HEATHER ANNE VOCE v. THE HENLEY GROUP LTD

HCA 1370/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1370 OF 2006

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JUDGMENT  ON  COSTS

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1.  On 13 November 2007, I dismissed an application for further discovery made by the Plaintiff by summons dated 13 July 2007, and ordered that the Plaintiff should pay the Defendant’s costs of the application.  At the Defendant’s request, I agreed to make a gross sum assessment of such costs pursuant to RHC Order 62 rule 9(4)(b).  However, the information that the Defendant was in a position to provide in respect of such costs at the hearing appeared to be insufficient, and I therefore directed that the Defendant should provide a statement setting out the costs that it said it had incurred, on which the Plaintiff could comment.  The Defendant would then have an opportunity to respond, after which I would assess the amount of costs recoverable by the Defendant.

2.  The Defendant provided a statement of its costs the following day, 14 November 2007.  According to this statement, its costs of the application amounted to HK$151,812.

3.  It appeared from the statement that, apart from having instructed counsel to appear for the Defendant (at both the hearing before me and at an earlier call-over hearing before a Master), four persons from the Defendant’s solicitors (Messrs Simmons & Simmons) were involved in the application – Mr Gareth Hughes, a partner, Mr Wong Wai Keung, a newly admitted assistant solicitor, a trainee solicitor, and Mr Ian Johnston, an English solicitor, who had qualified in England in 2006, and who had become a registered foreign lawyer in Hong Kong in 2007.  Mr Hughes’ services were claimed for at the rate of HK$4,000 per hour, while those of Mr Wong and the trainee were claimed for at HK$2,000 and HK$1,300 per hour respectively.  Mr Johnston was described in the statement as a paralegal, and the cost of his services was sought to be recovered at a rate of HK$1,300 per hour, the same rate as was applicable to the trainee solicitor.  Their respective standard hourly rates were substantially higher – HK$5,900 for Mr Hughes, HK$3,000 for Mr Wong, HK$2,000 for the trainee and HK$3,400 for Mr Johnston.

4.  The statement indicated that between them, these four individuals had spent some 63.8 hours dealing with the application – 6.5 hours for Mr Hughes, 18.6 hours for Mr Wong, 1 hour for the trainee, and 37.7 hours for Mr Johnston.

5.  On 19 November 2007, the Plaintiff’s solicitors (Messrs Horvath & Giles) responded to the statement.  They did not dispute the rates sought to be charged in respect of Mr Hughes, Mr Wong or the trainee.  However, they did raise a number of other points, which were as follows:-

(1)     Costs relating to the earlier call-over hearing before the Master had been included, but these had not been the subject of any order.

(2)     The costs referable to Mr Johnston’s involvement were irrecoverable on the grounds that Mr Johnston was prohibited from practising Hong Kong law by rule 12 of the Foreign Lawyers Registration Rules made under the Legal Practitioners Ordinance (Caps. 159S and 159 respectively).

(3)     The statement did not contain sufficient information to enable the Defendant’s costs to be assessed.

(4)     In relation to the items of costs claimed, there was no differentiation between the work done by the different persons within Simmons & Simmons, and there appeared to be duplication of work, or unnecessary work, or excessive time spent on some matters.

(5)     Subject to point (1) above, Counsel’s attendance at the call-over hearing had not been the subject of a certificate for counsel, nor was it necessary.

(6)     Counsel’s brief fee was excessive.

6.  Simmons & Simmons responded on 21 November 2007, rejecting these contentions.  Thereafter, further submissions were made by both sides in further correspondence which was copied to the court.  Having considered the correspondence, I was of the view that the point relating to the recoverability of the costs of Mr Johnston’s involvement involved called for fuller argument, and directed that this should be dealt with by a further oral hearing.  As the point seemed also to be one of general importance to the solicitors’ profession, I invited the Law Society of Hong Kong to attend and make submissions at the further hearing.

