Lin Jian Wei and another v Lim Eng Hock Peter

V K Rajah JA (delivering the judgment of the court):

[4] The respondent, Lim Eng Hock Peter, was involved in the formation of Raffles Town Club Pte Ltd (“the Company”) and the setting up of Raffles Town Club (“RTC”) from mid 1996 to April 2001. The Company was set up in 1996 to own and manage RTC. At the time of its inception, its shareholders were Mr Lawrence Ang, Mr William Tan and Mr Dennis Foo (collectively “the original shareholders”). The respondent was apparently instrumental in the formation of RTC. In June 1996, the respondent made his first investment in the RTC project by channelling funds through Mr Lawrence Ang, which gave him a 20% beneficial shareholding (see [17] of Raffles Town Club Pte Ltd v Lim Eng Hock Peter and others (Tung Yu-Lien Margaret and others, third parties) [2010] SGHC 163). The respondent’s share was subsequently enlarged. Sometime in June 1997, Mr Lawrence Ang held nearly 80% of the shares in Erasmia/the Company (Erasmia was the predecessor of the Company) and another company, Europa Holdings Pte Ltd (“EH”). However, the actual beneficial shareholding in Erasmia/the Company and EH was roughly in the proportion of 40:40:10:10, being the respective shares of the respondent, Mr Lawrence Ang, Mr William Tan and Mr Dennis Foo. Sometime in September 2000, disputes arose between the original shareholders. A settlement was eventually reached in April 2001. Pursuant to the settlement, the respondent and Mr Dennis Foo’s shares in the Company (which approximated to a 50% stake in the Company and EH) were sold to Mr Lawrence Ang and Mr William Tan. After this was done, Mr Lawrence Ang and Mr William Tan entered into a “back to back” sale of 50% of the shares in the Company to the appellants, Lin Jian Wei and Tung Yu-Lien Margaret. The appellants and the first appellant’s wife subsequently acquired all the shares in the Company in mid-2001.

[5] Having explained how the appellants came to acquire their interests in the Company, we return to the narrative on how the parties became embroiled in the present proceedings. Much earlier, around November 1996, the Company invited “selected” members of the public to join the most “prestigious private club” in Singapore at a discounted price of $28,000. Those who had joined this club of supposedly “exclusive and limited membership” were later shocked to discover that there were over 19,000 members. Dissatisfied by the Company’s failure to provide an exclusive club and upset by the problem of overcrowding at RTC, the members initiated proceedings against it in November 2001. This was after the appellants had taken over responsibility for RTC’s operations from the original shareholders of the Company. The dispute eventually reached the Court of Appeal in August 2003. This Court held that there had been a breach of an implied promise by the Company to deliver to the plaintiffs a premier and exclusive club, see Tan Chin Seng and others v Raffles Town Club Pte Ltd [2003] 3 SLR(R) 307. It later ordered that the Company pay $3,000 in damages to each claimant. This amounted to $45m, see Raffles Town Club Pte Ltd v Tan Chin Seng and others [2005] 4 SLR(R) 351. As the Company had insufficient funds to compensate the members, it proposed in 2005 a Scheme of Arrangement under s 210 of the Companies Act (Cap 50, 1994 Rev Ed) (“the Companies Act”) to its creditors. More than 90% of the scheme creditors (mainly members) voted in favour of the Scheme of Arrangement and it was subsequently approved by the Court. Pursuant to s 211(1) of the Companies Act, the Company/RTC was required to send an explanatory statement explaining, inter alia, the effect of the scheme.

[11] The Judge also found that urgent work had to be undertaken by counsel for the respondent because of voluminous documents disclosed at very late stages of the proceedings. For instance, there was late discovery by the appellants of over 100 arch files of documents and 40 cartons of working papers (which had been disclosed earlier in Suit 46) less than one month before the commencement of the trial for Suit 514. This was followed by further disclosure of 30 arch files of documents less than two weeks before the trial. A further 11 itemised documents were also disclosed by the appellants just one week before trial. During the trial, the appellants tendered 52 volumes of documents totalling 14,885 pages.

