LAU YU SHING AND ANOTHER v. PHILIP CHAN WING HUNG

HCMP 263/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 263 OF 2010

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JUDGMENT

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1.  By this originating summons, the plaintiffs ask for an order that the defendant solicitor do render a bill for work done for them in respect of the non-contentious business of obtaining compensation arising from what the parties called “Minor Route 3 Resumption” of land.

THE BACKGROUND

2.  I adopt the succinct summary of facts provided by Mr Yau, counsel for the plaintiffs.   The plaintiffs and other fongs are the beneficiaries to the estate of an ancestor.  The ancestor died, leaving behind a very substantial estate comprising, amongst others, agricultural lands in the New Territories.  In 1946, the 8 fongs (including the plaintiffs’) of the ancestor entered into a Deed of Family Arrangement (“DFA”) dividing among themselves the lands in the New Territories into 8 shares, reserving a small portion for the purpose of ancestral worship.  Dispute among the 8 fongs arose and legal proceedings were instituted under HCMP No. 3924 of 1995 and HCMP No. 3209 of 1996 (“the 95/96 Proceedings”).  Those proceedings ended up at the Court of Final Appeal (see Re Lau Wai Chau (2000) 3 HKCFAR 98) which affirmed the validity and continued subsistence of the DFA in 2000.  As a result, each of the 8 fongs was considered in law as beneficial owners of the lands allocated to it under the DFA since its execution in 1946.  The trial judge’s order on how the lands should be divided and resumption compensation apportioned was thus affirmed.

3.  In the meantime, the 4^th son of the ancestor obtained the letters of administration and became the Administrator in respect of the ancestor’s estate in 1995.  Although the lands beneficially belonged to the 8 fongs, they were registered in the name of the ancestor.  The lands were resumed by the government in 1995 who offered to pay compensation to the Administrator. It was in these circumstances that the defendant came into the picture as the solicitor for the Administrator in liaising with the government over the question of compensation.  The plaintiffs obtained letters of administration in the years 2007 and 2008 respectively.  In October 2008, the compensation was paid by the government to the Administrator. The total compensation apportioned and designated to the plaintiffs estates (“the compensation”) stood at about $3.4 million as of 27 October 2008 and is held by the defendant on account of the Administrator.  The defendant would not release the compensation to the plaintiffs unless they paid his costs of $492,630. 

4.  The plaintiffs concede that as beneficiaries they are liable to pay the defendant but challenge the amount as exhorbitant.  The defendant had been instructed to take a neutral position in the 95/96 Proceedings and attend to administration and distribution of the estate pursuant to court orders.  The work was meant to be non-contentious and simple.  It was basically a conveyancing exercise of proving title and the DFA, coupled with the CFA ruling, would provide the most authoritative evidence of good title.  The defendant, however, said it was more complicated than the plaintiffs thought.  The plaintiffs allege that they have asked the defendant to render a bill and have it taxed but the defendant has failed to do so, hence these proceedings.

THE ISSUES

5.  The core issues are:

A. Whether the plaintiffs have the locus standi to make this application;

B. Whether the defendant has already delivered a bill; and

C. Whether the substance of this application could be distinguished from the issues in the 95/96 Proceedings.

LOCUS STANDI OF THE PLAINTIFFS IN MAKING THIS APPLICATION

6.  The defendant’s contentions as regards locus standi are two-fold: (i) the plaintiffs are not his clients; and (ii) the letters of administration of the plaintiffs are limited grants which would not entitle them to the compensation.

Limb (i): Plaintiffs Are Not the Defendant’s Clients

7.  It is true that the Administrator is the client of the defendant but it is the beneficiaries of the estate who have to settle the defendant’s costs. 

8.  Part VI of the Legal Practitioners Ordinance, Cap. 159 (“LPO”), consisting of sections 56 to 71, is concerned with remuneration of solicitors. Sections 56 and 57 relate to non-contentious business.  Sections 64-71 are general provisions regarding remuneration.

9.  The Court can order a solicitor to deliver a bill of costs: section 65(1) LPO.  Once that is ordered, the matter can proceed to taxation under section 67 and no action shall be commenced thereon until the taxation is completed.

