NEW LAND PROPERTIES DEVELOPMENT LTD AND ANOTHER v. GEORGE Y.C. MOK & CO (A FIRM)

HCMP 31/2024

[2024] HKCFI 2379

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 31 OF 2024

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DECISION

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Introduction

1.  By this originating summons dated 8 January 2024 (“the 2024 OS”), New Land Properties Development Limited (“New Land” or “P1”) and Chan Wai Leung Jacky (“JC” or “P2”) (collectively “the Plaintiffs”) seek to set aside the consent order dated 7 November 2022 granted by Master David Chan in HCMP 1572 of 2022 commenced by way of an originating summons dated 14 October 2022 (“2022 OS” or “HCMP 1572”).

2.  At the conclusion of the hearing, the Decision was reserved which I now give.

3.  This application has a complicated background and procedural history which is set out below.

Relevant background

A. From mid-2017 to 17 December 2021

4.  In mid-2017, Plaintiffs engaged the Defendant George YC Mok & Co (“GMC”) in relation to matters concerning the sale and purchase of 5 land lots. It is common ground that the agreement was made orally (“the oral agreement”) but the parties differ as to its terms.

5.  On 29 January 2019, GMC commenced DCCJ 505/2019 (“the District Court action”) against the Plaintiffs to recover legal costs in the sum of $629,750[1] for work done based on the oral agreement.

6.  On 22 May 2020, after hearing the application of the Plaintiffs made under RDC 14A, Deputy District Judge Jonathan Wong dismissed the District Court action and held (at §76) that as a matter of law, under section 56 of the Legal Practitioners Ordinance (“LPO”), the oral agreement is unenforceable and/or cannot be relied by a solicitor against his client.

7.  GMC’s application for leave to appeal was refused. On 17 December 2021, the Court of Appeal also refused to grant GMC leave to appeal.

B. HCMP 1572: 3 August 2022 to 18 December 2023

8.  On 3 August 2022, GMC delivered its bill #0036799 dated 29 July 2022 (“the 2022 Bill”) to the Plaintiffs for total costs (excluding disbursements) of $886,617 for the period from 3 August 2017 up to 15 June 2018 for payment. The 2022 Bill went on to state that the parties had previously agreed to pay $600,000.

9.  The 2022 Bill contains a 5-page description of work carried out during that period of approximately 10 ½ months whereas the 2018 Bill was a short single page document although the underlying matters are the same.

10.  On 14 October 2022, GMC took out the 2022 OS against the Plaintiffs, returnable before Master David Chan on 8 November 2022, seeking an order that (1) the 2022 Bill “be referred to the Taxing Master for taxation” and other relief[2].

11.  On 28 October 2022, GMC wrote to the Plaintiffs referring to the 2022 Bill. GMC requested the Plaintiffs to honour their promises and agreement by tendering $600,000 to GMC within 7 days and alternatively to put forward the Plaintiffs’ offer of settlement.

12.  On the very same day, Messrs Raymond Cheung & Chan, solicitors (“RCC”) filed their notice to act for the Plaintiffs. For reasons unexplained, the Plaintiffs chose to instruct a new firm of solicitors who had no background knowledge of the District Court action to represent them.

13.  In their letter of 3 November 2022 to GMC sent in response to the 2022 OS, after referring to the return hearing date of 8 November 2022, RCC stated that they “have instruction (sic) to agree to your application” and requested a draft Consent Summons for approval.

14.  RCC and GMC then signed a consent summons on 4 November 2022 (“the Consent Summons”). §1 provided as follows:

“1. the Plaintiff’s costs, charges and disbursements under Bill No. 0036799 dated 29^th July 2022 (as per copy attached to the [2022 OS], “the Plaintiff’s bill”) which was delivered to the Defendants on 3^rd August 2022 for payment, be referred to the Taxing Master for taxation;”

15.  On 7 November 2022, after making some minor amendments[3] to the Consent Summons, Master David Chan granted the Consent Order.

16.  Thereafter, the Plaintiffs made 3 applications[4] for time extensions to file their list of objections.

17.  At the hearing on 28 February 2023, upon the Plaintiffs stating that they wished to file a summons to set aside the Consent Order, Master Phoebe Man made an unless order that the application be made within 14 days failing which the Plaintiffs would be barred from so doing.

