LAU YUE KUI, the administrator of the estate of LAU WAI CHAU, deceased AND OTHERS v. PHILIP CHAN & CO (a firm)

HCMP 593/2007

[2020] HKCFI 2093

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 593 OF 2007

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D E C I S I O N

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BACKGROUND

1.  This is my decision on the taxation of two solicitor’s bill of costs in non-contentious business.  The two bills are referred to as “Bill No 1” and “Bill No 2” respectively. 

2.  As submitted by the 2^nd to 6^th plaintiffs (“P2-6s”), any reasonable tribunal and lawyers involved in this taxation would inevitably be daunted by the task of assessing these two bills which were rendered for non-contentious business work the respondent did for the estate (“the Estate”) of the late Mr Lau Wai Chau (“the Deceased”).  The work spanned over many years and according to the respondent it was over 11 years.  During this period, there were litigations fought among the beneficiaries in relation to the validity of the Deed of Family Arrangement executed in 1946 (“the DFA”).  These litigations were fought all the way to the Court of Final Appeal and the validity of the DFA was finally upheld in 2000. 

3.  Bill No 1 concerns the work for obtaining estate duty clearance and grant of letters of administration.  It consists of 595 items relating to work done under the 1^st fee agreement made between the 1^st plaintiff and the respondent on 29 November 1994 (“the 1^st Fee Agreement”), whereby the 1^st plaintiff agreed to pay the respondent’s legal costs (exclusive of disbursements) at 2% of the gross value of the Estate.  The Deceased owned many pieces of land in the New Territories and passed away in 1933.  The Government has resumed part of the Deceased’s land since 1980s and paid large sums of money to the Estate by way of compensation.  It has been agreed that the value of the Estate is $1 billion.  Thus, 2% of the gross value of the Estate is $20 million.  However, P2-6s estimated that the costs under Bill No 1 should be $1.25 million, but now revise it to $4.5 million. 

4.  In terms of time spent under Bill No 1, the respondent clocked 448.9 hours.  P2-6s originally estimated that the time spent should be 187 hours, but now contends that it should be 360 hours.  So the difference between the parties is just about 80 hours.  

5.  Bill No 2 concerns administrative work after the 1^st plaintiff has obtained the grant but the work has not been completed yet.  Thus, Bill No 2 is just an interim bill.  It consists of close to 20,000 items.  The work was divided into 33 Heads.  Head 32 itself consists of more than 18,000 items, the bulk of which, according to the respondent, called for his attention for 0.1 hour.  Under this bill, the respondent charged $20 million because the total amount chargeable at the hourly rate of $5,500 has exceeded the cap under the 2^nd fee agreement between the 1^st plaintiff and the respondent made on 7 November 1995 (“the 2^nd Fee Agreement”). 

6.  On the other hand, P2-6s estimated that the amount should be $1,624,590, but now revise it to $3.15 million.  P2-6s refuse to accept that a reasonable solicitor, with the skill and experience the respondent claimed, could have spent and needed to spend so much time on the work he was supposed to do under the 2^nd Fee Agreement. 

7.  Both bills were rendered to the court in small prints at just font size 8 with line spacing of 1.0.  If they were printed in the standard fonts commonly used in court proceedings, these 2 bills would take 6 box files. 

8.  The taxation was originally fixed for a 6-day hearing in March 2016, but the parties took 5 days to argue 3 preliminary issues.  I delivered my decision on the 3 preliminary issues on 24 June 2016.  Thereafter the parties did not appeal against my decision.  It seems that the parties have accepted my decision and are bound by it now. 

9.  In gist, I have decided that (1) when conducting a global assessment for Bill No 1, I should group the items as suggested by P2-6s in the examination of the time-spent element without doing it item by item; (2) Bill No 2 is a gross sum bill; and (3) since Bill No 2 is a gross sum bill, it is no longer a live issue to decide what should be done in the examination of the time-spent element without doing it item by item, but I still need to determine whether the amount charged under Bill No 2 is fair and reasonable, and one has to know whether the time spent would allow the respondent to charge the maximum of $20 million at an hourly rate of $5,500. 

10.  During the course of hearing, P2-6s seem to suggest that the respondent did not actually spend the time that he claimed to have spent, but after clarification, P2-6s confirm that they are only contending that the time spent were not reasonable for the work required to be done, without challenging the fact that such time were actually spent by the respondent. 

11.  Both parties have no dispute that the two bills should be taxed on solicitor and own client basis, and Rule 5 of the Solicitors (General) Costs Rules, Cap 159G (“Rule 5”) applies.  Under Rule 5, assessment or taxation of solicitor’s fees would need to take into account all the circumstances of the case and in particular 7 non-exclusive and non-exhaustive factors, namely: (a) the complexity of the matter or the difficulty or novelty of the questions raised; (b) the skill, labour, specialized knowledge and responsibility involved on the part of the solicitor; (c) the number and importance of the documents prepared or perused without regard to length; (d) the place where and circumstances in which the business or any part thereof is transacted; (e) the time expended by the solicitor; (f) where money or property is involved, its amount or value; and (g) the importance of the matter to the client (“Factors (a) to (g)”). 

12.  The key issues in this case are (1) whether the quantum of the fees payable under the 1^st Fee Agreement is fair and reasonable and (2) the time spent under Bill No 2 is excessive.  However, P2-6s challenge each and every aspect of the two bills and raise various arguments, which make this taxation so convoluted. 

