WING HING PROVISION, WINE & SPIRITS TRADING CO LTD v. HANJIN SHIPPING CO LTD

HCA 9510 of 1995

IN THE HIGH COURT OF THE HONG KONG SAR

COURT OF FIRST INSTANCE

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JUDGMENT

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1. By my Judgment dated 24th December 1998 I gave Judgment in favour of the Plaintiff company in the sum of $585,144 together with interests thereon and I also awarded costs of the Action and costs of the Counterclaim to the Plaintiff. At the request of both parties, I also ordered that the costs so awarded was to be assessed by me by way of gross sum assessment under Order 62 rule 9(4)(b). This judgment is my decision on the amount of costs to be awarded to the Plaintiff upon the gross sum assessment.

2. The claim of the Plaintiff for costs can be conveniently divided into two periods, the first was from the beginning of the case until about mid 1998 ("1st Period"), during which the Plaintiff was represented by the solicitors firm of Herbert Smith and Counsel. The second period was from mid 1998 onwards ("2nd Period") when the Plaintiff was without formal legal representation and was being represented by Mr. Steven Yip Chun Nam (" Steven") pursuant to an Order of the Court dated 3rd July 1998 giving leave for Steven to represent the Plaintiff in this Action.

3. The make-up of the claim of the Plaintiff for costs .. can be seen in the Affirmation

of Yip Chun Nam filed on the 5th of February 1999. The claim can be reduced into 8 heads of claims as follows:-

(1) Costs of Plaintiff incurred by employement of Herbert Smith, the former solicitors of the Plaintiff in the sum of $590,054.47. (para. 3 & 4)

(2) The costs of witness Yip Chun Tung in the sum of $5,871. (para. 5)

(3) The costs of obtaining documents and tapes in the sum of $5,064.00. (para. 6 & 7)

(4) The costs of travelling expenses to and from court in the sum of $9,120.00. (para. 8)

(5) The costs of rental of premises in the sum of $153,600. (para. 9)

(6) The costs of remuneration of employees and directors of the company in the total sum of $930,000. (para. 10)

(7) The costs of Adrian Yip's attendance in the sum of $10,762.50. (para. 11)

(8) The costs of 51 working meals in the sum of $39,792.00. (para. 12)

It will be seen that Claim (1) relates to the 1st Period and Claims (2) to (8) relate to the 2nd Period.

4. The Defendant disputes each and every one of the 8 Claims, even down to the smallest one. This is not surprising as the Defendant, no stranger to litigation worldwide, is a hard-headed Korean company which has not given a single inch in this piece of litigation but has subjected the Plaintiff company to the highest and worst kind of exposure. It is therefore my unpleasant task to consider the objections of the Defendant to the claim of the Plaintiff for costs and in the light of the objections, make my determination on the gross sum assessment. But before I proceed to consider the details of the objections, I should first set out my general approach.

5. This is gross sum assessment and not a detailed taxation. The advantage of the Trial Judge doing the gross sum assessment of the whole case is that he has lived with the case for some time and has intimate knowledge of what steps had been taken and what ought to be regarded as reasonable costs which should be paid by the losing party. I have seen all the Yips in my court over a period of many days and on many different occasions and I have formed, as I said in my Judgment, a most favourable opinion of each and every one of the Yips, whom and whose company the Plaintiff had been hard done by the actions of the Defendant. So long as there is a reasonable basis for the claim and not forbidden by the law. I will look favourable and fairly on the claim and allow it in so far as it is permissible for me to do so. This is my first general approach.

6. My second general approach is to ask myself what would have been a reasonable set of costs with proper representation, in respect of the 2nd Period when the Plaintiff was not legally represented but was being represented by Steven and the conduct of the Action was under his able management and supervision. This hypothetical set of costs would provide the guidance to the court, firstly of what ought to be the ceiling for the costs of the 2nd Period but secondly of whether the amount now claiming by the Plaintiff is excessive by reference to such reasonable costs with legal representation. If the costs of the 2nd Period claimed by the Plaintiff (without legal representation) is substantially lower than what would have been the costs with legal representation, then it seems to me that the paying party the Defendant is already benefiting from the fact that the Plaintiff was acting without representation and with Steven in charge and the court ought to be cautious in not further substantially reducing the reasonable claim for costs of the 2nd Period thereby in effect giving a further large undeserved windfall to the Defendant. But if the costs of the 2nd Period or any part thereof is particularly high and much higher than the costs of the Plaintiff with legal representation then close scrutiny must be given to the claim of the Plaintiff for the 2nd Period or specific part thereof to ensure that the Defendant is not worse off by the Plaintiff being not legally represented.

