FAMV33/2008 RE DAVID JOHN KENNEDY AND OTHERS - LawHero
FAMV33/2008
終審法院（民事）Mr Justice Chan PJ11/10/2012
合併案件：FAMV33/2008FACV30/2008
FAMV33/2008
FAMV No. 33 of 2008
IN THE COURT OF FINAL APPEAL OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
MISCELLANEOUS PROCEEDINGS NO. 33 OF 2008 (CIVIL)
(ON APPLICATION FOR LEAVE TO APPEAL
FROM CACV NO. 244 OF 2004)
____________________
BETWEEN
IN THE MATTER of the Companies Ordinance (Chapter 32)
and
IN THE MATTER of Wing Fai Construction Company Limited
and
IN THE MATTER of an application on behalf of Kelly Cheng Kit Yin and Robert Yip Kwong (Respondents) for an Order of Committal against DAVID JOHN KENNEDY (Applicant)
____________________
FACV No. 30 of 2008
IN THE COURT OF FINAL APPEAL OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
FINAL APPEAL NO. 30 OF 2008 (CIVIL)
(ON APPEAL FROM CACV NO. 244 OF 2004)
____________________
BETWEEN
DAVID JOHN KENNEDY Appellant
and
KELLY CHENG and ROBERT YIP Respondents
__________________
Before: Mr Justice Chan PJ in Chambers
Date of Hearing: 28 November 2011
Dates of Filing Further Materials : 2 & 9 December 2011
Date of Decision: 12 October 2012
__________________
D E C I S I O N
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Mr Justice Chan PJ:
These are two appeals against the taxation by the Acting Registrar ("the Registrar") of the appellant's costs on an indemnity basis.
History of this litigation
The appellant (the "Liquidator") was one of the liquidators of Wing Fai Construction Company Ltd ("the Company") appointed in connection with its winding up. During the course of the liquidation, the liquidators conducted a private examination of the respondents (who were the former directors of the Company) pursuant to s.221 of the Companies Ordinance, Cap 32. Suspecting that there was something improper in the management of the Company, the liquidators, without first seeking the leave of the court, disclosed the transcripts of the examination to the police for the purpose of investigation into the affairs of the Company. The respondents moved for the committal of the Liquidator, contending that such disclosure amounted to a contempt of court.
The Company Judge found that there was no case to answer for the Liquidator and dismissed the motion. The Court of Appeal initially dismissed the respondents' appeal, but on an application for variation, allowed the appeal, set aside the ruling of no case to answer and directed that the motion be remitted to the judge to resume the hearing.
Pursuant to leave granted by the Appeal Committee, the Court allowed the Liquidator's appeal, upheld the judge's ruling of no case to answer and dismissed the respondents' motion for contempt of court. On 12 January 2010, having considered the parties' written submissions, the Court ordered, among other things, that the respondents do pay the Liquidator's costs before this Court, which included the costs before the Appeal Committee in FAMV 33 of 2008 ("FAMV 33") and the costs before the Court in FACV 30 of 2008 ("FACV 30"), such costs to be taxed on an indemnity basis if not agreed.
The Registrar's taxation of costs
The Liquidator submitted two Bills of Costs which were taxed by the Registrar in October 2010 and April 2011. Not satisfied with the Registrar's taxation, the Liquidator applied for a review under Rule 57 of the Hong Kong Court of Final Appeal Rules ("the CFA Rules"). At the review hearing before the Registrar, the Liquidator raised issue on several matters: the appropriate hourly rates of the solicitors; senior and junior counsel's fees; the items of work involving 2 fee earners; and the items of work the amount of which was disputed.
In a written decision handed down on 29 July 2011, the Registrar allowed the review in part. In FACV 30, the bill was taxed down from $4,542,542.78 to $2,888,252.92 (including a reduction of the solicitors' profit costs from $2,375,546.67 to $1,004,742.50 and other items and counsel's fees). In FAMV 33, the bill was taxed down from $1,312,549.67 to $661,292.78 (including a reduction of the solicitors' profit costs from $757,028.34 to $344,875.92 and other items and counsel's fees).
The present appeals
The Liquidator appeals against the review decision of the Registrar pursuant to Rule 60(9) of the CFA Rules. In these appeals, the Liquidator raises two main grounds which are common to the two bills and they relate to the applicable principles of taxation:
The Registrar had erred in law and in principle in failing to apply the correct test on an indemnity taxation ; and
The Registrar had erred in finding that the Liquidator's solicitors' hourly rates were unreasonable.
In support of his arguments, Mr Wadham for the Liquidator in both his oral and written submissions refers to certain features in this litigation and the reasons why he submits the Registrar went wrong. In relation to FACV 30, the Liquidator also makes specific complaints against the Registrar's various reductions in the time spent in the preparation of his case and in the time charged by London senior counsel. In relation to FAMV 33, the Liquidator complains against the Registrar's decision reducing senior counsel's fees and the solicitors' profit costs as being unreasonable. On the other hand, Ms Fenn on behalf of the respondents has also made oral and written submissions opposing these appeals and supporting the Registrar's decision. Her main ground of objection is that the Registrar had exercised his discretion judicially and that it has not been shown that he had made any error of law or that an appellate court should interfere with such discretion.
At the end of the oral hearing, I directed the Liquidator to file a table of the items which are still in dispute and the respondents to file a response to it, in case I consider it desirable to deal with the individual items myself in order to save the parties further costs in coming before me again or having the matter remitted to the Registrar. This the parties have done. For their helpful submissions and written materials, I am most grateful.
Special features in this case
As the Registrar accepted in his decision, there are special features in this litigation which are relevant to taxation.
First, this case called for the proper construction of s.221 of the Ordinance, in the context of the relevant Winding-up rules, in particular, rule 62 and an examination of the exercise of the powers and the performance of the obligations of a liquidator, and the direct and derivative use of evidence obtained in an examination under s.221. It also involved consideration of the law of contempt, especially in the case of a person performing a statutory duty. These points had not been considered by the Court before this case.
Secondly, this was by no means a straightforward liquidation. There were a large number of related companies and the facts were complicated. When the liquidators first took over, they were severely handicapped by the unusual absence of the relevant documentation which these companies were obliged by statute to maintain and the lack of co-operation from the officers of the companies.
Thirdly, the litigation was conducted with hostility, with the respondents taking a very strong course against the Liquidator. This can be demonstrated by the history of the proceedings described above.
Fourthly, it was an application for committal for contempt against a professional accountant and an officer of the court. It did not only cast doubt on his integrity and reputation. His liberty was also at stake if he were to be found guilty of contempt. The importance of this litigation to the Liquidator and the stress which he was put under cannot be under-estimated.
By referring to these features, I must not be taken to suggest that the purpose of the order for costs on indemnity basis was to compensate the Liquidator for any loss other than his costs which had been caused to him by this litigation. Suffice it to say that the Court saw fit to award costs to him on an indemnity basis and that these features should be taken into consideration when assessing the time and effort which were required to be spent on this litigation and the amount of costs expended in relation thereto, having regard to the complexity of the case and its importance to the Liquidator.
Applicable principles in taxation appeals
Taxation is an exercise of discretion by the taxing master. The appellate court would not normally interfere with the exercise of such discretion unless it can be shown that there was an error of law or in the applicable principles; or the taxing master has taken into account irrelevant matters or failed to take into account relevant matters; or the assessment was plainly wrong or fell outside the generous ambit within which a reasonable disagreement was possible. See Yue Kwok Ying v Mak Shiu Tong, FACV No 4 of 2004, 14 February 2006, unreported, and Nam Chun Investment Co Ltd v Director of Lands (2007) 10 HKCFAR 523. When this happens, the appellate court may have to exercise the discretion afresh.
Approach in taxation on indemnity basis
Under Rule 57(1) of the CFA Rules, all bills of costs shall be taxed in accordance with Order 62 of the High Court Rules. The rule which is pertinent to taxation of costs on an indemnity basis is Order 62 rule 28(4A) which provides:
"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."
This statutory formula ("all costs shall be allowed except insofar as they are of an unreasonable amount or have been unreasonably incurred") is the same as in Order 62 rule 29(1) of the previous English Rules of the Supreme Court (RSC). That rule provided for taxation on a solicitor and own client basis which basis was held by Sir Robert Megarry VC in EMI Records v Wallace [1982] 2 All E R 980, 989 to be equally applicable to a taxation on an indemnity basis (subject of course to the differences provided in the statute, such as the conclusive presumptions in the case of solicitor and own client taxation). The learned Vice Chancellor explained what such a taxation entails as follows (p.989a):
"To say that on a taxation 'all costs shall be allowed except in so far as they are of an unreasonable amount or have been unreasonably incurred' seems to me to be giving the litigant a complete indemnity, shorn only of anything that is seen to be unreasonable. The litigant does not have to establish that the costs were necessary or proper, or that the costs were of a reasonable amount and reasonably incurred. Provided they are costs of and incidental to the proceedings, he is entitled to recover them, subject only to the qualification that they are liable to be reduced in respect of anything that the taxing master considers to fall within the headings 'unreasonable amount' or 'unreasonably incurred'. In a word, the difference is between including only the reasonable and including everything except the unreasonable. In any taxation there must be many items or amounts that are plainly allowable, and many others which are plainly not allowable. In between, there must also be many items or amounts which do not fall clearly within either extreme. On a party and party taxation, or on a taxation on the common fund basis, many such items may fail to be allowed; on a taxation on an indemnity basis, they will all be included."
He added at p.989f:
"The indemnity basis, as I would construe it, is the other way round. 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'".
In Petrotrade Inc v Texaco Ltd [2001] 4 All E R 853 (decided after the Woolf Reform in England), Lord Woolf MR expressed a similar view on indemnity taxation (para.62):
"… 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. Even on an indemnity basis, however, the receiving party is restricted to recovering only the amount of costs which have been incurred. (see CPR 44.4 ad 44.5)."