7.  The Law Society put forward a skeleton argument and appeared at the hearing through Mr Jamison.  I am grateful to him for his assistance.  The Plaintiff and Defendant were represented, as they had been at the discovery hearing, by Mr Chan Pat Lun and Mr Maurellet.

8.  Prior to the hearing, the Defendant put forward a further statement of Mr Johnston’s involvement in the matter, under cover of a letter from Simmons & Simmons dated 5 March 2008.  This stated that Mr Johnston was throughout his involvement in the matter subject to the direct supervision of Mr Hughes.  So far as communication with the client and the Plaintiff was concerned, his involvement was in drafting letters and e-mails, which were reviewed by Mr Hughes, with the e-mails being sent out only on Mr Hughes specific instructions.  In all communications, other than those with the client on matters not requiring an opinion as to Hong Kong law, he acted together with Mr Hughes or on his specific instructions.  So far as preparation of documents was concerned, Mr Johnston drafted the affidavits used at the hearing under the direction of Mr Hughes, who reviewed and amended them where necessary.  Mr Johnston’s perusal of documents (which was for a relatively small amount of time) was done to enable him to discuss matters with Mr Hughes, and the preparation for hearing was in relation to the documents he had drafted, with a view to assisting Mr Hughes in relation to the hearing bundles.  Finally, the time spent on producing the statement of costs was done under the supervision of Mr Hughes, and in association with Mr Wong.

9.  At the hearing, the argument was limited to the question of the recoverability of the costs relating to Mr Johnston, the parties indicating that they were otherwise content to leave the quantum of costs to my determination.

10.  Mr Chan submitted that the costs of Mr Johnston’s involvement were irrecoverable, because he, as a registered foreign lawyer, was prohibited from practising Hong Kong law by rule 12 of the Foreign Lawyers Registration Rules, and had given an undertaking to the Law Society in the same terms as that rule.

11.  Rule 12 of the Foreign Lawyers Registration Rules is in the following terms:-

“12.   Prohibition on the practice of Hong Kong law

(1)     Except as provided in subsection (2), a foreign lawyer shall not provide or offer any legal service which, having regard to all the circumstances of the case, can properly be regarded as a service customarily provided by a solicitor in his capacity as such.

(2)     A foreign lawyer may give advice on or handle any matter which –

(a)     is expected to be subject to the law of a jurisdiction other than Hong Kong; or

(b)     involves private or public international law or conflict of laws.”

12.  Mr Chan contended that in doing what he did in relation to the discovery application, Mr Johnston was guilty of a breach of this rule, and that, in consequence, none of the costs associated with his involvement should be recoverable by the Defendant.  He submitted that Mr Johnston had clearly been involved in the drafting of documentation for use at the hearing and in drafting letters and other communications with his client and the Plaintiff, and that these matters amounted to the provision of legal services, and given that solicitors frequently communicated with their clients and opposite numbers, and drafted correspondence and court documentation, these were legal services which were customarily provided by a solicitor in his capacity as such.

13.  Mr Chan also submitted that I should not follow the decision of Waung J in The Magway (unreported, CFI, HCAJ 14 & 246/1999, 23 June 2002), in which it was held that a registered foreign lawyer employed by a firm of Hong Kong solicitors did not himself provide any legal services so as to contravene this rule, as the services provided through him should be regarded as having been provided by the firm.

14.  Mr Maurellet, however, submitted that The Magway was correctly decided.  He also submitted that even if I did not follow Waung J in holding that the services were provided by the firm rather than the registered foreign lawyer, the actions of Mr Johnston did not in fact involve a breach of rule 12, and even if they did, I should follow the decision of Waung J in relation to an alternative basis for his decision, namely that a breach of rule 12 did not prevent recovery of the costs of the registered foreign lawyer in question.