18.  Pursuant to the 28 February 2023 order, on 10 March 2023, the Plaintiffs issued a summons in HCMP 1572 to set aside the Consent Order “on the ground that [GMC] was in breach of an oral agreement made between the [parties]” that legal fees were limited to $30,000[5]” (“the 1^st Setting Aside Application”).

19.  The evidence for that application comprised (i) JC’s affirmation in support filed on 22 March 2023 (“2023 1^st”), (ii) GMC’s affirmation in opposition filed on 20 April 2023 (“GMC 2^nd”); and (iii) JC’s 2^nd affirmation filed on 16 May 2023 (“2023 2^nd”).

20.  The 1^st Setting Aside Application was amended on 9 June 2023 by deleting in its entirety the ground originally relied on set out in the 1^st Setting Aside Application[6] as the basis for it.

21.  At the hearing on 4 August 2023, Master Alan Kwong dismissed the 1^st Setting Aside Application as amended, holding that even if the Consent Order falls within the “no objection” category and there is no real contract between the parties, the Court became functus officio when the 2022 OS concluded with the Consent Order, and hence, it had no jurisdiction to set it aside.

22.  The Plaintiffs did not appeal.

23.  The 2022 Bill was taxed on 12 September 2023, and on 24 October 2023, the Allocatur was issued in the sum of $666,337.

24.  On 18 December 2023, GMC commenced garnishee proceedings against the Plaintiffs.

C. HCMP 31 of 2024

25.  On 8 January 2024, the Plaintiffs issued an originating summons in HCMP 31/2024 (“the 2024 OS”) that is before this Court to set aside the Consent Order in HCMP 1572 granted on 7 November 2023. It is their 2^nd attempt to do so.

26.  On 24 April 2024, by consent, the Plaintiffs amended the 2024 OS to add the following relief: that the Consent Summons of 4 November 2022 be withdrawn and the Allocatur in HCMP 1572 be set aside.

27.  Meanwhile, on 31 January 2024, GMC obtained a garnishee order nisi in HCMP 1572 against (inter alia) Bank of China (Hong Kong) Limited which was adjourned on 15 March 2024 pending determination of the 2024 Amended OS.

The Plaintiffs’ case

28.  Mr Ray Kwan, counsel for the Plaintiffs, relied on a number of grounds for setting aside the Consent Order which are considered under the headings below.

(A)  Whether the Consent Order is a real contract

29.  An order expressed to be made “by consent” is ambiguous. It may evidence a real contract between the parties and in such case, the Court will only interfere with such an order on the same grounds as it would with any other contract. The other meaning is that the parties do not object to the order being made. In such a case the order can be altered or varied by the Court: see Siebe Gorman & Co Ltd v Pneupa Ltd [1982] 1 WLR 185 at 189E-G.

30.  Mr Kwan submitted that the Consent Order is not a real contract between the parties but merely that the parties do not object to the order being made. He highlighted the absence of evidence that the parties entered into any negotiation leading to the signing of the Consent Summons. There was no offer and acceptance of the Consent Summons and that was no passing of consideration, and no compromise made by the Plaintiffs.

31.  However, RCC’s letter of 3 November 2022[7] is clear and unambiguous. They have instructions “to agree” to GMC’s application that the 2022 Bill be referred to the Taxing Master for taxation.

32.  It is the evidence[8] of JC’s solicitor, Chan Shu Yung (“CSY”) of RCC that RCC always contacted JC by email/WhatsApp asking him to call back.

33.  JC’s affirmation filed on 8 January 2024 in support of the 2024 OS (“JC 1^st”) provided little information in relation to his instructions to RCC. In summary, it stated that:

(i)  from the outset, he made it clear to RCC that he intended to oppose all the relief sought in the 2024 OS (§7)[9];

(ii)  at the material time, JC thought RCC was aware of his instructions to oppose the 2024 OS (§8); and

(iii)  RCC had ‘mistakenly given consent’ to the relief in the 2024 OS (§11).

34.  The lacunae in the Plaintiffs’ evidence are immediately apparent. The numbering below follows the numbering used in the preceding paragraph:

(i)  the date(s) and the means by which the instructions were given to RCC;

(ii)  the date(s) constituting “the material time” referred to and the grounds relied on in support of JC’s belief; and

(iii)  particulars regarding RCC’s “mistake”.

