Taxation and Costs

It pays to read the Law Society of Hong Kong circulars circulated to members each week. They contain important information that affect a lawyer’s practice. The headings of some circulars may sound a bit technical at times but even within these circulars there is important information. Take, for example, the recent circular titled “High Court Taxation – Consolidated Circular, Updated April 2018” (18-241(PA)).

Besides informing members about updates to High Court taxation practices, there is reference (at paragraph 10) to solicitors’ hourly rates, which were increased for work done as from 1 January 2018 (also see Recovery of Solicitor Hourly Rates”, Industry Insights, January 2018; and the President’s letter to members for January 2018).

The increased rates represent a significant development in the litigation landscape of Hong Kong that litigants and insurers will have to come to grips with. Court decisions on actual recovery rates tend to have little precedent value.

The point (made in paragraph 10 of the circular), which is easy for busy practitioners to overlook, is that solicitors’ hourly rates are for the court’s guidance. These rates can be adjusted up or down as taxing masters consider appropriate on a case by case basis – albeit, the rates are important benchmarks and a starting point (the pre-2018 “range” of rates having gone).

At paragraph 11 of the circular is a very important reminder:

“Members are reminded that the Court will only award costs at the rate agreed with the client. It is therefore important to provide the court with evidence of such agreement, or the firm’s retainer letter which should be given to the client upon receipt of instructions and contain details of the following …”. (italics added)

There then follows a non-exhaustive list which includes details of the instructions and services provided and the charging rate for individual fee-earners and any support staff.

As for Counsel’s fees, good practice is to obtain money on account (Guide to Professional Conduct, principle 4.07 and 12.04).

A letter of engagement (no later than seven days after receiving instructions) is mandatory in criminal matters (Solicitors’ Practice Rule 5D). In civil matters, a letter of engagement is good practice (Guide to Professional Conduct, for example, principle 4.01 and 5.01) – one can envisage a time when it will become mandatory.

The absence of a letter of engagement (incorporating a provision for the periodic review of a solicitor’s charge-out rates) may well give rise to difficulties on taxation. For example, a receiving party cannot recover a sum in excess of their liability to their own solicitors (the “indemnity principle”). The absence of a letter of engagement (that is properly dated) begs the question how a receiving party’s solicitors can provide evidence of an agreement with their client as to costs (let alone justify recovery of the increased rates).

Jurisdictions: 

Partner, RPC

Associate, RPC