Ho Chor Ming v. Hong Kong Chiu Chow Po Hing Buddhism Association Ltd
Read the full judgment text of HCMP 506/2013 on BabelCite. This High Court CFI judgment was delivered on 8 June 2018.
1. The substantive proceedings concerning Hong Kong Chiu Chow Po Hing Buddhism Association Limited (“ Association ”) have been determined in my decision dated 25 November 2015. The matter that has arisen now is the Association’s application to set aside or re-open the assessment of the bills of the receiver and manager of the Association (“ Receiver ”) and his solicitors (“ Solicitors ”).
Cited by 3 cases · Cites 9 cases
|
HCMP 506/2013 [2018] HKCFI 1104 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO 506 OF 2013 ____________________
____________________
____________________
____________________ D E C I S I O N ____________________ Introduction 1.The substantive proceedings concerning Hong Kong Chiu Chow Po Hing Buddhism Association Limited (“Association”) have been determined in my decision dated 25 November 2015. The matter that has arisen now is the Association’s application to set aside or re-open the assessment of the bills of the receiver and manager of the Association (“Receiver”) and his solicitors (“Solicitors”). Background 2.Because of the dispute over the membership and directorship of the Association, on 29 August 2013, on the application of the original sole applicant in these proceedings (now the 1st Applicant), Harris J appointed Mr Fok Hei Yu, a professional accountant, as the Receiver with general management powers vested in him to the exclusion of the board of directors (see §6 of schedule 1 to the order). Apart from the usual functions of securing, managing and preserving the assets, the Receiver was further directed to verify the register of members, prepare a list of candidates for election of directors, and convene an EGM of the Association. As regards remuneration, §7 of schedule 1 to Harris J’s order provided:
3.On 17 April 2014, the Receiver wrote to the court to provide an update, inter alia, that the fees and disbursements incurred by him from the date of his appointment up to 31 March 2014 and those of his legal advisers up to 28 February 2014 came to a total of approximately $5.046 million and $80,000 respectively. The court’s reply dated 19 May 2014 stated:
4.The Receiver further wrote to the court on 28 May 2014 seeking, inter alia, the following directions:
“Applications” and “Further Applications” above refer to applications by potential members for declaration as to their membership of the Association. On 4 June 2014, the Court replied, giving directions in the terms sought. 5.As part of the work for ascertaining the membership of the Association, the Receiver sent questionnaires to numerous individuals, analysed the answers returned to him and reported his findings and conclusion to the court, namely, that none of the persons claiming to be a member was in the Receiver’s opinion a member of the Association. 6.The 2nd to 8th Applicants were joined into the proceedings as additional persons contending to be members of the Association. The question of membership of the 8 Applicants was determined by this court on 25 November 2015. I found the 1st to 7th Applicants but not the 8th Applicant to be members. At the end of my decision an order for costs was made as follows:
As drawn up, after an amendment, the order read:
7.By a letter of 10 May 2016, the Receiver indicated to this court that there was insufficient cash to pay outstanding fees and disbursements in the receivership (then standing at approximately $3.6 million), and proposed that the shop premises in Mongkok (“Shop”) owned by the Association be sold in order to settle the costs. This letter was copied to the 1st to 7th Applicants on 16 May 2016. 8.The parties having failed to reach agreement, I gave directions on 29 June 2016 to the following effect: that an EGM be convened for the purpose of electing directors of the Association, that management of the Association (save as to the Shop) be handed over to the board of directors after its election, and that the question of sale of the Shop be deferred with a view to giving an opportunity to the directors (once elected) to consider the matter and to make alternative proposals if any, with liberty to the Receiver to restore the application for directions for sale of the Shop. As for costs, I ordered that：
9.Pursuant to those directions, directors were duly elected at an EGM held on 12 August 2016. Management of the Association was handed over to the board of directors. At the directors’ request, the Receiver did not immediately restore his application for directions to sell the Shop, pending exploration of alternative ways of settling the outstanding fees and disbursements of the receivership. From September to December 2016 there were communications between the parties regarding a possible bank loan secured on the Shop, and taxation of the various parties’ costs pursuant to previous costs orders were put on hold. 10.On 18 January 2017, the 3rd Applicant wrote to the Receiver asking for:
This appears to have been the first request by any of the Applicants, whether for and on behalf of the Association or otherwise, to the Receiver for information about his fees and disbursements. 11.The Receiver replied by return giving the 3rd Applicant certain global figures as follows:
12.On 19 January 2017, the 3rd Applicant asked further for all approved bills, letters of approval from the court and the allocaturs issued, if any. By email of 7 February 2017, the Receiver stated that the fees and expenses had been taxed and allowed by the court, and that he failed to see why the 3rd Applicant needed to review the approved bills. Thereafter correspondence continued in which the 3rd Applicant pressed his demand for copies of the bills and the Receiver resisted it. In particular, in May 2017, the 3rd Applicant wrote to say that the amounts of fees and disbursements incurred were very high and far exceeded what was indicated by the Receiver before he was nominated for appointment by the court. 13.As the matter of payment of the outstanding amounts had not been resolved, the Receiver applied on 20 June 2017 to have the question of sale of the Shop restored for hearing. This was subsequently fixed for hearing on 20 December 2017. The fees and expenses as yet unpaid amounted to over $6 million. 14.In anticipation of the hearing, various members of the Association individually sought to obtain information on the Receivers’ fees and expenses, apparently because the board had been unable to form a quorum and pass the necessary resolutions. Thus, on 13 July 2017, the 1st to 3rd Applicants’ solicitors wrote to the court seeking a copy of the Receiver’s and the Solicitors’ bills. This was opposed by the Receiver for lack of legal basis. In reply, the 1st to 3rd Applicants referred to RHC Order 62 rule 21(2), which the Receiver considered to be inapplicable. 15.On 9 October 2017, the 4th Applicant wrote and asked the court to release to the parties information of the Receiver’s and the Solicitors’ bills. This was treated as an application by the 4th Applicant for discovery or inspection which Master Hui heard on 2 November 2017 and dismissed on the ground that the 4th Applicant did not have the requisite standing. The 4th Applicant’s appeal against this decision was later adjourned also to 20 December 2017. 16.Finally, on 13 December 2017, a summons was issued on behalf of the Association seeking an order to set aside the “taxation proceedings” in relation to the Receiver’s and the Solicitors’ bills, an order that the Receiver and Solicitors do submit their bills for taxation before a Master, that they provide the Association with their bills with full particulars and that the Association have leave to participate and serve a statement of objections. 17.At the hearing on 20 December 2017, the question of sale of the Shop was largely resolved and avoided by the Association undertaking to pay $4 million by the end of December 2017 and another $2 million within 6 months to the Receivers on account of his fees and expenses, subject to the Receiver’s undertaking to pay back any surplus if the previous assessments of his remuneration and disbursements were re‑opened and the amount found payable was reduced. The assessments 18.Meanwhile, the Receiver had from time to time submitted to the Registrar of the High Court his own bills and those of the Solicitors, which were then assessed by a Master with the result and the “taxing fee” notified to the Receiver by letters of the Registrar. Neither the Applicants nor any other person representing the Association (save the Receiver) were notified of the details of or took any part in these assessments. 19.The dates and results of the assessment are summarised in the tables below:
20.As at 20 December 2017, $7,755,500.15 of the Receiver’s bills and $1,315,539.96 of the Solicitors’ bills had been paid. Pursuant to the undertakings given at the hearing (see §17 above), most of the fees and expenses will have by now been paid, with a small amount outstanding. 21.These charges, totalling over $15.2 million, are, by any account, substantial sums, particularly when viewed in the light of the amount of net assets of the Association which I was told was in the region of $50 million. But I am not concerned on the present application with whether or not the fees and expenses are excessive or with how they should be assessed and taxed in principle.[1] The principal question is whether the Association, now controlled by its directors, should be able to obtain details of these fees and expenses and challenge them if so advised. 22.It is convenient to divide the discussion into three questions: (i) Should the Association, in principle, be permitted, if it so desires, to take part in the assessment of the Receiver’s remuneration and disbursements? (ii) Does the court have the power to re-open or set aside the “taxation” decisions of the Master made in the absence of the Association as separately represented? (iii) If so, should that be done in the present case? Participation in the determination of receiver’s fees and expenses 23.The remuneration of a court‑appointed receiver is provided for in RHC Order 30 rule 3, which reads:
24.The assessment of such remuneration, as well as the expenses of the receiver, is expressly excepted from the general regime of taxation of costs under Order 62, rule 9(1) and (2) of which provide:
