CHINA MERCHANTS KIN SWISS TRANSPORTATION CO LTD AND ANOTHER v. TREASURE WISE LTD AND OTHERS

HCA 344/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 344 OF 2007

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BETWEEN

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TAXATION REVIEW

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Introduction

1.  This is a review of taxation. The paying party sought to review the followings.

(a)       Three of my rulings in principle and thereafter, corresponding items of quantum to be adjusted.

(b)       Various counsel fees touching on quantum.

Background

2.  On 16 February 2007, the Plaintiff commenced the present proceedings against 3 Defendants.  It complained that the Defendants had breached its right of way towards a piece of land, and therefore claimed for, inter alia, injunction and damages.

3.  Shortly after the commencement of the proceedings, the Plaintiff sought for interlocutory junction.  At the hearing on 23 March 2007 both 2^nd and 3^rd Defendants were awarded costs together with Certificate for Counsel. Later, on 18 April 2007, by consent, the Plaintiff withdrew the proceedings against both 2^nd and 3^rd Defendants with no order as to costs.

4.  Thereafter, the Plaintiffs continued to pursue their case against the 1^st Defendant.  Parties prepared their respective cases up to trial, including quite some expert evidence.  After 2 PTRs having been held, they went before the Hon. Chung J. for a trial of 5 days in November 2007.  On the 3^rd day, the Plaintiffs indicated that they intended to apply to exclude a large portion of “irrelevant” expert evidence prepared by both parties.  At the same time, the 1^st Defendant further sought leave to adduce supplemental expert evidence.  The argument took place on the 4^th day and the Judge handed down his Ruling on Admissibility on 11 January 2008.

5.  Briefly, the Learned Judge agreed with the Plaintiffs ruled that only certain parts of expert evidence prepared by the parties were admissible.  Further, it was ordered that:

“ 3.  The remaining parts of the expert evidence of the 1^st Defendant and the Plaintiffs shall be inadmissible;

4.  Costs of the 1^st Defendant’s application be to the Plaintiffs in any event with Certificate for two counsel.

5.  Costs of the Plaintiffs’ application be to the Plaintiffs in any event with Certificate for two counsel.”

6.  Thereafter, the part-heard trial was resumed for about a further 4 days in 2008 before the Judge.  On 20 November 2008, the Judge handed down his detailed Judgment in favour of the Plaintiffs and granted the injunctive relief against the 1^st Defendant.  There was also an order nisi against 1^st Defendant to pay costs of this action to the Plaintiffs, to be taxed if not agreed.

7.  There was no application for variation of the order nisi by any of the parties.  It therefore became absolute.

8.  Pursuant to the costs orders, the Plaintiffs filed their taxation bill on 31 March 2009.  It went before me for 2 days in August 2009.  On the 1^st day, parties disputed, inter alia, whether the Plaintiffs should be allowed to the costs in preparing the evidence having been ruled as “inadmissible” or “excluded”.  I ruled against the Plaintiffs.

9.  On the 2^nd day, the Plaintiffs asked for an adjournment.  The 1^st Defendant did not seriously object to the application but reserved its position on the extra time to be taken by the Plaintiffs.  I allowed the adjournment and upon parties’ request, prepared a Note dated 21 August 2009, recording my ruling of the excluded evidence.

“ 8. …… I took the view that costs of Ps to prepare for their own ‘inadmissible’ expert evidence could not be recovered under party-and-party taxation. They were ruled out by the Trial Judge and had never been deployed before the Court.

9.  Ps attempted to argue that it was not something meant by the Trial Judge. However, they could not find anything in the Order or Judgment to that effect. I further considered that it was too late for Ps to argue the matter at the taxation. They should have brought up the matter before the Judge if they wanted to argue for it.

10.  Further or alternatively, even assuming that the taxing master does have the necessary jurisdiction, I thought that it would be very difficult to persuade me to exercise the discretion in favour of Ps in the circumstances.  If D1 had adduced irrelevant expert evidence, Ps should have applied to exclude them in the first place, rather than ‘followed’ it by being ‘responsive’.  By so doing, costs were incurred improperly and unnecessarily.”