10.  Section 68(1) LPO reads as follows:

“Where a person other than the person who is the party chargeable with the bill for the purposes of section 67 has paid, or is or was liable to pay, the bill to the solicitor or the foreign lawyer, or to the party chargeable with the bill, that person or his executors, administrators or assignees may apply to the Court for an order for the taxation of the bill as if he were the party chargeable therewith, and the Court may make thereon the same order, if any, as it might have made if the application had been made by that party: Provided that, in cases where the Court has no power to make an order except in special circumstances, the Court may, in considering, whether there are special circumstances sufficient to justify it in making an order, take into account circumstances affecting the applicant but which do not affect the party chargeable with the bill.” (emphasis added)

11.  Taking these sections together, the plaintiffs are persons liable to pay the defendant’s bill under section 68(1) LPO.  Accordingly, they are entitled to take out the present application without joining the Administrator.  At the hearing, the defendant concedes that the plaintiffs do have locus standi under this section.

12.  The defendant, however, suggests that he might be inhibited from replying to all the allegations of the plaintiffs because of his duty of confidentiality owed to his client.  I query what good reason his client may have in preventing the defendant from rendering the bill of costs or from answering the matters raised herein.  The Administrator is supposed to act in the best interests of the estate and it would be in his interest to see that the fees payable to the defendant can be promptly settled.  The defendant’s suggestion is unfounded.

Limb (ii): Limited Grant of Letters of Administration to the Plaintiffs

13.  The 2^nd limb of Mr Deng’s submission is that with only a limited grant to deal with “immovable property in Hong Kong”, the plaintiffs do not have a right to the compensation which is in the nature of a chose in action.  For this proposition, Mr Deng relies on the Court of Appeal’s decision in Tang Che Tai & others v. Tang On Kwai & others, CACV 137 of 2007.  Further, without a full grant, so the argument goes, the plaintiffs may not be able to give a valid receipt to the Administrator for any compensation paid to them.  A consent order signed by all fongs (“the consent order”) was necessary before the Administrator could distribute the compensation to the plaintiffs.

14.  In Tang Che Tai’s case, a tong was entrusted with the duty to facilitate ancestral worship.  The counterclaim was concerned with whether a 1982 agreement was valid and binding on the plaintiffs and effective in distributing compensation money received as a result of compulsory resumption of land.  The land fell under section 13 of the New Territories Ordinance.  It was held by the Court of Appeal (by a majority of 2 to 1) that such compensation money could not be regarded as land and insofar as the application of Chinese custom or customary right depended on section 13 of the New Territories Ordinance, such Chinese custom or customary right ceased to apply upon reversion of the land to the government (paras 11, 76).  It can be thus seen that the Court of Appeal there was dealing with a statutory definition of “land” that has no application to the present case.

15.  One needs to consider the meaning of the limited grants, which were issued to the plaintiffs under the probate jurisdiction of the High Court. Section 3 of the Probate and Administration Ordinance, Cap. 10 (“PAO”):

“The court shall have jurisdiction in all matters relating to probate and administration of deceased’s estates, with power to grant probates of wills and letters of administration to the estates of deceased persons and to alter or revoke such grants.” (emphasis added)

16.  Under section 2 PAO, “administration” includes any letters of administration of the estate of a deceased person, … and whether granted for general, special or limited purposes”.  “Estate” or “property” of a deceased person “means the movable and immovable property passing on the death of such person”. (emphases added)

17.  As the 2 deceased persons died before 11 February 2006, estate duty was chargeable on the principal value of all property “passing on the death” of a deceased person: section 5 of the Estate Duty Ordinance, Cap. 111.  A schedule of property passing on the death of each of the deceased issued by the Estate Duty Office (section 23, Cap. 111) was annexed to the respective letters of administration.

18.  In other words, the powers of an administrator is limited to the administration of property “passing on the death of” a deceased, be it a general or limited grant of letters of administration.  The change in form or character of that property between the time of death and administration is irrelevant.

19.  The deceased persons represented by the plaintiffs were the 3^rd son of the ancestor who died in 1987 and the 7^th son in 1956 respectively.  At that time, the 2 deceased persons were in possession of lands under the DFA which were still registered in the name of their ancestor.  Those interests in lands had been listed in a schedule of properties annexed to the respective letters of administration.  It is true that at the time these 2 grants were applied for in about 2007 and 2008, the lands had disappeared because of the resumption by the government in 1995 and compensation (quantum still not agreed upon) was to replace those lands.  That, however, does not detract from the fact that under the 2 letters of administration, it was interest in land that the administrators had to administer.  Accordingly, notwithstanding that the 2 grants were limited, the plaintiffs do have the right to receive the compensation money accruing from their lands and which has been apportioned and designated for the respective estate each of them represents.

20.  It would have been different if the lands were resumed before the deaths of the 2 deceased persons.  In that scenario, the schedule of properties annexed to the relevant letters of administration should state, as part of the deceased’s estates passing on their deaths, the amount of cash compensation or the right to receive the same.

