LAU KWAN v. TONYS LAWYERS (a firm)

HCMP 1079/2024

[2025] HKCFI 5876

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1079 OF 2024

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BETWEEN

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DECISION

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Introduction

1.  This is the substantive hearing of the Amended Originating Summons (“the AOS”) refiled by the plaintiff on 10 September 2024 seeking leave to tax four legal bills (“the Bills”) delivered by his former solicitors, the defendant herein, pursuant to section 67 of the Legal Petitioners Ordinance, Cap 159 (“the LPO”).

2.  Three of the Bills were issued by the defendant in 2021 (collectively “the 2021 Bills”) and the remaining one was issued in 2023 (“the 2023 Bill”) for the legal services rendered to the plaintiff relating to his matrimonial disputes with his former wife (“the Former Wife”).

3.  The plaintiff contends that the 2021 Bills were interim bills and the 2023 Bill falls within the second regime under section 67 of the LPO. Therefore, all of the Bills should be taxed.

4.  The position of the defendant is that the 2021 Bills were final bills and were fully paid more than 12 months before the commencement of these proceedings. Thus, they fall within the fourth regime and no taxation should be allowed. In respect of the 2023 Bill, the defendant accepts taxation on the condition that the plaintiff should pay 60% of the amount demanded therein as interim payment and the remainder should be paid into court pending taxation.

5.  At the hearing, Mr Lo appears for the plaintiff and Mr Chan appears for the defendant.

Undisputed background facts

6.  I shall first outline the essential background facts here and only minimal information about the matrimonial proceedings will be disclosed (“the Proceedings”).

7.  On 4 December 2020, the plaintiff engaged the defendant to act for him in the Proceedings. The retainer (“the Retainer”) was evidenced by a written engagement letter dated 18 November 2020 (“the Engagement Letter”). The relevant provisions in the Engagement Letter included:

“Clause 2: 本行之法律服務之標準條款已列載於以下部份。除非本行與閣下另有書面協議，否則這些條款將適用於閣下現所指示的事宜及任何其他閣下在將來指示本行之事宜。

Clause 4: “本行會定時向閣下發出中期賬單，列出本行收費及為閣下所墊付的開支，以及本行收到與閣下事宜有關之大律師及第三者收取費用的通知。通常中期賬單會每月發出，或在完成閣下指示中的某個階段或工作後發出。如本行認為直至當日已完成某個金額的工作或達到為閣下墊支的某個金額、或由閣下發出中期指示後已有一段時間、或由本行發出對上一張賬單後的某段時間，本行均會發出賬單予閣下。根據是項條款所發出之中期賬單，均會被視為為閣下工作之最後賬單，而閣下在賬單到期日時同意支付該賬單。

Clause 5: 本行亦會行使酌情權，隨時以閣下之預付款項或存於本行之其他款項，支付上述有關閣下之中期或最後賬單。

Clause 6: 閣下有權於本行賬單發出 30 天內要求對該賬單進行收費評定（由法院檢閱），而此權利必須在 30 天內實行。如閣下於 30 天後向法院作出申請，法院可作出收費評定，但法院有酌情權決定是否作出該收費評定及施加條款。

Clause 7: 本行要求閣下於30天内支付本行的中期或最後賬單。如有逾期未支付本行之賬單，無論是本行之收費或墊付之開支, 均將會以每月2%利率徵收利息。”

8.  The Former Wife commenced the Proceedings in mid-December 2020 by way of a petition and an application for ancillary relief against the plaintiff.

9.  A three-day trial was fixed to be heard from 20 to 22 October 2021. About two weeks before the trial, the plaintiff reached an agreement with the Former Wife for a divorce with monthly periodic payments to settle the Proceedings partially.

10.  On 12 January 2022, the plaintiff and the Former Wife commenced another set of proceedings for their joint application for their divorce on the ground of one year separation by consent. They could not agree on ancillary relief, however.

11.  A six-day trial was fixed to resolve preliminary issues in November 2023. The parties managed to reach a global settlement in late October 2023 on all issues and the trial was avoided. The plaintiff eventually resolved all his matrimonial disputes with the Former Wife.

12.  Prior to that, the plaintiff made the following payments to the defendant:

Date of Receipt	Receipt No.	Amount (HK$)
(1) 24 December 2020	1905	500,000
(2) 16 April 2021	2538	500,000
(3) 15 October 2021	4153	684,777
(4) 8 November 2021	4386	999,985
(5) 7 March 2023	6896	50,000
Total		2,734,762

13.  The defendant issued the Bills to the plaintiff during the currency of the Retainer and the details of the Bills are as follows.

