been reasonable.

33. In response, the LCD contended that the time was reasonable due to the fact that Mr Lee’s files were in a chaotic state.  In order to show the state of Mr Lee’s office, the LCD produced a bundle of photos that showed files were strewn around Mr Lee’s office.  The LCD further referred to a copy of the “Manual on Interventions” prepared by the defendant in January 2002.  In para 15 of the Manual, it stipulates a requirement that an intervention agent was required to index the files in accordance with the procedures approved by the Standing Committee on Compliance, which include preparation of computer index and guidelines set out in an appendix.  The LCD therefore submitted that as the legal executives were required to follow the procedures stipulated in the manual, extra time would have been needed to do the indexing.

34. I have carefully considered the arguments of both parties.  Whilst I agree that extra time would be needed due to the procedures set by the defendant, a 12 hours working day, as Mr Lee suggested, was also unusually long, and should be supported by evidence.  The defendant however was not able to produce any time records in support.  For these reasons, I accept Mr Lee’s objection, and tax off 8 hours from the total time of 24 hours claimed in the bill.  Accordingly, I review the time I have taxed by only allowing 16 hours for Mr Wong.

Item 8

(Bill Item 21)

35. This item is concerned with the attendance by AL, who specialized in conveyancing, and a legal executive in Mr Lee’s office.  In the bill, the defendant claimed for 2 hours for both of these fee earners, and I allowed the time claimed in full.

36. The LCD explained that the purpose of the attendance on Mr Lee’s office on that occasion was to search the title deeds in relation to a conveyancing transaction involving Mr Lee’s former client who had approached the Agent for assistance.

37. Mr Lee disputed that the Agent’s colleagues had ever attended his office for locating conveyancing files.

38. Contradictory to his denial of such an attendance, Mr Lee contended that it was unreasonable for AL to spend 2 hours in his office because the missing conveyancing file was subsequently found by him.  He further disputed the reasonableness of allowing the costs of the legal executive.

39. Mr Lee’s first objection in my view could be disposed of very quickly because I had inspected a contemporaneous email record of the attendance for the search of the relevant papers.  I am satisfied that the fee earners had attended the office to search for the relevant file.

40. Since the purpose of this attendance was in relation to a conveyancing matter, I am of the view that it was wholly reasonable for AL, who specialized in conveyancing, to attend.  The record also recorded the time spent.

41. As for Mr Lee’s other objection against the costs claimed by the legal executive, I am satisfied that it was reasonable for AL to be assisted by a legal executive with the search.  The suggestion of Mr Lee that his finding of the missing file rendered the attendance by the legal executive unnecessary is, in my judgment, baseless.  Whoever finally found the missing file, the record showed that the fee earners had actually spent the time claimed.  I thus reject Mr Lee’s submission.

42. For these reasons, I would also dismiss this item of review.

Item 9

(Bill Item 22)

43. In this item, I allowed 2 hours for AL and 18 hours for each of RY and WSL as claimed in the bill for reviewing 153 files of Mr Lee’s firm.

44. Mr Lee objected to the time that I had allowed on the ground that since the majority of the files had been closed, the Agent would not have been required to take any action, and thus only to spend very little time for reviewing them.  As for the small number of remaining active files, he contended that an experienced solicitor should only require very little time in deciding whether further action were to be taken.  He further disputed the reasonableness for the Agent to involve AL in the file reviewing exercise especially after all the files had earlier been properly indexed by the legal executives.  He suggested that it was reasonable to only allow 45 minutes for AL, and 6 hours for each of RY and WSL.

45. In support of the times claimed, the LCD produced a number of time sheets recording files reviewed on various occasions.  I was however not shown the actual time records of the times claimed for this item.  According to the LCD, the times claimed in this item were in fact based on his rough estimation of 15 minutes per file.