10.  The Plaintiff thereafter went before the Trial Judge to apply for, among others, an amendment of the costs orders.  The application was dismissed on 3 November 2009.  It was ruled that there was no clerical mistake or accidental slip on the costs order.  Further, as the taxation had not been concluded, the Judge did not see fit to intervene the matter.  Costs together with Certificate for 2 Counsel were awarded to the 1^st Defendant against the Plaintiffs, and later summarily assessed at $210,262.

11.  Parties then resumed the taxation before me for 3 more days in March and April 2010.  At the end of the taxation, the 1^st Defendant asked for a global deduction of the taxed sum to compensate the extra time taken by the said Plaintiffs’ application before the Trial Judge.  After hearing from the parties, I agreed and made a 2% overall deduction.

12.  Thereafter, the Plaintiffs filed the present Taxation Review.  It was opposed by the 1^st Defendant.  I heard the argument on 24 June 2010 and reserved my decision to be handed down.  I now do so.

Ruling

13.  Upon thought, I have decided to dismiss all the matters raised by the Plaintiffs under the Taxation Review.

Objection No. 1 – Principle

14.  There were 3 Defendants at the outset of the proceedings.  The 2^nd and the 3^rd Defendants dropped out of the picture after about 2 months.  At the taxation, in relation to the costs spent by the Plaintiffs during such period, including preparation of Statement of Claim and the hearing on 23 March 2007, I apportioned them evenly among all 3 Defendants.  So, the 1^st Defendant was only required to pay 1/3 of those costs, after quantum having been taxed.

15.  At the Review, the Plaintiffs argued that the 1/3 apportionment was not correct as it was well aware that the 1^st Defendant was the real tortfeasor.  The 2^nd and 3^rd Defendants were joined as a precautionary measure as they were also land owners.  The added or increased costs were nominal.  The Plaintiffs should be able to recover 90%, or at least 50%, of the relevant costs from the 1^st Defendant.

16.  I am not persuaded by the Plaintiffs’ argument.

(a)       There is no fast and hard rule in doing apportionment of costs between co-parties.  Each case depends on its own facts.

(b)       Within the 2 months’ time, the followings were done.

(i)      The Writ and Statement of Claim.

(ii)     The Order 29 Summons and Supporting Affidavit.

(iii)    Two Acknowledgments of Service filed by the Defendants, all indicating that they would contest the proceedings.

(iv)    One Affirmation of Service in relation of the 2^nd and 3^rd Defendants.

(v)     Two Affirmations filed by the 2^nd and 3^rd Defendants respectively to oppose the Order 29 Application.

(vi)    The Hearing on 23 March 2007 before the Hon. Saw J.  took about 2 hours.  Directions were given to all parties to file and serve pleadings as well as to prepare lists of documents inspection and witness statements.

(c)       The following observations were noted.

(i)      In the Statement of Claim, the Plaintiffs named “the Defendants” generally throughout the document, except paragraph 5(a) wherein a particular letter of complaint dated 25 October 2006 was referred to the 1^st Defendant’s solicitor.

(ii)     The Order 29 Summons sought injunction against all 3 Defendants.  The Supporting Affidavit dealt with the matter generally except that:

(1)   Paragraphs 13 to 16 were deposed to describe the problem between the Plaintiffs and the 1^st Defendant.

(2)   Paragraph 17 said that both the 2^nd and 3^rd Defendants had not replied to the Plaintiffs’ letter of protest.

(iii)    The followings are noted at the hearing on 23 March 2007.

(1)   The skeleton of the Plaintiffs’ Counsel did not distinguish the three Defendants from one another.

(2)   The Judge gave a set of directions for all the three Defendants.

(3)   More time was indeed spent by the 2^nd and 3^rd Defendants as they took the opportunity to argue on the question of costs.  Eventually, the Judge saw fit to grant costs to them with Certificate for Counsel payable forthwith.

(d)       With the above analysis, I remain of the view that a 1/3 apportionment is proper in the circumstances.

Objection No. 2 – Principle

17.  In relation to my ruling that the Plaintiffs could not recover their costs to prepare their own inadmissible or excluded expert evidence, it was argued that:

(a)       The expert evidence adduced by the 1^st Defendant was very complicated and their relevance or irrelevance was not clear and obvious.  Time was tight and the Plaintiffs could not be reasonably expected to issue a summons of exclusion without preparing his own evidence in rebuttal.  If unnecessary or improper costs were incurred, such costs should be borne by the party incurring it.