These passages throw light on the meaning of rule 28(4A) and the approach to be adopted on an indemnity taxation. In my view, having regard to the wording of rule 28(4A) and the points made in EMI Record and Petrotrade, the applicable principles to be adopted on a taxation of costs on an indemnity basis under that rule are as follows.
First, an award of costs on an indemnity basis is intended to allow for the payment of costs on a more generous level as compared to the case of costs awarded on a party and party or common fund basis. The object of such an order is to reimburse the winning party (the receiving party) "all (his) costs" and to give him "a complete indemnity" and "everything", "shorn only of" or "except the unreasonable" or "anything that is seen to be unreasonable". However, as the Registrar rightly observed, this is not giving a blank cheque to the receiving party to recover all his costs without proper scrutiny by the court. This would defeat the very object of having a taxation.
Secondly, the receiving party is prima facie entitled to be paid all his costs, provided that they are "costs of and incidental to the proceedings", subject only to the qualification that any particular item which has been unreasonably incurred or any particular amount which is unreasonable must be excluded. This means that all items incurred for the purpose of the litigation are included except that those items or amounts which the taxing master considers to be unreasonable would be taxed off. The receiving party does not have to show that his costs had been reasonably incurred or were of a reasonable amount, only that they are not unreasonable.
Thirdly, there is no question of the paying party having any burden of proof since there are relevant materials including client's instructions which are not available or discoverable to the paying party. So long as there are materials available to the taxing master, they can be considered by him. If necessary, he can ask the receiving party to produce them for the purpose of taxation.
Fourthly, the court only considers whether the costs were unreasonably incurred or of an unreasonable amount. (See Lord Woolf in Petrotrade.) The approach of the taxing master is to decide whether a particular item or particular amount which is being challenged is unreasonable. He is not required to go through the items and decide whether they are reasonable. He is required only to adjudicate on items or amounts which are said to be so unreasonable as to be excluded.
Fifthly, in the great majority of cases, this should not be difficult. The unreasonable items or unreasonable amounts would be easily identified or readily identifiable. It is only when it is not clear whether a particular item or amount is unreasonable, that is, where there is a doubt as to whether it is unreasonable, that the benefit of the doubt should be given to the receiving party.
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 (i.e. on an indemnity basis), I do not think it should be regarded as unreasonable to allow him to recover more than the normal average fees so long as they are not clearly excessive or, to use Megarry VC's words, absurd or extravagant.
Insofar as the Registrar appeared to have adopted in respect of any individual item an approach which was concerned with deciding whether certain items were reasonable, I take the view that this was not consistent with the principles as discussed above.
In paragraph 12, the Registrar relied on Francis v Francis and Dickerson [1955] 3 All E R 836 as authority for saying that the court should take into account "what a competent and sensible solicitor would consider as reasonable steps and what was reasonable in the interest of his client". In the light of the approach to be adopted on an indemnity taxation as discussed above, that is, in my view, not the main consideration. Francis v Francis and Dickerson was a matrimonial dispute in which the solicitors for a legally aided wife acting upon counsel advice engaged the services of an inquiry agent to investigate the husband's suspected adultery. The result of such effort was ultimately not used at the trial. On a legal aid taxation, the taxing master disallowed the fees expended on the inquiry and counsel's advice. This was reversed on appeal. I note that that case was not a taxation on an indemnity basis and the remark made by the Registrar in the present case came from what Sachs J said with regard to what was "proper" or "necessary" or "reasonably incurred" which was not appropriate on an indemnity taxation.
What I think may be more helpful to the present case was the following remark made by Sachs J:
"Where a solicitor bona fide acting in what he considers the best interests of his client has incurred expenditure which, unless allowed on legal aid taxation, will fall on him personally, it would be wrong for the court to be astute in seeking reasons to disallow the items, and in particular care must be taken not to be affected by what is colloquially termed 'hindsight'. Indeed there is authority for saying that as regards such honestly incurred expenditure (assuming there is nothing that can fairly be termed unwarrantable or excessive about it) the taxing officer on a 'common fund' taxation should take a 'liberal view'."
While the learned judge was there considering legal aid and common fund taxation, I think this remark is also apt in indemnity taxation: where a solicitor is bona fide acting for the best interest of his client and has honestly incurred expenditure in connection with the litigation, the court, having the advantage of hindsight (which the solicitor normally did not have), should take a liberal view and should not be astute in seeking reasons to disallow an item unless it is clearly unreasonable.
Solicitors' hourly rates on indemnity taxation
Since 1985, the Law Society, after consulting the Judiciary, started to issue circulars to its members from time to time informing them of the hourly rates which would be allowable by taxing masters on taxation. These rates represent the amounts of fees per hour charged by solicitors of different seniority and experience and those charged by trainee solicitors and paralegal personnel. The last circular was issued by the Law Society in 1997 as a result of a letter received from the then High Court Registrar dated 14 July 1997. The rates contained in the Law Society circulars are of considerable use for taxing masters but are obviously not binding (see Wharf Properties & Another v Eric Cumine Associates & Others [1992] 2 HKLR 273). They may be varied according to the circumstances of each case.
In relation to these hourly rates, two matters arise for consideration. First, it is submitted that these rates are out of date. As the Registrar noted, the "current" level of applicable hourly rates of fee earners was last revised in 1997 and has not been updated since then, although I understand that in April 2011, the Law Society started a survey on the level of solicitors' fees but the results are still pending. Meanwhile, taxing masters have adjusted the 1997 rates "upwards or downwards according to the special circumstances of the case" (Registrar's decision, para. 35). The Registrar considered it "speculative" for the Liquidator to suggest that these rates were outdated so that little weight should be attached to them. However, in my view, while Hong Kong had undergone periods of inflation and recession since 1997, it is unrealistic to suggest that our financial and economical conditions have remained static in the last 15 years. That is certainly not true with regard to the levels of office rentals and salaries for supporting staff. These changes clearly have a consequential effect on the hourly rates charged by solicitors (and also counsel's fees). So while one should not completely ignore the 1997 rates, I think taxing masters should not feel constrained to start with figures higher than those rates. How much higher depends on the taxing masters' "knowledge and experience" of the current situation of the average solicitor or executive employed by the average firm (See Kerr J (sitting with assessors) in Leopold Lazarus Ltd v Secretary of State for Trade and Industry, unreported, The Times, 8th April 1976.)
The second matter for consideration is whether these rates apply equally to an indemnity taxation. In the High Court Taxation Guide (Part II Section C), it is suggested that "the hourly rates will not increase ipso facto merely because the taxation is on an indemnity basis". (See also Hong Kong Civil Procedure 2012 Vol. 1, 62/App/22.) This is apparently based on what was said by Registrar Chu in Re Peregrine Investments Holdings Ltd & Others (No.5) [2001] 1 HKLRD 157 which was a case concerned with the taxation of the liquidators' solicitors' fees under r.179 of Companies (Winding-Up) Rules, Cap 32. It was held in that case that such taxation was different from a taxation on a solicitor and own client basis since the liquidators, unlike a lay client, had to pay legal fees out of the estate of the company being wound up and were obliged to protect the estate as well as the interests of the creditors. Registrar Chu noted that it was not stated in the letter from the Judiciary to the Law Society or in the Law Society Circular whether these hourly rates were to be adopted only on a party and party taxation or also applicable to other types of taxation on a more generous basis. However, on p.163, she said:
"Indeed, there is little justification for adopting different rates simply because the basis of taxation is different."
With respect, I have great reservations with this statement. I note that no authority was cited in support. This proposition overlooks the purposes of and differences between the various bases of taxation. On a party and party taxation, it would not be considered reasonable for the receiving party to have instructed solicitors who charged more than the average hourly rates and any excess would be taxed off. But on an indemnity taxation, it would not be considered unreasonable for the receiving party to have engaged solicitors who charged more than the average hourly rates unless they are clearly excessive. What is clearly excessive depends on the circumstances of each case.
Further, it is important to note that in Re Peregrine, Registrar Chu also added:
"The fact remains that the Circular reflects the rates which taxing masters generally consider to be appropriate and reasonable for solicitors of comparable experience and for the unqualified fee earners. There has to be good and compelling reason before the Registrar in a r.179 taxation will allow a liquidator to recover from the estate his solicitors' fees calculated at higher rates." (emphasis added)
In this passage, the learned Registrar obviously recognized that what the Law Society Circular reflects are the "appropriate" and "reasonable" hourly rates. The court in Nan Siu Man v Sin Chung Wing, unreported, HCA No. 9026 of 1992 took a similar view, saying that these hourly rates are what taxing masters consider as "fair and reasonable" in all the circumstances. Hence, in my view, the Law Society's suggested rates are probably more reflective of the rates allowable on a party and party taxation rather than on an indemnity taxation where a different approach is to be adopted.
As I discussed earlier, there are litigants who are prepared to spend more than the normal average rates (i.e. rates which would be reasonable and thus allowable on a party and party taxation) and if they are ultimately awarded indemnity costs, the higher hourly rates which they had paid should not be regarded as unreasonable unless they are clearly excessive. To the extent that the Registrar followed the reasoning in Re Peregrine to the effect that the Law Society's suggested hourly rates are applicable to all types of taxation, I would respectfully hold that this was incorrect. But having said that, I must not, however, be taken to suggest that there should be two sets of hourly rates, one for party and party taxation and another for indemnity taxation. In my view, the Law Society's hourly rates should be applied with flexibility bearing in mind the appropriate approaches to be adopted in different types of taxation.
For these reasons, I am of the view that while the 1997 hourly rates are usually a useful reference, it would not be right in the present case to adopt these rates as the starting point.
