Re M

HCMP 25/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 25 OF 2005

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Before: Hon Lam J in Chambers (Not open to public)

Date of Written Submission by parties: 24 March 2006

Date of Judgment: 7 April 2006

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J U D G M E N T

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1.This court had upon inquiry appointed two accountants as the committee for M.  Some of the backgrounds leading to such appointment were set out in my Reasons for Decision of 1 November 2005.  Remuneration for the committee was provided for in Paragraph 5 of the order:

“The remuneration of the committee be charged on a time-costs basis at the standard scale of fees as agreed from time to time between the Official Receiver and the Hong Kong Institute of Certified Accountants under the Administrative Scheme of contracting out of non-summary Court winding-up cases to professional accountants experienced in insolvency matter and subject to taxation of the Court, be paid out of the Assets of [M].”

2.The Committee lodged a bill of costs on 4 July 2005 covering fees and expenses incurred from 1 February to 31 March 2005 with the Registrar.  There were uncertainties as to the procedures and the basis on which the bill should be dealt with.  The matter was referred to the judge for directions.

3.Submissions were invited and received from parties concerned, including the Official Solicitor and the solicitor for the Committee.

4.The first question is whether the procedure under Order 62 relating to taxation of costs is applicable.  Although the word “taxation” was used in Paragraph 5 of the order, I am of the view that remuneration of the committee (as opposed to legal costs incurred by the committee in these proceedings) does not come within the scope of Order 62. 

5.Order 62 Rule 2 (1) provides that the order shall apply to all proceedings in the court.  It is necessary to bear in mind that we are not dealing with legal costs of the proceedings leading to the appointment of the committee.  The management and administration of the assets of a mentally incapacitated person [“MIP”] by the committee are not proceedings in court although from time to time, the committee may come to court for directions.  Hence, the remuneration of the committee is not costs of proceedings in the court.  In this connection, I note the distinction drawn between costs incurred in relation to proceedings in court and remuneration of the committee under Rules 84 and 43(1) of the Court of Protection Rules 2001 in England.  The judgment of Ferris J in Mirror Group Newspapers v Maxwell [1998] BCC 324 at p.344B-F also provide an illuminating exposition on the difference between the taxation of legal costs incurred by an office holder of a fiduciary nature appointed by court and the determination of the remuneration of that office holder.

6.This does not, however, mean that the court has no control over the remuneration of the committee.  I do not propose to repeat what I said about the respective roles of the court and the committee in my Reasons for Decision of 1 November 2005 (see also Re P HCMP 136 of 1981, 7 February 2006 and Re YLC HCMP 1190 of 2005, 25 January 2006).  Section 11(1) of the Mental Health Ordinance expressly provided for the power of the court to make order as to the remuneration of the committee out of the estate as the court may seem fit.  It is also obvious from Section 11(2) that the power of the committee in dealing with the estate is derived from appointment by the court.  It could be said in a loose sense that the court delegates the function of management and administration of the affairs and property of the MIP to the committee.  As I have said in previous cases, the court always retains the ultimate supervision and control.   Since the committee is in a fiduciary position, unless sanctioned by the court, it could not charge any remuneration. 

7.It would perhaps be better to refer to the assessment of the remuneration of the committee than taxation.  In future, one should refer to “assessment” as opposed to “taxation” of remuneration of the committee in court orders made under Section 11 to avoid unnecessary confusion as to the applicability of Order 62.  A useful standard expression would be that “the remuneration of the committee be assessed by a Master”.  

8.Given the inapplicability of Order 62, three matters have to be considered with regard to the assessment of remuneration of committee:

(a)     procedure;

(b)    scale;

(c)     basis.

9.Before I go into the discussion on each of these topics, I should mention that I agree with the submission of the Official Solicitor that in general the court is not inclined to allow remuneration for non-professional people like relatives who probably agree to act as committee out of love and affection.  Regarding professional people, generally the court will make such appointment only when circumstances warrant the same and provide for remuneration for their services.  There could be variations in circumstances mandating such an appointment and the services and tasks that a committee would be required to perform can be different.  There are cases where the court could fix the remuneration of a professional committee summarily (e.g.  by way of a fixed monthly or annual fee) if the management of the estate does not require too much effort.  On the other hand, there are cases where the property and affairs of the estate are so complicated that it cannot be said with any certainty at the time of appointment how much work has to be done.  In such cases the court could consider providing for the assessment of the remuneration of the professional committee by a Master in the order.  What I said below is intended to be applicable to that sort of scenario. 

10.Solicitor for the Committee urged this court to adopt the Procedural Guides for Taxation / Determination of Bill in Liquidation Process approved by Kwan J for assessment of the remuneration of the Committee.  Having considered the Procedural Guides, I am of the view that although it can be used as a reference, there are peculiar features in determination of liquidator’s bills that would not be applicable to assessment of remuneration of professional committee appointed under the Mental Health Ordinance. 

11.It may be that some time in the future, the volume of bills to be assessed will warrant a set of procedural guidelines from this court for assessment of remuneration of the committee.  For the time being, subject to what I shall say below, I would prefer to leave it to the Master to give the necessary directions to facilitate proper, efficient and fair assessment of the particular bill before the court.

12.I could however make a few observations.  First, the assessment should not be a costly process.  Unless it is absolutely necessary, hearing should not be required.  Second, the process should ordinarily be ex parte although the court could invite the Official Solicitor to comment on a bill submitted by a committee.  It is only in exceptional cases that the court will invite submissions from relatives.  Third, it would be helpful if the committee could file a short statement together with the itemized bill setting out the assets administered and their values, brief outline of works done and short explanation as justification.

