LAU YUE KUI AND OTHERS v. PHILIP CHAN & CO (A FIRM)

CACV 120/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 120 OF 2013

(ON APPEAL FROM HCMP NO. 593 OF 2007)

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REASONS FOR JUDGMENT

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Hon Barma JA:

1. This was an appeal by Messrs Philip Chan & Co (“the solicitors”), brought with the leave of this court (Cheung and Barma JJA) given on 5 June 2013, against the decision of Anthony Chan J dated 15 February 2013 by which he allowed an appeal from Master Ho. The Master had struck out the 2^nd to 6^th plaintiffs as parties to the proceedings against the Solicitors in HCMP 593/2007, an application for an order for taxation of two bills rendered by the Solicitors pursuant to fee agreements respectively dated 29 November 1994 and 7 November 1995. In allowing the appeal, the Judge in effect reinstated the 2^nd to 6^th as parties to the proceedings, gave directions for the conduct of the taxation, and awarded costs to the 2^nd to 6^th plaintiffs, which he proceeded to assess on a gross sum basis. At the conclusion of the hearing before us, we dismissed the appeal, ordered that the costs of the appeal should be paid by the Solicitors to the 2^nd to 6^th plaintiffs, to be taxed on the party and party basis if not agreed, and indicated that we would give our reasons for doing so in due course. This we now do.

2. These proceedings are one aspect of litigation concerning the estate of Lau Wai Chau, involving the administrator of the estate, who is the 1^st plaintiff in HCMP 593/2007 (“the administrator”), the 2^nd to 6^th plaintiffs and the solicitors, which has spanned many years and resulted in a number of different proceedings being brought.  For present purposes, it suffices to note the following:-

(1)  The estate, comprising mostly agricultural land in the New Territories, is a very sizable one, divided into nine parts by a Deed of Family Arrangement dated 20 March 1946.  Eight parts were allocated (as to one part each) to eight fongs (each headed by one of the eight sons of the deceased), while the remaining (ninth) part was designated as common property to be used for ancestral worship.

(2)  Following the conclusion of litigation as to the validity and effect of the Deed of Family Arrangement, the administrator informed the 2^nd to 6^th plaintiffs that he had (in his capacity as administrator) entered into certain fee agreements with the solicitors (who had represented him in the earlier litigation) under which the solicitors would be paid HK$43 million as legal fees for applying for estate duty clearance and letters of administration, and for checking the title to the properties comprising the estate.  The 2^nd to 6^th plaintiffs considered these fees to be exorbitant, and two of them (the 4^th and 6^th plaintiffs) commenced proceedings (HCAP 10/2001) against the administrator and the solicitors to have the fee agreements set aside.  In those proceedings the administrator and the solicitors contended that the proper course for the 4^th and 6^th plaintiffs to have taken was to exercise their right under section 68(2) of the Legal Practitioners Ordinance, Cap. 159 (“the Ordinance”) to have the Solicitors’ bills taxed.  The proceedings were eventually settled (during the course of CACV 141/2006, which was an appeal by the 2^nd to 6^th plaintiffs from the decision in HCAP 10/2001) by a consent order dated 21 March 2007, under which the solicitors and the administrator agreed to submit the two bills which are the subject of HCMP 593/2007 to taxation, and the solicitors further agreed not to rely on the existence of the fee agreements to contend that the fees charged were reasonable.

(3)  Shortly after the making of the consent order, the administrator took out HCMP 593/2007, seeking to have the bills taxed.  In July 2007, the 2^nd to 6^th plaintiffs sought to be joined as parties to the proceedings.  Their application not being opposed by the solicitors or the administrator, they were joined as the 2^nd to 6^th plaintiffs by an order dated 18 July 2007.

(4)  No steps to progress the proceedings, or any taxation of the bills, having been taken for some four years, the 2^nd to 6^th plaintiffs indicated in September 2011 that they would seek to have the taxation proceeded with, and issued a summons seeking directions to enable that to happen.  The solicitors response was to seek (by summons dated 15 May 2012) to strike out the names of the 2^nd to 6^th plaintiffs from the Originating Summons, on the grounds that they had no interest sufficient to enable them to be parties to the taxation, since the solicitors’ fees would be paid out of the ninth part of the estate (set aside for the purpose of ancestral worship), in which they had no interest, and also because the solicitors and the administrator had reached an agreement to settle the bills for just over HK$40 million, so that taxation was no longer necessary.