The hourly rates in this case
When considering the solicitors' costs, the taxing master shall have regard to all the circumstances, in particular the matters mentioned in para.1(2) of Part II of the First Schedule in Order 62. These include the complexity of the case, the difficulty and novelty of the issues involved, the skill, specialized knowledge and responsibility required and the importance of the case to the client. These are highly relevant matters in the present case as can be demonstrated by the special features which I have highlighted in the earlier part of this judgment.
There were five fee earners involved in this litigation on behalf of the Liquidator. The Registrar had considered each of them and reduced the hourly rates claimed by them. As discussed above, I take the view that the Registrar in exercising his discretion in respect of the hourly rates in question had failed to adopt the correct approach or apply the correct principles. I am entitled to consider the matters afresh. I shall deal with these fee earners one by one.
(i) Mr Rogers
The first was Mr Rogers. He was the original partner who had charge of this case on behalf of the Liquidator. He was qualified in Hong Kong for more than 10 years at the time of the appeal. His role was mainly supervisory and he spent only 5 minutes in FACV 30 for general care and conduct. He claimed an hourly rate of $6,500. Bearing in mind that the 1997 rate for a solicitor of over 10 years standing is $4,000, the Registrar considered that Mr Rogers' rate was exceptionally high and unreasonable. He allowed only $4,500 and maintained the same figure on review. In my view, in the light of the special features in this case, the Liquidator was entitled to take a very serious view of this litigation and to engage a reputable firm which he could trust to clear his name even though this would mean he had to spend more than the fees of an average solicitor firm. As discussed above, the 1997 hourly rates are clearly in need of adjustments in the present case which arose in 2009 and 2010 and the Registrar should not have taken the relevant rate as the starting point. In the circumstances of this case, on indemnity taxation, I think it would not be unreasonable for a partner of Mr Rogers' standing and experience having overall charge of such a litigation to charge $6,000 per hour. I would allow his hourly rate at this figure.
(ii) Mr Wadham
Mr Wadham was the partner in charge of this litigation. He was qualified in New Zealand since 1999 and then in Hong Kong in 2002. The Registrar took into account his overall seniority and experience. He had played a very significant role in this case which included acting as instructing solicitor and supervising partner; quasi junior counsel to assist senior counsel and London Silk; undertaking drafting the main part of the written submissions in the leave application, the Appellant's Case and the costs submissions in the appeal; exchanging views with senior counsel and London counsel in settling and finalizing relevant documents; giving advice to lay client on various legal issues and exercising skill and expertise in the preparation of the appeal. He claimed an hourly rate of $5,180. The Registrar considered that his claimed rate was substantially higher than the 1997 rate of a solicitor with 10 year standing (which is $4,000). He allowed $4,300 and on review increased it to $4,500. In my view, the work done by Mr Wadham was quite demanding and had contributed to a large extent to the presentation of the Liquidator's case before the Court. For the same reasons as discussed in the case of Mr Rogers, I would not consider an hourly rate of $5,000 as unreasonable in the circumstances and I would allow this figure.
(iii) Mr Johnson
The third fee earner was Mr Johnson who was the assistant solicitor. He was qualified in Australia in 2003 and in Hong Kong in 2008. He assisted Mr Wadham in preparing submissions by conducting research and was involved in co-ordination with counsel and other parties. He claimed an hourly rate of $4,300 (as compared to the 1997 rate of $3,500 for a lawyer of 7 to 8 years standing). The Registrar considered that he was doing the work of a "competent notional solicitor" and that the rate he claimed was unreasonable. He reduced it to $3,200. On review, the Registrar maintained this rate for Mr Johnson's work in FAMV 33 but increased it to $3,300 to "reflect his additional contributions" in assisting in preparing the Appellant's Case, the consolidated list of authorities and the written submissions on costs in FACV 30. I do not find anything to support the description that Mr Johnson's role was that of a "notional" solicitor. Nor do I see any justification in treating his role in FAMV 33 any differently from that in FACV 30; both were essential parts of the appeal process. I would allow his rate in the sum of $4,000 which could not be regarded as unreasonable on an indemnity taxation.
(iv) Mr Chu
Mr Joseph Chu was an assistant solicitor qualified in Hong Kong in 2003. The hourly rate claimed by him was $4,400. He was delegated the task of drafting part of the Appellant's Case (which was described by the Registrar as on a general issue of the criminal law). The Registrar considered that this rate was unreasonable and reduced it to $3,000. This was maintained on review. I see no material difference between the role played by Mr Johnson and that by Mr Chu. I would also allow his hourly rate at $4,000.
(v) Trainee solicitor
The last fee earner was a trainee solicitor. He was involved in conducting research and preparing document bundles. He claimed an hourly rate of $2,000. The Registrar considered that the hourly rate of a trainee solicitor was slightly higher than that of a litigation clerk and a legal executive because of his law degree and legal training but could not be paid as a newly qualified solicitor since he was still learning. The rate was reduced to $1,300 and the Registrar refused to increase it on review. For reasons which are similar to those in respect of the other fee earners, I would allow his rate at $1,800.
Fees for Senior Counsel in the leave application (FAMV 33)
Under the previous para.2(5) of Part II of the First Schedule, every fee paid to counsel shall be allowed in full on taxation unless the taxing master is satisfied that the same is excessive and unreasonable in which event, the taxing master shall exercise discretion having regard to all the relevant circumstances and in particular the matters set out in para.1(2). This was the applicable provision for counsel's fees at the time of the leave application (see the transitional provisions in Order 62 rule 37(2).) By the time of the substantive appeal, the new para.2(5) of Part II introduced by the Civil Justice Reform applied: The amount of fees to be allowed to counsel is in the discretion of the taxing master who shall, in exercising his discretion have regard to all relevant circumstances and in particular to the matters set out in para.1(2). The Registrar noted that this did not make any substantial difference in practice on an indemnity taxation. The parties do not dispute this.
For the leave application, Senior Counsel charged $380,000 as his Brief fee and this was taxed down to $250,000 by the Registrar. This was maintained on review. The Registrar's reasons (para.63) were: the hearing lasted only for 2 hours; Senior Counsel was involved in the lower courts and should be familiar with the factual background and the issues involved; there was no new ground before the Appeal Committee, except the issue whether those were civil or criminal proceedings for the purpose of granting leave; the work was shared by the solicitors and London counsel and hence his work would be much less. The Registrar added that the Brief fee "was on the high side" and that the "reasonable fee should be about $250,000". With respect, this was not the correct approach on an indemnity taxation. I also do not share the Registrar's reasoning. Senior Counsel had lost before the Court of Appeal and it was necessary to persuade the Appeal Committee that it was reasonably arguable that the Court of Appeal was wrong. That he was counsel in the lower courts and was familiar with the background and issues in question and that he had the benefit of experienced solicitors and London counsel do not "lessen" his duty and role as a member of the appeal team. It cannot be suggested that counsel's fees on appeal should be less simply on the ground that the trial was conducted by him. His task on appeal is different from that at the trial. I also do not accept that a conscientious counsel would feel that he can contribute less if he has the assistance of London counsel or junior counsel. Each has a different role to play. There is simply nothing to support the conclusion that the Brief fee was excessive to the extent of being absurd or extravagant. In the circumstances of this case, I think $350,000 would not have been regarded as unreasonable and I would allow this figure.
The additional refreshers for London Silk
London Senior Counsel was briefed to appear in the substantive appeal and he was paid a Brief fee and a refresher. The only matter which is still in dispute is the 2 additional refreshers of £7,500 each which were said to have been paid in respect of the time taken by counsel travelling to and from Hong Kong. The Registrar disallowed this claim. He considered that this was in the nature of compensation for loss of opportunity to earn during the time required for travelling and that this was unreasonable. I agree. There is nothing to suggest that counsel would have earned other briefs or refreshers during those two days and even if this might or could have happened, this could have been taken into consideration in fixing the Brief fee. I find it difficult in principle to justify this claim. It was rightly refused by the Registrar.
Specific items in the FAMV 33 bill
I now turn to the specific items in dispute. I remind myself of the principles applicable on an appeal against the exercise of discretion which I have mentioned in paragraph 16 above. If the Registrar had applied the correct principles of taxation on an indemnity basis, I should not interfere with such exercise of discretion. On the other hand, if it is clear that he had fallen into error as mentioned above, I shall do the best I can to adjudicate on the disputed items. The parties have agreed that I shall take such course in order to save time in having the matters remitted back to the Registrar.
Item 7.1 of the Bill
Item 7.1 concerned the drafting and consideration of the revised skeleton submissions for the leave application. It is claimed that Mr Wadham had spent 1450 minutes in the preparation of these submissions. The Registrar considered that this was "highly excessive and thus unreasonable" and took the view that only 15 hours (900 minutes) would be "a reasonable time". There were altogether 9 drafts and the preparation involved studying the 2 judgments of the Court of Appeal (the second judgment reversing the first one), considering the grounds of appeal and the available arguments, including the additional points whether the case was a civil or criminal matter and whether the Court of Appeal decision was a final or interlocutory judgment. Bearing in mind the special features of this case and adopting the correct approach on an indemnity taxation, I accept that 1450 minutes were unreasonable but consider that it would not be unreasonable for a lawyer of Mr Wadham's seniority and experience to spend 2 to 3 days on such task, revising the draft several times. I would allow 20 hours (1200 minutes).
Item 7.3 of the Bill
Mr Johnson spent 1166 minutes in reviewing the case law in the preparation of the skeleton submissions. The Registrar allowed 5 hours (300 minutes) holding that this was "more than reasonable and generous". I am not sure he had adopted the correct approach. There were 27 authorities, most of which had been used before the Court of Appeal. But this does not mean he should not have to study them again in the light of the Court of Appeal judgments. In the circumstances of this case, on an indemnity taxation, it would not be unreasonable to spend 10 hours (600 minutes) to do this and I would allow that.
