MA PO CHIM, PERCY AND OTHERS v. LEE TUNG HAI, LEO AND OTHERS

HCMP3253/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3253 OF 2004

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J U D G M E N T

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1. This is an application by Horwath Corporate Advisory Services Ltd (“Horwath”) by summonses dated 6 August and 5 September 2007 for interim payment of fees. 

2. The background to these proceedings has been summarized in the judgments of Chung J dated 13 June 2007 and Tang VP dated 10 July 2007, and I shall not repeat them in full.  I would add that despite the clear terms of paragraphs 1 and 2 of the order of Reyes J dated 4 April 2007 and despite its successive failures to obtain stay of execution pending appeal before Chung J or Tang VP, the 3^rd respondent has still not paid the four Allocaturs, or the $1 million into court, as required.  

3. Despite the filing of the 5^th affirmation of Percy Ma on behalf of the 3^rd respondent in opposition to Horwath’s summonses, no explanation has been put forward by the 3^rd respondent to explain this default.  In the stay application, lack of funds had not been cited as a reason.  When I asked Mr Kenneth Chan representing the 3^rd respondent this morning as to the reason for non-payment, he informed me, on instructions, and I have no reason to doubt that those were his instructions, that this was because there were factions within the 3^rd respondent and they had great distrust against each other and there were difficulties in getting them together. 

4. Even accepting that or assuming that to be the reason for non-payment, that is not an acceptable reason in the eyes of the court.  Orders are made to be obeyed until they have been stayed or set aside I cannot see how distrust with each other has anything to do with obeying an order of the court.  It is not said that the factions had a distrust against the court.  Insofar as “not wanting to meet” is concerned, the factions really had to put down any prejudices or ill-feelings they had against each other and try to comply with an order of the court.  I take it that members of the 3^rd respondent are all or all supposed to be prominent members in their respective walks of life, and if by their personal animosity against each other they managed to place their organisation into a position of contempt that will reflect badly on them.  I do not want any finger-pointing by respective factions, and I am sure that this judgment, or at least this paragraph, will be translated for their benefit. 

5. Since the four Allocaturs, three bills (which I shall call Bills no. 6, 7 and 8) had been issued by Horwath.  Taxation of those bills had been adjourned.  Although this was not expressly stated on the face of the orders adjourning the taxation hearing, the parties before me have proceeded on the basis that the adjournment was to await the result of the appeal against the orders of Kwan J dated 24 May 2006 and of Reyes J dated 4 April 2007.  Those appeals are going to be heard in February 2008.  

6. The two summonses before me today were issued by Horwath to seek an interim payment in respect of these three bills.  The amount sought by way of interim payment is 90% of the face value of the bills to reflect the possible effect of a trustee basis taxation plus perhaps, and I assume, some buffer.  In terms of jurisdiction, the marginal notes to the summonses cited the inherent jurisdiction of the court, whereas the submissions of the 3^rd respondent in opposition to the summonses relied on several principles derived from Order 29.  Mr Kenneth Chan accepted that the wording of Order 29 may not be apposite to cover a case where the party seeking to be paid is a court appointed person and not a party to any lis or dispute in front of the court.  Mr Chan, however, does not dispute that there is inherent jurisdiction to order such interim payment.  However, jurisdiction cannot be conferred by consent.  Having considered the matter, I am satisfied that the court has inherent jurisdiction to order interim payment as part of its inherent jurisdiction to regulate the conduct of persons appointed by it to carry out functions.  This inherent jurisdiction to appoint persons must also include jurisdiction to fix the remuneration payable to those persons and for providing for payments, including interim payments, to such persons pending a precise quantification of the amount payable to them.  The inherent jurisdiction does not depend on squeezing the facts of a case within the straitjacket of the statutory wording of Order 29.  

7. In the circumstances of this case, having considered all the matters put before me by the parties, I am satisfied that I should exercise my discretion in favour of ordering interim payment.  First, the point is taken by Mr Kenneth Chan for the 3^rd respondent that because there is an appeal pending against the orders of Kwan and Reyes JJ and because Tang VP had been prepared to proceed in the stay pending appeal hearing on the basis that the point may succeed on appeal, the 3^rd respondent therefore had an arguable case on appeal and if the 3^rd respondent were to succeed, the costs orders which formed the basis of Horwath’s entitlement to costs would disappear.  And it is said further by Mr Chan that because Order 29 requires the court to be satisfied that the claimant “would obtain judgment” for a substantial sum as opposed to his “likely to succeed”, in view of such an arguable appeal the court cannot be so satisfied, and therefore there is no jurisdiction, or the court should not exercise its discretion. 

