NG YEE WAH v. LAM CHUN WAH

HCMP4616/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.4616 OF 2001

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J U D G M E N T

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1. This is a review of the taxation by the Taxing Master Lung in respect of, basically, one item of work and which goes back to the Order of Kwan J on 28 June 2005 which ordered costs in favour of the plaintiff which would include the costs of preparing the affidavit of an accountant Mr Kan Ping Kee filed on 20 January 2005.  This affidavit comprised 45 pages of affidavit, 11 pages of schedule and 40 exhibits.  This is a complicated and important affidavit in support of the plaintiff’s application against the defendant, the plaintiff being the ex-wife of the defendant, in respect of certain transactions of a company.  I do not have to go into detail.

2. Taxation took place on 3 dates : 20 February 2006, 3 and 4 August 2006.  On 3 August, the taxing master began to tax for the work involved in preparing this affidavit.  In the morning, he had taxed 28 items out of 54 items in respect of the work done by counsel, accountant and solicitors.  The total sum of counsel fees was $189,000; accountant, $114,750; and solicitors, $556,648.  The total sum comes up to $840,398 for preparing one long affidavit of the accountant.

3. The modus operandi adopted by the plaintiff solicitor, Mr David Wong, was to take instructions from the accountant, reduce the accountant’s instructions into writing or in the form of instructions to counsel and send them to counsel.  Counsel was to draft the affidavit and he raised certain queries.  The queries would be sent to the accountant and the solicitor thereafter would have conference with accountant again and obtain instructions from him in order to answer counsel’s queries.  This went on to and fro with a number of conferences and sometimes the conferences were on the phone with the accountant, and in the meantime, he received the accountant’s further analysis, conclusions and summary.  From counsel he also obtained several written advices.  The solicitor has also made several instructions to counsel or letters of reply to counsel.

4. Mr Raymond Chua, solicitor for the defendant set out those different kinds of work in his annexure 2.  There were in total 10 conferences between solicitor and accountant, three conclusions and analysis or summary, and counsel made six advices and eventually settled the accountant’s affidavit.  The solicitors also drafted four instructions to counsel and eventually also made a draft accountant’s affidavit for counsel to settle.

5. At the taxation, the taxing master followed the usual rule and taxed each and every item of the work done by each of the three persons for 28 items, starting from item 123 of the bill up to item 182.  The total amount claimed by counsel was $102,000 and this total amount was allowed by the taxing master.  Accountant claimed $84,125 and the taxing master allowed $73,500.  The solicitor claimed profit cost of $153,069 and the taxing master allowed $141,069.

6. After item 182, that is, after 28 items were taxed, the learned taxing master then started to query the modus operandi adopted by the solicitor in preparing this long affidavit of the accountant.  The taxing master summarised Mr Cheung’s submission the solicitor who appeared for the defendant there and then and said at page 399 of the bundle, which is the transcript, line J :

“

Mr Cheung submitted that the plaintiff should have taken a more reasonable approach to do it, that is, to take client, not client but the accountant and counsel together to have a conference and sort out the queries raised by counsel in one go instead of having comments, consider, take instructions from the accountant, reduce the comments in writing, back to counsel, counsel comment again and then you go to the witness.  You can save all these diverse steps by taking conference with counsel, and his [i.e. Mr Cheung’s] ...other objection will be excessive time, excessive costs.  So the step you have taken will cause a duplication of work.”

7. After Mr Wong for the plaintiff submitted that that was the approach done, he submitted that if he had used the other approach, then counsel’s time would have been involved and he could would have to charge for the conference.  He would not know whether it would be more expensive or it would come up to more or less the same thing, but of course there would also be a complication of arranging a suitable time for counsel and accountant to attend conference.

