XCHRX SHIU PAK NIN v. HSBC INTERNATIONAL TRUSTEE LTD. AND OTHERS

HCA 11070/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 11070 OF 1998

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D E C I S I O N

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Background

1. For the present purpose, the background of this matter can be briefly stated as follows. The plaintiff is the settlor of 2 trust funds. The 1st defendant was appointed as the trustee of the trusts. The settlor sought to set aside the trusts. The trustee argued that it could not be done as the trusts were irrevocable. The settlor by his next friend took out the action against the 1st defendant and other beneficiaries as defendants to set aside the trusts. The administration of the trusts had encountered a lot of problems. Prior to the institution of the action, the plaintiff requested documentation and accounts relating to the trusts, which the 1st defendant had supplied. Subsequently, the plaintiff issued a number of non-specific requests for further information relating to the trusts, each of which was dealt with promptly by the 1st defendant. The plaintiff considered the 1st defendant's responses unsatisfactory. As a result, on 29 April 1999, the plaintiff issued the summons for accounts. Further correspondence ensued. The plaintiff was not satisfied and the matter proceeded to court. On the day of the hearing, the plaintiff agreed to withdraw the summons. During the hearing, Judge Findlay ordered costs on the summons for accounts against the plaintiff (para.1 of the order dated 7 September 1999). He also ordered that such of the trustee's costs as were not recoverable from the plaintiff be paid from the trust fund on an indemnity basis (para.9 of the order). On 20 February 2001, the 1st defendant's bill was taxed pursuant to the order made by Findlay J in his order dated 7 September 1999.

The review

2. This is the plaintiff's application for review in respect of five items. These items are respectively items numbered 32, 33 (page 5 of the bill), (F)(1) (page 8 of the bill), (F)(4) (page 9 of the bill), and (J)a (page 11 of the bill). I have heard submissions from both sides in relation to the items in question. I have dismissed the plaintiff's application to review those items. I now give my reasons for the decision in respect of each of those items under review.

Item 32

3. In respect of item 32, that is the brief fee for counsel, Mr Anderson Chow. The brief fee is $20,000. The grounds for the review as submitted to this court today by counsel for the plaintiff are that based upon the hypothetical counsel principle as laid down in the authority of Simpsons Motor sales (London) Ltd. v Hendon Corporation (No.2) [1965] 1 WLR 112, Anderson Chow is not the appropriate counsel because of his seniority for this particular case. Therefore the principle of hypothetical counsel and for the fee charged should be applied. Miss Lam submitted that a junior counsel of five years' standing should be sufficient to carry out the duties and therefore the counsel fee should be in accordance with a junior counsel of five years' standing. She submits that the appropriate fee should be about $8,000.

4. In reply to this argument, Miss Kendall, who is the handling solicitor for this case, submits that Mr. Chow was instructed to deal with two other summonses apart from this summons, and for the proceedings before Findlay J, the other parties had instructed senior counsel. For example, the plaintiff had instructed a senior counsel leading a junior counsel for the summonses. Therefore on the scale of economy, it would be more economical to have the case conducted by one counsel rather than by a counsel for the other summons and engage a junior counsel for this summons because there will be a duplication of work for the same background of facts.

5. The authority of Simpsons Motor is a general principle for assessment of the quality of counsel required for a particular case. But that general principle must be examined in the context of individual cases. I accept the submission put forward to me by Miss Kendall, that it will be more appropriate to get one counsel to conduct all the summonses. In fact, I have no submission from the plaintiff that they had instructed a junior counsel to handle this particular summons and instructed leading counsel for the other summonses. So they are proceeding on the same basis. I do not accept the argument that a more junior counsel should be instructed separately for the matter. In any event, I do not accept that it was inappropriate for the 1st defendant to instruct Mr. Chow to handle this summons. I refuse the application of the plaintiff to have the item to be reviewed. There is no argument put forward to me today that Mr. Anderson Chow should not charge $20,000 for the work he has done. That deals with item 32.

Item 33

6. Item 33 is the disbursement under the bill for the extra work by the trustee because of the plaintiff's request for information and documents or accounts. The grounds of the objection are that the trustees are under the duty to carry out the duties anyway and therefore it should not be termed as disbursement, and further, it should be borne by the trust fund under paragraph 9 of the order.

7. I find that the order of Findlay J is to order the plaintiff to pay the costs of the 1st defendant for the additional work that the 1st defendant had to do because of the unreasonable requests by the plaintiff. Whether it is termed as disbursement or costs for the 1st defendant is not important. Paragraph 9 of the order provides an indemnity for the trustee to recover costs from the trusts if the plaintiff is unable to pay.

8. Another argument put forward by counsel for the plaintiff is that they were not the additional work, and even if they were, the costs should be the costs without any profit margin. It should be the bare cost for the labour of the trustee. Miss Kendall for the 1st defendant replies that those work were the additional work caused by the plaintiff's insistence on the documents, information and accounts which had been provided to the plaintiff previously. Under the agreement between the trustee and the trusts, for extra work the trustee will be entitled to charge $3,000 on average per hour. For the time being, Jacqueline Wong is charging $1,500 per hour, and Christina Kwan $1,000 per hour. So, strictly speaking the trustee is not charging the same rate as they have been promised under the agreement. Miss Kendall submits that that is the reasonable amount which the trustee is entitled to charge because the trustees were entitled to do business, and those staff, if they were not doing the work for the request of the plaintiff which, at the end of the day, turned out to be unreasonable, they should have carried out some other more productive and profitable work. So they should be given the additional costs.

