LEE CHAN CHENG, SOLICITORS & NOTARIES v. YUNG MEI CHUN

HCA4594/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4594 OF 2002

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J U D G M E N T

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1. This is an appeal against Master Roy Yu’s decision in refusing the discovery of counsel fee notes and other related documents, and the correspondences in relation to a totally different and earlier case which gave rise to those notes and documents.

Background

2. The plaintiff is a solicitors’ firm which acted for the defendant, who was also the defendant in the District Court Action No. 15756 of 2000 (“the DC Action”).  The plaintiff now seeks to recover $614,805 from the defendant as legal costs in the DC Action.  The defendant resisted the claim and counterclaimed against her previous solicitors on the ground of professional negligence.  The defendant submitted that the trial judge for the DC Action, Deputy Judge Chan (“Mr Wilson Chan”) was biased in his judgment because he had a monetary dispute with the plaintiff solicitors in an earlier case (“the Earlier Case”).

The ground for professional negligence

3. The ground for professional negligence is regrettably not stated in the clearest term in the Defence and Counterclaim and Ms Yung’s skeleton submission.  She was acting in person all along.  The failure to put forward a clear ground for professional negligence has caused much confusion.  At this point it is helpful to ask : What did the plaintiff do, as alleged by the defendant, that resulted in professional negligence as alleged?

4. Paragraph 8 of the Affirmation of Yung Mei Chun reads :

“The Defendant submits that the existence of the monetary disputes between the Plaintiff and the deputy trial judge sufficiently caused the deputy trial judge Wilson Chan to have bias against the Plaintiff and the Defendant when Wilson Chan gave its judgment of DCCJ 15756 of 2000 [the DC Action]which are against both the Plaintiff and the Defendant.”

5. The defendant in this action relies on several questions that were put forward by the trial judge Deputy Judge Chan to the defendant’s witnesses to establish that the learned judge was biased against her. 

6. The defendant alleged that the monetary dispute arose from the plaintiff’s failure to settle in full the amount stated in Mr Chan’s counsel bills relating to the Earlier Case.  She said in her witness statement (at p. 275 of plaintiff’s bundle) that she first heard of this dispute from Ms Angela Lau at Lau’s office only at the end of the second trial.  She said :

“During the meeting, Angela Lau of the plaintiff told me that the plaintiff had instructed the trial judge, Wilson Chan, to act as a counsel for another action earlier in 2002…  But there were disputes on the Counsel fees and it was an unhappy ending.”

She said she did not know the details of the dispute while she was appealing against the judgment in the DC Action. 

7. The defendant now seeks to “inspect and take copies, all the documents relating to the counsel fees in another proceedings, including but not limited to, correspondences exchanged between the plaintiff and Wilson Chan [Deputy Judge Chan], the fee notes, revised fees notes, subsequent payments including bank cheques and statements, receipts and any final agreements on the counsel fees”.  The defendant did not explain how she would use these items in the establishment of professional negligence.

8. In my view, what the defendant wants to do with those items was to suggest that there was an earlier monetary dispute between the plaintiff and the learned deputy judge, and the plaintiff was negligent in not advising the defendant to raise this matter before the learned judge before trial on the ground of presumed bias and request him to recuse himself.

9. The defendant also said at para. 10 of her affirmation :

“The plaintiff gave evidence, through the Counsel asked Wilson Chan to accept the defendant’s evidence that it was the plaintiff who advised the defendant and her husband not to disclose the hand book…”

This would appear to be another possible ground for negligence.  In effect the defendant is saying that the plaintiff was negligent in its failure to advise the defendant to produce a certain hand book earlier in the trial. 

10. Thus there are two grounds for professional negligence.  The first ground was the failure of the plaintiff to advise the defendant to raise the matter of a monetary dispute before Deputy Judge Chan.  The second ground was the failure of the plaintiff in advising the production of a hand book at an earlier stage.

11. Although it is not strictly necessary for me to comment on the second ground at this stage, for the purpose of saving the time and costs of both parties in future proceedings, I would add but not decide that the second ground is flawed.  It would appear that the defendant initially blamed her former counsel but not her solicitors for the failure to produce the “hand book” or advising her that it was not necessary to disclose the “hand book”.  Deputy Judge Chan dealt with this “hand book” (referred as the “notebook”) in paragraph 119 of his judgment :

“119. At the end, I am satisfied that I should attach no weight at all to the notebook.  I find it most surprising that such an allegedly important document was not disclosed until the eleventh hour.  In order to excuse that, the defendant sought to lay the blame on her former counsel.  According to the defendant, at a conference attended by both the defendant and her husband, they mentioned to counsel the existence of the notebook.  However, her former counsel advised that it was unnecessary for him to see the notebook and he did not ask the defendant to produce the document.  Frankly, I find this evidence wholly unconvincing and incredible.  I reject the same.”

