Re "A"

HCMH 36/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MENTAL HEALTH CASE NO. 36 OF 2008

----------------------

----------------------

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

Date of Hearing: 21 November 2008

Last Date of Filing of Written Submission on Costs: 13 March 2009

Date of Judgment on Costs: 15 April 2009

-----------------------------------------------

JUDGMENT  ON  COSTS

---------------------------------------------

1.In this inquiry pursuant to Part II of the Mental Health Ordinance, I made my decision on the substantive application for appointment of a committee on 21 November 2008.  Reasons for that decision were handed down on 28 November 2008.  The order has to be amended subsequently due to potential conflict of interest on the part of the independent accountant originally appointed.  But apart from that amendment, the substance of the decision remains the same.

2.There is an outstanding question as regards costs of those took part at the inquiry.  Written submissions were filed and skeleton bills were lodged.  I have already dealt with the costs of the Official Solicitor in the sum of $295,286.20 (including $64,350 paid to Dr Lai for medical examination of A) on 21 November 2008.  The costs sought by the other parties are as follows,

(a)  Mrs A seeks $710,000;

(b)  B seeks $4,044,225;

(c)  C seeks $5,417,773.

These parties sought to have their costs paid out of the estate of A.  There is no suggestion that the estate cannot afford to pay these costs.  But is it fair and just that it should be required to do so?

3.Bearing in mind that these are said to be costs incurred for the purpose of an inquiry for the appointment of a committee and the actual substantive hearing took only one day (with 4 interlocutory hearings before that and one afterwards for the change of the identity of the independent accountant to be appointed), such figures are exorbitant and called for careful examination. 

4.In Part II proceedings, at least in respect of costs of the initial inquiry, usually the court will try to deal with it by way of a gross sum order.  First, since the proceedings are summary in nature (see Re RSH [2006] 4 HKLRD 339) the costs incurred by those involved should not be too difficult to be assessed on a gross sum basis.  Second, taxation proceedings will be a further burden on the estate.  Third, if there were to be taxation proceedings, the committee will have to act as the paying party in raising objection to the bill of the receiving party.  Very often, the receiving party would be the applicant who in many cases is likely to be the committee as well.  This would put the committee in a conflict position.  In other cases, like the present situation, where the committee is an independent professional not being involved at the initial inquiry, he would have to incur time and costs at the expense of the estate to put himself in a position to perform the role of a paying party in taxation.  This is not desirable.

5.I am of the view that even though the present case is complicated by the large bill of costs put forward by the parties, the question of costs should be dealt with by a gross sum order.

6.Without trying to fetter the court’s general discretion as to costs, Lindley LJ had identified the following to be relevant considerations in the context of costs to be awarded in mental health proceedings in Re Cathcart [1892] 1 Ch 549 at p.558-9,

“The points to be considered are: (1) The reasons for believing in the [mental incapacity]; (2) The reasons for believing him to be not only [mentally incapable], but also incapable of managing himself or his affairs; (3) The reasons for instituting any proceedings … (4) The relation in which the Petitioner stands to the alleged [MIP], and the objects and conduct of the Petitioner; (5) The respective means of the parties and the amount of the costs.  These matters must always be important; but, in addition to them, there may be others, and if there are, they also must be taken into account by the court before coming to a conclusion as to what ought to be done.”

7.In the present context, it is pertinent to note what was said by the learned judge at p.561 as regards the amount of the costs claimed,

“Moreover, in considering these matters regard must be paid not only to the expenses incurred, but to the necessity for them, which will very often depend on the course taken by the Petitioner or by the [MIP].  Either party may by his conduct render an inquiry much more expensive than it might otherwise have been.”

8.To that, I would add that the conducts of the other family members may also have an impact on the costs actually incurred.

9.That case went on appeal.  In the appeal, Lord Halsbury agreed with the observations of Lindley LJ except His Lordship did not regard the means of the parties to be relevant, see [1893] 1 Ch 466 at p.472.

10.In the present case, I accept that Mrs A, B and C had legitimate interest to appear at the initial inquiry and it is fair and just for them to recover reasonable costs from the estate of A.  However, I do not think they should get the full amount of costs as claimed.

11.At the initial inquiry, as in similar inquiry in other cases, the issues that the court is concerned with are those identified in the judgment of Re RSH [2006] 4 HKLRD 339, namely,

(a)  whether the alleged patient was incapable of managing his properties and affairs by reason of mental incapacity;

(b)  if so, what measures the court should put in place to protect him in the exercise of its power under Part II, including whether a committee should be appointed;

(c)  if a committee is to be appointed, who should be appointed;

(d)  what power should be conferred upon the committee.

12.Though initially there were some uncertainties, issue (a) was largely resolved after the medical examination arranged by the Official Solicitor.  By 13 November 2008, it was agreed that there was no need to call the doctors to give evidence at the inquiry.

