LAM & LAI SOLICITORS v. HO CHUN YAU ALBERT

HCMP 555/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDING NO 555 OF 2015

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DECISION

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Background

1.  The plaintiffs (the solicitors), represented the defendant (Mr Ho), in judicial review proceedings in which Mr Ho, an elected Legislative Councillor and the senior partner of a firm of solicitors, brought judicial review and election petition proceedings in respect of the election of the Chief Executive in 2012.

2.  Following the completion of the proceedings the parties could not agree on the legal fees to be paid by Mr Ho to the solicitors.  The solicitors commenced taxation proceedings pursuant to section 67 Legal Practitioners Ordinance Cap 159.  The master heard the taxation over three days in January 2016.

The review of the taxation

3.  Mr Ho was dissatisfied with the result and, pursuant to Order 62, rule 33 of the Rules of the High Court, made an application to the taxing master for a review of certain items in the bill. The review was undertaken on 2 December 2016, and on 27 January 2017 the master handed down a written decision.

The appeal

4.  The defendant was not satisfied with the decision on the review and determined to pursue the matter further.  This matter came before me as an appeal to a Judge in Chambers against a master’s decision, pursuant to Order 58.  That was not the correct procedure. 

5.  The proper procedure is an application for review of the taxing master’s certificate by a Judge pursuant to Order 62, rule 35.  Ms Lan, for the solicitors, took the point, but was properly obliged to immediately acknowledge that her clients suffered no prejudice as a result of the wrong procedure having been followed.

6.  This is as clear a case as there could be for the application of the discretionary jurisdiction contained in Order 2, rule 1.  No amendment was required to any papers nor was any further evidence or any other steps required.  I ordered that the matter should continue as though it had been commenced under Order 62, rule 35. 

7.  The parties were agreed that a Judge, on his review of the taxing master’s certificate, (the second review of the original taxation decision), is not required to conduct a taxation de novo, but only considers the reasons for the taxing master’s decision to ascertain whether or not taxing master erred in principle, took into account irrelevant matters or failed to take into account relevant matters: see Chan Yin Na v Union Medical Centre Limited (unreported, HCPI 804 & 805/2003, 5 August 2011, per Bharwaney J)[1].

The legislative framework:

8.  The starting point for the taxation of a solicitor’s bill to his own client is Order 62, rule 29 which provides:

“ (1) On the taxation of a solicitor's bill to his own client (except a bill to be paid out of funds provided by the Legislative Council pursuant to section 27 of the Legal Aid Ordinance (Cap 91), or a bill with respect to non‑contentious business) all costs shall be allowed except in so far as they are of an unreasonable amount or have been unreasonably incurred. (my emphasis)

(2) For the purposes of paragraph (1), all costs incurred with the express or implied approval of the client shall, subject to paragraph (3), be conclusively presumed to have been reasonably incurred and, where the amount thereof has been expressly or impliedly approved by the client, to have been reasonable in amount.

(3) For the purposes of paragraph (1), any costs which in the circumstances of the case are of an unusual nature and such that they would not be allowed on a taxation of costs in a case to which rule 28(2) applies, shall, unless the solicitor expressly informed his client before they were incurred that they might not be so allowed, be presumed, until the contrary is shown, to have been unreasonably incurred.”

9.  Rule 29(3) refers to r 28(2) which provides:

“ Subject to the following provisions of this rule, costs to which this rule applies shall be taxed on the party and party basis, and on a taxation on that basis there shall be allowed all such costs as were necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed.” (my emphasis)

The “following provisions” of rule 28 are not relevant to the issues before me.

10.  Part II of the First Schedule to Order 62, under the heading “Discretionary costs” provides that:  

“ In exercising his discretion under this paragraph or under rule 32(2) in relation to any item, the taxing master shall have regard to all relevant circumstances, and in particular to-

(a) the complexity of the item or of the cause or matter in which it arises 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, the solicitor or counsel;

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

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

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

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

(g) any other fees and allowances payable to the solicitor or 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.”