25.The effect of these rules coupled with the court’s direction of 19 May 2014 (see §3 above) is that the Receiver’s remuneration and disbursements would be assessed by a master of the High Court. In doing so the master would not, strictly speaking, be “taxing” the bills. Hong Kong’s Order 30 rule 3 has not adopted the amendment made to the equivalent English rule in 1992 that provided a receiver’s remuneration may be directed to be “assessed by a taxing officer”: see Mirror Group Newspapers plc v Maxwell (No 1) [1998] BCC 324; [1998] 1 BCLC 638, 649‑650; Alliance & Leicester Building Society v Edgestop Ltd (No 2) [1995] 2 BCLC 506, 509. Nor is the remuneration assessed pursuant to Order 30 rule 3 “costs” within the meaning of Order 62: Mirror Group Newspapers plc v Maxwell [2001] BCC 488, §§13-15.[2] In the present case, the reference to taxation in subsequent directions (see §§3 and 4 above), insofar as they concerned the Receiver’s fees and expenses payable out of the Association’s assets, should in my view be understood as an assessment under Order 30 rule 3 (read in conjunction with Order 62 rule 9(2)) rather than general taxation of costs as such under Parts III and IV of Order 62. In consequence I accept Ms Lam’s submission that the procedure prescribed by Order 62 rules 21 to 24 does not have direct application to the assessment of the Receiver’s fees.[3] The same position obtains in my view with regard to the Receiver’s expenses. Although Order 30 rule 3 only mentions remuneration, a receiver’s disbursements and expenses are likewise expressly excepted from Order 62 by rule 9(2). Harris J’s direction of 19 May 2014 for assessment (see §3 above) made no distinction between the Receiver’s remuneration and disbursements. 26.It does not, however, follow that the assessment under Order 30 rule 3 is necessarily to be conducted ex parte. Ms Lam submitted that the matter of remuneration is “strictly between the court and the Receiver”. But the rule is simply silent on that question; it does not expressly preclude participation by the paying party — usually the owner of the assets from which the fees are to be paid. The starting point in my view should be that as a matter of natural justice, the Association, as the paying party, ought to be permitted to take part if it so desires. There is nothing in the rules or the authorities that detracts from this. More generally, where a receiver is appointed to hold and preserve assets pending the resolution by the court of a dispute over them, it would be wholly surprising if the law were to say that the parties claiming the assets, out of which the receiver’s fees and expenses are to be paid, have no standing in the question of the propriety and quantum of such charges. 27.Ms Lam referred to Re Peregrine Investments Holdings Limited & Others (No 4) [1999] 2 HKLRD 722 in support of her submission. But what was in issue in that case was whether, upon the making of the winding‑up order, it was for the committee of inspection to agree or approve the provisional liquidators’ fees. The court held that it was not. The case authoritatively decided that it was the court rather than the committee of inspection that had authority to determine the fees of provisional liquidators; it is not authority for the proposition that a company that has emerged from provisional liquidation or receivership cannot be permitted to take part in the assessment of the remuneration of the former office‑holder. 28.The procedure concerning a receiver’s disbursements is related to the duty of a receiver to render accounts. Previously, the receiver’s accounts had to be passed by the court. The practice was that the receiver, upon passing his accounts, brought in also his bill of costs, which was then taxed, and the amount included in his disbursements: Daniell’s Chancery Practice (8th ed), vol. 2, p 1492. Subsequently, although there was no such general requirement of passing the accounts, it was considered that a receiver should take the opportunity of examination of his accounts to bring in his bill: Kerr on Receivers and Administrators (17th ed, 1989), p 242.[4] Irrespective of the precise practice of submission of accounts, there seems to me no reason in principle why solicitors’ fees incurred by the receiver should not be an expense reflected in the receiver’s accounts. In the UK the current practice is also that a receiver’s disbursements are accounted for as part of his account for the assets in receivership: see Practice Direction 69, §9.6. In Hong Kong, RHC Order 30 rule 5(1) provides that a receiver shall submit such accounts to such parties at such intervals or on such dates as the court may direct. Rule 5(2) provides that any party to whom a receiver is required to submit accounts may inspect the books and other papers relating to the accounts. Rule 5(3) and (4) provide that any party who is dissatisfied with the accounts of the receiver may give notice specifying the item or items to which objection is taken, which may then be followed by an examination by or on behalf of the court[5] of such item(s). 29.It appears that a receiver’s remuneration was also a matter to be set out in his accounts. Thus it was stated in Daniell’s Chancery Practice (8th ed), vol. 2, p 1494 that where a receiver neglects to pass his accounts, the court may, “when the receiver’s subsequent accounts are produced to be examined and passed, disallow the salary therein claimed by such receiver …”.