(1) the first one was dated 23 February 2021 for HK$338,502 covering the legal service rendered from 4 December 2020 to 22 February 2021 (“the First Bill”);

(2) the second one was dated 9 September 2021 for 1,356,274 covering the legal service rendered from 23 February 2021 to 20 August 2021 (“the Second Bill”);

(3) the third one was dated 30 December 2021 for HK$660,015 covering the legal service rendered from 21 August 2021 to 30 November 2021 (“the Third Bill”); and

(4) the fourth one was dated 27 December 2023 for HK$4,883,452.30 covering the legal service rendered from 1 December 2021 to 30 November 2023 (“the Fourth Bill”).

14.  The defendant contends that the outstanding costs payable after applying all the costs on account stand at HK$4,493,482.30.

Applicable legal principles

15.  Section 67 of the LPO provides,

“(1) On the application, made within 1 month of the delivery of a solicitor’s bill or a foreign lawyer’s bill, of the party chargeable therewith the Court shall, without requiring any sum to be paid into court, order that the bill shall be taxed and that no action shall be commenced thereon until the taxation is completed.

(2) If no such application is made with in the period mentioned in subsection (1), then, on the application of the solicitor or the foreign lawyer, or of the party chargeable with the bill, the Court may, upon such terms, if any, as it thinks fit (not being terms as to the costs of the taxation), order—

(a) that the bill shall be taxed;

(b) that, until the taxation is completed, no action shall be commenced on the bill, and any action already commenced be stayed:

Provided that—

(i) if 12 months have expired from the delivery of the bill, or if the bill has been paid, or if a verdict has been obtained or a writ of inquiry executed in an action for the recovery of the costs covered thereby, no order shall be made on the application of the party chargeable with the bill except in special circumstances and, if an order is made, it may contain such terms as regards the costs of the taxation as the Court may think fit;

(ii) if the bill has been paid, no order under this subsection shall be made where the application for the order is made after the expiration of 12 months from the date of payment of the bill.”

16.  Both Mr Lo and Mr Chan refer to Mark Richard Charlton Sutherland v CRB (a firm) [2024] HKCA 331 in which Chow JA referred to some relevant authorities to explain the operation of section 67 of the LPO, the differences between an interim bill and a final bill and the significance of such differences. I need not look no further than this authority for guidance on the applicable principles.

17.  In §§27-28, Chow JA said this,

“Where a series of bills have been issued by a solicitor to a client, it is necessary to consider whether the earlier bills preceding the last (or final) one are (i) “interim” bills, or (ii) “separate”/“final” bills. For this purpose: (a) interim bills refer to requests for payment of money on account, while a final bill is one for the total amount of professional costs and disbursements together with any increase or reduction on the interim bills and giving credit for all payments received as a result of previous interim bills (see Tianjin Textiles (Hong Kong) Limited v S K Wong & Co (a firm), HCMP 2019/2011 (23 August 2012), at §10, quoting §§62/App/61 and 62 of Hong Kong Civil Procedure 2012, Vol 1, at pp 1177-1178); and (b) a bill delivered at a natural break in a litigation is regarded as a separate/final bill.

The distinction between an interim bill and a separate/final bill is important in the context of solicitor and own client taxation because, for the purpose of s 67, time does not begin to run until the last bill in the series or the final account is delivered. The rationale for drawing this distinction was explained by Deputy High Court Judge To in Chin Yuk Lun Francis and Another v Messrs Lo & Lo (a firm), HCMP 1142/2005 (unreported, 7 July 2006):

‘[10] A retainer is normally an entire contract under which a solicitor is to do certain work for his client. In the absence of a contrary agreement, the solicitor is not entitled to be paid until the work has been completed or the retainer has been terminated. Thus, in a litigation which extends over a considerable period of time, the burden of financing the client’s litigation falls upon the solicitor. To mitigate this harshness, the principle of natural break was evolved under which the solicitor becomes entitled to bill his client when a natural break occurs in the course of protracted proceedings even though the matter for which he was retained has not been brought to a conclusion. Thus the question arises whether a number of bills issued in respect of a litigation are separate bills or whether they are a series of bills which together form one bill. If they are separate bills, the client has to demand taxation within a month of delivery of each of the bills on him. If they are a series which together formed one bill, his right to demand taxation on all the bills in the series is preserved as long as he demands taxation within a month of delivery of the final account, i.e. the last bill of the series. Or, if he demands taxation within twelve months of delivery of the final account, the court may, in the exercise of its discretion, order taxation subject to terms. This concept of treating a series of bills as a single bill was evolved for the purpose of overcoming statutory time-bars for taxation. In course of time, another practice has also developed under which the solicitor’s right to demand interim payment is written into the retainer. Thus, the approach nowadays is to look first at the retainer to see if the solicitor has the contractual right under the retainer to issue separate bills prior to conclusion of the matter for which he was retained. If he has no, he may only issue final bills at natural breaks in the matter.

