TSANG KWAI CHUN v. LEUNG MAN CHIU

cacv 64/2007

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 64 of 2007

(on appeal from HCPI NO. 1032 of 1997)

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J U D G M E N T

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Hon Rogers VP:

1.  This is an appeal from Suffiad J.  Primarily it concerns what has been referred to as the Bill No. 2 costs which have been raised by the solicitors following a settlement of a very unfortunate personal injury case.  I would preface this judgment by saying that my concerns are primarily for the plaintiff because the plaintiff has suffered severe injuries; she has been awarded damages which are, by no means, excessive and as far as this court is concerned, we are concerned to make sure that no money is spent if it should not be spent, and so we wish to be very careful.

2.  What happened was that after the settlement of the damages claim had been approved by the court, the suggestion was made that a trust should be set up.  The court gave its approval to the idea but, of course, that had to be put into practice.  That meant a trust deed had to be prepared and the matter had to be approved by the court.  Whilst that was in process, the very sensible step was taken to purchase a flat for the plaintiff to live in.  I have no doubt that, looking at it now, that was a sensible course because I am sure that the flat would now be worth more than what was paid for it in those days.  But the flat was put in the name of a company which was given the plaintiff’s name.  That was a BVI company and that was the normal thing to do in those days.  The court approved the prospective trustee purchasing it provided the trustee declared that the flat was held for the sole benefit of the plaintiff.

3.  Unfortunately, things did not work out quite in the way that had once been envisaged.  Seagroatt J came to the conclusion that the trust was not a good idea, partly because of matters which had been drawn to his attention by the Registrar.  Thus, in September 2001, this was made clear but by that stage, the flat had been bought and the matter had to be unravelled.  As I understand it, the flat has been transferred into the next friend’s name or, at least, the plaintiff’s name.  At any rate, it has been transferred out of the BVI company name.

4.  Bill No. 2 costs appear to relate to matters which took place after the settlement had been approved but in addition to the costs which have been incurred with a view to setting up the trust, there are also costs in relation to a manager.  He had been appointed because the solicitors, quite rightly, drew the court’s attention to the fact that there were proposals to spend money which did not appear to be in the interests of the plaintiff.  For example, it was suggested that a $70,000 piano should be purchased when it would appear that the plaintiff was unlikely to play that herself; it would also appear that an expensive computer was going to be purchased.  Again, it was unlikely that the plaintiff would be using it herself.  So the solicitor raised this matter with the court and said that it was advisable that a manager be appointed so that he could advise the court as to what expenses should be properly incurred on behalf of the plaintiff and that there should be no excess expenditure.  The court approved that.

5.  It seems to me that most of the costs which are claimed in Bill No. 2 relate to the manager’s expenses.  Some relate to the attempts up until September 2001 to set up the trust, and some relate to unravelling what had been done in respect of the prospective trust after that.  It may be that this matter was not really appreciated by the judge below.  That seems to me to be the case because reading his decision, he concentrated very much on the prospective trustee’s costs after September 2001.  It was not until it was explained in this court that those costs of the prospective trustee actually related to unwinding, for example, the purchase of the flat in the name of the company which had been set up that the reason for those costs appearing in Bill No. 2 became apparent.

6.  On that basis, I would be prepared to allow taxation of Bill No. 2.  No doubt the taxing master has to scrutinise the bill carefully to make sure that only proper costs are being allowed and that the prospective trustee’s costs after September 2001 relate only to unravelling what had been done and not to trying to pursue setting up the trust unnecessarily.

7.  The other matter of the appeal was a matter of costs because there have been two taxations instead of one.  That has been sorted out in the course of the discussion this morning and Ms Mo on behalf of the Director of Legal Aid has indicated that they would not be claiming in respect of that and so that matter can rest and does not need to be pursued any further.

8.  In those circumstances, I would allow this appeal to the extent of allowing taxation of Bill No. 2. 

Hon Le Pichon JA:

9.  I agree.