[6] It was the practice that the amount of the receiver’s salary or allowance was not fixed until the passing of the first account: ibid, p 1485. In Ward v Swift (1848) 8 Hare 139, Wigram VC refused to re-open the Masters’ decisions giving salary to a receiver, on the ground that the parties had not put forward any objection before the Masters and had acquiesced in their passing the accounts and allowing the receiver his poundage. The decision clearly proceeded on the basis that the parties beneficially interested in the assets were entitled to raise objections to the allowance of remuneration to the receiver. In Harris v Sleep [1897] 2 Ch. 80, a receiver was appointed in 1892 upon the dissolution of a partnership. He brought in his accounts in 1895, in which he claimed to be allowed for workmen’s wages the sum of £2 per week to himself for the work done by him as an ordinary workman. The master having allowed all these items by his certificate, the plaintiff applied by summons to vary the certificate by disallowing, inter alia, that item. Kekewich J varied the certificate and disallowed the item, but the Court of Appeal disagreed and allowed the wages. There was no suggestion that the plaintiff lacked standing to challenge the remuneration of the receiver. 30.There is no reason in principle to suppose that a receiver’s remuneration, which is a charge on the assets under receivership, is immune from objection by the interested parties. The authorities, unsurprisingly, suggest that the parties interested in the estate do have a part to play. I have already referred to Ward v Swift and Harris v Sleep above. In Day v Croft (1840) 2 Beav 488, a receiver was appointed of a testator’s estate in February 1839 and directed to pass his accounts half-yearly. Under the first of such accounts brought in in November 1839, the Master allowed him remuneration in the very substantial sum of over £1,014, being at the rate of 5% on the full amount of his receipts. A petition was issued to raise objection, contending that the Master had allowed an extravagant remuneration to the receiver. A great many parties, no doubt all interested in the estate, appeared and made representations by counsel. Lord Langdale MR noted that the Master stated that at the time the matter was before him, an objection had been made to the amount of the allowance, but that the particular circumstances and the particular nature of the items were not brought to his attention, in consequence of which he made an award under the common rule of 5%. The judge held that it could not be considered as an universal or general rule that 5% should be allowed, and “the Master not having had the opportunity of considering what ought to be allowed in this particular case: I think there is no doubt that I ought to refer it back to him, to review his report.” 31.In Wildridge v McKane (1827) 2 Molloy 545, on a former ward of court’s application upon attaining full age, the court directed that the receiver previously appointed in respect of his property should account from commencement, on the basis that the accounts formerly passed should not bind the applicant. The report, which was very brief, stated: “When a ward of this court attains his full age, the persons employed about his property by the court should be ready to satisfy him fully how they have acted respecting his property.” 32.In Re Kay and Lovell [1941] Ch. 420, 425, it was also assumed (though not decided) that there was jurisdiction to re-open a master’s certificate of the remuneration of a receiver, although the attempt by the subsequently appointed trustee-in-bankruptcy to challenge such remuneration failed in that case because he had made no application to vary the certificate. 33.In Re Hong Kong Chung Shan Lung Chan Clan Association (unrep, HCMP 1989/2004, 29 June 2005), where receivers had been appointed on 15 October 2004 because, like the present case, there were rival camps of individuals claiming control of an association, by January 2005 the receivers were prepared to seek their release. In June 2005, Barma J (as he then was) made an order for their release and that their fees and disbursements be paid by the association out of its assets “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” (see §9). It is clear that his Lordship envisaged nothing other than a process in which the association was entitled to take part. In fact, the subsequent taxation was conducted before Master de Souza inter partes as between the association and its former receivers: see the Master’s ruling dated 28 September 2007. 34.That natural justice requires that a company be allowed to take part in the determination of the remuneration of an officer appointed by the court in respect of it has also been made clear by several authorities relating to provisional liquidators’ remuneration. These authorities are in my view apposite because the remuneration of provisional liquidators is governed by the inherent jurisdiction of the court (see Re Peregrine Investments Holdings Limited & Others (No 4) [1999] 2 HKLRD 722, 729D per Le Pichon J; Re Lehman Brothers Securities Asia Ltd (No 2)[2010] 1 HKLRD 58 at §§31 & 34 per Barma J) — like the general power under Order 30 rule 3 — rather than by any detailed statutory scheme. 