ACHIEVE GOAL HOLDINGS LTD v. ZHONG XIN ORE-MATERIAL HOLDING CO LTD

HCA 1987/2005

[2024] HKCFI 124

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1987 OF 2005

________________________

BETWEEN

AND
BETWEEN

(By Counterclaim)

___________________________________________________

TAXATION REVIEW DETERMINATION AND CERTIFICATE

___________________________________________________

1.  This is the application of the 1^st and 2^nd defendants (by counterclaim) (the “Paying Parties”) to review my rulings made in the taxation of the costs of the plaintiffs (by counterclaim) (the “Receiving Parties”) in respect of the bill of costs filed herein on 29 September 2022 (the “Bill”).

2.  As the Receiving Parties had instructed different firms of solicitors at different stages of these proceedings, the Bill was divided into six parts. This review only concerns section B of Part F of the Bill. References to item numbers in this determination and certificate are references to items in section B of Part F of the Bill unless otherwise stated.

Brief Summary of Proceedings

3.  The original action in this case had been discontinued by order dated 22 July 2009. The counterclaim proceeded to trial (the “Trial”). Only the Paying Parties of the defendants (by counterclaim) took part in the Trial.

4.  The disputes between the parties concerned ultimate ownership of 35% interest in a coal mine in Yulin City, Shaanxi Province, PRC. The issues in dispute included: the proper construction of a joint venture agreement (the “JV Agreement”) entered between the 2^nd plaintiff (by counterclaim) and the 2^nd defendant (by counterclaim); who breached the JV Agreement and when; consequences of the breach and termination of the JV Agreement; and whether the disputes between the parties had already been settled by a written agreement purportedly made between the 2^nd plaintiff (by counterclaim) and the 2^nd defendant (by counterclaim).

5.  After the Trial which lasted for 11 days in March 2018, Au-Yeung J handed down a judgment on 15 December 2018 (the “Judgment”) ordering the 2^nd defendant (by counterclaim) to pay RMB 1 million to the 2^nd plaintiff (by counterclaim) with interest. The learned Judge further ordered the Paying Parties to pay 30% of the costs of the whole action of the Receiving Parties on an indemnity basis.

6.  The Receiving Parties appealed to the Court of Appeal. Again, only the Paying Parties of the defendants (by counterclaim) took part in the appeal. After hearing the appeal, the Court of Appeal allowed the appeal and set aside the lower court judgment (including the aforesaid costs order) and made certain orders in lieu.

7.  In respect of costs incurred in the lower court proceedings, the Court of Appeal ordered the Paying Parties to pay the Receiving Parties costs of the whole action. For costs incurred prior to 3 July 2009, the Court of Appeal ordered such costs to be paid on party and party basis, whereas for costs incurred after 3 July 2009, on indemnity basis, with certificate for two counsel (the “Costs Order”).

8.  The Receiving Parties commenced this taxation on 29 September 2022 and filed the Bill.

9.  The Paying Parties filed their list of objections on 14 February 2023 and amended the same on 12 May 2023 (the “Amended LOO”).

10.  The Bill was taxed by me at the hearing held on 24 August 2023 (the “Taxation Hearing”).

11.  On 7 September 2023, the Paying Parties applied for review of taxation. In the list of objections for review filed on 20 September 2023 (the “Review Objection”), the Paying Parties identified 22 objections, all related to fees of counsel.

12.  Mr Barry Leung, law costs draftsman for the Receiving Parties, confirmed to the court at the review hearing of 24 October 2023 (the “Review Hearing”) that the Receiving Parties would not file answers to the Review Objection.

13.  I heard the parties’ submissions at the Review Hearing. As the Paying Parties in the Review Objection requested me to state in my review certificate the reasons for my decisions on the review items, I issue this determination and certificate setting out my decisions on the review items and the reasons for my decisions.

The Review Items

14.  The plaintiff sought review on my taxation rulings on items 9.2 to 9.12 and items 10.10 to 10.20 (the “Review Items”).

15.  Items 9.2 to 9.12 were fees of Mr Edward Chan SC for attending the Trial. Items 10.10 to 10.20 were fees of Mr Clark Wang of counsel also for attending the Trial as the junior of Mr Chan SC.

16.  Item 9.2 was for the brief fee (inclusive of consultation on 27 February 2018 which was 2 days before the commencement of the Trial on 1 March 2018) of Mr Chan SC for the Trial. Mr Chan SC charged $2,000,000 for his brief fee.

