BOND SPEED LTD v. GOODWELL SAM CHEONG GROCERY CO LTD

CACV90/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 90 OF 2010

(ON APPEAL FROM HIGH COURT ACTION NO. 382 of 2006)

__________________________________________________

DECISION ON OBJECTION AGAINST ORDER NISI
UPON PROVISIONAL TAXATION

__________________________________________________

I.  INTRODUCTION

1.  The hearing before me on 21 December 2011 (“Hearing”) concerns the objection by the Paying Party, Bond Speed Limited (“Bond Speed”), against the order nisi granted upon provisional taxation of one item of counsel’s fees in the taxation bill of costs filed on 5 July 2011 (“CA Bill”) by Messrs Wilkinson & Grist (“W&G”) on behalf of the Receiving Party, Goodwell Sam Cheong Grocery Co Ltd (“Goodwell”).

II.  TAXATION HISTORY

2.  On 26 March 2010, after a three-day trial in HCA 382/2006, Chung J dismissed Bond Speed’s claim against Goodwell and made no order in respect of Goodwell’s counterclaim (“CFI Judgment”).  He also ordered Bond Speed to pay costs of the action (including any reserved costs) to Goodwell to be taxed if not agreed, but declined to give certificate for two counsel (“CFI Costs Order”).

3.  Bond Speed appealed against the CFI Judgment to the Court of Appeal (“CA”) in the present proceedings (“CA Appeal”).  By its judgment handed down on 18 May 2011 (“CA Judgment”), the CA dismissed the CA Appeal with costs to Goodwell, but declined to give certificate for two counsel (“CA Costs Order”).

4.  For the first instance trial before Chung J and the appeal hearing of the CA Appeal, senior counsel PF leading junior counsel BM appeared on behalf of Goodwell.  Bond Speed appeared by junior counsel PS at trial, but employed junior counsel LR for the CA Appeal.

5.  Notwithstanding his written submissions that suggested otherwise, Mr Wong, solicitor for Goodwell, conceded (and Mr Ip, solicitor for Bond Speed, confirmed) that Goodwell’s costs in the CFI Action were not taxed but agreed by the parties in a lump sum.  In respect of Goodwell’s costs in the CA Appeal, W&G on behalf of Goodwell filed the CA Bill on 5 July 2011 pursuant to the CA Costs Order.  By item 1 of Part B1 (Counsel’s Fees) of the CA Bill, Goodwell claimed for PF’s brief fee to appear before the CA for the CA Appeal (including settling draft skeleton submissions for Goodwell) in the sum of HK$500,000.00 (“Item B1.1”).

6.  On 2 August 2011, Bond Speed by its solicitors Messrs John Ip & Co (“JIC”) filed its List of Objections to the CA Bill (“LOO”).  In the LOO, Bond Speed raised both general and specific objections to Item B1.1 as follows:

(a) For general objections, Bond Speed claimed Chung J did not find it justified for Goodwell to engage two counsel for the first instance trial, and the CA allowed fee for only one counsel as it was of the view that the CA Appeal was uncomplicated and turned on the construction of the phrase “direct sale (retail)” (“Phrase”) in the sole distribution agreement dated 1 September 2003 (“Agreement”) made between the parties and prepared by their solicitors.  Bond Speed complained that the CA Bill was drawn akin to a solicitor and own client bill that sought to charge for work and attendance by inter alia two counsel.  It was said that since the issue ventilated at trial and on appeal was relatively narrow, junior counsel BM employed by Goodwell was more than capable of conducting the CA Appeal on his own without senior counsel.  Further, on Goodwell’s application for security for costs for the CA Appeal, Le Pichon JA after considering W&G’s draft skeleton bill for approximately HK$550,000.00 merely ordered Bond Speed to pay security in the sum of HK$350,000.00 into court.

(b) For specific objections, Bond Speed claimed it was unjustified for Goodwell to instruct senior counsel for the CA Appeal, and such luxury (which was out of proportion to the single issue in the appeal) should not be allowed. A brief fee in the range of HK$80,000.00 to HK$100,000.00 for BM, a competent junior counsel who also appeared (with PF) at trial for Goodwell, would have been appropriate.  But even if brief fee for senior counsel were allowed, an all-inclusive fee of HK$130,000.00 would have been appropriate.

7.  Goodwell and Bond Speed reached agreement on all items of the CA Bill (as evidenced by W&G’s letter to the court dated 7 September 2011) save and except for Item B1.1.  At the paper taxation call-over on 16 August 2011, I directed that Item B1.1 be set down for provisional taxation.  On 21 September 2011, I provisionally taxed Item B1.1 by granting an order nisi that allowed counsel’s brief fee in the sum of HK$330,000.00.

8.  Bond Speed objected to the order nisi, and by JIC’s letter to the court dated 3 October 2011 (with grounds of objection annexed thereto (“BS 1^st Submission”)) requested for a hearing (“JIC Letter”).

9.  On 7 October 2011, Master K K Pang set Item B1.1 down for taxation with a hearing, and granted the following directions (“7/10/11 Order”):

(a) Bond Speed shall serve copies of the JIC Letter and BS 1^st Submission on Goodwell within 14 days thereof;

(b) Goodwell shall serve a reply within 21 days thereafter;

(c)  the parties shall liaise with each other to fix a date for taxation with a hearing with the Listing Clerk within 21 days thereafter;

(d) Bond Speed shall lodge and serve its skeleton submissions at least 7 days before the adjourned hearing;

(e)  Goodwell shall lodge and serve its skeleton submissions at least 3 days before the adjourned hearing.

10.  Pursuant to the 7/10/11 Order, Goodwell on 1 November 2011 filed its Reply to the BS 1^st Submission (“GW 1^st Submission”). On 21 November 2011, without leave of the court, Bond Speed filed a document titled “[Bond Speed]’s Response to [the GW 1^st Submission]” (“BS 2^nd Submission”).  On 14 and 16 December 2011, JIC and W&G respectively lodged their skeleton submissions for the Hearing (“BS 3^rd Submission” and “GW 2^nd Submission”).

11.  The taxation bundle was not placed before me at the Hearing, so after hearing arguments I reserved my decision pending consideration of the taxation bundle to be re-lodged by W&G.  It later transpired that the taxation bundle was in fact kept with the court, and was eventually made available for my consideration.  Notwithstanding Bond Speed’s submissions set out in paragraph 62 below, BM’s fee note for the CA Appeal was not found in the taxation bundle, so on 5 January 2012 I granted paper directions requiring W&G to submit BM’s fee note to the court.

12.  The GW 2^nd Submission complained that the BS 2^nd Submission (see paragraph 10 above) was filed without leave of the court, but at the Hearing Mr Wong confirmed he would not take such procedural point, so Mr Ip was free to rely on the BS 2^nd Submission if he so wished.

III.  BACKGROUND

13.  The individuals behind Bond Speed and Goodwell were blood-related. Goodwell was set up by the father of the Lui family (“Father”).  Its main business was the sale of foodstuffs and edible oil.  At the time of the first instance trial, the Father and his elder son (“Elder Son”) were behind Goodwell whilst the wife (“YS Wife”) of his younger son (“Younger Son”) was behind Bond Speed.  The Younger Son was a director of both companies until he ceased to be such in 2004 and 2006.

14.  In early 2003, Goodwell agreed that YS Wife would develop and promote the sale of certain health products (“Products”) which led to the execution of the Agreement.  The recital and clause 1 of the Agreement stated that Bond Speed was appointed as sole distributor in Hong Kong in relation to “direct sale (retail)” (ie the Phrase) of the Products.  Clauses 4 and 5 provided that during the continuance of the Agreement Bond Speed shall not and shall give up its right to “sell or otherwise deal with” the same and similar products.  Clause 6 provided that Bond Speed would have no right to sell a new product if the overseas manufacturer/exporter appointed another distributor in Hong Kong to sell such product.  By clause 10, Bond Street confirmed that during the continuance of the Agreement it had no proprietary rights in the trademarks/copyright of the Products, and shall not deal with such trademarks save and except for advertising the Products for sale in Hong Kong and selling the Products.