35.In Re Boldwin Construction Co Ltd (unrep, HCCW 340/2002, 7 November 2006), provisional liquidators were appointed in October 2002 on the basis of a petition to wind up the company on the just and equitable ground. The dispute between the shareholders having been settled, the petition was dismissed and the provisional liquidators discharged in February 2006. In March 2006 the erstwhile provisional liquidators rendered their bill of costs for taxation. The company wished to take part in the taxation but the provisional liquidators contended it should be held ex parte. Registrar C Chan, in a preliminary ruling, held that the company should be allowed to take part. On the provisional liquidators’ appeal, they contended that a provisional liquidator is not a party to adversarial litigation; his function is to look after the assets of the company pending determination of the winding‑up petition. He is an officer of the court, and his remuneration should be a matter only between him and the court – a submission echoed by Ms Lam in this case. It was also submitted that the court’s Procedural Guide for the taxation or determination of bills of provisional liquidators or liquidators (issued by the court on 1 April 2004), which did not provide for involvement of the company, should be followed. Dismissing the appeal, Kwan J (as she then was) held:
36.In Lu Jun v Yu Qi [2017] 2 HKC 327, the provisional liquidators were appointed in January 2015, and discharged on 16 November 2015 following the settlement of the parties’ dispute and dismissal of the petition. The company then issued a summons to seek disclosure of the taxation package delivered to the taxing master on 9 November 2015 in respect of the first 75% of the fees and expenses claimed by the provisional liquidators and an opportunity to comment on their bills. By the time of the hearing in September 2016, the provisional liquidators had been informed of the taxing master’s decision in respect of two disbursement items. Harris J specifically stated (at §8) he agreed with the statement in Re Boldwin Construction Co Ltd, supra, at §21 that:
and held (at §9):
In the result, his Lordship essentially granted the company’s application, but directed that the amount of the two items already assessed and determined by the taxing master should stand and not be re‑opened. 37.In Re The Grande Holdings Ltd [2018] HKCFI 507, there was a restructuring exercise for the company which had been placed in provisional liquidation. The restructuring agreement, to which the company, an investor and the provisional liquidators were all parties, provided for payment of the provisional liquidators’ costs by the investor subject to a specified limit and thereafter by the company, and for taxation to be conducted on an inter partes basis but otherwise by reference to the Procedural Guide and in accordance with the so‑called Maxwell principles outlined in Re Peregrine Investments Holdings Limited [1998] 2 HKLRD 670. For the purpose of the taxation, the company and the investor applied for production of extensive information and documents by the provisional liquidators, who objected on the ground that such requirement was unnecessary, disproportionate and oppressive. Dismissing the provisional liquidators’ appeal from the master who ordered disclosure, Harris J held that the principles explained in Peregrine and the procedure to be found in the Procedural Guide were flexible and did not prevent the company and the investor from seeking production of contemporaneous documents that evidenced the type and extent of the work done in relation to the various items. In particular, his Lordship stated (at §13):
38.Harris J ultimately rejected the argument that the disclosure required was oppressive, saying (at §16):
39.Mr Lam has referred me to the English Court of Appeal’s decision in Brook v Reed [2012] 1 WLR 419, which concerned the principles applicable in fixing or approving the remuneration of a trustee in bankruptcy. There it was stated (at §14) that it was established that even without express provision, the bankrupt could challenge a trustee’s remuneration. 40.In the case of a company, the peculiar feature is that it is usually represented by the office‑holder (whether a receiver, provisional liquidator or liquidator) while that office lasts, and by no one else. If taxation takes place during this period, when there is no one who can in the name of the company scrutinise the office‑holder’s bills and raise objections, it may become an ex parte procedure with the kind of inherent conflict referred to in Peregrine (No 2) as quoted in §53 below, occasionally necessitating the appointment of assessors (see eg Re Lehman Brothers Securities Asia Ltd (No 2) [2010] 1 HKLRD 58). But taxation does not in every case have to take place during this period: provisional liquidation and receivership may come to an end with the company emerging as a going concern under the management of a board of directors (as in Boldwin, Lu Jun, Hong Kong Chung Shan Lung Chan Clan Association and, indeed, the present case). In such cases I see no reason why the company should not in principle be allowed to take part in the taxation. 