R A STEGEMANN v. TIME ENTERPRISES PUBLICATIONS LTD

HCA 282/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 282 OF 2005

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J U D G M E N T

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Introduction

1.  On 7 July 2006, after hearing a striking out summons, the Registrar dismissed all the claims made by the plaintiff against the 3^rd defendant.  He also gave the 3^rd defendant its costs of the action in a gross sum to be assessed, in lieu of taxation, pursuant to Order 62, rule 9(4)(b), Rules of the High Court (Cap 4).  The decision was affirmed on appeal by Burrell J, who also ordered the transfer of the plaintiff’s remaining claims against the 1^st and 2^nd defendants to the District Court.

2.  On 29 September 2006, the Registrar assessed the 3^rd defendant’s costs in the gross sum of $8,710, which he ordered the plaintiff to pay to the 3^rd defendant.

3.  From that decision, the 3^rd defendant appealed.  It contended that the Registrar had under-assessed its costs.

4.  In general, a judge in chambers will not allow an appeal from a master’s costs order unless the order was unreasonable or the master erred in law, failed to take into account proper matters or took into account matters that should not have been taken into account: Man Fong Hang v Man Ping Nam [2002] 4 HKC 538, 544, para 16; Hong Kong Civil Procedure 2006,Vol 1, para 58/1/6.  But that principle, as I understand it, is usually directed at appeals going to the incidence of the liability for costs, rather than the amount assessed under a gross sum assessment. 

5.  In relation to an appeal over the amount assessed under a gross sum assessment, I am not aware of the application of such a principle.  As both parties are unrepresented, they were unable to provide the Court with any assistance on this point, and I am therefore reluctant to make any definite decision in relation to it.  All I would note is that in cases of taxation, a party could always ask a judge in chambers to review the taxing master’s certificate, if he is not satisfied with the decision of the taxing master at the review hearing before the taxing master himself: see the procedures laid down in Order 62, rules 33 to 35.  Such a review by a judge in chambers is not hampered by any rule that the taxing master’s certificate should not be disturbed unless in the limited situations described above.

6.  I would proceed on the basis that this is a normal appeal, and the hearing was a de novo one.

7.  Nonetheless, I bear in mind a number of special features.  First, assessment of gross sum costs by the court should be carried out on broad principles and should not be an exercise similar to taxation.  Hong Kong Civil Procedure 2006,para 62/9/10.

8.  Second, the Registrar has dealt with the present action as well as the related HCA 283/2005 since their transfer from the Labour Tribunal to the High Court in 2005, including the successful striking out application made by the 3^rd defendant already described.  He was well familiar with the disputes between the parties and the steps taken in the proceedings.  He was in a particularly privileged position to assess the costs of the 3^rd defendant on broad principles.  The Registrar’s written decision on costs therefore remains a most valuable guide in this appeal.

9.  Third, the Court is concerned with costs incurred by a litigant in person.  The 3^rd defendant was at one stage, as was required by the rules, represented by solicitors who instructed counsel to appear for all the defendants at the initial striking out hearing (which was adjourned part-heard).  Subsequently, it acted in person with the leave of the court, with Mr Ho, a director and co-defendant, acting on the company’s behalf.  The Registrar adopted, rightly in my view, the usual rate of $200 per hour for the work done by Mr Ho on behalf of the 3^rd defendant: Hong Kong Civil Procedure 2006,para 62/App/56.  The basis of assessment is one of party and party costs.  In other words, only those costs as were necessary or proper for the attainment of justice or for enforcing or defending the rights of the receiving party would be allowed: Order 62, rule 28(2), which applies to taxation.  The same criterion must apply to a gross sum assessment.

10.  However, adjustments are required in the assessment process because of the fact that it was a layman, instead of a trained lawyer, who has conducted the case.  Thus, for instance, it would, understandably, take a layman more time to read and digest the contents of a letter coming either from the court or from the other side.  A litigant in person who is not thoroughly conversant with the English language may require longer time to read a document or letter written in English than a trained lawyer.  He may need to look up a dictionary for the meanings of words used in the document or letter.  He may even need to ring up friends to find out the meaning of a document.  What is trite to a trained lawyer may appear as a complete mystery to a layman.  Appropriate adjustments should be made without violating the basic criterion that only necessary or proper costs should be allowed.  To some extent, the longer time that a layman may require, for instance, to read and comprehend a document, would be compensated by the much lower hourly rate that would be allowed to him as compared with that applicable to a trained lawyer.  Thus the usual rate of $200 per hour is over 10 to 20 times less than what would be allowed to a solicitor, depending on his experience and skill.

