HEATHER ANNE VOCE v. THE HENLEY GROUP LTD

HCA 1370/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1370 OF 2006

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RULING   ON   COSTS

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1.  This Ruling deals with the costs of the hearing before me on 14 May 2008, in respect of which judgment was given on 28 August 2008.  That hearing related to the assessment of the costs of an unsuccessful application for discovery that had been made by the Plaintiff, in respect of which I had ordered that the Defendant’s costs should be paid by the Plaintiff.

2.  The Defendant had sought to have its costs of the discovery application assessed on a gross sum basis, but as the information as to its costs that it could provide at the conclusion of the discovery hearing was, in my view, insufficient, I directed that the Defendant should provide a statement of its costs in respect of which the Plaintiff could make such submissions as she thought appropriate.

3.  That statement disclosed that a significant portion of the time spent by the Defendant’s solicitors in dealing with the matter had been spent by a registered foreign lawyer employed by those solicitors.

4.  The Plaintiff raised a number of objections to the costs claimed by the Defendant.  One point of principle that was raised related to the recoverability of the costs referable to the involvement of the registered foreign lawyer, Mr Ian Johnston.  It was the Plaintiff’s contention that such costs were irrecoverable, because Mr Johnston’s involvement amounted to the practising by him of Hong Kong law in contravention of rule 12 of the Foreign Lawyers Registration Rules made under the Legal Practitioners Ordinance (Cap. 159 and 159S).  I thought that this point merited fuller argument, and therefore directed that the assessment of the Defendant’s costs be dealt with at an oral hearing (this was the hearing that took place on 14 May 2008).  In view of the fact that the point seemed to be one of general importance to the solicitors’ profession, I invited the Law Society of Hong Kong to attend and make submissions as well.

5.  In the event, at the hearing on 14 May 2008, the parties addressed their argument exclusively to the recoverability of the costs relating to Mr Johnston’s involvement, leaving the other objections that had been raised to be resolved on the basis of the written submissions that had been provided to me.

6.  I came to the conclusion that the costs of Mr Johnston’s involvement were recoverable by the Defendant.  The detailed reasons for my view are set out in my judgment on costs dated 28 August 2008.  Although I held, disagreeing with Waung J in The Magway (unreported, CFI, HCAJ 14 and 246/1999, 23 June 2002) that Mr Johnston, and not the Defendant’s solicitors, by whom he was employed, should be regarded as the provider of any legal services which he undertook on behalf of the Defendant, I concluded that there had not in fact been any breach of the relevant rule, or of section 50 of the Ordinance, as Mr Johnston was not, by reason of his having been closely supervised in all that he did by the partner in charge of this matter, providing legal services customarily provided by a solicitor in his capacity as such, or otherwise acting as a solicitor.  I also agreed with Waung J’s other ground for decision in The Magway that a breach of Rule 12 did not lead to the irrecoverability of the costs attributable to the involvement of the registered foreign lawyer.

7.  The Law Society has made it clear, by its letter of 24 October 2008, that it does not seek any order of costs in its favour in respect of the 14 May 2008 hearing.

8.  The Defendant contends that as it was successful in recovering the costs attributable to Mr Johnston’s involvement, which was the only point of contention dealt with at the hearing, it should be awarded the costs of and associated with the hearing, which it invited me to assess on a gross sum basis, providing a statement of its costs in similar form to that provided in respect of the substantive discovery application.

9.  The Plaintiff submits that this would not be the right order to make.  Her solicitors suggest instead that she should be awarded her costs up to 5 March 2008, and that thereafter, there should be no order as to costs as between herself and the Defendant.

10.  The Plaintiff’s argument runs as follows:-

(1) The Defendant’s submission that The Magway was rightly decided was not accepted, as I accepted the Plaintiff’s criticisms of that case.

(2) My decision was based on my conclusion that Mr Johnston had been closely supervised in his work, a matter which turned on information that was not provided until a letter from the Defendant’s solicitors dated 5 March 2008 set this out.  On this basis, the costs up to that date should, it was said, be awarded to the Plaintiff.

(3) As to the costs thereafter, including the costs of the hearing, these should not be visited on the Plaintiff, as the Plaintiff’s view of The Magway had been preferred to that put forward by the Defendant, and the court’s “primary motivation in calling for oral argument was the point of general importance to the solicitor’s profession”.

(4) Further, as the Defendant’s costs were taxed down by a substantial amount, this provided a further reason for awarding the Plaintiff her costs up to 5 March 2008.

11.  The Plaintiff has also raised a number of points as to the quantum of the costs claimed:-

(1) The statement of such costs is so inadequate that it should be disregarded.

(2) In any event, it does not enable the court to distinguish between the work done by the respective fee earners, so that it does not enable a proper estimate of the work done to be made.

(3) Further, the failure to distinguish the work done means that there may well have been duplication of work, which should be disallowed.

(4) The time spent by the Defendant’s solicitors on preparation and research should be irrecoverable as this would have been done by counsel in any event, and even if something might be recoverable for this, the amounts claimed are excessive.

(5) Part of the costs claimed in respect of the preparation of the statement of costs (i.e. in relation to Part A of the statement) had already been claimed at the last hearing and awarded in the 28 August 2008 judgment.

(6) Counsel’s fee was excessive, having regard to the length of the skeleton prepared and the fact that the hearing lasted one hour.

