Kao Chai-Chau Linda v Fong Wai Lyn Carolyn and others

JudgeSteven Chong J
Judgment Date14 October 2015
Neutral Citation[2015] SGHC 260
Date14 October 2015
Docket NumberSummons No 4976 of 2014 in Suit No 428 of 2010
Published date20 October 2015
Plaintiff CounselJimmy Yim SC, Erroll Ian Joseph, Soo Ziyang Daniel, Mahesh Rai s/o Vedprakash Rai, and Lee Yicheng Andrew (Drew & Napier LLC)
Hearing Date15 September 2015,12 January 2015,12 March 2015,09 March 2015,02 April 2015
Defendant CounselTan Chuan Thye SC, Fu Qui Jun, and Jonathan Lee Zhongwei (Rajah & Tann Singapore LLP),Lee Eng Beng SC, Loh Chin Leong Ryan, and Zhu Ming-Ren Wilson (Rajah & Tann Singapore LLP),Chelva Retnam Rajah SC (Tan Rajah & Cheah),Manoj Pillay Sandrasegara, Rajan Menon Smitha, Chng Zi Zhao Joel, and Tan Mei Yen (Wong Partnership LLP)
CourtHigh Court (Singapore)
Subject MatterCompanies,Remuneration of,Receiver and manager
Steven Chong J: Introduction

Disputes over professional fees regularly come before the courts for adjudication, both as regards liability and quantum. Challenges to lawyers’ fees are not uncommon and have generated a substantial body of case-law. Recently, a dispute over a surgeon’s fees hit the news when, in an ironic twist, the husband of the surgeon found liable by the Singapore Medical Council (“SMC”) for overcharging lodged a complaint that the SMC’s lawyers, in seeking excessive party-and-party costs, were themselves guilty of overcharging. Disputes over the fees of insolvency practitioners are not free of controversy either. In one extreme case, it was alleged that the Court of Appeal’s order that the fees sought by an insolvency practitioner be renegotiated constituted a breach of natural justice (though I should add that the application to set aside the decision of the Court of Appeal has since been dismissed).

As the fees of the insolvency practitioner usually require the court’s sanction, applications are brought on a regular basis. However, there is usually no consensus as to what the proper level of fees should be. Insolvency practitioners, having put in the hours, see no reason why they should not be allowed to bill according to the hourly market rate which they would charge their private clients. Creditors invariably oppose the quantum of fees as it has a direct financial bearing on their recovery rate. The insolvent company also has every incentive to seek a reduction of the fees in order not to worsen its already dire financial position.

In this case, the fourth defendant, Airtrust (Singapore) Pte Ltd (“Airtrust”) was placed into voluntary receivership so that it might be granted a reprieve from the numerous legal disputes that beset it. Ironically, it now finds itself mired in satellite litigation over the subject of its receivers and mangers’ (“R&M”) fees. To date, the R&M of Airtrust have filed four separate applications seeking the court’s sanction for their bills of costs. In the present case, perhaps as a reflection of the difficulty of assessing the appropriate level of fees, a discount of 30% was offered. This is consistent with the general practice in such cases where, as a defensive reaction, insolvency practitioners usually offer a discount when seeking the court’s approval of their fees. No explanation was offered as to why a figure of 30% was chosen save that it was a “goodwill” gesture. The R&M still maintained that the level of remuneration sought was reasonable. Unsurprisingly, this did not satisfy the other parties. However, the first, second, and third defendants, as they did at the hearing on the third bill of costs, were merely content to offer qualitative critiques (eg, by pointing out that particular tasks could have been more efficiently performed) without offering a view as to what the appropriate quantum should be.