46. In some instances, a time claimed in a bill based on established practice or the rough estimation by a law costs draftsman’s own experience may be acceptable.  This item under challenge however could not have been based on any established practice or the LCD’s own estimation due to the nature of this case (which is not an ordinary civil dispute).  In the light of the lack of proper time records to support the times claimed, I’d therefore be inclined to accept Mr Lee’s objection, and review this item by only allowing 6 hours for each of RY and WSL.  So far as the time claimed by AL is concerned, I am unable to accept Mr Lee’s suggestion that 45 minutes is unreasonable.  I am of the view that AL had a very important role to play on that occasion for he was entrusted with the rather heavy responsibility of overseeing and supervising the files review.  Despite the absence of the actual time records, I am nonetheless satisfied that it was reasonable to allow 2 hours for AL.

47. I thus review the times I have allowed for RY and WSL, by taxing off 12 hours for each of these fee earners, but maintaining the original ruling in respect of AL by allowing 2 hours as claimed.

B. 2 Part III of the bill

Item 11

(Bill Item 30)

48. In this item, the defendant claimed 48 hours by a legal executive for attending Mr Lee’s office between 25 November and 2 December 2008 for locating office files, which were later packed into 174 carton boxes.  I allowed the time claimed in full at the taxation.

49. In the schedule attached to the summons, Mr Lee submitted that it was excessive for the defendant to have been allowed 48 hours for locating and packing his office files especially as the defendant had claimed and been allowed all the times claimed by four legal executives in item 24 of the bill for locating and packing files between the period of 17 October and 5 November 2008.

50. The LCD explained that the work done in this item though was a continuation of the work described in item 24 of the bill; it was however for the purpose of ending the intervention. The Agent was specifically instructed to prepare an entry in table form detailing a full record of Mr Lee’s files after all the files had been packed into 174 boxes .  The LCD further clarified that the reason why the Agent stopped the packing on 5 November 2008 as shown in item 24 of the bill was because the bankruptcy order against Mr Lee was annulled on that day.  The Agent only resumed the work when the defendant instructed him to conclude the intervention.  The LCD also produced time sheets that showed that during this period, the legal executive spent 8 hours each day in sorting out the files.

51. From the photos the defendant produced, I observed that the files had been stacked up.  According to Mr Lee, his office had kept the files in order with the latest files placed on top.  I was also told that some sort of a list with reference to the case number was also prepared.

52. In item 24 of the bill, I had allowed a rather substantial number of hours claimed by four legal executives in the packing exercise.  That being the case, I’d tend to believe that when the Agent continued with the packing of the files, much of the work would have been done previously.  The Agent in this later packing exercise was required to prepare a table.  I had however observed from the table that the files had not in fact been recorded in any particular order but only randomly.  The preparation of the table would not have been as time-consuming as it would have otherwise been.

53. In the circumstances, upon further consideration of this item, I’d be inclined to come to the view that it was excessive for the Agent to have claimed 48 hours for this item.  I will accordingly reduce the total time claimed by 8 hours, allowing only 40 hours.

Item 12

(Bill Item 31)

54. In this item, the defendant claimed 7 hours for the time spent by RY to review 21 files, and to prepare an active file list, based on a broad estimate of 20 minutes by RY in reviewing one file.  At the taxation, I only allowed 15 minutes per file, and taxed off a total of 1 hour 45 minutes.

55. Mr Lee submitted that I should not have allowed 15 minutes for each case file as the Agent had already claimed in items 18 and 19 of the bill the time spent in sorting out case files, and in items 5, 21 and 22 for reviewing files on various occasions.  He suggested that 1 hour should have been the reasonable time for this item of work.

56. In respect of this item of work, the Agent was expressly instructed by the defendant to prepare a list of active files when the intervention was drawing to a close.  After having had the opportunity of inspecting the list prepared by the Agent at the taxation hearing, I had indeed formed the impression that the recording of certain information in the list such as the number of the cases, the names of clients, the dates of the hearing etc only required clerical skill.  However, other information (as shown from the correspondence in the case files) such as the history of contacts made between Mr Lee and his former clients etc would have required the Agent’s staff to give more attention and spend more time.

57. After having carefully considered Mr Lee’s submission, I respectfully disagree with him that the work in bill items 18 and 19, and items 5, 21 and 22 were duplicating the work of this item, which was mainly to prepare a list of active case files.  The alleged duplicated work was for a wholly different purpose and also at different stages of the intervention.

