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HCCW 340/2002
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
COMPANIES (WINDING-UP) NO. 340 OF 2002
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IN THE MATTER of the Companies Ordinance, Chapter 32 of the Laws of Hong Kong |
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and |
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IN THE MATTER of BOLDWIN CONSTRUCTION COMPANY LIMITED (寶盈建築有限公司) |
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AND
HCCW 345/2002
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
COMPANIES (WINDING-UP) NO. 345 OF 2002
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IN THE MATTER of the Companies Ordinance, Chapter 32 of the Laws of Hong Kong |
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and |
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IN THE MATTER of MAINTAIN PROFITS LIMITED |
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AND
HCCW 346/2002
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
COMPANIES (WINDING-UP) NO. 346 OF 2002
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IN THE MATTER of the Companies Ordinance, Chapter 32 of the Laws of Hong Kong |
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and |
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IN THE MATTER of MYRIAD GOLD CORPORATION |
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AND
HCCW 691/2004
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
COMPANIES (WINDING-UP) NO. 691 OF 2004
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IN THE MATTER of the Companies Ordinance, Chapter 32 of the Laws of Hong Kong |
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and |
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IN THE MATTER of B.F. CONSTRUCTION COMPANY LIMITED |
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Before: Hon. Kwan J. in Chambers
Date of Hearing: 6 June 2006
Date of Decision: 6 June 2006
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D E C I S I O N
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The summonses
1. I have before me 4 summonses for review of various decisions made by Registrar Chan on the taxation of costs of the solicitors engaged by provisional liquidators. The summonses were made under Order 62 rule 35 of the Rules of the High Court. The summonses may be divided into 2 groups. The first group concerns Boldwin Construction Company Limited in HCCW No. 340 of 2002, I shall refer to this as “the Boldwin Review”. The other group concerns Maintain Profits Limited in HCCW No. 345 of 2002, Myriad Gold Corporation in HCCW No. 346 of 2002 and B.F. Construction Company Limited in HCCW No. 691 of 2004, I shall refer to these collectively as “the BF Review”.
The Boldwin Review
2. Four bills of Stephenson Harwood & Lo (“SHL”) were taxed by Registrar Chan on 7 December 2005, they were as follows:
(1) bill No. 60373 for the period of 22 February 2004 to 26 March 2005;
(2) bill No. 55814 for the period of 19 October 2003 to 21 February 2004;
(3) bill No. 60190 for the period of 21 April 2004 to 19 March 2005;
(4) bill No. 60189 for the period of 18 September 2004 to 19 March 2005.
3. By a letter to the Registrar dated 21 December 2005, SHL applied to the Registrar for a review of taxation of these 4 bills under Order 62 rule 33. The applicant is required by rule 33(3) to deliver objections in writing specifying by a list the items or parts of items the allowance or disallowance of which or the amount allowed in respect of which is objected to, stating concisely the nature and grounds of the objection. This SHL sought to do in their letter of 21 December 2005.
4. Regarding bill No. 60373, SHL objected to the hourly rates allowed for Mr Malcolm Kemp and Mr Jamie Stranger and time deductions for specific items. For bill No. 55814, SHL objected to the hourly rates allowed for Mr Kemp and Mr Stranger. For bill No. 60190, SHL objected to hourly rates allowed for Mr Kemp, Mr Stranger and Mr Jason Toms; in fact, no claim for Mr Kemp as a fee earner was made in this bill. For bill No. 60189, SHL objected to hourly rates allowed for Mr Kemp, Mr Stranger and Mr Toms and time deduction for items concerning Mr Toms; in fact, no claim for Mr Kemp and Mr Stranger was made as fee earners in this bill. Lastly, SHL claimed costs in applying for the review at HK$17,418.00.
5. On 15 February 2006, the Registrar considered the letter of 21 December 2005 with the bundle prepared by SHL. He found the documents placed before him helpful and dispensed with the attendance of the solicitors. He gave judgment on 20 February 2006.
6. SHL applied for review of the Registrar’s decision by a judge by summons dated 6 March 2006, this has come before me today.