13.  However, P2-6s have changed their positions a few times and a lot of the arguments raised by P2-6s are not really relevant to the determination of the costs payable under the two bills.  As I have pointed out at the hearing, P2-6s’ objections should only be in relation to the quantum of the two bills and they are precluded from launching a challenge that it was unfair for the 1^st plaintiff to have entered into the two fee agreements.  Hence I will not deal with each and every argument raised by P2-6s.  I will only concentrate on the key issues in this case to assess the costs payable under the two bills. 

BILL NO 1

14.  In relation to Bill No 1, P2-6s submit that the 1^st Fee Agreement was unfair and unreasonable, as it is clear from the UK authorities cited by them that fixing solicitor’s remuneration by applying a percentage to the overall value of the estate or property involved was inappropriate, and the court has the power to declare an agreement for remuneration void if the terms of such agreement shall not be deemed by the court or judge to be fair or reasonable.  The court should adopt the approach of assessing the value factor by applying a regressive scale of percentages to bands of increasing values of the property involved.  The value factor is one of the factors, often important in estate of huge value, to be considered by the taxing master when taxing fees for non-contentious work. 

15.  P2-6s submit that the 1^st Fee Agreement was prima facie unreasonable because the fixing of fee at a flat percentage would pay no due regard to the true responsibility and work done by the respondent.  Further, the flat rate of 2% adopted in the 1^st Fee Agreement was way above the Law Society’s Scale for Professional Fees for Probate Work in 1980 (“the Scale”).  The Scale was scrapped in 2000, but it is clear that in the Scale, the remuneration was charged at regressive percentages. 

16.  In sum, P2-6s’ objections to Bill No 1 are that the 2% fixed rate of charge is unreasonable and the value factor can be fully reflected by applying a fixed regressive scale.  According to P2-6s’ computation, Bill No 1 should be taxed down from $20 million to $4.5 million. 

17.  First of all, in a solicitor and own client basis taxation, the onus of proof lies on the complaining party to show that the terms of the fees charged are unreasonable, or the fees liable under the issued bill are grossly and manifestly excessive (see China Creator Estate Ltd v KC Ho & Fong, unreported, HCAMP 2689/1997, 3 January 2000; and Treasury Solicitor v Regester & Anor [1978] 1 WLR 446). 

18.  From the complaints raised by P2-6s, what I need to decide is just whether the 2% rate of charge is reasonable or whether I should adopt the regressive scale suggested by P2-6s.  In determining this question, Rule 5 applies and I need to take into account all the circumstances of the case and in particular the 7 non-exclusive and non-exhaustive factors mentioned above.  As Bill No 1 is a gross sum bill, I do not need to go through each and every item of the bill in detail. 

19.  One of the factors under Rule 5 is the time expended by the solicitor.  As the difference between the parties in term of the time spent is just about 80 hours now, the dispute in this regard is insignificant.  I can take it that the time spent is roughly about 400 hours. Hence I do not need to go through each item of Bill No 1 to make determination of the time spent.  

20.  In considering all the circumstances of the case, I need to consider the evidence on the circumstances of entering the 1^st Fee Agreement.  The respondent has summarised the evidence available in paragraphs 55 to 63 of his closing submissions, and I do not find it necessary to repeat everything here, save to say that I accept all these evidence as summarized by the respondent. 

21.  In fact, the plaintiffs in HCAP10/2001 were Lau Yue Chiu and Lau Leung Wa (deceased) who are the 4^th and 6^th plaintiffs in these proceedings.  They are therefore bound as parties in HCAP10/2001 to the evidence adduced therein.  As the 2^nd, 3^rd and 5^th plaintiffs herein have not in fact adduced any additional or further evidence against the respondent in these proceedings, they are also bound by the evidence in HCAP10/2001 which was concerned with whether it was fair in the circumstances for the 1^st plaintiff to enter into the 1^st and 2^nd Fee Agreements with the respondent. 

22.  Thus, in considering whether Bill No 1 is fair and reasonable, I have considered all the circumstances of the case as summarised by the respondent.  I will now go on to consider the 7 factors under Rule 5 as stated below. 

Factor (a): the complexity of the matter or the difficulty or novelty of the question raised

23.  From the evidence available, I have no doubt at all that the work concerning the Estate was very complicated.  As P Cheung JA at the Interim Payment Appeal observed: “one must look realistically at the position when the solicitors were first instructed to carry out the work twenty years ago.  Mr Chan had to gather information pertaining to the administration afresh.  The complexity of the matter can, in a certain way, be gleaned from the complex issues that were canvassed in the trial concerning the division of the estate to the eight fongs that took place in 1997 (HCMP Nos 3924/1995 and 3209/1996) and appeals to the Court of Appeal and Court of Final Appeal which affirmed the first instance decision.”  

24.  P2-6s in their Closing Submissions also “acknowledge that the work on the Estate was complex” but downplay the complexity and novelty by suggesting that “it was not rocket science”.  They also accept that there are some complex documents to read, and give credit to the respondent on the reduction of the valuation of the Estate but only for spotting the valuation provided by the 3 trustee-sons.  However, they reject that the work was complex only because “The more complex the issues were, the more time was likely to be spent on the piece of work.” 

25.  This approach is akin to saying time spent equal to complexity.  This is completely arbitrary and wrong and contrary to all the authorities.  As stated in Cook on Costs, 2013 edition, at pp 393, “High quality work which should be encouraged is in fact severely penalized in any system of charges solely based on time.  Charges based on the time spent reward the painful plodder for his slowness and inefficiency while penalizing the speed and efficiency of others.” 