8. Eventually, the master made the following ruling at page 401, line J to 402, line E :

“	It is wrong.  The approach is totally wrong because you can see that you spent more than half a million dollars on a solicitor to prepare the affidavit.  I take the objection that this process is not reasonable.
	You spent hours and hours on taking instruction from the accountant and hours and hours in putting down all his comments and sort of factual findings in the letter sent to counsel, and then you take hours and hours to consider counsel’s comments, pass them back to the accountant and take further instructions, put them into writing, pass them to counsel.  I think all these can be saved by way of a conference among all parties.  I see no restriction on counsel taking direct instructions or evidence from the expert.  After all, it’s the counsel who would settle the affidavit.  So, in fact, your significance in the drafting or the preparation of the affidavit will dwindle because you have to ask counsel to settle it ultimately.  You may have to do the groundwork.  Fine, but what have you done?  You set out the factual ground; you set out the factual things done by the accountant.  You are not an accountant, so, inevitably, you have to put in the affidavit what the accountant has found in his investigation, put them through the counsel.
	Now, if we do it the way the bill is presented, we have to follow the process of what you have done, but I disagree with you.  It will be difficult for me to do it item by item because I can see that you have got evidence to show that you spent time on the work.  If I totally disallowed the time, it would be unfair to you.  How much time do I cut off?  80 per cent?  90 per cent?  It’s difficult.
	So, on those bases, I think it’s more appropriate for me to consider the costs for the preparation of the affidavit, taking into account of all the items you have set out before me.”

9. From then onwards, Mr Wong urged the learned master to go on to tax the remaining 26 items starting from item 183, but the court decided that it was against logic to do so.  Eventually, the learned master taxed the total amount for the affidavit of the accountant at the global sum of $360,000 and he assigned $120,000 for counsel, $90,000 for accountant and $150,000 for the solicitor.

10. Now, stopping here for a moment, we must assume that the 28 items taxed by the taxing master was done meticulously and he vetted each and every item to see whether the time spent, say, by the solicitor or accountant was reasonable; the charge of counsel for the time he spent in preparing this affidavit was also reasonable. 

11. If that is the case, “the global assessment” that the master called would mean this : for counsel fee of $189,000, he had already allowed $102,000 which he had considered as being reasonable.  Thus, consequently, only $18,000 was allowed for the remaining work which counsel said he had spent 29 hours in doing so.  So if we go by taxation item by item, he only allowed 6 hours (instead of 29 hours) at $3,000 an hour for all the work counsel had done for items 194, 205 and 209 in the bill. 

12. Similarly, the amount claimed by the accountant was taxed down from $30,625, being the difference between total amount of $114,750 and the total amount claimed up to the 28^th item, $84,125, leaving item 125.  When the taxing master taxed down the total amount of accountant by a global assessment to $90,000, that would mean that the original claim of the accountant for the remaining 26 hours for the sum of $30,625, (i.e. $90,000 - $73,500 allowed by him by the 28^th item) he had taxed down to $16,500, nearly by half.

13. It would be even more so for the solicitors who claimed more than half a million for all the work done by him : $556,648, and up to the 28^th item, the taxing master had already allowed $141,069 out of the total amount claimed, one of $153,069.  And if he only allowed $150,000 for the solicitors, then for the remaining 26 items, he only allowed $8,931 for the total amount of $403,569 claimed by solicitors. 

14. Of course, in the global assessment, the learned taxing master was adopting a different approach globally for all 54 items and set aside the 28 items he had taxed by saying at page 402O to Q that :

“	I will overrule the other items which I assess [meaning 28 items].  I would set them aside because once it’s a global view, it’s got to be a global view.”

15. He further said at page 403Q-R :

“	Yes, I will take into account all the items you set out the bill and the previous one which I have already taxed.”

The learned master even said that, procedurally, the plaintiff’s approach is right but then it is against logic to tax item by item.

16. Mr Chua for the defendant submitted that the learned master must have read all the supporting documents in respect of 454 items.  From the transcript, I can only see that for the first 28 items, Mr Cheung for the defendant was objecting to the items and the taxing master used the normal procedure and taxed them item by item.  For the rest, those supporting documents were not read by the taxing master.  He just came to a conclusion that he must assess the end product, that is, the affidavit of the accountant by a global assessment and, that is, apparently, he read the affidavit and considered that the plaintiff was only entitled to $360,000 for this piece of work and he assigned it as various sums as aforesaid for counsel, accountant and the solicitor respectively.