The BF Review
7. Five bills of SHL were taxed by the Registrar on 24 January 2006, they were as follows:
(1) bill No. 56407A for the period of 19 October 2003 to 11 June 2004;
(2) bill No. 59346 for the period of 21 November 2004 to 20 December 2004;
(3) bill No. 58974 for the period of 24 October 2004 to 20 November 2004;
(4) bill No. 58566A for the period of 26 September 2004 to 23 October 2004;
(5) bill No. 58280A for the period of 12 June 2004 to 25 September 2004.
8. By a letter dated 15 February 2006 to the Registrar, SHL applied for review of his taxation of the above 5 bills. Regarding bill No. 56407A, SHL objected to hourly rates, but only the rate of Mr Stranger was specifically raised in objection. Regarding bill No. 59346, bill No. 58974 and bill No. 58566A, it was stated that the comments regarding hourly rates for bill No. 56407A were repeated; it would appear that only the rate of Mr Stranger was objected to. For bill No. 58280A, it was stated that the comments regarding hourly rates were repeated, in addition specific objection was raised to the rate of Mr Andrew Cotterell. For each of the first 4 bills, SHL also objected to time deductions for specific items.
9. On 17, 22 and 23 Febraruy 2006, the Registrar taxed further bills in these proceedings, among them were the following 5 bills:
(6) bill No. 60923A for the period of 24 April 2005 to 21 May 2005;
(7) bill No. 59754A for the period of 19 December 2004 to 22 January 2005;
(8) bill No. 60375A for the of period 23 January 2005 to 26 March 2005;
(9) bill No. 60568 for the period of 27 March 2005 to 23 April 2005;
(10) bill No. 61433A for the period of 22 May 2005 to 25 June 2005.
10. By their letter to the Registrar dated 7 March 2006, SHL applied for review of his taxation of the above 5 bills. Regarding bill No. 60923A, bill No. 59754A, bill No. 60568, and bill No. 61433A, they objected to the hourly rates of Mr Kemp and Mr Stranger. For bill No. 60375A, they objected to the hourly rates of Mr Kemp and Mr Stranger and time deductions for a specific item.
11. As by the time applications for review were made in these proceedings, SHL have already sought to review the Registrar’s decision in the Boldwin petition and this is to be heard on 6 June 2006, the Registrar’s initial direction was to defer review in the other proceedings until there is a decision from a judge on the hearing on 6 June 2006. SHL however requested the Registrar to deal with the review of the above 10 bills, as they have raised additional arguments regarding hourly rates in the other proceedings and it may be convenient for the judge hearing the Boldwin Review on 6 June 2006 to also deal with the additional arguments advanced if SHL should decide to seek review by a judge in respect of the other proceedings. The Registrar acceded to the request and on 20 April 2006, he considered the review of the above 10 bills as regards the hourly rate objections only, and adjourned the review for time deduction objections until after the decision was given at the hearing on 6 June 2006. Again, the attendance of SHL was dispensed with. The Registrar gave his decision on 28 April 2006.
12. SHL applied for review of his decision by 3 summonses issued on 25 May 2006. They have also come before me today.
Review under Order 62 rule 35
13. Under rule 35(4), unless the judge otherwise directs, no further evidence shall be received on hearing the application for review before him, and no ground of objection shall be raised which was not raised on the review by the taxing master.
14. In the Boldwin Review, I will exercise my power under rule 35(4) and allow the evidence raised by SHL in the BF Review in respect of the fees of 3 other solicitors firm (referred to in paragraph 11 of the Registrar’s decision of 28 April 2006) to be received in this hearing.
15. I have set out above the objection raised in respect of which of the fee earners in which of the bills in some detail. By virtue of rule 35(4), I am not at liberty to consider the hourly rate of any other fee earner in any bill that is not the subject of objection in the letters of SHL dated 21 December 2005, 15 February 2006 and 7 March 2006. I am therefore concerned only with hourly rates of 4 fee earners: Mr Stranger, Mr Kemp, Mr Toms and Mr Cotterell.
The authorities cited
16. Three English decisions were cited to the Registrar in the BF Review, as to this court. They are Johnson & Others v Reed Corrugated Cases Limited [1992] 1 All ER 169; Stubbs v Board of Governors of the Royal National Orthopaedic Hospital, 21 December 1988, unreported, Hirst J; and Finley v Glaxo Laboratories Limited, 9 October 1989, unreported, Hobhouse J.