26.  I agree with the respondent that this factor must be considered separate from the time-spent factor. 

27.  In the absence of any evidence from P2-6s to seek to rebut the obviousness of the difficulties, complexity and the novelty of matters arising in the work for the Estate, I can only rely on the evidence as summarised by the respondent.  The evidence shows that at all levels of the courts in the litigious proceedings, there were difficulties in relation to the legal questions arising from the intention of the testator and the intention of his successors and beneficiaries in conflicting testamentary and trust documents spanning over 13 years (from 1933 to 1946) and with the Japanese occupation in Hong Kong between it. 

28.  The difficulties and complexity of the work under the 1^st Fee Agreement lie with the factual and legal difficulties in obtaining probate and estate duty clearance, including but not limited to the following matters: (1) The ancestor died in 1933, no probate or grant obtained and the original belief by all the fongs that he died intestate which led to multiple instances of unintentional intermeddling; (2) Inconsistent signatures between the English will and Chinese codicil; (3) Many of the beneficiaries passed away in the intervening years which created complications in the administration of the ancestor’s estate and many did not have grants of representations issued themselves, which led to fracturing of beneficiaries and obtaining consent; (4) The tenants and trespassers claims against the ancestor’s estate due to the lack of title deeds, inaccurate lot particulars, inaccurate description of plots, and wrong boundaries; (5)      The debts of the Estate from all historical documents would have to be ascertained before probate could be granted; (6) Estate duty clearance which required tracing matters back to 1933 and seeking special waivers due to the lack of cash in the Estate at the material time; (7) The urgency of obtaining probate due to the statutory time limits to recover compensation from compulsory resumption which had occurred in 1993 and impending resumption in 1995.  

29.  Moreover, the 6^th fong in HCMP 1176/2016 (ie the 4^th plaintiff in these proceedings) sought to revoke the letters of administration de bonis non granted to the 1^st plaintiff’s successor (the 1^st plaintiff passed away on 9 August 2015) on inter alia the grounds that he had priority.  Helpfully, DHCJ Ng sets out in detail the difficulties and the fluid situation facing any potential administrator and his solicitor at the material time in 1994.  After reciting the history of the unadministered estate in her judgment, DHCJ Ng held that: “Some of the lands in the schedule to the DFA were resumed by the government in 1989 (affecting the 8^th fong), 1993 and 1995 respectively.  In 1980 and 1981, some smaller pieces of land under the DFA were also resumed.  After Lau Yue Kui obtained the grant of Letters of Administration (with will) in respect of the Estate in 1995, he proceeded to negotiate with the resumption authority (ie the Government) to collect cash compensation for the resumption of lands in 1993 and 1995, which lands respectively belonged to the 4^th fong and to the 1^st, 4^th, 5^th, 6^th and 8^th fongs under the DFA.  Since such lands were still registered in the names of the 3 sons, the Government insisted Lau Yue Kui should obtain vesting orders as precondition for release of cash compensation.”  

30.  It is therefore quite clear that at the material time: (1) There was a complex estate to administer and to apply for estate duty clearance that was going back to 1933 and that it was a huge estate; (2) There was a falling out among the beneficiaries which would complicate the work of any administrator; (3) The solicitor would be required to gather the information pertaining to the administration afresh notwithstanding the long elapse of time and the multiple changes in between in land holding and resumptions (some of which took place in 1989) afresh (as indicated by Cheung JA); and (4) There was great urgency in obtaining probate so as to collect cash compensation from compulsory resumption which would otherwise be lost, not only for the 4^th fong, but for the 1^st, 6^th and 8^th fongs and indeed all the fongs as well.  

31.  P2-6s’ suggestion that the urgency and complexity was related to the probate for the 4^th fong (ie the 1^st plaintiff) misses the point entirely.  Had no urgent steps been taken, it would have been detrimental to all the beneficiaries.  After obtaining probate for the plaintiff’s own fong, the next logical step was to obtain the probate for the ancestor’s estate so that all of the beneficiaries’ lands could be protected and compensation obtained upon compulsory resumption. 

32.  P2-6s’ contention is to play down the complexity and play down the difficulties of obtaining probate, whereas all the objective evidence points otherwise.  P2-6s’ contention has been consistently rejected at all levels of courts.  

33.  On the other hand, the long and short of all the aforesaid is that the respondent’s oral evidence both in court and in his various written affirmations and witness statements are wholly consistent with the findings at all levels of courts.  

34.  It is also important to point out that P2-6s’ submissions amount to a denigration of the contribution and importance of the solicitors profession in that somehow a solicitor’s role is reduced as compared to counsel and more so when counsel is instructed.  Such sentiment is rejected outright.  As held by Master Lai in Cheng Ningning v King & Wood, unreported, HCMP 163/2012, 21 March 2016, it is not right to think that when counsel and other professionals were engaged, the solicitor would only need to act as messenger or post box.  There was in fact division of labour between different professionals.  

35.  I am therefore of the view that strong weight to the factor of complexity and novelty of the case should be given to the question of reasonableness of the terms of the 1^st Fee Agreement.  I reject P2-6s’ suggestion for discounting the complexity by reflecting in a 20% discount on time spent. 