[11] If there is authority in the retainer for rendering bills prior to conclusion of the litigation, then it is a matter of construction of the retainer whether the bills, by whatever term they are called, though usually they are called ‘interim bills’, is a final bill or just a mere statement of how things were going on…

[12] Thus, in my view, ‘final’ in the context of a solicitor’s bill of costs does not mean ‘last’. It means finality, i.e. it will not be changed and it implies self containment. It is final in respect of a certain stage defined in the retainer, whether by event or by time. As a matter of construction of contract, it is possible to arrive at a construction authorising the issue of a number of periodical final accounts under a retainer, but the court should lean against such an interpretation.

[13] If there is no authority under the retainer for the solicitor to issue final bills before the conclusion of the matter, then he would have to rely on the authority to issue final bills at natural breaks. If a number of bills have been issued, and the solicitor asserts that any one of those bills is a final bill, he has the burden of proving that bill is a separate and final bill and not one of a series of bills…’.”

18.  At §30, Chow JA cited the following principles for determining whether a bill is interim or final for the purposes of solicitor and own client taxation expounded by DHCJ Le Pichon at §14 of her judgment in Li Shu Chung v Stevenson, Wong & Co (a firm) [2018] HKCFI 2372:

“(a) A retainer is normally an entire contract and in the absence of an agreement of the contrary the solicitor is not entitled to be paid until the work has been completed or that retainer terminated with the effect that the solicitor bore the burden of financing the client’s litigation.

(b) The natural break principle was evolved to mitigate this harshness. It entitled the solicitor to bill his client should a natural break occur in protracted litigation.

(c) The concept of treating a series of bills as a single bill was evolved for the purpose of overcoming statutory time-bars for taxation. At the same time, the practice of writing into the retainer the solicitor’s right to demand interim payment was developed.

(d) If the retainer allows the rendering of bills prior to conclusion of the matter, whether such a bill is final (in the sense that it will not be changed and implies self-containment) or interim (in the sense of a statement to show how things were going on) is a matter of construction. The court should lean against an interpretation that authorises the issuance of a number of periodical final accounts.

(e) In determining whether a bill is a separate bill or one of a series of bills, the court has to ask 2 questions: the 1^st Question - whether the solicitor has the power to send it in as a final bill; and the 2^nd Question - whether the bill has been delivered as a final bill. The burden of proof is on the solicitor.

(f) In determining the 1^st Question,

(i) absent any contractual provision entitling the issuance of the final bills, the solicitor can only do so at a natural break in the litigation;

(ii) a natural break is not synonymous with the conclusion of a distinct and separate matter; the matter should be considered from the perspective of the lay client.

(g) The 2^nd Question is a question of fact involving 2 elements: the solicitor has to deliver the bill intending to be a final bill and it is also intended and understood by the client to be a final bill. It has to be answered by looking at the intention of the solicitor and client, their conduct, the reaction of the client upon receipt of the bill in the form the bill took.”

The 2021 Bills - Interim Bills v Final Bills

19.  Bearing these principles in mind, I should first determine (1) whether the defendant has the power to issue the 2021 Bills as final bills and (2) whether the 2021 Bills have been delivered as final bills. The burden of proof is on the defendant.

20.  For the first question, the plaintiff relies on Clause 4 of the Engagement Letter and submits that the defendant has the contractual right under the Engagement Letter to issue periodical final accounts.

21.  On a plain reading of Clause 4, I agree with Mr Chan that it entitles the defendant to issue interim bills to the plaintiff regularly and that such interim bills would be deemed or taken to be final bills. It is amenable to no other construction and Mr Lo does not really argue so.

22.  Clause 6 makes it clear that the bills issued pursuant to Clause 4 are to be treated as final bills unless otherwise indicated by the parties. The time frames set out therein for the plaintiff to ask for taxation of the bills issued by the defendant are in line with the statutory time bars in section 67 of the LPO.

23.  Clause 6 expressly entitles the plaintiff to ask for taxation of the bills of the defendant. The court would not normally allow taxation of the defendant’s bills if they are only interim bills to start with. Clause 6 would be meaningless if the bills issued by the defendant are not agreed to be final bills.