Item 7.2 of the Bill
This item concerned the drafting and consideration of a supplemental submission. It was a short submission (2 pages). What was claimed was 95 minutes. The Registrar considered that "the reasonable time" for such work was one hour (60 minutes). That is not the correct approach. Bearing in mind the special features of this case and adopting the correct principles, I would not regard 95 minutes as claimed to be unreasonable in the circumstances and I would allow it in full.
Item 7.7 of the Bill
This concerned the preparation of the hearing bundles and 570 minutes were claimed. There were 4 bundles but as the Registrar noted, there was no explanation why the appeal bundles used before the Court of Appeal could not be adopted for use in the application before the Appeal Committee. Mr Johnson spent 570 minutes for this task. The Registrar considered this to be "far from reasonable". I agree. He allowed only 2 hours. It appears that he had applied the correct principle in approaching this item. I have no reason to interfere with his discretion. I would uphold his assessment.
Item 8.2 of the Bill
At the leave application, both Mr Wadham and Mr Johnson attended the hearing. The Registrar considered that since the application was not a particularly difficult application, it was "not reasonable" to have another solicitor at the hearing. Even bearing in mind the special features in this case and the fact that no junior counsel was briefed to appear, I cannot say the Registrar had adopted the wrong approach. I do not see what role Mr Johnson was required to play in attending the hearing. I would not interfere with the Registrar's discretion. I would uphold his assessment.
Specific items in the FACV 30 Bill
Item 6 of the Bill
This concerned the work done in the preparation of the Appellant's Case. It was prepared by Mr Wadham with the assistance of Mr Johnson and the trainee solicitor and settled by Senior Counsel and London Silk. Mr Wadham spent 95 hours, Mr Johnson 34 hours and the trainee solicitor 27 hours on this task and applying their respective hourly rates, a lump sum of $700,000 was claimed. Without any objection from the parties, the Registrar adopted a global approach in assessing this item. He considered that the amount claimed to be "excessive and unreasonable". He reasoned that Mr Wadham had been involved in the lower courts and should be familiar with the issues in dispute and the grounds of appeal; that all the arguments proposed in the Appellant's Case had been argued fully before the Court of Appeal. He considered that the "reasonable costs" should be "in the range of $250,000". While he was entitled to regard the lump sum clamed was unreasonable, I do not think that he was applying the correct principles on an indemnity taxation in coming to the figure which he did. As discussed above, the fact that the lawyers involved had conducted the trial does not mean that they can spend less time in preparing the appeal. An appeal involves considering the judgment appealed against and formulating arguments to demonstrate that the judgment in question is wrong. I would not like to say that the lawyers' task in an appeal is any easier than that in the trial. In the present case, there is nothing to suggest that Messrs Wadham and Johnson and the trainee solicitor had not spent the number of hours claimed by them or that they were not acting conscientiously and in good faith in preparing the Appellant's Case. Bearing in mind the special features in this case and the novelty of the issues involved, I would not consider it unreasonable for them to charge a global sum of $500,000 for the work. I would allow this figure.
Item 16.2 of the Bill
The trainee solicitor spent 1390 minutes (23 hours) preparing a consolidated list of authorities which contained 98 cases. Mr Johnson had drafted the list which was agreed to by the respondents. In such circumstance, the Registrar could not see how the trainee solicitor would need 23 hours to prepare the consolidated list and he allowed only 8 hours. Nor can I. In his consideration, the Registrar did draw a distinction between taxation on a party and party basis and taxation on an indemnity basis. I cannot say he was wrong in his approach on this item. I would not interfere with his discretion and would uphold his assessment.
Item 20.2 of the Bill
Mr Johnson spent 5 hours in perusing and considering the respondents' supplement list of authorities. There were 8 cases. The Registrar allowed only 1.5 hours saying that since Mr Wadham had considered them, Mr Johnson did not need too much time to do the same. I do not agree. I should think that it was necessary for both Mr Wadham and Mr Johnson to study these additional authorities. They were members of the appeal team working together and would have to decide whether these authorities should be brought to the attention of counsel and to discuss them with him. I do not think it could be regarded as unreasonable to spend 5 hours studying these additional cases. I would allow this item in full.
Items 37.5 of the Bill
This item concerned the work done by the trainee solicitor in reviewing the Respondents' Case and updating the Part B bundles and the transcripts bundles. He spent 180 minutes (3 hours) in doing that. The Registrar disallowed this item holding that it was already covered under other items for work done by other case handlers. He also doubted whether the trainee solicitor's work had made any contribution to the preparation of the case, adding that "most probably, [this was time spent] for their (trainee solicitors') learning process in how to prepare a case for trial/appeal hearing." I do not agree with the Registrar's reasoning. First, as submitted by the Liquidator, upon receipt of the Respondents' Case, it was necessary to review it and to ensure that any documents referred to in that document were included in the Record for the hearing. There was nothing to suggest that the work was not undertaken by the trainee solicitor. While there might be some overlap in the work done by members of the same appeal team, each would be playing a different role. Secondly, a trainee solicitor no doubt is also learning his trade at the same time as he is performing his duty, but he is required to apply his legal knowledge to the work he is doing. He is paid for doing that and his firm is entitled to be remunerated albeit a trainee solicitor's fees are at a much lower rate than those of a qualified solicitor. In the circumstances of this case, I think it would be wrong to say he did not make any contribution to the preparation of the appeal. Also I would not consider his work and the time spent were in any way unreasonably incurred. I would allow this item in full.
Item 37.9 of the Bill
The trainee solicitor spent 360 minutes (6 hours) preparing and updating Senior Counsel's hearing bundles and authorities bundles. The Registrar disallowed this item holding that the work "is purely clerical and administrative in nature and should be covered by the profit costs claimed by the main fee earners". He considered that it was unreasonable to have these costs separately charged. I disagree with such approach. While the work might consist mainly of preparing new sets of folders, labels and dividers, I do not think this could be described as purely clerical and administrative. Proper pagination is quite important in the preparation of the relevant bundles lest the court's time and counsel's time might be wasted. I think it is not unreasonable to ask a trainee solicitor who is involved in the case and who has the requisite legal knowledge to make sure the work is done properly and accurately. On indemnity taxation, I would not regard it as unreasonable for the trainee solicitor to spend at least 3 hours to do that. I would allow this item at this figure.
Item 46.3.2 of the Bill
This item concerned the time required by Mr Johnson in preparing a long letter to the Bar Council in support of an application for the admission of London Queen's Counsel to conduct the appeal on behalf of the Liquidator. He spent 690 minutes (11.5 hours) to do that. The Registrar took the view that Mr Johnson was familiar with the background of the case and 5 hours was "a correct and appropriate assessment of the reasonable time" to spend on such a letter. While I am not sure the Registrar had applied the correct approach in making this assessment, I think that given the background in this case, this cannot be said to be plainly wrong or falling outside the generous ambit within which a reasonable disagreement was possible. I would uphold the Registrar's assessment.
Conclusion
For the reasons given above, I would allow the appeal in part. The resulting assessments of the items disputed in this appeal appear in the appendix attached to this judgment. Since the Liquidator has succeeded in some but not all of the items, I would make an order nisi that he be awarded 70% of the costs of this taxation appeal to be taxed on an indemnity basis if not agreed. The parties may file written submissions within 14 days with regard to this costs order.
(Patrick Chan)
Permanent Judge
Mr James Wadham, of Clifford Chance, for the Appellant (Receiving Party)
Ms Lily Fenn, of Lily Fenn & Partners, for the Respondents (Paying Party)
Appendix
Solicitors' costs and counsel's fees in FAMV 33 Bill and FACV 30 Bill
No. Description of item Hourly Rate/Amount Claimed Registrar's Decision This Appeal
1 (i) Fee earner - Mr Rogers $6,500 $4,500 $6,000
(ii) Fee earner - Mr Wadham $5,180 $4,500 $5,000
(iii) Fee earner - Mr Johnson $4,300 $3,200 in FAMV33; $3,300 in FACV 30 $4,000 in both
(iv) Fee earner - Mr Joseph Chu $4,400 $3,000 $4,000
(v) Fee earner - trainee solicitor $2,000 $1,300 $1,800
2 Brief fee of senior counsel to appeal before the Appeal Committee $380,000 $250,000 $350,000
3 2 additional refreshers for London Silk in the substantive appeal £7,500 each day Disallowed Disallowed
Specific items in FAMV 33 Bill
No. Bill Item No. Description of item Time/Amount Claimed Registrar's Decision This Appeal
1 7.1 Drafting and consideration of the revised skeleton submissions 1450 min 900 min 1200 min
2 7.2 Drafting and consideration of a supplemental submission 95 min 60 min 95 min
3 7.3 Reviewing the case law in the preparation of the skeleton submissions 1166 min 300 min 600 min
4 7.7 Preparation of the hearing bundles 570 min 120 min 120 min
5 8.2 Attendance of 2nd solicitor 180 min Disallowed Disallowed
Specific items in FACV 30 Bill
No. Bill Item No. Description of item Time/Amount Claimed Registrar's Decision This Appeal
1 6 Preparation of the appellant's case $700,000 $250,000 $500,000
2 16.2 Preparation of the consolidated list of authorities 1390 min 480 min 480 min
3 20.2 Perusing and considering the respondents' supplement list of authorities 300 min 90 min 300 min
4 37.5 Trainee solicitor in reviewing the respondents' case and updating the Part B bundles and the transcripts bundles 180 min Disallowed 180 min
5 37.9 Trainee solicitor in preparing and updating senior counsel's hearing bundles and authorities bundles 360 min Disallowed 180 min
6 46.3.2 A long letter to the Bar Council in support of an application for the admission of London Queen's Counsel 690 min 300 min 300 min
FAMV No. 33 of 2008
IN THE COURT OF FINAL APPEAL OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
MISCELLANEOUS PROCEEDINGS NO. 33 OF 2008 (CIVIL)
(ON APPLICATION FOR LEAVE TO APPEAL
FROM CACV NO. 244 OF 2004)
____________________
BETWEEN
IN THE MATTER of the Companies Ordinance (Chapter 32)
and
IN THE MATTER of Wing Fai Construction Company Limited
and
IN THE MATTER of an application on behalf of Kelly Cheng Kit Yin and Robert Yip Kwong (Respondents) for an Order of Committal against DAVID JOHN KENNEDY (Applicant)
____________________
FACV No. 30 of 2008
IN THE COURT OF FINAL APPEAL OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
FINAL APPEAL NO. 30 OF 2008 (CIVIL)
(ON APPEAL FROM CACV NO. 244 OF 2004)
____________________
BETWEEN
DAVID JOHN KENNEDY Appellant
and
KELLY CHENG and ROBERT YIP Respondents
__________________
Before: Mr Justice Chan PJ in Chambers
Date of Hearing: 28 November 2011
Dates of Filing Further Materials : 2 & 9 December 2011
Date of Decision: 12 October 2012
__________________
D E C I S I O N
__________________
Mr Justice Chan PJ:
These are two appeals against the taxation by the Acting Registrar ("the Registrar") of the appellant's costs on an indemnity basis.
