GEORGE YC MOK & CO (a firm) v. TRADE ADVISERS CO LTD

DCCJ18479/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 18479 OF 2001

D E C I S I O N

1.  There are 2 applications before me today: the first one is by the Defendant for leave to serve interrogatories on the Plaintiff; and the second one is by the Plaintiff to strike out paragraph 6 of the Defendant’s Amended Rejoinder.  As the interrogatories proposed to be served relate to the allegation pleaded in the said paragraph 6, it is common ground that interrogatories should not be allowed in the case that the striking-out application is successful and vice versa.

Background of the application

2.  The background of this application has been set out in detail in the Affirmation of George Yuen Chee Mok dated 11 April 2008.  In short, the Plaintiff, which is a firm of solicitors, acted for the Defendant in High Court Action No. 20671 of 1998 (“the High Court Action”) brought by the Defendant and others against one Silkart Limited (“Silkart”) and others.

3.  There were 3 hearings in the High Court Action which involved the work done by the Plaintiff over the span of 3 periods from 1998 to November 2000.  The Defendant was successful in all of the 3 hearings and was awarded costs against Silkart, though not for the full 100% for the first 2 periods.  The Plaintiff’s private costs were then taxed by the taxing masters on 2 separate occasions.  It is the Plaintiff’s case that on 9 February 2000, an Oral Agreement was reached between the Plaintiff and the Defendant (“the Oral Agreement”) that the Plaintiff would give a discount to the Defendant in the form of charging the Defendant on party-and-party basis instead of the usual solicitor-and-own-client basis.  Pending the outcome of the party-and-party taxation, a number of interim bills were issued to the Defendant.  Under the terms of the Oral Agreement, if the amounts of the taxed costs awarded on the party-and-party taxation were higher than the figures billed by the Plaintiff in the interim bills, the Defendant would have to pay the balance to the Plaintiff.  As it was indeed such the case after the taxation proceedings, the Plaintiff brought the present action against the Defendant to claim for the balance of the unpaid professional fees in the amount of $71,449.95.

4.  The Defendant contests the Plaintiff’s claim mainly on the following grounds.  Firstly, the Defendant denies the existence of the Oral Agreement and claims that the Defendant had paid all the outstanding fees to the Plaintiff as agreed by them.  Secondly, the Oral Agreement was in substance an arrangement for payment of contingency fees.  As a result, such agreement is not enforceable in law.  Thirdly, the Oral Agreement, if it existed, did not affect the bills issued to the Defendant prior to the making of the Oral Agreement.

5.  The case was originally fixed for trial before myself on 22 November 2007.  However, as the Defendant had applied for leave to file a rejoinder to include some of the said defences, the trial was then adjourned.  On 3 January 2008, the parties agreed for the Defendant to file an Amended Rejoinder, and paragraph 6 of the Amended Rejoinder now becomes the subject of this striking-out application.

6.  Paragraph 6 of the Amended Rejoinder reads as follows:

“The Defendant further avers that it was in any event an implied term of [the alleged Oral Agreement]  (if they ever existed) that the taxation on party and party basis in [the High Court Action] must be undertaken by the Plaintiff in a truthful and bona fide manner before it could be properly relied upon by the Plaintiff as the basis of the Plaintiff’s claim for costs against the Defendant.  Wrongfully and in breach of the said implied term, the Plaintiff has grossly inflated the 2 bills of costs filed with the Court in [the High Court Action] respectively on 30 May 2000 and 6 December 2000 and purportedly taken out by the Plaintiff on behalf and in the interest of the Defendant against the defendants in [the High Court Action]; and taxation proceeded on the basis of the 2 said inflated bills.”

Particulars have been pleaded in support of such allegation, including an alleged admission made by the Plaintiff contained in a letter from the Plaintiff to the Defendant dated 23 April 2001.

7.  The Plaintiff seeks to strike out paragraph 6 of Amended Rejoinder based on the following 3 grounds:

(a)      the plea in paragraph 6 amounts to a collateral challenge to the decision of H H Judge Chan on 22 September 2003;

(b)     such plea amounts to a collateral challenge to the judgment of Deputy High Court Judge Muttrie on 3 February 2005; and

(c)      the making of such plea is a breach of the Defendant’s undertaking to Court as contained in the order of Registrar J Ko on 27 August 2007.

I will deal with each argument in turn. 

