WINGAMES INVESTMENTS LTD AND OTHERS v. MASCOT LAND LTD AND OTHERS

CACV20/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 20 OF 2012

(ON APPEAL FROM HCA NO.907 of 2011)

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REASONS FOR DECISION

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1.  This is the plaintiffs’ application for security for costs for the defendant’s appeal against Reyes J’s judgment dated 20 December 2011 (“the Appeal”). The Appeal is fixed to be heard on 9 November 2012 together with the application for leave to appeal (“the Leave Application”) in HCMP 32 of 2012.  At the conclusion of the submissions, I ordered that the defendants provide security in the sum of $280,000. My reasons appear below. 

2.  Both the Appeal and the Leave Application stem from HCA 907 of 2011. The subject matter of the Appeal is a final judgment on admission whereby the 1^st defendant is ordered to re-assign to the 3^rd plaintiff the share in Rich Base International Limited. The admission in question is contained in paragraph 56(2) of the Amended Defence and Counterclaim, which reads:

“56. As to Paragraphs 83 to 85:-

…

(2) The Procurer is ready able and willing to cause Topath Ltd (“Topath”) to return the share in Rich Base to CHCH.”

3.  The subject matter of the Leave Application is Reyes J’s order made at the same hearing, refusing leave to the defendants to amend paragraph 56(2) of the Amended Defence and Counterclaim. The amendment, according to the defendants, is to further elucidate what was already pleaded in paragraph 56(2), viz. all entitlements should be determined at the trial and the defendants are ready able and willing to comply with any final orders made in the trial.   

4.  Prior to Tang V-P’s direction that the Appeal and the Leave Application are to be heard together, the defendants had, pursuant to the order by consent dated 8 February 2012, provided security for costs in the amount of $300,000.  The plaintiffs’ present application related solely to security for the costs of the Appeal and the amount sought was reduced from $734,220 to $424,210.

5.  The defendants do not dispute that an order for security for costs may be made against them by reason of their being resident outside the jurisdiction. Their objection is to the amount of the security. The defendants had previously made an offer to provide security in the amount of $200,000, but it was not accepted by the plaintiff.  At the hearing, the defendants’ position is that the appropriate amount should be between $100,000 and $150,000.

6.  Mr Chu, who appeared for the defendants, raised the following arguments. The first is that the Appeal is closely related to the Leave Application and there was and will be substantial overlap in the preparation involved.  Mr Brock who appeared for the plaintiffs disagreed and contended that the work required for an appeal and that for an application for leave to appeal was different and distinct. I accept in principle the two matters involve different considerations and that the emphases are not the same. In reality, however, the arguments involved in the Leave Application would be intertwined with those of the Appeal. In considering the Appeal, the Court will have to consider whether Reyes J was correct in concluding that, having regard to the Amended Defence and Counterclaim as a whole, paragraph 56(2) contained a clear and unambiguous admissionsuch that it could not be salvaged by the proposed amendment and that judgment on admission should be entered. The arguments therefore overlapconsiderably. In terms of the appeal bundles, communications with client, counsel and the opposing parties and the general preparation, there should be some reduction in the costs involved.  To say the least, only one counsel brief is involved.  I am aware that the plaintiffs had made allowance for this by reducing the amount of security sought from $734,220 to $424,210.  Nevertheless, looking at the time estimated for the work to be done, I am of the view that there is room for further saving of costs.

7.  The second argument Mr Chu raised is that the hourly rate of two of the fee earners, AJB and JWC, are excessive. AJB is a registered foreign lawyer, admitted the New South Wales in 2005.  JWC was admitted in New South Wales in 2005 and in Hong Kong in 2011.  Both claim $3,000 as hourly rate.  Mr Chu argued that their hourly rate should only be allowed at $1,300 and $1,800 respectively. Mr Brook justified the hourly rates by reference to Hong Kong Law Society Circular 97-234 dated 21 July 1997 and Circular 07-653 dated 29 October 2007 (“the Circulars”) and the decisions in The Magway (unreported) HCAJ 14/1999 and Heather Anne Voce v. The Henley Group Limited (unreported) HCA 1370/2006.