12. It is up to the defendant to decide whether she still wants to pursue the second ground of professional negligence in light of what was held in the DC Action.  If she wants to pursue the second ground she must state it clearly as a ground of professional negligence, rather than putting it under the heading “Evidence that the deputy trial judge, Wilson Chan, had bias against the plaintiff and the defendant”.

The purpose behind the discovery

13. The defendant did not say clearly what her purpose behind this discovery proceedings was.  I suppose the primary purpose for the discovery of these documents is to establish that there was a monetary dispute between Mr Chan and the plaintiff.  These documents may also show the extent of the dispute and its outcome.  It appears that the defendant does not intend to use these documents to show that the learned judge was biased.  It seems that the defendant is confident that the judgment in the DC Action, together with the question quoted above regarding the “hand book” are sufficient for establishing that the learned judge was indeed biased.

The problem of res judicata

14. As this action is highly relevant to the DC Action, I am particularly mindful of the danger of allowing the defendant to abuse the process of the court by re-opening an issue that could and therefore should be raised in an earlier proceedings.  The problem with the defendant’s contention is that it will inevitably raise the issue of whether Deputy Judge Chan was biased, which could and should have been brought in the DC Action and its subsequent appeal, which was dismissed by the Court of Appeal.  This can be described as res judicata in “a wider sense” (per Lord Kilbrandon in Yat Tung Investment Co. Ltd v Dao Heng Bank Ltd [1975] AC 581).

15. The law has developed since the Yat Tung case and it is now settled law that a broader approach needs to be adopted (Johnson v Gore Wood & Co. [2002] 2 AC 1, endorsed by the Hong Kong Court of Appeal in Ngai Few Fung v Cheung Kwai Heung [2008] 2 HKC 111).  Cheung JA in Ngai Few Fung referred to the Yat Tung case (as explained by Lord Bingham in the Johnson case) and laid down the following principles regarding this branch of res judicata at para. 16 :

“(1)    The principle is to serve public interest in that there should be finality in litigation and that a party should not be twice vexed in the same matter.

(2)    This is reinforced by the current emphasis on efficiency and economy on the conduct of litigation, in the interests of the parties and the public as a whole.

(3)     The onus is on the party alleging abuse.

(4)     The bringing of a claim or the raising of the defence in later proceedings may, without more, amount to abuse if the court is satisfied that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all.

(5)     It is, however, not necessary, before abuse may be found, to identify any additional elements such as a collateral attack on a previous decision or some dishonesty. But where those elements are present the later proceedings will be much more obviously abusive.

(6)     There will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party.”

16. At para. 17, Cheung JA further cited Lord Bingham’s judgment with approval at page 31 C-E, [2002] 2 AC 1 :

“It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not.”

17. Is the current proceedings an abuse of process?  In the hearing, I asked the defendant why she did not raise the bias argument in the Court of Appeal when she was appealing against the judgment of the DC Action (HCMP4776/2003).  She replied that she was aware of the alleged dispute only after the appeal.  Apparently, there is no delay on the part of the defendant in bringing forward this argument.

18. I also note that the bias argument was raised as a counterclaim to the plaintiff’s claim for legal fees.  The defendant is resisting a larger sum in the current proceedings than she was in the DC Action.  The defendant submitted that she has no intention to contest the issues in the DC Action once again and I believe this to be the case.  There is no reason why the defendant would want to complicate the current proceedings (a larger sum) with the issue of re-opening a District Court final judgment (a lesser sum).

19. Also, the defendant is not vexing the plaintiff a second time with her counterclaim.  The issue of professional negligence is only brought for the first time. 

20. Thus it appears that nothing contravenes the test laid down by Cheung JA in Ngai Few Fung.  On the broader consideration of public interest, it is unjust for a solicitor’s firm to say that it can escape from the allegation of professional negligence merely because the allegation could have been brought in an earlier proceedings (res judicata in a wider sense).  This will create an unacceptable hurdle to every claim in professional negligence against solicitors.