17. In Johnson, Evans J at 173j cited with approval the decision of Kerr J in Leopold Lazarus Limited v Secretary of State for Trade and Industry (1976) SJ 268 in which Kerr J had this to say:
“The assessment of the appropriate rate per hour would be based on the Taxing Master’s knowledge and experience of the average solicitor or executive employed by the average firm in the area concerned.”
18. Evans J went on to say at 173j to 174a as follows:
“This reference to the average solicitor and the average firm in question has been repeated and emphasized in all the later judgments and reviews to which I have been referred. I have no reason to doubt that it represents the current practice throughout the whole country, nor that it is the proper basis in principle for the assessment of an hourly rate.”
19. Although Johnson was not cited to the Registrar in the Boldwin Review, I have no reason to think that he is not aware of this “proper basis in principle for the assessment of an hourly rate”, as is evident from the approach of the Registrar in his earlier decision in Re Pro KTA Ltd, HCCW No. 71 of 1995, 1 September 2004. Further, as he stated in his decision in the BF Review at paragraph 7, the “Hong Kong system is in its own way operating under this general concept”.
20. The authorities cited in this context, whether they be English cases or local decisions, are useful as general guidance on matters of approach and principle and no more. As Evans J pointed out at 178d to e:
“The decision in any particular case must always depend upon the circumstances of that case and upon the knowledge and experience of the registrar. It is also important that there shall be consistency of decisions between registrars and in similar types of case, ‘both in the interests of general fairness, and to assist parties to negotiate reasonable settlements of disputes on costs’ (per Hirst J in Stubbs’s case). But this means consistency arising from the registrars’ accumulated knowledge of local conditions and their experience of the figures being claimed in taxations which they conduct regularly in the course of their work. This is a factor which counts against, rather than for, reference being made to the details of other cases, just as it is, in my view, a reason for not placing exclusive or undue reliance upon figures showing the costs of the particular firm or solicitor in any individual case.”
The hourly rates – the Registrar’s approach in general
21. Assessing costs is not an exact science. As stated by Evans J at 181a and 183g, the basis and the starting point is the registrar’s general – and he emphasized the word “general” – knowledge and experience of the relevant matters. In 183c, he said, “the registrar’s general knowledge and experience of local conditions and circumstances remains the only firm basis for reliable and consistent taxation”.
22. This experience and discretion of the masters in a taxation matter had been emphasized repeatedly, by Kerr J in Leopold Lazarus and by Hirst J in Stubbs.
23. Here, the Registrar has extensive experience of the sums claimed by solicitors engaged by liquidators and provisional liquidators for him to acquire the general knowledge of relevant matters to form a view on assessing the appropriate rate of the average solicitor employed by the average firm in the field of insolvency. This is something that I place great weight on. Unless it is demonstrated that he is clearly wrong, I am not inclined to interfere with the assessment he made in his wide experience.
24. The Registrar in his decision in the BF Review came to the view that the hourly rates contained in Law Society Circular No. 97-234 (PA) issued on 21 July 1997 (I will call this in short “the Hong Kong Scale”) represent the hourly charge of an average solicitor in an average firm. For solicitors practising in the field of insolvency, he is prepared to give a “slightly higher” rate in an appropriate case (paragraph 14 of his decision in the BF Review, and his decision in Pro KTA Ltd).
25. In arriving at his view on the Hong Kong Scale as representing the hourly charge of an average solicitor in an average firm, the Registrar has drawn on his vast experience and understanding through his own personal involvement in the subject in different capacities during the last twenty years (paragraph 9 of his decision in the BF Review). I see no reason to differ from his acceptance of the Hong Kong Scale as “a good reference point”. I do not accept the submission of SHL that the Hong Kong Scale “no longer reflects the market” in respect of the periods covered by the bills in question. Nor do I think it is relevant to have regard to the standard scale of fees for various fee earners in an accountant’s firm agreed between the Official Receiver and the Hong Kong Society of Accountants, as it was then called.