3. The Judge rejected these submissions, holding that the 2^nd to 6^th plaintiffs had a sufficient interest to be parties to the taxation because:-

(1)  the 4^th and 6^th plaintiffs were parties to the consent order and undertaking given to settle the earlier proceedings, under which it was agreed that there should be a taxation, and the 2^nd, 3^rd and 5^th plaintiffs were in the same position as the 4^th and 6^th plaintiffs, being also beneficiaries of the estate (see paragraphs 15-16 of the judgment below).

(2)  notwithstanding that the 2^nd to 6^th plaintiffs did not have a beneficial interest in the property constituting the ninth part of the estate out of which part alone the solicitors’ fees were now to be paid, they nonetheless had a sufficient interest in that property for the purposes of section 68(2) of the Ordinance to seek an order for taxation.  This was because, in the Judge’s view, section 68(2) did not require that they have a beneficial interest in the property out of which the fees were to be paid, but merely such interest as appeared sufficient to the court to justify their being entitled to seek taxation of the bills in question.  Further, even in relation to the ninth part of the estate set aside for the purpose of ancestral worship, there was such a sufficient interest, both because of the possibility that they might be able to obtain a distribution of surplus income, and also because of their more general interest in ensuring that the purpose of ancestral worship could be properly carried out (see paragraphs 21-26 of the judgment below).

4. Having come to this conclusion, the Judge allowed the appeal, and gave the directions sought by the 2^nd to 6^th plaintiffs in respect of the taxation.  He also awarded the 2^nd to 6^th plaintiffs their costs of the hearings before the Master and himself, which he assessed at HK$250,000 and HK$370,000 respectively.  Subsequently, a further costs order was made in favour of the 2^nd to 6^th plaintiffs in respect of the application for leave to appeal heard by the Judge, the costs of that hearing being assessed at HK$80,000.

5. Originally, the solicitors sought by this appeal to have the order of the Judge set aside in its entirety, so as to restore the decision of Master Ho striking out the names of the 2^nd to 6^th plaintiffs from the Originating Summons, and to bring to an end the participation of the 2^nd to 6^th plaintiffs in any taxation of the bills that had been rendered.  However, Mr Yu, who appeared with Mr Lau for the solicitors before us (neither of them having appeared in the court below), made it clear in his skeleton argument and in his oral submissions at the hearing that it was no longer contended that the Judge’s order should be set aside. Instead, what was sought was a declaration to the effect that the 2^nd to 6^th plaintiffs were “interested persons” within the meaning of section 68(2) of the Ordinance by reason only of the undertaking and consent order given and made in CACV 141/2006.  An application was made for leave to amend the notice of appeal to reflect this.

6. The solicitors also sought certain further relief on this appeal, namely:-

(1)  an order that the 2^nd to 6^th plaintiffs be renamed as defendants in the proceedings, and that the title of the proceedings be amended accordingly;

(2)  orders that the taxing fee for the taxation be paid, not by the solicitors, as had been ordered by the Judge, but out of the estate, and that the taxing fee already paid by the solicitors be refunded to them with interest at judgment rate; and

(3)  orders substituting lower amounts for the amounts at which the costs of the 2^nd to 6^th plaintiffs to which I have referred above had been assessed by the Judge.

As this relief was also different to that sought by the Notice of Appeal in respect of which leave to appeal had been given, the application for leave to amend the Notice of Appeal also covered these matters (although it should be noted that the original notice of appeal did complain of the decision to require the solicitors to pay the taxing fee, and of the level at which the 2^nd to 6^th plaintiffs’ costs had been assessed by the Judge).

7. We heard argument on all of these matters de bene esse, leaving the question of amendment of the Notice of Appeal to be dealt with at the end of the day.  In the result, we did not accept the submissions of Mr Yu on any of these matters, with the result that the appeal was dismissed in its entirety.  It follows that it would not be appropriate to give leave to amend the notice of appeal, and the summons dated 30 August 2013 seeking such leave is therefore dismissed with costs to the 2^nd to 6^th plaintiffs.