41.On behalf of the Receiver, Ms Lam submitted that the Mirror Group v Maxwell line of cases show that the assessment of a receiver’s costs is generally an exercise involving only the court and the receiver. It is not clear what counsel meant by that line of cases. The circumstances in Maxwell were rather special: Robert Maxwell had died; no grant of representation had been obtained; receivers were appointed by the court on the application of Mirror Group Newspaper plc which was complaining of very large misappropriations of assets by the late Mr Maxwell. Such a case is far removed from the kind of receivership, of which the present case is an example, where an interim receiver is appointed for the protection or preservation of property, pending some suit or proceedings, for the benefit of persons having an interest in it. 42.It may be that in relation to insolvent estates that ended with a bankruptcy or liquidation, the assessment of the remuneration and disbursements of the office-holder is often conducted ex parte, but that is in all probabilities because those who have a real stake in such cases are the creditors, who often are scattered, have little knowledge of the general affairs of the estate and a low expectation of obtaining any significant return from an insolvency, and would seldom wish to throw good money after bad (see Maxwell at p 642c and Peregrine (No 2) at p 675C), not because the exercise should by reason of its juridical nature be dealt with ex parte. 43.Indeed, in the case of remuneration of provisional liquidators of solvent companies, Harris J has suggested that the proper practice in future should provide for how the shareholders might take part in the determination and taxation of such remuneration; see Lu Jun v Yu Qi, supra, at §10, where the learned judge said:
44.It seems to me, with respect, that Ms Lam’s submission that a receiver’s remuneration and disbursements is a question strictly between the court and the receiver from which other parties are to be excluded is unsupported by either principle or authority. In my judgment, the Association as the party whose assets are charged with payment of the receiver’s fees and expenses, can legitimately seek to take part in their assessment. Whether the assessment can be set aside or re-opened 45.Unlike Boldwin, Lu Jun, and Hong Kong Chung Shan Lung Chan Clan Association, “taxation” of the bills had already been conducted before the Association took out this application and, for some of the bills, before the Association left the control of the Receiver. Nevertheless, in my view the court does have jurisdiction to re-open the matter. This may be achieved via two juridical routes. 46.First, such an assessment of a receiver’s remuneration and disbursements may be set aside as an ex parte order. RHC Order 32 rule 6, which succinctly states: “The Court may set aside an order made ex parte”,is a provision of general application. It has been held to apply to an order obtained ex parte under s 14(1)(d) of the Prevention of Bribery Ordinance (Cap 201): P v Commissioner of Independent Commission Against Corruption (2007) 10 HKCFAR 293, §40. In the present case the assessments by the master were, in my view, orders made ex parte within the meaning of the rule, and were made in proceedings in which Association was a party, who clearly therefore had standing to apply for an order under the rule: Jones v Vans Colina [1996] 1 WLR 1580, 1584H. Wildridge v McKane is an example of the court opening up previous assessments when the person, for whose benefit the receiver was appointed, attained independence. 47.Secondly, approaching it as a matter concerning the receiver’s accounts, Order 30 rule 5 clearly provides that the court may direct the receiver to submit accounts to a party, that such party should have access to the underlying books and papers, and that he may specify items to which objection is taken, which is then to be examined by or on behalf of the court: see §28 above. The authorities show that a master’s decision or certificate passing a receiver’s accounts, including his remuneration and disbursements, could be opened up and varied if there was a valid objection; see the cases of Day v Croft, Harris v Sleep, and Re Kay and Lovell referred to above. In the present case, upon an objection so raised, the previous taxation cannot be an answer as it was not a ruling on any such objection raised by the Association. 48.I note that in Lu Jun, Harris J, while granting the company access to the taxation package and an opportunity to comment on the provisional liquidators’ bills, declined to reopen two items which had already been assessed by the master (see §36 above). It does not appear, however, that his Lordship did so on the ground of lack of jurisdiction. 49.Ms Lam relied on Hosking v Slaughter & May [2016] 3 Costs LR 617 in support of her submission that there is no jurisdiction to re‑open the question of remuneration already taxed and paid, and that the appropriate means to challenge the Receiver’s conduct, if the Association so wishes, is by way of misfeasance proceedings. I do not accept this submission. Hosking is a very different kind of case. There the company’s administrators appointed by the court employed the solicitors firm of Slaughter and May and agreed their fees. Subsequently on the application of the administrators, the company was wound up and liquidators were appointed. The question that arose was whether the liquidators could call for a detailed assessment by the court of the agreed fees of the solicitors. Rule 7.34(1) of the (UK) Insolvency Rules 1986 in force at the time provided that such expenses “shall be decided by detailed assessment unless agreed between the responsible insolvency practitioner and the person entitled to payment”. The court held that rule 7.34(1) did not apply to administrators, but that even without rule 7.34(1), they could both before and after the end of the administration agree and pay the fees of Slaughter and May. If the subsequently appointed liquidators did not agree with the solicitors’ fees, they could bring misfeasance proceedings against the administrators for wrongfully agreeing those fees without seeking a detailed assessment, but the liquidators could not themselves require the court’s detailed assessment of the expenses paid in the earlier administration. 