Re Otu

• Jurisdiction: Cayman Islands
• Judge: (Foster, J.)
• Judgment Date: 07 June 2013
• Court: Grand Court (Cayman Islands)
• Date: 07 June 2013

Grand Court, Financial Services Division

(Foster, J.)

IN THE MATTER OF OTU

Cases cited:

(1) Petrotrade Inc. v. Texaco Ltd., [2001] 4 All E.R. 853; [2001] C.P. Rep. 29; [2000] CLC 1341; [2002] 1 Costs L.R. 60; noted at [2002] 1 W.L.R. 947, distinguished.

(2) Wing Fai Construction Co. Ltd. (Costs: Taxation), Re, sub nom. Kennedy v. Cheng(2012), 15 HKCFAR 657; [2012] 6 HKC 440; [2012] HKCFA 64, considered.

Legislation construed:

Grand Court Rules, O.62, r.3(3): The relevant terms of this paragraph are set out at para. 2.

O.62, r.30: The relevant terms of this rule are set out at para. 1 and para. 6.

Practice Direction cited:

Practice Direction No. 1/2011, Guidelines Relating to the Taxation of Costs.

Bankruptcy and Insolvency-costs-taxation of costs-attorneys acting as agents for trustee in bankruptcy owe duty to estate to make only reasonable charges-taxing officer entitled to consider proportionality of charges to size and value of estate and whether hours and rates charged excessive for work done, since 2011 Guidelines only state maximum rates-entitled to depart from rates agreed with trustee if so excessive and unreasonable as to be apparent breach of trust-may disregard para-legals” charges entirely if no evidence as to qualifications or experience

The applicants sought a review of the taxation of their costs.

The applicants were engaged by the trustee in bankruptcy at the maximum rates permitted by the Guidelines Relating to the Taxation of Costs (Practice Direction No. 1/2011) to sell property belonging to the bankrupt. They sold the property for CI$201,155 (net of real estate agents” fees) and claimed costs amounting to CI$98,297.90 for fees relating to the actual conveyancing and for the two attorneys and the two paralegals who worked on the sale. The Judge of the Grand Court taxed the costs himself and found that the applicants were entitled to the conveyancing fees (CI$8,100), but that, given that the sale was for a relatively modest amount, the remaining costs of CI$90,179.79 were out of proportion to the value of the work and, given the simple nature of the sale, that the rates and the hours claimed were too high. He therefore ordered that the costs would be awarded on the indemnity basis and reduced the rates claimed for the more senior lawyer and more junior lawyer from US$652 (CI$513) to US$365 (CI$300) and US$335 (CI$275) respectively, and the rates for the paralegals from US$320 (CI$262) to US$175 (CI$143). He further reduced the hours claimed to roughly 20 hours for the more senior lawyer,

80 hours for the more junior and 25 hours for each paralegal, ultimately taxing the costs to CI$26,705.69 (including the conveyancing fees).

The applicants submitted that the judge had been wrong to consider whether their costs were proportional to the value of the work done, as they were within the guidelines set out by the Guidelines Relating to the Taxation of Costs. Further, as the applicants had been engaged by the trustee in bankruptcy at their stated rates, the judge was bound by their agreement.

Held, dismissing the application:

The judge had been entitled to reach the conclusions that he did when taxing the applicants” costs. The applicants, as agents of the trustee in bankruptcy, owed a duty to the trust estate to make only reasonable charges. The judge was therefore entitled to consider the proportionality of the costs to the size and value of the estate and was entitled to find that costs of close to half the value of the sale were unjustified. Moreover, the Guidelines Relating to the Taxation of Costs (Practice Direction No. 1/2011) only gave the maximum possible rates and the judge was entitled to determine that, in the circumstances of the case, lower rates were appropriate. He had been right to find that, as the sale of the property was very straightforward, two attorneys and two paralegals working for the hours claimed was excessive, and that the work could have been done by a single junior attorney and a single paralegal. He had therefore been entitled to reduce the rates and hours claimed; further, as there had been no evidence as to the qualifications and experience of the paralegals, he would have...