Collateral attack on the decision of H H Judge Chan

8.  On 22 September 2003, H H Judge Chan heard an application made by the Plaintiff to strike out the then paragraphs 6 and 7 of the Defence and Counterclaim.  The said two paragraphs read as follows:

“6. Paragraph 2 of the Amended Statement of Claim is admitted save that the Defendant believes and so avers that in the bills prepared for the party and party taxation there were many instances of overcharging for work mainly by charging for attendances stated to be by Mr George Y C Mok which were actually attended by legal executives whose work should have been charged at lower hourly rates as a result of which the taxation bills were much inflated.

7. The Defendant also believes and so avers that in the bills prepared for party and party taxation the amounts claimed for certain items were more than the amounts actually billed by the Plaintiff to the Defendant.”

9.  H H Judge Chan allowed the Plaintiff’s application and the learned judge said the following in her judgment:

“46. The taxation of the first and second tax bills which proceeded in the High Court were on a party and party basis.  The opposing party, Silkart Ltd, had the opportunity to challenge every item whether as to necessity for the expenditure or as to its quantum.  The plaintiff has to produce attendance notes and other relevant documents to justify the expenditure.  Throughout the whole process of taxation of costs on a party/party basis, the taxing master would bear in mind that he or she would only allow such costs as were necessary or proper for the attainment of justice or for enforcing or defending the rights of the defendant.  He or she would have an overall view of the taxation bill in the taxation process and an overall view of the work undertaken by the solicitor for the taxing party in respect of the whole action.  Silkart Ltd, the paying party, it seems was vigilant in ensuring that they would pay a sum which is not ‘necessary and proper for the attainment of justice’.  The evidence from the law costs draftsman referred to aforesaid has shown that they contested the bill of taxation rigorously.  In my view, the decisions of the taxing masters in the first and second taxed bills amounted to final decisions by a court of competent jurisdiction.  Were issues 6 and 7 to be re-tried in this Court, there could inevitably be the possibility that two final but inconsistent decisions of courts of competent jurisdiction would emerge.  This would be an affront to our coherent system of justice.

                        ......

48. In my view, it is virtually impossible to fairly re-try in these proceedings the assessment on taxation of the disputed items of the tax party/party bills.  The first and second tax bills as referred to aforesaid had not only been taxed but allocators had been issued to certify the amount of tax costs in the two tax bills.  The amount in the two taxed bills had been paid by Silkart Ltd.  Finality in litigation is an important factor to be considered here.

49. In my view, the defendant’s plea in paragraphs 6 and 7 of the defence amounts to an abuse of collateral challenge to the earlier decisions on taxation of the two taxed bills on a party/party basis.  Further, the party/party bills were drawn under heading of the High Court action.  Any attempt to challenge the contents thereof would be in the nature of challenge to decisions made by taxing masters of the High Court.

10.  Mr Fung, SC, counsel for the Plaintiff, submits that the plea in paragraphs 6 of the Amended Rejoinder is an attempt to reopen the issue of overcharging and inflation of the Plaintiff’s bill for the taxation proceedings, and so it abused and punched deliberately directly on the decision of H H Judge Chan. 

11.  In reply, Mr Wong, counsel for the Defendant, tries to draw a distinction between the plea in paragraph 6 of the Amended Rejoinder and that in the former paragraphs 6 and 7 of the Defence and Counterclaim.  Firstly, he submits that the purpose of the plea in the earlier pleading is to support the basis of the Defendant’s counterclaim, whereas the purpose of the plea in paragraph 6 of the Amended Rejoinder is to challenge the validity and the enforceability of the Oral Agreement, in the sense that the Plaintiff had failed in its duty in submitting bona fide bills for the taxation proceedings.  Secondly, the Defendant is not trying to challenge the results of the taxation proceedings.  Rather, the Defendant only seeks to show that the bills submitted by the Plaintiff to the Defendant are different from those submitted by the Plaintiff for the taxation proceedings.  As such, the Plaintiff had breached the implied terms of the Oral Agreement, if it existed, in inflating the bills and submitting the inflated bills for the taxation proceedings.  Thirdly, the Defendant did not appear in the taxation proceedings and so the results of such proceedings should not be binding on it.  Fourthly, without allowing the Defendant to raise the plea in the said paragraph 6, the Defendant would not be in a position to challenge that the Oral Agreement which, it argues, was an arrangement for contingency fee.

