HKSAR v. YIP KIM PO

HCCC67&188/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CRIMINAL CASE NOS. 67 AND 188 OF 2008

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D E C I S I O N

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I. INTRODUCTION

1.  Following trial on indictment for offences involving obtaining pecuniary advantage by deception, fraud, false statement by a company director and conspiracy to falsify accounts, the claimant was acquitted on all charges.  On 19 March 2009, the Court ordered that the costs of those proceedings including those in the court below and of the bail application be awarded to the claimant, taxed if not agreed.

2.  The claimant’s Bill of Costs filed on 25 March 2011 was partly taxed by me over three days in August 2011.  Among other items, I allowed the claimant’s expert fees and certain profit costs incurred in relation to communications between the solicitors of the claimant and the Insurer.  The respondent filed an application to review my decision relating to these two sets of costs on 9 September 2011.

3.  When the review came on for hearing on 17 December 2012, the costs relating to the solicitors for the Insurer having been previously settled in February 2012, the scope of the review was confined to the costs and disbursements of the claimant’s expert.

4.  Having heard and read submissions from senior counsel for both parties, the respondent succeeded minimally on just two items totaling HK$122,000.00 which I was persuaded should be wholly taxed off.  In doing so, I gave brief oral reasons that were recorded in the transcript.

5.  On 25 January 2013, the respondent by letter requested a copy of my reasons for review in writing and the full transcript of the review.  A request for the written reasons for review ought to have been made within 14 days after the review or such shorter period as might be fixed by the taxing master: Rule 8 of the Costs in Criminal Cases Rules, Cap. 492 and O.62 r.34(4) but I take no issue with the lateness of the request.  The transcript duly certified on 5 February 2013 has since been provided.

6.  I now provide written reasons for decision upon review.

7.  The respondent very helpfully delineated the areas of dispute by their Annexure to their supplemental written submissions, entitled “Bill of Costs Items related to Expert’s fees”.  The table in the Annexure conveniently lists 12 items, each being an umbrella label for associated items in the bill of costs, with an explanatory note.  For clarity and easy reference the table is set out in full here.

Bill of Costs Items related to Expert’s fees

	Items Nos.	Claimed Amount (HK$)	Respondent’s assessment (HK$)
1.	923 – fees for reviewing three TA reports (for the services rendered between 6/11/08 and 16/1/09)	2,800,000	1,536,000 (Note 1)
2.	924 – disbursements for courier, photocopying and travelling	66,853	174 (defence expert report only run to 58 pages @$3)
3.	1001 – Prof. fees for reviewing 4th TA report	1,000,000	410,000 (Note 2)
4.	1183 – acting as expert per the 2nd engagement letter	375,000	Disallow (beyond the scope of retainer)
5.	1257 – prof. fees for translating the report into Chinese	50,000	Disallow (beyond the scope of retainer)
6.	1438 – for reviewing PWs’ transcripts (15 hrs x $4,800)	72,000	Disallow (beyond the scope of retainer)
7.	1439 – attendance in court to give evidence and listen to evidence given by the TA (30 hrs x $4,800)	144,000	Disallow (beyond the scope of retainer) or 96,000 (30 hrs X $3,200)
8.	1440 – disbursement for travelling	506	506
9.	1442 – disbursements	15,581	1,424
10.	1443 – disbursements	16,163	1,511
11.	1444 – disbursements	99	99
12.	1445 – reviewing the cloned data and preparing the IT Forensics Report per 2nd engagement letter	125,000	14,400 (Note 3)
Total		4,665,202	2,060,114

Note

1.  Allow an expert @ $3,200/hr; 1 Senior Manager @$2,500/hr; 1 Account @$600/hr

320 hrs x ($2,500 + $600 + $600) = $1,184,000
110 hrs x $3,200 = $352,000
Total: $1,536,000

2.  The 4^th TA report was a consolidation of the previous three TA reports.  In any event, we allow $410,000

3.  None of these materials were used.  The claimant has not provided a breakdown on such item.  Assuming:

24 hrs x $600 = $14,400

II. GENERAL PRINCIPLES APPLICABLE TO TAXATION OF COSTS IN CRIMINAL PROCEEDINGS

8.  The award of costs in criminal proceedings is regulated by the Costs in Criminal Cases Ordinance, Cap. 492.  S.15(a) thereof stipulates:

“ the costs that may be awarded by virtue of an order shall not be punitive but shall be such sums as appear to a court or a judge reasonably sufficient to compensate any party to the proceedings for any expenses properly incurred by him in the course of these proceedings, including any proceedings preliminary or incidental thereto;” (italics mine)

9.  Rule 7 of the Costs in Criminal Cases Rules further provides that:

“ (1) The taxing authority must consider the claim, any further particulars, information or documents supplied by the claimant under rule 6 and any representation by any interested party and must allow such costs in respect of –

(a) such work as appears to the taxing authority to have been actually and reasonably done; and

(b) such disbursements as appear to the taxing authority to have been actually and reasonably incurred,

as it considers reasonably sufficient to compensate the claimant for any expenses properly incurred by the claimant in the proceedings.

(2) In taxing costs under subrule (1) the taxing authority must take into account all the relevant circumstances of the case including the nature, importance, complexity or difficulty of the work and the time involved.

(3) For the purposes of this rule, there must be allowed a reasonable amount in respect of all costs reasonably incurred and any doubts which the taxing authority may have as to whether the costs were actually and reasonably incurred or were reasonably sufficient in amount must be resolved against the claimant. (emphasis supplied)

10.  As to whether a particular set of costs has been properly or reasonably incurred, Sachs J pertinently observed in Francis v Francis and Dickson [1955] 3 All ER 836 at 840:

“ When considering whether or not an item in a bill is ‘proper’ – the correct viewpoint to be adopted by a taxing officer is that of a sensible solicitor sitting in his chair and considering what in the light of his then knowledge is reasonable in the interest of his lay client … the lay client … should be deemed a man of means adequate to bear the expense of the litigation out of his own pocket – and by, ‘adequate’ I mean neither ‘barely adequate’ nor ‘super-abundant’.”

11.  Any costs taxed or agreed in present circumstances will inevitably be met by the public purse.  The timely reminder of Lord Denning in Storer v Wright [1981] 2 WLR 208 at 212 in legal aid taxation is nonetheless apt. He stated:

“ Seeing that there is no-one to oppose, it seems to me that, on a legal aid taxation, it is the duty of the taxing officer to bear in mind the public interest. He should himself disallow any item which is unreasonable in amount or which is unreasonably incurred. In short, whenever it is too high, he must tax down. Otherwise the legal aid system could be much abused by solicitors and counsel.”

III. THE EXPERT FEES OF THE CLAIMANT

12.  The overall quantum of the claimant’s expert fees and associated items fell under close scrutiny in this review.  The fees previously allowed on taxation were undoubtedly considerable.  Were they properly and reasonably incurred and had an amount more than reasonably sufficient to compensate the claimant for such proper expenses been taxed and allowed such that on review those costs should be reigned in?

13.  The respondent through their senior counsel, Mr. Smith submitted that the level of fees allowed at HK $4,665,202 was excessive.  Various other labels were used, some of which were “exorbitant, staggering, padded and unjustified”.

(A) ITEM 1 OF THE ANNEXURE

14.  Turning then to the specific complaints, reference is first made to item 1 of the Annexure.  It relates to item 923 of the bill described as “fees for reviewing three TA reports (for the services rendered between 6/11/08 and 16/1/09”.  The amount claimed and allowed was HK $2.8m.  On review, the respondent offered as a reasonable quantum HK $1,536,000.

15.  The respondent submitted that the expert’s report was just 59 pages of which 20 pages were of undisputed facts with the thrust being no more than the presentation of a possible alternate and viable hypothesis for the business model of the listed companies in question.  Simply counting pages and concentrating on the limited number of paragraphs in which forensic expertise is offered completely ignores the amount of work and time required to be undertaken by the expert (and his team of accountants) in reaching his conclusion.

16.  The report, however relatively concise or short, contributed in no small measure to the acquittal of the claimant.  Proposing a cogent and plausible alternative following extensive checking and consideration of the data and documents in the three Treasury Account’s reports to the damning scenario presented by the prosecution, it was of considerable importance to the claimant.  It cannot be argued that it was other than proper to have obtained and adduced such expert evidence over the objection of the respondent at his trial.  Admittedly, one does not and cannot tax the expert evidence on the basis of its value to the claimant.  Rather, Rule 7(2) of Costs in Criminal Cases Rules enjoins the taxing master to take into account all relevant circumstances of the case including the nature, importance, complexity or difficulty of the work and the time involved.  Such background factors where appropriate must be taken into account.