15.  The Elder Son prepared the first draft of the Agreement in Chinese, which was sent to Bond Speed’s solicitors for translation into English and formal language, and the latter draft was sent to Goodwell’s solicitors for approval.  YS Wife decided to use Bond Speed to carry out such business venture.

16.  In 2003, Goodwell’s board of directors resolved at various directors’ meetings (at which the Younger Son was present) to locate and rent 1-2 small shop spaces for use as showroom and retail shop for the Products. Goodwell commenced to operate a retail shop in 2004.

17.  Bond Speed claimed that Goodwell was in breach of the Agreement by operating its own retail business.  Goodwell denied the claim and counterclaimed for the Agreement to be rectified.  The dispute turned on how the court would construe the meaning of the relevant terms of the Agreement, in particular whether the Agreement conferred on Bond Speed as against Goodwell the exclusive right to “retail and direct sale” or merely “retail by direct sale”.  Although Bond Speed’s claim was also based on an alleged collateral agreement, such contention was abandoned at the beginning of trial.  At the pre-trial review stage, Bond Speed had abandoned its attempt to adduce expert evidence on the quantum of loss.

(a)  CFI Judgment

18.  In the CFI Judgment, Chung J discussed (a) the proper approach in construing the true meaning of contractual terms and (b) the undisputed factual matrix (ie the Agreement was shown to and revised by legally trained draftsmen, and the individuals behind the parties were mature and experienced in commercial transactions of various kinds).

19.  As to the factual disputes, Chung J disbelieved the Younger Son’s assertion that he never told YS Wife of Goodwell’s intention to start operating a retail shop to sell the Products.  He held that the Younger Son’s knowledge should be imputed to Bond Speed since (a) he was one of Bond Speed’s directors and (b) his pleadings expressly averred he was Bond Speed’s agent in discussions with Goodwell in mid-2003 for launching a sale campaign for marketing the Products. Chung J was inclined to think that Goodwell’s retail business around the time of the Agreement was minimal, but this had to be balanced against Goodwell’s intention to expand into that area.

20.  Bond Speed admitted the dictionary meaning of the Phrase, ie a sale to purchasers directly without going through conventional retail outlets, but denied it was the true meaning.  Chung J adopted the dictionary meaning, and held that in construing the Agreement in its entirety, adding the word “retail” after “direct sale” in the Phrase was to put it beyond doubt that the direct sale in question should not cover anything other than retail so as not to affect Goodwell’s main line of wholesale business.  Chung J therefore dismissed Bond Speed’s claim.  On such basis, Goodwell invited the court not to consider its counterclaim for rectification of the Agreement.

21.  In paragraph 41 of the CFI Judgment, Chung J said as follows:

“Although senior counsel’s court attendance has greatly assisted the court, this has to be balanced against factors including the nature of the issues raised in this action, the likely quantum of loss and the seniority and experience of junior counsel for the defence. At the end, I do not find this action to justify court attendance by 2 counsel.”

(b)  Notice of Appeal filed on 20 April 2010 (“Appeal Notice”)

22.  The 7-page Appeal Notice contained 10 distinct grounds of appeal:

(a) On a true and proper construction of the Agreement as a whole, it was the manifest intention of the parties that Goodwell (being importer of the Products and appointing Bond Speed as its sole distributor in Hong Kong) granted sole distribution rights of the Products in Hong Kong by way of direct sale and retail in any manner except that such appointment did not preclude Goodwell’s wholesale and distribution of the Products to existing customers including the catering industry.

(b) The ordinary and natural meaning of the Phrase in clause 1 of the Agreement was to the intent and effect that Bond Speed had the sole right of distribution and sale of the Products by or through retail channels or retail outlets, and that Goodwell did not retain or reserve an independent right of retail sale of the Products by or through retail outlets.

(c)  Chung J adopted a wrong approach to the construction of the Phrase in clause 1 of the Agreement to mean that Bond Speed’s right to sell the Products was limited to a channel or manner of direct sale, and that Goodwell retained or reserved an independent right to retail sale of the Products by retail outlets in Hong Kong irrespective of Bond Speed’s right of sole distribution.

(d) Chung J erred in his interpretation of clause 1 of the Agreement by failing to give sufficient consideration or weight to the following: (i) there was no definition of “direct sale” or of the Phrase and no indication/details of the manner of “direct sale” or otherwise in the Agreement, (ii) in the context of the whole Agreement, the employment of “(retail)” following “direct sale” served to explain the scope of direct sale to include retail generally and not restrictively otherwise “(retail)” would be of no real significance, and (iii) “(retail)” ought to be given a wide and liberal interpretation in favour of Bond Speed against Goodwell.

(e)  Chung J failed to give sufficient consideration or weight to the full import and language of clause 1 of the Agreement such that Bond Speed in the capacity of Goodwell’s sole distributor was granted the sole right to sell and promote the Products in Hong Kong for Goodwell.

(f)   Chung J erred in his construction of clause 1 of the Agreement in failing to give sufficient consideration to the full import, effect and purpose of particular provisions in clauses 2-5 and 7-8 of the Agreement.

(g) Chung J failed to give sufficient consideration or weight to the fact that (i) clauses 1-5 and 7-8 of the Agreement were formulated and tailored in order to give effect to the long-term commercial commitments undertaken by the parties arising from Bond Speed’s appointment as Goodwell’s sole distributor and from its right of sole distribution of the Products in Hong Kong by way of direct sale and retail in any manner except that such appointment did not preclude Goodwell’s wholesale and distribution of the Products to existing customers including the catering industry, and (ii) the Agreement was in substance different and distinguishable from common variety agreements between main and sub- distributors for non-exclusive distribution of goods, such that his interpretation of clause 1 of the Agreement did not reflect such purpose or true spirit or give business efficacy thereto as intended by the parties.

(h) Chung J failed to give sufficient consideration or weight to evidence adduced in respect of the commercial backgrounds and surrounding circumstances of each of the concerned parties and the relevant documents occurring in the period between early and mid-2003 leading to the antecedent discussions and exchanges amongst the exporter, Bond Speed and Goodwell through various individuals.

(i)   In construing clause 1 of the Agreement, Chung J failed to take into account or rely on the testimony of the Younger Son in finding that at some stage during the aforesaid discussions and exchanges it was made known to Bond Speed through the Younger Son by Goodwell’s directors of its intention to open a showroom and retail outlet at an uncertain future date, which was irrelevant to the commercial and contractual commitments made by the parties for sole distribution of the Products under the Agreement.

(j)   In construing clause 1 of the Agreement, Chung J wrongly applied or attributed in the context of the Agreement the definition of “direct sale” in the Wikipedia dictionary to the Phrase to signify the manner of sale as excluding retail sale from a retail outlet.

23.  It is plain from the Appeal Notice that Bond Speed challenged Chung J’s construction and interpretation of the Phrase as against the parties’ intentions, his factual findings, the commercial background and the surrounding circumstances.  In short, the Appeal Notice challenged almost every conclusion or finding in the CFI Judgment.

(c)  Bundle of documents for the CA Appeal

24.  Since Bond Speed disputed the factual findings in the CFI Judgment, the Chinese transcript for witness evidence at the first instance trial running to 50 pages (with 152 pages of certified English translation) were included in the bundle of documents for the CA Appeal.