17. It is not clear how that $360,000 figure came from apart from an educated guess by an experienced taxing master.  I am afraid taxation of course by itself is a tedious job.  Taxing master has to vet each and every item by looking at the actual piece of work done by a solicitor.  Here, the solicitor has done a diligent job by interviewing the accountants, taking instructions and instructing counsel properly.  After he got advice from counsel with queries, he had conference with the accountant himself, took instructions again, reduced those instructions into writing in the form of instructions to counsel for further advice and settlement of the affidavit. 

18. Inevitably, this had been going on for quite some time to and fro with the suggestion by the taxing master there should be conferences of three persons together which, in his view, might have cut down the cost.  This has not been mathematically proven to be the case.  If the alternative procedure is adopted by the solicitor, more counsel fee would have been involved and solicitor fee might have been saved by lesser instructions to counsel.  But as I have said, mathematically, it has not been proven that must be a cost-saving exercise.  In particular, it is not wrong for a solicitor to take instructions from a witness, and here, an expert witness directly and to instruct counsel accordingly.  Needless to say, this is a very important affidavit in order to support the plaintiff’s application.  The end product is meticulous in this 56 pages of affidavit. 

19. In my view, it is the taxing master’s job to vet every single item done by the fee earner and to decide whether each and every item is reasonable and proper.  There are repetitions of conferences.  There are repetitions of comments and writing to counsel and, in the master’s words that “then taking comments, further comment, etc.”  This repetition is a repetition of the modus operandi.  It is not shown that the substance of the conference, instructions to counsel and comments were repetitions in the sense that they were discussing exactly the same thing.  There are quite a number of items to go through in this long affidavit involving a long string of pieces of evidence.

20. I am afraid it is a tedious way of taxation to go through each and every item in order to see whether there is repetition, or improper or unreasonable amount claimed by the fee earner.  Here, in my view, the taxing master should have gone on to tax the remaining 26 items.  After that, he might, for good reason, tax down globally if he has reasons to do so.  But the taxation of each and every item is required in order to see whether each piece of work is reasonable.  When counsel says eventually he spent two solid months by way of 28 hours in settling the final draft of the affidavit, it is the taxing master’s job to see whether 28 hours were reasonable; if not, what is the reasonable time allowed by the taxing master for such settling or eventual settling of the affidavit?

21. Global assessment, as submitted by Mr Lee Yee Hung, counsel for the plaintiff, was unheard of.  It was tainted with an element of gross sum assessment under Order 62, rule 9(4)(b).  However, the learned master said it is not a gross sum assessment.  Mr Chua submitted that it is not a gross sum assessment and accepted that taxing master had no jurisdiction to make gross sum assessment unless he was sitting in a court, making a costs order against anyone.  For the purpose of this judgment, I accept this is not a gross sum assessment.

22. Mr Lee has diligently gone through in his research and he informed me that this term “global assessment” does not appear in the White Book; it does not appear in the judiciary website, or in any of the judgment; and this global taxation or global assessment would be unfair to the plaintiff.  The proper way, which I accept, is to tax each and every item to see whether the work done therein was reasonable or not. 

23. For the aforesaid reason, I allow the appeal.  I set aside the amount of $360,000 taxed for the said affidavit. 

24. Before I hear the ancillary matters, one point I would like to add to what I have said just now in my judgment.  From the paragraph I quoted in the transcript as to the learned master’s holding, he said at page 402 that :

“	It will be difficult for me to do it item by item because I can see that you have got evidence to show that you spent time on the work.  If I totally disallowed the time, it would be unfair to you.  How much time do I cut off?  80 per cent?  90 per cent?  It’s difficult.”