1ST PERIOD - Claim (1) for $590,054.47 for Herbert Smith Fees

7. Mr. Shieh says that this first head of claim for the fees of Herbert Smith is too high, and that it ought to be much reduced as it would have been taxed down in ordinary taxation and that even if some element of the fees might attract costs on an indemnity basis, all of the action should not be awarded costs on an indemnity basis and that therefore this court ought not to assess the Herbert Smith costs in the full sum claimed. I reject all the arguments of the Defendant. In the particular circumstances of the case, I would have exercised my discretion that the whole of the Action should be given costs on an indemnity basis if taxation is ordered. The fact that this is now gross sum assessment instead of taxation does not thereby put the Plaintiff into a less advantageous position. But in any event, even if the costs were to be taxed on a party and party basis and not on an indemnity basis, having studied the bills and what they cover in the Action, I have no doubt that the costs so claimed by Herbert Smith, even on an ordinary basis of taxation are reasonable. This is a heavy commercial litigation and a very large amount of difficult work have to be done and had been well done. The amount of costs sought by Herbert Smith is very reasonable as can be seen by the fact that the Plaintiff had not challenged the bills in any way. The whole of Claim (1) in the sum of $590,054.47 is allowed but I do not award any additional sum for interests which Herbert Smith said it would be claiming. I am not awarding any interest, in the hope that Herbert Smith, unlike the Defendant, would behave with decency and commercial sensibility and that in the circumstances, it will agree not to insist on interests or will be very moderate in its insistence on interest.

2ND PERIOD - APPLICABLE PRINCIPLE

8. The most important question which has to be asked in relation to the tx1 Period is whether the Plaintiff is a litigant in person, because if it is then the generous provisions of Order 62 rule 28A applies, and substantial recovery for costs could be made by the Plaintiff. The Defendant through Mr. Shieh submits to me that the Plaintiff being a limited company and therefore a persona ficta, is not in law a litigant in person and Mr. Shieh places reliance on the authority of Jonathan Alexander Ltd. v Proctor [1996] 1 W.L.R. 518; Australian Telephone Distributoros Property Ltd. v Golden Always Ltd. [1996] 3 HKC 401 and In Re Minotaur Data Systems Ltd. [1999] 1 W.L.R. 449. Although I have considerable reservation that the law can be in such a state as to have three groups of litigants, those represented, those unrepresented but litigants in person (being able to rely on Order 62 rule 28A) and those unrepresented but not litigants in person such as companies or Official Receiver (unable to rely on Order 62 rule 28A), for present purposes, I will assume that the Plaintiff is not a litigant in person. The effect of this is enable the Defendant to object to a number of the substantial claims of the Plaintiff. Is the law so helpless in the face of such hard stand and what should-be the applicable principle for the recovery of costs if the Plaintiff is not a litigant in person.

9. It seems to me that on the basis of the Plaintiff being not a litigant in person then the authorities on what a litigant in person can claim or cannot claim gives no or very little guidance. One must look for general principle starting with the words of the statute of what is covered by costs. Order 62 which is the governing statute for costs, defines costs to "include fees, charges, disbursements, expenses and remuneration." The relevant question to ask in relation to the costs claimed by the Plaintiff for the 2nd Period is that in relation to each head of Claim, whether such Claim could be said to be fees, charges, disbursements, expenses and remuneration. It seems to me further that in order that any particular Claim may come within the scope of recoverable costs, there must be a linkage between the Claim and the Plaintiff company, so that it is not enough if a particular amount is held to be expenses but the expenses must be that of the Plaintiff company and not some personal expenses of a director of the company. I appreciate of course that in the Jonathan Alexander case, the English Court of Appeal decided the case against the company but the Court looked at the matter not from the point of view of construction of our statutory words. I believe that there is no binding authority against the approach of mine stated above.

