XCHRX HONG LEE & CO. (a firm) v. SUN WAI CHUN

HCMP 5857/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 5857 OF 1999

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D E C I S I O N

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1. In these proceedings begun by originating summons, the plaintiff seeks an order that a bill of costs it delivered to the defendant be referred for taxation and the consequential directions. The defendant opposed the application. At the conclusion of the hearing, I granted the application with costs and gave oral reasons for the decision. I now reduce the reasons into writing.

Background

2. The plaintiff is a firm of solicitors. The defendant is the registered owner of a property in Fairview Park, Yuen Long, New Territories. In High Court Action no. A5782 of 1994 ("the Action"), the defendant was sued by the management company of Fairview Park in respect of certain alterations on her property. The plaintiff represented the defendant in the Action until 24 November 1998 when it formally came off the record and ceased to act for the defendant.

3. The Action concluded with a judgment against the defendant. The defendant appealed to the Court of Appeal and lost. Leave to appeal to the Court of Final Appeal was refused by both the Court of Appeal and the Court of Final Appeal.

4. On 3 May 2000, the plaintiff delivered to the defendant a bill of costs no. SHL/01052/94 in the amount of $417,228 ("the Bill"), representing the balance of the plaintiff's costs and disbursement incurred in the Action on the defendant's behalf. The Bill has not been paid. On 24 September 1999, the plaintiff commenced these proceedings.

5. A total of 5 affidavits and affirmations had been filed. Three of them were by the handling solicitor of the plaintiff, one by the defendant and another by Mr Choy Bing Wing, the defendant's authorized agent in the Action.

The Objections

6. The defendant's objection herein is on the basis that the plaintiff had been negligent in the handling of the Action on her behalf in a number of respects. The defendant set out in her affirmation various allegations of negligence and stated that she has suffered loss as a result of the negligence. The loss is particularized as costs already paid to the plaintiff, costs payable to the management company and her own costs in the Action and in the appeals. The defendant said that the plaintiff is liable for her loss and is not entitled to seek any costs from her. She also indicated in her affirmation that she objects to each and every item in the Bill.

7. The affirmation of Mr Choy raises further allegations of overcharging and disobedience of instructions. In both the defendant's and Mr Choy's affirmation, it was urged that the originating summons should be dismissed.

8. The plaintiff in the affidavits filed on its behalf streneuously denied all these allegations.

Reasons for Decision

9. From the allegations raised by the defendant, namely, negligence, disobedience of instructions and overcharging, there are 2 issues or areas of disputes between the parties. They are, firstly, the issue of whether the defendant is liable to pay the plaintiff the costs incurred for the Action, and, secondly, the issue of what is the reasonable or proper amount of costs payable by the defendant under the Bill. For ease of reference, I shall refer to them as "the liability to pay" issue and "the amount payable" issue respectively.

10. The position taken by the defendant in the 2 affirmations filed herein is that the plaintiff, by reason of its negligence and disobedience of instructions, is not entitled to be paid by the defendant, and the application herein should therefore be dismissed. It appears that the defendant has mixed up the 2 issues of the liability to pay and the amount payable, which are different matters and merit different considerations.

11. The orders and directions sought in the originating summons herein are in these terms :

"1. The bill of costs delivered by the Plaintiff to the Defendant on 3rd May 1999 ("the siad Bill") be referred to the Taxing Officer to be taxed, the Plaintiff giving credit for all sums of money received by the Plaintiff from or on account of the Defendant, and refunding what (if anything) may appear on such taxation to have been overpaid.

2. The Plaintiff do lodge a formally itemised bill of costs in respect of the said Bill with the Court for taxation within 28 days.

3. The Taxing Officer do tax the costs of the reference and certify what shall be found due to or from either party in respect of the said Bill and of the costs of the reference and certify what shall be found due to and from either party in respect of the said Bill and of the costs of the reference to be paid according to the event of the taxation pursuant to the Legal Practitioners Ordinance, Cap.159."

12. The plaintiff has not in the originating summons sought an order for payment of the taxed amount. All that the plaintiff will get on the orginating summons is an order for taxation, together with directions on the procedure or manner for carrying out the order of taxation. At the taxation, the taxing master will only be concerned with the proper and reasonable amount payable under the Bill. This will also address the defendant's complaint of overcharging. If after the taxing master makes the certification as ordered, the defendant neglects or refuses to pay the certified amount, the plaintiff will still have to commence another set of proceedings to recover the amount. The Court will then have to adjudicate on the liability to pay issue, if the defendant were to repeat the allegations of negligence and disobedience of instructions as a defence or counterclaim to the plaintiff's claim.

13. Mr Yeung, who appeared for the defendant, submitted that it is more logical for the taxation to proceed after the liability to pay issue is determined. He further referred to O. 28 r.4, RHC and asked that an order be made for the action to continue as if begun by writ, together with consequential directions on pleadings and so on.