21. Although this was not raised by the plaintiff, I observe that even if the defendant can establish the existence of a monetary dispute and a breach of duty of care, she may have difficulty in establishing damage and causation.  It is true that this court has no jurisdiction to say that the DC Action was wrongly decided and that the defendant suffered from the adverse outcome of the DC Action.  The situation is similar to other professional negligence cases where the claimant is unable to establish that the case would have proceeded differently had the solicitors acted competently.  The law regarding those situations is explained in great detail in the Eleventh Edition of Charlesworth & Percy on Negligence (8-277 onwards).  For the purpose of the present proceedings, the defendant may have suffered damage simply because she had lost a chance to have a different judge in the DC Action. 

22. It is of fundamental importance that justice must be seen to be done as well as actually done.  A judge may be asked to recuse himself if there is an apparent bias.  Lord Brown-Wilkinson in Reg. v. Bow Street Magistrate, Ex p. Pinochet (No. 2) [2000] 1 AC 119 explained that an apparent bias may arise if “his [the judge’s] conduct or behaviour may give rise to a suspicion that he is not impartial, for example because of his friendship with a party.” (page 133 A to B).  The present situation is the exact opposite to the example given by Lord Browne-Wilkinson because the suspicion flows not from friendship but hostility.  If before the trial of the DC Action, the defendant could successfully establish that a hot dispute existed not long before the trial between the plaintiff and Mr Chan, she could have asked the learned judge to recuse himself without actually establishing that he would be biased.  The “damage” which the defendant suffered as a result of the allegedly negligent act of failing to advise her about the monetary dispute is the loss of a chance to ask Deputy Judge Chan to recuse himself.

23. The issue of whether the loss of a chance to ask a judge to recuse himself can be regarded in law as a form of damage remains to be determined.  It is not necessary for me to determine this issue at this stage.

The items sought in this proceedings

24. The defendant wants to “inspect and take copies, all the documents relating to the counsel fees in another proceedings, including but not limited to, correspondences exchanged between the plaintiff and Wilson Chan [Deputy Judge Chan], the fee notes, revised fees notes, subsequent payments including bank cheques and statements, receipts and any final agreements on the counsel fees”

25. Both parties concede that the relevant law can be found in Order 24, rule 7 and rule 8 of the Rules of the High Court.  Rule 7 reads :

“(1)    Subject to rule 8, the Court may at any time, on the application of any party to a cause or matter, make an order requiring any other party to make an affidavit stating whether any document specified or described in the application or any class of document so specified or described is, or has at any time been, in his possession, custody or power, and if not then in his possession, custody or power when he parted with it and what has become of it.

(2)     An order may be made against a party under this rule notwithstanding that he may already have made or been required to make a list of documents or affidavit under rule 2 or rule 3.

(3)     An application for an order under this rule must be supported by an affidavit stating the belief of the deponent that the party from whom discovery is sought under this rule has, or at some time had, in his possession, custody or power the document, or class of document, specified or described in the application and that it relates to one or more of the matters in question in the cause or matter.”

and rule 8 reads :

“(1)    On the hearing of an application for an order under rule 3 or 7 the Court, if satisfied that discovery is not necessary, or not necessary at that stage of the cause or matter, may dismiss or, as the case may be, adjourn the application and shall in any case refuse to make such an order if and so far as it is of opinion that discovery is not necessary either for disposing fairly of the cause or matter or for saving costs.

(2)     No order for the disclosure of documents shall be made under section 41 or 42 of the Ordinance, unless the Court is of opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs.”

26. The law is explained in Berkeley Administration v McCelland [1990] FSR 381.  It was held that :

1.       There is no jurisdiction to make an order under RSC, O. 24, r. 7, for the production of documents unless

a.       There is sufficient evidence that the document exist which the other party has not disclosed;

b.       The document or documents relate to matters in issue in the action;

c.       There is sufficient evidence that the document is in possession, custody or power of the other party;

2.       When it is established that those three prerequisites for jurisdiction do exist, the court has a discretion whether or not to order disclosure;

3.       The order must identify with precision the document or documents or categories of document which are required to be disclosed, for otherwise the person making the list may find himself in serious trouble for swearing to a false affidavit, even though doing his best to give an honest disclosure.

27. It would appear that only “(b) the document or documents relate to the matters in issue in the action” is at issue.  Mr Enzo Chow, counsel for the plaintiff submitted that the items sought in this proceedings are irrelevant and protected by privilege.