History of this litigation
The appellant (the "Liquidator") was one of the liquidators of Wing Fai Construction Company Ltd ("the Company") appointed in connection with its winding up. During the course of the liquidation, the liquidators conducted a private examination of the respondents (who were the former directors of the Company) pursuant to s.221 of the Companies Ordinance, Cap 32. Suspecting that there was something improper in the management of the Company, the liquidators, without first seeking the leave of the court, disclosed the transcripts of the examination to the police for the purpose of investigation into the affairs of the Company. The respondents moved for the committal of the Liquidator, contending that such disclosure amounted to a contempt of court.
The Company Judge found that there was no case to answer for the Liquidator and dismissed the motion. The Court of Appeal initially dismissed the respondents' appeal, but on an application for variation, allowed the appeal, set aside the ruling of no case to answer and directed that the motion be remitted to the judge to resume the hearing.
Pursuant to leave granted by the Appeal Committee, the Court allowed the Liquidator's appeal, upheld the judge's ruling of no case to answer and dismissed the respondents' motion for contempt of court. On 12 January 2010, having considered the parties' written submissions, the Court ordered, among other things, that the respondents do pay the Liquidator's costs before this Court, which included the costs before the Appeal Committee in FAMV 33 of 2008 ("FAMV 33") and the costs before the Court in FACV 30 of 2008 ("FACV 30"), such costs to be taxed on an indemnity basis if not agreed.
The Registrar's taxation of costs
The Liquidator submitted two Bills of Costs which were taxed by the Registrar in October 2010 and April 2011. Not satisfied with the Registrar's taxation, the Liquidator applied for a review under Rule 57 of the Hong Kong Court of Final Appeal Rules ("the CFA Rules"). At the review hearing before the Registrar, the Liquidator raised issue on several matters: the appropriate hourly rates of the solicitors; senior and junior counsel's fees; the items of work involving 2 fee earners; and the items of work the amount of which was disputed.
In a written decision handed down on 29 July 2011, the Registrar allowed the review in part. In FACV 30, the bill was taxed down from $4,542,542.78 to $2,888,252.92 (including a reduction of the solicitors' profit costs from $2,375,546.67 to $1,004,742.50 and other items and counsel's fees). In FAMV 33, the bill was taxed down from $1,312,549.67 to $661,292.78 (including a reduction of the solicitors' profit costs from $757,028.34 to $344,875.92 and other items and counsel's fees).
The present appeals
The Liquidator appeals against the review decision of the Registrar pursuant to Rule 60(9) of the CFA Rules. In these appeals, the Liquidator raises two main grounds which are common to the two bills and they relate to the applicable principles of taxation:
The Registrar had erred in law and in principle in failing to apply the correct test on an indemnity taxation ; and
The Registrar had erred in finding that the Liquidator's solicitors' hourly rates were unreasonable.
In support of his arguments, Mr Wadham for the Liquidator in both his oral and written submissions refers to certain features in this litigation and the reasons why he submits the Registrar went wrong. In relation to FACV 30, the Liquidator also makes specific complaints against the Registrar's various reductions in the time spent in the preparation of his case and in the time charged by London senior counsel. In relation to FAMV 33, the Liquidator complains against the Registrar's decision reducing senior counsel's fees and the solicitors' profit costs as being unreasonable. On the other hand, Ms Fenn on behalf of the respondents has also made oral and written submissions opposing these appeals and supporting the Registrar's decision. Her main ground of objection is that the Registrar had exercised his discretion judicially and that it has not been shown that he had made any error of law or that an appellate court should interfere with such discretion.
At the end of the oral hearing, I directed the Liquidator to file a table of the items which are still in dispute and the respondents to file a response to it, in case I consider it desirable to deal with the individual items myself in order to save the parties further costs in coming before me again or having the matter remitted to the Registrar. This the parties have done. For their helpful submissions and written materials, I am most grateful.
Special features in this case
As the Registrar accepted in his decision, there are special features in this litigation which are relevant to taxation.
First, this case called for the proper construction of s.221 of the Ordinance, in the context of the relevant Winding-up rules, in particular, rule 62 and an examination of the exercise of the powers and the performance of the obligations of a liquidator, and the direct and derivative use of evidence obtained in an examination under s.221. It also involved consideration of the law of contempt, especially in the case of a person performing a statutory duty. These points had not been considered by the Court before this case.
Secondly, this was by no means a straightforward liquidation. There were a large number of related companies and the facts were complicated. When the liquidators first took over, they were severely handicapped by the unusual absence of the relevant documentation which these companies were obliged by statute to maintain and the lack of co-operation from the officers of the companies.
Thirdly, the litigation was conducted with hostility, with the respondents taking a very strong course against the Liquidator. This can be demonstrated by the history of the proceedings described above.
Fourthly, it was an application for committal for contempt against a professional accountant and an officer of the court. It did not only cast doubt on his integrity and reputation. His liberty was also at stake if he were to be found guilty of contempt. The importance of this litigation to the Liquidator and the stress which he was put under cannot be under-estimated.
By referring to these features, I must not be taken to suggest that the purpose of the order for costs on indemnity basis was to compensate the Liquidator for any loss other than his costs which had been caused to him by this litigation. Suffice it to say that the Court saw fit to award costs to him on an indemnity basis and that these features should be taken into consideration when assessing the time and effort which were required to be spent on this litigation and the amount of costs expended in relation thereto, having regard to the complexity of the case and its importance to the Liquidator.
Applicable principles in taxation appeals
Taxation is an exercise of discretion by the taxing master. The appellate court would not normally interfere with the exercise of such discretion unless it can be shown that there was an error of law or in the applicable principles; or the taxing master has taken into account irrelevant matters or failed to take into account relevant matters; or the assessment was plainly wrong or fell outside the generous ambit within which a reasonable disagreement was possible. See Yue Kwok Ying v Mak Shiu Tong, FACV No 4 of 2004, 14 February 2006, unreported, and Nam Chun Investment Co Ltd v Director of Lands (2007) 10 HKCFAR 523. When this happens, the appellate court may have to exercise the discretion afresh.
Approach in taxation on indemnity basis
Under Rule 57(1) of the CFA Rules, all bills of costs shall be taxed in accordance with Order 62 of the High Court Rules. The rule which is pertinent to taxation of costs on an indemnity basis is Order 62 rule 28(4A) which provides:
"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."
This statutory formula ("all costs shall be allowed except insofar as they are of an unreasonable amount or have been unreasonably incurred") is the same as in Order 62 rule 29(1) of the previous English Rules of the Supreme Court (RSC). That rule provided for taxation on a solicitor and own client basis which basis was held by Sir Robert Megarry VC in EMI Records v Wallace [1982] 2 All E R 980, 989 to be equally applicable to a taxation on an indemnity basis (subject of course to the differences provided in the statute, such as the conclusive presumptions in the case of solicitor and own client taxation). The learned Vice Chancellor explained what such a taxation entails as follows (p.989a):
"To say that on a taxation 'all costs shall be allowed except in so far as they are of an unreasonable amount or have been unreasonably incurred' seems to me to be giving the litigant a complete indemnity, shorn only of anything that is seen to be unreasonable. The litigant does not have to establish that the costs were necessary or proper, or that the costs were of a reasonable amount and reasonably incurred. Provided they are costs of and incidental to the proceedings, he is entitled to recover them, subject only to the qualification that they are liable to be reduced in respect of anything that the taxing master considers to fall within the headings 'unreasonable amount' or 'unreasonably incurred'. In a word, the difference is between including only the reasonable and including everything except the unreasonable. In any taxation there must be many items or amounts that are plainly allowable, and many others which are plainly not allowable. In between, there must also be many items or amounts which do not fall clearly within either extreme. On a party and party taxation, or on a taxation on the common fund basis, many such items may fail to be allowed; on a taxation on an indemnity basis, they will all be included."
He added at p.989f:
"The indemnity basis, as I would construe it, is the other way round. 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'".
In Petrotrade Inc v Texaco Ltd [2001] 4 All E R 853 (decided after the Woolf Reform in England), Lord Woolf MR expressed a similar view on indemnity taxation (para.62):
"… 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. Even on an indemnity basis, however, the receiving party is restricted to recovering only the amount of costs which have been incurred. (see CPR 44.4 ad 44.5)."
