A Hong Kong judge has slashed a fee request for Linklaters by almost 80 percent.
The U.K. firm had successfully won dismissal of claims against audit firm KPMG made by Artificial Life Inc., a company that invests in smartphone app development. Artificial Life had sued KPMG in 2011 for malpractice, and the former company claimed the suit led to a decline in market value exceeding $100 milion.
In a July hearing, Hong Kong High Court Judge Marlene Ng awarded KPMG costs on the basis of Hong Kong’s “loser pays” rules.
KPMG requested costs of around $241,000 for the work performed by Linklaters, with a team led by partner Melvin Sng, and barrister Charles Manzoni SC. But Judge Ng found the overall request “disproportionate” and ordered costs reduced to around $54,000.
The requested rate for Sng was around $936 per hour, with rates for associates ranging from around $285 to around $684. The judge cut Sng’s rate to around $528 with associate rates similarly slashed.
The court ruled that the time spent on many activities was “excessive.” She allowed a little under $10,000 for “attendance on client” when KPMG had requested $30,000. She also slashed the amount charged for meetings between Linklaters and the barrister, allowing only around $6,445 when over $31,000 had been requested.
The judge most drastically cut the $50,000 requested for hearing preparation. “There was only one substantive hearing attended by senior counsel since the initial call-over hearing was vacated by consent,” she wrote. “I am unable to see how such intensive preparation at a cost that was more than double senior counsel’s brief fee as claimed can be justified as being necessary or proper, or indeed proportionate.”
Judge Ng allowed a little over $2,500 for hearing preparation.
The plaintiff in the case was represented by Denis Brock of King & Wood Mallesons.
The decision highlights some of the difficulties law firms face reaping big fees in litigation in Hong Kong.
The successful litigant usually pays the difference when courts slash fees in cost orders, and the gap has become a point of controversy in Hong Kong legal circles. In an April 2013 note, Hong Kong Law Society President Dieter Yih, a partner at Milbank, Tweed, Hadley & McCloy said the difference generally ranged from 15 to 50 percent, making the 77 percent shortfall in the KPMG case unusually large.
Ironically, KPMG recently conducted a study for the law society recommending that the scale rates used by judges be increased by an average of 55 percent. The rates were last revised in 1997 and lawyers argue that the costs of maintaining a legal practice in Hong Kong have increased considerably since then.