11.  With all this in mind, I approach the items under challenge in this appeal. 

Item B: lawyers’ charges

12. The Registrar dealt with these charges in paragraphs 8 to 13 of his written decision.

13.  These charges related to the period when all three defendants in the present action as well as the two plaintiffs in HCA 283/2005 (i.e. the 1^st and 2^nd defendants in the present action as plaintiffs therein – with the plaintiff in the present action as defendant therein) were represented by the same firm of solicitors and counsel.  A total sum of $30,000 was charged.  A sum of $1,000 was for an amended pleading in HCA 283/2005, leaving the remainder ($29,000) attributable to the present action.  The Registrar, for reasons set out in paragraphs 10 to 12 of his decision, apportioned one-fifth of the sum of $29,000 as the 3^rd defendant’s costs in the present action.

14.  The Registrar took the view that so far as the 3^rd defendant was concerned, only one point was taken on its behalf by counsel (namely privity of contract).  The rest of the lawyers’ efforts related to the other two defendants.  Moreover, he took the view that the two actions were interrelated, so that efforts expended by the lawyers on behalf of the other two defendants in the present action also went to their claim in HCA 283/2005.

15.  The 3^rd defendant argued on appeal that the apportionment was grossly unfair.  He contended that credit (in the sum of $1,000) had already been given for the work done in relation to HCA 283/2005.  The sum of $29,000 was wholly in relation to the present action.  The 3^rd defendant was not a party to the other High Court action, which is a separate case.  The documents in the other High Court action only went to about 30 pages, whereas documents relating to the present action went to over 4,000 pages.  At the last hearing, which took place on 18 May 2006, only 30 minutes were spent on the other High Court action. 

16.  I have borne in mind all the points raised by the 3^rd defendant.  The Registrar was fully aware of them as he was in charge of hearing the two actions ever since they were transferred from the Labour Tribunal.  He was in the best position to judge what costs should be apportioned to which party under which action.  Moreover, one is not concerned with a detailed taxation but an assessment on broad principles. 

17.  I do not agree that the Registrar has come to a wrong, unfair or unreasonable apportionment.  I would maintain the one-fifth apportionment.

Item C: handing over materials

18.  The 3^rd defendant claimed for costs and expenses associated with the handing over of documents by the former solicitors acting for the 3^rd defendant to Mr Ho.

19.  The Registrar took the view that prima facie, the 3^rd defendant, a limited company, should be represented by solicitors.  The plaintiff should not be held responsible for the costs of handing over the documents and materials in the present action, which were necessitated by the 3^rd defendant’s decision to terminate its solicitors’ retainer and act in person (albeit with the leave of the court).  Those costs must be borne by the 3^rd defendant itself.

20.  The 3^rd defendant contended on appeal that it terminated the solicitors’ service due to financial constraint.  It also pointed out that paragraph 15 of the decision of the Registrar was wrong in so far as it stated that the 1^st defendant is an individual.

21.  I agree with the Registrar.  Furthermore, I do not think the lack of means of the 3^rd defendant should have the effect of rendering the plaintiff liable for the costs of the handing over process.  The mistake in paragraph 15 of the Registrar’s decision is neither here nor there, as one is not concerned with the 1^st defendant’s costs in the assessment exercise.

Item E2: hearings

22.  They were dealt with in paragraphs 19 and 20 of the Registrar’s decision and related to the costs of various hearings before the Labour Tribunal and the High Court when the defendants were acting in person.  A sum of $780 was allowed.

23.  The 3^rd defendant complained about the one-fifth apportionment.  For reasons explained above, I reject this ground of appeal. 

24.  However, Mr Ho on behalf of the 3^rd defendant also pointed out that the Registrar has forgotten the hearing before the Labour Tribunal lasting 5 hours.