15.  For the Law Society, Mr Jamison submitted that insofar as Waung J held that rule 12 did not apply to foreign lawyers employed by Hong Kong firms, this went too far, but that there was a legitimate distinction to be drawn between a person providing a legal service, and someone who assists in the provision of legal services, so that a registered foreign lawyer employed by a local firm could properly do clerical and administrative work, and a range of work (such as the drafting or preparation of court documents and correspondence) under the supervision and control of a Hong Kong solicitor, but not things that can only be done by a Hong Kong solicitor, such as the giving of advice on Hong Kong law, or appearing in court.

16.  In my view, the work done by Mr Johnston did not involve a breach of rule 12.  What rule 12 prohibits is the provision by a foreign lawyer of any legal service which, having regard to all the circumstances of the case, can properly be regarded as a service customarily provided by a solicitor in his capacity as such.

17.  The first question is whether Mr Johnston was providing a legal service.  As to this, I would agree with Mr Chan and Mr Jamison that in suggesting, in The Magway, that a foreign lawyer employed by a local firm should not be regarded as a provider of legal services, since the client’s contract was with the firm and not the individual doing the work, Waung J would appear to have gone too far.  If Waung J were right, rule 12 would not in fact prevent a foreign lawyer from practising Hong Kong law, as an employed foreign lawyer could (theoretically, at least) advise on matters of Hong Kong law, or perhaps appear in court on behalf of a client, without being in breach of rule 12 or the undertaking he gives to the Law Society.  So long as he was employed by a local firm, he would not, on this basis, be the provider of the legal services in question.  Such an approach would, I think, create a very substantial hole in rule 12, by limiting it to foreign lawyers practising on their own account.

18.  The principal policy consideration behind rule 12 would appear, as Mr Jamison submitted, to be to ensure that only persons qualified to advise on Hong Kong law, or provide Hong Kong legal services, do so.  A secondary purpose may be to foster a strong local legal profession.  The first of these objectives would not be promoted, and would indeed be undermined, by the approach taken in The Magway.

19.  I would therefore, with respect, disagree with Waung J in his view that an employed foreign lawyer does not himself provide legal services, so as to fall outside the purview of rule 12.

20.  But that is not the end of the matter.  Even if Mr Johnston might have been providing legal services (and in drafting correspondence and documentation for use in court proceedings, he would appear to have been doing so), it is still necessary to ask whether the services he provided were those customarily provided by a solicitor in his capacity as such.

21.  As to this, while it might well be said that all services related to the giving of legal advice or provision of legal services, when provided by a solicitor, would be provided in his capacity as such, it is still necessary to consider whether they are services of a nature “customarily” provided by a solicitor.

22.  Mr Chan submitted that what Mr Johnston had done was to draft letters and other correspondence related to the case, and to draft affidavits for use in the discovery application, and that drafting of such documents was clearly a service that would customarily be provided by a solicitor in his capacity as such.

23.  However, I think that this is to describe what Mr Johnston did in terms that are over-broad.  On the basis of the material before me, Mr Johnston was closely supervised in his work, acting on the instructions of Mr Hughes, supervised by him, and with his work product being reviewed and amended by Mr Hughes before it was eventually used.  He did not take any action, or do anything of substance, without such supervision.  In those circumstances, it seems to me that what Mr Johnston did was to draft correspondence and affidavits under the supervision of, and for review by, Mr Hughes.  So stated, I do not think that what he did should be regarded as something “customarily” done by a solicitor in his capacity as such.  A qualified Hong Kong solicitor does not require supervision and review of his work (although there may be circumstances in which it might be prudent for this to be done – for example, where the solicitor in question is newly qualified, or inexperienced in the area of practice in question).  Thus, I think that the doing of such work under supervision should not be regarded as work that is “customarily” done by a Hong Kong solicitor, and therefore falls outside the ambit of rule 12.