12.  I shall deal first with the question of the incidence of costs.  As to this:-

(1) It is not correct to say that the Plaintiff’s submissions as to The Magway were accepted in preference to those of the Defendant.  As will be clear from my judgment of 28 August 2008, although I rejected one element of the Plaintiff’s submissions as to that authority, I accepted that it was rightly decided in respect of the question of the recoverability of fees charged in respect of a registered foreign lawyer notwithstanding any breach of Rule 12.  Neither party’s submissions as to this authority were accepted in their entirety.  However, ultimately, the effect of my decision so far as that case was concerned was that even if their had been a breach of Rule 12, this would not have affected the Defendant’s entitlement to recover its costs arising from Mr Johnston’s involvement on its behalf.

(2) While it is correct to say that my decision was based on my conclusion that Mr Johnston was closely supervised in his work, a matter which may not have been very clear until the Defendant’s solicitors’ letter of 5 March 2008 provided more information as to this, I do not see that this assists the Plaintiff, given that the Plaintiff continued, even after that date and with that information available to it, to insist that the costs referable to Mr Johnston’s involvement should be disallowed.  The position might have been different had the Plaintiff dropped this point on receipt of the letter of 5 March 2008, but it did not do so.  Had it not been for the Plaintiff’s insistence that the fees referable to Mr Johnston’s involvement were irrecoverable by the Defendant, the hearing on 14 May 2008 would almost certainly have been rendered unnecessary.  I therefore do not think that it would be right to award the Plaintiff its costs up to this point.

(3) Further, while this point was, in my view, one of general importance to the solicitors’ profession, this does not justify depriving the Defendant of its costs in respect of the argument.  The point was raised by the Plaintiff in an attempt to escape having to bear the Defendant’s costs.  Having taken the point, and argued it all the way to the hearing, I see no reason why the Plaintiff should not have to bear the costs of the argument now that it has failed, simply because the point might be regarded as one of general importance.  The hearing was necessitated because the point seemed to me to be one which merited fuller ventilation than might have occurred had it been dealt with on paper.  But that does not make it any the less a point which was raised by the Plaintiff, on which the Plaintiff failed.

(4) Although it is right to say that the amount of costs claimed by the Defendant was reduced (by about one third), I do not think that this merits the making of the order proposed by the Plaintiff in this case, particularly since the hearing was necessitated by the Plaintiff’s insistence on the irrecoverability of any amount in respect of Mr Johnston’s involvement in the matter.

13.  For all of these reasons, I am satisfied that, subject to any objections as to the quantum of the costs claimed, the Plaintiff should pay the Defendant’s costs of and relating to the hearing of 14 May 2008, on a party and party basis.

14.  I turn, therefore, to deal with the objections to the amount of the costs claimed:-

(1) As to the format of the statement, I remain of the view expressed in paragraph 31 of my judgment of 28 August 2008, that the statement is sufficient for the purpose of a gross sum assessment, bearing in mind the summary nature of the determination of costs under this procedure, and the fact that the court dealing with the assessment will have more than a passing familiarity with the matter.

(2) Nor do I agree with the suggestion that the failure to distinguish between the work done by the different fee earners means that the court should disregard the statement.  I do not think that the amount of detail that might reasonably be expected to be provided for a full-scale taxation should be expected in the context of a gross sum assessment.

(3) As to the suggestion that there has been duplication, it seems to me that this requires the court to look at the statement, and see whether there might be any basis for the complaint.  At the end of the day, however, the court should be able to come to a broad assessment of the allowable costs, based on the information provided as to time spent, and its knowledge of the case.  Here, the total amount of time spent by the partner, solicitor and paralegal on communication (with the client, the opposing party and the court) came to some 18.89 hours.  This seems to be on the high side, having regard to the nature of the issues that were raised, although I would recognise that there was a fair amount of correspondence between the parties, and between the parties and the court.  I would therefore reduce the amount claimed under this heading by about one-third, and will allow a total of HK$30,000 in respect of this item.

(4) So far as time spent on research is concerned, I think that while one might expect a party’s solicitors to spend some time on research, it is also necessary to have regard to the fact that counsel was engaged, and (having been engaged from the outset) could have been expected to do most of the necessary research.  In the circumstances of this case, it seems to me that to have spent some 14.81 hours on research in total was excessive.  I would allow instead the whole of the time spent by the partner (0.6 hours accounting for HK$2,400), two hours in respect of the solicitor (or HK$4,000) and four hours in respect of the paralegal (or HK$5,200), giving a total of HK$11,600 for this item.

(5) As for the time spent on preparation of the statement of costs, the Plaintiff is right to point out that the part referable to part A of the statement has already been claimed and awarded (see paragraph 36 of my earlier judgment).  That leaves a claim for HK$1,650 for the preparation of part B, which I shall allow in full, as this is in line with the amount allowed for the preparation of part A in my earlier judgment.

(6) As to counsel’s fees, I shall allow HK$25,000 in respect of counsel’s brief fee for the hearing on 14 May 2008.  This seems to me to be reasonable, having regard to the fact that it will include all necessary preparation and research for the hearing.  Moreover, although the hearing lasted for one hour, it had been set down for three hours hearing, an estimate based (in part at least) on the view of the Plaintiff’s solicitors.

(7) Finally, so far as the item for photocopying is concerned, this was not objected to and will be allowed in full, at HK$966.

15.  I shall therefore order that the Plaintiff is to pay the Defendant’s costs of the hearing of 14 May 2008, which I have assessed in the gross sum of HK$69,216.  I shall also make a costs order nisi that the Plaintiff is to pay the Defendant’s costs referable to the written submissions by the Defendant dated 18 and 25 September 2008.  It is to be hoped that the amount of those further costs can be agreed between the parties without the need to come back to the court.