13.As regards issue (b), again that was largely resolved in that all took part at the inquiry agreed a committee should be appointed.  The main dispute was focused on issue (c).  It is fair to say as early as 25 August 2008, C had indicated her position that she would not seek to have herself to be appointed as committee and the appointment of someone completely independent of B would be appropriate (see para.9 of the skeleton submissions lodged on her behalf on that date).  Unfortunately, B insisted on her being included as one of the members of the committee.  That had led to very substantial evidence being filed and arguments being advanced.  As a result, substantial costs were spent by the parties.

14.I regret to observe that in so doing, parties had adopted an adversarial mindset in the preparation of their evidence and embroiled themselves in unnecessary allegations and cross-allegations against each other.  This court had repeatedly stated that such an approach is inappropriate in the context of a Part II inquiry.  Fortunately, at the time of the actual inquiry, counsel were able to focus on the real issue and the court was therefore able to conclude the hearing within one day.

15.Had the parties properly addressed their minds to the real question that this court had to decide as identified at paragraph 11 of my Reasons for Decision of 28 November 2008, the answer should have been obvious and there was simply no need to spend costs and time on the voluminous evidence that was placed before the court.  Whilst parties may have their own considerations in putting forward such evidence, it was simply unhelpful to the fair and summary determination of the initial inquiry.

16.Having regard to the respective position taken by the parties (in evidence as well as in submissions advanced at different stages of the proceedings) and the evidence filed, I am of the view both B and C have contributed to this state of affairs and neither party can be said to be more blameworthy.

17.Against such background, in my judgment it would not be right to lump all the costs incurred by B and C on the estate of A.  In coming to such conclusion, I have taken into account that some of the evidence touched upon matters that this court directed the committee to investigate.  However, I do not think there is any need to go into such great details in the evidence filed for the purpose of the inquiry.  As demonstrated in the course of hearing, it should not be too difficult or time consuming for a list of issues to be agreed between the parties without any need to go through such details.

18.Further, both B and C engaged legal representation on an extravagant scale.  This is readily borne out by an examination of the skeleton bills submitted with reference to the number of solicitors involved, the hours that said to have been spent on the case and the brief to counsel.  I express no opinion on whether costs on such a scale is justified as between solicitor and client.  But it is certainly not justified to burden the estate with such level of costs in the present context, bearing in mind the narrow scope of dispute that this court can usefully determine in the initial inquiry.  As I said, B and C may have their own reasons for seeking legal representation of such calibre with such level of attention and they may agree to pay their respective lawyers fees commensurate with such services.  However, they cannot assume they can pass on such burden, no matter how extravagant it is, onto the estate.

19.In this connection, the parties seem to labour under the impression that in Part II proceedings costs out of the estate would be paid on a higher basis than party-to-party basis.  I wish to highlight that this is not necessarily so.  This court retains a general discretion over costs. 

20.No doubt in the context of personal injuries litigation where a plaintiff had been rendered mentally incapacitated by reason of the accident, as between the parties to that piece of litigation, the established practice is that the defendant who is liable will have to indemnify the plaintiff as to the reasonable costs incurred in the Part II application necessitated by the disability caused by the accident.  But it does not follow in other cases where applications are brought under Part II, the family members who appear would always be indemnified as to their costs.

21.The guiding principle is that an applicant who makes a Part II application bona fide in the interest of the MIP should usually get costs out of the estate and if that person has been conducting the application reasonably he should not be out of pocket.  Hence, one can find the following statement from the judgment of Lord Halsbury in Re Cathcart [1893] 1 Ch 466 at p.473,

“It seems to me that if the demand for inquiry is really prompted by a desire to protect the person and property of the alleged [MIP], and is presented on reasonable grounds and in a reasonable manner, the expense of such a proceeding ought not to fall upon the person so invoking the aid of the law to protect those in need of protection.”

22.A family member other than the applicant is in a slightly different position.  Once an application has been made, there is no need to incur an extra set of costs unless (1) there are matters relevant to the welfare of the MIP and pertinent to the court’s determination which ought to be brought to the court’s attention; and (2) the applicant has failed to allude to the same.  If these criteria are satisfied, the family member may recover the reasonable costs in so doing out of the estate.

23.An applicant as well as other family members intending to participate in Part II inquiry should bear in mind the summary nature of the inquiry and the matters that the court can properly decide at this stage.  Those advising them should also bring to their attention the court will scrutinize whether the costs incurred by them are reasonable and necessary before deciding whether such costs should fully be borne by the estate.