25.  Such appeal bundle comprised (a) the Writ of Summons and pleadings (including answers to requests for further and better particulars by both parties), (b) the witness statements of YS Wife (3 in total) and the Younger Son (4 in total) for Bond Speed (comprising 60 pages), (c) the witness statements of the Elder Son (4 in total) and a marketing executive of Goodwell (5 in total) for Goodwell (comprising 56 pages), (d) certified English translations of the witness statements, and (e) bundles of sales-related documents, correspondence, Goodwell’s internal documents, documents relating to Bond Speed’s distributorship, Goodwell’s minutes of directors’ meetings, and purchase/sales records.  The appeal bundle comprised about two lever arch files.

(d)  Skeleton submissions

26.  For the CA Appeal, Bond Speed’s counsel LR lodged written submissions (13 pages) with a list of 13 authorities (9 of which were extracts from dictionaries), a supplemental list of 2 authorities (1 of which was an extract from a glossary), and supplemental written submissions (10 pages) with a further list of 4 authorities. PF and BM lodged written submissions (6 pages) with 1 authority, and supplemental written submissions (2 pages) with a further authority.

27.  LR’s written submissions made reference to the written submissions lodged for the purpose of the first instance trial.  Paragraph 19 of the CA Judgment stated that PF and BM adopted their submissions for Goodwell in the court below.  The written submissions lodged for the first instance trial included opening and closing submissions (9 pages and 16 pages respectively) by Bond Speed’s counsel PS, and a note of opening and closing submissions (16 pages with extract of dictionary meaning of direct selling from Wikipedia and 14 pages respectively) as well as a note of reply to PS’ closing submissions (4 pages) by Goodwell’s counsel PF and BM.

(e)  CA Judgment

28.  In the CA Judgment, Yeung and Yuen JJA agreed with Kwan J who held it was unnecessary to refer to the successive drafts of the Agreement as negotiations and previous drafts were not admissible in aid of construction of the Agreement and were admissible only for the claim of rectification.

29.  Kwan JA further noted that LR took two main points. First, LR argued that Chung J was in error in holding that the Younger Son’s knowledge of Goodwell’s intention to start operating a retail shop to sell the Products should be imputed to Bond Speed because the Younger Son had no duty to communicate to Bond Speed the information he had acquired as Goodwell’s director or to receive such information.  Kwan JA took the view that Chung J was entitled to disbelieve the evidence of the Younger Son and YS Wife, and there was ample evidence to support such finding.  “It was not necessary to deal with the elaborate arguments of [LR] on imputation of knowledge in his supplemental submissions” (see paragraph 21 of the CA Judgment).

30.  Secondly, LR took a somewhat different approach to the dictionary meaning of “direct sale”.  In the court below, Bond Speed argued that direct sale was a form of retail sale and that the proper construction of the Phrase should be “direct sale and retail” of the Products.  But at the CA Appeal, LR cited from other dictionaries not referred to Chung J, and suggested that the Phrase could mean selling to a customer without going through a dealer or middleman and that the proper meaning of the Phrase would include “all types of retail sale”.  Kwan JA rejected such construction as it gave no meaning to the term “direct sale” in the Phrase.  She saw nothing to impugn Chung J’s reasoning as to the meaning of the Phrase and agreed that the relevant factual matrix found by him would militate strongly against the construction that Bond Speed would have the exclusive right to undertake retail sales in general.  Kwan JA did not think that LR’s arguments based on various dictionary meanings of the separate words of “direct”, “sale”, “sell” and “retail” or on an authority cited by LR concerning the meaning of “sole distributor” would assist in the construction of the Phrase.

31.  Consequently, the CA dismissed the CA Appeal with costs to Bond Speed, but declined to give certificate for two counsel (see paragraph 3 of the CA Judgment).

IV.  ISSUES

32.  Both Mr Ip and Mr Wong agreed there were two main issues: (a) whether it was necessary or proper for Goodwell to instruct senior counsel to appear on its behalf for the CA Appeal, and (b) what would be the appropriate quantum for counsel’s brief fee.

V.  LEGAL PRINCIPLES – BASIS OF TAXATION

33.  Order 62 rule 28(2) of the Rules of the High Court (“RHC”) provides that costs allowed on a party and party basis are “all such costs as were necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed”.

34.  Prior to the amendments to the RHC pursuant to the Civil Justice Reform (“CJR”), paragraph 2(5) of the First Schedule, Part II of Order 62 provided that “[every] fee paid to counsel shall be allowed in full on taxation, unless the taxing master is satisfied that the same is excessive and unreasonable, in which event the taxing master shall exercise his discretion having regard to all the relevant circumstances and in particular to the matters set out in paragraph 1(2)” (my emphasis), and the relevant circumstances as provided in paragraph 1(2) were as follows:

“ (a) the complexity of the item or of the cause or matter in which it arises and the difficulty or novelty of the questions involved;

(b) the skill, specialised knowledge and responsibility required of, and the time and labour expended by, the solicitor or counsel;

(c) the number and importance pf the documents (however brief) prepared or perused;

(d) the place and circumstances in which the business involved is transacted;

(e) the importance of the cause or matter to the client;

(f) where money or property is involved, its amount or value;

(g) any other fees and allowances payable to the solicitor or counsel in respect of other items in the same cause or matter, but only where work done in relation to those items has reduced the work which would otherwise have been necessary in relation to the item in question.”

35.  In Re Greater Beijing Region Expressways Limited HCCW 399/1999 (unreported, 12 May 2004), Barma J described the approach to be adopted in respect of party and party taxation of counsel’s fees as follows:

“15. …… Paragraph 2(5) of Part II of the First Schedule is a provision that is peculiar to Hong Kong. …… It has recently been described as “exceptional” by the Chief Justice’s Working Party on Civil Justice reform in its Final Report, since it provides a substantially more generous basis of taxation for counsel’s fees in party and party taxations (to which it applies by virtue of rule 32(1)) than for other items in such taxations. The question that is to be asked when considering counsel’s fees is whether such fees are “excessive and unreasonable” – if they are not, they are to be allowed in full on taxation. This wording is very different from the test of “necessary or proper” which applies to party and party taxations. It resembles most closely the wording of Order 62 rule 29(1), applicable to the taxation of costs between a solicitor and his own client, where all costs are to be allowed unless they are of an “unreasonable amount” or have been “unreasonably incurred”, and which is clearly a more generous basis of taxation than the party and party basis. Further, paragraph 2(5) provides that where the taxing master is satisfied that the fee is “excessive and unreasonable”, he should exercise his discretion having regard to all the relevant circumstances and in particular the matters set out in paragraph 1(2) of this Part of the Schedule. Paragraph 1(2) itself states that it is applicable to (inter alia) the exercise by a taxing master of his discretion under rule 32(2), which, as noted above, applies to solicitor and own client and trustee taxations. This is a further indication that a more generous basis than that applicable to a party and party taxation is to be applied to counsel's fees, whatever the basis of taxation.

……

I therefore approach the question of quantum of counsel’s fees that are challenged on the basis that they are to be disallowed or reduced only if they are excessive and unreasonable, and that this requires the adoption of a more generous basis that would otherwise be applicable on a party and party taxation.” (my emphasis)

36.  The provision in paragraph 2(5) of the First Schedule, Part II of Order 62 of the RHC has been changed after the CJR, namely, “the amount of fees to be allowed to counsel is in the discretion of the taxing master who shall, in exercising his discretion, have regard to all relevant circumstances and in particular to the matters set out in paragraph 1(2)” (my emphasis), but the matters set out in paragraph 1(2) has remained unchanged.

37.  Yet Hong Kong Civil Procedure 2012 Vol.1 para.62/App/28 at pp.1171-1172 still states as follows:

“Subject to the provisions in O.62, counsel’s fees incurred in relation to contentious business are to be taxed in accordance with para. 2, Part II of the First Schedule: O.62, r.32(1). Under para. 2:

……

(5) Every fee paid to counsel shall be allowed in full on taxation, unless the taxing master is satisfied that the same is excessive and unreasonable, in which event the taxing master shall exercise his discretion having regard to all the relevant circumstances and in particular to the matters set out in paragraph 1(2). ……” (my emphasis)

Further, Hong Kong Civil Procedure 2012 Vol.1 para.62/App/28A at p.1172 still cites Re Greater Beijing Region Expressways Limited for the approach to be adopted in respect of party and party taxation of counsel’s fees.

