SINOCARE GROUP LTD v. DORON BIRAN AND OTHERS

HCA 714/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 714 OF 2010

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BETWEEN

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D E C I S I O N

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1.  This is an application by the plaintiff for a gross assessment of costs pursuant to Order 62, rule 9A of the Rules of High Court. The defendants were notified of the plaintiff’s intention to seek such an order on 12 December 2011 following unsuccessful attempts by the plaintiff to seek an agreement on the costs relating to the 1^st defendant’s unsuccessful challenge to the court’s jurisdiction on 29 March 2011.

2.  The plaintiff’s costs, incurred both in Hong Kong and London, have been set out in schedule form and explained to the court by Mr Jeffrey Lane, a partner of King & Wood, the plaintiff’s solicitors.

3.  The 1^st defendant was not represented at the hearing but had been represented by Sidley Austin until very recently.  Even though they no longer had instructions to represent the 1^st defendant at this hearing, they, very helpfully, sent to the court a letter and written submissions dated 30 January 2012 inviting the court to consider a number of issues when making its gross assessment.

4.  Also very helpfully, Mr Lane, for the plaintiff, had no objection to the court considering Sidley Austin’s submission (even though they no longer represented the defendant) and sought to answer the points raised in the written submission.

5.  The court’s approach to this application is set out at page 1133 Hong Kong Civil Procedure 62/9/12: (referring to the UK practice):

“Section 11 of the Costs Practice Direction indicates, however, that in applying the test of proportionality the court will have regard to r.1.1(2)(c) by; so far as practicable, dealing with the case in ways which are proportionate:

(i) to the amount of money involved;

(ii) to the importance of the case;

(iii) to the complexity of the issues; and

(iv) to the financial position of each party.

Paragraphs 11.1 to 11.3 of the UK Practice Direction give the following warnings as to the test of proportionality:

(i) the relationship between the total costs incurred and the financial value of the claim may not be a reliable guide. A fixed percentage cannot be applied in all cases to the value of the claim in order to ascertain whether or not the costs are proportionate.

(ii) in any proceedings, there will be costs which will be inevitably be incurred and which are necessary for the successful conduct of the case. Solicitors are not required to conduct litigation at rates which are uneconomic. Thus in a modest claim the proportion of costs is likely to be higher than in a large claim and may even equal or possibly exceed the amount in dispute.

(iii) where a trial takes place the time taken by the court in dealing with the particular issue may not be an accurate guide to the amount of time properly spent by the legal or other representatives in preparation for the trial of that issue.

The UK Court of Appeal has given guidance on the correct approach to proportionality when assessing costs:

‘what is required is a two stage approach.  There has to be a global approach and an item by item approach.  The global approach will indicate whether the total sum claimed is or appears to be disproportionate having particular regard to the considerations which Part 44.5(3) states are relevant.  If the costs as a whole are not disproportionate according to that test then all that is normally required is that each item should have been reasonably incurred and the costs for that item should be reasonable.  If on the other hand the costs as a whole appear disproportionate then the court will want to be satisfied that the work in relation to each item was necessary, and, if necessary, the cost of the item was reasonable’—Home Officer v. Lownds  [2002] EWCA Civ 365;[2002] 1 W.L.R 2450; [2002] 4 All E.R.755 CA.”

6.  Thus, this court, unlike a Taxing Master, may take a global view of the matter.

7.  The plaintiff’s claim for costs may be divided into 3 heads:

(a) Hong Kong solicitor’s fees;

(b) Hong Kong counsel’s fees and other disbursements; and

(c) London solicitor’s fees and disbursements.

8.  Under (a) $560,308 is claimed, under (b) $184,170.01 and under (c) GBP 29,992.00.

9.  Having considered items (i) – (iv) inclusive, referred to above, I am satisfied that the “costs as a whole are not disproportionate”.  It therefore remains to decide whether, on an overall view, they are reasonable.

10.  Sidley Austin’s written submission invites me to have regard to unreasonably high hourly rates claimed, unreasonably excessive hours claimed for various items, routine tasks performed by partners rather than litigation clerks, some duplication of work and some unnecessary work.

11.  Mr Lane has responded to each complaint.  In particular he explained that mid-way through the case he moved firms and it was more cost effective for him to do much of the work with his new firm rather than re-train new junior staff to become familiar with the case.  Whilst I agree that his approach was probably the most cost effective way forward I do not think it reasonable for the 1^st defendant to be wholly liable for the consequences of Mr Lane’s move from one firm to another.  I do not criticize Mr Lane’s approach to do more of the work than he might otherwise have done, however, I am persuaded that the final bill should be reduced as a result.

12.  I also attach some weight to Sidley Austin’s complaint that the hourly rates claimed are higher than those quoted in the Law Society circular 08-213(PA). I recognize that this circular is dated 1997 and therefore have only made minor adjustments under the heading of ‘reasonableness’ on this particular issue.

13.  The court’s gross assessments of costs against the 1^st defendant are as follows:

(a) $500,000;

(b) $184,170; and

(c) I accede to Mr Lane’s suggestion that the claim for fees incurred in London be adjourned sine die. Sidley Austin has raised issues in its written submission, dated 30 January 2012, which Mr Lane seeks further time to consider.  It is hoped that, in due course, a measure of agreement may be reached with regard to the London fees. If not, a further application may be necessary.

14.  I therefore make an order for the above sums and that the “London fees” be adjourned sine die plus an order that the 1^st defendant pay the costs of this hearing which I assess at $25,000 being the sum requested by Mr Lane in court.