WITHERS (a firm) v. ANTONIA BASILE also known as ANTONIA BASILE WILSON

HCMP 1162/2016

[2019]HKCFI 325

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1162 OF 2016

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J U D G M E N T

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Introduction

1.  This is an appeal from a Master’s decision.[1]  The dispute lies between the plaintiff, a firm of solicitors (“the Firm”), and the defendant, who is the Firm’s former client in relation to the matrimonial litigation she was engaged in against her former husband.  For convenience I shall refer to the defendant as the “Wife” and to her husband as the “Husband”. The issue is whether special circumstances exist so that 6 bills of costs issued by the Firm to the Wife should be referred to taxation.

Background

2.  The Wife first engaged the Firm on 26 June 2012.  Initially she sought advice in relation to her matrimonial matters and certain family trusts.  In 2014, she decided to file a petition for judicial separation, and lodged an application for maintenance pending suit (“MPS”) in August 2014 in which she claimed against her Husband, inter alia, funds to cover her legal expenses.  This first application for MPS was resolved by an agreement reached in September 2014 after mediation, pursuant to which the Husband provided a total of $1.25 million for the Wife’s legal expenses.  A second application for MPS was heard on 10 February 2015 which led to an order for the Husband to provide $2 million for the Wife’s legal expenses with the condition that it was to be offset against the ancillary relief award in her favour at the end.  A consent order was further made in June 2015 for a sum of $3 million for the Wife’s legal expenses, subject to the same condition.  Another MPS application was heard on 27 October 2015 and decided in December 2015, resulting in an award of $3 million as legal funding for the Wife up to the financial dispute resolution (“FDR”) scheduled for February 2016.

3.  The matrimonial proceedings were highly acrimonious and contentious.  From September 2014 to October 2015, there were 8 court hearings, in all of which the parties were represented by senior counsel on both sides.  By then, the Husband had incurred legal costs of about $14 million and the Wife $8 million.

4.  It appears from the documents that the Wife had written to the Firm about her concerns over costs management since August 2015. The retainer was eventually terminated on 22 January 2016, about a month before the FDR.

5.  A total of 24 bills were issued to the Wife during the course of the Firm’s retainer, from 26 June 2012 to 22 January 2016.  The first 9 bills were not the subject of any legal dispute.  5 of the last bills issued by the Firm, delivered between November 2015 and January 2016, were either not paid or only partially paid.  On 9 May 2016, the Firm issued an originating summons for these 5 bills to be referred to taxation. This was not opposed by the Wife, and an order was made in July 2016 for these 5 bills to be taxed.  I shall refer to them as “the 5 OS Bills” to signify they are the subject matter of the originating summons itself.

6.  Meanwhile, on 30 June 2016, the Wife cross‑applied by summons in the originating summons proceedings for a further 10 bills, delivered between 16 February 2015 and 18 December 2015, to be taxed.  These bills had been paid.  I shall refer to them as “the 10 Paid Bills”. 

7.  The particulars of the 10 Paid Bills and the 5 OS Bills have been helpfully summarised by Mr Lui, counsel for the Firm, in a table which (subject to modifications) is appended at the end of this decision.

8.  It is not in dispute that, of the 10 Paid Bills, 4 (ie Bills 1 to 4) had been paid more than 12 months before the Wife’s application, and that consequently no order could be made for their taxation having regard to proviso (ii) to s 67(2) of the Legal Practitioners Ordinance (Cap 159).  Master J Wong refused to refer these 4 bills for taxation.  There is no appeal by the Wife from this decision. 

9.  The other 6 bills (ie Bills 5 to 10) had been delivered more than 1 month but less than 12 months before the Wife’s application, but had also been “paid”.  By virtue of proviso (i) to s 67(2), which I shall refer to simply as s 67(2)(i), no order for taxation may be made in such a case “except in special circumstances”.  The Master held that there were special circumstances and referred those 6 bills for taxation.  He also refused leave for both parties to adduce certain late affidavit evidence.  The Firm now appeals against both decisions.