17.  Coming late as it did with the resulting inordinate number of man hours being engaged to produce it, the respondent contended that they should not be saddled with the very high fees for the expert’s report.  It was further contended that the expert’s hourly rate of HK $4,800 was inordinately high when HK $3,200 per hour would have been appropriate by reference to what solicitors acting as experts on Hong Kong law might reasonably have been entitled to charge.

18.  In my considered view, very little if any assistance in assessing the hourly rate of an expert engaged on accounting forensics can be had simply by reference to the hourly rates of solicitors.  Their expertise obviously lies in different fields.  Furthermore, there was no evidence or any material before the court as to why the hourly rate billed was unreasonable, excessive or otherwise inappropriate for the level of expertise engaged.  I allowed the hourly charge accordingly.

19.  The expert’s 1^st engagement letter (respecting item 923 of the bill) dated 4 November 2008 signed and accepted by the claimant sets out the scope of services to be provided.  The relevant provisions read:

“ 7.2 RSM Nelson Wheeler will charge professional fees on the basis of time spent and applying our standard forensic accounting hourly rates according to the schedule attached as Annexure 3. Annexure 4 shows a breakdown of our estimated time costs for the Engagement. However, we are prepared to apply a fee cap of HK $2,800,000.00, excluding reasonable expenses and disbursement as more particularly described in paragraph 7.7, notwithstanding that, based on current understanding and level of complexity, our actual time charges are likely to exceed HK $4,000,000.00.

   7.4  As the conduct of the trial and the outcome of which cannot be ascertained at this stage, the fee quoted above does not include any partner, director or staff of RSM Nelson Wheeler whom may be required to give expert evidence and be cross-examined in Court.  If this is required, the actual hours spent in Court shall be charged accordingly.”

20.  As to court attendance being separately chargeable, see also clause 2.1.7.

21.  Even if lateness in commissioning the services of the expert had necessitated an increase in man hours being engaged (and I was not persuaded that this was so or that the claimant had been dilatory in the preparation of his defence on the evidence), the expert’s charges have been considerably and significantly capped.  The much pared down charge of HK $2.8 m for item 923 of the bill, albeit still significant in quantum, was properly and reasonably incurred.  A sensible and competent solicitor armed with knowledge of the case would have deemed the item proper and reasonable in the interest of his lay client.

22.  As for quantum, I discerned no reason to arbitrarily reduce the expert fees under this item to the level contended for by the respondent.  Not to accede to this request would not be punitive to the respondent.  In my considered judgment, the sum of HK $2.8 m represented reasonably sufficient recompense for expenses properly incurred as urged by Mr. Coleman SC for the claimant.

(B) ITEM 2 OF THE ANNEXURE

23.  This is item 924 of the bill for disbursements for courier, photocopying and travelling, totaling HK $66,853.  The respondent countered that just HK $174 should be permitted for a single copy of the expert report, the argument being that the report only ran to 58 pages at HK $3 per page with no details or breakdown given for why numerous other documents had to be copied.

24.  I profess to having had some difficulty as did Mr. Coleman in following this contention.  The charge represented disbursements properly and reasonably incurred by the expert in discharging his function and were separately chargeable.  I saw no reason to disturb this item on review.

(C) ITEM 3 OF THE ANNEXURE

25.  This is a charge of HK $1 m, relating as it does to item 1001 of the bill for “Prof. fees for reviewing 4^th TA report”.

26.  The services rendered and charged under this item were covered by the 2^nd Engagement Letter dated 9 January 2009, the particulars of which can be seen in paragraph 1 under “Scope of Services”.  The expert was tasked, inter alia, to review, assess and verify the findings in the 4^th report of the Treasury Accountant and prepare a report accordingly.

27.  For this aspect of the engagement, the expert’s fees were capped at HK $1m as per clause 7 which reads:

“ We are prepared to apply a fee cap of HK $500,000 for IT Forensics and a fee cap of HK $1,000,000 for the review of the TA 4th Report. These quotations exclude reasonable expenses and disbursements as more particularly described in paragraph 12 notwithstanding that, based on current understanding, level of complexity and the urgency of the review, our actual time charges are likely to exceed HK $2,500,000.”

28.  As is patent from both Engagement Letters, fees were chargeable on the basis of the time spent at the stipulated hourly rates.