38.  In my view, given the CJR amendments to paragraph 2(5) of the First Schedule, Part II of Order 62 of the RHC, the approach outlined in Re Greater Beijing Region Expressways Limited (see paragraph 35 above) and as referred to in Hong Kong Civil Procedure 2012 (see paragraph 37 above) no longer reflect the current regime on taxation of counsel’s fees on party and party taxation.

39.  In my view, after the CJR, the amount of fees to be allowed to counsel on party and party taxation should be what is necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed having regard to the matters and considerations in paragraph 1(2) of the First Schedule, Part II of Order 62 of the RHC.

VI.  LEGAL PRINCIPLES – EMPLOYING SENIOR COUNSEL

40.  Unless the costs order has already certified that the case was fit for senior counsel, the taxing master will have to consider whether the instruction of senior counsel was justified, such decision being a matter for his/her discretion.  The leading authority on the principles for the exercise of discretion for two counsel is Xinyuan Trading Co Ltd v NPH Petrochemical Limited HCA 18159/1998 and CACV 276/1998, Master Poon (as he then was) (unreported, 25 September 2000).  Master Poon stated as follows:

“24. After the abrogation of the two counsel rule, the client and his solicitor, when instructing counsel, have to decide whether to instruct a leader and if so, whether to instruct a junior also? Depending on the choice made, the client will be represented either by a junior counsel alone, or by leading counsel alone, or by both. On taxation, the taxing master has to determine whether or not the costs were necessary or proper and he must necessarily do so after the event, when leading counsel was in fact instructed. Because leading counsel can now accept instructions without a junior, the first step is to ask whether it was necessary or proper to instruct a leader, even if one counsel was required or actually briefed. In this connection, the following factors are relevant:

(1) the nature of the case;

(2) difficult questions of fact or law;

(3) the complexity, difficulty or novelty of the issues involved;

(4) the skill, specialized knowledge or expertise required for the case;

(5) where money or property is involved, its amount or value;

(6) the importance of the matter to client;

(7) the general importance of the case, for example as affecting other cases;

(8) if a junior counsel has already been instructed, the experience, competency and seniority of that junior;

(9) whether the other side has instructed a leader: see British Metals Corporation Ltd. v. Ludlow Brothers (1913) Ltd. [1938] Ch 774.

These above list is not exhaustive.  Depending on the circumstances, other reasons why a leader is required may exist. …… ”

41.  As explained in paragraph 21 in my decision on review of taxation in Woo Hing Keung Lawrence v CEF Brokerage Limited (formerly known as CEF GC Brokerage Limited) HCCL 39/2004 & CACV 148/2007 (unreported, 3 March 2010), the test is whether senior counsel was required, not whether the junior counsel was capable of conducting the case on his own (see R v Dudley Magistrates’ Court, ex p Power City Store Ltd (1990) 140 NLJ 361).  Such test must be applied to the particular circumstances of the case.  The reasonableness of the decision to instruct senior counsel must be judged by whether it was in the client’s interests to do so, and a balance has to be struck between the advantages of more efficient preparation of the client’s case and the extra expenses involved in instructing senior counsel.

VII.  LEGAL PRINCIPLES – COUNSEL’S BRIEF FEE

42.  A brief fee covers perusing the brief, reading the documents, researching the law, preparing the case, attending upon the case at court when listed, and committing reasonable time and effort that delivery and acceptance of the brief involves.  Counsel is not normally entitled to be remunerated separately for necessary work which is an incident of the proper representation of the client since it is all part of the work which he accepts as an obligation to perform by accepting the brief (see Hong Kong Civil Procedure 2012 Vol.1 para.62/App/31 at pp.1172-1173), eg preparing written submissions or skeleton arguments (see Hong Kong Civil Procedure 2012 Vol.1 para.62/App/33 at pp.1173).  Insofar as counsel has prepared whilst drafting the written submissions or skeleton arguments, that preparation time should not be duplicated in the brief fee.

43.  The appropriate measure of counsel’s brief fee is always in the discretion of the Taxing Master, who should (a) use his/her knowledge and experience and (b) take into account the work generally remunerated by and the special factors of the particular case that impact on counsel’s brief fee. There is in the nature of things no precise standard or measurement.  Each case has to be considered on its own facts.

44.  The test posited for counsel’s brief fee envisaged a hypothetical solicitor determining a proper and reasonable fee for a hypothetical counsel competent to do the case and not being in a position to expect a fashionable fee (see Woo Hing Keung Lawrence at para.111).  Hong Kong Civil Procedure 2012 Vol.1 para.62/App/31 at pp.1172-1173 states as follows:

“Brief fee – A proper measure for counsel’s fees was to estimate what fee a hypothetical counsel, capable of conducting the case effectively, but unable or unwilling to insist on the high fees sometimes demanded by counsel, of pre-eminent reputation, would be content to take on the brief; but there was no precise standard of measurement, and the taxing master or the judge, must, using their knowledge and experience, determine what was the proper figure ……”

VIII.  LEGAL PRINCIPLES – EMPLOYING SENIOR COUNSEL FOR CA HEARING

45.  Mr Wong submitted that for the purpose of taxation of Item B1.1, ie counsel’s brief fee for the CA Appeal, the legal position before the CJR was (and after the CJR still is) that in any matter before the CA, whether in chambers or in open court and whether before a single judge or a full court, a party was entitled to be represented by senior/leading counsel and junior counsel.

46.  Prior to the CJR, Rogers VP in True Rank Holdings Limited & anor v Lam Ka Chung, William & ors CACV 38/2004 and CACV 184/2004 (unreported, 30 October 2004) said at para.13 as follows:

“At the conclusion of the hearing when costs were discussed, Mr Chan, junior counsel on behalf of the plaintiffs, sought a certificate for two counsel. This court explained that it was not prepared to give a certificate for two counsel because it considered that it in any matter before the Court of Appeal, whether in chambers or in open court and whether before a single judge or a full court, a party was entitled to be represented by leading and junior counsel. As such, it has not been the practice of this court to grant certificates for two counsel and it would be undesirable for this court to do so. Indication was however given to the parties that if there should be any difficulty on taxation in recovering the costs in respect of two counsel the matter could be referred back to this court for further directions and order.” (my emphasis)

47.  In Cheung Sun Lam v Lai Kam Man [2008] 5 HKLRD 1, 3, Rogers VP reiterated as follows:

“5. But when a matter comes to the Court of Appeal, this Court has consistently refused to give a certificate for two counsel. I think it is for the first time that I have the opportunity of saying so in a judgment and I do so. We have not done so because it is my considered view that parties who appear in front of the Court of Appeal are entitled to have two counsel and, for that reason, we do not give a certificate for two counsel because it sends the wrong message back, that in cases where no certificate has been given, taxation for two counsel should not be allowed. So that one approaches this case on the basis that the taxation should take into account two counsel.” (my emphasis)

48.  After the CJR, Hong Kong Civil Procedure 2012 Vol.1 para.62/App/48 at p.1175 states as follows:

“In respect of the Court of Appeal, the approach continues to be the same following the implementation of the Civil Justice Reforms – despite the provision under Pt II of this First Schedule that no costs shall be allowed in respect of more than one counsel unless attendance at the Court of Appeal is certified as proper, nearly every case in the Court of Appeal merits the attendance of two counsel; hence the practice of the Court of Appeal continues to be to grant such certificate unless the matter is specifically raised – see UDL Holdings Ltd & Anor v Leung Yuet Keung & Anor (unrep., CACV 356/2008, [2010] H.K.E.C. 343), confirmed in Chan Hei Ling Helen v. The Medical Council of Hong Kong (unrep., CACV 403/2006, [2009] H.K.E.C. 1169).”

and at para.62/38/1 at p.1164 further states as follows:

“Certificate for 2 counsel at CA – The amendments to [the First Schedule to Order 62 of the RHC] under the CJR include a provision in Pt II that no costs shall be allowed in respect of more than one counsel. Rogers V.P. noted that: “in view of the fact that parties will frequently forget to request such a certificate and nearly every case in the Court of Appeal merits the attendance of two counsel. The practice of this court in respect of substantive appeals will be to grant a certificate unless the matter is raised specifically.” (UDL Holdings Limited & Anor v. Leung Yuet Keung & Anor (unrep., CACV 356/2008). This has been echoed in Dr Chan Hei Ling Helen v. The Medical Council of Hong Kong (unrep., CACV 403/2006) by Le Pichon J.A.: “I consider that the amendment was not intended to effect a change of substance. The practice of this court subsisting prior to the introduction of the CJR remains unchanged: a party coming to this court is entitled to have leading counsel should they so choose”.”

