Lau Yue Kui and Others v. Philip Chan & Co (A Firm)
Read the full judgment text of CACV 75/2014 on BabelCite. This Court of Appeal judgment was delivered on 10 December 2014 before Cheung JA, Kwan JA, Chu JA.
Civil procedure – costs – interim payment of costs – non-contentious business – solicitor and own client basis – appellate review of discretion – Civil appeal from order of Recorder Houghton SC ordering $15 million interim payment of solicitors' fees to the administrator of a deceased estate – estate worth over $1 billion comprising New Territories landholdings to be divided among eight fongs – respondent solicitors Philip Chan & Co sought to recover $40 million in fees under two bills for non-contentious probate work – 2nd to 6th plaintiffs representing five fongs objected on grounds of excessive charges and prior receipt of $10 million by solicitors – whether Recorder erred in exercising discretion to order interim payment – whether new evidence regarding nature of $10 million payment should be admitted – section 67(2) of Legal Practitioners Ordinance (Cap 159) as source of power to order interim payment – Rule 5 of Solicitors (General) Costs Rules – factors for non-contentious business costs – principles from Mars UK Ltd v Teknowledge Ltd on 'rough and ready' approach to ensure 'close approximation of justice' – consideration of financial position of parties from Re Miller Peart – analogy from third party taxation under section 68(2) LPO from Tim Martin v Akin Gump – appellate restraint under Piglowska v Piglowski – Recorder did not err – taxation on solicitor and own client basis under Order 62, rule 29(1) – 2nd to 6th plaintiffs financially well resourced from land resumption compensation totalling $144.5 million plus further land and joint account balances – administrators and remaining fongs in favour of payment to avoid accrual of judgment-rate interest against estate – any excess refundable after taxation – appeal dismissed with costs to solicitors with certificate for two counsel – no order as to costs on application to adduce new evidence.
Legal issues: Whether new evidence should be admitted regarding the $10 million payment · Whether the Recorder erred in ordering $15 million interim payment despite objections of excessive fees
Outcome: Appeal dismissed.
Cited by 8 cases · Cites 6 cases
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CACV 75/2014 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 75 OF 2014 (ON APPEAL FROM HCMP NO. 593 OF 2007) ________________________
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________________________ REASONS FOR JUDGMENT ________________________ Hon Cheung JA : 1.Philip Chan & Co (a firm) (‘the solicitors’), the respondent, had carried out work for Lau Yue Kui, the 1st plaintiff, who is the administrator (‘the administrator’) of Lau Wai Chau, deceased (‘the deceased’). In 1994, the administrator, as the intended administrator of the estate, engaged the solicitors to obtain estate duty clearance and letters of administration of the estate. After the letters of administration were granted in mid-1995, the administrator entered into another fee agreement engaging the solicitors to carry out work concerning administration of the estate. In 2000, he entered into a third fee agreement with the administrator agreeing that the value of the estate should be $1 billion for the calculation of the 2% remuneration the solicitors would receive under the 1st and 2nd fee agreements respectively. The work is known in legal terms as ‘non-contentious business’. The solicitors seek to recover from the administrator fees in the sum of $40 million represented by two bills. 2.The estate of the deceased which comprises large holdings of land in the New Territories is to be divided amongst eight fongs. The 2nd to 6th plaintiffs represent the 3rd, 5th, 6th, 7th and 8th fongs. They have taken an antagonistic role towards the fees charged by the solicitors. As a result of the compromise of an action brought by the 4th and 6th plaintiffs against the solicitors and the administrator (CACV 141/2006 on appeal from HCAP 10/2001), the solicitors agreed to submit the two bills rendered to the administrator for taxation. This Court (CACV 120/2013 on appeal from HCMP 593/2007) affirmed the right of the 2nd to 6th plaintiffs to take part in the taxation proceedings. 3.Bill No. 2 (then described as the 1st interim bill for the sum of $22.7 million but with a cap at $20 million) was served on the 2nd to 6th plaintiffs and lodged in Court for taxation on 2 August 2005. The 2nd to 6th plaintiffs had not lodged any list of objection to this bill until recently. 4.Bill No. 1 (a gross sum bill of $20 million) was served on the 2nd to 6th plaintiffs on 6 March 2007. Again no objection was filed by them until recently. 