Legal principles on s 67(2)(i)

10.  There is no dispute between the parties on the relevant legal principles.  The authorities have established that “special circumstances” in s 67(2)(i) is a very flexible concept that depends on the court’s assessment of the facts and circumstances of the particular case. The discretion is a wide one.  Special circumstances “are those which appear to the judge so special and exceptional as to justify taxation”: In re Boycott (1885) 29 Ch D 571, 576, per Bowen LJ.  They are not capable of precise definition or exhaustive enumeration. 

11.  Relevant guidance from the authorities has been summarised by Deputy Judge Lok (as he then was) in Ding Xiaohong & Others v King & Wood (a firm) [2013] 2 HKC 245, at §32, as follows:

“ As regards what constitute special circumstances, the following legal principles are relevant:

(i) they are something out of the ordinary, something serious to justify not only an ordinary taxation but a special one (see: Re Miller Peart [2007] 3 HKLRD 125 at §65, per Recorder Jat SC);[2]

(ii) the discretion to extend the limitation is a wide one and a liberal interpretation should be given to the words “special circumstances” (see: Re Solicitors [1984] HKC 346 at 349I, per Mayo J);

(iii) each case will depend on its own facts (see: Re Miller Peart, supra, at §85);

(iv) overcharging and false charging are well‑established special circumstances (see: Re Miller Peart, supra, at §86, Re Solicitors, supra, at 349D‑I, Wang Yeoh Yu Ruth v Chan Victoria [1988] 1 HKC 687 at 690I‑691E, In Re Norman (1886) QBD 673 at 676 and Re A Solicitor [1961] 1 Ch 491); and

(v) lack of particularity in the bill also constitutes a special circumstance (see: Springbok Shipping (HK) Ltd v Clayton Wong & Co [1998] 1 HKLRD 225 at 227E‑F).”

Special circumstances

12.  I turn to the matters alleged and relied on by the Wife as giving rise to special circumstances in the present case.  They are summarised in the skeleton argument of Mr Hughes who appeared for her, as follows:

(1) duplicated and excessive charging;

(2) pressure being brought to bear on the Wife to provide costs on account, and mismanagement of her legal funding;

(3) on two separate occasions, the Firm on behalf of the Wife agreed to receive litigation funding from the Husband with the condition that the amount provided would be set off from the matrimonial assets pool; this was contrary to counsel’s advice and client’s instructions;

(4) most of the Firm’s fees were not “paid” by the Wife from her own pocket; instead they were paid from litigation funding sourced from the Husband and were deducted from time to time as bills were presented;

(5) the Wife complained repeatedly to the Firm about its billing practices;

(6) the bills related to a highly contentious matrimonial dispute involving substantial amount of assets, and both parties engaged city firms with senior counsel; and

(7) there will be a taxation of the 5 OS Bills in any event.

Duplicated and excessive charging

13.  Whether the fees are excessive has to be assessed on a solicitor and own client basis, which is governed by Order 62 rule 29 of the Rules of the High Court (Cap 4A).  The approach is conveniently summarised in the following passage in Hong Kong Civil Procedure 2019 at volume 1 p 1319 (which is the same as that in the 2018 edition quoted by the Master):

“ Solicitor and own client basis (O.62 r.29) — On the taxation of solicitor’s bill to his own client (except a bill to be paid out of funds provided pursuant to section 27 of the Legal Aid Ordinance, or a bill with respect to non‑contentious business) all costs shall be allowed except insofar as they are of an unreasonable amount or have been unreasonably incurred. For the purposes of r.29(1), all costs incurred with the express or implied approval of the client shall, subject to r.29(3), be conclusively presumed to have been reasonably incurred and, where the amount thereof has been expressly or impliedly approved by the client, to have reasonable in amount (r.29(2)). For the purposes of r.29(1), any cost which in the circumstances of the case are of an unusual nature and such that they would not be allowed on a taxation of costs in a case to which r.28(2) applies, shall, unless the solicitor expressly informed his client before they were incurred that they might not be so allowed, be presumed, until the contrary is shown, to have been unreasonably incurred (r.29(3)).”