49.  In UDL Holdings Ltd, Rogers VP stated as follows:

“17. …… The amendment to the Rules of the High Court have included a provision in Part II, 1(3) of the First Schedule of Order 62 that no costs shall be allowed in respect more than one counsel appearing before the Court of Appeal unless the attendance is certified as being proper. In view of the fact that parties will frequently forget to request such a certificate and nearly every case in the Court of Appeal merits the attendance of two counsel, the practice of this court in respect of substantive appeals will be to grant a certificate unless the matter is raised specifically.” (my emphasis)

50.  This has been reiterated by Rogers VP in December 2009 in Cheung Cho Kam Sindy (appointed by Order dated 10 May 2005 to act as the representative of the estate of Madam Lau Mei Tai, the deceased) & anor v Cheung Yuet Ying Rose CACV 178/2008 (unreported, 8 December 2009):

“12. We have generally adopted the approach that even if people do not ask for it, they will be entitled to a certificate for two counsel into the Order. But we now will make it clear, as very often people forget to ask for it. In this Court we think that no case should come to this court unless it merits two counsel.” (my emphasis)

51.  In Dr Chan Hei Ling Helen, Le Pichon JA said (and Cheung JA and Stone J agreed) as follows:

“ 5. Mr Bleach SC who appeared with Mr Wong applied for a certificate for 2 counsel pursuant to Order 62, First Schedule,Part II paragraph 2 (3). Mr Thong who appeared for the respondent did not oppose the application. The decision on costs was reserved to be dealt with in the reasons for judgment.

6. That provision was recently amended with the introduction of the Civil Justice Reform (“CJR”). Set out below is the marked up version showing the amendment made:

“(3) No costs shall be allowed in respect of counsel appearing before a master in chambers, or of more counsel than one appearing before a judge in chambers, unless the master or judge master in open court or a judge or the Court of Appeal, unless the master or judge or the Court of Appeal, as the case may be, has certified the attendance as being proper in the circumstances of the case.”

7. Prior to the introduction of the CJR, as Rogers VP explained in S v L, (unreported), CACV 205 of 2007, 20 November 2007, para 24,

“… the practice of this court is that no certificate for 2 counsel is given in this court as it is considered that parties are entitled to have leading counsel in the court of appeal should they so choose.”

See also para 10 of the judgment of Ma CJHC in PCCW-HKT Telephone Ltd v Telecommunications Authority, (unreported), CACV 274 of 2003, 7 September 2004, where a similar view was expressed, Ma CJHC opining that it would be surprising if the taxing master were to disallow the costs of 2 counsel.

8. While the amendment made to paragraph 2(3) gave effect to rule 247 of the Steering Committee’s Recommendation, the intention behind rule 247 would not appear to have been to effect any change of substance. That is apparent from the Consultation Paper issued by the Steering Committee in April 2006 inviting comments, inter alia, to the proposed amendment. Para 3.3 (c)(vii) of the Paper, in pertinent part, reads:

“(vii) First Schedule – Fees to Counsel

……

It is not the intention of the reform to affect the present position on rights of audience of the profession. The purpose of the amendment is to avoid argument on taxation as to entitlement of counsel’s fees.”

9. I consider that the amendment was not intended to effect a change of substance. The practice of this court subsisting prior to the introduction of the CJR remains unchanged: a party coming to this court is entitled to have leading counsel should they so choose. For those reasons, for my part, I would grant the certificate sought.” (my emphasis)

52.  Mr Wong submitted that although the above authorities concerned the issue of whether certificate for two counsel ought to be granted for hearings before the CA, they were still relevant to show that (a) a party was in principle entitled to be represented by senior counsel at the CA if he so chose and (b) a costs order by the CA declining to grant certificate for two counsel only related to the separate and distinct question of whether a junior counsel should have been instructed in addition to the employment of senior counsel so that such costs order merely meant the receiving party would only recover senior/leading counsel’s fees but not those of junior counsel.

53.  Mr Ip disagreed and submitted that the above authorities were specifically on the issue of whether certificate for two counsel ought to be granted for hearings at the CA, and they therefore did not support Mr Wong’s contentions.

54.  I note that unlike the above authorities where the CA readily granted certificates for two counsel the CA Costs Order specifically declined to grant such certificate.  In cases where the CA readily grants certificate for two counsel (ie senior/leading counsel together with junior counsel), there can be no question that senior/leading counsel’s brief fee must be allowed.  But where the CA has specifically exercised its discretion to decline certificate for two counsel without further elaboration (so that on the face of the judgment by the CA it is unknown whether senior or junior counsel’s brief fee will be disallowed), it cannot be assumed that the above unquestioned principle of having both senior/leading counsel and junior counsel in conventional cases coming before the CA (in which the CA will readily grant certificate for two counsel) will continue to apply.  In my view, if the costs order made by the CA is silent as to propriety or otherwise of the receiving party having instructed senior counsel, then it will be for the Taxing Master to exercise such discretion.

IX.  DISCUSSION

(a)  Bond Speed’s case

55.  Mr Ip submitted the CFI Judgment noted it was common ground that the dispute depended on the construction and true meaning of the Phrase in clause 1 of the Agreement, ie whether the Agreement conferred on Bond Speed an exclusive right to retail and direct sale or merely “retail by direct sale”.  Chung J considered the matrix of facts showed the parties were mature and experienced business people who were sufficiently careful to engage lawyers to draft the Agreement to give effect to their intentions, and he adopted the dictionary meaning of “direct sale” (ie sale without through retail outlets) for reasons given by him.  Mr Ip submitted that as far as Chung J was concerned the factual dispute was limited in scope, and there was nothing complicated or unusual about the matrix of facts which was resolved in favour of Goodwell.  Mr Ip further submitted that the matter of expert evidence as to the quantum of loss was abandoned at the pre-trial review, so Goodwell merely faced a claim for account of profits arising from breach of the Agreement and as such there was no serious financial consideration at trial.

56.  After trial, Chung J declined to grant certificate for two counsel.  The BS 2^nd and 3^rd Submissions said in effect that Chung J considered the issue of construction of the Agreement in the context of the parties’ relationships and the commercial background was not difficult or complex, hence this was not a case where the service/expertise of senior counsel in preparation for and/or representation at trial itself was justified.  Mr Ip submitted that Chung J used emphatic language in the CFI Judgment to highlight “the nature of the issues raised in this action, the quantum of loss and the seniority and experience of junior counsel for the defence”, and that such language was tantamount to suggesting it was unnecessary for Goodwell to instruct senior counsel for trial and further implying it would have sufficed to have junior counsel only.