5.After further proceedings the nature of which I do not need to go into, the two bills were lodged for taxation on 14 March 2013. 6.The solicitors then sought an interim payment of fees from the 2nd to 6th plaintiffs. Master J Wong dismissed the application. On appeal to Recorder Houghton SC, the solicitors obtained leave to amend his summons for interim payment so as to seek the payment from the administrator and not the 2nd to 6th plaintiffs. The Recorder proceeded to hear the appeal based on the amendment and ordered $15 million be paid by the administrator as interim payment. 7.The 2nd to 6th plaintiffs who are directly affected by the order appealed against the judgment of the Recorder. The administrator took a neutral stand in this appeal. We dismissed the appeal at the conclusion of the hearing. The plaintiffs’ case 1) Objections 8.Mr Albert Yau and Mr Leo Wong, counsel for the 2nd to 6th plaintiffs, objected to the interim payment on the following grounds :
9.Mr Albert Yau further submitted that at most the interim payment should be $2.9 million which is the amount assessed by the 2nd to 6th plaintiffs’ law costs draftsman. 2) New Evidence 10.In support of the payment of $10 million as agreed costs, Mr Yau seeks leave to adduce evidence which was not before the Recorder who accepted the solicitors’ contention that the $10 million payment was paid on ‘personal basis’. The solicitors objected to the new evidence on the ground that it does not conform with the Ladd v Marshall requirement. 11.In my view this is not strictly a Ladd v Marshall situation. The effect of the Recorder allowing the amendment and then proceeded to hear the appeal on the basis of the amendment means that he was dealing with, for the first time, a new case from the solicitors. The 2nd to 6th plaintiffs had in fact asked the Recorder not to deal with the new case and to allow them an opportunity to put in new evidence. The Recorder indicated that such chance would be given if he saw it necessary. 12.In respect of the $10 million, the Recorder referred to Chung J’s decision in HCAP 10/2001 that it was not part payment of fees and he further accepted the solicitors’ submission that the payment was not for the non-contentious work covered by these two bills. Mr Yau said the Recorder was wrong in not taking into account the fact of payment or in apprehending the nature of payment. 13.The new evidence includes an affirmation of the administrator in support of a 2001 application by the 1st and 4th fongs for payment out of compensation arising from resumption of the estate land that had been lodged in Court in 2001. The administrator affirmed that $5 million out of the 1st and 4th fongs’ share of the resumption compensation sought to be released out of Court would be applied to pay to the solicitors as agreed legal costs under the fee agreements. The work done under these fee agreements were itemised in the two bills of costs. I (then sitting as a judge of the Court of First Instance in HCMP Nos. 3924/1995 and 3209/1996) ordered that the compensation monies to the said two fongs were to be released by cheques payable to the solicitors. 14.The 2nd to 6th plaintiffs contended this evidence shows that the solicitors did receive part of his costs under the bills. Hence, in the circumstances, the solicitors are not entitled to interim payment. 3) Excessive charge 15.In respect of the plaintiffs’ case on excessive charge, Bill No. 1 is a gross sum bill of $20 million. In the breakdown of Bill No. 1, Mr Philip Chan of the solicitors claimed to have spent 448.9 hours and his clerk 23.3 hours for the work done. The hourly rate claimed was $5,500 for Mr Chan and $1,000 for his clerk respectively. At such rate, even if all the items are allowed on taxation, the work would only attract fees in the sum of about $2.49 million. 16.Bill No. 2 relates to the work done by the solicitors under the 2nd Fee Agreement. Under that agreement, the solicitors were instructed to do three things at the hourly rate of $5,500, subject to a cap of $20 million :