As counsel for the appellants did not make any specific submission on the figures, the Judge assumed (wrongly, as it turned out) that they were not contending that the charge out rates listed by counsel for the respondent were unreasonable or excessively high when compared to the prevailing market rate.

[14] The Judge thought that the disparity between the time expended by counsel for each party, ie, 1,149 hours by counsel for the appellants and 2,309.3 hours by counsel for the respondent, was due to the fact that the former had prior involvement in Suit 46 and therefore had intimate knowledge of the matter. The same, however, could not be said of counsel for the respondent who had not been involved in Suit 46.

[19] Counsel for the appellants, Ms Kristy Tan (“Ms Tan”), submitted that although the Judge’s award of $650,000 was effectively a discount from the respondent’s original claim of $1,115,655, this amount was still wholly disproportionate, manifestly excessive and unreasonable in the light of all the circumstances of the case. After all, Suit 514 was only a six-day trial with the respondent alone testifying, and the whole matter was disposed of within a year of its commencement. She forcefully submitted that the principle of proportionality demanded a steep reduction in the amount awarded by the Judge.

[20] Counsel for the respondent, Mr Chan Hock Keng (“Mr Chan”), argued that the appellants’ reliance on the doctrine of proportionality was misplaced. Mr Chan referred to the position in England and Wales where rr 44.5(1)(a) and (b) of the Civil Procedure Rules (SI 1198 No 3132) (UK) (“the CPR”), which is reproduced below, at [39], expressly stated that the principle of proportionality does not apply to taxation on an indemnity basis.

[24] A remuneration order can be made by a committee (constituted in accordance with ss 108(1) and (2) of the LPA) (“the Committee”) under s 108(3) of the LPA to regulate the remuneration of solicitors in non-contentious business. In making a remuneration order, the Committee has to take into account the following considerations:

[32] Singapore Court Practice 2009 (Jeffrey Pinsler gen ed) (LexisNexis, 2009) at para 59/27/5, p 1219 succinctly summarises the position as follows:

[35] The position under the English RSC 1965 is as follows:

Mr Chan maintained that since the Singapore ROC was modelled on the English RSC 1965 (see [21] above), the English position in respect of taxation on an indemnity basis prior to the introduction of the CPR should be adopted. As O 62 r 12(2) of the English RSC 1965 only made reference to “reasonableness”, the position in Singapore should logically be based on the principle of reasonableness.

There is no similar bifurcation in the ROC, both before and after the incorporation of the express proportionality rule. Therefore, statements on the principle of proportionality from English cases (particularly those construing the CPR, see [45] below) must be considered with reserve.

[44] Order 59 r 27(3) of the ROC states that:

[45] The English Court of Appeal in Lownds v Home Office [2002] 1 WLR 2450 (“Lownds”) explained the relationship between the concepts of reasonableness and proportionality in the context of the CPR. Lord Woolf CJ, delivering the judgment of the Court, suggested a two-stage approach at [31]:

[49] At para 5.13, p 37 of the Jackson Final Report, Jackson LJ recommended the abandonment of the practice in Lownds in favour of an approach which prioritises proportionality:

Interestingly, the so-called Victorian notion of necessity (which was embodied in the rules up until its removal in 1986) and the provisions under the English Rules of the Supreme Court 1883 (UK) (contained in The Annual Practice 1923 (Sweet & Maxwell Ltd, 41st Annual Issue) at p 1356) (“the English RSC 1883”) relating to costs and the taxing registrar’s exercise of discretion in awarding discretionary costs under the then scale of costs system seem also to point towards the principle of proportionality.