57.  Mr Ip submitted that Chung J’s observations had bearing on the consideration whether senior counsel’s brief fee should be allowed under the CA Costs Order since the CA took a similar view and only allowed the fees of one counsel.  But the BS 2^nd Submission acknowledged that the CA Judgment did not use explicit language, and Mr Ip at the Hearing fairly accepted that the CA Judgment was silent on whether the fees of senior counsel or junior counsel should be allowed.  Nevertheless, Mr Ip argued that the CA declined to grant certificate for two counsel because it was of the view that the case was neither unusual or complicated and did not present any lengthy or complex set of facts or issues, but rather turned on the construction of the Phrase in clause 1 of the Agreement (which agreement was prepared by solicitors) in the context of a commercial dispute.

58.  Mr Ip contended that the CA Appeal did not present any real difficulty as the hearing before the CA was very brief and took less than 30 minutes.  The CA found ample grounds for the trial judge to make the findings as he did.  A review of the CA Judgment showed there were no real fresh points, and indeed PF and BM relied on submissions similar to those made before Chung J.  Apart from the construction point, LR took the additional point concerning Bond Speed’s alleged imputed knowledge of Goodwell’s intention to operate a retail shop, but Mr Ip argued that “this was a matter which only touched on the background of the case and was subsidiary to the dominant issue of construction of the [Agreement] in the context of the surrounding circumstances and the intention of the parties in making the [Agreement]”.  The CA considered there were no merits to the appeal and dismissed it.

59.  Mr Ip argued that given the nature of the claim and the fact that (a) the issues in the CA Appeal lacked complexity and/or difficulty, (b) the issue of construction was not complicated, difficult or novel, and (c) there was no heavy documentation, instructing senior counsel PF was unjustified and a luxury out of all proportion “to the single issue in the case”.  After all, the grounds of appeal in the Appeal Notice were all related to the issue of construction, and the further issue of imputed knowledge was mere background and not complicated.  In such circumstances, PF’s fees were a solicitor and own client expense that should not be charged to Bond Speed.

60.  Mr Ip claimed that a hypothetical solicitor would not have engaged senior counsel to defend the CA Appeal, which only served to escalate costs of the litigation.  Mr Ip submitted that the persuasive factors of proportionality, economy and cost-effectiveness would drive towards a conclusion that (a) senior counsel’s brief fee should be disallowed and (b) the Taxing Master should exercise discretion on the basis that it was only necessary and/or proper to brief an experienced and competent junior counsel of significant seniority and skill and well versed in the commercial field and with the facts and issues of this case to protect and defend the rights and interests of Goodwell in the CA Appeal.  Accordingly, PF’s brief fee for the preparation for and representation at the CA Appeal ought to be disallowed as being not necessary or proper to be incurred under the principles of party and party taxation.

61.  Mr Ip reminded that Goodwell was represented by BM, a very able and competent junior counsel well known to the High Court at all levels.  BM appeared at several interlocutory proceedings at the intermediate and pre-trial stage and also at the first instance trial with PF, and was therefore fully familiar with the salient facts, pleadings and core issues of the case.  For example, he was instructed to appear on behalf of Goodwell at the pre-trial stage to apply security for costs, and his written submissions addressed on inter alia the facts and issues raised in the pleadings and the strength and merits of the parties’ respective case which led to an order being granted for security to be given by Bond Speed.  BM was instructed to appear with PF for the CA Appeal, but Mr Ip submitted that BM had the requisite seniority and experience to conduct the CA Appeal by himself without the service of a leader.

62.  Mr Ip next submitted that the quantum of counsel’s brief fee as provisionally taxed was excessive.  The BS 1^st Submission contended that the brief fee of one counsel (ie junior counsel BM) “should only be allowed at a fee of $100,000.00 for the [CA Appeal]”.  But the BS 3^rd Submission (and Mr Ip at the Hearing) suggested that the quantum of junior counsel’s brief fee in substitution for PF’s brief fee should be allowed in a sum not exceeding HK$150,000.00.  Mr Ip submitted that PF’s brief fee would not be a proper and/or reasonable fee determined by a hypothetical solicitor for a hypothetical counsel competent to do the CA Appeal and not being in a position to expect a fashionable fee.  He reminded that the amount of BM’s brief fee for the CA Appeal would be well known to Goodwell and available to be supplied to the Taxing Master, but nevertheless a necessary and proper fee should not exceed HK$150,000.00.

(b)  Goodwell’s case

63.  Mr Wong submitted that Chung J’s observations in the CFI Judgment (which merely formed background material) for the purpose of determining whether certificate for two counsel ought to be granted for the first instance proceedings were not per se relevant to the CA Appeal and/or the taxation of Item B1.1.  In any event, Chung J himself expressly acknowledged in the CFI Judgment that “senior counsel’s court attendance has greatly assisted the court” (see paragraph 21 above).  Mr Wong further submitted that although the CA took the view that the CA Appeal turned on the construction of the Phrase in the Agreement, there were two main points in the appeal, ie whether the trial judge had been in error in holding that the Younger Son’s knowledge of Goodwell’s intention to start operating a retail shop to sell the Products should be imputed to Bond Speed, and what the true meaning of the Phrase in the Agreement was.  Mr Wong submitted that nowhere was it stated or suggested in the CA Judgment that the CA regarded the case uncomplicated and/or did not present any lengthy or complex set of facts and issues.

64.  Mr Wong reminded that one could not elicit the issues for the CA Appeal simply by looking at the CA Judgment and/or by noting that LR decided to take two main points on behalf of Bond Speed at the appeal.  It was important to bear in mind that at the time when Goodwell had to consider whether to instruct senior counsel to appear on its behalf at the CA Appeal, there was the 7-page Appeal Notice which contained no less than 10 distinct grounds of appeal seeking to challenge every aspect of the CFI Judgment.  Further, contrary to Bond Speed’s suggestion that the point concerning its imputed knowledge was a matter only touching on background matters and was subsidiary, the CA Judgment expressly recognised such point as one of two main points in the CA Appeal.  In these circumstances, Goodwell could not be criticised for having instructed senior counsel for the CA Appeal.  Above all, Bond Speed could not be heard to say that the CA Appeal was merely a simple and straightforward appeal involving a single uncomplicated issue of construction or that the appeal did not justify instructing senior counsel.  Mr Wong submitted there was complexity to the CA Appeal and retaining senior counsel was more than reasonable.

65.  Mr Wong submitted that, contrary to what Mr Ip suggested, the real issue was not whether junior counsel was capable of conducting the CA Appeal on his own, but whether it was necessary and/or proper for Goodwell to retain senior counsel, therefore Bond Speed’s submissions relating to BM’s ability and competency to conduct the appeal on his own were irrelevant.  Mr Wong contended that instructing PF was fully proper and justified given the nature of the appeal, senior counsel’s close involvement with the case ever since the first instance proceedings, and the importance of the appeal outcome to Goodwell:

(a)  Instructing PF to conduct the first instance trial was wholly proper and justified since Bond Speed claimed damages against Goodwell in the order of HK$40-50 million.  Although Bond Speed abandoned expert evidence on quantum pre-trial, it was reasonable to take into account the fact that Bond Speed had pitched its claim at such amount.  PF was thoroughly familiar with the facts, legal principles and arguments pertinent to the CA Appeal, hence instructing him for the CA Appeal was reasonable, proper and justified.

(b)  The outcome of the CA Appeal was of great importance to Goodwell financially (given the amount of the claim) and personally (since the natural persons behind the parties were members of the same immediate family).

66.  Mr Wong argued that since it was Bond Speed that brought Goodwell to the CA, it could not now complain that Goodwell resisted the CA Appeal properly and successfully by instructing senior counsel.  He submitted that Goodwell in employing senior counsel to appear on its behalf at the CA Appeal was fully proper and justified.

67.  For the above reasons, Mr Wong submitted that senior counsel’s brief fee assessed as per the order nisi made upon provisional taxation of Item B1.1 should be upheld and made absolute, and Bond Speed be ordered to pay costs of and incidental to the application including costs of the Hearing to be assessed on summary basis.