2nd Period Costs if Plaintiff Represented

10. Before I proceed to consider each of the 7 Claims under the 2nd Period, it seems to me, to put matters in proper proportions, that I should determine what I would consider to be reasonable costs of the Plaintiff if Herbert Smith had continued to act for the Plaintiff for the 2nd Period. As a generalisation, costs of the trial of an action is normally at least 50% of the costs of the action Very often lawyers go by the rule of thumb of 20% for the period from start to pleadings, another 30% from pleadings to pre Trial and 50% for Trial. In my view, a fair and reasonable costs of the Plaintiff for the 2nd Period up to Judgment, if the Plaintiff had continued to be represented by say Herbert Smith and Clifford Smith of Counsel would be at least $600,000. A simple calculation will show that in relation to Counsel alone, a Brief Fee of $150,000 and a Refresher of $50,000 for the Trial for this case would bring the total of reasonable Counsel's fees for the 6 day Trial alone to $400,000. From Judgment to the final day of the hearing on costs on 6th May 1999, there would have been incurred easily another $150,000. The total costs if the Plaintiff had been represented from July 1998 to May 1999 would have been no less than $750.000. The question which will have to be examined later is to what extent the Claims now made by the Plaintiff for the 200 Period is unreasonable having regard to what the Plaintiff (with representation) would have incurred (certainly recoverable) in the minimum sum of $750,000.

Claim (2) for $5,871.00 for Attendance of Witness Yip Chun Tung

11. Yip Chun Tung was a witness in the Action and he came to Hong Kong from Bangkok where he lived and worked to give evidence. The claim under this head consists of $2,400 for round trip air ticket from Bangkok to Hong Kong of Yip Chun Tung and $3,471.00 for compensating Mr. Yip for his attendance. The question to ask in relation to this head of Claim is whether the two sums under this Claim (2) could be said to be expense of the Plaintiff, disbursement of the Plaintiff or remuneration liability incurred by the Plaintiff. The critical factor is not whether that amount had actually been paid by the Plaintiff but whether the liability for such an amount had been genuinely incurred by the Plaintiff. Take for example the air ticket from Bangkok to Hong Kong return which might have been paid by Mr. Yip. Chun Tung but for which he would expect reimbursement by the Plaintiff company as this was an expenditure for the benefit and at the request of the Plaintiff, in order that Mr. Yip could attend as a witness for the Plaintiff at the Trial. The fact that Mr. Yip is a son of the Yip family or a brother of Steven who was conducting the case for the Plaintiff as directed by the Court does not diminish the liability of the Plaintiff to reimburse Mr. Yip for that ticket or the right of the Plaintiff to seek the recovery of the price of the ticket from the Defendant. The same principle also applies to the sum of $3,471.00 as compensation or remuneration to Mr. Yip for his attendance in Hong Kong. It is at the request of the Plaintiff and for the benefit of the Plaintiff that Mr. Yip can to Hong Kong and stayed the necessary number of days to attend court to give evidence and I see that claim of $3.471 for Mr. Yip's attendance as perfectly proper and legitimate. I would therefore allow this Claim for $5,871.00 in full.

Claim (3) for $5,064.00 for Copy Documents and Tape

12. This small claim was also disputed by the Defendant. $2.964 was paid to Messrs Sinclair Roche for documents required for the hearing as Herbert Smith had exercised a lien on the documents. I see the case as being no different from the Plaintiff having to pay for reconstituted documents as result of a fire. The amount was genuinely paid and I see no basis for rejecting that claim.

13. As for paying for the tapes, this amount was paid to the Court for the tapes to assist Steven to prepare for final submissions. Being a non-lawyer, Steven was already very handicapped when he was facing Mr. Shieh of Counsel who had the able assistance of sometimes two solicitors sitting in court to take notes and give instructions. Steven had to do most things himself. Mr. Shieh argued that this item of payment for the tapes is not recoverable and referred me to Order 68 rule 2(3). Order 68 rule 2 relates to a situation where the judges takes the view that his notes of evidence is sufficient for the appeal and there is no need to transcribe the shorthand note of the evidence, but if one party still insists on a transcript of the evidence being prepared, then the charge for such transcripts shall be borne by that party in any event. That situation is totally different from our case, where in order to assist the Court in his final submission, the Plaintiff sought and obtained the tapes with the permission of the Court. This objection of the Defendant has no substance and serves to illustrate the extent to which the Defendant will stoop to object with every conceivable point against the Plaintiff. I allow this Claim for $5,064.00 in full.

Claim (4) for $9,120.00 for Travel to and from Court

14. Unlike the Defendant's Solicitors based in Central, Steven is based in Kowloon from where he had to take a taxi to come to Court with bundles of documents in the course of the proceedings. The claim represents travel to and back from Court 38 times and does not include in fact the numerous times of travel after Judgment was given when Steven had to attend court in relation to assessment of costs. I allow this Claim for $9,120 in full.