17.  Items 9.3 to 9.12 were for the daily refresher of Mr Chan SC for other days of the Trial. Mr Chan SC charged $220,000 for each day of the refresher.

18.  In the Amended LOO, the Paying Parties submitted that: “Mr Edward Chan SC was assisted by 1 junior counsel Mr Clark Wang of Counsel throughout the proceedings, including but not limited to preparing court documents. SC’s fee is totally excessive. Suggest allowing $1,800,000 [for items 9.1 to 9.12].”

19.  At the Taxation Hearing, I taxed off item 9.1 and allowed the brief fee and refresher of Mr Chan SC (ie items 9.2 to 9.12) in full. As such, I allowed $4,200,000 in total for items 9.1 to 9.12 at the Taxation Hearing.

20.  Item 10.10 was for the brief fee (also inclusive of consultation on 27 February 2018) of Mr Wang for the Trial. Mr Wang charged $600,000 for his brief fee.

21.  Items 10.11 to 10.20 were for Mr Wang’s refresher for the remaining period of the Trial. Mr Wang charged $50,000 for each day of the refresher.

22.  In the Amended LOO, the Paying Parties submitted that: “Mr Clark Wang was supervised by Mr Edward Chan SC throughout the proceedings. Counsel’s fee is totally excessive. Suggest allowing $900,000 [for items 10.1 to 10.20].”

23.  At the Taxation Hearing, I taxed off $47,000 from items 10.2 to 10.8 and another $100,000 from Mr Wang’s brief fee in item 10.10. I allowed items 10.1 and 10.9 as well as the refresher of Mr Wang in full. As such, I allowed $1,211,000 in total for Items 10.1 to 10.20 at the Taxation Hearing.

Discussion

24.  In the Review Objection, the Paying Parties only sought to review items 9.2 to 9.12 and items 10.10 to 10.20. The grounds of objection stated in the Review Objection were as follows:

“The Master erred in making the amount of deduction as made or not making any deduction, and failing to take or take proper account of the fact that:-

(a) 1^st and 2^nd Defendants (by counterclaim) have previously at different stage of these proceedings instructed 2 other senior counsel and 6 other junior counsel

(b) A total sum of HK$2,174,100 for counsel fees have separately been allowed

(c) The said total sum of HK$2,174,100 is for service rendered during the period from 2006 to 2015

(d) By then, discovery and preparation for trial (including list of documents, witness statements and expert reports) have already been completed

(e) Change of counsel team in 2016 to Mr Edward Chan SC and Mr Clark Wang necessarily means duplication of work and/or wasted costs”

25.  There was no dispute that according to the Costs Order, the fees of Mr Chan SC and Mr Wang, being costs incurred after 3 July 2009, were to be taxed on indemnity basis. Order 62 rule 28(4A) of the Rules of the High Court (the “RHC”) provides that:

“On a taxation on the indemnity basis all costs shall be allowed except insofar as they are of an unreasonable amount or have been unreasonably incurred and any doubts which the taxing master may have as to whether the costs were reasonably incurred or were reasonable in amount shall be resolved in favour of the receiving party; and in these rules the term “indemnity basis” (彌償基準) in relation to the taxation of costs shall be construed accordingly.”

26.  The Paying Parties did not seek to argue that the engagement of Mr Chan SC and Mr Wang for the Trial was unreasonable. In fact, the Costs Order had provided for certificate for two counsel. The only issue was quantum.

27.  Mr J Chan for the Paying Parties confirmed at the Review Hearing that the main ground of objection was duplication of costs caused by change of counsel. Mr Chan submitted that the Paying Parties should not be liable for such costs caused by duplication even in taxation on indemnity basis. Mr Chan pointed out that the Paying Parties had not specifically raised this change of counsel point at the Taxation Hearing and the court’s attention had not been drawn to possible duplication of counsel fee caused by such change of counsel.

28.  In the Bill, the Receiving Parties had claimed fees of other counsel (including senior counsel) prior to the engagement of Mr Chan SC in early 2017 and Mr Wang in late 2016. The fees of the other counsel had been agreed between the parties in the total sum of $2,174,100 (the “Agreed Counsel Fee”) as stated in the Review Objection.

29.  This Action was commenced in 2005 and the Trial only took place in March 2018. According to the Bill, the Agreed Counsel Fee was for works done by various counsel from 2006 to June 2015. In other words, the Agreed Counsel Fee was for works done more than 2.5 years before the Trial.

