GALSWORTHY LTD v. LIU POR appointed to represent the estate of LIU CHENG CHAN, deceased AND OTHERS

HCA 560/2017

[2019] HKCFI 2830

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 560 OF 2017

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DECISION ON SUMMARY ASSESSMENT OF COSTS

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1.  On 30 September 2019, I handed down judgment in respect of a number of applications in the present action (“Judgment”). For convenience, in this Decision I adopt the abbreviations in the Judgment.

2.  I refer to paragraphs 36-37 of the Judgment which explained that on 21 June 2019 by the Jinhui Consent Summons the parties agreed on the terms of the cross-undertaking offered by Jinhui Holdings to bolster the cross-undertaking by Jinhui for the 1^st/2^nd Orders as varied because it transpired that Jinhui was a Bermuda company rather than Hong Kong company. This court granted the 28/6/19 Order in relation to the Jinhui Consent Summons. However, the parties could not agree on the appropriate costs order for the Jinhui Consent Summons, and such disputed costs issue was argued before this court at the 2^nd Hearing. By paragraph 490(e) of the Judgment, I granted the following costs order:

(a)  save for the costs provision in (b) below, P shall pay Ds costs of and occasioned by the Jinhui Consent Summons (including all costs reserved if any) on party-and-party basis to be summarily assessed and paid forthwith (ie Ds’ Jinhui Costs Order);

(b)  Ds shall pay P costs of and occasioned by the 2^nd Hearing in respect of Ds’ application for costs of the Jinhui Consent Summons on indemnity basis to be taxed on party-and-party basis if not agreed;

(c)  20 minutes’ hearing time at the 2^nd Hearing were apportioned for the Jinhui Consent Summons;

(d)  85% of the hearing time in (c) above was apportioned for Ds’ application for costs of the Jinhui Consent Summons on indemnity basis.

3.  By paragraph 494 of the Judgment, I granted directions for summary assessment of costs in respect of Ds’ Jinhui Costs Order:

(a)  Ds do within 7 days from the date of the Judgment lodge and serve statement costs for Ds’ Jinhui Consent Summons not exceeding 1 page pursuant to Practice Direction 14.3 (“PD14.3”) (ie Ds’ Costs Statement);

(b)  P do within 14 days thereafter lodge with court and serve succinct summary of objections of not more than 1 page in response to Ds’ Costs Statement;

(c)  the summary assessment of costs will be by paper disposal (unless otherwise directed).

4.  On 11 October 2019, Ds lodged the Ds’ Costs Statement. On 25 October 2019, P lodged its summary of objections (“List of Objections”).

5.  The proper approach to summary assessment of costs has been laid down by the Court of Appeal in Poon Shu Fan v Wong Tin Yan.[1] For present purpose, it is sufficient to refer to the useful summary in the headnote of the reported judgment at pp 512 – 514 as follows:

“(2) As in an ordinary taxation, under O.62 r.28(2) of the Rules of the High Court (Cap.4A) (the RHC), in a summary assessment, party-and-party costs were allowed only if they were ‘necessary or proper’ for the attainment of justice or for enforcing or defending the rights of the receiving party. Pursuant to Practice Direction 14.3, the court adopted a broad-brush approach to ensure the final figure assessed was not disproportionate and/or unreasonable having regard to the nature and circumstances of the application or matter and the underlying objectives stated in O.1A of the RHC, even if there was no challenge to individual items. ……

(3) A summary assessment required a two-stage approach. If total costs claimed appeared proportionate, then all that was normally required was that each item should have been reasonably incurred and the cost reasonable. If the overall costs appeared disproportionate, then the court would have to be satisfied that each item was necessary and its costs was reasonable. A sensible standard of necessity should be adopted allowing fully for the different judgments which those responsible for the litigation could sensibly come to as to what was required. While the threshold was higher than that of reasonableness, it should be achievable by a competent practitioner without undue difficulty. The conduct of the other party was relevant, since a cooperative party could reduce costs, but an uncooperative party could render necessary costs which would otherwise be unnecessary. ……

(6) Since Civil Justice Reform in 2009, taxation of counsel’s fees under a party-and-party taxation was no different from taxation of costs and expenses. The test of ‘necessary or proper’ applied and must take into account the matters set out in para.1(2) of Part II of the First Schedule to O.62 of the RHC, as well as the requirement of reasonable proportionality. Accordingly, paras.62/App/28(5) (p.1172) and 62/App/28A of Hong Kong Civil Procedure 2012 (p.1172), which referred to the previous pre-CJR ‘excessive and unreasonable’ test under the former para.2(5) of Part II of the First Schedule to O.62 of the RHC, should no longer be followed, ……”

6.  I also refer to the following guidance in PD14.3:

“13. A broad-brush approach will be taken by the Court in the summary assessment procedure. The Court will not embark on a mini-taxation. Prolixity in contents of a statement of costs is therefore not acceptable. Costs for gathering information and drafting of these statements will generally not be granted.

