RE LHY

HCMP 869/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 869 OF 2005

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AND

HCA 2626/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2626 OF 2007

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(Heard together)

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R U L I N G

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1.  This ruling deals with some aspects relating to costs payable out of the estate in the context of a settlement proposal submitted to this court for approval.  Subject to the question of costs, the Registrar recommends approval of the settlement.

2.  The terms of the settlement contain provisions as to payment of each party’s costs in the two High Court Actions out of the $19 million to be paid to LHY subject to caps.

3.  The Registrar was of the view that such provision is reasonable except that the costs of the party shall be on common fund basis instead of solicitors and own client basis.

4.  The Registrar has also attempted to quantify the costs payable on common fund basis.

5.  In the order appointing the Committee dated 9 December 2005, paragraph 9 authorized the Committee to instruct solicitors and counsel.  Paragraph 11 provided that the costs and expenses of the Committee, including legal expenses, are to be taxed on an indemnity basis and paid out of LHY’s estate.

6.  Subsequently, the court granted leave to commence HCA 2626/2007 and to prosecute the same.

7.  As regards HCA 2426/2007, it is a derivative action with leave being granted by Kwan J. for the prosecution of the same.  LHY is not a party to that action.  But there is no doubt that the action was prosecuted partly for his benefit.  This is reflected in the terms of the settlement.

8.  As the settlement involves both actions and I am satisfied that in the circumstances one should have regard to the situation globally.  The costs of the two actions should, for present purposes, be treated on equal footing.

9.  Given the terms of the order of 9 December 2005, the Committee should be able to recover costs of the two actions on indemnity basis as regards legal expenses incurred in the two actions.

10.  Since it is a settlement, given that the Committee would be able to recover costs on indemnity basis, I am prepared to authorize a settlement on equal footing regarding the costs of the other parties.

11.  I will therefore authorize a settlement to that effect.  In other words, I shall approve clause 6 provided that the reference to solicitors-and-own clients basis is replaced by indemnity basis.

12.  As regards the actual amount, it is a matter of taxation and not something that this court needs to be concerned with at this stage.  However insofar as agreement can be reached with figures proposed by the Registrar (after revising the basis of taxation) so much the better.  But this is not essential for the approval of the settlement.

13.  Concerning the costs of the MHO proceedings, the costs of LCC, the mother and LCK have been reserved.  LCC is not seeking costs.

14.  As a matter of principle, costs of the mother and LCK in HCMP 869 of 2005 should be dealt with in accordance with Re A, HCMH 36/2008, 15 April 2009.

15.  In Re A, it was held that costs in MHO proceedings should be assessed on a gross sum basis.  Further the court will enquire into the extent the costs incurred is reasonable and necessary in the light of the issues that can be resolved in the summary proceedings.  The court also held that one must not assume that applicant or relatives will always get a full indemnity as to costs incurred.

16.  The court sets out various guidelines at paras. 21 to 23 of the judgment.

17.  The court in Re A also considered the question whether a relative other than the applicant should get his costs out of the estate if he chose to have separate representation, see para. 22.

18.  In the special circumstances of the present case, bearing in mind that though the applicant was the mother, the person who had the resource and who was actually appointed as Committee was LCK and the attack by LCC on LCK’s fitness to be so appointed, I am of the view that it was reasonable and necessary for LCK to be represented at the inquiry.

19.  On the quantum of costs incurred by LCK and the mother in the MHO proceedings, skeleton bills were filed for the purpose of the hearing on 9 December 2005.  The skeleton bill of ONC was for a total sum of $431,371.  The skeleton bill of Fairbairn Catley Low & Kong added up to $483,300.

20.  These skeleton bills can be compared with those submitted pursuant to the direction of the Registrar.  It seems that the latters covered works done beyond 9 December 2005.

21.  There is a distinction between legal costs incurred prior to the appointment of the Committee and those after.  As far as costs incurred prior to the appointment, they would be subject to the court’s discretion over costs of legal proceedings and, as mentioned, to be considered in accordance with Re A.

22.  As regards costs incurred after the appointment of the Committee, they should in general be governed by the terms of the orders appointing the Committee and authorizing steps to be taken with the engagement of lawyers.  A relative who was not appointed as Committee is usually not entitled to get post-appointment costs out of the estate since the managerial power is vested in the Committee.  On the other hand, if there were further legal proceedings in the context of MHO, the court may exercise its discretion regarding the costs of such legal proceedings in the usual manner.

23.  In the present context, the skeleton bills submitted recently do not give any indication as regards the nature of the post-appointment works and there is no suggestion that they were related to specific steps in legal proceedings under the MHO.  If they were in respect of the general administration and management of the affairs of the estate, they should be considered with reference to the terms of the order of 9 December 2005.  This applies to items 3 to 11 of Part I of the Schedule of Costs attached to the Registrar’s report.

24.  On the basis of skeleton bills submitted in December 2005, I shall make an order fixing the pre-appointment costs of the mother and LCK at $431,371 and $483,300 respectively.

25.  I believe the above comments should clarify some aspects regarding the costs elements.  The Committee is directed to lodge representations to the Registrar on post-appointment costs in the light of these comments within 14 days to facilitate the finalisation of question of MHO costs of the Committee payable out of the estate.  The Committee should also inform his court whether the suggestion at para. 11 is agreed by the parties to the settlement.  The Registrar will report to this court within 21 days thereafter.

26.  I also approve the costs of the Official Solicitor at $39,600 in addition to the $128,262.13 previously approved.  These sums are to be payable out of the $19 million.