11.  The reform of the civil procedure law in Hong Kong (CJR) which led to the implementation of the Civil Procedure Rules in April 1999, introduced the concept of “underlying objectives” to the rules. These are set out in Order 1A, rule 1 and include:

“ (a) to increase the cost-effectiveness of any practice and procedure to be allowed in relation to proceedings before the Court;

….

(c) to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings;

(d) to ensure fairness between the parties;”

12.  The commentary to this rule in Hong Kong Civil Procedure, 2017, Vol 1 at 1A/0/6, makes the following statement:

“ The concept of “proportionality” was introduced as part of the overriding objective in CPR 1.1(2)(c), which requires the court to deal with cases in ways which are proportionate to: (a) the amount of money involved; (b) the importance of the case; (c) the complexity of the issue; and (d) the financial position of each party…….

The concept of proportionality is of particular relevance in various areas.  One such area is costs.  The Court of Appeal in England has held that it is essential that courts should attach the appropriate significance to the requirement of proportionality when making orders for costs and when assessing costs……”      

13.  Taxing masters must accordingly have regard to proportionality when undertaking a taxation.

14.  Although not part of the formal legislative framework of the costs regime, the High Court taxing masters have prepared a High Court Taxation Guide.  This is not intended to be a definitive or comprehensive work on taxation but a compilation of the relevant general principles and commentary which one may have to consult for taxation: see Hong Kong Civil Procedure §62/App/21.  Included in the Guide are general rules of taxation described in so far as is relevant to this case, in the following terms:

“ When dealing with these items, the taxing master will have regard to the basis of taxation, the applicable principles and the factors contained in para.1 (2) of Part II of the First Schedule. As a general rule, on taxation inter parties:

……

(3) Only one fee earner will be allowed for a particular item of work, e.g., drafting pleadings or attendance at court. When a junior solicitor did the work under supervision of a partner, the taxing master will bear in mind, inter alia, the possibilities of duplication of work, the time spent by the solicitor and the partner respectively, and the overall costs incurred as compared to those incurred by a single fee earner.  The costs attributable to the solicitor or partner may be reduced or taxed off where appropriate……”

……

(9) When counsel is instructed, the time claimed to have been spent on considering the research by counsel will be stringently scrutinised, less there will be considerable duplication of work."

15.  The principles to be applied in a review of a taxation will be drawn from these basic sources.

The bill

16.  At this stage of the proceedings I am only concerned with the items in the bill which were challenged by Mr Ho on the review by the master.  The matters challenged comprise 64 items which demonstrate that both partners of the plaintiff firm attended.  Essentially they involve the consideration of letters, skeleton submissions and authorities, court documents, judgments delivered on an interlocutory and other occasions, conferences, and attending counsel in court.

17.  Two matters are immediately apparent from the bill.  First, on each of the 64 occasions on which a charge is made, both partners were engaged.  Second, on each of the 64 occasions both partners spent precisely the same time, to the minute, on the attendance.

18.  Certain items particularly stand out.  Under objection 4 to item 63 of the bill both partners spent five hours “considering and studying list of authorities for the 1^st Respondent”.  Objection 16 to item 102 of the bill both partners spent 19 hours 30 minutes “considering and studying list of authorities for the Secretary for Justice”.  Objection 17 to item 103 of the bill showed that both partners spent 16 hours 30 minutes “considering and studying list of authorities for the 1^st Respondent”.  Objection 24 to item 146 of the bill shows that both partners spent 10 hours 30 mins “considering and studying supplemental list of authorities for the Secretary for Justice”.  Objection 29 to item 174 of the bill shows that both partners spent exactly five hours considering a judgment handed down by Lam J.  Objection 59 to item 507 of the bill shows that both partners spent precisely 39 hours “considering, checking and studying eight bundles of consolidated authorities”.  Objection 60 to item 508 of the bill shows that both partners spent exactly 27 hours 45 minutes “considering, checking and studying 7 bundles of consolidated authorities”. 