14.  Various examples of alleged overcharging were mentioned in the materials.  Mr Lui said even if some criticism could be levelled at specific entries, there was no “gross overcharging”.  I am not sure such epithets are useful here.  Granted that the court will not act on slight grounds and needs to find something special, it would not be surprising if a court refused to order taxation on the mere basis of a few isolated small items.  I do not think however that overcharging must reach a “gross” level before special circumstances arise.

15.  In the present case the Wife alleges there was serious duplication of costs and excessive charging.  She considered there was serious and substantial duplication of work between the handling partner and other fee earners of the Firm and between the partner and counsel.  She has referred in particular to the following: (a) charging for reading internal emails from staff involved in her case, despite a previous indication that they would not do so; (b) charging for reading emails when the handling partner was away when he had arranged another partner to cover for him; (c) charging for work on unspecified documents; (d) charging for research (which she expected him as a specialist to have knowledge of); (e) excessive charging for preparing drafts of documents; (f) charging (by the partner) for work that should have been delegated to more junior staff such as preparing, checking and cross‑referencing hearing bundles; and (g) charging for reviewing and finalising counsel’s submissions.

16.  As Mr Hughes highlighted, the Master had reviewed not only the correspondence but also the 6 bills before concluding at paragraph 30(c) of his decision as follows:

“ The defendant said that the fees were duplicated and excessive. The defendant also said that pressure was brought to her to provide costs on account. The plaintiff denied them and said that the defendant made no complaint whatsoever. Upon reviewing the 6 bills and other evidence before me, including in particular the following contemporaneous documents recording the complaints of the defendant, on balance, I prefer the case of the defendant.”

17.  I am entitled to place weight on the views of the Master who has a great deal of experience in relation to the taxation of solicitors’ bills.  But having gone through the bills myself I also accept that there are real prospects for the Wife to establish her criticisms. Without in any way prejudging the taxation, there are, for example, a number of entries where a partner was simply said to have worked on documents, without further particulars; substantial number of hours were entered for a partner to compile and check bundles; a very considerable amount of time was charged for internal communication between fee earners — an area with scope for argument; attendance at hearings by more than two fee earners; potential duplication including for instance the handling partner charging for reading emails when another partner had been arranged to cover him while he was away — the subject matter of a specific complaint by the Wife in November 2015.

18.  The Firm said that the Husband incurred substantially more legal costs than the Wife in the litigation.  In my view this fact of itself is not probative of anything relevant here.  It is likely that the Husband’s team had much more to do in terms of making disclosure during the ancillary relief proceedings.  Further, the evidence shows that the Wife took on part of the preparation work for the litigation with a view to reducing costs, to an extent it is doubtful the Husband could match.

19.  The Firm also said that discounts had been given.  Of the 10 Paid Bills, a total write‑off or discount of $66,996 was given for June, July and September 2015.  In the scheme of things I do not think this alters the position in any way.

Pressure and mismanagement of legal funding

20.  There is no dispute that as a matter of fact, during the matrimonial proceedings, litigation funding was provided to the Wife by her Husband either by agreement or pursuant to the court’s order, as follows:

Date	Amount	Particulars	Payee of cheque
October 2014	$1,000,000	Pursuant to mediation agreement	Firm
January 2015	$250,000	By agreement	Firm
February 2015	$2,000,000	By court order	Firm
June 2015	$3,000,000	By consent summons	Firm
December 2015	$3,000,000	By MPS award	Wife

21.  These sums were not, however, all provided in time to cover the Firm’s demands for payment.  The Wife complained that that she was pressurised by the Firm to pay sums out of her own capital to the Firm at short notice as costs in advance.  Two instances were mentioned.  First, shortly before the MPS hearing on 10 February 2015, the Firm asked the Wife to provide $300,000 on account from her own capital.  The Firm’s response is that it made the request for funds orally on 3 February 2015, not “just a few days before the hearing” as the Wife alleged, and emailed its client account details to the Wife on 6 February.  Eventually this led to the Wife being told a day or two before the hearing, while she was away on a trip, that she would not have legal representation if she did not provide costs on account.