14. In my view, the originating summons should not be dismissed merely because the defendant has raised allegations of negligence and disobedience of instructions against the plaintiff. The fact that the defendant has raised allegation of overcharging and has indicated that all the items in the Bill are objected to supports, rather than undermines, the plaintiff's application. There is clearly a need to tax the Bill.

15. The only question is whether there should be an order for taxation now. There is no inflexible rule that, where a client disputes his liability to pay his solicitors, the taxation can or should only take place after the liability issue has been resolved. Each case will have to depend on its own facts.

16. In the present case, notwithstanding the indication in the defendant's affirmations that the liability to pay issue is an important issue and the fundamental dispute between the parties, the defendant has taken no step towards a resolution of it. The defendant has not commenced any action in negligence and/or agency claiming for damages. Neither has the defendant lodged a counterclaim herein. There is not even a draft pleading exhibited to the affirmations nor is there any indication that the defendant would litigate the liability to pay issue in any proceedings.

17. In the circumstances, it is inappropriate to accede to the defendant's request, made as an alternative to dismissal of the originating summons in her affirmation, and renewed by Mr Yeung at the hearing, to order the action to continue as if begun by writ. There can be no doubt that the plaintiff is entitled under the Legal Practitioners Ordinance, cap. 159 to have the Bill taxed. The plaintiff has not sought to enforce payment of the Bill after taxation in these proceedings. The liability to pay issue does not arise on the plaintiff's application. The issue only falls to be determined when the defendant puts in a counterclaim or, at least, indicate with some conviction that a counterclaim is to be lodged. As the defendant has not done so, there is no ground for ordering exchange of pleadings and for this action to proceed as if begun by write. There is plainly no justification why the plaintiff should not be allowed to proceed to taxation of the Bill now, when there is no or no clear indication that the liability to pay issue will be litigated

18. Even if there is a counterclaim, I have reservations whether it is appropriate to delay the plaintiff's entitlement to taxation merely by reason of the counterclaim. If this matter is to be ordered to proceed to trial as if begun by writ, only the liability to pay issue will and can be determined at the trial. The amount payable issue cannot be resolved by the trial judge at the trial, and has to be determined by the taxing master through the taxation procedure. In as much as the judge at the trial will not be concerned with the amount charged in the Bill, the taxing master is also not concerned with the liability to pay issue. It follows that time and costs are unlikely to be saved through lumping the 2 issues into one action. Seen in this light, it will be more appropriate for the defendant, if minded to do so, to litigate the liability to pay issue in another forum by means of a separate action.

19. At any rate, even if the defendant were permitted to litigate the liability to pay issue in this action by way of a counterclaim, there is no reason, on the facts of this case, why the taxation of the Bill should not proceed before or parallel to the determination of the issue. This is all the more so when the possibility of the liability to pay issue being litigated is unclear.

20. For the reasons above, the plaintiff should be entitled to the orders sought in the originating summons.

Costs

21. Mr Yeung for the defendant submitted that the Court should depart from the general rule that costs follows event, and asked that there be no order as to costs of this action. In so doing, he relied on a "without prejudice save as to costs" letter dated 8 May 2000 from his firm to the plaintiff. This letter stated that the defendant had no objection to taxation provided that the plaintiff agreed to "stay execution of any 'quantum' order after taxation pending for a claim which our client shall institute against your firm under which issue of liability can be decided". The plaintiff did not reply to this letter. Mr Yeung submitted that it is because of the plaintiff's failure to take up this offer coupled with the plaintiff's previous demands made in correspondence for payment of costs after taxation that the application was opposed and the hearing was necessary.

22. I do not agree with this submission. There is no justification nor basis for imposing the condition in the letter, not at least when there is no indication when the defendant will bring the alleged claim against the plaintiff. The plaintiff is quite entitled to ignore the letter and to proceed with the action. Whatever previous demand the plaintiff may have made for payment of the costs after taxation, the fact remains that the plaintiff has not by the originating summons herein sought an order for payment after taxation. There is plainly no reason why the plaintiff should not be awarded the costs of this action.

Conclusion

23. The orders that I make are as follows :

1. There be an order in terms of paragraph 1 of the originating summons.

2. There be an order in terms of paragraph 2 of the originating summons.

3. The defendant is to deliver a list of objections to the itemised bill within 21 days form being served with the itemised bill.

4. There be an order in terms of paragraph 3 of the originating summons.

5. Costs of these proceedings, including the costs of the hearing on 22 March 2000 and 10 May 2000, be to the plaintiff against the defendant to be taxed, if not agreed.

6. The taxation of the costs herein to take place immediately after the taxation of the Bill and of the costs of the reference mentioned in paragraphs 1 and 4 above.