50.Thus the case concerned fees of solicitors retained by administrators which they had power to agree and had in fact agreed. In the present case there is no suggestion that the Solicitors’ fees could simply be agreed by the Receiver. Harris J’s direction of 19 May 2014 was that both the Receiver’s fees and disbursements were to be assessed by a master. They were in fact assessed, though it was not taxation as such. The question is whether, in the circumstances in which the assessment was carried out, it can now be re‑opened at the instance of the Association. 51.It is possible, I suppose, for the Solicitors to argue that the assessment of their fees was not conducted ex parte, if in fact the Receiver had acted on behalf of the Association and taken on the role of raising objections. But the reality is that because presumably the work done by the Solicitors was all done on the instructions of the Receiver, the scope of any objection that could be raised by the Receiver to the Solicitors’ charges was severely limited. Nor did Ms Lam rely on this to contend that the Solicitors’ bills should be treated any differently from the Receiver’s bills for the purposes of this application. Exercise of the power 52.Should the assessment be re‑opened in this case? Ms Lam submitted that the remuneration and disbursements have been assessed in this case and the Receiver has a right to be paid accordingly. But this simply begs the question. The right of access to the court and the right to a fair hearing are fundamental rights: see Keen Lloyd Holdings Ltd v Commissioner of Customs and Excise [2016] 2 HKLRD 1372 at §38, and, as stated by both Kwan J and Harris J in Boldwin and Lu Jun respectively, one instinctively recoils at the notion that a person may be financially encumbered without an opportunity of being heard. Order 30 also recognises that a party may be afforded an opportunity to raise objections to the Receiver’s accounts. 53.Bills 1, 2 and 3 of the Receiver and Bills 1 and 2 of the Solicitors were assessed before August 2016, when the Association was mired in the problems of uncertain membership and directorship, and was represented only by the Receiver. As the Association is a recognised charity and a company limited by guarantee, there was no shareholder with a stake in its assets to be given the task of scrutinising the bills and raising objections where appropriate. The inherent conflict of duty and interest on the part of the Receiver in relation to the assessment of his own remuneration is self-evident. As Le Pichon J said in Peregrine (No 2) at p 679D, referring to Maxwell at p 648d‑e:
54.Bills 4, 5 and 6 of the Receiver and Bills 3 and 4 of the Solicitors were (as far as one can see from the date of the Registrar’s letters) all assessed after the board of directors was elected on 12 August 2016 and the Association (except the Shop) had reverted to the management of the board. Had the Association been informed at that point of the assessment of the bills and sought to take part, I have little doubt it would have been permitted to do so. 55.The first time that the Applicants obtained some information about the costs of the Receiver seems to have been on 10 May 2016, when the Receiver — in order to pursue an application to sell the Shop — gave them copies of his letter to the court dated 4 May 2016, one of the annexures to which set out, under the heading “Receiver’s Fees and Disbursements”:
56.While it could be inferred from this that there had been some “taxation” of the fees and disbursements, this annexure did not set out the actual amounts incurred up to that time, but only the amounts outstanding, so that the full magnitude of the fees and disbursements was not apparent. Further, the Applicants had not yet been appointed directors of the Association at that time. 57.On behalf of the Receiver, Ms Lam placed reliance on the language of the various court orders that have been made (see §§2-8 above). In my view the phraseology used provides no assistance on the point in issue. The court’s direction that the Receiver’s fees should be “assessed” or “taxed” by the court or by a taxing master in my view simply harked back to the position under Order 30 rule 3 and the original direction pursuant to which the Receiver’s fees and disbursements were to be assessed by a master. It did not direct that the assessment must be carried out ex parte or without notice to any interested parties. Where the court ordered the Receiver’s costs to be paid “out of the assets of the Association”, it simply indicated the incidence of costs. It did not mean, nor has the Receiver contended that it meant, that the Receiver’s fees and expenses were not subject to assessment. 