The commentaries in respect of O 62 r 28(2) as found in The Supreme Court Practice 1973 vol I (I H Jacob gen ed) (Sweet & Maxwell Ltd, 1972) at Part 1, p 946 are to the following effect: that “[i]t is of great importance to litigants who are unsuccessful that they should not be oppressed by having to pay an excessive amount of costs”; and, per Sir R Malins VC in Smith v Buller (1874-1875) LR 19 Eq 473 at p 475, “the costs chargeable under a taxation as between party and party are all that are necessary to enable the adverse party to conduct the litigation, and no more. Any charges merely for conducting litigation more conveniently may be called luxuries, and must be paid by the party incurring them.” We note that the origins of O 62 r 28(2) of the English RSC 1965 can be traced back to O 65 r 27(29) of the English RSC 1883, which states as follows:

[53] Another Victorian provision which hinted at the principle of proportionality is O 65 r 27(38) of the English RSC 1883, which stipulates as follows:

[54] The local equivalent of O 65 r 27(38) of the English RSC 1883 can be found in O 62 r 58 of the Civil Procedure Rules of the Supreme Court 1934 (“the Civil Procedure Rules 1934”) which states:

Both O 65 r 27(38) of the English RSC 1883 and O 62 r 58 of the Civil Procedure Rules 1934 suggest that there ought to be a correlation between the costs claimed by the solicitor and the “nature and importance of the cause or matter”, “the amount involved”, “the interest of the parties”, “the fund or persons to bear the costs, the general conduct and costs of the proceedings” as well as “all other circumstances”. In our view, these are also very broad considerations that necessitate a reference to the concept of proportionality.

We share the views and concerns of Jackson LJ and Prof Zuckerman, especially in the light of para 1(2) (f) of Appendix 1 to O 59 of the ROC, which makes express this consideration in the assessment of costs. When one juxtaposes the provisions of O 65 r 27(38) of the English RSC 1883 and O 62 r 58 of the Civil Procedure Rules 1934 against the views in the Jackson Final Report at para 5.7, p 36 and Civil Procedure: Principles of Practice at para 26.88, it seems that proportionality, as a principle or consideration in the context of assessment of legal costs, is neither a modern nor novel innovation of the 21st century, having found expression as early as 1883.

(5) Qualitative and quantitative factors to be taken into account pursuant to para 1(2) of Appendix 1 to Order 59 of the ROC

[67] In our view, the Judge should have first assessed the matter on the scale of relative complexity. Had he done this, he would have concluded that the legal and factual issues in this matter were not particularly complex and the time claimed to have been spent in getting up on this matter by the respondent’s counsel was clearly over the top. There was likely to have been a significant degree of overlap or repetition of the work done by the solicitors. By placing an undue emphasis on the significance of the time said to have been spent by the respondent’s counsel, even though he subsequently discounted this, the Judge erred in preferring a quantitative approach (as opposed to qualitative) in taxation.

[71] In summary, although it is true that the importance and complexity of the matter and the difficulty or novelty of questions raised affects the amount of time spent, it ought to be appreciated that the time spent, while significant, is but only one of a number of reference points to gauge the reasonableness and proportionality of the amount to be taxed. A taxation award should result from an exercise in judgment, not arithmetic, whatever arithmetical cross-checks may be employed (per Donaldson J in Treasury Solicitor v Regester [1978] 1 WLR 446).

[75] We accept that some aspects of the pre-trial work in this matter required urgent attention from counsel for the respondent given the late discovery of voluminous documents just a month before the commencement of the main trial. However, this should be viewed against the respondent’s unequivocal (and correct) stance right from the outset that Suit 46 was entirely irrelevant. It seems to us that it would have been plain to any competent solicitor that Suit 46 was a red herring and it was quite unnecessary to spend much time to arrive at that view. We also accept Ms Tan’s submission, which was not disputed by Mr Chan, that as respondent’s counsel were informed of the appellants’ decision not to call the subpoenaed witnesses on 31 July 2008, two days after the pre-trial conference, there was no need to do any substantive preparation work for their cross-examination.