19.  In all, some 145 hours on the part of each solicitor, a total of 290 hours, were charged for considering submissions and authorities.

20.  Attendances at court were by both partners, each for exactly the same length of time.  Attendances reviewing affirmations filed in the proceedings were by both partners, again, each for exactly the same length of time.  Each letter sent or received was given precisely the same amount of attention by both partners.

21.  The sole objection made to all 64 items of the bill is that each item demonstrated an exact duplication of work, in that two partners did precisely the same item of work.

22.  The costs of the 64 objected items, subject to this review, totalled 367 hours, amounted to $1,460,000.  Ms Ng says that this very substantial sum was the result of duplication which, in the circumstances of the case, was unwarranted and unreasonable.

23.  Some reductions in the time claimed for some of the items were made by the master.  It may be fairly said that the reductions in time taxed off were relatively minimal.  But the master maintained the involvement of two partners and the consequent duplication of work.  On this review, no challenge is made to the amount of the charges made by the solicitors, or the time spent, (as taxed off), for the 64 items.  The challenge is confined to the fact of duplication.

Express or implied approval

24.  If the client has given his express or implied approval to costs being incurred, by Order 62, rule 29(2), the costs are conclusively presumed to have been reasonably incurred. 

25.  By Order 62, rule 29(3), costs which, in the circumstances of the case, are of an unusual nature and such that they would not be allowed on a taxation of costs in a case to which rule 28(2) applies, shall, unless the solicitor expressly informed his client before they were incurred that they might not be so allowed, be presumed, until the contrary is shown, to have been unreasonably incurred.  Pursuant to Order 62, rule 28(2) the only costs that shall be allowed are:

“ such costs as were necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed”.

26.  It was agreed between the parties that the defendant gave neither express nor implied approval to the challenged items. At the same time, there is no suggestion that, in accordance with rule 29(3), the solicitors expressly informed Mr Ho before the duplicate costs were being incurred and that they might not be allowed in a party and party taxation.

27.  Consequently, Order 62, rule 29(2) is not engaged and there is no conclusive presumption against Mr Ho that the duplication of the costs have been reasonably incurred.  The effect of rule 29(3) is that where there is no express advice to the client, as in this case, that the costs might not be allowed on a party and party taxation, the costs are presumed to be unreasonably incurred.  That presumption is a rebuttable presumption.

The masters reasons

28.  The master heard the application for review of the taxation on 2 December 2016.  His reasons for declining to tax off the duplicate fees charged by the solicitors for the 64 items are set out in his reserved decision handed down on 27 January 2017.  The essential passages are as follows:

“ 23 In gist, Ms Ng, Counsel for (Mr Ho) submitted that it is of an unusual nature for (the solicitors) doing exactly the same piece of work such as studying the same authorities and submissions, and attendance of court. In my view, if the defendant had already accepted that these 4 Counsel were instructed, they should be allowed to do exactly the same or substantially the same piece of work such as studying the same authorities and submissions, attendance of court etc. In that case, I fail to see why it is unreasonable to expect (Mr Ho) to also accept 2 solicitors to do exactly the same or substantially the same studying the authorities and submissions, attendance of court. Needless to say, the various applications in HCAL 84/2012 and HCAL 85/2012 including their appeals to the CFA must be extremely important to (Mr Ho) who is not only a politician but also a candidate in the 2012 Chief Executive Election.

24 Even as to the question of costs, I am of the view that (the case) must be very complicated since the costs order made by Lam JA in HCAL 84/2012 against (Mr Ho) with certificate for 2 counsel was indeed overturned by the Appeal Committee of the CFA by replacing with “no order as to costs” eventually.

25 Ms Ng for (Mr Ho) submitted that the legal complexity was a matter for counsel. With respect, I disagree.

26 (The master then cited Gotland Enterprises Ltd v Kwok Chi Yau & Ors (unreported, CACV 260/2014, 19 January 2016) for the proposition that it was not unreasonable to expect a solicitor have a proper understanding as to the issues involved in appeal when he prepares the appeal bundles.)