24.In Re Cathcart [1892] 1 Ch 549, the court only awarded two-thirds of the taxed costs as between party and party to the husband applicant (and this was upheld on appeal in [1893] 1 Ch 466).  The reason can be found in the judgment of Bowen LJ at p.567-8,

“I have come to the conclusion that the husband, although he has been acting bona fide in this petition and in the proceedings about it, has unconsciously, by a certain harshness or certain want of judgment, placed himself in a hostile position to the lady.  I think, therefore, the true measure of relief which is to be granted to him in respect of his costs is to give him only such costs as a hostile person could recover against those with whom he is waging litigation.  And indeed that is not the entire measure of the diminution which should be made in respect of these costs.  They have been enormous; we know they have been enormous.  I have seen, like the Lord Justice, that there has been no real attempt to keep down expense, and I think that the nearest approach that we can make to justice in the matter, an approach which I am satisfied can only be an imperfect one with all our endeavours, is to say that the lady shall pay her on costs, and that the husband shall have 2/3 of the taxed costs as between party and party.” 

In the same vein, see Lindley LJ at p.564-5.

25.Kay LJ was more trenchant in his criticism against the husband’s conduct of the proceedings.  At p.569, after referring to the justification for an inquiry to be held, His Lordship said,

“But then, if such measures had been carefully and considerately taken, and a position of personal hostility avoided, the inquiry might have been conducted in a comparatively friendly manner and at comparatively trifling expense.  Here, on the contrary, the husband has treated his wife … in a mode which was sure to intensify the feelings under which she was labouring, and to drive her to regard him as her chief enemy; and the consequence has been this most lamentable and costly struggle [in an inquiry that lasted 17 days].  … It cannot be said that a futile inquiry such as this could be for her benefit in any way. ”

And at p.570, after adverting to the difficult circumstances as regards the means of the parties, His Lordship agreed to the order proposed and said,

“This would be ample to cover the costs of an ordinary inquiry, such as I think might have taken place in this case if the husband had acted with due consideration for his wife.”

26.In the present case, instead of hostilities between A and others, there were hostilities between B and C and substantial costs on an extravagant scale were incurred as a result of those hostilities.

27.Although the facts are different, I find the principles set out in Re Cathcart [1892] 1 Ch 549 to be applicable.  The canvassing of rivalries in the scale as we see in the evidence filed in this case is unnecessary and I am afraid I got the impression that a lot of things said in the evidence were dictated by the personal vendetta of B and C instead of clearly focusing on matters that this court would really need to decide at the inquiry.  In this connection, as I said before, both B and C are at fault.

28.Whilst I accept that costs had to be incurred by B to launch an application under Part II and C had a reasonable ground to make representation to the court on the person to be appointed as committee and the power of the committee, I cannot regard it as just and fair as between the estate of A on the one part and B and C on the other parts to put the burden of all the costs of B and C on the estate.

29.By reason of the extent of unnecessary excess and extravagance on their parts, I do not even find it fair and just to make an award based on their skeleton bills discounted by a percentage as suggested by the Official Solicitor.

30.Instead, I will adopt the approach of Kay LJ by asking what sums should be ample to cover the costs of B and C had they conducted the inquiry in a reasonable manner bearing in mind the issues that should have been canvassed and the complexity of the case.  In so doing, I take into account of the size of the estate and the complexity of the state of affairs of A.  In that regard, it must be recognized that this is a case where significantly more costs have to be incurred on that account.  As I said, I also accept that some costs need to be spent on identifying the areas that the committee should be directed to look into.

31.The costs charged by the Official Solicitor can serve as a general indication of the level of complexity of the matter though I acknowledge the parties inevitably had to incur more costs on account of private representation and their more involved roles in the proceedings.

32.B was the applicant and she would need to collate the materials to support the application.  Also she was not in a managerial position regarding most of the companies of A and more costs would have to be incurred on her part in procuring information concerning the properties and affairs of A.  She also needed to put forward some medical evidence on mental incapacity.  Doing the best that I can, I will award her $2 million out of the estate of A on account of her costs in the application.

33.C had a lesser role to play.  I will award her $1 million out of the estate of A on account of her costs in the application.

34.As regards Mrs A, though it can be said that she was basically lending her support to B and strictly speaking she needed not be separately represented, she was the wife and her solicitor claimed a relatively modest sum of $710,000.  In the light of the awards I made to B and C, I do not think it fair and just to deprive Mrs A of her costs out of the estate.  I will grant her $710,000 out of the estate of A accordingly.

Mr Edward Chan, SC & Mr Godfrey Lam, SC, instructed by Messrs Fred Kan & Co, for “B”

Mr Ambrose Ho, SC and Mr Victor Dawes, instructed by Messrs JSM, for “C”

Mr David P H Wong, of Messrs Wong, Hui & Co, for the Mrs A

Ms Sherman Cheung, of Official Solicitor

“Mr A”, present