LAU YUE KUI AND OTHERS v. PHILIP CHAN & CO (A FIRM)

HCMP 593/2007

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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J U D G M E N T

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Background

1. The background to this appeal in taxation proceedings from the decision of Master J. Wong has been set out in some detail in the skeleton submission of the appellant respondent (“the Solicitor”).  I will summarise the position only briefly.  The Solicitor acted for the Administrator of a large and relatively complex estate who is the 1^st plaintiff in these proceedings comprising primarily land in the New Territories.  The Solicitor was engaged by the Administrator in 1992 and the estate in question (“the Estate) has a value of around $1 billion.

2. That estate comprised nine shares, one component of which was said to be dedicated for the establishment of an ancestral worship trust.  The beneficiaries fell into dispute over the Estate and the terms of a Deed of Family Agreement however and litigation ensued (described in the Solicitor’s skeleton as “the 95/96 proceedings”) culminating in a decision of the Court of Final Appeal to the effect that the Deed of Family Agreement did not in fact establish such a trust.

3. I was informed that the beneficiaries had formed two rival “camps”, the 1^st, 2^nd and 4^th “Fongs” in one camp, and the 3^rd, 5^th, 6^th, 7^th and 8^th Fongs in the other.  Following the conclusion of the dispute before the CFA further litigation then ensued in which the 2^nd to 6^th plaintiffs in these proceedings commenced proceedings against the respondent and the 1^st plaintiff in these proceedings (“the P10 proceedings”).

4. The subject matter of the P10 proceedings were certain agreements said to have been made by the 1^st plaintiff in these proceedings with the Solicitor who had reached an agreement with the 1^st plaintiff (the Administrator) in respect of fees to be charged for professional services in connection with the Estate.  It was alleged that the fee agreement resulted in grossly excessive fees being charged for work in connection with the estate.

5. The P10 proceedings were compromised after the Solicitor undertook to have his Bills of Costs taxed rather than insisting on the fee agreements alleged to have been made.

6. The issue of fees was (and is) primarily a matter between the 1^st plaintiff and the Solicitor since the fees were incurred in respect of work for the Administrator.  However, the 2^nd to 6^th plaintiffs have been given leave to intervene in the taxation proceedings as interested third parties under s.68(2) of the Legal Practitioners Ordinance.  It is common ground that they will, ultimately, bear a share of these costs.

7. The matter before the Master was a summons dated 19^th April 2013 by which the Solicitor sought, inter alia, an interim payment in respect of his Bill of Costs.  The order sought was, perhaps unusually, an order that such an interim payment be made by the 2^nd to 6^th plaintiffs.  The Master dismissed that application on 25^th November 2013, and the Notice of Appeal was filed on 9^th December 2013.

The Amendment

8. In the Notice of Appeal the Solicitor seeks leave to amend its summons, maintaining its application for an interim payment, but now seeking the interim payment from the 1^st Plaintiff, rather than the 2^nd to 6^th plaintiffs.  Thus the Solicitor, having made its application against the third parties rather than the party with whom the fee agreement was said to have been made, takes the unusual step of seeking an amendment in the notice of appeal changing the identity of the party liable to make the interim payment.

9. In some respects equally strangely, the amendment is not opposed by the 1^st plaintiff, who does not in fact challenge the reasonableness of the fees at all, but it is opposed by the 2^nd to 6^th plaintiffs.  The position of the 2^nd to 6^th plaintiffs is that the application is, by the amendment, in reality a fresh application, and therefore one which should “start again” before a Master.

10. I prefer a more pragmatic approach to matters.  The parties have been embroiled in the affairs of this estate for a very long period of time, and this application for an interim payment alone has been on foot for around 8 months.  Evidence has been filed and submissions made by all parties affected.  The 1^st plaintiff does not oppose the amendment, or the application.  It seems to me that no interest is served by sending the application back to a Master, but there would be delay, the addition of costs, and a waste of judicial resources.  Accordingly I allowed the amendment and heard the application.

The Application

11. A convenient starting point in considering the application for an interim payment is the amount of the fees claimed by the Solicitor.  These correspond to the amount of the fee agreement, and stand at $40 million.  For present purposes the fee agreement is to be, in effect, disregarded and the Bill of Costs considered as otherwise conventional, comprising a series of work activities charged on a time basis. The Solicitor submits, and I accept, that the course of proceedings so far make it reasonably certain that the course of the taxation will be protracted, and most likely contested.  The challenge to the amount of fees does not come from the party directly chargeable with those fees however (the 1^st plaintiff) but rather comes from the 3^rd parties; the 2^nd to 6^th plaintiffs.

12. The 1^st plaintiff was represented at the hearing by Mr Au Lut Chi, on a watching brief.  Mr Au provided the Court with a brief skeleton submission in which it was "observed" that the 1^st plaintiff does not dispute the reasonableness of the bills of costs; does not object to any order to be made by the court for an interim payment; and notes that making such an order would save interest of $4,830 per day if ordered in respect of 50% of the amount of the Bills of Costs (i.e. $20 million).  That skeleton (and Mr. Wong’s skeleton) recorded that the amount of interest accrued to date exceeded $20 million.