24.  Even leaning against such a construction, I am satisfied that Clause 4 does authorise the defendant to issue interim final bills.

25.  Mr Lo, in fact, in his written submissions, accepts that bills issued pursuant to Clause 4 would be deemed to be final bills. Mr Lo does not explain why the deeming effect of Clause 4 does not apply to the 2021 Bills. The only point Mr Lo made in respect of the first question is that there is no express reference to Clause 4 in any of the 2021 Bills.

26.  This argument is unmeritorious. Whether the defendant made an express reference to the relevant provision in the Engagement Letter in the Bills can have no bearing on whether the Engagement Letter contained the relevant provision. Furthermore, as a matter of contract, I do not find it necessary to expressly refer to the contractual provision in their exercise of the contractual right in the Engagement Letter.

27.  For the second question, the defendant insists that the 2021 Bills were intended to be final bills because they were issued pursuant to Clause 4. In these Bills, the defendant demanded the plaintiff to settle the same within 30 days and interest would accrue at the rate of 2% per month thereafter. Moreover, the defendant made it clear to the plaintiff that deduction from the money on account would be made for the purpose of payment of the 2021 Bills. The 2021 Bills were not merely intended by the defendant to show how things were going.

28.  On the other hand, the plaintiff makes a bare assertion that the 2021 Bills are not intended to be final. However, he did not allege that the 2021 Bills were issued on any basis other than Clause 4. The plaintiff is bound by Clause 4 and he should have intended that pursuant to Clause 4, the Bills must be deemed to be final bills.

29.  The plaintiff’s payment of the Second Bill is particularly telling. The plaintiff delivered a cheque issued by King Prosper Trading Ltd on 15 October 2021 in the amount of HK$684,777.00 for the specific purpose of settling the exact amount demanded by the Second Bill after the two amounts paid as costs of account ($161,498 and $500,000) had been utilised to pay the outstanding fees.

30.  Similar payment was considered as evidence of an intention to pay the outstanding legal fees and not as costs on accounts: Wong Kar Gee Mimi v KC Ho & Fong (unreported, HCMP 61/2014, 20.5.2015) per Master M Wong at §21.

31.  The clear fact is that the plaintiff settled the First, Second and Third Bills on 3 March 2021, 21 October 2021 and 7 January 2022 respectively without demur. It was not until the plaintiff instructed his current solicitors that he for the first time complained about the quantum of the legal fees demanded by the Bills by his letter dated 20 May 2024.

32.  Mr Lo makes the following submissions to argue that the plaintiff had no intention that the 2021 Bills were final bills.

33.  First, he repeats his submission that the 2021 Bills did not have any express reference to Clause 4 and they were merely labelled as “Bill” as opposed to “Final Bill”.

34.  There is no substance in this argument. The 2021 Bills were issued by the defendant and at most such an omission to refer to Clause 4 in the 2021 Bills reflects the intention of the defendant and not the plaintiff’s intention.

35.  I do not find it unreasonable or concerning that the defendant neither referred to Clause 4 in the 2021 Bills nor marked them as “Final Bills”. As explained above, it is quite unnecessary for the defendant to do so.

36.  It should be noted that the 2023 Bill, agreed to be a Final Bill, likewise made no reference to Clause 4 and was labelled “Bill” only.

37.  Second, Mr Lo points out that the Bills were gross sums bills in nature and they merely provided summaries of the total hours allegedly spent by the defendant’s fee earners and their hourly rates without any detailed breakdown. He submits that this is indicative of their interim nature in that the plaintiff was never in a position to assess the reasonableness of the fees charged.

38.  I have studied the 2021 Bills. Each of them has a summary of legal services rendered set out in chronological order. There is no breakdown of the billable hours spent on each entry in the summary. There is a schedule containing the hourly rates of Ms Cindy Wong, the handling solicitor, and a clerk and the total numbers of hours spent are stated.

39.  I am not convinced by Mr Lo’s submission. Such gross sum bills are not unusual and are not necessarily suggestive that the bills are interim bills only. My attention is drawn to Wong Kar Gee Mimi in which Master M Wong found such gross sum bills were intended to be final bills and rejected the submission that there was a total lack of particulars in such bills. I reach the same conclusion here.

40.  Mr Lo next complains that the amounts claimed are grossly inflated and suggestive of likely applications of future discount or adjustment.

