LAU CHO KWAN, LEO AND ANOTHER v. LAU SIU FAN, ELAINE AND OTHERS

HCCW 262/2020

[2021] HKCFI 3718

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO. 262 OF 2020

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S U M M A R Y    A S S E S S M E N T

O F    C O S T S

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A.     Introduction

1.  Sometimes, it seems it is not only butter which is churned.

2.  This summary assessment of costs follows from my Judgment dated 18 October 2021 [2021] HKCFI 3067 and my Costs Ruling dated 18 November 2021 [2021] HKCFI 3448.  I shall continue to adopt the definitions and abbreviations used in my Judgment.

3.  By my Judgment and Costs Ruling, amongst other things:

(1)  I dismissed the Set Aside Summons, by which the Company applied to set aside the Carry On Order that appointed Betty to represent the estate of Leo to carry on these proceedings and the proceedings to be carried on as if she had been substituted for Leo;

(2)  I dismissed the Strike Out Summons, by which the Company sought to strike out the prayer for winding up relief in the original Petition and the relevant paragraphs and prayer for winding up relief in the draft Amended Petition, on the grounds that the winding up relief sought is plainly and obviously unsustainable and seeking such relief against the Company is frivolous, vexatious or otherwise constitutes an abuse of process; and

(3)  I allowed the Amendment Summons, by which Leo and Betty sought leave to amend the Petition;

(4)  as to the Set Aside Summons, I ordered the Company to pay 80% of Betty’s costs of the summons;

(5)  as to the Strike Out Summons, I ordered the Company to pay Leo and Betty’s costs of the summons;

(6)  as to the Amendment Summons, I ordered the Company to pay 80% of Leo and Betty’s costs of the summons; and

(7)  I directed all costs orders in favour of Leo and Betty to be with certificate for two Counsel, to be summarily assessed on the party and party basis and payable forthwith.

4.  Leo and Betty had filed separate Statements of Costs in respect of each of the three relevant summonses on 15 November 2021. The Company filed matching separate Lists of Objections on 2 December 2021.

B.     Approach

5.  As appropriate to a summary assessment, I assess the costs looking at the overall figure claimed and the individual components of that figure.  I specifically take into account matters such as proportionality and complexity, and the specific objections raised.

6.  The scope of argument and degree of complexity, and the extent of the materials reasonably necessary to determine the arguments, are all apparent from my Judgment.  In short, though obviously hard fought between disputatious litigants, this was far from the most complex of arguments, and two of the summonses dealt with essentially the same point.

7.  Most of the argument was not particularly fact sensitive, and there was little need for anyone to have made lengthy reference to any of the evidence filed.  Indeed, as I pointed out in the Judgment,with the benefit of prior written skeleton arguments, the oral submissions made at the hearing were crisp, and little or no reference was actually made by anyone to the majority of documents in the hearing bundle.

C.     Overview

8.  Having considered each of the Statements of Costs and the relevant List of Objections, there is great force in many of the objections raised.  This is particularly so where the total costs claimed seem to me to be obviously wholly disproportionate to the difficulty or complexity of the points being argued.  With the claimed significant involvement of both leading and junior Counsel, there is also force in the objection as to the clearly excessive time attributed to solicitors, and the apparent doubling up on fee earners’ time.

9.  The total costs claimed were in excess of HK$2.2 million and comprise:

(1)  $518,540 for the Set Aside Summons;

(2)  $1,183,199 for the Strike Out Summons; and

(3)  $515,750 for the Amendment Summons.

10.  I am afraid that I have to say I find those to be ‘silly’ numbers.

D.     The Set Aside Summons

11.  The Set Aside Summons essentially gave rise to a concise legal argument as to the proper effect of certain rules within RHC Order 15.  Though it was ultimately argued by leading Counsel (in the context of his conducting argument on the other matters), it is the kind of point routinely argued by junior Counsel before a Master.  Any relevant evidence was minimal.  I do not see how the Set Aside Summons could conceivably justify anything remotely like the claimed roughly 110 hours of solicitors’ time (equivalent to more than 13 full 8-hour billing days of solicitors’ time).

12.  The claimed costs suggest that four fee earners (one partner who is a solicitor advocate, one associate, and two trainee solicitors) spent between them, amongst other things:

(1)  12 hours attending on the client,

(2)  19 hours attending on Counsel,

(3)  42 hours preparing documents,

(4)  almost 10 hours perusing documents,

(5)  7 hours preparing for the hearing, and

(6)  a further 4 hours on ‘general care and conduct’.

13.  When it is remembered that these hours were claimed for dealing only with an application to set aside a procedural carry on order, the numbers only have to be read to be seen to be wholly indefensible.  Having instructed Counsel to argue the summons, it is difficult to imagine how it could conceivably be justified to spend and seek to charge for 19 hours discussing the matter – just this summons – with Counsel, and then a further 7 hours preparing for the hearing which would be argued by Counsel.  I confess I also find it difficult to imagine how it could conceivably have required 42 hours to prepare the relevant documents for responding to this summons, even if one types with only one finger.  Further, what was not already covered in the previous 100 or so hours, and so somehow might justify a further 4 hours of ‘general care and conduct’, utterly escapes me.