58. For these reasons, I dismiss the review for this item.

B. 3 Costs of taxation

Item 13

(Bill item 2)

59. In the bill, the defendant claimed 25 hours of the LCD’s time for preparing the bill for the commencement of taxation.  I taxed off 5 hours of his time.

60. Mr Lee’s main complaint against this item was in respect of the defendant’s change of solicitors from its former solicitors, ONC Lawyers, to the present lawyers, Messrs Lo, Wong Tsui. Mr Lee stated that prior to the commencement of taxation, ONC Lawyers had already provided to him 3 office bills.  It was therefore suggested that had the defendant engaged the same firm of solicitors, the LCD could have prepared this bill based on these office bills.  He suggested that he should not be responsible for the extra time incurred and suggested 5 hours to be the reasonable time.

61. I would respectfully reject this argument.  In my view, a detailed bill prepared for the purpose of taxation is different to a solicitor’s office bill no matter how comprehensive the office bill may have been.  A bill is required to be drafted in a specific format for the purpose of taxation.  I do not accept that extra time had been incurred by the LCD in the preparation of this bill as a result of the defendant’s change of solicitors.

62. The objection is thus rejected.

Item 14

(Bill item 9)

63. This item is concerned with the costs incurred by the defendant’s solicitor and the LCD for the preparation of the taxation bundles used at the taxation hearing.  The LCD informed me that he had actually spent 40 hours and the handling solicitor, Mr Lam, 5 hours in going through the files and the preparation of the bundles.  I allowed 2 hours for Mr Lam and 16 hours for the LCD.

64. Mr Lee objected to the time I had allowed on the ground that the costs claimed by the fee earners had duplicated the costs having been claimed in item 2 of the costs of taxation in respect of the costs of preparation of the bill for taxation.

65. As discussed above, the costs under item 2 in the Costs of Taxation is concerned with the costs for the drafting of the detailed bill for taxation.  This item however relates to the post-bill work, which is for the preparation of the taxation bundles.  There is no duplication.

66. I also disagree with Mr Lee that the time I had allowed for Mr Lam and the LCD is excessive for the following reasons:

(1) This taxation involved taxation of a bill arising from the exercise by the defendant of its statutory power of intervention, not from ordinary run of the mill civil litigation;

(2) Mr Lee had throughout the proceedings raised numerous  objections to the costs claimed by the defendant; and

(3) This bill was taxed on an indemnity basis, being more generous than a party and party basis.

67. For these reasons, I reject Mr Lee’s objection.

Item 15

(Bill item 10)

68. In this item, I had allowed Mr Lam 5 and ½ hours and the LCD 8.5 hours  for attending the taxation hearing.

69. At the review, Mr Lee only reviewed the time I had allowed for Mr Lam’s attendance.  It was contended that as it was a taxation matter, the solicitor’s attendance should not have been allowed.  He suggested 2 hours should have been allowed for Mr Lam’s attendance.

70. As I have stated in objection item 14 (bill item 9) above, the nature of this taxation is not the usual run of the mill taxation like that of a civil litigation.  Given the numerous allegations Mr Lee had made against the defendant and the Agent, such as the preliminary arguments concerning his allegations of negligence and misconduct, I had in the course of taxation sought Mr Lam’s assistance to understand and resolve some of Mr Lee’s disputes and allegations.  It is not unreasonable, in my view, to allow a reasonable time for Mr Lam’s attendance.

71. I thus also dismiss this review item.

C. Conclusion

72. In conclusion, of the 14 items Mr Lee had applied for review,  save for the following items, I dismissed his review in respect of all the items set out in the schedule attached to the summons:

(i) Item 7 – the 24 hours claimed by Timson Wong was reduced by 8 hours, allowing 16 hours only.

(ii) Item 9 - the 18 hours claimed by each of RY and WSL were reduced by 12 hours, allowing 6 hours for each of these two fee earners.

73. (iii)Item 11 – the 48 hours claimed by the LE was reduced by 8 hours, allowing 40 hours.