58.Ms Lam submitted that unless and until legitimate and properly substantiated complaints are raised about the fees and expenses, the assessment already carried out should be left to stand and the Association should not be allowed to look behind it. I do not think this point carries much weight in this case. The information provided to the Association so far concerning the fees and expenses is sparse. Order 30 rule 5(2) envisages that a party to whom the receiver’s accounts are to be submitted should be able to inspect “the books and other papers” relating to the accounts and then raise objections. Without further information it is difficult to see how the Association can consider its position and devise “legitimate and properly substantiated complaints”. 59.To allow the assessments to be re‑opened would inevitably lead to further expenses and time to be incurred to complete the exercise. But this must be looked at in context. In Re Boldwin Construction Co Ltd, supra, at §28, it was held that the added expense of an inter partes procedure was not a sufficient reason against allowing the company to take part:
Here, the amounts of the bills are substantial seen in the context of both the assets of the Association and the cost of a further assessment exercise. 60.Admittedly there was some delay before the Association made the present application, but the 3rd Applicant has explained that the 5th and 6th Applicants who were two of the six directors elected had failed to take part in board meetings after February 2017, and the articles which required a quorum of not fewer than 5 directors for board meeting were only amended on 10 December 2017. I do not think this entirely absolves the Association from responsibility for the delay, but on the other hand there is in my view little prejudice caused to the Receiver. He and the Solicitors have by now in effect already received interim payment virtually in full. Even if the outcome is that certain amounts already received have to be paid back, it cannot be said to be prejudice. It is not prejudice to be required to disgorge what one should not have received in the first place, subject to any argument of change of position which has not been raised in this case. Nor is there any suggestion that the Receiver would be hampered by the lapse of time or loss of information or documents if the assessment exercise has to be conducted again. 61.For all these reasons, in my judgment the assessment should be re-opened. As a practical matter, however, there is no reason to set aside everything that had gone on before and to require the Receiver to go through the whole process again, unless there is an objection raised in relation to the items in question. What I propose to do therefore is to allow the Association access to information and then to raise objections, and treat only those items to which objection is taken as being re-opened. 4th Applicant’s appeal 62.It appears that the 4th Applicant’s application for access to information and documents concerning the Receiver’s fees and disbursements was dismissed by the Master solely for lack of standing. But it seems to me that it is open to the court to give the 4th Applicant, as a party to the proceedings, access to the accounts and books and papers relating to them by virtue of Order 30 rule 5(1) and (2). These rules did not seem to have been drawn to the attention of the Master. 63.Now that the Association has taken on the cudgels, however, there is no need for the 4th Applicant himself to take part. In these circumstances I would dismiss his appeal, but propose to order that there be no order as to costs here and below as between the Receiver and the 4th Applicant, without prejudice to the position between the Receiver and the estate. Conclusion and orders 64.For the above reasons, on the Association’s summons there will be orders as follows:
65.On the 4th Applicant’s appeal, there will be the following orders:
The 1st Applicant appeared in person The 2nd Applicant appeared in person The 3rd Applicant appeared in person The 4th Applicant appeared in person Miss Arlina MW Mak, instructed by Messrs Johnnie Yam, Jacky Lee & Co, for the 5th to 7th Applicants Mr Douglas Lam SC and Mr David Chen, instructed by Messrs T.H. Wong & Co, for the Respondent (the Association) Ms Rachel Lam, instructed by Messrs So Keung Yip & Sin, for the Receiver and Manager of the Association [1] In that regard, the principles laid down by Le Pichon J in Re Peregrine Investments Holdings Limited [1998] 2 HKLRD 670 in the light of Mirror Group Newspapers plc v Maxwell (No 2) [1998] 1 BCLC 638 are well established and no doubt familiar to the Masters of the High Court. [2] Ferris J decided in that case that taxing fee for the taxation of costs under the then Supreme Court Fees Order was not payable upon the assessment of the receiver’s remuneration, which was not “costs”. In the present case the question whether taxing fees were payable was not the subject of any submissions before me and I express no opinion on that question. [3] We are not concerned here with costs ordered in legal proceedings in which the Receiver was a party and was awarded costs against other parties. [4] this being the edition immediately prior to the amendment of RSC Order 30 rule 3 in 1992. [5] The phrase “on behalf of” the court suggests that the examination may be carried out by a Master. [6] As per the General Order of 23 April 1796 (see 15 Ves 278). | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Other judgments that cite this case
Further hearings and rulings under HCMP 506/2013