30.  In item 9.1, the Receiving Parties claimed $50,000 for the fee of Mr Chan SC for perusal of papers and consultation on 19 January 2017. I was of the view that such fee had been unreasonably incurred as this case had already been set down for trial. I taxed off this item at the Taxation Hearing.

31.  Although the issue of change of counsel had not been specifically raised at the Taxation Hearing, the fee charged by Mr Chan SC in item 9.1 was his fee for reading into this case after change of counsel. If change of counsel had caused any duplication of counsel fee charged by Mr Chan SC, it was the fee charged by him in item 9.1. As I had taxed off item 9.1, albeit for different reason, I had in effect disallowed duplication of counsel fee caused by change of counsel by the Receiving Parties.

32.  The brief fee charged by Mr Chan SC was for attending and conducting the Trial, the trial preparation and the pre-trial conference. Mr Chan SC did not charge again for reading into this case.

33.  I had allowed the brief fee and daily refresher of Mr Chan SC at $2,000,000 and $220,000 respectively at the Taxation Hearing.

34.  As pointed out in §23 above, I had at the Taxation Hearing, taxed off $47,000 of the fees charged by Mr Wang prior to the Trial and claimed in items 10.2 to 10.8. The Paying Parties do not seek to review my rulings for items 10.1 to item 10.9. These were fees charged by Mr Wang for works done from October 2016 until the Trial in March 2018.

35.  At the Taxation Hearing, the parties had not drawn the court’s attention to change of counsel of the Receiving Parties. I taxed down the fees of Mr Wang for his pre-trial works on the basis that he had knowledge of the background of this case. Thus, the amounts of his fee claimed in the Bill for his pre-trial works were unreasonable.

36.  Mr Wang did not separately charge fee for reading into this case. If the Receiving Parties’ change of counsel had caused any duplication in the fees of Mr Wang, the duplicated fees would have been reflected in items 10.1 to 10.9 instead of in the brief fee or refresher charged by Mr Wang for the Trial. Such duplicated costs, if any, had already been taxed off when I taxed down Mr Wang’s fees claimed in items 10.1 to 10.9.

37.  As such, there was no duplication or wasted costs incurred in respect of the brief fee or refresher of Mr Chan SC and Mr Wang as contended in the Review Objection.

Applicable legal principles for taxation on indemnity basis

38.  In Poon Shu Fan v Wong Tin Yan [2012] 5 HKLRD 512, the Court of Appeal pointed out in §31 of the judgment that after the Civil Justice Reform, in determining the amounts of fee allowed for counsel in party and party taxation, the court should have regard to all the relevant circumstances and in particular to the following matters:

(a) the complexity of the matter and the difficulty or novelty of the questions involved;

(b) the skill, specialized knowledge and responsibility required of, and the time and labour expended by, counsel;

(c) the number and importance of the documents prepared or perused;

(d) the place and circumstances in which the business involved is transacted;

(e) the importance of the matter to the client;

(f) where money or property is involved, its amount or value; and

(g) any other fees and allowances payable to counsel in respect of other items in the same cause or matter, but only where work done in relation to those items has reduced the work which would otherwise have been necessary in relation to the item in question.

39.  The matters referred to in Poon Shu Fan v Wong Tin Yan are matters set out in §1(2) in Part II of the First Schedule of order 62 of the RHC. The Court of Final Appeal noted in §46 of Re Wing Fai Construction Co Ltd (Costs: Taxation) (2012) 15 HKCFAR 657 that in practice such approach also applied to indemnity taxation.

40.  In EMI Records Ltd v Ian Cameron Wallace Ltd [1982] 2 All ER 980, Sir Robert Megarry V-C stated at 989f that in taxation on indemnity basis: “Everything is included unless it is driven out by the words of exclusion, namely, “except in so far as they are of an unreasonable amount or have been unreasonably incurred”.”

41.  Lord Woolf MR further stated in Petrotrade Inc v Texaco Ltd [2001] 4 All ER 853 at §62 that: “… where the costs are assessed on an indemnity basis, the issue of proportionality does not have to be considered. The court only considers whether the costs were unreasonably incurred or for an unreasonable amount. The court will then resolve any doubt in favour of the receiving party.”