Factor (b): the skill, labour, specialized knowledge and responsibility involved on the part of the solicitor  

36.  P2-6s have not in fact asserted anything in particular about skill, labour, specialised knowledge and responsibility except to repeat that the complex issue was dealt with by counsel in HCMP 3924/1995 and HCMP 3209/1996.  For the same reasons set out above, I reject such submissions. 

37.  The matters which the court will take into consideration when considering Factor (b) is in fact different from Factor (a).  What the court has to consider is the value of the skill, labour and specialised knowledge of the solicitor in question that he brings to the table.  The court does not look merely at the CV of the solicitor but to consider whether the skills, labour, specialised knowledge generated results.  

38.  The evidence shows that despite multiple solicitors being consulted upon since 1970s, there was not any fruitful result for the Estate and due to the urgency and complexities involved, had the respondent failed to obtain probate and take such steps to effect estate duty clearance so as to be in a position for the administrator to obtain compensation monies, the loss to the Estate would be in the region of $100 million dollars. 

39.  Coming back to the reasonableness of the terms of the 1^st Fee Agreement, it is quite clear that if the respondent failed to obtain probate and estate duty clearance, he would not be entitled to any payment other than an hourly rate for efforts to obtain probate and estate duty clearance.  The windfall was precisely agreed due to the grant of probate and estate duty clearance being seen as difficult, almost impossible in November 1994.  

40.  Another consideration wholly omitted by P2-6s is the responsibility of the respondent – when one looks at the reasonableness of the reward, the other side of the same coin is to consider what those risks are (see Rule 9.1(e) of the New Zealand Code).  The degree of risk and responsibility assumed by the solicitor is an important consideration. 

41.  In the present case, one can glean the reasonableness of the 1^st Fee Agreement from the responsibility and the risks against the respondent in 1994 was huge.  The respondent is and was at all times a sole proprietor or sometimes with the assistance of an assistant solicitor, armed with only his specialised skill and knowledge and with very little other administrative support.  The degree of risk he undertook in taking up this case, and any potential negligence suit would have led to serious repercussions, financially and professionally.  As indicated in the Witness Statement of Anson Kan, the “professional indemnity consideration” would specifically come under Factor 5(b).  

42.  The hostility among the beneficiaries also compounded the respondent’s responsibility and difficulties and would increase the risk of adverse litigation (which already occurred in HCMP 3924/1995 and HCMP 3209/1996 where the respondent was subject to severe allegations of impropriety, and in HCAP 10/2001 where the respondent was accused of dishonest assistance in breach of fiduciary duties to enter into the 1^st and 2^nd Fee Agreements). 

43.  Another important aspect is that the respondent gave the Estate in effect an extended credit line.  This can be seen from the terms of the 1^st Fee Agreement that the solicitor did not have to be paid forthwith but payment was contingent upon the distribution of the Estate or when cash compensation is released.  It would be quite clear to any objective and reasonable observer that the dispute between the beneficiaries would be long-running and any payday would be in the distant and far future. The opportunity cost for the solicitor involved is also a matter which the court must consider as highly relevant when considering the reasonableness of the 1^st Fee Agreement. 

44.  This sentiment was likewise echoed by Cheung JA in the Interim Payment Appeal where he held that: “The solicitors had not been paid by the estate the fees under the two bills for over 20 years. Substantial interests had already accrued and will accrue on the fee of $40 million.  The two bills were served on the 2^nd to 6^th plaintiffs in 2005 and 2007 respectively.  They only served the objections after a delay of nine years.  The taxation is likely to be a long and drawn out matter.  The 2^nd to 6^th plaintiffs are financially well off from the distribution of the compensation received from the Government on the resumption of the land in the Estate.” 

45.  I therefore agree with the respondent that strong weight should be given to the factor of skill, labour, responsibility and risk involved in taking up the case to the question of reasonableness of the terms of the 1^st Fee Agreement, and I reject P2-6s suggestions for discounting the complexity by reflecting in a 20% discount on time spent. 

Factor (c): the number and importance of the documents prepared or perused without regard to length

46.  I have seen some of the documents required to be perused in the course of assessing Bill No 2, for example the historical texts such as the English Will, the Chinese codicil and the DFA.  The language in both English and Chinese and its intended effects were archaic.  The amount of information missing from the land registry and having to recompose all information to effect estate duty clearance and satisfy the requisitions of the Probate Registry would have taken not only time but a deep understanding of Chinese customary law and the interaction with English testamentary documents.  

47.  This is compounded by the difficulties of different signatures, as well as the inconsistent description of the Estate’s properties in multiple historical documents and the registration in many of the lands under the Estate.  

48.  I do not find the 486 odd hours claimed by the respondent being excessive or unreasonable at all.  If I had to go through the time spent, I would also allow this time spent in full.  I reject P2-6s’ suggestion for discounting the complexity by reflecting in a 20% discount on time spent.  

Factor (d): the place where and circumstances in which the business or any part thereof is transacted 

49.  P2-6s have suggested that this factor has no significance.  The authorities on this factor seem to suggest that this is usually concerned with whether London rates are applicable – this is because in England and Wales, London firms due to their operating expenses command a higher premium.  Nonetheless, what can be gleaned from the authorities is that the court will take into account the operating expenses of the solicitor in question, as well as the average costs of other firms or quotations received by the client, and the prevailing practice of the solicitor’s profession at the time.  

