COMPANIA SUD AMERICANA DE VAPORES S.A. v. HIN PRO INTERNATIONAL LOGISTICS LTD

HCMP 1449/2014

MISCELLANEOUS PROCEEDINGS NO1449 OF 2014

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D E C I S I O N
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1.  On 12 January 2016, I commented on the way in which the plaintiff’s application for leave to file a further affirmation was dealt with on both sides. In particular, I was not satisfied that it was necessary to prepare a draft affirmation (“draft affirmation”) in anticipation of the grant of leave to the plaintiff. I ordered, amongst others, solicitors for the plaintiff (“SH”) to show cause as to why they should not bear costs of that draft affirmation.

2.  SH had appeared on 18 January 2016 and had lodged written submission with supporting documents to show costs.  They explained:

(a) why they prepared the draft affirmation;

(b) why they briefed counsel to appear on 12 January 2016; and

(c) that the costs statement in fact overstated counsel’s fees by $60,000.

3.  With regard to (a), from the correspondence submitted by SH, it could be seen that SH acted on the advice of leading and junior counsel who in turn relied on some past experience in a similar situation before deciding to prepare the draft affirmation.  SH apparently has informed their clients of counsel’s advice.  The draft affirmation went into some length, one of the reasons being that this case had gone through the hands of six judges just at the interlocutory stage. 

4.  Taking all circumstances into account, SH has satisfied me that it has not acted in an improper or unreasonable manner or had other misconduct or default within the meaning of section 52A (6) of the High Court Ordinance, Cap 4.

5.  With regard to (b), Hin-Pro/Soar had indicated in correspondence that they would be represented by counsel.  Although that did not in itself justify the engagement of counsel on a party and party basis in view of the nature of the application, however, this case had been handled by counsel all along.  It was not an entirely unreasonable decision for a junior counsel to be engaged to handle the hearing especially since she had settled the affirmation.

6.  Further, Hin‑Pro or Soars’s position had been obscure in purporting to open up new issues in their affirmation in reply and in purporting to rely on unidentified affirmations previously filed. 

7.  There was justification in engaging counsel from the client’s angle.  The privileged correspondence between SH and counsel show that SH took cautious and not unreasonable steps in consulting counsel and keeping the client informed with reasons before taking the steps as they did under the summons.  SH has satisfied me that it had not acted in an improper or unreasonable manner, or had other misconduct or default within the meaning of section 52A(6) of the High Court Ordinance.

8.  I am more concerned with item (c).  It was a serious matter to overstate the fees of counsel (and in fact of solicitors as well) as a matter of principle in a costs statement, because it might be seen as an attempt to mislead the court and the paying party.  It was a matter that prima facie would have justified disciplinary sanction. 

9.  What happened was that counsel agreed to a brief fee for appearing on 12 January inclusive of drafting the supporting affirmation (“Part 1 Fees”).  Fees for settling the draft affirmation (“Part 2 Fees”) were negotiated separately, and counsel quoted a fee range.  SH agreed and so did the plaintiff client.  The Part 1 brief was delivered to counsel.  The handling solicitor’s experience was that counsel would issue a fee note after the hearing for Part 1 and Part 2 fees, a notion which I would not regard as unreasonable.

10.  When preparing the costs statement, SH chose a median figure from the range of fees quoted by counsel for Part 2 fees.  The costs statement was approved by the plaintiff client.  SH now accept that they should not have assumed that counsel would have charged her full Part 2 fees.  They claimed that it was not their intention to mislead the court and apologised for their mistake.

11.  It was a serious matter, in my view.  This was particularly so when counsel was present when the costs statement was handed up.  There was nothing to stop SH from confirming the fees with counsel.  If there had not been an issue of wasted costs, the overstatement of counsel’s fees in the costs statement would not have been discovered. 

12.  However, SH had properly brought the matter to this court’s attention on their volition despite the court having already made an order for party and party costs. 

13.  Having regard to the correspondence between SH and counsel, I am satisfied that SH had no intention of misleading the court.  I am not minded to refer this matter for disciplinary action.  The overstatement of counsel’s fees in fact had no impact on the order of party and party costs as I have disallowed the bulk of the costs for the reasons given extempore on 12 January 2016, save for a sum of $4,000.

14.  In summary, I do not see the need to impose a wasted costs order on SH, but I take this opportunity to remind practitioners to be vigilant in preparing costs statements.  Overstating the amount in a costs statement undermines the integrity of the summary assessment system.  It has to be noted that the indemnity principle, ie, that a receiving party cannot recover a sum in excess of their liability to their own solicitors apply equally to summary assessment as for taxation.

15.  But for the fact that I am satisfied with the explanation of SH, which was supported by contemporaneous documents, the matter would have been referred to the Law Society for investigation.