42.  In Re Wing Fai Construction Co Ltd (supra), Chan PJ stated that:

“26. I should also add that in assessing what is unreasonable (as opposed to assessing what is reasonable), the court should bear in mind the practical reality that there are litigants who, being understandably more anxious than others to pursue or defend their rights, are willing to pay more than the normal average fees of counsel and solicitors. How much more such a litigant is prepared to pay over and above the normal average fees depends on a variety of factors including in particular, the complexity of the case and the importance of the case to him. In my view, it is not uncommon and certainly cannot be considered as unreasonable for a concerned litigant to adopt such an attitude. On a party and party taxation, it is likely that anything over and above the normal average fees would not be regarded by the court as reasonable and will be taxed off and the receiving party will have to shoulder the shortfall. But if the court, for good reasons, saw fit to award him his costs on a more generous basis (ie on an indemnity basis), I do not think it should be regarded as unreasonable to allow him to recover more than normal average fees so long as they are not clearly excessive or, to use Megarry V-C’s words, absurd or extravagant.”

43.  Bearing the above legal principles in mind, I shall look into the complexity of this case and the other circumstances to determine whether the various amounts of counsel fee charged by counsel and claimed by the Receiving Parties were unreasonable, ie absurd or extravagant.

The disputes for the Trial

44.  The disputes for trial in this case were not simple matters. They involved more than 10 companies and their shareholders. The parties had to prepare a chart setting out the relationship among the parties to assist the trial judge. The chart agreed by the parties was annexed to the Judgment as Annex A. The chart showed the complex corporate structure engaged by the parties to carry out their business venture and the disputes for the Trial arose out of such complex corporate structure.

45.  The disputes related to a joint-venture for a coal mine. The registered share capital of the joint-venture company was said to be RMB 71 million. Mr Leung, the law costs draftsman for the Receiving Parties, informed me at the Taxation Hearing that the assets of the join-venture company worth more than $2 billion.

46.  The plaintiffs (by counterclaim) claimed that the 2^nd defendant (by counterclaim) was contractually liable to inject substantial fund of RMB 57 million into the joint-venture business. The dispute was whether the 2^nd defendant (by counterclaim) had fully discharged its contractual obligations in respect of RMB 25 million. The nature of the contractual obligation of the 2^nd defendant (by counterclaim) as well as consequences for breach of such contractual obligations were also in dispute. The amounts involved were substantial.

47.  The learned Judge had identified the issues for the Trial in the Judgment as follows:

“112. The issues in Stage 1 covered the period of 2005 to 2007. They can be summarized as follows:

The Construction Issue

(1) On the true construction of the JV Agreement, whether the obligation of Angola [ie the 2^nd defendant by counterclaim] was to arrange finance for Zhong Xin [ie the 5^th defendant by counterclaim] or to provide direct capital injection;

(2) Whether by arranging the Loan Agreement [dated 14 February 2005], Angola has duly performed its obligations to inject capital of RMB 20 million as required by the JV Agreement;

The Termination Issue

(3) Whether Angola was in breach of its obligation to transfer US$ equivalent to RMB 20 million to Zhong Xin under Clause 2.2 [of the JV Agreement];

(4) Whether Angola was in breach of its obligation to pay the 2^nd RMB 2 million and RMB 3 million to Bai Jun [ie the 2^nd plaintiff by counterclaim] under Clauses 2.4 and 2.5. Conversely, whether Bai Jun was in breach [of] its obligation to cause the mining, exploration and land usage permits to be issued to CLB [ie the sino-foreign joint venture company for the coal mine project] within time under Clauses 2.5 and 2.6 and the implied terms in connection thereto; these affected the date of termination and the party in breach;

The Consequence Issue

(5) What are the consequences of the breaches or termination and, in particular, how much of the shareholding in Zhong Xin should remain with Angola – 50%, 20% or 0%?

113. As for Stage 3, the Angola Camp [ie the Paying Parties] claims that the Settlement Agreement [dated 20 May 2009] had the effect of preventing the Bai Jun Camp [ie the Receiving Parties] from pursuing its counterclaim in the present case. The issues are:

(6) Whether the Settlement Agreement was backdated;

(7) Whether the Settlement Agreement was unenforceable for lack of actual or ostensible authority of Wang Li who purported to enter into the same on behalf of Bai Jun; and

(8) Whether the Settlement Agreement was unenforceable for being a breach of trust, dishonestly assisted by Angola and/or breach of contract procured by Angola.