50.  I therefore agree with the respondent that for the purpose in Hong Kong, the court may take into consideration the following: (1) Any evidence of legal fees and quotations from other solicitors or similar professional work; (2) Any evidence that the solicitor in question is extending credit to the client; (3) Evidence of prevailing practice and guidance from the Law Society of Hong Kong, and other practitioners experienced in the subject area of practice; and (4) Evidence of the size of the firm and the percentage of professional time devoted to the works by the firm.  

51.  In the present case, there are uncontested evidence that: (1) There was an offer by a developer to pay $220 million in legal and estate duty fees, in a deal to purchase all the lands of the Estate outright for a further consideration of $680 million; (2) The fees of trust companies charging at least 1-2% flat fee for acceptance and the obtaining estate duty clearance, 1% withdrawal fee, an annualised 1% management fee and 1% -2% withdrawal fee (which would mean that an estate administered for 3 – 5 years would incur around 5 – 9% of fees assessed at the gross value of the Estate); (3) The guidance of the regressive scale for the Hong Kong Law Society was the“minimum” fees chargeable by a solicitor in order to avoid under-cutting and unhealthy competition and punishment by disciplinary misconduct upon breach (contrast with England where the regressive scale fees were the maximum a solicitor was entitled to charge unless special circumstances arose); (4) The evidence of Anson Kan whose expert evidence clearly states that the 2% gross value of the Estate at the time the 1^st Fee Agreement was entered into was entirely consistent with the spirit of the Law Society’s 1980 circular and reasonable in the circumstances; and (5) The evidence of the respondent who devoted about 30% of his professional time in this case from 1992 to 2003, and in the peak years under Bill No 2 (ie 1996 to 1998), 60% to 80% of his professional time. 

52.  While P2-6s have not directly commented on this factor, they have sought to play down the relevance of comparable rates for professional fees of trust companies, alleging that the work done by such companies is very different in nature from the respondent’s work as a solicitor. 

53.  However, P2-6s have failed to address the respondent’s evidence that the work he did and the advantage he offered was in fact similar to that of a trust company if not more.  Furthermore, P2-6s do not challenge the evidence that trust companies would charge at the rates of between 5% to 9% for a 5-year administration of the Estate depending on which bank or firm, starting with around 1% to 2% for the initial fee and a subsequent 1% for annual administration fees and 1% to 2% for withdrawal fee. As such, I am entitled to take into consideration the prevailing rates of professional trustees in the administration of estates including obtaining estate duty clearance to assess whether the 1^st Fee Agreement is reasonable.  

54.  As regards the $200 million odd legal costs which P2-6s were prepared to pay, P2-6s seem to suggest that that amount contained more components than what the respondent was concerned with under the 1^st Fee Agreement.  This submission is made without any evidential foundation but in any event, there is no explanation as to why when comparing $200 million to $20 million, the latter is not manifestly excessive while the former would be.  I note that it is the 6^th plaintiff’s admission himself that the legal costs would be very high – he himself being a solicitor.  Yet to this date, he himself has not asserted what his own firm would have charged for the purpose of administering the Estate despite having the opportunity to do so in HCAP 10/2001 as well as in this taxation proceedings. 

55.  As such, I am entitled to take into consideration of the legal fees of $200 million to compare as a benchmark as to whether the terms of the 1^st and 2^nd Fee Agreements are reasonable.  

56.  P2-6s rely heavily on the regressive scale as the maximum fees in which a solicitor ought to receive.  This is in fact contrary to the applicable guidance in effect in 1994 pursuant to the 1980 Law Society Circular, and the expert evidence of Anson Kan.  There is no evidence offered by P2-6s to the contrary nor can they find any authority that such practise has been adopted in Hong Kong at the material time or even now. 

57.  I therefore agree that I should give strong weight to the factor of where and circumstances in which the business or any part thereof is transacted to the question of reasonableness of the terms of the 1^st Fee Agreement.  I reject P2-6s’ suggestions for discounting the complexity by reflecting in a 20% discount on time spent, as well as applying a regressive scale. 

Factor (e): the time expended by the solicitor

58.  As stated above, the difference between parties of time spent under the 1^st Agreement is minimal and I can take the time spent as being about 400 hours.  There is no reason to accept P2-6s’ assessment of time as being accurate or their suggestion that the time spent for such a complex administration and probate work is an indication of the efficiency, skill and knowledge of the respondent.  

59.  I therefore reject P2-6s’ submissions for a 20% reduction in time spent.  

Factor (f): where money property is involved, its amount or value

60.  P2-6s have consolidated their analysis on Factors (f) and (g) together.  Their attack here is primarily premised on applying a regressive scale against the value of the Estate to ascertain the “value-add” aspect to the 1^st Fee Agreement. 

61.  P2-6s rely heavily on the Court of Appeal’s analysis in Jemma Trust C Ltd v Liptrott [2004] 1 WLR 646 (“Jemma Trust No.1”), which was a decision issued on 24 October 2003.  They also relied on the same UK example of scale fees in HCAP 10/2001 to justify their attack on the fairness of the 1^st plaintiff into entering the 1^st and 2^nd Fee Agreements with the respondent.  Chung J rejected outright this line of submissions and held that: “The plaintiffs have also referred to the fees charged in the UK.  I also agree with the defence that references to the fees charged in the UK are not helpful to the determination of this issue; there is no evidence relating to whether the respective fees charged there and in Hong Kong are similar.”  