Needless to say, this is not a satisfactory state of affairs. This led Lee Kim Shin JC to remark at the hearing over the third bill of costs that the situation was akin to a “fish market”. In a similar vein, Judith Prakash J recently observed (in the context of a dispute over the fees of a liquidator) that, in the absence of legislative intervention prescribing a mathematical formula for the calculation of fees, any adjustment made by the courts can be criticised on the ground that it is arbitrary (see Liquidators of Dovechem Holdings Pte Ltd v Dovechem Holdings Pte Ltd (in compulsory liquidation) [2015] SGHC 167 (“Dovechem”) at [84]. I must confess at the outset that — for the reasons which are set out below — I likewise applied an additional discount which may be viewed as being “arbitrary”. It is profoundly unsatisfactory that the conventional response is simply to slash down the quantum of remuneration sought without any clear objective reference point as to what the appropriate quantum ought to be.

Legislative intervention is clearly desirable. However that process will inevitably take time. In the meantime, this state of affairs should not be allowed to continue. When the challenges over fees are closely examined, it is apparent that the sources of disagreement typically relate to the same issues: the scope and necessity of the work, allegations of over-manning and duplicity of work, disagreement over the division of the work between the lawyers and the insolvency practitioner, the justifications proffered for the time spent, and the applicable rates. These are issues which should more sensibly be the subject of a negotiated agreement at the time of appointment, rather than the loci of discord several months on. It seems to me that an altogether more sensible approach would be to take pre-emptive measures and address the problem at source: ie, to lay down guidelines at the start rather than deal with the problem after the fact. In the general dissatisfaction over the subject of fees, it can frequently be overlooked that insolvency practitioners play a pivotal role in the rehabilitation or winding down of companies. For their contributions, they should receive fair and reasonable remuneration which is properly due without concern that the sums sought may be subject to “arbitrary” adjustments. The introduction of clear upfront guidelines would ensure that they are fairly and justly rewarded for their services.

When I articulated my concerns and broached the idea of implementing a system of “costs scheduling”, I was pleased that all the parties readily welcomed the suggestion. Given the impact of my decision on the insolvency practice, I felt it prudent to adopt two steps. First, I invited submissions from the Insolvency Practitioner’s Association of Singapore (“IPAS”) to whom I would like to record my appreciation for their useful and constructive amicus curiae brief. Second, I took the somewhat unusual step of releasing the portion of my Grounds of Decision that dealt with the costs schedule in draft for comments. I felt comfortable to do so on this occasion because my judgment on the merits had already been delivered. I was of the view that the treatment of the issues covered in my Grounds would benefit from the further input of the parties and indeed this was my experience. I will begin by explaining my decision in this case before setting out my proposal for a system of “costs scheduling” in a separate annex to these Grounds.

The facts

Airtrust was set up by the late Mr Peter Fong in 1972. The plaintiff is a shareholder of Airtrust and was its managing director. The first and second defendants, Carolyn Fong Wai Lyn (Mr Peter Fong’s eldest daughter) and Anthony Craig Stiefel, are both directors of Airtrust. The third defendant, Mr Alvin Hong, is a minority shareholder with a 2% stake in Airtrust. For ease of reference, I will refer to them collectively as “the respondents” since they were all united in opposition to the application filed by the R&M.

Following Mr Fong’s passing in 2008, a number of legal actions were commenced against members of the late Mr Fong’s family, against Airtrust, and also by Airtrust against others (see, eg, Airtrust (Singapore) Pte Ltd v Kao Chai-Chau Linda and another suit [2014] 2 SLR 673; Fong Wai Lyn Carolyn v Airtrust (Singapore) Pte Ltd and another [2011] 3 SLR 980). One of these proceedings is the present suit — Suit No 428 of 2010 — wherein the plaintiff sought to restrain the defendants from holding an Extraordinary General Meeting to remove her from her position as managing director and director of Airtrust.

On 17 January 2012, the parties to the present action reached an agreement to place Airtrust into receivership pending a negotiated settlement of the outstanding legal suits in which Airtrust was involved. This was achieved by way of a consent order dated the same day. The R&M were to “manage and carry on the business of [Airtrust] in place of its Board of Directors until further order” and their terms of reference included, but were not limited to, the management of Airtrust’s bank account and its existing employment contracts.