114. The issues relating to the Purported Capital Injection and Bai Jun’s claim under Clause 4.3 of the JV Agreement in Stage 2, and the issue of sham in Stage 3, no longer require adjudication. The PRC Court Sanctioned Settlement [dated 29 June 2009] also becomes irrelevant (except on credibility) since Angola only relies on it to contend that Bai Jun has waived its claim under Clause 4.3.” (Original emphasis)

Other circumstances

48.  The Trial was originally set down for nine days with one extra day reserved. The credibility of the witnesses was in issue. Although altogether only three witnesses testified at the Trial, the Trial lasted for 11 days. One can easily envisage the intensity of the examination and cross-examination of the witnesses at the Trial.

49.  There were 11 trial bundles consisted of more than 5,600 pages of documents with a core bundle of important documents consisting 462 pages.

50.  Both parties were represented by senior counsel and junior counsel at the Trial. The opening submissions of the Receiving Parties consisted of 68 pages referring to 24 authorities whereas the opening submissions of the Paying Parties consisted of 52 pages referring to 19 authorities. Closing submissions of the Receiving Parties and the Paying Parties went to 193 pages with 12 additional authorities and 98 pages with 30 authorities respectively. The Paying Parties lodged further reply submissions of 27 pages referring to another 10 authorities. Together, the parties referred to 95 authorities in their submissions.

51.  The learned Judge wrote a 158-page judgment with 530 paragraphs.

52.  In the Costs Order, the Court of Appeal specifically granted certificate for two counsel for the proceedings in the lower court.

53.  From the above, it will not be difficult for one to see the complexity of this case.

Review determination

54.  There is no dispute that Mr Chan SC is a very experienced senior counsel having been called to the bar in 1975 and to the inner bar in 1989. I am of the view that for him to charge brief fee in the sum of $2,000,000 and daily refresher in the sum of $220,000 for this case is not unreasonable bearing in mind the complexity of the case and the large number of documents involved.

55.  I am of the view that even if there were no change of counsel, the time which counsel had to spend in preparing and conducting the Trial would be the same bearing in mind that all previous involvement of counsel in this case was back in more than 2.5 years before the Trial.

56.  As I am of the view that the brief fee and refresher charged by Mr Chan SC did not include duplication caused by change of counsel and the amounts were not unreasonable, I maintain my rulings made in the Taxation Hearing allowing them in full.

57.  Mr Wang of counsel was called to bar in 2007. He had about 11 years’ experience when the Trial commenced in March 2018. He had been involved in this case in as early as October 2016 when he was instructed to attend the case management conference for this case. He had previously charged fees for settling Points of Reply, joint memorandum and advice for expert directions, and supplemental witness statement for the only witness of the Receiving Parties. He should be acquainted with the background of this case.

58.  Bearing in mind that Mr Wang was led by Mr Chan SC in the Trial, I was of the view that the brief fee charged by Mr Wang for the Trial in the sum of $600,000 was unreasonable in the circumstances of this case. I taxed down his brief fee to $500,000 at the Taxation Hearing.

59.  I was of the view that the daily refresher of Mr Wang in the sum of $50,000 was not unreasonable. I allowed his daily refresher in full at the Taxation Hearing.

60.  Having reconsidered the allowed brief fee and the refresher of Mr Wang at the Review Hearing and taking into account the complexity of the case and the volume of documents involved as discussed above, I maintain my rulings made at the Taxation Hearing.

Conclusion and costs

61.  For reasons set out above, I maintain my rulings made on the Review Items at the Taxation Hearing and dismiss this review application of the Paying Parties.

62.  Costs shall follow events. The Paying Parties shall bear the costs for this review application. I shall assess such costs by summary assessment.

63.  As the review of the Bill was dealt with together with review of another bill of the Receiving Parties filed in CACV 6/2019, I direct that the costs incurred by the parties for the aforesaid review applications shall be split equally between the two actions.

64.  To conclude, I dismiss the Paying Parties’ review application in respect of the Bill and make a costs order nisi ordering the Paying Parties to pay 50% of the Receiving Parties’ costs for this review application to be assessed by summary assessment.

65.  This costs order nisi shall become absolute after 14 days from the date of this determination and certificate unless application to vary the same shall be received from either party within this 14-day period.

66.  I direct the Receiving Parties to submit to the court their statement of costs for this review application within 7 days after the aforesaid costs order nisi shall become absolute with copy to the Paying Parties. The Paying Parties shall submit to the court their comments (if any) to the Receiving Parties’ aforesaid statement of costs within 7 days thereafter with copy to the Receiving Parties.

67.  The summary assessment will be conducted by the court by way of paper disposal.

Certificate

68.  I certify that review of all the Review Items failed for the reasons set out above.