8.  The Circulars set out, inter alia, the level of hourly rates which taxing masters will in general allow to solicitors and unqualified fee earners upon taxation. In respect of solicitors, the reference to the number of years of practice is a reference to the years of practice as a solicitor in Hong Kong.  In appropriate cases (but not in all cases), the admission and experience in other jurisdictions may be taken into account to allow for an upward adjustment in the hourly rate of a registered foreign lawyer. In the case of AJB, she is not admitted in Hong Kong and is not regarded as a qualified fee earner for the purpose of taxation.  Even accepting that her experience in New South Wales may be taken into account to allow for an upward adjustment from the hourly rate allowed to an unqualified fee earner, it will not be justifiable to adopt the hourly rate of $3,000, which is at the upper end for solicitors admitted in Hong Kong for five to six years.  Similarly, JWC was newly admitted in Hong Kong, even allowing for an upward adjustment on account of his admission and practice in New South Wales, there is no justifiable basis to adopt the hourly rate allowed for a solicitor with five to six years’ practice in Hong Kong.      

9.  As toThe Magway and Heather Anne Voce v. The Henley Group Limited, they only establish that the fees of registered foreign lawyers are recoverable on taxation. They are not authorities that in all cases a registered foreign lawyer’s years of experience in other jurisdiction will be taken into account and that he will be allowed the hourly rate as if he had been admitted in Hong Kong.  Although the registered foreign lawyer in The Magway was allowed an hourly rate of $3,000, it does not follow that it is an appropriate rate for AJB or JWC. As Mr Chu pointed out, the registered foreign lawyer in The Magway had great expertise in the issues involved in the case such that the Registrar was of the view that he should be allowed the hourly rate of a solicitor admitted in Hong Kong for five to six years and this was upheld on appeal.  By contrast, the registered foreign lawyer in Heather Anne Voce v. The Henley Group Limited(see the judgment in [2008]5 HKLRD 429, at para.3) was only allowed an hourly rate of $1,300, the rate of a trainee solicitor.       

10.  In the present case, the issues in the Appeal were not complex; I consider the appropriate hourly rate for AJB and JWC is $2,200 and $2,500. I acknowledge, however, that the revisions to their hourly rate will only have a small effect on the aggregate amount in view of the little time that they claim.

11.  The third argument of Mr Chu is that more than one fee earner was involved in one item of work, that excessive time was claimed by the most experienced fee earner and that there were duplications in some of the work.  Mr Brock did not accept these criticisms. He made the specific point that the case is conducted by the legal team of the plaintiff’s solicitors and there is delegation of work for each fee earner. This being a security for costs application and not a taxation hearing, I do not consider it is necessary to dwell into the individual items of the statement of costs so as to investigate the defendants’ complaints.  It will suffice to bear in mind that a significant part of the statement is estimation of future costs and further that on party-and-party taxation, often some of the costs, for example, costs on communications with clients and counsel and preparation for hearing, will be taxed down or taxed off.   

12.  The final argument of Mr Chu is that the counsel fees are excessive. As the plaintiffs did not appear by counsel in this application, the $100,000 counsel fee for this hearing should be deducted while some allowance should be made for the preparation work and attendance of Mr Brock.  As for senior and junior counsel fees for the hearing of the Appeal, I am inclined to think that they are a little on the high side, having regard to the issues involved.  I would however refrain from expressing a firm view.

13.  In conclusion, I am of the view that security should be ordered at $280,000. Mr Chu did not argue against the seven days’ limit sought in the summons.

14.  Although the only issue relates to the amount of security, the offers of the defendants are significantly lower than the amount ordered. The normal rule of costs follow event applies and the plaintiffs should have the costs of the application.

15.  The orders I made are:

(1)  The defendants do within 7 days provide security for the plaintiffs’ costs of the appeal by paying into court the sum of $280,000.

(2)  In the event the defendants fail to provide the security within the stipulated time, the appeal shall, without further order, stand dismissed with costs to the plaintiff.

(3)  The defendants pay the plaintiffs the costs of this application in any event, to be taxed if not agreed.