(c)  Analysis

68.  On the first issue of whether senior counsel ought to be instructed for the CA Appeal, as Mr Ip fairly admitted, the CA Judgment merely declined to grant certificate for two counsel and was silent on whether the permitted sole counsel should be senior counsel or junior counsel.  It therefore falls on the Taxing Master to exercise discretion to determine whether senior counsel should be instructed.

69.  In deciding whether or not senior counsel should be employed, the Taxing Master has to consider whether it is necessary or proper to instruct senior counsel in the particular circumstances of the CA Appeal.

70.  Mr Ip suggested that the CFI Action and the CA Appeal were simple, uncomplicated and presented no difficulty.  He brought me through the CFI and CA Judgments to illustrate his point, saying that the factual dispute was limited in scope and that the construction of the Phrase in the Agreement being the central feature of the CFI Action and of the Appeal was straightforward.

71.  Notwithstanding the attractive simplicity of Mr Ip’s arguments, it is necessary to bear in mind that the decision whether or not to instruct senior counsel was not made after the CA Judgment was handed down, but at a time when Goodwell was about to resist Bond Speed’s appeal and had to decide on suitable counsel to protect its interests.  Thus, relevant considerations for deciding whether the specialist skill and knowledge of senior counsel were required for resisting the CA Appeal would include the nature of the appeal case that Goodwell had to meet, the value of the claim, the issues of law and fact that arose for the CA Appeal and their complexity, difficulty and novelty.

72.  In respect of the amount of the claim, Mr Ip sought to brush aside this factor by saying that the quantum of the claim was of no moment even at trial let alone the appeal because Bond Speed had made clear it would not adduce expert evidence at/after the pre-trial review. I am not persuaded that this is correct.

73.  In the Amended Statement of Claim, Bond Speed prayed for damages for breach of the Agreement and/or an account/enquiry of Goodwell’s retail profits in respect of all direct sales and direct dealings of the Products to retail customers at its shop from June 2004 onwards and an order for payment of such profits by Goodwell to Bond Speed.  This was reiterated in PS’ written opening submissions at trial which stated that Bond Speed prayed for “an account/enquiry on [Goodwell] and/or damages to be assessed” because Bond Speed was “kept in the dark as to the sales figure/net profit of the [Products] on retail basis between 1 September 2003 and 31 August 2008”.  But in PS’ closing submissions, by relying on the evidence of the Younger Son that it would be reasonable for Bond Speed to score HK$1,000,000.00 for each of the remaining 4 years of the Agreement, Bond Speed prayed for an award of damages in the sum of HK$4,000,000.00 being the high end of its case.

74.  On the other hand, Goodwell submitted that Bond Speed failed to prove any damage.  It was argued that the plea for an account of Goodwell’s retail profits was misconceived as Bond Speed could only claim for its loss and not Goodwell’s profits in a breach of contract claim especially when no exceptional circumstances were identified.  In any event, the level of Bond Speed’s purchases remained broadly the same before as after the opening of Goodwell’s shop.  Further, there was no plea for damages to be assessed nor was there any order for split trial.  Still further, Goodwell disputed the relevance of the Younger Son’s evidence, and submitted that the contention in PS’ closing submissions on quantum were not pleaded or investigated at trial.

75.  Although the issue of quantum eventually became irrelevant in view of the ruling on liability in the CFI Judgment, the above gives a flavor of how Bond Speed pitched the quantum of its claim ranging from reliance on Goodwell’s retail profits for just under 6 years to about HK$4,000,000.00 had it succeeded on liability at trial (and perhaps on appeal).  LR’s written submissions for the CA Appeal focused on the issue of liability and little was said on the issue of quantum, but a successful appeal by Bond Speed might have opened the door for Bond Speed’s claim for damages or for an account/enquiry (with an order for eventual payment to Bond Speed), hence it cannot be said that the quantum of Bond Speed’s claim was of little moment.  Indeed, PS and BM had to maintain their contentions that there was no viable claim for any damage in their written submissions for the CA Appeal.

76.  On the issue of liability, Mr Ip referred to the CA Appeal as one that turned on the “single” and “narrow” issue of construction of the Phrase in the Agreement within a factual matrix that was largely uncontested, and he further suggested that the limited factual dispute between the parties faded into insignificance in face of the construction issue.  Mr Ip again brought me through the CFI and CA Judgments in some detail in an attempt to illustrate his contentions.

77.  However, having considered the Appeal Notice and the taxation bundle, I am of the view it is not justified to say that the CA Appeal merely turned on construction of the Phrase in the Agreement.  According to the principles of construction as explained by Chung J in the CFI Judgment, interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.  Hence, construction of a written agreement is made in the context of the relevant factual matrix.

78.  Although some aspects of the factual matrix were undisputed (see paragraph 18 above), there was a key factual dispute being the subject matter of both the trial and the appeal, ie whether or not the Younger Son’s knowledge of Goodwell’s intention to start operating a retail shop to sell the Products was imputed to Bond Speed (see paragraph 19 above).  This dispute formed a separate and distinct ground of appeal in the Appeal Notice (see paragraph 22(i) above) and was the subject of LR’s entire supplemental written submissions (10 pages) for the CA Appeal bolstered by a list of 4 authorities (see paragraph 26 above).  It also entailed the inclusion of the witness statements and the trial transcript of the witness evidence in the appeal bundle (see paragraphs 24-25 above).

79.  Contrary to what Mr Ip suggested, such factual dispute was described in the CA Judgment as a “main point” taken by Bond Speed in the CA Appeal (see paragraph 29 above).  Kwan JA highlighted its significance by saying that the relevant factual matrix found by Chung J would militate strongly against the construction of the Phrase in the Agreement suggested by Bond Speed (see paragraph 30 above).  Although the CA eventually disposed of the factual dispute on Bond Speed’s imputed knowledge by saying there was ample evidence to support Chung J’s rejection of the evidence of the Younger Son and YS Wife without going into LR’s submissions in this respect, when deciding whether or not to instruct senior counsel for the CA Appeal Goodwell faced a serious challenge to Chung J’s factual findings that formed (a) an important cornerstone to his construction of the Phrase in the Agreement and (b) what Kwan JA described as Bond Speed’s “elaborate arguments” on imputation of knowledge in LR’s supplemental submissions (see paragraph 29 above).  I am not persuaded the factual dispute is a mere background skirmish that it was uncomplicated.

80.  It is evident from the Appeal Notice that Bond Speed took a wholesale and multi-faceted challenge to Chung J’s construction of the Phrase in the Agreement (see paragraphs 22(a)-(h) and (j) and 23 above).  Bond Speed also resurrected and put in issue the commercial background and commitments by the parties as well as their discussions and negotiations that led to the Agreement. Although the CA considered the latter (ie the antecedent discussions and negotiations) inadmissible in aid of construction of the Agreement (see paragraph 28 above), such separate and distinct ground of appeal was an elaborate one with 11 sub-paragraphs comprising 2 pages out of the 7-page Appeal Notice.

81.  Even more significantly, Bond Speed took a new twist to the construction issue at the CA Appeal by putting forward a meaning of the Phrase that was (according to Kwan JA) “somewhat different” from the approach it adopted in the court below (see paragraph 30 above).  In doing so, LR cited other dictionaries not referred to Chung J.  Although the CA eventually rejected such arguments, there is no shying from the fact that Goodwell could not just rest on counsel’s submissions for the first instance trial and on the CFI Judgment in its favour, but had to respond to the “somewhat different” approach by LR in the appeal.  Indeed, Part E of the initial written submissions by PF and BM for the CA Appeal titled “[the] true construction of [the Phrase]” focused almost entirely on the new definitions put forward by LR in his written submissions for the CA Appeal.  The CA’s decision on the construction of the Phrase in the Agreement also turned on their consideration and eventual rejection of the new definitions put forward by Bond Speed.  I reject Mr Ip’s submissions that there were no fresh points for the CA Appeal (see paragraph 58 above).