These passages throw light on the meaning of rule 28(4A) and the approach to be adopted on an indemnity taxation. In my view, having regard to the wording of rule 28(4A) and the points made in EMI Record and Petrotrade, the applicable principles to be adopted on a taxation of costs on an indemnity basis under that rule are as follows.
First, an award of costs on an indemnity basis is intended to allow for the payment of costs on a more generous level as compared to the case of costs awarded on a party and party or common fund basis. The object of such an order is to reimburse the winning party (the receiving party) "all (his) costs" and to give him "a complete indemnity" and "everything", "shorn only of" or "except the unreasonable" or "anything that is seen to be unreasonable". However, as the Registrar rightly observed, this is not giving a blank cheque to the receiving party to recover all his costs without proper scrutiny by the court. This would defeat the very object of having a taxation.
Secondly, the receiving party is prima facie entitled to be paid all his costs, provided that they are "costs of and incidental to the proceedings", subject only to the qualification that any particular item which has been unreasonably incurred or any particular amount which is unreasonable must be excluded. This means that all items incurred for the purpose of the litigation are included except that those items or amounts which the taxing master considers to be unreasonable would be taxed off. The receiving party does not have to show that his costs had been reasonably incurred or were of a reasonable amount, only that they are not unreasonable.
Thirdly, there is no question of the paying party having any burden of proof since there are relevant materials including client's instructions which are not available or discoverable to the paying party. So long as there are materials available to the taxing master, they can be considered by him. If necessary, he can ask the receiving party to produce them for the purpose of taxation.
Fourthly, the court only considers whether the costs were unreasonably incurred or of an unreasonable amount. (See Lord Woolf in Petrotrade.) The approach of the taxing master is to decide whether a particular item or particular amount which is being challenged is unreasonable. He is not required to go through the items and decide whether they are reasonable. He is required only to adjudicate on items or amounts which are said to be so unreasonable as to be excluded.
Fifthly, in the great majority of cases, this should not be difficult. The unreasonable items or unreasonable amounts would be easily identified or readily identifiable. It is only when it is not clear whether a particular item or amount is unreasonable, that is, where there is a doubt as to whether it is unreasonable, that the benefit of the doubt should be given to the receiving party.
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 (i.e. on an indemnity basis), I do not think it should be regarded as unreasonable to allow him to recover more than the normal average fees so long as they are not clearly excessive or, to use Megarry VC's words, absurd or extravagant.
Insofar as the Registrar appeared to have adopted in respect of any individual item an approach which was concerned with deciding whether certain items were reasonable, I take the view that this was not consistent with the principles as discussed above.
In paragraph 12, the Registrar relied on Francis v Francis and Dickerson [1955] 3 All E R 836 as authority for saying that the court should take into account "what a competent and sensible solicitor would consider as reasonable steps and what was reasonable in the interest of his client". In the light of the approach to be adopted on an indemnity taxation as discussed above, that is, in my view, not the main consideration. Francis v Francis and Dickerson was a matrimonial dispute in which the solicitors for a legally aided wife acting upon counsel advice engaged the services of an inquiry agent to investigate the husband's suspected adultery. The result of such effort was ultimately not used at the trial. On a legal aid taxation, the taxing master disallowed the fees expended on the inquiry and counsel's advice. This was reversed on appeal. I note that that case was not a taxation on an indemnity basis and the remark made by the Registrar in the present case came from what Sachs J said with regard to what was "proper" or "necessary" or "reasonably incurred" which was not appropriate on an indemnity taxation.
What I think may be more helpful to the present case was the following remark made by Sachs J:
"Where a solicitor bona fide acting in what he considers the best interests of his client has incurred expenditure which, unless allowed on legal aid taxation, will fall on him personally, it would be wrong for the court to be astute in seeking reasons to disallow the items, and in particular care must be taken not to be affected by what is colloquially termed 'hindsight'. Indeed there is authority for saying that as regards such honestly incurred expenditure (assuming there is nothing that can fairly be termed unwarrantable or excessive about it) the taxing officer on a 'common fund' taxation should take a 'liberal view'."
While the learned judge was there considering legal aid and common fund taxation, I think this remark is also apt in indemnity taxation: where a solicitor is bona fide acting for the best interest of his client and has honestly incurred expenditure in connection with the litigation, the court, having the advantage of hindsight (which the solicitor normally did not have), should take a liberal view and should not be astute in seeking reasons to disallow an item unless it is clearly unreasonable.
Solicitors' hourly rates on indemnity taxation
Since 1985, the Law Society, after consulting the Judiciary, started to issue circulars to its members from time to time informing them of the hourly rates which would be allowable by taxing masters on taxation. These rates represent the amounts of fees per hour charged by solicitors of different seniority and experience and those charged by trainee solicitors and paralegal personnel. The last circular was issued by the Law Society in 1997 as a result of a letter received from the then High Court Registrar dated 14 July 1997. The rates contained in the Law Society circulars are of considerable use for taxing masters but are obviously not binding (see Wharf Properties & Another v Eric Cumine Associates & Others [1992] 2 HKLR 273). They may be varied according to the circumstances of each case.
In relation to these hourly rates, two matters arise for consideration. First, it is submitted that these rates are out of date. As the Registrar noted, the "current" level of applicable hourly rates of fee earners was last revised in 1997 and has not been updated since then, although I understand that in April 2011, the Law Society started a survey on the level of solicitors' fees but the results are still pending. Meanwhile, taxing masters have adjusted the 1997 rates "upwards or downwards according to the special circumstances of the case" (Registrar's decision, para. 35). The Registrar considered it "speculative" for the Liquidator to suggest that these rates were outdated so that little weight should be attached to them. However, in my view, while Hong Kong had undergone periods of inflation and recession since 1997, it is unrealistic to suggest that our financial and economical conditions have remained static in the last 15 years. That is certainly not true with regard to the levels of office rentals and salaries for supporting staff. These changes clearly have a consequential effect on the hourly rates charged by solicitors (and also counsel's fees). So while one should not completely ignore the 1997 rates, I think taxing masters should not feel constrained to start with figures higher than those rates. How much higher depends on the taxing masters' "knowledge and experience" of the current situation of the average solicitor or executive employed by the average firm (See Kerr J (sitting with assessors) in Leopold Lazarus Ltd v Secretary of State for Trade and Industry, unreported, The Times, 8th April 1976.)
The second matter for consideration is whether these rates apply equally to an indemnity taxation. In the High Court Taxation Guide (Part II Section C), it is suggested that "the hourly rates will not increase ipso facto merely because the taxation is on an indemnity basis". (See also Hong Kong Civil Procedure 2012 Vol. 1, 62/App/22.) This is apparently based on what was said by Registrar Chu in Re Peregrine Investments Holdings Ltd & Others (No.5) [2001] 1 HKLRD 157 which was a case concerned with the taxation of the liquidators' solicitors' fees under r.179 of Companies (Winding-Up) Rules, Cap 32. It was held in that case that such taxation was different from a taxation on a solicitor and own client basis since the liquidators, unlike a lay client, had to pay legal fees out of the estate of the company being wound up and were obliged to protect the estate as well as the interests of the creditors. Registrar Chu noted that it was not stated in the letter from the Judiciary to the Law Society or in the Law Society Circular whether these hourly rates were to be adopted only on a party and party taxation or also applicable to other types of taxation on a more generous basis. However, on p.163, she said:
"Indeed, there is little justification for adopting different rates simply because the basis of taxation is different."
With respect, I have great reservations with this statement. I note that no authority was cited in support. This proposition overlooks the purposes of and differences between the various bases of taxation. On a party and party taxation, it would not be considered reasonable for the receiving party to have instructed solicitors who charged more than the average hourly rates and any excess would be taxed off. But on an indemnity taxation, it would not be considered unreasonable for the receiving party to have engaged solicitors who charged more than the average hourly rates unless they are clearly excessive. What is clearly excessive depends on the circumstances of each case.
Further, it is important to note that in Re Peregrine, Registrar Chu also added:
"The fact remains that the Circular reflects the rates which taxing masters generally consider to be appropriate and reasonable for solicitors of comparable experience and for the unqualified fee earners. There has to be good and compelling reason before the Registrar in a r.179 taxation will allow a liquidator to recover from the estate his solicitors' fees calculated at higher rates." (emphasis added)
In this passage, the learned Registrar obviously recognized that what the Law Society Circular reflects are the "appropriate" and "reasonable" hourly rates. The court in Nan Siu Man v Sin Chung Wing, unreported, HCA No. 9026 of 1992 took a similar view, saying that these hourly rates are what taxing masters consider as "fair and reasonable" in all the circumstances. Hence, in my view, the Law Society's suggested rates are probably more reflective of the rates allowable on a party and party taxation rather than on an indemnity taxation where a different approach is to be adopted.
As I discussed earlier, there are litigants who are prepared to spend more than the normal average rates (i.e. rates which would be reasonable and thus allowable on a party and party taxation) and if they are ultimately awarded indemnity costs, the higher hourly rates which they had paid should not be regarded as unreasonable unless they are clearly excessive. To the extent that the Registrar followed the reasoning in Re Peregrine to the effect that the Law Society's suggested hourly rates are applicable to all types of taxation, I would respectfully hold that this was incorrect. But having said that, I must not, however, be taken to suggest that there should be two sets of hourly rates, one for party and party taxation and another for indemnity taxation. In my view, the Law Society's hourly rates should be applied with flexibility bearing in mind the appropriate approaches to be adopted in different types of taxation.
For these reasons, I am of the view that while the 1997 hourly rates are usually a useful reference, it would not be right in the present case to adopt these rates as the starting point.