21.  It is, of course, not strictly necessary to rule on the meaning of the limited grant for the purpose of this application.  This is because, even if the term “immovable properties” does not extend to the compensation or the limited grants do not confer sufficient right on the plaintiffs to receive the compensation money, I agree with Mr Yau that that does not deprive the plaintiffs of locus standi under section 68(1) LPO.  The plaintiffs had asked the defendant to do work for them which the defendant did.  They accepted they had the duty to pay even if their belief in having a right to the compensation was erroneous.   By delivering the Draft Bill to them, the defendant effectively agreed that the plaintiffs were liable to pay him.

22.  Accordingly, the plaintiffs do have locus to take out the present application. 

HAS THE DEFENDANT ALREADY RENDERED A BILL OF COSTS BEFORE THE ORIGINATING SUMMONS WAS ISSUED?

23.  In November 2008, shortly after the compensation was received by the Administrator, the plaintiffs have already asked for a bill from the Administrator/the defendant.  The defendant claims that he had delivered an “interim” bill under cover of a letter as early as 6 March 2009.  It met all the requirements of section 66 LPO as being signed by the solicitor and delivered to the party to be charged, i.e. the Administrator and the plaintiffs.

24.  With respect, the description “interim” bill only first appeared in the affirmation in opposition filed by the defendant.  In truth, the bill was marked as “5^th DRAFT” (“the Draft Bill”).  It implied that there had been past versions and the bill might be further altered.   In fact, in the cover letter, the defendant expressly stated that there were further items of work and time spent to be included in the bill.  Yet if the plaintiff’s contribution could be agreed, the defendant proposed not to incur further time in that respect.  The contribution could not be agreed.  Hence, to a reasonable reader of the correspondence, the bill remained in draft form.

25.  There is a difference between a “draft bill” and an “interim bill”.  A draft bill means that the contents are yet to be finalized.  It is usually sent to the paying party for the purpose of negotiation before settlement.  When the amount cannot be agreed by the paying party, the receiving party may be at liberty to reformat the bill for the purpose of taxation and claim for other costs.  An interim bill may be a bill delivered as part of the running account (see Lee Chi Enterprises Co. Ltd. v. K.C. Ho & Fong (a firm), HCMP 61 of 2007), a mere statement of how things were going on, or a “final” bill, depending on the terms of the retainer.  A final bill, in the context of a solicitor’s bill of costs, means it will not be changed and implies self containment.   “Final” does not mean “last”: Chin Yuk Lun & anor v. Messrs. Lo & Lo, HCMP 1142 of 2005.

26.  The plaintiff has pressed repeatedly for a bill to be rendered before the originating summons was issued.  Despite 2 open letters in July and October 2010 from the plaintiffs inviting the defendant to deliver a bill and go to taxation, the defendant has never seen fit to confirm that the Draft Bill was good enough and that the plaintiffs were free to proceed to taxation if they wanted to. I find that the defendant has never rendered a final bill to the plaintiffs prior to issue of the originating summons.

27.  At the hearing, the defendant has eventually agreed to adopt the Draft Bill as one falling within the letter and spirit of the bill sought under the originating summons.  He was amenable to have it taxed.  He would, however, like to put in a supplemental bill for work done after 2008, which the plaintiffs have no objection to.  The above analyses under this issue thus affects the question of costs of this application.

SUBSTANCE OF THE PRESENT APPLICATION COULD NOT BE DISTINGUISHED FROM THE 95/96 PROCEEDINGS

28.  The defendant claims that the substance of the present application by the plaintiffs cannot be distinguished from the issues in the orders for administration and distribution of the estate in the 95/96 Proceedings.  What this line of argument really means is hard to follow.  The 95/96 Proceedings were concerned with the validity of the DFA and hence beneficial division of land and compensation.  Subsequent to the CFA’s decision, there could not be any further dispute as to which parcel of land belonged to which fong.  The boundaries of lands had been professionally surveyed in the course of and for the purpose of the 95/96 Proceedings.  The work done by the defendant after this decision would be in the nature of non-contentious work in the administration of the ancestor’s estate.  The fact that the CFA’s ruling is relevant to the administration does not mean the present proceedings concerning costs of such non-contentious administration should be dealt with under the 95/96 Proceedings.

