TO KAN CHI AND OTHERS v. TO KIN WAH AND ANOTHER

HCMP509/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 509 OF 2002

____________________

____________________

_____________________________

RESAONS FOR DECISION

_____________________________

1.  This is the decision on the plaintiffs’ summons filed on 3 May 2005.  As I understand it and as Mr Leong SC for the plaintiffs’ confirms, it is an interim application for payment out pending the hearing of the plaintiffs’ application by summons for payment out of $9 million to defray expenses and legal costs of the T’ong Tsing Wan Kun (“the T’ong”), which has been fixed for argument on 28 October 2005.

2.  That being the nature of the application, I will proceed on the basis that there are serious issues to be tried as to the plaintiffs’ entitlement to payment out.  This will take care of the defendants’ point about the To Ka Yi Tso (“the Tso”) and the T’ong being different legal entities and that the Plaintiffs should only look to the Tso’s assets for meeting legal expenses of litigations involving the Tso.  I will additionally note that the T’ong comprises the Tso and the To Clan and that members of the Tso are also members of the T’ong: see the CFA judgment in Secretary for Justice v. To Kan Chi & Others (2000) HKCFAR 481 at 486F and the judgment of Tang J (as he then was) in To Kin Wah v. Tun Mun District Court Officer & Others (unreported) HCAL 105/2002, 27 August 2004 at para.1.

3. Two main questions called for determination this morning.  The first is whether a case has been made out for the need for an interim payment out.  The second is what should be the proper quantum for the payment out.

4. On the first question, the payment sought falls principally into two categories: (1)Operational expenses of the T’ong, and (2) Legal costs and expenses. 

5. In respect of operational expenses, it would appear from the schedule of breakdown for November 2004 to March 2005 (exhibit DL-2) that the bulk of the expensesrelate to salaries, MPF contributions, utility bills, rates and government rents.  They are recurrent in nature and will be necessary in order to maintain the T’ong.  I consider that a need has been made out for their payment. 

6. As for legal costs and expenses, they are in relation to several pieces of pending actions and appeals.  Some of the costs sought, being in the nature of counsel brief fees, had already been incurred. They have to be paid.  The other legal costs are estimated and projected costs for hearings due to come up in the next few months.  On balance, I am satisfied that the incurrence of the future legal costs is necessary. 

7. Mr Krishnan asks me to note that on 19 November 2004, Yam J had ordered payment out of $4.3 million to the plaintiffs and that inspection carried out by the defendants reveals payment vouchers recording three payments totalling $3.52 million had been made to To Wing On and other payments totalling $80,000 were paid to various persons and institutions in Tuen Mun.  I am unable to see the relevance of the finding to the present application, when it is clear from Mr Dominic Lai’s affirmation that $3.9 million out of the $4.3 million was to reimburse payments of legal fees and that counsel fees had indeed been settled and paid.  It is also not in dispute that the plaintiffs have intimated that the underlying receipts are available for inspection, but that the defendants have not taken up the offer.  In short, I accept that the plaintiffs have made out a case for an interim payment of the expenses and costs sought. 

8.  I move on to deal with the question of quantum.  Item 1 is legal costs already incurred. Mr Leong SC has indicated that the plaintiffs are prepared to show the defendants the documents in support of these expenses.  On that basis, and looking at the list of outstanding disbursements (exhibit DL-1 at p.5), I am prepared to allow a payment out of the full amount claimed, which is $138,015.

9.  Item 2 relates to operational expenses of the T’ong.  The schedule of breakdown (exhibit DL-2) revealsthat approximately $36,000 is required on a monthly basis.  Since this is an interim payment pending the October hearing, it will be appropriate to provide for the eight months’ period between March when the summons for payment out of $9 million was taken out and the hearing of it in October.  The total sum for eight months is $288,000 (i.e. $36,000 x 8) and I will round it up to $290,000.  In this regard, the figure I indicated at the hearing (i.e. $250,000) is erroneous and stemmed an error in calculation

10.  Item 3 is described as accountancy fees. Mr Leong SC explains that it relates to the fees of the experts appointed under Yam J’s Order dated 17 December2004.  Although not explicit in the order of appointment, it will be implicit from paragraph 2 of the said order of appointment, which provides for payment out to meet the initial costs of the accounts and solicitors as well as the nature and scope of the appointment, that it was intended or contemplated that the costs and expenses of the experts should come out from the assets of the T’ong, at least initially.   Accordingly and workingalso on an eight months’ basis, the amount of interim payment for this item should be $600,000 (i.e. $75,000 x 8).

11.  Item 4 is the legal costs foran appeal against Master’s decision in HCA 1692/2004, which has been set down for hearing in July 2005.  Theestimated costs, including senior and junior counsel’s brief fees, are $560,000.  This may, on the face of it, seem to be a lot of money for a Master’s appeal.  However, in view of the very substantial amount of money involved in the dispute, I am prepared to accept that it is appropriate to instruct two counsel and also the estimated amount.  I will allow a payment out of the full sum claimed, being $560,000.

12.  Item 5 is the security for costs for the appeal in the Court of Appeal under CACV358/2004.  The $70,000 is to be allowed in full. 

13.  Items 6 and 7 are to be dealt with together.  Item 6 is estimated costs for the possession action in the District Court action.  Item 7is general costs, which I understood from the submissions to be, for servicing the various pending actions and appeals.  As noted above,there are several pieces of litigation in progress.  On a global basis, I am prepared to allow $300,000 to cover both items 6 and 7.

14.  The amounts for items 1 to 7 come up to $1,958,015.  Again, there is an error in the figure of $1,846,015 that I mentioned at the hearing. 

15.  In conclusion, I make the following orders: 

(1)	A sum of $1,958,015 be paid out of the funds held by HSBC International Trustee Limited and be paid into the account of Tsing Wan Kun with the Bank of China (Hong Kong) Limited under account No. 01256410007280, as interim payment to meet the costs and expenses of the plaintiffs in their capacity as managers and trustees of and for the purposes of the T’ong, pending the determination of the plaintiffs’ summons filed on 16 March 2005.
(2)	The costs of the plaintiffs’ summons filed on 3 May 2005 and of the hearing today, be in the cause of the plaintiffs’ summons filed on 16 March 2004.
(3)	The Plaintiffs’ own costs be reserved to the hearing on 28 October 2005.