26. The Registrar has considered the information provided by SHL on the hourly rates charged by 3 reputable solicitors firms. As noted by the Registrar, one of these firms is generally adopting the Hong Kong Scale, and the rates claimed by SHL in these proceedings are “above the average”. He did not think the figures of the rates charged by the other 3 firms would assist SHL in this instance. I respectfully agree.
27. I also agree with what the Registrar said in paragraphs 15 to 19 of his decision in the BF Review as to the difference between Hong Kong and England in the application of the 7 factors known as “the 7 pillars of taxation” in the assessment of discretionary costs set out in paragraph 1(2) of Part II of the First Schedule to Order 62 of the Rules of the High Court. It is important to bear in mind that unlike England, in assessing hourly rates in Hong Kong, a global approach is taken, so once the charging rate of a fee earner in a bill is fixed, that rate would apply to all the work he did in the entire bill and no distinction is made between different kinds of work within the same bill.
Mr. Stranger’s hourly rates
28. A matter greatly emphasized upon is the overseas experience of Mr Stranger. It was complained that the Registrar gave little or no regard for Mr Stranger’s overseas working experience in allowing him the hourly rate of $2,300.00 in some instances and $2,100.00 in other instances.
29. Mr Stranger was admitted in Western Australia in October 1997 and practised as a solicitor and barrister in that jurisdiction until January 2000 and part time throughout 2000. His total post qualification experience in Western Australia was approximately two and a half years. Mr Stranger was employed as a legal assistant by SHL for approximately one and a half years and then as a registered foreign lawyer for SHL and by Messrs. Richards Butler for a little less than two and a half years. He was admitted as a solicitor in Hong Kong in September 2004.
30. The rate allowed by the Registrar for Mr Stranger is equivalent to that of a solicitor with two to four years’ experience. Under the Hong Kong Scale, the rate for a solicitor with two to four years’ practice is in the range of $2,000.00 to $2,500.00 and the rate for a solicitor with five to six years’ practice is in the range of $2,400.00 to $3,000.00.
31. The difference in the two rates allowed by the Registrar for Mr Stranger would seem to be due to this. For bills No. 55814, 56407A, 58566A and 58280A, the rates were fixed at $2,100.00 – these all related to work done before Mr Stranger was admitted as a solicitor in Hong Kong. For bill No. 60190, according to the covering letter of the Registrar’s clerk dated 7 December 2005, it was stated that Mr Stranger’s rate was fixed at $2,000.00. I think this is a clerical error as it is clear from the bill enclosed that the rate was in fact fixed at $2,100.00 as well. For the other 5 bills, Mr Stranger’s rate was fixed at $2,300.00, these bills related to work done in the periods substantially after Mr Stranger’s admission as a Hong Kong solicitor.
32. These rates were fixed by the Registrar when he first made the assessment, he did not alter them on review.
33. I think it is right to draw a distinction in the rates fixed for the periods before and after Mr Stranger’s admission as a solicitor in Hong Kong.
34. As for the criticism whether the rates fixed had sufficiently taken into account the overseas experience and the complicated nature of the work done by Mr Stranger, the Registrar said he had taken these factors into account but he took a “global approach” when he fixed the rates (paragraph 21 of his decision in the BF Review).
35. I would also take a global approach. I looked at work actually done by Mr Stranger, I am persuaded that slightly higher rates are justified in these proceedings, having regard to the complexity of the issues involved and the challenges to the provisional liquidators’ work raised by different parties. For bills No. 55814, 56407A, 58566A, 58280A and 60190, I will fix Mr Stranger’s rate at $2,300.00. For the other 5 bills, I would fix his hourly rate at $2,500.00. I decline to fix his hourly rate as claimed, which is $2,904.00.
Mr Kemp’s hourly rate
36. The Registrar fixed Mr Kemp’s hourly rate initially at $4,000.00 and increased it to $4,200.00 in the Boldwin Review. He also applied the rate of $4,200.00 for Mr Kemp in the BF proceedings and he did not alter this on review. Mr Kemp is a senior partner of SHL, he was qualified in the United Kingdom in 1980 and in Hong Kong in 1982. Having regard to the work undertaken by Mr Kemp in the bills, I am not persuaded I should increase it to the rate claimed at $4,632.00.