29.  It was argued that the 4^th Treasury Accountant’s report was basically a consolidation of the three previous reports of the Treasury Accountant.  As such, the claimant’s expert would not have been required to undertake a huge amount of new work.  That being so, a much lower figure of HK $410,000 ostensibly reflecting a reduction in hourly rates and the number of hours thought adequate was offered.  It is difficult to discern either the rationale or fairness in such approach.

30.  The work relating to the expert under item 1001 of the bill was properly undertaken.  Further, in my view the fees taxed and allowed represented reasonable recompense and I saw no reason to disturb my finding on review.

(D) ITEMS 4 AND 12 OF THE ANNEXURE

31.  These two items can and were conveniently addressed together as they related to the IT forensics undertaken by the expert as part of the second aspect of the 2^nd Engagement Letter.

32.  Item 4 was a claim allowed at HK $375,000 under item 1183 of the bill of costs for “acting as expert per the 2^nd engagement letter”.  Item 12 concerned “reviewing the cloned data and preparing the IT Forensics Report per 2^nd Engagement Letter” at the allowed costs of HK $125,000 under item 1445 of the bill.  Together they came to HK $500,000 and represented the fee cap for IT forensics under clause 7 set out above.

33.  Mr. Smith submitted that insofar as the expert was charging for his continuing engagement in that capacity, item 4 fell within the original retainer and in any event was covered by the capped fees and should have been disallowed. Further, both these items for IT forensic work were not reflected in the final report nor did the expert make any reference to this IT forensics at all. Accordingly, it could not be said that these expenses had been properly incurred as reasonably necessary for the conduct of the defence.

34.  Mr. Coleman contended that the expenses were properly incurred relating as they do  to the IT forensic report commissioned under the 2^nd Engagement Letter consequent upon the prosecution providing a considerable amount of unused materials in the form of approximately 300 gigabytes of cloned data from six computers to the defence.  Whilst they were of no assistance to the prosecution, it was nonetheless necessary and prudent to have the expert analyze them.  I cannot agree more.

35.  The charges under these two items were not inordinately excessive in quantum and have in any event been capped despite the man hours involved.  I was persuaded by the claimant that they should not be disturbed and I so ordered.

(E) ITEM 5 OF THE ANNEXURE

36.  This concerned item 1257 of the bill for “prof. fees for translating the report into Chinese” which the respondent contended should be wholly disallowed.  I was persuaded on review that this should be so.

37.  The respondent queried whether this item was properly billable as part of the costs of the defence.  Whilst accepting that the claimant might well have wished to read the expert’s report in his own language, it was said to be “almost a luxury item”.  I agreed that the cost of the translation, useful and convenient for the claimant, should not be borne by the respondent.

38.  This item therefore fell away.

(F) ITEM 6 OF THE ANNEXURE

39.  The charge under item 1438 of the bill was “for reviewing PWs’ transcripts (15 hrs x $4,800)” in the amount of HK $72,000.

40.  I was persuaded by Mr. Smith’s submission that this was not a proper expense in that a huge amount of the factual briefing of the expert had come directly from counsel.  I also agree that it was work undertaken that fell without the expert’s retainer.

(G) ITEM 7 OF THE ANNEXURE

41.  This item refers to item 1439 of the bill and is for “attendance in court to give evidence and listen to evidence given by the TA (30 hrs x $4,800)”.  The charge was properly documented.

42.  It was submitted that this set of costs should have been covered by the capped fees and in any event should have been taxed at a reduced hourly rate of HK $3,200.  I saw no reason for reducing the hourly charge of the expert as I have indicated above.  Additionally, the expert was plainly entitled to charge for court attendance pursuant to clause 7.4 of the 1^st Engagement Letter as we have seen.

43.  This was an item of expense properly incurred with the amount hardly exorbitant or unreasonable as to call for any reduction on review.  It was a quantum reasonably sufficient to compensate the claimant.

(H) ITEMS 8 AND 11 OF THE ANNEXURE

44.  The respondent was content that they should remain undisturbed.

(I) ITEMS 9 AND 10 OF THE ANNEXURE

45.  These were disbursement items that should have been covered by the solicitors’ costs the respondent asserted.  As rightly pointed out by the claimant, they related to expenses incurred not by the solicitors but by the accountants acting for him.

46.  They were proper expenses and reasonable in quantum.  I accepted Mr. Coleman’s submission that they should be allowed in full.

V. COSTS

47.  The claimant having substantially prevailed, I awarded the costs of the review together with any costs reserved in respect thereof to him, taxed if not agreed, with certificate for counsel.