E.     The Strike Out Summons

14.  The Strike Out Summons focused on only one part of the prayer for relief in the Petition and the proposed Amended Petition, that relating to the alternative relief of a winding up order.  The summons was largely argued by reference to well settled legal principles.  Albeit some fairly limited evidence was relevant and helpful to the determination of this summons, the claimed costs are obviously wholly disproportionate.

15.  The claim is based upon a staggering, roughly 230 hours of solicitors’ time (equivalent to nearly 29 full 8-hour billing days), including amongst other things:

(1)  48 hours attending on the client;

(2)  34 hours attending on other parties;

(3)  49 hours attending on Counsel;

(4)  51 hours preparing documents;

(5)  26 hours perusing documents;

(6)  7 hours preparing for the hearing; and

(7)  4 hours on ‘general care and conduct’.

16.  The idea that the equivalent of 6 full 8-hour working days of lawyer time would be justified as time spent with the client to consider and discuss just the Strike Out Summons stretches credulity far beyond its limits.  I also fail to understand how it could require 34 hours of discussions with other parties, when the only parties taking any stance at all towards this summons were Leo and Betty and the Company.  Counsel having been instructed, I find it unfathomable why it would be necessary to spend 49 hours in discussion with Counsel, and then a further 7 hours preparing for the hearing which would be argued by Counsel.  The 51 hours claimed for preparation of documents at least does not leap out at me as justified by reference to the documents which were in fact prepared.  Again, after spending more than 200 hours, it is difficult to imagine what might possibly be left to be encompassed by a further 4 hours of ‘general care and conduct’.

F.     The Amendment Summons

17.  The only point at issue on the Amendment Summons was directly linked to the argument on the Strike Out Summons, being the proposed amendment relating to the claimed alternative relief of a winding up order.  No other part of that summons was in any way controversial.

18.  Nevertheless, the claim to costs on this summons is based upon another roughly 113 hours of solicitors’ time (equivalent to roughly another 14 full 8-hour billing days). Those hours comprise, amongst others:

(1)  20 hours attending on the client;

(2)  6 hours attending on the Company;

(3)  25 hours attending on Counsel;

(4)  22 hours preparing documents;

(5)  23 hours perusing documents;

(6)  7 hours preparing for the hearing;

(7)  4 hours on ‘general care and conduct’.

19.  In context, it is difficult to believe that these figures are put forward seriously.  Somehow, having already spent 60 hours of fee earner time attending on the client in relation to the previous two mentioned summonses, there is a claimed justification for spending a further 20 hours attending on the client in relation to the extremely limited issue on the proposed amendment.  In my view, there is no conceivable such justification.  Counsel having been instructed to argue the summons, and four fee earners having already spent a combined 49 hours discussing the overlapping Strike Out Summons with Counsel, I find it inconceivable to think that a further 25 hours of fee earner time with Counsel might be in any way justified – and then to spend a yet further 7 hours preparing for the hearing which Counsel was instructed to conduct.  I confess also to finding it difficult to accept that another 22 hours was required to produce documents relevant only to the narrow issue on the Amendment Summons, or to spend 23 hours perusing documents relevant only to that narrow issue.

G.     The Assessment

20.  In addition to the above comments, there is also some force in the objections raised about some aspects of Counsel’s fees.  But, on the relatively broad brush approach applicable to a summary assessment of costs, I do not think it necessary further to go into any detail.

21.  The key point is that the costs claimed for these summonses seem to me to be massively inflated, far above what was in any way proportionate or appropriate.  The solicitors’ time costs claimed were for a total of hours equivalent to a lawyer working for 56 days – that is, more than 11 weeks of 5-day working, billing 8 hours every single day.  All that, whilst also instructing leading and junior Counsel to conduct what were essentially non-fact-sensitive legal arguments on interlocutory summonses with at least significant overlap, dealt with in a roughly half-day hearing.

22.  Having carefully considered matters, and perhaps even erring on the side of being generous to the costs claimants, I summarily assess the costs payable as follows:

(1)  on the Setting Aside Application: $128,000 (being 80% of my summary assessment of the whole at $160,000);

(2)  on the Striking Out Summons: $380,000;

(3)  on the Amendment Summons: $80,000 (being 80% of my summary assessment of the whole at $100,000).

H.     Further Action

23.  It is unfortunate that the costs claimed leave the impression of such an exaggerated ‘try on’.  Even before applying the necessary deductions to reflect those orders where I apportioned costs, I have assessed costs at less than 29% of the amount claimed.  Not only do I think that the Company ought not to pay anything even approaching the amount of costs claimed, I wonder whether Leo and Betty should themselves be required to pay their solicitors fees in the range of figures put forward.

24.  I am therefore considering making, of my own motion, a wasted costs order against the solicitors under RHC Order 62 rules 8(2) and 8A(1), as would disallow the solicitors from charging their own clients more than a total of $800,000 for the three summonses combined (inclusive of all Counsel’s fees and disbursements).  The solicitors are invited to consider their position and, should they so wish, to make relevant submissions or representations to me within 14 days, for my further consideration under the various provisions in Order 62 rule 8(3)-(8).