The hourly rates in this case
When considering the solicitors' costs, the taxing master shall have regard to all the circumstances, in particular the matters mentioned in para.1(2) of Part II of the First Schedule in Order 62. These include the complexity of the case, the difficulty and novelty of the issues involved, the skill, specialized knowledge and responsibility required and the importance of the case to the client. These are highly relevant matters in the present case as can be demonstrated by the special features which I have highlighted in the earlier part of this judgment.
There were five fee earners involved in this litigation on behalf of the Liquidator. The Registrar had considered each of them and reduced the hourly rates claimed by them. As discussed above, I take the view that the Registrar in exercising his discretion in respect of the hourly rates in question had failed to adopt the correct approach or apply the correct principles. I am entitled to consider the matters afresh. I shall deal with these fee earners one by one.
(i) Mr Rogers
The first was Mr Rogers. He was the original partner who had charge of this case on behalf of the Liquidator. He was qualified in Hong Kong for more than 10 years at the time of the appeal. His role was mainly supervisory and he spent only 5 minutes in FACV 30 for general care and conduct. He claimed an hourly rate of $6,500. Bearing in mind that the 1997 rate for a solicitor of over 10 years standing is $4,000, the Registrar considered that Mr Rogers' rate was exceptionally high and unreasonable. He allowed only $4,500 and maintained the same figure on review. In my view, in the light of the special features in this case, the Liquidator was entitled to take a very serious view of this litigation and to engage a reputable firm which he could trust to clear his name even though this would mean he had to spend more than the fees of an average solicitor firm. As discussed above, the 1997 hourly rates are clearly in need of adjustments in the present case which arose in 2009 and 2010 and the Registrar should not have taken the relevant rate as the starting point. In the circumstances of this case, on indemnity taxation, I think it would not be unreasonable for a partner of Mr Rogers' standing and experience having overall charge of such a litigation to charge $6,000 per hour. I would allow his hourly rate at this figure.
(ii) Mr Wadham
Mr Wadham was the partner in charge of this litigation. He was qualified in New Zealand since 1999 and then in Hong Kong in 2002. The Registrar took into account his overall seniority and experience. He had played a very significant role in this case which included acting as instructing solicitor and supervising partner; quasi junior counsel to assist senior counsel and London Silk; undertaking drafting the main part of the written submissions in the leave application, the Appellant's Case and the costs submissions in the appeal; exchanging views with senior counsel and London counsel in settling and finalizing relevant documents; giving advice to lay client on various legal issues and exercising skill and expertise in the preparation of the appeal. He claimed an hourly rate of $5,180. The Registrar considered that his claimed rate was substantially higher than the 1997 rate of a solicitor with 10 year standing (which is $4,000). He allowed $4,300 and on review increased it to $4,500. In my view, the work done by Mr Wadham was quite demanding and had contributed to a large extent to the presentation of the Liquidator's case before the Court. For the same reasons as discussed in the case of Mr Rogers, I would not consider an hourly rate of $5,000 as unreasonable in the circumstances and I would allow this figure.
(iii) Mr Johnson
The third fee earner was Mr Johnson who was the assistant solicitor. He was qualified in Australia in 2003 and in Hong Kong in 2008. He assisted Mr Wadham in preparing submissions by conducting research and was involved in co-ordination with counsel and other parties. He claimed an hourly rate of $4,300 (as compared to the 1997 rate of $3,500 for a lawyer of 7 to 8 years standing). The Registrar considered that he was doing the work of a "competent notional solicitor" and that the rate he claimed was unreasonable. He reduced it to $3,200. On review, the Registrar maintained this rate for Mr Johnson's work in FAMV 33 but increased it to $3,300 to "reflect his additional contributions" in assisting in preparing the Appellant's Case, the consolidated list of authorities and the written submissions on costs in FACV 30. I do not find anything to support the description that Mr Johnson's role was that of a "notional" solicitor. Nor do I see any justification in treating his role in FAMV 33 any differently from that in FACV 30; both were essential parts of the appeal process. I would allow his rate in the sum of $4,000 which could not be regarded as unreasonable on an indemnity taxation.
(iv) Mr Chu
Mr Joseph Chu was an assistant solicitor qualified in Hong Kong in 2003. The hourly rate claimed by him was $4,400. He was delegated the task of drafting part of the Appellant's Case (which was described by the Registrar as on a general issue of the criminal law). The Registrar considered that this rate was unreasonable and reduced it to $3,000. This was maintained on review. I see no material difference between the role played by Mr Johnson and that by Mr Chu. I would also allow his hourly rate at $4,000.
(v) Trainee solicitor
The last fee earner was a trainee solicitor. He was involved in conducting research and preparing document bundles. He claimed an hourly rate of $2,000. The Registrar considered that the hourly rate of a trainee solicitor was slightly higher than that of a litigation clerk and a legal executive because of his law degree and legal training but could not be paid as a newly qualified solicitor since he was still learning. The rate was reduced to $1,300 and the Registrar refused to increase it on review. For reasons which are similar to those in respect of the other fee earners, I would allow his rate at $1,800.
Fees for Senior Counsel in the leave application (FAMV 33)
Under the previous para.2(5) of Part II of the First Schedule, every fee paid to counsel shall be allowed in full on taxation unless the taxing master is satisfied that the same is excessive and unreasonable in which event, the taxing master shall exercise discretion having regard to all the relevant circumstances and in particular the matters set out in para.1(2). This was the applicable provision for counsel's fees at the time of the leave application (see the transitional provisions in Order 62 rule 37(2).) By the time of the substantive appeal, the new para.2(5) of Part II introduced by the Civil Justice Reform applied: The amount of fees to be allowed to counsel is in the discretion of the taxing master who shall, in exercising his discretion have regard to all relevant circumstances and in particular to the matters set out in para.1(2). The Registrar noted that this did not make any substantial difference in practice on an indemnity taxation. The parties do not dispute this.
For the leave application, Senior Counsel charged $380,000 as his Brief fee and this was taxed down to $250,000 by the Registrar. This was maintained on review. The Registrar's reasons (para.63) were: the hearing lasted only for 2 hours; Senior Counsel was involved in the lower courts and should be familiar with the factual background and the issues involved; there was no new ground before the Appeal Committee, except the issue whether those were civil or criminal proceedings for the purpose of granting leave; the work was shared by the solicitors and London counsel and hence his work would be much less. The Registrar added that the Brief fee "was on the high side" and that the "reasonable fee should be about $250,000". With respect, this was not the correct approach on an indemnity taxation. I also do not share the Registrar's reasoning. Senior Counsel had lost before the Court of Appeal and it was necessary to persuade the Appeal Committee that it was reasonably arguable that the Court of Appeal was wrong. That he was counsel in the lower courts and was familiar with the background and issues in question and that he had the benefit of experienced solicitors and London counsel do not "lessen" his duty and role as a member of the appeal team. It cannot be suggested that counsel's fees on appeal should be less simply on the ground that the trial was conducted by him. His task on appeal is different from that at the trial. I also do not accept that a conscientious counsel would feel that he can contribute less if he has the assistance of London counsel or junior counsel. Each has a different role to play. There is simply nothing to support the conclusion that the Brief fee was excessive to the extent of being absurd or extravagant. In the circumstances of this case, I think $350,000 would not have been regarded as unreasonable and I would allow this figure.
The additional refreshers for London Silk
London Senior Counsel was briefed to appear in the substantive appeal and he was paid a Brief fee and a refresher. The only matter which is still in dispute is the 2 additional refreshers of £7,500 each which were said to have been paid in respect of the time taken by counsel travelling to and from Hong Kong. The Registrar disallowed this claim. He considered that this was in the nature of compensation for loss of opportunity to earn during the time required for travelling and that this was unreasonable. I agree. There is nothing to suggest that counsel would have earned other briefs or refreshers during those two days and even if this might or could have happened, this could have been taken into consideration in fixing the Brief fee. I find it difficult in principle to justify this claim. It was rightly refused by the Registrar.
Specific items in the FAMV 33 bill
I now turn to the specific items in dispute. I remind myself of the principles applicable on an appeal against the exercise of discretion which I have mentioned in paragraph 16 above. If the Registrar had applied the correct principles of taxation on an indemnity basis, I should not interfere with such exercise of discretion. On the other hand, if it is clear that he had fallen into error as mentioned above, I shall do the best I can to adjudicate on the disputed items. The parties have agreed that I shall take such course in order to save time in having the matters remitted back to the Registrar.
Item 7.1 of the Bill
Item 7.1 concerned the drafting and consideration of the revised skeleton submissions for the leave application. It is claimed that Mr Wadham had spent 1450 minutes in the preparation of these submissions. The Registrar considered that this was "highly excessive and thus unreasonable" and took the view that only 15 hours (900 minutes) would be "a reasonable time". There were altogether 9 drafts and the preparation involved studying the 2 judgments of the Court of Appeal (the second judgment reversing the first one), considering the grounds of appeal and the available arguments, including the additional points whether the case was a civil or criminal matter and whether the Court of Appeal decision was a final or interlocutory judgment. Bearing in mind the special features of this case and adopting the correct approach on an indemnity taxation, I accept that 1450 minutes were unreasonable but consider that it would not be unreasonable for a lawyer of Mr Wadham's seniority and experience to spend 2 to 3 days on such task, revising the draft several times. I would allow 20 hours (1200 minutes).
Item 7.3 of the Bill
Mr Johnson spent 1166 minutes in reviewing the case law in the preparation of the skeleton submissions. The Registrar allowed 5 hours (300 minutes) holding that this was "more than reasonable and generous". I am not sure he had adopted the correct approach. There were 27 authorities, most of which had been used before the Court of Appeal. But this does not mean he should not have to study them again in the light of the Court of Appeal judgments. In the circumstances of this case, on an indemnity taxation, it would not be unreasonable to spend 10 hours (600 minutes) to do this and I would allow that.