9. I have considered the submissions given by both parties. In particular, I have to bear in mind that the 1st defendant, HSBC International Trust Limited is a trustee for the trusts. At the end of the day, as provided in paragraph 9 of the order, this trustee should be indemnified out of the trust funds and therefore the party who would have to bear the costs will be the trusts. On that basis, I do not accept the argument put forward to me by counsel acting for the plaintiff that the profit costs for the trustee should be the bare cost for the employees, that is to say, the salary paid to the employees. I do not accept this argument because there is no authority from counsel acting for the plaintiff that this is the proper basis for the court to consider for costs. The basic principle of awarding costs against the party in favour of another party is the principle of indemnity. I have to consider who is going to bear the costs at the end of the day. The answer should be the trusts. So the trust funds should be indemnified of the extra costs caused by the plaintiff.

10. Bearing in mind that there was an agreement between the trusts and the trustee in which the trusts agreed to pay $3,000 per hour for the extra work done by the trustee. Now the highest rate charged by Jacqueline Wong is $1,500 per hour, whereas Christina Kwan charged $1,000 per hour, which is much lower than the agreed rate between the trusts and the trustee. I consider that their fees are reasonable.

11. I have had the benefit of having Miss Kendall before me to put forward the 1st defendant's case to me. She says that those works were carried out by the staff of the trustee because of the demand by the plaintiff for those materials and accounts. Time spent by those staff is supported by the records, which I have already considered. There is no evidence that the records are incorrect. I will therefore reject the application to review this item as well.

Item (F)(1)

12. Then I come to the third item, that is (F)(1), on page 8 of the bill: 15 hours for the preparation of the affirmation of Jacqueline Wong by Miss Kendall. Plaintiff's objection is that the time was excessive. Miss Lam pointed out that drafting and reading the letters for the basic facts took about five hours and five minutes, therefore drafting the summary for those correspondences should take less than that. The basic facts of the matter take the first nine pages of the affirmation - the affirmation being 21 pages. Considering that more time would be required for the rest of the affirmation, counsel submitted that it is still far less than 15 hours as charged. In the taxation, I have taken off one hour from the proposed 15 hours, so altogether 14 hours have been allowed.

13. Miss Kendall, who is in charge of the matter and who had prepared the affirmation, has appeared before me. She submits that a different approach has to be adopted for drafting the affirmation because she had to go through all the documents and consider their context. She says that the total time for the drafting of the affirmation is 28.5 hours, which have been apportioned. She confirms that it is not a fictitious time record. But this point has been taken further by counsel for the plaintiff. Miss Lam says that for other items, the apportionment has been clearly stated in the bill, whereas in this particular item there is no mention of apportionment. As Miss Kendall appears before me today, she will be in the best position to explain the situation. I accept her explanation that although the word of apportionment has not been stated in the bill, the time has been apportioned.

14. It is not in dispute that there are many documents involved in this case. According to the materials before me today, there are more than 1,000 pages of documents involved. Miss Kendall appears before me today. She confirms that she had to spend that amount of time on the preparation. Time records had been shown to me on the first occasion. I had already considered those time records carefully. I have no evidence to show that Miss Kendall was trying to make up the records for the costs or she is telling lies to me today. I accept the evidence of Miss Kendall. I would therefore reject the application for review of this item.

Item (F)(4)

15. Now, I come to item number 4, that is (F)(4), page 9 in the bill. It is the time spent by again Miss Kendall for perusing documents from clients, including statements of account, bank accounts, fee scale and schedules. According to the reasons given by Miss Kendall in relation to this particular item, she says that she had to go through all these documents in order to ascertain whether or not any of them were privileged documents or extraneous documents which should not be disclosed. Counsel acting for the plaintiff submits that in fact there is no privilege involved and therefore time was excessive. She further submits that one hour and 30 minutes will be sufficient for the whole exercise.

16. Miss Kendall argues that she had gone through the 270-odd pages of documents, and as there are other litigation involved other than this summons, she had to take them into consideration as well. There may be extraneous or privileged matters. She had to be more careful. She also says that on average she spent 40 seconds on one document. I do not think I would have any adverse comment or adverse inference against the conduct of Miss Kendall lightly without evidence. I have already gone through the time record myself in the first taxation exercise. I have no evidence to show that those time records were incorrect or fake. I accept the evidence. I refuse to review this item.

Item (J)(a)

17. The last item is the time charged by the partner of the firm - the time being 30 minutes. The objection is that the partner should not be engaged because Miss Kendall, who has more than 10 years' experience, should be senior enough to take charge of the whole matter. In reply, Miss Kendall submits that on average the partner spent five minutes per month on the matter. It is justifiable for a partner to oversee the work she was doing. As the plaintiff was so insistent upon those requests, there might be a lurking doubt that there was something behind the requests. She submits that the work should be overseen by a more senior professional. I agree that the partner of the firm is obviously entitled to oversee the conduct of the staff in the discharge of the duty. It very much depends upon the extent he gets himself involved in the case. In fact, I do not think that counsel for the plaintiff has a serious argument on this point. I would therefore dismiss the application for review of this item.

18. In conclusion, I have dismissed the plaintiff's application for review of all five items.