35.  That aside, §33 (i) and (iii) above contradict JC’s earlier evidence given in 2023 1^st filed in support of the 1^st Setting Aside Application where JC stated (at §5) that as he was a busy businessman, he

“had not given full instruction to [RCC] that I opposed [GMC’s] entitlement to any legal costs or at all and the full background. So [RCC] had not taken opposition to [GMC’s] Bill of costs”.

36.  In JC’s reply affirmation filed on 17 May 2023 (“2023 2^nd”), JC considered that the signing of the Consent Order “was due to the ineffective communication” between RCC and JC which he considered “unfortunate”.

37.  I do not consider that the evidence adduced can support a viable claim that RCC made ‘mistake’. I do not accept the suggestion that RCC had ‘mistakenly given consent’.

38.  Whether RCC did or did not carry out the Plaintiffs’ instructions is not the question before the Court. In so far as the Plaintiffs consider that RCC did not carry out their instructions, they are not without recourse.

39.  In my view, the analysis of the Consent Order falling into the “no objection” category does not make sense. The 2022 OS sought substantive relief - an order that the 2022 Bill be taxed by the Taxing master. In that context, ‘not objecting’ effectively means agreeing to the taxation process which is premised on the Plaintiffs’ liability.

40.  On the question of consideration for the contract, Mr Andrew Mak and Ms Jennifer A Tse, counsel for GMC submitted that when the Plaintiffs were served with the 2022 OS, they had options. They could have opted to fight the case by way of a strike out on the basis that the matter had already been litigated. They did not. Instead, the Plaintiffs chose another route by gambling on the amount GMC could get on taxation and participated in the taxation process that followed.

41.  Another aspect of consideration was that the effect of the Consent Summons which obviated the need for the hearing scheduled for 8 November 2022, thereby effecting a saving of costs.

(B)  Res judicata/abuse of process

42.  The Plaintiffs submitted that GMC should not be allowed to relitigate a matter that had been decided in the District Court action in May 2020.

43.  Pausing here, in their written submissions, neither counsel referred to GMC’s applications for leave to appeal the District Court Judgment of 22 May 2020. It was the result of this Court’s attempt to understand the hiatus of 2½ years between the District Court Judgment and the commencement of HCMP 1572 on 14 October 2022, that the matters stated in §7 above emerged.

44.  After the hearing, in considering the res judicata point, the Court obtained and read the Court of Appeal’s Judgment dated 17 December 2021 (“the CA Judgment”).

45.  I find it inexplicable and highly regrettable that neither counsel saw fit to refer this Court to the CA judgment[10]. Since counsel in the present case were not involved in the District Court action and subsequent leave applications, it is unclear when they were first instructed in this matter[11]. But once instructed, it would be surprising that counsel for both parties would not have known of the leave to appeal applications.

46.  Had they actually read the CA Judgment, they would have realised that it is dispositive of the matter before this Court.

47.  In [2021] HKCA 1919 (at §3), Kwan JA (as she then was) described the only contention sought to be raised in GMC’s intended appeal in the following terms:

“under section 56 of the LPO, whether an agreement for remuneration in non-contentious business which is not in writing and/or not signed by the client or his agent in that behalf is unenforceable and/or cannot be relied upon by a solicitor against his client”.

48.  After considering English jurisprudence (relating to the legislative history governing the agreement for remuneration of solicitors) which the CA considered directly relevant, it concluded (at §15) that:

“Quite clearly, section 56 (3) of the LPO is a prescriptive provision that the agreement for remuneration in a non-contentious business should be in writing, signed by the person to be bound thereby, or by his agent in that behalf. It brings in a “disability to make an agreement as regards non-contentious business unless it is in writing”. So unless the prescriptive requirements are complied with, the agreement for remuneration in a non-contentious business is not enforceable. The position is clear and the plaintiff’s arguments to the contrary are quite simply untenable.”

Disposition

49.  The CA Judgment is binding on this Court.

50.  It follows that the Consent Order is unenforceable and must be set aside.

51.  The implications of having to reach this conclusion at this late stage are considerable. Had the CA Judgment been brought to the Court’s attention in HCMP 1572/HCMP 31, it would have saved considerable judicial time and resources that have since been spent on applications and hearings that should not have been allowed to occur.

52.  In my view, both parties must bear responsibility for this highly regrettable state of affairs.

Order

53.  I make an order in terms of §1 of the 2024 OS. I also order that there be no order as to costs.