25.  He was right.

26.  The plaintiff argued that those 5 hours were not spent on matters relating to the 3^rd defendant.

27.  Having looked at the record kept by the Tribunal, I think the 3^rd defendant was correct.  At that hearing, Mr Ho, on the record, only represented the first two defendants.  However, a substantial part of the hearing was concerned with the plaintiff’s application to join the 3^rd defendant as an additional defendant in the Labour Tribunal proceedings.  Looking at it as a matter of substance, Mr Ho represented the two defendants already on record as well as the proposed defendant at the hearing, in opposing the joinder application.

28.  In my view, the 3^rd defendant should get a substantial portion of the costs incurred at that hearing.  The hearing lasted 5 hours.  I would apportion 50% to the 3^rd defendant (as it contended during the appeal).  At $200 per hour, it means $500.

Item F: perusal of documents

29.  This was dealt with in paragraphs 21 and 22 of the Registrar’s decision.

30.  The 3^rd defendant claimed 200 hours.  The Registrar took the view that that was a grossly exaggerated and excessive figure.  He allowed 15 hours for all defendants.  The 3^rd defendant’s share was only one-fifth of the time.

31.  As described, there were over 4,000 pages of documents.  All parties, including the 3^rd defendant, were responsible for generating the voluminous documents.  Some of them were repetitive in contents.  Not many of them were found by the Registrar to be helpful.  The Registrar also remarked that many of the documents simply set out the grounds or reasons for the claims submitted by the plaintiff at different stages.  They were nothing more than “elaboration” of the same points “again and again”.  He took the view that “one can easily recognize and consider them”.

32.  The plaintiff also made the point that many of the documents authored by him were written in response to unfounded or unmeritorious allegations made by the defendants.  The voluminous documents were “self-generated”.

33.  In my view, one must not forget that one is concerned with laymen in litigation in the present case – after the defendants’ termination of the service of their lawyers.  A layman like Mr Ho is not expected to be as quick as a trained lawyer in perusing documents and understanding their relevance or lack of it.  On the other hand, a much lower hourly rate is allowed for the time spent.

34.  As regards the plaintiff’s point that many of the documents written by him were written in response to the defendants’ documents and correspondence, it is true to some extent.  On the other hand, as regards the question of causation, one must not lose sight of the primary fact that it was the plaintiff who chose to sue the 3^rd defendant in the first place.

35.  Taking a broad view of the matter, I do not think the defendants should only be allowed 15 hours in reading the 4,000 odd pages of documents.  More specifically, I do not think the 3^rd defendant should only be given 3 hours (one-fifth) for perusal.

36.  I think a fair figure for the 3^rd defendant would be 10 hours, i.e. $2,000.

37.  I have already borne in mind the fact that many of these documents had already come into existence before the defendants’ solicitors ceased to act.  They had been perused by the defendants’ solicitors.  For reasons explained above, the defendants, and the 3^rd defendant in particular, should not be allowed any costs for perusing the same documents again after the solicitors had come off the record.

Item G: preparation of documents

38.  They were dealt with in paragraphs 23 and 24 of the Registrar’s decision.  The Registrar found most of the documents, including letters to the court, a chronology of facts, a chart showing the three defendants’ relationship, an index of exhibits and a flowchart of the litigation, not necessary or helpful at all.  He allowed 6 hours in total for the whole exercise.

39.  The plaintiff echoed the Registrar’s view. 

40.  Again, I come back to my point that one cannot expect the same standard from a litigant in person as though he were a trained lawyer.  The difference in quality and standard is, to a significant extent, reflected in the much lower hourly rate enjoyed by a litigant in person.  The fact that the court does not, at the end of the day, find a particular document prepared for hearing purposes helpful is not a sufficient reason to deprive the successful party of the costs of preparing the document.  The court does not take such a stringent approach towards work done by solicitors and counsel and their charges, save in exceptional circumstances.

41.  For my part, having borne in mind all relevant factors and adopting a broad-brush approach, I would allow 5 hours for the 3^rd defendant.  At $200 per hour, it amounts to $1,000.

Item H: perusal of correspondence

42.  This was dealt with in paragraphs 25 and 26 of the Registrar’s decision.

43.  The Registrar took the view that most of the letters were from the plaintiff or the court, which resulted from complaints made by the plaintiff that which had no relevance to the defence of the action.  He only allowed 1 hour for all three defendants.