41.  I accept Mr Chan’s submission that the alleged excessiveness of the 2021 Bills is irrelevant to the issue as to whether they are interim bills or final bills. The suggestion that it implies further discount or adjustment is not acceptable bearing in mind that the plaintiff is contractually bound to settle them within 30 days after their delivery. It is far-fetched to say that because of the excessive demands made in the 2021 Bills, discount or down adjustment is expected to be made by the defendant and yet the plaintiff should settle them within 30 days.

42.  It should be noted that the plaintiff is expressly entitled to apply to tax the Bills pursuant to Clause 6 should he find the fees demanded by any of them to be excessive. Of course whether the plaintiff intended to exercise this contractual right is another matter.

43.  Mr Lo then points out that payment time and the 2021 Bills do not tally and this shows that the defendant did not treat the 2021 Bills to be final. It is not the evidence of the plaintiff in the first place.

44.  And this is, with respect, a non sequitur. .

45.  Mr Lo further relies on the fact that the defendant did not actually charge the plaintiff default interest pursuant to Clause 7. In my view, it does not begin to show that the 2021 Bills are mere interim bills. The defendant made an express reminder of the contractual default interest in each of the 2021 Bills and it was clearly the defendant’s commercial decision whether to charge the plaintiff such interest despite his late payments. If the 2021 Bills were not meant to be payable, such a reminder would be totally meaningless and there is no reason why it was included in the 2021 Bills.

46.  Mr Lo highlights that payments by deduction of costs of account do not conclusively indicate the nature of the Bills, citing Li Shu Chung. I agree with him but he simply could not explain away the exact payment of HK$684,777.00 made by the plaintiff to settle the Second Bill.

47.  None of the grounds advanced by Mr Lo can convince this court that the plaintiff did not issue and the defendant did not settle the 2021 Bills as final bills.

48.  The 2021 Bills were paid more than 12 months before the commencement of these proceedings. There can be no taxation in respect of these Bills.

The 2023 Bill - Interim payment?

49.  Now I turn to the 2023 Bill. There is no dispute that it is a final bill. The defendant has no objection to its taxation but seeks interim payment of the 60% of the outstanding balance in the sum of HK$2,696,089.30 and payment of the remainder in the sum of HK$1,797,393 into court pending taxation.

50.  There is no dispute that this court has the jurisdiction to order interim payment as a term for ordering taxation under section 67(2) of the LPO: Re Miller Peart [2007] 3 HKLRD 125 per Recorder Jat SC at §107.

51.  The 2023 Bill had been long overdue before the plaintiff issued the AOS. Now the defendant has to wait even longer. It is only fair that interim payment should be ordered as a condition for taxation: Zhang Lan v Herbert Smith Freehills (unreported, HCMP 285/2016, 3.3.2017) per Lok, J at §19.

52.  As to quantum, Mr Lo seeks to convince this court that the amount of legal fees in the 2023 Bill has been hugely inflated whereas Mr Chan seeks to justify those fees. Despite the submissions of Mr Lo and Mr Chan, I should not embark on a mini-taxation here. At this stage, I am unable to form a clear view as to how much the 2023 Bill would be taxed down. I can only take “a rough and ready” approach: Rich Trend Ltd v Wong, Hui & Co [2021] 5 HKLRD 578 at §81 per DHCJ Winnie Tsui (as she then was)

53.  My view is that 50% of the outstanding balance should be paid by the plaintiff as a condition. Half of it (HK$1,220,863.00) should be paid to the defendant and the remaining half in the like amount should be paid into court within 42 days from the date of this Decision. Of course, there should be an order that the defendant do upon taxation give credit for all sums of money received from or on account of the plaintiff, and the defendant do make a refund if it transpires that the defendant has been overpaid on such taxation.

Conclusion and Orders

54.  For the reasons given, I believe that on a proper construction of the Engagement Letter, the defendant is entitled to issue periodical final bills to the plaintiff. The defendant issued and delivered to the plaintiff the 2021 Bills as final bills and both parties treated them so. They were paid by the plaintiff more than 12 months before the commencement of these proceedings. The plaintiff has lost his right to have them taxed in accordance with section 67 of the LPO.

55.  For the 2023 Bill, absent any objection, I accede to the application of the plaintiff and order taxation of the same on the condition that the plaintiff do pay the defendant a sum of HK$ HK$1,220,863.00 and another sum of the like amount into court within 42 days from the date of this Decision.

56.  Parties are granted liberty to apply.

57.  Costs should follow the event. I make an order nisi that costs of and occasioned by the AOS be paid by the plaintiff to the defendant, to be taxed if not agreed.

58.  Lastly, I thank Mr Lo and Mr Chan for their assistance in this matter.