(b)       There were various interlocutory directions governing filing and exchange of expert evidence.

(c)       When it was not clear whether the expert evidence was relevant or not, the discretion should be left to be decided at trial (Ko Chi Keung HCA 18029/1999).

(d)       The Judge did not expressly state that the costs of the “inadmissible” evidence could not be recovered by the Plaintiffs.

18.  With respect, I am still not persuaded by the above argument.

(a)       Taxation comes from costs order.  It sets out the scope of the taxation.  It is not disputed that the Plaintiffs was awarded of the costs of the action as well as costs of their application to exclude the inadmissible evidence.  However, it is also indisputable that costs of the inadmissible evidence cannot be recovered unless otherwise ordered by the Trial Judge.

(b)       In every action, interlocutory directions are made from time to time.  However, it is always the case that the Trial Judge will have the final say on them, including admissibility of evidence and costs thereof.

(c)       I agree with the principle extracted from Ko Chi Keung and indeed, the Trial Judge in the present case did make a ruling on the admissibility of expert evidence. Nonetheless, no one applied to him for specific costs order to cater for the situation in our case.

(d)       It is true that the Judge did not say expressly that the costs of the inadmissible evidence could not be recovered. However, it is not enough. The Plaintiffs indeed had to ask for a positive costs order to enable them to get the costs. Hence, I could only adopt a hypothetical approach of allowing time for the Plaintiffs to consider the “inadmissible” evidence of the 1^st Defendant and then, to take necessary or proper steps to apply to exclude them. 

Objection No. 3 – Principle

19.  The Plaintiffs argued that I should not have ordered a 2% deduction upon the overall taxed costs.  There was no misconduct or neglect on the part of the Plaintiffs to go back to the Trial Judge. Although the application was dismissed on irregularity, the purpose of clarification was achieved.

20.  I am unable to agree to the Plaintiffs’ argument. I do not consider that the application has achieved anything to help the taxation.  More importantly, I made the 2% deduction because the 1^st Defendant should not be “punished” to pay more interest to the Plaintiffs by the time taken between August 2009 and April 2010 when the Trial Judge needed to deal with the Plaintiffs’ application.  The “adjustment” made has nothing to do with “misconduct or neglect” on the part of the Plaintiffs.

Counsel Fees

21.  Finally, the Plaintiffs sought to review the following deduction of counsel fee by me.

Bill Item No.	Page No.	Description	Amount Claimed	Amount Allowed
144	16	Senior counsel’s brief fee for attending hearing on 27.7.07	250,000	112,000
145	16	Junior counsel’s brief fee for attending hearing on 27.7.07	60,000	28,800
216	24	Senior counsel’s fee for Joint Opinion	50,000	14,000
232	25	Senior counsel’s fee for Pre-Trial Review	35,000	nil
251	27	Senior counsel’s fee for 2nd Pre-Trial Review	35,000	nil
383	40	Senior counsel’s fee for Mid-Trial Review	35,000	nil
316	33	Senior counsel’s brief fee for trial	500,000	315,000
317	33	Junior counsel’s brief fee for trial	150,000	81,000

22.  The Plaintiffs argued that:

(a)       Counsel’s brief and fee for Joint Opinion were reasonable, having taking into account their full preparation, the complexity of the case, difficult concept of easement and abandonment of right of way, importance of the matter to the Plaintiffs which affect their operation, loss of business of $1m per month, voluminous documents as well as 8 days of trial.

(b)       It was necessary for Senior Counsel to attend the Pre-Trial Reviews and Mid-Trial Review.

(c)       The 1^st Defendant briefed Mr. Denis Chang SC, leading a junior.  It was necessary and proper for the Plaintiffs to resort to Counsel of similar standing.

23.  Upon careful thought, I have declined to change any of my decision on Counsel’s fees.  In doing so, I remind myself of the principles as stated under paragraphs 62/App/31 to 48 of HKCP 2010 at page 1154-1156, including that it is not a sound principle on party-and-party taxation to treat the fee paid by the other party as a yardstick.

