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HCMP 2111/2005
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
MISCELLANEOUS PROCEEDINGS NO. 2111 OF 2005
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IN THE MATTER of Messrs Miller Peart (a firm), Solicitors of the High Court |
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and |
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IN THE MATTER of the Legal Practitioner Ordinance, Cap. 159, section 67 |
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BETWEEN
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TO KAN CHI, TO FUK TIM
and TO KAM CHAU
as Managers of the TO KA YI TSO
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Plaintiffs |
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and |
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MILLER PEART (a firm) |
Defendant |
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Before: Mr Recorder Jat, SC in Chambers
Dates of Hearing: 21, 29 and 30 December 2006
Date of Handing Down Decision : 17 January 2007
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D E C I S I O N
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A. INTRODUCTION
1. The plaintiffs in this action are and were at all material times the Managers of the To Ka Yi Tso (“the Tso”). They were claimants in a long and protracted litigation concerning the ownership of the temple Tsing Wan Kun (“the Temple”) and the assets standing in its name. Such assets included land in the New Territories and funds in court (“the Funds”) representing the proceeds of sale of letters of land exchange entitlement issued by the Government to the Temple upon the resumption of land held in its name.
2. The protagonists in the litigation were the Tso and the To Clan (“the Clan”) on the one side and the Government (represented by the Secretary for Justice) on the other.
3. In around February 1996, 5 representatives (“the 5 Representatives”) of the Clan on behalf of the Tso and the Clan instructed Messrs Miller Peart, the defendant in this action, to be their solicitors in that litigation.
4. The Tso and the Clan succeeded in their claim before Yam J and the Court of Appeal. The Government appealed to the Court of Final Appeal (“CFA”). On 22 December 2000, the CFA dismissed the Government’s appeal. The CFA confirmed the findings of the lower courts that the Temple and its assets including the Funds were owned by the t’ong Tsing Wan Kun, the members of which t’ong were the members from time to time of the Tso and the Clan.
5. The CFA also ordered the Government to pay the costs of the Tso and the Clan in the courts below and 80% of the costs in that court. For these who are interested in the background, the CFA judgment is reported in [2000] 3 HKLRD 756.
6. Unfortunately, success in the highest court was not the end of litigation for the Tso and the Clan. Rather, it heralded the beginning of other chapters of dispute, one of which is between the Tso and the Clan on the one hand and Miller Peart on the other over the latter’s solicitor and client costs.
7. On 3 October 2005, the Managers commenced the present action by issuing an Originating Summons for taxation of Miller Peart’s solicitor and client’s bills of costs, charges and disbursements delivered to the Managers on 26 June 2003 on a common fund basis. At first sight, the taxation sought by the Originating Summons would appear to be odd, in that ordinarily costs and charges between a solicitor and his client should be taxed on the solicitor and own client basis: Order 62 r 29. As will be explained presently, this unusual state of affairs arose because of certain costs order made by the CFA.
8. The present appeal by the plaintiffs is against the decision of Master Lung made on 8 September 2006 ordering, inter alia, that Miller Peart’s solicitor and client bills delivered in June 2003 be referred to taxation.
9. It is necessary to recount the events that took place since the CFA judgment in December 2000 in order to understand the context in which this appeal arose.
B. THE CFA COSTS ORDER
10. At the hearing before the CFA, leading counsel for the Tso and the Clan sought an order that there be solicitor and own client taxation of their own costs, and that pending that taxation there be an immediate payment out of $40 million from the Funds to meet the legal costs of the Tso and the Clan.
11. According to the transcript of the hearing, leading counsel for the Tso and the Clan submitted that the estimated total costs of the Tso and the Clan, on the solicitor and own client basis, was around $50 million, and he asked for $40 million to be paid out pending taxation.
12. The CFA said that it would accede to that application (see [2000] 3 HKLRD at 775B), but what it did order was not exactly what had been asked for. In so far as material for present purposes, the CFA made the following costs order (“Costs Order”):
“(4) There be common fund taxation of all of the [Tso and the Clan’s] own costs, the costs so taxed to be paid out of the HK$40 million mentioned in item (5) below.