8. I turn, therefore, to deal with each of the matters that were argued before us, namely:-

(1)  whether or not the court should grant the declaration sought as to the basis on which the 2^nd to 6^th plaintiffs were “interested persons” within the meaning of section 68(2) of the Ordinance;

(2)  whether or not the 2^nd to 6^th plaintiffs should be redesignated as defendants to the Originating Summons;

(3)  whether or not the solicitors should be required to pay the taxing fee in the first instance; and

(4)  whether the assessments of costs by the Judge should be disturbed.

Should the declaration now sought be granted?

9. It will be noted that all that is now sought, by way of the declaration proposed in the amendments that are sought to be made to the Notice of Appeal, is a declaration as to the basis on which the order made by the Judge could (in the solicitors’ view) properly be made.  It is no longer contended that the Judge’s order was wrong.  On the contrary, it is recognised that the order made was correct, although the solicitors do not accept all of the bases identified by the Judge for making the order.  Given that the order made is no longer challenged, that would appear (for the purposes of this case) to be an academic matter, and not an appeal which this court will normally entertain.  It is well established that an appeal lies against the order made in the court below, and not against the reasons for it (see Hong Kong Civil Procedure, Vol. 1, para 59/0/11; Lake v Lake [1955] P 336; Tele-Art Inc (In Liquidation) v Tam King Ching Kenny and Shum Lap Chi et al (unreported, CA, CACV 234/2007, 19 March 2008).

10. Mr Yu submitted that this was not an inflexible rule, and referred us to the observations of Fok J (as he then was) in Ubamaka v Secretary for Security [2011] 1 HKC 508 (which were not commented on in the decision of the Court of Final Appeal, which reversed the decision of the Court of Appeal), where Fok J expressed the view (at paragraphs 172 to 181 of his judgment) that it was not necessarily contrary to principle for the court to express a view as to the correctness of a judge’s reasoning for a particular decision (especially in the field of public law) for the purpose of providing guidance of general application for future cases.

11. Mr Yu suggested that it would be beneficial for us to express a view as to the correctness of the Judge’s reasoning in relation to the nature of the interest that would make a person an “interested person” for the purposes of section 68(2) of the Ordinance.  Apart from providing general clarification, he submitted that it would also be of more immediate relevance, since the solicitors had performed other work for the estate, for which they were about to deliver bills, and it could be expected that the 2^nd to 6^th plaintiffs would almost certainly seek to challenge those bills also.

12. While we would accept that there might be exceptional cases in which this court would not adhere to the practice described in paragraph 9 above, we do not think that this is one of them.  The situation in Ubamaka was far removed from that here.  As Fok J noted, Ubamaka was a public law case.  And as Mr Chow SC, appearing for the 2^nd to 6^th plaintiffs (and who had appeared in Ubamaka), emphasised, in that case there were a number of other similar cases which were in the pipeline, for which the guidance of the Court of Appeal would have been valuable.  Additionally, there was a clear possibility of a claim for false imprisonment by the applicant in Ubamaka if his detention were unlawful, in which case the reasoning for holding his detention unlawful would be highly material.  This case, however, does not involve questions of public law.  There do not appear to be any other cases in the wings that raise the same issue.  I do not consider that the fact that the solicitors have other bills to render is a sufficient reason for dealing now with what has become an academic question.  We do not know what the amount of the bills to be rendered might be.  It is therefore speculative, to say the least, to suppose that they will inevitably be challenged.  Further, depending on the size of those bills, it may or may not be the case that the ninth part of the estate set aside for ancestral worship purposes will suffice to pay them.  If it does (or may) not, the factual position may prove to be very different, so far as the position of the 2^nd to 6^th plaintiffs is concerned.  It would, I think, be greatly preferable to consider and deal with the points as to the nature of the interest required to entitle a person to seek taxation of a solicitors’ bill under section 68(2) of the Ordinance when those points actually arise as live points in a future case.

13. I therefore do not think that it would be appropriate to entertain the appeal insofar as it is sought to be put forward on this basis.  The point can and should be raised when it actually arises in future proceedings, at which time the correctness or otherwise of the Judge’s views can be canvassed, bearing in mind that the reasoning to which the solicitors take exception was but one of the routes by which the Judge reached his conclusion.

Should the 2^nd to 6^th plaintiffs be redesignated as defendants?