(a)       Brief for hearing on 27 July 2007

(1)     After pleadings were closed, the Plaintiffs attempted again to pursue interlocutory injunction against the 1^st Defendant in July 2007.  They took out a summons, together with a supporting affirmation, for a hearing of half an hour before the Judge.  Both sides engaged leader and junior.  They prepared full skeleton submissions and authorities.  At the hearing, there was insufficient time to dispose the matter substantively.  Counsel sought intermittent adjournments from the Judge to sort out directions.  Court recorded hearing time for 0.5 hour in the morning and 10 minutes in the afternoon.  Parties agreed various directions for the trial, including a speedy trial and that the interlocutory injunction application was adjourned sine die.

(2)     By that time, I also noted that the Senior Counsel had been helping the Plaintiffs in settling the Reply and Defence to Counterclaim as well as advising in the matter. Further, both the Senior and the Junior Counsel had also helped preparing for the application for interlocutory injunction and supporting affidavit. Finally, Senior Counsel further charged 2 hours consultation before the hearing. I allowed him 1.5 hours.

(3)     With the above in mind, I remain that 3 days’ work (5 hours a day) together with 1 hour for the hearing with the hourly rate at $7,000 and $1,800 were appropriate in the circumstances.

(b)       Senior Counsel fee for Joint Opinion

(1)     After the said hearing of the interlocutory injunction application and the obtaining of various directions to get ready the case for speedy trial, both Counsel were engaged from time to time to advise in conferences, pursuing documents, attending site visit and assisting in expert and factual evidence.  In October 2007, Counsel prepared a 10-pages written joint advice to the Plaintiffs, advising merits of their case with reference to a number of authorities.

(2)     Junior Counsel spent 14 hours.  I did not make any deduction.  Senior Counsel’s fee cost $50,000.  I only allowed him 2 hours at $7,000 per hour as it ought to be the reasonable time to be spent in settling the Joint Advice drafted by his Junior. I see no good justification to change it.

(c)       Senior Counsel’s fees for PTRs and Mid-Trial Review

(1)     There were 2 PTRs and 1 Mid-Trial Review in the present proceedings.  Each of them was fixed for 0.5 hour.  On all these occasions, the Plaintiffs had both their Leader and Junior to attend.  It cost $35,000 and $9,000 respectively on each of these occasions.  I allowed the Junior’s fee, but not the Leader.

(2)     To start with, there was no Certificate for Counsel granted on any of the occasions.  Further, as revealed for the preparation, court notes and directions given thereof, they all concerned with procedural or house-keeping matter only.  I did not see fit to have a Leader attending it.

(d)       Brief fee for Trial on 19 November 2007

(1)     Counsel was constantly involved throughout the proceedings from the commencement until trial, including assisting in pleadings, discovery, interlocutory applications, expert evidence and advice from time to time.  Quite some fees had been incurred by the Plaintiffs.  They were 5 witnesses at the trial, 2 for the Plaintiffs and 3 for the 1^st Defendant.  Hearing was scheduled for 5 days.  It overran for some days, probably, because of, the inter alia, the argument on admissibility of expert evidence.

(2)     The 2 Counsel for the Plaintiffs charged for $500,000 and $150,000 brief respectively.  They amounted to about 71 hours and 83 hours of work for each of the Counsel.  In further reviewing the papers before me, including the skeleton and list of authorities prepared by both sides, I sticked to my original figures allowed.

	Senior Counsel	Junior Counsel
Reviewing all papers	5 hours	5 hours
Conducting research, preparing skeleton, list of authorities, etc.	20 hours	20 hours
Persuing skeleton, list of authorities, etc. of opponent party	10 hours	10 hours
Pre-trial conference and discussion between Counsel	5 hours	5 hours
Attending the 1st day trial	5 hours	5 hour
	45 hours	45 hours

Costs

24.  Having dismissed the Plaintiffs’ Review before me, I see no reasons to depart from the general rule that costs follow the event.  There will be an order nisi that the Plaintiffs do pay costs of the review, including the hearing before me on 24 June 2010, to be summarily assessed by me (0.5 hour reserved) if parties cannot come to any agreement within 21 days from the date hereof.