13. Counsel for the Solicitor, Mr Alexander Wong (with Mr Earl Deng) refer me to a decision of the Court of Appeal in England; Tim Martin v Atkin Gump [2012] 2 Costs LR 325 in which the Court made clear that the jurisdiction in taxing costs which may be chargeable to the 3^rd party was no more extensive than that arising in a taxation between the solicitor and his client.  It follows from this, it seems to me that the fact that the 1^st plaintiff has indicated that it has no objection to the amount of the Bills, or indeed to the making of interim payment, is only one factor in the consideration as to whether or not a payment should be made, and the amount of any such payment.

14. The Solicitor's counsel submits that the 2^nd to 6^th plaintiffs should not be allowed to raise an objection to an interim payment being ordered, the only issue properly arising from the intervention of the 2^nd to 6^th plaintiffs being the amount of such an interim payment.  Given that the application was taken out against the 2^nd to 6^th plaintiffs, and they succeeded before the Master, I do not accept that it is open to the Solicitor to take such a stance on an appeal from the decision of the Master.

Factors

15. In terms of the factors in the exercise of my discretion to order an interim payment, the Solicitor submits that there has been delay caused by the 2^nd to 6^th plaintiffs during the course of the taxation proceedings, this arising from an application made by those plaintiffs for a reformatting of the Bills of Costs.  The legal services provided by the Solicitor remain unremunerated according to the Solicitor who, while acknowledging that other fees have been paid in respect of other (contentious) work connected with the estate, says he has not been paid anything towards the administrative work.  It is relevant, according to the Solicitor, that the 2^nd to 6^th plaintiffs (as the parties objecting and as parties likely to have to bear at least part of the costs) are not "financially impecunious" being indeed "flush with cash".

16. It appears, as the Solicitor acknowledges, that some money has been provided by two of the Fongs but this was, he says, “on a personal basis”, in 2001.  This was a not insubstantial sum ($10 million) but was not considered a part payment of fees by Chung J in his judgment in the P10 proceedings.

17. The potential liability of the 2^nd to 6^th plaintiffs is said by the Solicitor to be 5/8 of the total amount of the bills, and the Solicitor submits therefore that since the other parties, including the 1^st plaintiff have no objection to the amount of the bills, at the least an order for payment of not less than 3/8 of the total bill (i.e. HK$15 million) could safely be made.

18. The 2^nd to 6^th plaintiffs, represented by Mr Albert Yau of counsel at the hearing before me, acknowledged that the taxation would be a complex exercise.  This was part of the rationale for an application which had previously been made by the 2^nd to 6^th plaintiff’s seeking a reformatting of the presentation of the Bills of Costs so as to make them more amenable to an efficient conduct of the taxation.

19. Mr Yau submits that the Solicitor is now estopped from bringing an interim payment applicaltion against the 2^nd to 6^th plaintiffs, it being an abuse of process for the Solicitor now to seek to raise, in subsequent proceedings, a matter (the liability of the 1^st plaintiff to make an interim payment) which could and should have been determined in earlier proceedings.

20. While I agree that the Solicitor could have brought the earlier application either against, or including, the 1^st plaintiff, I do not accept that there is, in the circumstances, any abuse of the process involved in the Solicitor looking to his client (the 1^st plaintiff in this case) for an interim payment in circumstances in which an application for such a payment to be made by intervening parties has not succeeded.  These being interlocutory proceedings the approach to any alleged issue estoppel is of course less stringent than would otherwise be the case, and in my judgment the overall circumstances, including the fact that the 1^st plaintiff itself does not oppose such an application indicates to me that it is just and reasonable that the application be heard.

Should an Interim Payment be Ordered?

21. The position of the 1^st plaintiff taken together with the substantial amount of the costs claim, the fact that the work in question, whatever its true value, was performed some considerable time ago, and the likely substantial period of time to be taken in the taxation leads me firmly to the conclusion that my discretion should be exercised to order such a payment.  It is of no benefit to any of the plaintiffs for interest to accrue on money which, on any view, is due in respect of the services which have been rendered.

The Amount of the Interim Payment

22. As to the appropriate amount, the 2^nd to 6^th plaintiffs submit that payment has already been made to the Solicitor of a substantial sum in regard to fees.  The Solicitor submits, and I accept, that the fees which have been paid are those in respect of contentious work in the 95/96 Proceedings, not the non-contentious work covered by these Bills of Costs.  In addition the Solicitor has received certain monies from two Fongs “in a personal capacity” as referred to above.

23. The application seeks an interim payment of HK$20 million and Mr. Wong submits that a bottom line should by HK$6.25 million, this being the estimate of the value of the work described in the fee notes made by the law costs draftsman of the 2^nd to 6^th plaintiffs.  However the share of the various Fongs who do not dispute the reasonableness of the Bills of Costs would amount by itself to some $15 million.

24. I keep in mind the fact that the 1^st plaintiff and others raise no dispute as to the overall amount of the fees and the fact that, it appears, a very substantial entitlement to interest has already accrued.  Also relevant it seems to me, is that the payment is to be made in circumstances in which the discontented 2^nd to 6^th plaintiff’s could seek recourse from the 1^st plaintiff (if not the Solicitor) in the event of any overpayment.

25. The “estimate” of the law costs draftsmen referred to above seems, on the evidence, inevitably to be a cautious one.  Moreover, interest will have accrued on even that assessment of entitlement in proportion.

26. The entirety of the above considerations leads me to the conclusion that a payment of $15 million would represent a fair and reasonably cautious assessment of the sum inevitably due. Accordingly I will order an Interim Payment in that amount.

Costs

27. The Solicitor having succeeded in his application is to have his costs of the appeal as against the 1^st plaintiff.