24.  Such an approach to rule 12, which was broadly that advocated by Mr Jamison, would promote both the policy objectives that might be thought to underlie it.  The legal services provided as a result would be subject to the supervision of a qualified Hong Kong solicitor (thus meeting the first policy objective), and by enabling a foreign lawyer to gain experience of Hong Kong legal practice and ultimately to qualify as a solicitor here (as I understand Mr Johnston has now done), the pool of qualified solicitors would be expanded and strengthened (thus promoting the second).

25.  I am therefore of the view that the work undertaken by Mr Johnston did not breach the provisions of rule 12.

26.  However, even if I am wrong in this conclusion, I do not think that this would make any difference.  This is because I am of the view that while a breach of rule 12 would give rise to disciplinary consequences for the foreign lawyer concerned, it would not lead to the costs of the work done being rendered irrecoverable.

27.  In this regard, it is necessary to have regard to the provisions of section 50 of the Legal Practitioners Ordinance.  This provides that “a person cannot in any legal proceedings recover costs for anything done by an unqualified person who acts as a solicitor or solicitor corporation”.  This appears to be the only provision in the Ordinance that renders costs of work done by an unqualified person irrecoverable.  Its existence shows that the legislature has provided expressly for this consequence, but has done so to this extent only.  That being so, I do not think that it would be right to impose the consequence of non-recoverability of costs in other situations where this has not been expressly provided for.  Moreover, and in any event, the terms of section 50 would appear to be wide enough to cover all cases in which there would be good reason to impose this sanction.

28.  I do not think that section 50 would bite in this case.  While Mr Johnston was clearly an unqualified person for the purposes of section 50 (since he was not, at the time, qualified to be admitted as a solicitor), I do not think that it can be said that he was acting “as a solicitor”.  Given that all of the work that he did was supervised and reviewed, I would not characterise what he did as amounting to acting as a solicitor.  As Litton JA (as he then was) pointed out in Hong Kong Bar Association v City West Investment Limited [1994] 2 HKLR 39, at p.45:-

“... Clearly a person, be he a financial advisor or even a foreign lawyer, may perform some of the everyday functions of a qualified barrister without “acting as a barrister” within the meaning of section 44(a). ...”

29.  Here, even if the drafting and other work done by Mr Johnston might be regarded as work which a solicitor might do, he did not do so on his own, without supervision.  Had he done so, the position might possibly have been different.  However, the fact that he was throughout under Mr Hughes’ supervision means, in my view, that he was not himself “acting as a solicitor” so as to bring the situation within the terms of section 50.

30.  For the foregoing reasons, I am satisfied that the costs sought to be recovered in respect of Mr Johnston’s work are in principle recoverable.  I therefore turn to consider the amount claimed in the light of the other objections that have been raised.

31.  As to the general complaint as to the insufficiency of the information provided, I do not think that the statement provided was insufficient.  It is largely in the form suggested by the Registrar’s Note on Assessment of Costs (which is set out at paragraphs 62/9/10A-D of the Hong Kong Civil Procedure, 2008 edition) which provides guidance on the procedure to be adopted and information to be provided for the purposes of a gross sum assessment.  Although the information provided will be much less detailed than that which would be provided for a full taxation, the courts will nonetheless be able to make an assessment of the costs to be allowed on a broad principle basis, having regard to the nature of the hearing, its complexity, and the amount of time and documentation involved.

32.  So far as counsel’s attendance at the call over hearing before the Master is concerned, while it is correct that no order was made in relation to the reserved costs of that hearing, it seems to me that it is still open to me to deal with those costs, as the formal order in relation to the discovery summons has not yet been drawn up, pending the assessment of the costs.  Simmons & Simmons suggested in correspondence that it would be appropriate to deal with the costs of that hearing as well.  In my view, there would be little to be gained by not dealing with those costs now, as the call-over hearing was clearly related only to the discovery application, and I therefore propose to deal with those costs also, particularly as they appear to be limited to the costs of attendance by counsel and a trainee solicitor.