14. So far as the second point is concerned, the parties were in agreement that this could be dealt with by amending the title of the proceedings so as to make the administrator (the 1^st plaintiff) a co-defendant with the solicitors, having regard to the fact that the real dispute was between the 2^nd to 6^th plaintiffs on the one hand and the solicitors on the other.  This was a course to which the administrator had no objection. It was therefore unnecessary for us to rule on it, and it was left to the parties to take the steps required to achieve this.

Should the solicitors have been required to pay the taxation fee?

15. The complaint here was that it was common ground that taxing fees are an expense of the administration of the estate, and that there was a bank account in existence designated for the payment of the expenses of the administration out of which it could have been paid.  At the hearing of the appeal, Mr Chow SC renewed an offer which had been made by the 2^nd to 6^th plaintiffs to the effect that the taxing fee could be paid out of such account in the first instance, subject to an undertaking from the solicitors to refund it in the event that more than one-sixth was taxed off their bills.  This offer was not accepted by the solicitors.  Having regard to the fact that the taxing fee is based on the amount of the bills to be taxed (and not on the amount allowed), and that the incidence of the fee (as between the parties to the taxation) is a matter within the discretion of the Master dealing with the taxation, I do not think that it can be said that the direction made by the Judge fell outside the range of reasonable directions which he could properly have made.  As Mr Chow SC pointed out, if the taxation results in no, or only a small, reduction to the bills, it is likely that the Master would order the taxing fee to be borne by the 2^nd to 6^th plaintiffs, or the estate, whereas if there were substantial reductions made, the solicitors might well be left to bear the taxing fee.

Should the Judge’s assessments of the 2^nd to 6^th plaintiffs costs be disturbed?

16. In the end, the complaints as to the Judge’s assessment of the 2^nd to 6^th plaintiffs’ costs focused on 3 matters:-

(1)  The assessment of their costs of the hearing before the Master at HK$250,000 was too generous, when compared with the Master’s assessment of the solicitors’ costs of that hearing at HK$150,000, even allowing for the fact that the Judge took account of the costs of the application for directions made by the 2^nd to 6^th plaintiffs.

(2)  In relation to the hearing before the Judge, the Judge should not have allowed the costs of HK$40,000 claimed to have been incurred by their solicitors in relation to the transcript of the hearing before the Master.

(3)  Junior counsel’s brief fee for the hearing of the application to the Judge for leave to appeal, which had been set down for 30 minutes, was, at HK$75,000, too high.

17. The assessment of costs on a gross sum basis is intended to be conducted in a broad brush manner.  It will be rare for an appeal on the quantum assessed to succeed – for this to happen, it will have to be shown that the Judge has gone clearly wrong in his approach or assessment.  This cannot, in my view, be shown here.

18. So far as the costs of the hearing before the Master are concerned, while the costs incurred by the other party may provide a useful check against which the costs claimed by the successful party may be measured, it must be remembered that it is no more than that.  It certainly does not amount to a guide which should be rigidly followed.  The actual costs incurred by the 2^nd to 6^th plaintiffs were significantly higher than the amount allowed, and were assessed downwards resulting in a reduction of about one-third.  I do not think that the Judge can be said to have erred in his assessment, let alone erred to such an extent as would call for this court to intervene.

19. As for the costs in relation to the transcript of the hearing before the Master, bearing in mind that the transcript was included in the hearing bundle before the Judge, and was actually referred to (as appears from footnote 4 in his judgment), it seems to me that it was entirely proper for the Judge to have allowed the costs claimed in relation to it.

20. Finally, in relation to the brief to junior counsel on the application for leave to appeal, as is apparent from the Judge’s judgment of 12 March 2013 in relation to that hearing, there were at least five applications before the Judge, and the hearing in fact took nearly 1½ hours.  While a brief fee of HK$75,000 might be considered to be slightly on the high side, the figure of HK$20,000 suggested by Mr Yu is, with respect, far too low.  At the end of the day, it does not seem to me that the amount allowed fell outside the range in which the Judge could reasonably have assessed it.

21. For the foregoing reasons, the appeal was dismissed with costs. For completeness, as explained in paragraph 7 above, we also dismiss the summons dated 30 August 2013 seeking leave to amend the Notice of Appeal with costs to the 2^nd to 6^th plaintiffs.

Hon McWalters J:

22. I agree with the Reasons for Judgment of Barma JA.