Relevance

28. Are those items under the three categories relevant to the defendant’s counterclaim?  In the context of admissibility of evidence it has been held in R v Watson (1996) 108 CCC (3d) 310 that an evidence is relevant if it makes the existence of a fact more probable than without.  I have found that the defendant’s counterclaim is centered on the existence of a monetary dispute between the plaintiff and Mr Chan (ground 1 of professional negligence).  Therefore those items are certainly relevant in the sense that it makes the existence of the fact (the monetary dispute) more likely than without.

Privilege

29. Both parties referred to privileged information and client confidentiality, but these words are imprecise.  For legal professional privilege to apply, the plaintiff must establish that the two items fall under either legal advice privilege (“LAP”) and/or litigation privilege (“LP”).  I do not venture to repeat the law here, suffice it for me to say that LAP requires the communication to be related to the giving of “legal advice” (Three Rivers District Council v Bank of England (No. 6) [2005] 1 AC 610) and LP requires the document to be prepared with litigation as its primary purpose (Waugh v British Railways Board [1980] AC 521).

30. I am satisfied that neither LAP or LP can be attached to these items sought in these proceedings.  These items are purely evidence of a commercial transaction which took place after the litigation of both Mr Chan and the plaintiff’s lay clients.  The legal advice had already been given and the litigation had ended by the time these items were created.  There is a chance that the counsel fee notes and correspondences may contain the strategies employed by counsel and the revelation of these strategies may be disadvantageous to the client.  However, this issue can be resolved by the court’s undertaking to screen the documents for any privileged information before discovery is made.  If a document contains both privileged information and the content of the alleged monetary dispute, the court will only order the disclosure of the part that relates to the monetary dispute.

31. Mr Chow for the plaintiff submitted that the cases International Business Machines Corp. and another v Phoenix International (Computers) Ltd [1995] 1 All ER 413 (“the IBM case”) and Chant v Brown (1852) 9 Hare 790 establish that solicitors’ bills are privileged.  However, in the IBM case, the plaintiff had already conceded that the legal bills were documents for which privilege could have been claimed (at p. 419 h to j), therefore that case is not instructive in showing whether all legal bills are privileged.

32. The head note in the case Chant v Brown may be responsible for Mr Chow’s submission that “Turner VC said that such bills are privileged on the ground that “an attorney’s bill of costs is, in truth, his history of the transaction in which he has been concerned”.  On page 790 it reads “but he [the clerk of a solicitor] cannot be received to depose further as to the contents of the bill of costs, or the subject to which it relates, for an attorney’s bill of costs is his history of the transaction”.  However the head note did not end here but instead go on to say, on the next page “and the attorney could not be himself permitted to give evidence of the transaction against his client, or against those claiming under his client” (my emphasis).  To understand the true ratio of the case, it is instructive to read the relevant part of the judgment itself, starting from page 793 :

“…  The document… is the bill of costs of Brown against Melton, with reference, amongst other things, to the appointment and the mortgage…  The evidence is tendered for the purpose of impeaching the title of Timewell, whose title is under the mortgage, and rests upon the appointment; and if Brown had been proposed to be examined as to the matters contained in the document I think his evidence could not have been received against the parties claiming under Timewell.  The appointment and the mortgage were one transaction, and Brown was solicitor of Timewell in the mortgage transaction… [the witness who prepared the document was the clerk of Brown]…  An attorney’s bill of costs is, in truth, his history of the transaction in which he has been concerned; and if he cannot be called to prove the facts I think his clerk cannot be called to prove the history of them.”  [emphasis supplied]

33. It should be clear that the true reason behind that decision was that the solicitor was himself prohibited from revealing the content in the bill.  Chant v Brown did not lay down a strict rule which prohibited the production of all legal costs notes.  The learned Vice-Chancellor first investigated the purpose behind the witness’ deposition, which referred to the document of legal costs and then moved on to consider whether the solicitor himself would be allowed to reveal the content in the document.  In the present case I have already held that the purpose for discovering the items in the two categories was to establish the existence and extent of a monetary dispute.  The figures in the two categories are highly relevant to prove such an existence.  Mr Chan and the plaintiff are allowed to disclose these figures as they are merely numbers arising from a commercial transaction.  The fact that the commercial transaction happens to relate to legal services is immaterial, for I have held that LAP and LP do not attach to them.

Conclusion

34. I will allow the appeal and order the plaintiff to make the discovery as sought by the defendant.  However, if in respect of any of the documents the plaintiff still seeks to claim privilege, they should supply the same to me in a sealed envelope and with their reasons thereof in writing to be included in the same envelope and I shall consider them further on ex parte basis.

35. There shall be an order nisi that the defendant shall have her costs of her application here and in the Court below.