82.  On the above analysis, I am not persuaded that the nature of the case on appeal and the factual and/or legal issues in the CA Appeal were so simple, narrow and uncomplicated that it is out of proportion to instruct senior counsel.  I bear in mind that Bond Speed retained junior counsel LR for the appeal, but LR was 20 years more senior than BM.

83.  A careful study of the CA Judgment also shows that the CA did not give any such reason for declining to grant certificate for two counsel.  Indeed, Mr Ip did not disagree that it is so (see paragraph 57 above).  Mr Ip submitted that the emphatic language adopted by Chung J in his observations in the CFI Judgment (see paragraph 21 above) implied that it was not necessary to instruct senior counsel for the trial and a fortiori for the appeal (see paragraph 56 above).  In my view, Chung J’s observations plainly led him to the conclusion that only one counsel was justified for the first instance trial, but he did not expressly decide that the senior counsel was unnecessary.  He referred on one hand to the great assistance to the court by senior counsel, and on the other hand he mentioned other factors such as the nature of the issues raised in the action, the likely quantum of loss, and the seniority and experience of junior counsel.  I am not persuaded (as Mr Ip submitted) that it was necessarily implicit from Chung J’s reference to the seniority and experience of junior counsel that senior counsel was unnecessary.  With the abrogation of the two counsel rule senior counsel can now appear without a junior, so the aforesaid reference on its own is neutral for it is equally consistent with it being necessary or proper to instruct senior counsel without a junior or necessary or proper to instruct junior counsel with a leader.  It therefore falls within the remit of the Taxing Master to exercise discretion to determine whether it is necessary and/or proper to instruct senior counsel.  This is particularly so for the CA Appeal in which the CA was silent in the CA Judgment as to whether it was necessary or proper to employ senior counsel or whether junior counsel would have sufficed (see paragraph 57 above).

84.  BS 1^st Submission made reference to the application for security for costs for the CA Appeal.  Goodwell in asking for security for costs of HK$548,509.33 presented a skeleton bill specifying that senior counsel would be employed for the appeal.  Bond Speed’s counsel JC in his written submissions gave HK$162,037.00 as the reasonable sum of security to be ordered on the basis of various objections, including the contention that engaging senior counsel for the CA Appeal was unjustified.  However, Le Pichon JA ordered Bond Speed to give security in the sum of HK$350,000.00.  Since Le Pichon JA made her own assessment of the quantum of the security without acceding to the amounts suggested by Goodwell or Bond Speed, I am not persuaded that the quantum of security ordered by the CA is indicative of whether or not senior counsel was justified for the CA Appeal.

85.  In my view, the CA Appeal was of real importance to Goodwell.  First, its board of directors had resolved to expand beyond its existing wholesale business into the new world of retail business.  Had Goodwell been unsuccessful in resisting the CA Appeal, Goodwell’s commercial opportunity would have been lost, its business development would have stagnated, and its profits from retail sale of the Products since June 2004 would have been at risk of having to be paid over to Bond Speed.  Secondly, had Bond Speed won the CA Appeal, Goodwell might have been liable to give account/enquiry (and eventually pay what was found to be due) or to pay damages.  Thirdly, as Mr Wong pointed out, although the present case was fought between two limited companies, in practical terms the battle was mounted between two camps of immediate family members with the Father and Elder Son on one side and the Younger Son and YS Wife on the other.  In my view, the need to temper the forensic objective of strongly putting forward Goodwell’s best case for the appeal with the sensitivity and restraint that recognised the familial relationships of the natural persons behind the corporate litigants required considerable skill and experience on the part of counsel in the conduct of the CA Appeal.  These factors lend weight to Goodwell’s decision to employ senior counsel for the CA Appeal.

86.  Mr Ip emphasised the seniority, experience and ability of junior counsel BM in suggesting that instructing senior counsel PF in addition to BM was a luxury that was not necessary or proper for the purpose of the CA Appeal.  I have no doubt that BM is familiar with the facts and issues in this case both at trial and on appeal as he had appeared on behalf of Goodwell on his own in interlocutory hearings and with PF at trial before Chung J.  But the proper approach for determining whether it is necessary and/or proper to instruct senior counsel for the CA Appeal is not whether junior counsel would have sufficed.  I refer to paragraph 21 of my judgment in Woo Hing Keung Lawrence as follows:

“The title of senior counsel signifies that counsel has reached a level of seniority, expertise and standing in the legal profession that merits the appointment to silk. Hence, the employment of senior counsel is often regarded as giving a party forensic advantage in more effective deployment of his case through senior counsel’s skill and experience. As to whether in a particular case it is appropriate to harness such benefits by employing senior counsel, the true question to be answered is whether it is necessary and/or proper for the relevant party …… to retain senior counsel and not whether junior counsel is capable of conducting the case on his own.” (see paragraph 41 above)

87.  In light of the aforesaid analysis and all the circumstances, I am of the view that it is in Goodwell’s interest and it is necessary, proper and/or reasonably justified for Goodwell to have instructed senior counsel but without a junior for the CA Appeal.

88.  In taxation of costs, the amount of the brief fee is always in the discretion of the Taxing Master.  The test posited for counsel’s brief fee envisaged a hypothetical solicitor determining a proper and reasonable fee for a hypothetical counsel competent to do the case and not being in a position to expect a fashionable fee (see paragraph 44 above).  Since I have concluded that it was appropriate to employ senior counsel for the CA Appeal, the hypothetical solicitor could not have ignored the status of senior counsel that brought with it the ability to demand higher fees.  In my view, taking into account the above-discussed circumstances and further taking into account the scope of work covered by PF’s brief fee (eg settling skeleton submissions), it could not be said that PF’s brief fee allowed under the provisional taxation, ie HK$330,000.00, was not necessary or proper from the perspective of a reasonably careful and prudent solicitor under the test posited above.  I am not persuaded that the brief fee of HK$150,000.00 suggested by Mr Ip is reasonably realistic.  In my view, the hypothetically reasonable solicitor who is expected to know the going rate for the hypothetical senior counsel capable of conducting the CA Appeal effectively would not have balked at or, in other words, would have offered a brief fee of HK$330,000.00 but not HK$500,000.00 for PF.  I hereby confirm and maintain my ruling on Item B1.1 under the provisional taxation.

X.  CONCLUSION

89.  In the circumstances, I direct that the order nisi on costs made on provisional taxation of Item B1.1 (ie counsel’s brief fee allowed at HK$330,000.00) be made absolute.

90.  There is no reason why costs should not follow event.  I grant a costs order nisi that Bond Speed shall pay costs of its application to object the order nisi on costs (including all costs reserved, if any) to Goodwell to be summarily assessed.  In respect of such summary assessment, I hereby grant the following directions:

(a)  if no application is made to vary the above costs order nisi within 14 days from the date hereof, Goodwell shall within 21 days from today lodge and serve statement of costs pursuant to Practice Direction 14.3, and Bond Speed shall within 7 days thereafter lodge and serve succinct summary of objections in bullet point format of not more than half page in respect of Goodwell’s statement of costs (“Objection Summary”);

(b) if application is made to vary the costs order nisi within 14 days from today, both parties do within 21 days from today lodge and serve their respective statement of costs pursuant to Practice Direction 14.3, and within 7 days thereafter respectively lodge and serve its Objection Summary to the other party’s statement of costs;

(c)  Goodwell do within 14 days from today fix a date with the Listing Clerk for the hearing of the summary assessment of costs to be heard before me in chambers (open to the public) on a date not before 42 days from today with half hour reserved;

(d) any application for variation of the costs order nisi shall be heard at the same time as the hearing for summary assessment of costs.

91.  Last but not least, I thank both solicitors for their able assistance.