13.The scale of fees in this particular instance has already been provided for in Paragraph 5 of the order.  On the facts of the present case, it is appropriate to adopt that scale.  That does not mean that the scale is suitable for other cases.  It depends on the facts of each case, in particular the complexity of the affairs of the estate and the level of expertise required. 

14.Turning to the basis of assessment, solicitor for the Committee invited this court to adopt the trustee basis whilst the Official Solicitor suggested the court to follow the English Court of Protection practice in assessment.

15.The trustee basis is laid down in Order 62 Rule 31 which deals with legal costs.  I have already explained why on proper construction of the rules and as a matter of principle Order 62 is not applicable to assessment of the remuneration of a committee.  The difficulty of applying trustee basis to such assessment can be highlighted by reference to the commentary at Para.62/App/9 of Hong Kong Civil Procedure 2006.  It is said on taxation on trustee basis, costs authorized by trustee can only be disallowed if that authorization amounts to a breach of trust.  Reading that in isolation, it might be suggested the court cannot reduce the bill of a trustee even though an item were unreasonably incurred or the quantum were unreasonably high so long as the same does not constitute a breach of trust.  

16.I do not accept that as a full and comprehensive statement of the relevant principle.  In dealing with costs awarded to trustees, the court retains a discretion to disallow costs incurred unnecessarily or improperly, see Wah Ying Cheong Co Ltd v Chan Kwok Ping HCMP 3059 of 1997, 17 March 2004. 

17.Leaving that aside, for reasons given below, I would prefer to frame the basis for assessment of the remuneration of the committee without any reference to the trustee basis under Order 62. 

18.In England, the Master of the Court of Protection issued a Practice Note on 2 March 2005 prescribing that unless there are exceptional circumstances where the court sees fit to order otherwise, costs in the Court of Protection (including remuneration for committee under Rule 43 of the COP Rules) shall be assessed on standard basis which is as follows:

“Assessment on the standard basis will disallow costs, which have been unreasonably incurred or are unreasonable in amount and will only allow costs, which are proportionate to the matters in issue.  The [court] will resolve in favour of the paying party any doubt, which it may have as to whether the costs were reasonably incurred or were reasonable and proportionate in amount.”

19.There is no standard basis in Hong Kong.  Instead, a useful analogy can be drawn with the determination of the remuneration of liquidators.  In Re Peregrine Investments Holdings Ltd [1998] 2 HKLRD 670, Le Pichon J (as she then was) applied the principles set out in Mirror Group Newspapers v Maxwell [1998] BCC 324.  In this context, a committee appointed under the Mental Health Ordinance is in a similar position as the other fiduciaries referred to in paragraph (1) at p.679 in Re Peregrine.  Paragraph (2) on the same page set out the reason why the remuneration of a court appointed office-holder had to be justified. 

“The allowance of remuneration to office-holders represents an exception to the rule that a trustee must not profit from his trust which rule applied to all kinds of person who are in a fiduciary position.  This exception inevitably involves a conflict between the interests of the fiduciary who is to receive such remuneration and the interests of those to whom the fiduciary duties are owed, who will bear whatever remuneration is allowed.”

20.In my judgment, this applies equally to the remuneration of a committee.  It follows what was said in Maxwell and applied in Peregrine as regards how the remuneration of a liquidator should be justified and determined is equally applicable to the assessment of the remuneration of a professional committee (see in particular p.679E-682G of Peregrine).  The overriding test appears to be whether a reasonably prudent man, faced with the same circumstances in relation to his own affairs, would lay out or hazard his own money in doing what the office-holders have done.  In case of reasonable doubt, the committee can always apply to the court for direction before it embarks on a particular exercise.

21.It should be clear from the judgment of Le Pichon J that in respect of assessment done on time cost basis, the court should consider:

(a)     Whether the time charged for was reasonably and properly expended in the course of the management and administration of the property and affairs of the MIP by the committee;

(b)    In relation to that, it is important to bear in mind the overriding test mentioned above and a professional committee charging a fee for its services is expected to exercise commercial judgment and not to incur expenses disproportionately;

(c)     If the expense was reasonably and properly incurred, what is the appropriate hourly or other charge.

22.So understood, the correct basis for assessment of the remuneration of a committee in Hong Kong does not substantially differ from the standard basis applied by the Court of Protection in England.  The Master may on occasions find it useful to refer to Guidance for Professionals on Court of Protection Costs published by the Court of Protection in England.  However, it must be borne in mind that the legal framework in Hong Kong is not the same and one cannot apply the English practice as a matter of course.   

23.I believe I have said all that can usefully be said at this stage.  The Master should be able to proceed with the assessment in the light of this judgment.  Of course, in case of difficulties, either the Master or the parties could refer the matter back to this court for further directions.

24.I propose to publish this judgment for general guidance regarding assessment of the costs of a professional committee in complex cases.  Any party who wishes to comment on publication shall do so in writing to this court within 5 days. 

Written Submission by Messrs Deacons, for the Committee (KPMG)

Written Submission by Official Solicitor

No Submission by Messrs Winnie Leung & Co., for the Applicants

No Objection by Messrs Kwok, Ng & Chan, for the Non-applicants Relatives (“NAR”)