27 I also accept the evidence in the affidavit of RL filed 20 May 2016 that in every court hearing, instructing solicitors are expected to render assistance to counsel and the court, and to take instructions from client as and when necessary, especially in view of this extremely important and complicated case. Hence, to enable the instructing solicitors to follow the proceedings and assist the counsel team, they were obliged to go through the submissions and legal authorities. Although Ms Ng for (Mr Ho) submitted that such purpose should not have required the extravagant number of hours. However, in this application for review, the defendant never raises the objections as to the quantum which was allowed by me at the taxation. I therefore disagree with her submission in this regard.

28 After having carefully considered all relevant factors, I accept the submission of the plaintiff’s Counsel, Ms Lan, that the circumstances of the case justified every assistance from 2 fee earners namely RL and EL to the four Counsel involved. It is also necessary for the 2 solicitors to be fully conversant with and proper understanding of the various applications, their backgrounds and the relevant legal principles in order to discharge their professional duties.

29 Further, it is not a strict rule that whenever an item of work involves participation of more than one fee earner would as a matter of principle be taxed off on a party-party basis. Even according to the Decision of Master C Chan (as he then was) in The Educational (HK) Group Ltd v Deacons (unreported, HCMP 2138/2008, 11 May 2009), which is relied upon by (Mr Ho) and strictly not binding on me, the exception is that unless it is very complicated, the fees of two-earners are not allowed for both solicitors doing the same piece of work on a party-and-party taxation. In my view, these judicial review and election petition are so complicated as to justify the participation of 2 fee earners.

30 Last but not least, it is well-known that (Mr Ho) had himself is a very experienced litigation solicitor who was entitled to and could impose a limit on costs against the plaintiff when instructing them in the concerned litigation according to the Hong Kong Solicitors’ Guide to Professional Conduct, which provides:

(Rule 4.05 of the Guide is then set out).

31 There is certainly no evidence before me that (Mr Ho) ever imposed such a limit on costs against (the solicitors). In other words, if (Mr Ho) did set such a limit and (the solicitors’) costs did substantially exceed the same, it is highly likely for me to disallow them in these taxation proceedings even though it may be arguable that the Law Society’s commentary is strictly speaking not binding on this court[2].” (sic)

29.  Relying upon those reasons the master concluded that the 64 items involving the participation of two fee earners were not of an unreasonable amount nor had the fees been unreasonably incurred.  The application for review was dismissed.

The authorities

30.  The test for reasonableness on a party and party taxation is that:

“ there shall be allowed all such costs as are necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed”

will be allowed: see Order 62, rule 28(2).

31.  In the present case, the duplicate costs being presumed to have been unreasonably incurred, by virtue of rule 29(3), the principle to be applied by the taxing master, in order to determine whether costs are reasonably incurred, is to examine whether or not the costs incurred are necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed. 

32.  Guidance to the “reasonableness” test, and the interpretation of rules, 28(2) and (3) for the taxing master, may be found in the judgment of Sir Robert Megarry V-C in EMI Records Ltd v Ian Cameron Wallace Ltd [1983] 1 Ch 59 at 72E – H:

“ What, then, of rule 29 (2) and (3)[3]? By sub- rule (2), all costs and all amounts which the client has expressly or impliedly approved are “conclusively presumed” to have been reasonably incurred. Under sub- rule (3) there is a rebuttable presumption that costs which “are of an unusual nature” and would not be allowed on a party and party taxation have been unreasonably incurred, unless the solicitor expressly informed his client before they were incurred that they might not be allowed. Such provisions, if I may say so, seem to be entirely just and proper as between a solicitor and his own client. The client ought not to be allowed to complain about what he has authorised his solicitor to do, and the solicitor ought not to be allowed to claim payment for unusual items unless he has first given his client due warning of risk. Where, on the other hand, the costs are to be paid not by the client to his own solicitor but by another party to the litigation, these provisions seem entirely inappropriate. It would be monstrous if the loser could complain of nothing that the winner had authorised. Confident of success (as many are, when moving for contempt), the winner may have authorised half a dozen conferences with three expert witnesses, when two conferences with a single expert would plainly have been ample. He may have needlessly employed the most expensive experts, two of the most fashionable silks and a pair of juniors. He may throughout have insisted on his case being conducted by two of the senior partners in his solicitors’ firm, instead of one. He may have done dozens of other things which to a greater or lesser extent were costs unreasonably incurred to an unreasonable amount.” (My emphasis)

33.  Not surprisingly, there is a paucity of authority in point as to what constitutes “unusual” costs.  Ms Ng placed strong reliance on the decision in The Educational Group (HK) Ltd v Deacons (unreported, HCMP 2138/2008, 11 May 2009, master Christopher Chan).  In particular Ms Ng relied upon the passage at §38, where the master said:

“ I cannot say that obtaining the assistance of another solicitor is something of an unusual nature. This happens everyday in a solicitor’s firm. However, the fees of two fee-earners are not allowed for both solicitors doing the same piece of work in a party and party taxation unless it is very complicated.” (sic)

34.  Ms Lan argued that the passage related to party and party taxation, and so would not apply in a solicitor own client taxation. As master Chan pointed out in the decision however, (see §§36 – 37), in a solicitor own client taxation, rule, 29(3) has the effect of disallowing an item that would be disallowed in a party and party taxation.

35.  Master Chan was undoubtedly a very experienced taxing master, having brought to his post as a master many years of experience as a litigation solicitor.  But great care must be taken in the application of the passage relied upon. 

36.  There is nothing unusual in a senior solicitor delegating work to a junior solicitor, so that two fee earners are engaged in the matter.  For example, upon receipt of a bundle of authorities it would not be unusual for a senior solicitor to delegate the work of reviewing the authorities to a junior solicitor.  The junior solicitor, having reviewed the authorities, would give the senior solicitor a note of which of the authorities, and which parts of those authorities, would be a matter of concern in the litigation. 

37.  Authorities which stated principles which were not in dispute, or on which counsel instructed by the senior solicitor would rely in any event, need not be subject to close examination by the senior solicitor.  The note the senior solicitor would expect from the junior solicitor would draw his attention to the important authorities, and in particular the specific passages in those authorities, which were against the case.  This course of action appropriately has regard to the general rules of taxation, item (9); see §14 above.

38.  The same principles must apply to the requirement to read affirmations or skeleton submissions when they are received.

39.  An example of a case where charges for more than one fee earner were allowed on a solicitor own client taxation may be seen in Deacons v Wiseking Mining Investment Company Limited, (unreported, 25 June 2013, HCA 1221/2011, per master de Souza).  There, in a bill of costs related to non-contentious business, a commercial transaction, no less than four senior solicitors were engaged.  The solicitors demonstrated that in a very complicated commercial transaction, each solicitor involved dealt with a different specialty.  One was a merger expert, another a Hong Kong tax expert, another a listing rules and takeover expert and one whose practice was in the area of Sino-foreign cross-border mergers and acquisitions. 

40.  The master said, at §59:

“ The (solicitors) were tasked with a complicated matter that had to be done expeditiously and properly in the most cost-effective manner. The involvement of more than one fee earner on a particular piece of work is justified if each of those fee earners can demonstrate that they have significant and tangible contributions to make. In the circumstances of this case, the fee earners complained of contributed their particular expertise and experience. There was plainly no duplication of work as was suggested. This was a large-scale project that had to be handled efficiently, expertly and expeditiously if the project was to materialise for the benefit of (the client).” (my emphasis)

41.  The consequence of the rules and the authorities that I have cited is that unless the client has given his express or implied approval to the costs being incurred, and unless the costs are of an unusual nature being costs which are necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed, the costs will not be allowed.