14.  Although the Court may allow the full amount claimed by the receiving party, it will, so far as possible, ensure that the final figure is not disproportionate and/or unreasonable having regard to the nature and circumstances of the application or matter and the underlying objectives stated in Order 1A. The Court will retain this responsibility notwithstanding the absence of challenge to individual items in the make-up of the figure sought. The fact that the paying party is not disputing the amount of costs can however be taken as some indication that the amount is proportionate and reasonable. The Court will therefore intervene only if satisfied the costs are so disproportionate that it is right to do so.”

7.  On an overall basis, P submitted that the total quantum of Ds’ Costs Statement was unreasonable/excessive in that (a) the solicitors’ professional fees ($239,070) were disproportionate, (b) the involvement of 2 senior solicitors of about 10 years and 14 years of post-qualification experience was not properly justified, and (c) it was unclear what advice was sought from senior counsel and counsel.

8.  Bearing in mind the two-stage approach required for summary assessment, and having considered the nature and scope of the Jinhui Consent Summons, skeleton submissions and list of authorities, what transpired at the 2^nd Hearing in relation to the issue of costs in respect of the Jinhui Consent Summons, and considering all the circumstances, I make the following general observations:

(a)  Costs are assessed on party-and-party basis such that only costs that are necessary and reasonable will be allowed.

(b)  The underlying facts in respect of the Jinhui Consent Summons were straightforward, ie Jinhui was a Bermuda company and not a Hong Kong company, which did not sit well with P’s affidavit evidence. Once this fact was identified (presumably from the corporate documents), the only issues for Ds would be to consider (i) the appropriate strategy/approach to adopt in relation to such discovery, and (ii) the appropriate response to P’s offer to resolve such error, ie its offer to have Jinhui Holdings give a cross-undertaking.

(c)  Senior counsel and counsel were engaged to render advice. Presumably, senior counsel and counsel were engaged to advise on the merits and/or propriety of the matters in (b)(i) - (ii) above. In light of the background of this matter but subject to (d) - (e) below, I find the involvement of senior counsel and counsel to advise on such matters necessary and/or proper.

(d)  Costs for any advice by senior counsel and counsel on D’s claim for indemnity costs for the Jinhui Consent Summons, which application eventually failed, would not be recoverable under Ds’ Jinhui Costs Order.

(e)  On party-and-party assessment, the availability of advice by senior counsel and counsel would have impact on the necessity and/or scope of the work done and time spent by solicitors.

9.  There was some force in P’s contention that it was not necessary or proper on party-and-party basis to involve 4 professional fee-earners, especially 2 senior fee-earners with inevitable increased supervision, reporting and/or possible duplication, which factor I take into account in the assessment of costs under Ds’ Jinhui Costs Order. But it was not inappropriate for a senior fee-earner to work with a more junior fee-earner with more general work done by the latter under focused supervisory input by the former so that costs could be reasonably contained. Here, there was significant involvement by JJF, who could not be said be junior himself/herself as he/she was admitted to practice in 2009 and hence had 10 years’ post-qualification experience by 2019. On party-and-party assessment, I am not persuaded notional solicitor with JJF’s experience would require any intensive supervision by DG, and in fact JJF should be able to effectively supervise TM who should be handling the bulk of the work (especially given the involvement of senior counsel and counsel).

10.  In relation to items B1 and B2, P had no objection to the total claim of $383.

11.  In relation to item C1, I allow 0.3 hours for DG being the partner-in-charge to inform the client about the issue raised by the situs of Jinhui and about the management of the matter by JJF, and to confirm with the client for instructions to counsel. Bearing in mind this was not a matter that required factual instructions from P, I am persuaded that the time costs incurred by JJF and TM were excessive on party-and-party assessment. I allow 1.5 hours for JJF and 2.5 hours for TM. This would result in 0.3 x $5,200 + 1.5 x $5,200 + 2.5 x $3,200 = $17,360.