8. In my judgment this argument misses the point.  First of all, as I said above, my inherent jurisdiction is not confined to straitjacketing the facts of a case within the wording of Order 29.  In any event the issue is not whether or not I am satisfied that Horwath would succeed in resisting the appeal.  For the purpose of Order 29 the relevant “trial” is not the appeal.  The relevant “trial” is the taxation of Horwath’s bills.  Transposed to the facts of this case, an application of the principles of Order 29 would be to require me to consider whether, if Horwath’s bills proceeded to taxation, Horwath would obtain judgment for a substantial sum.  The answer is plainly in the affirmative.  The fact that the taxation hearing for the three bills had been adjourned pending the outcome of the appeal is neither here nor there.  The wording of Order 29 requires the court to consider the scenario if the matter proceeded to trial.  In other words, on the facts of this case, if the matter proceeded to taxation.  I would therefore have to proceed that the matter is to proceed to taxation.  Mr Chan criticized Horwath for, in a way, jumping the gun because after consenting to adjourning the taxation hearings until after the result of the appeals are known, Horwath issued at least one of the summonses for interim payment.  In my view, I can see valid reasons for not proceeding with the taxation given the proximity between the time of the consent order and the hearing date of the appeal.  And I can see potential wastage of costs which would be incurred if the appeal ends up in a variation or over-turning of the costs orders below.  It may well be said on behalf of the 3^rd respondent that if Horwath had the courage of their conviction in the validity of the underlying orders, they could or should have proceeded with a taxation anyway, but that sort of argument is always easier said than done.  I do not believe that Horwath can be criticized for consenting to adjourning the taxation hearing on the one hand and proceeding with applying for interim payment on the other. 

9. Even if one has to take into account the potential strength of the appeal in the context of Order 29 (assuming Order 29 principle are applicable by analogy) I have had the chance of perusing the judgments of Chung J and of the Vice President together with the papers which the parties had chosen to put before me.  Having taken all these matters into account, I do not think that they preclude me from exercising my discretion in ordering interim payment. 

10. One point which Mr Chan made this morning is that Horwath is not a firm of certified public accountants.  I do not think that this point takes the 3^rd respondent any where.  There is nothing in the orders of Kwan and Reyes JJ to indicate that the making of the order was based on an assumption that Horwath was a firm of certified public accountants.  The application in front of Kwan J certainly did not proceed on the basis that only a firm of certified accountants could be appointed and it is said before me by Mr Lam on behalf of Horwath, on instructions, that Horwath is part of a global group of professionals headed by a firm of certified public accountants by the name of Horwath.  I do not think I need to dwell on this point.  Even if Horwath had been a standalone organisation which is not a firm of CPA, I do not think that this is relevant.  In this day and age there are lots and lots of professional firms which, albeit not bearing the qualifications or registration of a CPA firm, carry out a wide variety of professional services involving forensic accountancy, insolvency practice and the like.  Any argument as to qualifications of the fee earners are matters going to taxation.  I do not think much of this point at this stage. 

11. As to the justification for ordering interim payment, in my discretion I believe that it is prima facie unjust that Horwath should be kept out of pocket for fees in respect of services that they had rendered for sometime but have yet to proceed to taxation.  I have considered whether an order for interim payment would be rendered futile because of the fact that the 3^rd respondent had demonstrated an unwillingness to comply with previous orders of this court in respect of payment.  I have decided to place no weight on the fact that the 3^rd respondent had previously not paid, because otherwise I will be succumbing to the contempt demonstrated by the 3^rd respondent’s conduct.  I am not saying that it must invariably follow that if a party has issued an appointment for taxation he can always, in a way, jump the gun or be “trigger happy” in issuing an interim payment application.  Each case depends on its facts.  It may well be, in a different case, a party should really await the normal process of taxation to determine the amount actually entitled rather than resort to an interim payment application to obtain payment prior to the taxation hearing.  Without seeking to lay down an inflexible rule, this may well be so where the paying party has always demonstrated sensibility or has always been amenable to a quick agreement or quick taxation.  On the facts of this case one is concerned with a party who has demonstrated an unwillingness to pay and which there is reasonable ground to suppose may well do things (or omit to do things) which could delay taxation. 

12. As to the amount of interim payment I have had regard to the law costs draftsman’s report and objections relied on by the 3^rd respondent.  It is not appropriate for me to dwell on each and every objection in the report and to rule either in its favour or against.  I would adopt a broad-brush approach and I would resist the temptation to purport to act as a taxing master.  I have also have regard to the points raised by the 3^rd respondent about the lack of (or the alleged lack of) professional qualification on the part of some or even a lot of Horwath’s staff.  I do not give them a lot of weight.  As I said that is a matter going to taxation.  There is evidence that Horwath’s previous bills have been substantially allowed on taxation and presumably the work in those bill have been performed by broadly the same personnel. 

13. That said, I do take into account the 3^rd respondent’s objection in relation to qualifications.  I have also taken into account the fact that the 3^rd respondent has not had a chance to oppose the previous taxation but equally I do not proceed on the basis that the taxing master simply “rubberstamped” the bills without exercising his/her independent judgment. 

14. I do not accept wholesale the figures put forward by the 3^rd respondent’s report and objection.  However I do not accept Horwath’s figures in their entirety either.  Bearing in mind that this is merely an interim payment and the broad-brush approach I proposed to take and also the fact that any deficiencies or overpayments can be adjusted upon final taxation, I order that an amount equal to 80% of the total of the three bills made by way of interim payment.  I have not got a calculator so the parties or someone will have to do the sums.