Discussion

42.  I accept that this was a complex and difficult case for counsel to argue in court, fully justifying the seniority of the counsel involved.  But there was nothing in Ms Lan’s submissions to indicate that the solicitors side of the work was equally as complex and difficult.

43.  It is plainly right that it is not unreasonable to expect a solicitor to have a proper understanding of the issues involved in a case when the bundles are prepared.  But nothing was said to me which would justify two solicitors reading every authority, in order to prepare the bundles, when four counsel were instructed.  The only point taken on the application for review is that the two solicitors duplicated the work they undertook.  For myself, I would have had difficulty in allowing the amount of time claimed by one senior solicitor on the authorities and submissions in this matter.  But it is not open to me in this review to make any adjustment in that respect.  My jurisdiction is limited to examining the master’s reasons and determining whether or not they are in accordance with principle.

44.  Even allowing for the complexity of the case, I am quite unable to say that the duplication of work by the solicitors in respect of the reading of authorities was necessary or proper for the attainment of justice or for enforcing or defending the rights of Mr Ho.

45.  The same proposition must necessarily apply to the remainder of the work duplicated.  Other than complexity and importance to the client, no justification was offered as to why both solicitors should exactly match each other on the 64 items of work.  The best that could be said in respect of the attendances at court was that one solicitor would back up the other if the other had to leave the courtroom.  That is not a sufficient justification.  That is a role for a junior solicitor to play, especially when there are four counsel.

46.  There was nothing in the submissions for the solicitors that justified both solicitors reviewing every item of correspondence, every interlocutory order, every judgment, and every step taken in the proceedings.

47.  At paragraph 23 of the decision, the master has simply applied a wrong principle.  The mere fact that four counsel were instructed is no basis to say that the client must also accept two solicitors doing exactly the same or substantially the same work, especially matters such as studying authorities and submissions or attending at court.  It does not follow from the fact that four counsel were instructed that the work was of an unusual nature, or necessary or proper for the attainment of justice or enforcing or defending the rights of Mr Ho to justify the duplication.

48.  With respect to the master I simply do not understand the proposition in paragraph 24, used by the master to justify a finding of complexity.  Ms Ng did not dispute that the matter was complex. Complexity alone, unless explained, as it was in Deacons v Wiseking, will not justify duplication of work by solicitors.

49.  The conclusion reached by the master in paragraph 27 that it was necessary for both solicitors to go through submissions and legal authorities in order to follow the proceedings and assist counsel simply does not follow.  In the absence of special or unusual reasons why two solicitors should be required to give assistance to counsel, the duplication is not justified, and is unreasonable.

50.  In paragraph 30, the master appears to justify the duplication on the basis that Mr Ho could have imposed a limit on the costs.  It is right that Mr Ho may be taken to have been aware of the power to impose a limit, and it is clear that Mr Ho did not impose a limit on the costs incurred. 

51.  But that is quite a different matter from authorising the exact duplication of work by the two solicitors.  The mere knowledge of, or ability, to impose a limit on the costs cannot be a relevant factor in determining whether the work was of an unusual nature, necessary or proper for the attainment of justice or enforcing or defending the rights of Mr Ho.  The master has taken into account an irrelevant matter.

Conclusion

52.  For the foregoing reasons I am satisfied that in rejecting the review for the 64 items the master has erred in principle, has taken into account irrelevant matters, and failed to take into account relevant matters. 

53.  The appeal will accordingly be allowed.  The claim in the bill for two solicitors on each of the 64 items under objection is rejected.  The amount of the bill, as taxed down by the master, is further taxed down to entitle the time claimed for one solicitor only.

Costs

54.  Mr Ho has succeeded entirely in the application for review of the master’s decision.  There will be an order nisi that the solicitors must pay Mr Ho’s costs, both here and below, on a party and party basis, with a certificate for two counsel.