FONG SHUI HIN AND OTHERS v. LAM KIT SING AND OTHERS

HCMP1989/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1989 OF 2004

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D E C I S I O N

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1.  This is an application by the Receivers of the Hong Kong Chung Shan Lung Chan Clan Association Limited (“the Association”) for their release, and for certain other orders consequent upon their release. 

2.  The Receivers were appointed by an order which I made on 15 October 2004, against the background of a dispute that had arisen in relation to the running of the affairs of the Association.  The members of the Association at that point appeared to have divided into two camps with a considerable amount of distrust between the camps, such that it had been impossible for the Association to convene its annual general meeting and hold an election for a new board of directors for some considerable period of time. 

3.  Following a hearing that lasted two days, I made an order appointing the Receivers in order to take over the affairs of the Association pending the holding of an annual general meeting and election and giving the Receivers the power to convene the annual general meeting and to conduct the election for a new board of directors.

4.  That annual general meeting was held on 2 December 2004, at which time it was adjourned, a vote having been taken to enable the ballots to be counted.  The annual general meeting reconvened on 29 December 2004 at which the result of the election was announced. 

5.  Following the conclusion of the annual general meeting and the election of a new board of directors for the Association, the primary task for which the Receivers were appointed was accomplished.  However, there were some further interlocutory applications in the proceedings shortly after that, as a result of which the Receivers remained in office.  By about January this year, the Receivers had indicated to the parties that they were prepared to seek their release. 

6.  Unfortunately, it has taken some time before the application has reached the court, partly because the Receivers sought to obtain some assurance from the incoming board of directors that they would be paid their charges, in relation to which they had advised the amount of charges up to 15 January 2005.  That amount, on the basis of the rates that were approved by the court in making the appointment, came to some HK$1.393 million in respect of some 1,193-odd hours of work by some 18 staff (including the Receivers themselves) from the firm of accountants of which the Receivers are partners.

7.  Mr Vaughan, who appears today for the 1^st, 4^th and 5^th Respondents, has indicated that he does not intend to take any point that the Receivers should be deprived of any of their fees, costs or charges during the period of their receivership and he has indicated that his clients, for their part, had no objection to the release of the Receivers today.  The petitioners, for their part, have indicated by letter from their solicitors that they too have no objection to the release of the Receivers. 

8.  It seems to me that it would be sensible that the Receivers should be released and I therefore propose to make an order releasing them from their office as Receivers.  However, the two other aspects of the application by the summons before me have given rise to some argument. 

9.  The Receivers have asked, in their summons, for an order that the 7th Respondent, that is the Association, should ensure that all the fees and disbursements of the Receivers should be paid by the Association out of its assets.  That seems to me to be an appropriate order to make.  There is no doubt that the Receivers are entitled to be remunerated out of the assets of the Association in respect of the work that they have done for it, subject to either agreement by the Association as to the amount of such charges and disbursements or alternatively to a taxation, if that be necessary.

10.  The matter that has given rise to the real controversy today is the application in paragraph 3 of the summons seeking permission for the Receivers to retain out of the assets of the Association, a sum of some HK$1.5 million as payment on account of their remuneration.  It is this aspect of the application that has caused some difficulty for the 1st, 4th and 5th respondents, and Mr Vaughan expressed their concerns in clear terms.  However, it seems to me that at the end of the day the Receivers are right in saying that they are entitled to lien or a charge over the assets over which they have been appointed Receivers - that appears from the case of Mellor v Mellor [1992] 1 WLR 517, cited to me by Mr Ng appearing from the Receivers.  In that case, the question arose as to whether or not the lien remained effective, notwithstanding that the receivers had gone out of office and had handed back the property over which they had been appointed to the companies concerned.  It was held that the lien survived those events and that the receivers remained entitled to an equitable lien over all of the assets which had been placed under their charge during the relatively short time (in that case) that they had been appointed as receivers.