Mr Toms’ hourly rate
37. The Registrar fixed Mr Toms’ hourly rate at $3,200.00 in the Boldwin Review, the rate claimed is $3,504.00. Mr Toms was qualified as a solicitor in the United Kingdom in 1995 and in Hong Kong in 1997. The Registrar has had regard to his overseas experience (paragraph 13 of his decision in the Boldwin Review). Having regard to the work undertaken by Mr Toms, I see no reason to differ from the Registrar.
Mr Cotterell’s hourly rate
38. This was fixed by the Registrar at $2,800.00, the rate claimed is $4,260.00. Mr Cotterell is a partner in SHL, he was qualified in the United Kingdom in 1992 and in Hong Kong in 1998. The Registrar did not expressly deal with the hourly rate of Mr Cotterell in his decision in the BF Review. It was submitted that comparison should be made to the rate he allowed for Mr Toms in the Boldwin Review. I think there is justification in this complaint, I will increase Mr Cotterell’s hourly rate to $3,200.00.
39. That deals with all the objections on the hourly rate in the Boldwin Review and the BF Review. I now turn to the objections for time deductions for specific items in the Boldwin Review.
Bill No. 60373
Items 38, 39 and 44
40. These items related to considering papers in the derivative proceedings, the shareholders dispute, the misfeasance allegations against a director, and the winding-up proceedings of Boldwin. A total of 10 hours were spent by Mr Stranger. The Registrar deducted 7 hours, on review he varied his assessment and the time allowed as reasonable was 5 hours. He took into account that these topics are not unfamiliar to Mr Stranger, as I had dealt with these matters in some depth in the judgment I gave in October 2002 when I appointed provisional liquidators for Boldwin and the other companies. It is unlikely that Mr Stranger was reading into the papers for the first time, although he might not have perused and considered the documents with as much attention as on this occasion when he was required to give a summary of the derivative action and related proceedings to the provisional liquidators. I see no reason to differ from the Registrar’s assessment.
Item 41
41. This related to considering the law in derivative proceedings in Hong Kong. Three hours were spent by Mr Stranger, the Registrar reduced it to 1 hour, and did not alter it on review. No attendance note was produced to show the books and authorities considered and the research made, but a description was given in the letter seeking review dated 21 December 2005. It would appear that research was made into the common law, the legislative amendments on statutory derivative actions, and procedural aspects in derivative actions. I would increase the time spent to 2 hours.
Items 54, 55, 56 and 59
42. This related to considering papers and drafting documents, being a summons and supporting affidavit, for the provisional liquidator’s application to sell and abandon some of Boldwin’s assets. Mr Stranger spent a total of 10 hours. The Registrar assessed reasonable time at 4 hours, on review he altered his assessment and allowed 5 hours. I have considered the nature of the work undertaken and the drafts produced, I see no reason to take a different view for this item.
Bill No. 60189
43. Here, the Registrar made a deduction of 5 hours from the total time of Mr Toms of 38 hours 25 minutes. As explained in the covering letter of his clerk dated 7 December 2005, the Registrar regarded it excessive for Mr Toms to use more than 10 hours to check documents and found the time spent for preparation of other documents regarding other claims also excessive. He did not give a breakdown of how much he deducted for each individual item of work done by Mr Toms but took a global approach. I see nothing wrong with that approach or the deduction of 5 hours from the total time spent.
Costs of the taxation review
44. SHL claimed $17,418.00 as costs for time spent in applying for the review in the Boldwin Review. The Registrar deducted the time spent for Mr Kemp and Mr Stranger and reduced the hourly rate of Mr Stranger and Mr Kemp. I would not vary the time deductions for Mr Kemp and Mr Stranger. For Mr Stranger’s hourly rate I would increase it to $2,500.00. That is the only extent of variation that I make.
45. I would hear Mr Stranger on any consequential order and direction I should make on this hearing.
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(S Kwan) |
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Judge of the Court of First Instance |
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High Court |
Mr J Stranger of Messrs Stephenson, Harwood & Lo, for the former Provisional Liquidators of the Companies
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