Claim (5) for $153,600 for Rental of Premises

15. I am not satisfied with the quality of the evidence for this Claim and I therefore disallow this Claim.

Claim (6) for $930,000 for Remuneration of Directors/Employees of the Plaintiff

16. This is the most controversial of the Claims made by the Plaintiff. The total amount of $930,000 is made up of remuneration of 4 persons, namely Steven, his father, his brother and his sister. The total sum of $930.000 is obviously very large having regard to what I regard as a proper and recovery sum of $750,000 for the 2nd Period if Herbert Smith had continued to represent the Plaintiff.

17. In my judgment, the only person who has a legitimate claim to being remunerated is Steven because he was appointed by the Court to represent the Plaintiff in the Action and because he actually did all the work and appeared in my Court day after day including this present hearing in relation to costs stretching from February 1999 to March 1999 when directions were given and the hearing proper itself from April to May 1999 when the hearing concluded. Even thereafter. Steven continued to perform valuable work by furnishing further submissions to the Court subsequent to the last hearing on the 6th of May. The question therefore under this Claim is whether in respect of all the work done by Steven Yip in this Action starting from when Herbert Smith ceased to act, does the Plaintiff company have a liability to Steven for remuneration and if so what is the reasonable amount of such remuneration.

18. The first matter which has to be borne in mind is that the Plaintiff company ceased its business due to its poor financial position caused by the Defendant's action and that from mid 1998 when it ceased its representation by Herben Smith and also ceased its business, Steven although a director was not an employee receiving any kind of wages. It is in that context one would have to consider whether there ought to be reasonable remuneration by Plaintiff to Steven. There is no doubt in my mind that having been exposed to this case for a long time and in particular to the considerable ability of Steven that I can say Steven had done valuable work for the Plaintiff in this Action and that what he did was beyond the call of duties of a director of the company. I am certain that a self-respecting company will find it is obliged to remunerate properly someone like Steven for such valuable services, although there might have been nothing said between the parties at the relevant time on remuneration. I therefore conclude that the services of Steven is remuneration which is properly payable to Steven by the Plaintiff and is within the scope of costs under Order 62. What should be the quantum is the difficulty. What ought to be the right figure, specially when paragraph 10(2) of the Affidavit does not even include the work done by Steven for the period of time after 24^th December 1998, namely after Judgment when costs became the focus. For a period of another 5 months, Steven was also the only person as far as I could see, involved with costs and did the work in relation to the Plaintiffs claim for costs. Doing the best I can in the circumstances, in my view the proper quantum as remuneration by the Plaintiff for the work of Steven should be in the sum of $250,000 which represents one third of the amount of $750,000 which the Plaintiff would have to incur if Herbert Smith had continue to represent the Plaintiff.

Claim (7) for $10,762.50 for Remuneration of Attendance of Adrian Yip Chun To

19. Adrian Yip was a key witness in the Action and I singled him out in my Judgment as the most impressive of all the Plaintiffs witnesses. His remuneration should be awarded on the same principle as that of his brother Yip Chun Tong but the quantum is different because Adrian has a higher earning capacity. I allow this Claim of $10,762.50 in full.

Claim (8) for $39,792 for Working Meals

20. The basis of this Claim is that to prepare for the Trial of this Action, the Plaintiff company and in particular Steven had to attend and pay for some 51 Meals either amongst the special working Group itself or with various professionals and non professionals. Very little particulars were given. I regard 51 meals as somewhat excessive in the absence of full particularisation. I would regard 2 meals per month during the period from July 1998 to May 1999 as being reasonable and on that basis I would allow 20 meals at $750 per meal totally $15,000.

CONCLUSION

21. The final calculation is that I allow the following sums:

Claims (2), (3), (4), (6), (7) and (8) add up therefore to $295,817,50, which is very much less than the notional costs of $750,000 of Herbert Smith if they had continue to act for the Plaintiff for the 2nd Period.

22. The total figure for Claim (1) under the 1st Period and for the other Claims under the 2nd Period is therefore $885,871.97 and this total figure which is inclusive of the Plaintiffs costs incurred in relation to its claim for costs and for the gross sum assessment of costs, is therefore my final determination of the amount of costs under the gross sum assessment. The Defendant is to pay this gross sum assessment figure of $885,871.97 immediately.