12.  In relation to item C2, bearing in mind the relevant correspondence between the parties, I find the claimed time costs excessive. In fact, most of the correspondence in negotiating the terms of the Jinhui Consent Summons and the joint letter to the court should not require DG’s input, and notional solicitors with the experience of JJF and TM would have been sufficient. P’s concession of 0.6 hour for DG was clearly reasonable. As for JJF and TM, I allow 4 hours and 6 hours of time costs respectively. This would result in 0.6 x $5,200 + 4 x $5,200 + 6 x $3,200 = $43,120.

13.  In relation to item C3, I agree that the time costs claimed were excessive. The terms of the Jinhui Consent Summons and the joint letter to court have been worked out and agreed via inter-solicitors’ correspondence. The preparation and review of the engrossment of such documents for submission to the court should require minimal time. In this respect, I allow 0.2 hour for JJF and 0.5 hour for TM, which translated to 0.2 x $5,200 + 0.5 x $3,200 = $2,640.

14.  In relation to item C4, as explained in paragraph 8(c) above, I consider it appropriate to seek advice from senior counsel and counsel on the matters in paragraph 8(b)(i)-(ii) above, but not on the matter in paragraph 8(d) above. However, senior counsel and counsel engaged for such purpose were the very same senior counsel and counsel briefed to appear for Ds at the 1^st/2^nd Hearings in respect of Ds’ Summonses, P’s Summons, 1^st Aff Summons, and 2^nd Aff Summons in respect of the Draft D3 7^th Aff and consequential applications for leave to adduce the other Draft Affs. Plainly, senior counsel and counsel so engaged would be familiar with the background and developments in the present action, and would not require further background instructions. As explained above, the factual background for the Jinhui Consent Summons was straightforward. I am not persuaded that significant liaison with senior counsel or counsel would be required. I would allow 0.4 hour and 0.7 hour for JJF and TM respectively. This meant that 0.4 x $5,200 + 0.7 x $3,200 = $4,320 was assessed for item C4.

15.  In relation to item D1, plainly the terms of the joint letter to the court and the Jinhui Consent Summons were the subject matter of negotiations in inter-solicitors’ correspondence, and this must be taken into account in assessing the necessary or proper fees for drafting work under party-and-party assessment. P asked this court to discount this item altogether. But even discounting any drafting in relation to P’s claim for indemnity costs, P would still be entitled to time costs for preparing the initial drafts. I therefore allow 0.4 hour for JJF and 1.2 hours for TM for this item, ie 0.4 x $5,200 + 1.2 x $3,200 = $5,920.

16.  In relation to item D2, I find the time costs sought for perusal of documents excessive. I allow 0.25 hour, 0.5 hour and 1 hour for DG, JJF and TM respectively. This meant that 0.25 x $5,200 + 0.5 x $5,200 + 1 x $3,200 = $7,100.

17.  In relation to item D3, I agree with P that under party-and-party assessment it would not be necessary or proper for 4 professional fee-earners to attend the 2^nd Hearing for the Jinhui Consent Summons. I therefore allow 0.05 hour for DG in the sum of 0.05 x $5,200 = $260.

18.  In relation to item E1, I have found it was appropriate for senior counsel and counsel to advise on matters in paragraph 8(b)(i)-(ii) above but not the matter in paragraph 8(d) above. But it seemed that the matter in paragraph 8(d) above was the true contested issue between the parties, and must have featured in the advice by senior counsel and counsel. In the circumstances, I allow $15,000 and $6,000 totalling $21,000 for item E1.

19.  In relation to item E2, senior counsel’s and counsel’s apportioned brief fees were agreed at $7,200.

20.  In coming to the above view that the overall costs claimed by Ds appeared to be on the high side on party-and-party basis, I have taken into account all the circumstances and adopted a broad-brush approach in considering the scope of the Jinhui Consent Summons, the parties’ joint letter dated 21 June 2019, Ds’ Jinhui Costs Order, the skeleton submissions, what transpired at the 2^nd Hearing, the involvement of senior counsel and counsel, and the matters noted above.

21.  Upon considering the items of costs claimed to see whether or not they were “necessary and its costs reasonable” on the sensible standard of necessity as explained by the Court of Appeal, Ds’ total costs in the Ds’ Costs Statement are assessed at $163 (B1) + $220 (B2) + $17,360 (C1) + $43,120 (C2) + $2,640 (C3) + $4,320 (C4) + $5,920 (D1) + $7,100 (D2) + $260 (D3) + $21,000 (E1) + $7,200 (E2) = $109,303 to be paid by P.