(5) … HK$40 million be paid out of the Funds forthwith to the [Tso and the Clan’s] solicitors on account of and for the purpose of meeting the [Tso and the Clan’s] own costs, taxed on acommon fund basis, pending recovery from the [Secretary for Justice].”(Emphasis added)
13. That Costs Order proved to be problematic, and gave rise to disputes between the Tso and the Clan and Miller Peart which have yet to be resolved to this day. In short, the Managers took the position that because of the costs order made by the CFA, Miller Peart were only entitled to their costs to be taxed on the common fund basis. Obviously, Miller Peart disagreed and insisted that their costs ought to be paid, and taxed if necessary, on the solicitor and own client basis.
C. PAYMENT OUT AND DELIVERY OF MILLER PEART’S BILLS
14. Following the CFA judgment, $40 million was released from the Funds and paid to Miller Peart.
15. Pursuant to a written Costs Agreement made on 17 February 2001 between Miller Peart and the 5 Representatives, Miller Peart retained $20 million and the other $20 million was paid over to the 5 Representatives. It was also agreed that Miller Peart would undertake the party and party taxation vis-a-vis the Government and would accept the sum recovered from that taxation in full and final settlement of their costs.
16. However, both sides before me confirmed that the Costs Agreement had been disavowed. Hence, for present purpose, its relevance lies only in explaining as a matter of fact that Miller Peart obtained only $20 million rather than $40 million as originally provided under the Costs Order.
17. It is convenient at this juncture to mention the amount of costs actually received by Miller Peart. Mr Roderick Miller, currently the sole proprietor of the firm, deposed that Miller Peart had received around $21 million from the Clan over the course of the litigation. Out of this total, Miller Peart utilised $18.7 million for disbursements such as counsel and expert fees, leaving around $2.3 million towards Miller Peart’s own profits costs. The sum recovered from the Government in party and party taxation was about $6m million. Together with the $20 million received in circumstances mentioned above, Miller Peart received in total $29.3 million towards their own profits costs. As will be seen later, Miller Peart are now claiming a further $33.3 million for their costs.
18. A number of events took place in 2001 and 2002. It is not necessary to mention all of them in detail. Of particular relevance to the present appeal are the following.
19. First, in February 2002, the Managers made an application to Yam J for the release of the Funds remaining in court, then standing at $280 million. On 28 June 2002 Yam J ordered that the Funds be deposited with a Custodian Trustee and that no further payment out should be made without an order of the court. HSBC International Trustee Ltd was appointed Custodian Trustee in December 2002. I have been given to understand that some payment out had been made for the maintenance of the Temple and other uses, so that the Funds stood at about $213.7 million as at the end of October 2006.
20. Secondly, in the course of the application to Yam J, it was revealed that on 3 January 2000, the Managers signed what has been called a “loan agreement” whereby the Managers agreed, inter alia, to repay those members of the Tso who had provided funds for the litigation 5 times the principal amount of the loan plus 20% interest from the Funds if the Tso and Clan should succeed in the litigation. By letter dated 22 November 2002, a firm of solicitors on behalf of the “lenders” demanded payment of some $86 million plus interest under this “loan agreement”. However, I have received no evidence on the further development of this claim.
21. Thirdly, in May 2002, Messrs Terry Yeung & Lai (“TYL”) took over from Miller Peart as solicitors for the Tso and the t’ong but Miller Peart were authorised to continue to undertake the taxation against the Government on behalf of the Tso and the Clan. By a letter dated 17 June 2002, Miller Peart provided to TYL a breakdown of the monies received and disbursements paid to date, and sought confirmation from TYL whether they had instructions to accept service of Miller Peart’s solicitor and client bills. By letter dated 2 July 2002, TYL acknowledged receipt of Miller Peart’s solicitor and own client bill in the Court of Appeal, and requested delivery of the solicitor and own client bills for the trial and the appeal to the CFA.
22. The dispute in relation to Miller Peart’s costs first came to a head in May 2003. In a letter dated 9 May 2003, TYL on behalf of the Managers stated that the $40 million received by Miller Peart pursuant to the Costs Order should not be utilised for payment of Miller Peart’s costs until taxation. Further, in a letter dated 10 May 2003, TYL asserted that Miller Peart were only entitled to their own costs to be taxed on a common fund basis.
23. On 26 June 2003, Miller Peart delivered to TYL 2 sets of bills: a set of common fund bills and a set of solicitor and own client bills (collectively “the...
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