17.Bill No. 2 consisted of 32 heads of work. Heads 1 to 31 concern the solicitors’ work in reading and working on 31 items of documents. They account for about 40% of the amount claimed (i.e. $8,978,955 out of $22,753,255). Head 32, which accounted for the remaining 60% of the total value of the bill, concerns work spent on checking the devolution of title of each and every piece of land covered by the DFA. 18.Mr Yau submitted that the bill is highly repetitive and in respect of the largest head of items, templated. It is artificially broken down into excessive and minute detail. 19.Mr Yau argued that for the purpose of administration of the estate, the personal representative of the estate would only need to vest the relevant property in the name of the beneficiary according to the testamentary instrument. He is not under any obligation, like a vendor in an ordinary conveyancing transaction, to make good title of the property to the beneficiary as if he were a purchaser. It is doubtful if checking the devolution of title is necessary for the administration of estate. In any event, most of the checking can be done through a conveyancing clerk. 20.Further, as an experienced probate lawyer, Mr Chan had to work with reasonable skill, care and efficiency. If the checking of one lot helped him to understand the situation which also applied to the other lots, he should have taken advantage of his learning curve and the foundation knowledge. 21.In this case, all the title deeds of these 217 lots were lost. So the only relevant documents of title, apart from the Block Government Lease, would be the DFA and the letters of administration. 22.In this case, Mr Chan realized in as early as 1996, that owing to the nature of the exercise and for the purpose of saving expense, what was required was a vesting order for each fong of the lands which that fong was entitled to be distributed under the DFA. This was achieved at the end of the trial in the 1995/96 proceedings. The vesting orders were annexed to the Consequential directions granted by me dated 24 January 1998 in those proceedings. So the checking of title must stop after obtaining the Consequential directions. Nothing needed be done or could be done after that day. But Mr Chan continued billing for checking title well beyond March 2000. The litigation proceedings were then pending appeal and they were eventually heard by the Court of Final Appeal in March 2000. The Consequential directions were affirmed. Again nothing needed be done afterwards. 23.In respect of Head 32, the solicitors conducted a template approach. For each of the 217 lots of land which the solicitors allegedly checked the devolution of title, they billed the work in a form of template. So that for instance, item 2 in respect of the first lot he checked was similar to item 2 in respect of the second lot and the many many lots under his examination. Costs of non-contentious business 24.Section 56(1) of the Legal Practitioners Ordinance (‘LPO’) (Cap 159) allows a solicitor and his client to make an agreement as to the remuneration by the solicitors of any non-contentious business to be undertaken by the solicitors. The remuneration may be by ‘gross sum, or by commission or percentage or by salary, or otherwise’ (section 56(2)). 25.Rule 5 of the Solicitors (General) Costs Rules (‘the Rules’) (Cap 159 sub leg G) provides that the costs for non-contentious business shall be such sum as may be fair and reasonable, having regard to all the circumstances of the case and, in particular, to―
26.In this case, the solicitors had agreed not to rely on the terms of the fee agreements he had entered with the administrator in respect of the two bills of costs. Power to order interim payment 27.This Court has held that the power to order interim payment of costs is found in section 67(2) of the LPO in respect of the words that the Court may, upon such terms, if any, as it thinks fit, order, amongst other things taxation of the bill : Baker & McKenzie v Grande Holdings Ltd [2013] 1 HKLRD 63, paragraph 7. Principles on interim payment 28.Mr Alexander Wong and Mr Earl Deng, counsel for the solicitors, have referred to a number of authorities such as Mars UK Ltd v. Teknowledge Ltd [2000] FSR 138, Re Miller Peart [2007] 3 HKLRD 125, Re Hawkins Development Ltd. [2010] 1 HKLRD 535 and Tim Martin v Akin Gump [2012] 2 Costs L.R. 325 from which they extracted principles relevant to interim payment of costs. These authorities are mainly concerned with costs of contentious business but the principles are also applicable to that of non-contentious business subject to modifications. I will adopt the formulation of some of these principles with modifications :
My view 1) Appeal from discretion 29.This is an appeal from the exercise of a discretion and the established principles clearly only allow the appellate court to interfere where there is an erroneous exercise of the discretion where, for example, the judge has taken irrelevant matters into account or ignored relevant matters or misdirected himself. Lord Hoffmann observed in Piglowska v Piglowski [1999] 1 WLR 1360 at page 1372 :