62.  The application of the UK regressive scale as a limit to the maximum level of remuneration, apart from being never adopted in Hong Kong, is directly contradicted by the Hong Kong approach prevailing in 1994 that a “minimum scale” would be used and for estates over a certain value a discretionary amount to be negotiated at arms-length by the solicitor and client (see Witness Statement of Anson Kan). 

63.  Despite P2-6s’ detailed submissions in this regard, they can be quickly disposed of.  What P2-6s have failed to realise, or at least failed to bring to the court’s attention, is that after Jemma Trust No.1, the matter went back down before the Costs Judge.  In Jemma Trust No.2 [2004] EWHC 9011, the Costs Judge Master Rogers held that: “My overall reading of the two judgments of the Court of Appeal is that, at the end of the day, it is for me to take all factors into account in arriving at what I consider to be the appropriate figure.  Applying the so called updated Maltby regressive scale is one of those factors, but by no means the only, or indeed the decisive one.  I am persuaded by Mr Bacon’s skeleton, and Mr Fenwick’s advocacy, that that is correct, and that I am in no sense bound by such a low figure, if, as I do, I find that it does not represent a proper assessment of the value element in this matter.”  

64.  This subsequent decision was upheld on further appeal with a single judge sitting with Costs Judge Wright sitting as an assessor in [2004] 4 Costs L R 610.  

65.  In any event, as set out by Master Rogers, the regressive scale is at most a cross reference as to the reasonableness of the 1^st Fee Agreement, but depending on the circumstances, it is not the only or decisive factor.  Subsequent to going through 7 of the objections not dissimilar to P2-6s’ objections, Master Rogers observed and concluded that: “In his skeleton, in paragraph 18, Mr Post suggested that taking the above issues cumulatively it would appropriate to make a 30% disallowance in the hours claimed by the Defendants in this case.  Mr Fenwick in his submissions said that that was a totally arbitrary percentage, and that, even were I to hold that Mr Post was right in each and every one of those objections, that of itself could not possibly justify a reduction of 30% in the time.  I accept Mr Fenwick’s submissions in that respect.  This is not a case for adding up the successful objections and then making a global reduction. … 100.  I have come to the conclusion after taking into account all the factors laid down by the remuneration order, all the submissions made to me by the advocates, and on my perusal of the documents, consideration of the transcripts and evidence given by the witnesses, that the fair and reasonable charge for these bills, which is both fair and reasonable to the solicitors, as well as to Jemma Trust, is the total sum of £500,000.  This of course equates to a value element of £141,906.71, which is considerably in excess of the £30,300 which the application of an updated regressive Maltby v D J Freeman scale would suggest, but I do not think that the application of such a scale would produce the right result in this case.”  

66.  This holding was upheld on appeal in [2004] 4 Costs LR 610.  In other words, the value element of £141,906.71 in that case amounted to an uplift of almost 5 times the strict regressive scale approach which would otherwise have only amounted to ₤30,300.00.  For all intents and purposes the regressive scale principle was not applied in that case.  Instead, the court took a view based on experience and the work done as to what was a reasonable amount to allow and evidently felt unconstrained by regressive scale parameters.  That is more consistent with the position in Hong Kong where such regressive scale has no place in law.  

67.  The approach of P2-6s by applying a pure maximum regressive scale approach and without considering all other factors would certainly produce the wrong result in the present case as there is simply no uplift in respect of the value factor.  

68.  I have the benefit of oral evidence in relation to Bill No 2 in respect of the background of the case due to the overreach of P2-6s’ own cross-examination.  I also have the benefit of: (1) the judgments of the Court of First Instance before P Cheung J and the Court of Final Appeal in the HCMP 3924/1995 and HCMP 3209/1996; (2) the judgment of the Court of First Instance before Chung J in HCAP 10/2001; (3) the judgments of the Court of First Instance before Recorder Houghton, and the Court of Appeal with P Cheung JA giving judgment on interim payment in these taxation proceedings at the Interim Payment Appeal; and (4) the oral evidence of the respondent when he was cross-examined in relation to Bill No 2 and especially the early part of the evidence concerning his background knowledge and experience of the case before entering into the 1^st Fee Agreement. 

69.  Although the respondent was separately remunerated for these proceedings, these proceedings confirm clearly that the work for the Estate under the 1^st Fee Agreement was not an easy task at all.  The money or value involved does not support P2-6s’ contention that the regressive scale approach is appropriate. 

70.  Thus, I totally reject the regressive scale approach as suggested by P2-6s. 

Factor (g): Importance to the Client

71.  P2-6s have not directly addressed this factor, but their submissions downplay the importance of the work and its urgency on the basis that the 1^st plaintiff was in fact administering his own fong’s estate and therefore the importance was limited to that instead of the overall picture.  

72.  However, there is no evidence to this effect. P2-6s did not seek to call the 1^st plaintiff to give evidence or to cross-examine his successor on this point (Freeman Lau was at all times assisting the 1^st plaintiff in the administration of the ancestor’s estate and is also the executor of the 4^th fong’s estate).  They therefore have no basis to make such spurious allegations as to what is or not important to the 1^st plaintiff.  

73.  The evidence in fact shows that the obtaining of probate for the ancestor’s estate was of paramount importance to all the beneficiaries, as can be seen from the reasons set out by Chung J and DHCJ Ng.  

