Capital Partners Securities Company Ltd v Sturgeon Central Asia Balanced Fund Ltd (Costs)

• Jurisdiction: Bermuda
• Judgment Date: 01 May 2017
• Docket Number: Civil Jurisdiction 2016 No 101
• Date: 01 May 2017
• Court: Supreme Court (Bermuda)

[2017] Bda LR 43

In The Supreme Court of Bermuda

Civil Jurisdiction 2016 No 101

Between:

Capital Partners Securities Co Ltd

Plaintiff

and

Sturgeon Central Asia Balanced Fund Ltd

Defendant

Ms K Tornari for the Plaintiff

Mr S White for the Defendant

The following cases were referred to in the judgment:

Golar LNG Ltd v World Nordic SE (Costs) [2012] Bda LR 2

Moulder v Cox Hallett Wilkinson and ors (Taxation Review) [2012] Bda LR 1

Nilon Ltd v Royal Westminster Investments SA [2015] UKPC 2

In re Swaledale Cleaners Ltd [1968] 1 WLR 1710

Re Inverdeck Ltd [1988] BCC 256

R v Soneji [2005] UKHL 49

Smith v Fawcett Ltd [1942] Ch 304

Village Cay Marina v Acland [1998] 2 BCLC 327

Re Electric Mutual Liability Insurance Co Ltd (Costs) [1997] Bda LR 24

Bateman Engineering Inc v Nelson Gold Copr Ltd & Ors [1997] Bda LR 48

McCullie v Butler [1962] 2 QB 309

Lightbourne v Thomas (Costs) [2016] Bda LR 92

Contested taxation of Bill of Costs — Legal research — Drafting submissions — More than one counsel — Employment of oversea counsel — Hourly rates

RULING ON COSTS of Subair Williams R

Introduction:

1. This is a contested taxation of a Bill of Costs filed by the Plaintiff on 13 September 2016 pursuant to a costs award made by the Learned Hon. Chief Justice, Ian Kawaley, on 27 June 2017. The costs award with which I am concerned is made under Originating Summons proceedings for share rectification. The relevant background to these proceedings is inextricably linked, however, to the proceedings which arose out of a petition filed by the Plaintiff to wind up the Defendant.

Background Litigation under the Winding-Up Proceedings:

2. The Plaintiff in this case is a securities company whose registered office is in Tokyo, Japan.

3. The Defendant company, a fund (“the Fund”), was incorporated as a Bermuda exempted company on 20 March 2007. The Fund's objectives were to invest in equity and debt securities.

4. The share capital of the Fund comprised of management shares (where voting rights were mostly vested) and participating shares. Participating shareholders did not have rights of redemption under the operation of the Fund. Further, the sale or purchase of participating shares required the consent of the Board of the Fund.

5. The Plaintiff invested in the Fund and came to hold a beneficial interest in 7,561,000 participating shares. On the Plaintiff's case, the purchase of these shares was on the marketed basis that the Fund would be voluntarily liquidated between 31 December 2015 and 31 December 2017. By 2015 the share value depreciated significantly from its offering price and the Plaintiff became keen to redeem its shares.

6. However, in 2014 a management shareholder resolution was approved which had the effect of amending the company Bye-laws as they related to the redemption of participating shares. The amended Bye-law provided that a participating shareholder could only redeem 5% of its shares every two years.

7. Aggrieved by the amendment to the Bye-laws, on 17 August 2015 the Plaintiff filed a petition with the Bermuda Supreme Court to wind-up the Fund on just and equitable grounds seeking relief under section 111 of the Companies Act 1981 (alternative remedy to winding up in a case of oppressive or prejudicial conduct).

8. A return date was fixed for 20 November 2015 when an Unless Order contingently dismissing the Petition was made on the strength of the Defendant's argument that the Plaintiff (Petitioner) lacked standing to windup the Fund on the grounds that it was not a registered shareholder. The Court then adjourned the Petition to 22 January 2016.

9. To meet the standing objection, the Plaintiff (Petitioner) transferred legal title to the 7,561,000 shares back into its own name. The instruments of transfer were two stock transfer forms (one for 319,000 shares and the other for 7,242,000) dated 30 December 2015. However, the Fund's Board of Directors refused to register the shares.

10. The Plaintiff (Petitioner) subsequently filed a summons dated 20 January 2016 for leave in the following terms, inter alia:

“3. Leave be granted to amend the Petition, as in the copy annexed hereto (“the Amended Petition”) on condition that:

(a) The transfer of 7,561,000 participating shares in the Fund to CPS is recorded on the share register of the Fund by no later than 12 February 2016…”

11. The summons was listed to be heard together with the adjourned hearing date for the Petition on 22 January 2016.

12. On 22 January 2016 the Court adjourned the Petition to 5 February 2016 and the summons for share rectification was adjourned to be mentioned at the same time. On 5 February 2016 both the Petition and the summons were adjourned to 23 February 2016 for substantive hearing and the parties were at liberty to file further affidavit evidence under the summons on or prior to 18 February 2016.