2) The two objections 30.In my view the Recorder had not erred in the exercise of his discretion. I do not consider the two factors relied upon by Mr Yau would assist him. In terms of the payment of $10 million, this is not an appropriate proceeding to ascertain the true nature of the payment particularly when Chung J had expressed a view on its nature. But even accepting that they were payment of costs on account by the 1st and 4th fongs, it must not be forgotten that each of the eight fongs are liable for ⅛ of the costs of $40 million or $5 million each. The payment of $10 million cannot be a complete answer to a claim for interim payment of the two bills of $40 million. 31.In respect of excessive charges, again it must not be forgotten that the agreement of the parties (as embodied in the Consent Order of Master de Souza dated 18 July 2007) is that the taxation of the two bills are to proceed on solicitor and own client basis. This means all costs shall be allowed except in so far as they are of an unreasonable amount or have been unreasonably incurred : Order 62, rule 29(1). Further for the purposes of rule 29(1), all costs incurred with the express or implied approval of the client shall, subject to exception, be conclusively presumed to have been reasonably incurred and, where the amount thereof has been expressly or impliedly approved by the client, to have been reasonable in amount : rule 29(2). 32.The estate is a huge one worth over $1 billion. With hindsight it is easy to criticise the two bills as excessive but one must look realistically at the position when the solicitors were first instructed to carry out the work twenty years ago. Mr Chan had to gather information pertaining to the administration afresh. The complexity of the matter can, in a certain way, be gleaned from the complex issues that were canvassed in the trial concerning the division of the estate to the eight fongs that took place in 1997 (HCMP Nos. 3924/1995 and 3209/1996) and appeals to the Court of Appeal and Court of Final Appeal which affirmed the first instance decision. It must also not be forgotten that in 1994 and in the years leading to the reunification, Hong Kong had a rosy outlook of its future and the property market was extremely robust with high valuation of land holding. The Court at this stage is not concerned with detailed assessment of the costs but to adopt a rough and ready approach to ensure a ‘close approximation of justice’. This is more so drawing on the analogy of third party taxation under section 68(2) of the LPO, that a deduction can only be allowed if it is not permissible on the solicitors and own client basis. In the present case the parties have expressly agreed to taxation on the solicitor and own client basis. 3) Other factors 33.1The solicitors had not been paid by the estate the fees under the two bills for over 20 years. Substantial interests had already accrued and will accrue on the fee of $40 million. The two bills were served on the 2nd to 6th plaintiffs in 2005 and 2007 respectively. They only served the objections after a delay of nine years. The taxation is likely to be a long and drawn out matter. 33.2The 2nd to 6th plaintiffs are financially well off from the distribution of the compensation received from the Government on the resumption of the land in the estate. They have already received the following amount :
33.3In addition, large size land will be distributed to them. The joint accounts of the eight fongs has a current balance of about $13.5 million and there will be a further $6.48 million to be paid into this joint account from further compensation for land resumption. There is no need to liquidate any assets to effect interim payment. 33.4The administrator, who is the client and the paying party, is in favour of paying the fees to avoid interest at judgment rate on the bills from accruing to the detriment of the estate. The remaining three fongs (i.e. those other than the five fongs represented by the 2nd to 6th plaintiffs) have expressed their agreement to the bills. 34.As this is only an interim payment, any excess payment to the solicitors would have to be refunded after the bills have been taxed. There is no prejudice arising from the payment. Conclusion 35.In my view the Recorder has properly exercised his discretion both to the payment and its amount. 36.Accordingly the appeal is dismissed with costs of the appeal to be paid by the 2nd to 6th plaintiffs to the solicitors with a certificate for two counsel. There will be no order as to costs in respect of the application to adduce new evidence. Hon Kwan JA : 37.I agree with the Reasons for Judgment of Cheung JA and his order as to costs. Hon Chu JA : 38.I agree.
Mr Albert Yau and Mr Leo Wong, instructed by Hau, Lau, Li & Yeung, for the 2nd to 6th plaintiffs Mr Alexander Wong and Mr Earl Deng, instructed by Philip Chan & Co., for the respondent Attendance of Chui & Lau, for the 1st plaintiff was excused |
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