74.  What is important however is that P2-6s seem to suggest that the facts as found by Chung J is not relevant to the present proceedings as he was concerned with a different matter.  This is again an erroneous reading of Chung J’s judgment where he clearly made a finding and holding that in all the circumstances, it was not unfair for the 1^st plaintiff to have entered into the 1^st and 2^nd Fee Agreements with the respondent.  The only reason why he declined to assess the reasonableness of the fee agreements and tax the bills there and then was because he wanted to give P2-6s an opportunity to adduce further evidence on quantum.  

75.  The positions before Chung J in 2006, and before me now are identical.  Chung J was unable to assess the reasonableness of the term in the 1^st Fee Agreement at that time due to a lack of evidence then.  Even when it comes before me, P2-6s are merely making assertions that $20 million is too high without any concrete evidence in support. 

My finding 

76.  Having considered all the factors as discussed above, I come to the conclusion that the 2% rate of charge under the 1^st Fee Agreement is by no means unfair or unreasonable.  The burden is on P2-6s to show that it is unreasonable in the circumstances, but for reasons aforesaid, P2-6s have fallen far short of showing that the terms of the 1^st Fee Agreement are unreasonable. 

77.  I therefore allow the costs under Bill No 1 in full. 

BILL NO 2 

78.  P2-6s’ submissions in this regard are set out under two broad headings of: (1) general observations and (2) the assessment. 

79.  However, I do not find it necessary to deal with all the general observations as such.  Bill No 2 is a gross sum bill as determined by me in my decision for preliminary issues.  There is no dispute that the terms of the 2^nd Fee Agreement is reasonable.  It is just a matter of whether the respondent can claim the capped amount of $20 million in view of the time he spent.  P2-6s are not challenging that the respondent did actually spend the time he claimed.  They also confirm in their closing submissions that they made no objection based on the footing that the work as described was outside the scope of work the respondent was asked to perform under the 2^nd Fee Agreement.  So the issue is just whether it is reasonable to spend so much time for the work under the 2^nd Fee Agreement.

80.  P2-6s’ main contentions are just that there were a lot of repetition of work and the charge of 0.1 hour for most of the work is unreasonable.  They also contend that there were no documents to record the actual time spent in most of the items of claims. 

81.  However, these contentions would not bring P2-6s’ case any further.  First of all, as confirmed by the law costs draftsman, 0.1 hour is the smallest time unit allowed in usual practice.  The understanding of the profession to use 0.1 hours as the minimum time unit is set out in the English Law Society’s publication “The Expense of Time”, where even on the 5^th ed released in 2012 provides that: “For short letters and telephone calls which are not individually timed, an average of five or six minutes is normal.”  I accept that 0.1 hour is the smallest unit of charge.  Hence, there can be no complaint that this unit is used for a lot of the items. 

82.  Even when there were repetitions of work, it does not mean that the respondent did not need to repeat the work.  When the work is repeated, the respondent is till entitled to claim this smallest unit of charge.  It is not P2-6s’ case that the respondent did not do the repetition works, and that being the case, the respondent is entitled to claim the minimum charge even for repetition works. 

83.  As to the lack of record of time spent, there is no dispute that the respondent does not have a complete set of all the records.  However, this is not fatal to the respondent’s claims.  The law costs draftsman in preparing the bill would look at the documents for the work done and fix a time spent (such as the smallest unit of 0.1 hour) even when there were no contemporaneous records of the time spent.  It is up to the paying party to challenge the time fixed for each item. 

84.  Thus, I will only need to discuss the assessment aspect of P2-6s’ submissions. 

Assessment

85.  P2-6s made their assessment of Bill No 2 in Part IV(b) of their closing submissions.  I do not find it necessary to repeat the same here.  However, their assessment of the hours that the respondent should be entitled to claim as compared to the hours claimed by the respondent is helpfully set out in a table as follows: -

Group	Head	Description	PC claimed	P2-P6 propose
C	1	分產擬定書 (26 pages)	73.3	9.0
C	2	分產決定書 (21 pages)	68.3	9.0
C	3	分產決定書 (一宅劉汝器管業) (10 pages)	48.1	9.0
A	4	Original 1946 DFA with plan + China ppt	139.0	27.0
B	5	1946 DFA Lot Chart (2 pages)	79.9	45.0
D	6	劉維疇氏家譜新開紀元之始自序 (12 pages)	5.3	1.0
D	7	劉亮伯氏平生自序錄 (42 pages)	15.3	1.5
A	8	English Will (3 pages)	12.5	6.0
A	9	進支正流 (52 pages)	38.2	12.0
J	10	Chinese handwritten draft Will (1 page)	6.0	6.0
G	11	First D.D. sheet	38.6	5.5
B	12	1932 Division of Property (M8)	95.7	12.0
H	13	Family Tree (1 page)	17.5	3.0
E	14	Photo land searches made in 1980-1990	64.9	8.0
E	15	Land Registry Searches (952 searches)	89.0	20.0
J	16	Applying for missing title deeds	3.4	3.4
E	17	Summary of Memorial Cards	74.7	8.0
G	18	A Rent Roll Chart (7 sets)	43.4	5.0
G	19	Block Crown Lease Table (6 sets)	12.1	6.0
F	20	Survey Certificate (2 pages)	38.3	6.0
F	21	Division Plans Correspondences	62.5	16.0
F	22	Division Plans (133 copies)	14.9	6.0
F	23	Land registration	62.1	22.0
F	24	Deed Poll, etc	59.1	14.0
H	25	Tenancies; if any, land in 1946 DFA	63.0	10.0
J	26	Minutes of Meeting	4.6	4.6
J	27	Draft $50M Agreement	3.1	3.1
J	28	Aerial photos, maps, charts and plans	12.0	12.0
G	29	Lot Identification Plans (373 plans)	22.5	8.0
F	30	Land Boundary Plans / Dimension Plans	12.8	6.0
J	31	1946 DFA Plans (18 plans)	1.4	1.4
X	32	Work done on individual pieces of land	2,283.4	72.0
J	33	Miscellaneous work done	14.3	14.3
		Total	3,579.2	387.8