13. On 15 and 18 February 2016 the Plaintiff (Petitioner) filed the Fourth and Fifth Affirmations from Mitsugu Saito, the Deputy General Manager of Capital Securities Co. Ltd, in support of the summons for share rectification. Two days prior, on 16 February 2016 the Defendant filed a strike out summons as a measure of enforcing the 20 November Unless Order.

14. The preparation undergone by both parties for the 23 February 2016 hearing of the petition and summonses filed was evidenced by (1) the Plaintiff (Petitioner's) filing of a hearing bundle under a cover letter dated 19 February 2016 and (2) the Respondent's filing of a skeleton argument and authorities bundle under cover letter dated 22 February 2016, the eve of the fixed hearing.

15. However, on 23 February 2016 the Plaintiff (Petitioner) advised the Court of its intention to withdraw the Petition and to file an Originating Summons for redress against the Fund's refusal to transfer the shares. The Court accordingly issued leave for the withdrawal of the Petition and a Notice of Withdrawal was filed on 10 March 2016.

The Originating Summons Proceedings

16. These are the proceedings to which this taxation relates.

17. On 21 March 2016 the Plaintiff filed an Originating Summons claiming declaratory relief validating the transfer of the 7,561,000 participating shares from the Fund to the Plaintiff. The Plaintiff also sought, inter alia, an order (pursuant to section 67 of the Companies Act 1981) to compel the directors of the Fund to procure the rectification of the share register(s).

18. By Consent Order dated 7 April 2016 directions for the further filing of evidence were agreed between the parties and the hearing of the Originating Summons was fixed for 6 June 2016.

19. The 6 June 2016 hearing proceeded and a ruling in favour of the Plaintiff was delivered on 27 June 2016. Costs followed the event.

20. By letter dated 18 July 2016, the Plaintiff wrote to the Court seeking a hearing date to settle the terms of an order to give effect to the 27 June ruling in the absence of common ground between the parties. Subsequently, an agreed order dated 30 August 2016 (back-dating the share transfers to 10 January 2016) was obtained without the need for a hearing.

Summary of Bill of Costs:

21. The Plaintiff now claims $227,968.00 in costs, which includes the following:

• i. $116,525.00 in profit costs for MDM and

• ii. $111,443.00 in profits costs for Harney Westwood & Riegels in Hong Kong (“Harneys”)

22. The Defendant argues that the costs claimed are excessive, generally and specifically in relation to the following:

• i. The Plaintiff's fees for legal research are not commensurate to the narrow legal points to which they relate;

• ii. The claim for preparation of the Originating Summons and the First Affirmation of Mr Saito totals 43.6 hours: 19.6 hours from MDM and 23 hours from Harneys;

• iii. The claim for preparation of the Second Affirmation of Mr Saito totals 20.5 hours: 7.8 hours from MDM and 12.7 hours from Harneys;

• iv. The claim for preparation of the Third Affirmation of Mr Saito totals 18 hours: 6 hours for MDM and 12 hours for Harneys;

• v. The claim for pre-hearing preparation totals 75.15 hours: 61.1 hours from MDM and 14.5 hours by Harneys; and

• vi. The claim for the settling of the final order totals 48.76 hours: 29 hours for MDM and 19.6 hours for Harneys.

23. Additionally, Mr White made the following objections to the Plaintiff's bill of costs:

• i. The Plaintiff's employment of a team of six attorneys (Mark Diel ($625 p.h), Katie Tornari ($575 p.h) and Dantae Williams ($450 p.h) of MDM in Bermuda and Ian Mann ($720–900 p.h), Deirdre MacNamara ($440–675 p.h) and Vincent Lee ($300–350 p.h) of Harneys was overkill;

• ii. The engagement of the foreign attorneys was unjustifiable because this case does not qualify as cross-border litigation given that the litigation was confined to Bermuda; and (alternatively)

• iii. The hourly rates claimed by Harneys are excessive.

24. I now turn to address each of these objections and the relevant principles of law under which I have been guided in making my decisions. A summary of my decisions is provided in the Conclusion.

Legal Research by Counsel:

Legal Research on Procedural Matters:

25. The Defendant took issue with the Plaintiff's charges for research of the Originating Summons procedure.

26. In Golar LNG Ltd v World Nordic SEBDLR[2012] Bda LR 2 (para 13–14) the learned Chief Justice Richard Ground (as he then was), citing Cook on Costs, Butterworths, 2004, p 230 with approval, held: “Time spent considering the law and procedure is usually non-chargeable- and the higher the expense rate, the more law and procedure the fee earner is expected to know…” Ground CJ continued as follows, “I do accept that this case had some novel elements- the statutory provisions seem to be unique to Bermuda, and the Applicant raised a series of potentially difficult issues which had to be dealt with. Nonetheless, legal research as an element of charge should be constrained, particularly...