Item 7.2 of the Bill
This item concerned the drafting and consideration of a supplemental submission. It was a short submission (2 pages). What was claimed was 95 minutes. The Registrar considered that "the reasonable time" for such work was one hour (60 minutes). That is not the correct approach. Bearing in mind the special features of this case and adopting the correct principles, I would not regard 95 minutes as claimed to be unreasonable in the circumstances and I would allow it in full.
Item 7.7 of the Bill
This concerned the preparation of the hearing bundles and 570 minutes were claimed. There were 4 bundles but as the Registrar noted, there was no explanation why the appeal bundles used before the Court of Appeal could not be adopted for use in the application before the Appeal Committee. Mr Johnson spent 570 minutes for this task. The Registrar considered this to be "far from reasonable". I agree. He allowed only 2 hours. It appears that he had applied the correct principle in approaching this item. I have no reason to interfere with his discretion. I would uphold his assessment.
Item 8.2 of the Bill
At the leave application, both Mr Wadham and Mr Johnson attended the hearing. The Registrar considered that since the application was not a particularly difficult application, it was "not reasonable" to have another solicitor at the hearing. Even bearing in mind the special features in this case and the fact that no junior counsel was briefed to appear, I cannot say the Registrar had adopted the wrong approach. I do not see what role Mr Johnson was required to play in attending the hearing. I would not interfere with the Registrar's discretion. I would uphold his assessment.
Specific items in the FACV 30 Bill
Item 6 of the Bill
This concerned the work done in the preparation of the Appellant's Case. It was prepared by Mr Wadham with the assistance of Mr Johnson and the trainee solicitor and settled by Senior Counsel and London Silk. Mr Wadham spent 95 hours, Mr Johnson 34 hours and the trainee solicitor 27 hours on this task and applying their respective hourly rates, a lump sum of $700,000 was claimed. Without any objection from the parties, the Registrar adopted a global approach in assessing this item. He considered that the amount claimed to be "excessive and unreasonable". He reasoned that Mr Wadham had been involved in the lower courts and should be familiar with the issues in dispute and the grounds of appeal; that all the arguments proposed in the Appellant's Case had been argued fully before the Court of Appeal. He considered that the "reasonable costs" should be "in the range of $250,000". While he was entitled to regard the lump sum clamed was unreasonable, I do not think that he was applying the correct principles on an indemnity taxation in coming to the figure which he did. As discussed above, the fact that the lawyers involved had conducted the trial does not mean that they can spend less time in preparing the appeal. An appeal involves considering the judgment appealed against and formulating arguments to demonstrate that the judgment in question is wrong. I would not like to say that the lawyers' task in an appeal is any easier than that in the trial. In the present case, there is nothing to suggest that Messrs Wadham and Johnson and the trainee solicitor had not spent the number of hours claimed by them or that they were not acting conscientiously and in good faith in preparing the Appellant's Case. Bearing in mind the special features in this case and the novelty of the issues involved, I would not consider it unreasonable for them to charge a global sum of $500,000 for the work. I would allow this figure.
Item 16.2 of the Bill
The trainee solicitor spent 1390 minutes (23 hours) preparing a consolidated list of authorities which contained 98 cases. Mr Johnson had drafted the list which was agreed to by the respondents. In such circumstance, the Registrar could not see how the trainee solicitor would need 23 hours to prepare the consolidated list and he allowed only 8 hours. Nor can I. In his consideration, the Registrar did draw a distinction between taxation on a party and party basis and taxation on an indemnity basis. I cannot say he was wrong in his approach on this item. I would not interfere with his discretion and would uphold his assessment.
Item 20.2 of the Bill
Mr Johnson spent 5 hours in perusing and considering the respondents' supplement list of authorities. There were 8 cases. The Registrar allowed only 1.5 hours saying that since Mr Wadham had considered them, Mr Johnson did not need too much time to do the same. I do not agree. I should think that it was necessary for both Mr Wadham and Mr Johnson to study these additional authorities. They were members of the appeal team working together and would have to decide whether these authorities should be brought to the attention of counsel and to discuss them with him. I do not think it could be regarded as unreasonable to spend 5 hours studying these additional cases. I would allow this item in full.
Items 37.5 of the Bill
This item concerned the work done by the trainee solicitor in reviewing the Respondents' Case and updating the Part B bundles and the transcripts bundles. He spent 180 minutes (3 hours) in doing that. The Registrar disallowed this item holding that it was already covered under other items for work done by other case handlers. He also doubted whether the trainee solicitor's work had made any contribution to the preparation of the case, adding that "most probably, [this was time spent] for their (trainee solicitors') learning process in how to prepare a case for trial/appeal hearing." I do not agree with the Registrar's reasoning. First, as submitted by the Liquidator, upon receipt of the Respondents' Case, it was necessary to review it and to ensure that any documents referred to in that document were included in the Record for the hearing. There was nothing to suggest that the work was not undertaken by the trainee solicitor. While there might be some overlap in the work done by members of the same appeal team, each would be playing a different role. Secondly, a trainee solicitor no doubt is also learning his trade at the same time as he is performing his duty, but he is required to apply his legal knowledge to the work he is doing. He is paid for doing that and his firm is entitled to be remunerated albeit a trainee solicitor's fees are at a much lower rate than those of a qualified solicitor. In the circumstances of this case, I think it would be wrong to say he did not make any contribution to the preparation of the appeal. Also I would not consider his work and the time spent were in any way unreasonably incurred. I would allow this item in full.
Item 37.9 of the Bill
The trainee solicitor spent 360 minutes (6 hours) preparing and updating Senior Counsel's hearing bundles and authorities bundles. The Registrar disallowed this item holding that the work "is purely clerical and administrative in nature and should be covered by the profit costs claimed by the main fee earners". He considered that it was unreasonable to have these costs separately charged. I disagree with such approach. While the work might consist mainly of preparing new sets of folders, labels and dividers, I do not think this could be described as purely clerical and administrative. Proper pagination is quite important in the preparation of the relevant bundles lest the court's time and counsel's time might be wasted. I think it is not unreasonable to ask a trainee solicitor who is involved in the case and who has the requisite legal knowledge to make sure the work is done properly and accurately. On indemnity taxation, I would not regard it as unreasonable for the trainee solicitor to spend at least 3 hours to do that. I would allow this item at this figure.
Item 46.3.2 of the Bill
This item concerned the time required by Mr Johnson in preparing a long letter to the Bar Council in support of an application for the admission of London Queen's Counsel to conduct the appeal on behalf of the Liquidator. He spent 690 minutes (11.5 hours) to do that. The Registrar took the view that Mr Johnson was familiar with the background of the case and 5 hours was "a correct and appropriate assessment of the reasonable time" to spend on such a letter. While I am not sure the Registrar had applied the correct approach in making this assessment, I think that given the background in this case, this cannot be said to be plainly wrong or falling outside the generous ambit within which a reasonable disagreement was possible. I would uphold the Registrar's assessment.
Conclusion
For the reasons given above, I would allow the appeal in part. The resulting assessments of the items disputed in this appeal appear in the appendix attached to this judgment. Since the Liquidator has succeeded in some but not all of the items, I would make an order nisi that he be awarded 70% of the costs of this taxation appeal to be taxed on an indemnity basis if not agreed. The parties may file written submissions within 14 days with regard to this costs order.
(Patrick Chan)
Permanent Judge
Mr James Wadham, of Clifford Chance, for the Appellant (Receiving Party)
Ms Lily Fenn, of Lily Fenn & Partners, for the Respondents (Paying Party)
Appendix
Solicitors' costs and counsel's fees in FAMV 33 Bill and FACV 30 Bill
No. Description of item Hourly Rate/Amount Claimed Registrar's Decision This Appeal
1 (i) Fee earner - Mr Rogers $6,500 $4,500 $6,000
(ii) Fee earner - Mr Wadham $5,180 $4,500 $5,000
(iii) Fee earner - Mr Johnson $4,300 $3,200 in FAMV33; $3,300 in FACV 30 $4,000 in both
(iv) Fee earner - Mr Joseph Chu $4,400 $3,000 $4,000
(v) Fee earner - trainee solicitor $2,000 $1,300 $1,800
2 Brief fee of senior counsel to appeal before the Appeal Committee $380,000 $250,000 $350,000
3 2 additional refreshers for London Silk in the substantive appeal £7,500 each day Disallowed Disallowed
Specific items in FAMV 33 Bill
No. Bill Item No. Description of item Time/Amount Claimed Registrar's Decision This Appeal
1 7.1 Drafting and consideration of the revised skeleton submissions 1450 min 900 min 1200 min
2 7.2 Drafting and consideration of a supplemental submission 95 min 60 min 95 min
3 7.3 Reviewing the case law in the preparation of the skeleton submissions 1166 min 300 min 600 min
4 7.7 Preparation of the hearing bundles 570 min 120 min 120 min
5 8.2 Attendance of 2nd solicitor 180 min Disallowed Disallowed
Specific items in FACV 30 Bill
No. Bill Item No. Description of item Time/Amount Claimed Registrar's Decision This Appeal
1 6 Preparation of the appellant's case $700,000 $250,000 $500,000
2 16.2 Preparation of the consolidated list of authorities 1390 min 480 min 480 min
3 20.2 Perusing and considering the respondents' supplement list of authorities 300 min 90 min 300 min
4 37.5 Trainee solicitor in reviewing the respondents' case and updating the Part B bundles and the transcripts bundles 180 min Disallowed 180 min
5 37.9 Trainee solicitor in preparing and updating senior counsel's hearing bundles and authorities bundles 360 min Disallowed 180 min
6 46.3.2 A long letter to the Bar Council in support of an application for the admission of London Queen's Counsel 690 min 300 min 300 min