86.  Translating into money value, P2-6s contend that the respondent is entitled to claim $2,132,900 ($5,500 x 387.8 hours).  On top of that, P2-6s concede that the respondent’s clerk can charge a rounded sum of $1 million.  Thus, according to P2-6s, the total costs under Bill No 2 is $3,132,900. 

87.  On the other hand, using the hours claimed by the respondent, the respondent is entitled to claim $19,685,600 ($5,500 x 3,579.2 hours).  Adding the clerk’s remuneration as conceded by P2-6s, the total costs under Bill No 2 is $20,685,600, which exceeds the capped amount of $20 million. 

88.  The disparity between the respondent’s claimed amount of $20,685,600 and P2-6s’ assessment of $3,132,900 is just too great. 

89.  I find that P2-6s’ assessment is based on a lot of assumptions and very arbitrary in selecting some examples to make the assumptions, which could be the reasons for the great disparity between the aforesaid amounts.  I cannot simply adopt such arbitrary approach to arrive at a fair and reasonable amount for Bill No 2. 

90.  On the other hand, as P2-6s are challenging each and every item of Bill No 2, I also cannot simply adopt the respondent’s figures without doing any assessment of each and every item.  Even though Bill No 2 is a gross sum bill and I would not need to go through each and every item in normal cases, I find it unavoidable in this case to go through each and every items so as to assess whether the time spent for each item is fair and reasonable. 

91.  Thus, I have spent a lot of time to go through the taxation bundles (which are voluminous) so as to assess the time spent for each and every item under Bill No 2 (which has almost 20,000 items). 

92.  At the end of this exercise, I do not find any item of claims being unreasonable or excessive.  Thus, I allow all the costs claimed under Bill No 2 in full.  As computed above, the respondent’s claim is actually more than $20 million, but with the agreed cap, the allowed costs is therefore $20 million. 

INTEREST

93.  P2-6s raise the question of interest in their final submission.  They contend that after the respondent gave the undertaking to tax the two bills in 2007, there was for a long period of time in which no progress was made to proceed with the taxation.  The respondent sought to blame P2-6s for the delay because he said that paying parties could have the conduct of taxation.  In the end it was P2-6s who issued the summons compelling the respondent to issue the Notice of Commencement of Taxation in December 2011. Since then, the respondent used various reasons to oppose the taxation to move forward, relying on grounds like P2-6s had no locus standi to tax and also that he has agreed with the administrator so that the costs to be taxed here would be paid out of the properties of the common parts rather than by any individual beneficiaries.  His opposition to taxation continued from December 2011 until September 2013 when the Court of Appeal dismissed all his grounds of opposition in CACV 120/2013.  P2-6s, therefore, reserve their rights to argue in due course that the interest bearing period of the costs certified under these two bills should be abridged having regard to all these circumstances. They also ask me to give directions for written submissions to be submitted to canvass this issue on interest. 

94.  While the respondent admits that he sought to challenge the locus of P2-6s to participate in these proceedings and they have ultimately been allowed to do so, this was in fact a legitimate point of law which provided clarity to the profession.  In fact, Master A Ho’s initial ruling vindicated the respondent.  Before the Court of First Instance, the respondent was deemed to have been estopped to argue this point due to his undertaking, and thus the question of law was decided in obiter.  On appeal, the Court of Appeal actually left open the question of law raised by the respondent (upholding the appeal only on the estoppel point due to a concession by the respondent on the estoppel).  As a result of the respondent’s principled approach to the law on third party taxation, the respondent has already been penalised on this for substantial costs in those hearings.  It would therefore be entirely unfair for him to be suffer double jeopardy and further penalised on interest.  What P2-6s could have done, and should have done, is to have paid interim payment to stop the interest from accruing.  As one can see, it necessitated yet again the respondent’s initiative to seek interim payment to stop the interest from accruing to ensure that the Estate did not suffer from P2-6s’ hostile approach towards the 1^st plaintiff and the respondent.  The respondent therefore submits that interest should be allowed at the full or on an enhanced rate.  

95.  Since the parties have already made submissions on interest in their respective closing submissions, I do not find it necessary to give directions for them to file further written submissions. It is also not right for P2-6s to reserve this issue as it should be raised at the taxation. 

96.  In my view, I agree with the respondent that he was not at fault in raising the legal issue about the locus of P2-6s. This legal issue was in fact ruled in the respondent’s favour at the first instance but was left open on appeal.  So it cannot be said that the respondent was wrong in raising the issue.  P2-6s could have made interim payment and that could have stopped interest running.  Thus, the respondent is entitled to the normal interest without any deduction. 

CONCLUSION

97.  By reasons aforesaid, Bill No 1 is taxed at the sum of $20 million. 

98.  Likewise, Bill No 2 is taxed at $20 million. 

99.  The respondent is entitled to claim the normal interest without any deduction. 

100.  Usual directions after taxation apply.