11.  In this case, the Receivers have not yet gone out of office.  It seems to me that it is quite clear that they do have a lien over the assets of the Association that are in their possession.  If it were necessary, they would be entitled, it seems to me, to exercise that lien by retaining such of the assets of the Association as are necessary to satisfy their fees, charges and disbursements pending their payment. 

12.  While I can understand that the Association and the 1st, 4th and 5th respondents, who are now part of the current board of directors of the Association, may be concerned that the Association’s money should be tied up in this way, it does seem to me that on such information as I have been provided - and it is fair to say that this is not in the form of formal evidence - that the Association appears to have sufficient funds to enable that payment to be made and to have sufficient income going into the future that it is unlikely to be seriously prejudicial to the Association to permit the Receivers to retain an amount in the order of the amount which they seek, or alternatively for that amount to be placed on deposit or paid into court.

13.  Mr Ng for the Receivers indicated that the Receivers would have no particular problem with either having the amount sought to be retained paid into court or held on deposit by the Receivers.  It seems to me in all the circumstances of the case, given the identity of the Receivers, that it is not really necessary for the moneys to be brought into court.  However, it does seem to me that until such time as the Receivers’ remuneration is determined, it would be desirable for such sum as I authorise the Receivers to retain to be held in a separate interest-bearing account, so that it is put to some use pending an attempt to agree the Receivers’ remuneration and disbursements or, failing that, to have those matters taken to taxation. 

14.  I therefore propose to permit the Receivers to retain an amount of money in respect of their costs, charges and disbursements on their undertaking to keep that money in a separate interest-bearing account and to pay any surplus that may exist at the end of the day after their bills have been agreed or taxed to the Association.  That would include, of course, any accrued interest on those funds.

15.  That leaves really, I think, the question of how much the Receivers should be permitted to retain.  The Receivers have indicated, as I said earlier, that their fees up to 15 January 2005, on the basis of charging rates that were approved in the order of 15 October 2004, were some HK$1.393 million.  Since then, I think it is fair to assume that there will have been some further charges and costs incurred. 

16.  Doing the best that I can, given that there is little information as to those further charges and expenses, and taking into account the fact that if the matter does go to taxation it would seem reasonable to expect there to be some slight reduction in the amount allowed simply on the basis of the possibility that there will have been some duplication of work or some inefficiency, it seems to me in the circumstances that an appropriate amount to allow the Receivers to retain, on the terms which I have indicated, would be the sum of HK$1.4 million, and I therefore propose to make an order permitting the Receivers to retain that amount of money on the terms of the undertaking which I have indicated. 

(Discussion re provision to 1^st, 4^th and 5^th Respondents of breakdown of fees and disbursements)

17.  I think it would certainly be desirable for the Receivers to provide a breakdown of their fees and disbursements as soon as possible so that the process of either agreement or at least ascertaining that agreement is not going to be possible can get under way as soon as possible.  While I am disinclined to order them to do that, Mr Ng has made it clear that the Receivers are agreeable to providing a breakdown or a detailed bill to the Association and since the 1^st, 4^th and 5^th Respondents will, on the release of the Receivers, be taking over the affairs of the Association, delivery of the bill to the Association will be effectively giving that information to them.

(Discussion re costs)

18.  I think that, although the one matter I would have a little bit of concern about is in relation to the affidavit that has been filed on behalf of the Respondents who have appeared, I think at the end of the day that such Respondents were entitled to appear and be heard on this application and to express such concerns as they had in relation to the orders proposed.  Although the affidavit does perhaps go into rather more detail than was in the end necessary for the purposes of today’s hearing, I think in all the circumstances an appropriate order would be to make an order for costs along the lines proposed in the summons, and I shall make an order that all parties’ costs be paid out of the assets of the 7th respondent, the Association.

(Discussion re certificate for counsel)

19.  Ordinarily in a chambers’ hearing it is not necessary to seek certificate for counsel.  If the Association later wishes to take the point that counsel should not have been instructed, that is a matter that the taxing master will deal with.