29.  Costs for the contentious business under the 95/96 Proceedings were already subject to costs orders and those should be taxed in the High Court or Court of Final Appeal as may be appropriate.  In fact, on 3 May 2004 in the course of taxation of the 2 bills filed by the defendant, a binding agreement has been reached between the plaintiffs for all paying parties and the defendant for the defendant to be paid $7.7 million together with interest.  Neither the Administrator nor the defendant has ever denied the existence of such agreement.  (No order was made by the Court despite the defendant’s assurance that he would soon get a consent order approved and sealed after obtaining the consent of the absent 1^st and 2^nd fongs.)  If the defendant genuinely thought that the present application should be dealt with in the 95/96 Proceedings, it was difficult to see why he did not put the Draft Bill to taxation there as well.

30.  The defendant suggested that a consent order signed by the Administrator and all fongs in the 95/96 Proceedings would be necessary for the protection of the Administrator before the compensation should be released to the plaintiffs.  With respect, this is related to the limited grant issue referred to above.  I fail to see why the plaintiffs under the limited grant have no right to receive the compensation.  I also fail to see why, if compensation has already been apportioned to the plaintiffs, it was necessary to involve other fongs.  Even if the consent order has to be filed for the protection of the Administrator, the costs are limited.  It should not be a hindrance to the delivery of a bill and taxation thereon.

OTHER ARGUMENTS

31.  There are other arguments raised by the defendant like: it was through his effort that the compensation was increased by the government; scope of duties of the Administrator, whether the Administrator or defendant was unwilling to release any resumption money, whether there were other fongs involved in the questions of costs, whether the plaintiffs had failed to pay the defendant despite court orders and the availability of funds.   Suffice to say that they have no bearing on the issues before me. 

QUANTUM CHARGED UNDER THE DRAFT BILL

32.  Even though the Draft Bill purports to cover work spanned over 13 years, the plaintiffs submit that there was not much the Administrator or defendant had to do in relation to the lands in question.  The defendant had been instructed to adopt a neutral stance and to attend to administration and distribution of the estate pursuant to court orders.  The compensation had been received by the Administrator.  Even if the Administrator was entitled to apply to the Court for directions before releasing the money, that would not call for too much work from an experienced solicitor.  Mr Yau has analyzed the purported work done as described in the Draft Bill and submits that the amount of $492,630 seems exorbitant.  I am satisfied that the plaintiffs have made out a case for the court to examine the reasonableness of the defendant’s bill.

33.  Both parties are amenable to summarily disposing of the question of quantum instead of going through a formal taxation.  I consider that a sensible suggestion, but I reserve my directions until I have seen the supplemental bill.  They have no objection to my handling it notwithstanding that I have read the without prejudice correspondence between the parties.

CONCLUSION AND CONSEQUENTIAL DIRECTIONS

34.  I find that the plaintiffs have locus standi to take out the present application and that the defendant had not delivered a final bill.  It is not appropriate for the present application to be dealt with under the 95/06 Proceedings.   I order as follows:

(1) Order in terms of the originating summons so that the defendant do deliver a bill for work done, if any, for the estates represented by the plaintiffs in connection with the land resumption described in the schedule to the originating summons.

(2) The Draft Bill sent by the defendant to the plaintiffs under cover of the letter dated 6 March 2009 be deemed to be a bill that satisfies the letter and spirit of the order in paragraph (1). Re-service is dispensed with but filing within 21 days is necessary.

(3) The defendant is at liberty to file and serve, within 21 days from the date of this judgment, a supplemental bill pursuant to paragraph (1) for non-contentious work done after 2008.

(4) Further directions as to whether the bill(s) should be taxed or summarily assessed by a taxing master or me are deferred until 24 February 2011 when directions will be given on the papers. No attendance is required.

(5) Pending further directions, no action shall be commenced on the bill(s).

COSTS

35.  The plaintiffs have demonstrated that they were mindful of the importance of keeping costs of these proceedings down to what Mr Yau describes as “the efficient minimum”.  They have in letters before action advanced similar arguments as they did at the hearing.  They have by an open letter dated 17 July, repeated in a letter dated 27 October 2010, offered reasonable ways to dispose of this matter by consent which were not accepted by the defendant. As late as the Friday before this hearing, the defendant was still suggesting that the originating summons be dismissed and then the Draft Bill be taxed. That was not possible because without an originating summons, the court’s jurisdiction to tax a non-contentious bill was not invoked.  I commend the plaintiffs’ legal team for doing everything reasonably possible to avoid a contested hearing.

36.  In the premises, I make an order nisi that costs should be to the plaintiffs.  The plaintiffs shall file and serve a statement of costs by 14 February 2011.  The defendant shall file and serve its grounds in opposition by 21 February 2011.  Summary assessment of costs will be dealt with when I shall give the directions in paragraph 34(4).  No attendance is required.

37.  I am most grateful to counsel for their thorough preparation and able assistance.