25. Now, having said that, I am afraid the end result now adopted by the learned taxing master is even more unfair.  He cut off from the amount claimed by the solicitor from $556,648 to $150,000.  That means he is taxing down from the total amount to an amount which was only 26.947 per cent of what was claimed by the solicitor.  It is even much more than what he said 80 per cent, 90 per cent.  When he cut off by about 73 per cent of the solicitors’ work, his rationale is the solicitor should ask the counsel to attend a joint conference and therefore the solicitors’ work would be reduced.  If that is his view, then he should instead add to what counsel should charge by attending conferences.  But that was not done.  In fact, counsel’s work was also reduced by $189,000 to $120,000.  Of course, as I have said, $120,000, that figure was not explained as to why counsel was only entitled to $120,000 for all the work he had done.  And when he decided to have a global assessment in the way he suggested and, that is, counsel should attend conference to take instructions, then he should actually add more amount for counsel in attending those conferences which would enable the solicitor to cut down all the paperwork which he did and this is another point I think the global assessment in the way adopted by the taxing master and also the rationale behind it was faulted.

[Discussion re ancillary orders]

26. I think I will direct the same Taxing Master Lung to continue on with the taxation of the remaining 26 items from item 183 in the master bill for the following reasons.  The plaintiff’s side did not object to the same taxing master to continue with the taxing of the remaining items according to my judgment.  They had full confidence in the integrity and the judicial temperament of the same taxing master, it will save judicial time and increase efficiency since the same taxing master has been handling the taxation and has decided on the hourly rates he allowed of the solicitors, etc.

27. There is no reason why the first 28 items, having been gone through meticulously as the learned master did, would have to be done all over again and this also would have the danger of another taxation on the same bill for the first 28 items.  It was only thereafter that the taxing master had adopted another approach halfway through by a global assessment and came down substantially to $360,000.  I have no doubt on the integrity of the taxing master either. 

28. The only salient point which Mr Chua has kindly pointed out is that that might deprive the defendant — actually, it is not just the defendant, it might deprive the plaintiff as well — to raise objection as to the right to review the taxing master’s decision in respect of the items already taxed long time ago because 62-33(2) says :

“

An application under this rule for review of a taxing master’s decision may be made at any time within 14 days after that decision or such shorter period as may be fixed by the taxing master provided that no application under this rule for review of a decision in respect of any item may be made after the signing of taxing master’s certificate dealing finally with that item.”

29. I think in order to overcome this rule, there is a further direction that all 54 items shall be treated as items taxed at the time of the end of taxation for the purposes of Order 62, rule 33(2).  The rationale is simple.  If, on 4 August 2006, taxing master had not finished with the taxation, say, he taxed 45 items and for whatever reason there would have to be a long adjournment up to today, you cannot say that after he finished with all 54 items, the first lot was taxed a long time ago and 14 days’ run from each and every item when the decision was made.  I do not think that is the purpose of this rule.  So the direction here is made by way of ex abundanti cautela in order to avoid doubt.  You usually make a review of a taxing master’s decision to any item after the bill was taxed and not immediately after one item was taxed.

30. In my order, I set aside the amount of $360,000 taxed for the said affidavit and the allocator of the master’s certificate.  The whole certificate will have to be set aside because the amount for the affidivat is wrong.  I further direct the same taxing master to continue on with taxation of the remaining 26 items, from item 183 in the master bill.

Costs

31. I further accept the submissions of Mr Lee.  Although they are a little bit late in filing and serving their written submissions but not very late, the same argument was advanced in the appeal as before the taxing master except that of course it did not find favour from the taxing master.  For that reason, the defendant’s side knew in advance what argument they are going to put forward and I do not think a slight delay in submitting the written submissions should attract any penalty in accordance with the practice direction.  So the order I am making is costs order in the review before the master on 24 April this year be set aside and the sum of $20,000 be repaid to the plaintiff.  Costs of the appeal and costs of the review before the master (with certificate for counsel) be to the plaintiff, to be taxed if not agreed.