33.  As to the quantum of such costs, it does not seem to me that it was necessary to instruct counsel to attend what was clearly only a call-over hearing.  I would therefore disallow counsel’s fees in relation to that hearing.  However, I shall allow the costs of the trainee solicitor in the amount claimed (HK$650).

34.  Turning to the other costs claimed, I think that it is necessary to have in mind the nature of the application, and the quantity of documentation that was generated in relation to it.  The application was a straightforward discovery application that involved six specified categories of documents, and the affirmations in support and in opposition were, for the most part, fairly short and to the point, the longest being Mr Hughes’ affidavit in opposition to the application, setting out the background to the application and dealing with each category of documents of which discovery was sought.  This ran to some nine pages.  Each of the other three affidavits filed for the Defendant was just over one page long.  The correspondence prior to the application appears to have consisted of some two or three letters from each side, with those from the Defendant’s side each running to about two to three pages.

35.  Against that background, the total time spent by the Defendant’s solicitors on communications with their client, counsel and the other side, which totals 20.5 hours, seems on the high side.  Bearing in mind the nature of the application, and the correspondence which was exhibited to the various affidavits filed in support and in opposition to it, I would allow the 0.3 hours claimed for Mr Hughes, but would reduce the other amounts claimed by 40% – having regard to the length of the letters written and received, it seems to me that to have spent close to 20 hours dealing with them was excessive.  On this basis the amount recoverable under part B of the statement of costs would be HK$1,200 plus 60% of HK$31,440, i.e. HK$18,864, giving a sub-total of HK$20,864.

36.  So far as the professional work is concerned, again, having regard to the nature and extent of the affidavits filed by the Defendant, while the time spent by Mr Hughes is again, in my view, reasonable, the time spent by Mr Wong and Mr Johnston once again appears on the high side (particularly having regard to the fact that three of the four affidavits filed were very short), and I would also reduce these amounts by 40%.  This means that the costs recoverable will be HK$4,000 plus 60% of HK$30,140, i.e. HK$18,084, giving a total of HK$22,084 for item C1.  In relation to item C2, I think that this item is reasonable, and will allow it in full, in the amount of HK$7,040.  As for item C3, it is not clear what work, other than the suggestion as to what correspondence should be included in a correspondence file, was done on the Defendant’s side.  That being so, I would be prepared only to allow 50% of the amount claimed, or HK$5,570 for item C3.  In relation to item C4, I do not think that it was necessary for both Mr Hughes and Mr Wong to have attended the hearing, although I would accept that it was appropriate for Mr Hughes to have attended.  I will therefore allow the HK$12,000 claimed for Mr Hughes, along with the HK$650 claimed for the trainee in relation to the call-over hearing, for a total of HK$12,650 under this heading.  Finally, under item C5, while I am prepared to allow something for this item, it seems to me that the time claimed is very much on the high side, and I would be prepared to allow only 50% of this item also, or HK$3,450.

37.  So far as counsel’s fees are concerned, I have already indicated that I will not allow the fees for attendance at the call-over.  So far as the brief fee is concerned, doing the best that I can, I shall allow HK$25,000 for this item.

38.  Finally, the photocopying charges of HK$5,302 do seem very high, and I shall reduce these to HK$2,400.

39.  This gives a total amount of costs for the Defendant of HK$99,058.  I shall therefore order that the Plaintiff is to pay the Defendant its costs of the discovery application, including the reserved costs of the call-over hearing, which are assessed in the amount of HK$99,058.

40.  It remains necessary to deal with the costs of this hearing.  The Defendant has succeeded on the main point that was argued, and has recovered about two-thirds of the amount it has claimed.  As I have not heard submissions as to the appropriate costs order in relation to this hearing, I shall direct that the parties should file submissions in relation to the costs of this hearing within 21 days, accompanied by a statement setting out the costs that they seek to recover, and respond to the other party’s submissions and statement within 7 days thereafter.  I shall then rule on the matter, making a gross sum assessment of the costs in question, in writing.