12.  In my judgment, all these arguments are untenable.  No matter what is the purpose of the attack, H H Judge Chan in her decision had disallowed the Defendant to raise the argument about the inflated bills.  According to the learned judge, the decisions of the taxing masters were final decisions made by a court of competent jurisdiction on the reasonableness and the propriety of the Plaintiff’s charges.  As a result, it was not open to the Defendant to make a fresh attack.  Rightly or wrongly, the decision of H H Judge Chan is binding on this particular court and it is not open to the Defendant to raise another attack on the Plaintiff’s bills submitted for taxation.

13.  Further, the whole purpose of the taxation proceedings is to assess the reasonableness and the propriety of the professional bills of the solicitors of the receiving party.  What the Defendant is now seeking to establish, by comparing the bills submitted to the Defendant and to the Court for taxation, is that the bills submitted by the Plaintiff to the Court had been inflated.  However, no matter how the Defendant is trying to dress up the attack, it is in substance a challenge of the results of the taxation proceedings, and the same should not be allowed after the decision of H H Judge Chan on this same issue.  It is true that the Defendant did not appear in the taxation proceedings.  However, H H Judge Chan, rightly or wrongly, ruled that the results of the taxation proceedings were binding on the parties.  If the court were to allow the Defendant to raise the plea in the said paragraph 6, this would certainly amount to a collateral attack of the earlier decision of H H Judge Chan.  Finally, whether the Plaintiff had inflated the bill for taxation and whether the agreement between the Plaintiff and the Defendant was an arrangement for contingency fee are two separate issues.  Without allowing the Defendant to raise the argument about the inflated bills, it is still possible for the Defendant to contend that the Oral Agreement is unenforceable because of contingency fee arrangement.

14.  Based on the aforesaid reason, paragraph 6 of the Amended Rejoinder should be struck out and leave to administer interrogatories relating to such plea should not be allowed.  Further, by reason of such ruling, the Court does not need to deal with the issue as to whether the Plaintiff had indeed made an admission about inflating the bill in the letter dated 23 April 2001.

Collateral attack on the decision of Deputy High Court Judge Muttrie

15.  For the sake of completeness, I will also deal with briefly the remaining 2 grounds for the striking-out application. 

16.  In another action, HCMP1578 of 2004, the Defendant herein applied by way of an originating summons for an order that the Plaintiff’s bills for professional fees be referred to a taxing master for assessment.  In refusing the application, the learned Deputy High Court Judge Muttrie held that the dispute between the parties related to the contents of the agreement between the parties about the charging of professional fees and whether such agreement was a contingency fee arrangement.  As these issues were not matters for taxation, the originating summons was dismissed.  In dealing with the costs of the application, the learned judge in paragraph 56 of his judgment held that the application was an indirect attack on the findings of H H Judge Chan, as the application would necessarily reopen the party-and-party taxation which Judge Chan considered was a final decision by a court of competent jurisdiction.  The court therefore ruled that it was unreasonable and unconscionable for the Plaintiff to bring the application, and the Defendant was ordered to pay costs on an indemnity basis.

17.  In my judgment, the decision by Deputy High Court Judge Muttrie clearly showed that the Defendant, by reason of the earlier decision by H H Judge Chan,should not be allowed to reopen any issues relating to the reasonableness and the propriety of the Plaintiff’s bills, in particular, the allegation about inflation of bills by the Plaintiff.  As this is exactly what the Defendant is seeking to do by the plea in paragraph 6 of the Amended Rejoinder, such paragraph should be struck out as abuse of  the process of the court.

Breach of undertaking given before Registrar J Ko

18.  Further, on 27 August 2007, the Defendant made an undertaking to this Court before Registrar J Ko not to challenge the reasonableness of the items charged in the Plaintiff’s bills, notwithstanding paragraphs 6 and 7 of the Amended Defence and Counterclaim.  In my judgment, a plea that the Plaintiff had inflated the bills for the taxation proceedings is certainly a challenge on the reasonableness of the items charged in the Plaintiff’s bills, and the same should not be allowed as the making of such plea is a breach of the undertaking given before Registrar J Ko.

19.  Based on the aforesaid reasons, I allow the Plaintiff’s application to strike out paragraph 6 of the Amended Rejoinder and refuse the Defendant leave to administer interrogatories contained in the Defendant’s summons dated 5 January 2008.