44.  With respect, I disagree.  The complaints came from the plaintiff.  They related to the action in general.  As a layman, the 3^rd defendant would not be in a position to tell easily whether they were relevant to its defence or not.  And even if they were not relevant to its defence or the plaintiff’s claim, it does not mean that the 3^rd defendant need not read them.  In fact, before the 3^rd defendant had read a document, it would not be able to say whether the document was relevant to anything in the action or not.

45.  Furthermore, one must bear in mind that all the correspondence from the plaintiff was written in English.  Grant that Mr Ho can read English, yet one cannot judge the time he spent on reading English documents by the standard of somebody like the plaintiff who has English as his first language or that of a trained lawyer.

46.  I would give one hour for the 3^rd defendant, i.e. $200.

Item I: preparation for three hearings

47.  This was dealt with in paragraphs 27 and 28 of the Registrar’s decision.  The Registrar allowed 5 hours as preparation time for each hearing, instead of 40 hours as claimed, in respect of all three defendants’ costs. 

48.  I disagree.  First, as the 3^rd defendant correctly pointed out, the three defendants claimed a total of 240 hours, not 120 hours.  Second, I return to my earlier point that one is concerned with a layman in litigation.  Whilst a lawyer may only require 5 hours for the preparation of a hearing, a layman would, understandably, require much more time.  Again, the countervailing factor is that he is allowed a much lower rate.  In the present case, Mr Ho had a valid point that the lawyers actually spent a substantial period of time in preparation for the relevant hearing.  As I have already mentioned, it may be that at the end of the day, the court takes the view that many of the points raised by a layman are non-points.  It does not mean that the time he has spent in preparation for the hearing should be disallowed.  I do not think such an approach is taken against lawyers, save in special circumstances.  Nor should it be taken against a party acting in person.

49.  I would give the 3^rd defendant an average of 5 hours for each hearing, totalling 15 hours.  Preparation costs are $3,000 in total.

Item L: Preparation of statement of costs

50.  The Registrar allowed $400 for the preparation of the statement of costs for the purpose of the assessment in paragraph 33 of his decision.  However, he forgot to include this item in his final calculations (paras 34 to 36).

Outcome

51.  My assessment is:

Item		Amount
B	Lawyer’s charges	$5,800
C	Handing over materials	Nil
D1 and D2	Application to act in person	Nil
E1	Waiting time	Nil
E2	Hearings	$1,280
F	Perusal of documents	$2,000
G	Preparation of documents	$1,000
H	Perusal of correspondence	$200
I	Preparation for three hearings	$3,000
J	Costs of appeal	Nil
K	Photocopying charges and postage	$  150
L	Preparation of statement of costs	$  400
	Costs of hearing before the Registrar	$  500

52.  I arrive at a grand total of $14,330, which I round up to $14,400. 

53.  As mentioned at the outset, gross sum costs assessment should be conducted on broad principles.  I think the total of $14,400 appears reasonable for the costs of the 3rd defendant in this litigation, which ended prematurely as a result of the successful striking out application.  If the 3rd defendant had been represented by lawyers throughout, I am quite sure that the costs payable, whether after taxation or gross sum assessment, would have been much higher.

54.  As the 3rd defendant is substantially successful in this appeal, it must have the costs of the appeal. 

55.  The hearing of the appeal lasted 3 hours, and I would allow an additional 10 hours for the preparation of the appeal.  By preparation, I include all other incidental costs and expenses associated with lodging and prosecuting this appeal.  It gives a sum of $2,600 – this is just equivalent to one hour’s work by a junior solicitor.

56.  I therefore make the following order:

(1)     the appeal be allowed and the order of the Registrar dated 29 September 2006 be set aside;

(2)     the plaintiff do pay to the 3^rd defendant the costs of the action in the gross sum of $14,400;

(3)     (order nisi) the plaintiff do pay to the 3^rd defendant the costs of this appeal in the gross sum of $2,600 – unless an application is made by either party to vary the costs order nisi within 14 days after this judgment is handed down, the same shall become absolute upon the expiry of the 14-day period.