The previous bills of costs

Since their appointment, the R&M have filed several summonses to seek approval for their bills of costs. On 8 June 2012, they filed Summons No 2855 of 2012 to seek remuneration of $2.1m for three months’ work performed between 17 January 2012 and 13 April 2012 (“the First Bill”). The R&M offered a discount of 30%. When the matter came before Choo Han Teck J on 4 September 2012, he applied a further 12% reduction on top of the 30% discount offered (making for a final reduction of 42% from the original figure) and approved a sum of $1.21m. On 8 February 2013, they filed Summons No 760 of 2013 in respect of the bill of costs for three months’ work performed between 14 April 2012 and 20 July 2012 (“the Second Bill”). The proposed remuneration was again $2m but no discount was offered in this instance. Lee Seiu Kin J awarded a sum of $1.24m, a reduction of 38% from the initial sum proposed. On 18 September 2013, they filed Summons No 6009 of 2013 to seek a sum of $1.6m for six months’ work performed between 1 July 2012 and 31 December 2012 (“the Third Bill”). A discount of 10% was offered at the time of the hearing. Lee Kim Shin JC applied a further discount and approved a final sum of $1m (a total reduction of 38% from the initial figure proposed).

I note that the reductions were applied to the professional fees charged, and not the disbursements (which, in any case, only made up a small fraction of the total bills). This approach is correct. A claim for disbursements is a claim to be reimbursed for expenses reasonably incurred in the performance of a stipulated task. As long as they were reasonably incurred (and there was no suggestion that they were not), there should be no reason that the R&M should not be reimbursed in full.

The present application

On 12 August 2014, the R&M’s solicitors wrote...

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2 cases
  • Fong Wai Lyn Carolyn v Kao Chai-Chau Linda
    • Singapore
    • High Court (Singapore)
    • 23 May 2017
    ...Fong Wai Lyn [2016] SGHC 31 (refd) Joseph Hayim Hayim v Citibank NA [1987] AC 730 (refd) Kao Chai-Chau Linda v Fong Wai Lyn Carolyn [2016] 1 SLR 21 (refd) Kirby v Wilkins [1929] 2 Ch 444 (refd) Lee Pei-Ru Alice v Airtrust (Singapore) Pte Ltd [2013] SGHC 259 (refd) Low Gim Har v Low Gim Siah......
  • nTan Corporate Advisory Pte Ltd v TT International Ltd
    • Singapore
    • High Court (Singapore)
    • 22 August 2017
    ...Ltd v Dovechem Holdings Pte Ltd (in compulsory liquidation) [2015] 4 SLR 955 (“Dovechem”) and Kao Chai-Chau Linda v Fong Wai Lyn Carolyn [2016] 1 SLR 21 (“Linda Kao”). In this connection, a successful outcome entitles the insolvency practitioner to remuneration beyond incurred time costs. T......
1 firm's commentaries
  • Proposed System Of Costs Scheduling For Insolvency Practitioners
    • Singapore
    • Mondaq Singapore
    • 8 March 2016
    ...Chai-Chau Linda v Fong Wai Lyn Carolyn and others [2015] SGHC 260 INTRODUCTION This case concerns the quantum of professional fees reflected in a bill of costs issued by the receivers and managers ("R&Ms") of Airtrust (Singapore) Pte Ltd ("Airtrust"). Having previously succeeded in obje......
1 books & journal articles
  • Insolvency Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2015, December 2015
    • 1 December 2015
    ...(Liquidators of Dovechem Holdings Pte Ltd v Dovechem Holdings Pte Ltd[2015] 4 SLR 955 and Kao Chai-Chau Linda v Fong Wai Lyn Carolyn[2016] 1 SLR 21), and schemes of arrangement (Re Conchubar Aromatics Ltd[2015] SGHC 322, Re Sembawang Engineers and Constructors Pte Ltd[2015] SGHC 250 and Re ......

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