22.  Another instance according to the Wife is that shortly before another MPS hearing on 7 October 2015, the Firm asked for $600,000 from her as costs on account, which put great pressure on her.  The Firm’s response is that she was asked by letter on 25 September 2015 to put up $700,000, which was reduced to $600,000 on 30 September. Eventually the Wife agreed to pay the sum out of her own funds but not without misgivings.  In an email of 6 October to the Firm, she stated:

“ I have had considerable concerns over the management of my legal expenses and money held an account in the past and I have had a long discussion with Marcus about this at the end of August when I got back from my summer holidays and expressed my concern as to how late my invoices were being produced (usually 3 weeks into the following month) and not getting updates on balances of funds left on account. I also expressed my concern that I did not want to find myself in a financial situation is what happened at the beginning of the year when I was made to cover the shortfall of funds required to pay existing legal bills from my existing capital. As a consequence of what happened earlier this year, I also have had to hold back on paying off credit cards in order to ensure I have more cash on hand. Hence I am now disappointed to find that I am now back in this predicament and that MPS for legal funding was not raised with me at an earlier date …”

23.  I accept that the Firm’s demands for costs on account were not made just one or two days before the hearings but at least 7 days or longer in the two instances mentioned.  I accept also that there is nothing irregular in asking for costs on account and indicating to the client the consequences of non‑payment.  But the Wife’s grievance was that the Firm did not properly manage the issue of legal funding from the Husband to ensure that there was time to get more funding from him before it completely ran out and to ensure that the Wife was not “held to ransom” and forced to use the balance of her own capital to pay outstanding legal bills or further costs on account.  Her evidence suggests that as a single parent with three children to look after, she was placed under considerable financial stress as a result, and had to pay off only the minimum amount on her credit cards each month in order to build up a cash reserve to meet such demands of legal costs. 

24.  In ordinary litigation, the solicitor does not have a general duty to advise the client how or where to source funding to finance the litigation.  The point in this case, as made by the Wife, is that, unlike the usual case, obtaining legal funding from the adversary was the very thing (among others) the Firm was obliged to handle and advise her on. 

25.  The Firm did not deny that real difficulties were caused to the Wife.  As accepted by the Family Court, the Wife prima facie had no assets or none that could reasonably be deployed for litigation funding, could not provide security for borrowings or provide a charge on the outcome of the litigation, and would not be eligible for legal aid.

26.  I should mention, however, that I find nothing in the complaint by the Wife that the Firm “reneged” on the agreement to refund the $600,000 paid by her on 7 October 2015 as costs on account. The fact is that the $3 million legal funding obtained from the Husband in December 2015 was paid to the Wife directly, and not fully paid over to the Firm.

Agreeing to receive litigation funding with offsetting

27.  The Wife complained that the Firm gave advice, contrary to her interests, for her to accept legal funding from the Husband subject to the condition that such sums should be set off against her share of the matrimonial assets at the end.

28.  The principal relevant facts are that:

(1) From the outset, the Husband wanted any amounts paid to the Wife in the interim to be set off dollar for dollar from her share of the financial settlement at the end (“the offset condition”).

(2) Local Senior Counsel had, however, advised in consultation in as early as 2014 against such offset including in relation to legal funding, and the firm also wrote to the Husband’s solicitors in July 2014 stating there should not be the offset condition.

(3) The agreement reached by mediation between the parties in September 2014 did not contain the offset condition, and was expressly not binding on the parties in respect of any final disposition by way of ancillary relief.  This was the basis on which $1 million and later $250,000 was provided by the Husband to the Firm on account of the Wife’s legal expenses.

(4) When the Husband offered to pay a lump sum of $8 million for litigation funding with the offset condition in early February 2015, the Wife said she rejected it and only wanted to ask for $2 million at that stage without the offset condition.  She complained that at the MPS hearing on 10 February 2015, the Firm failed to ensure that counsel resist the Husband’s demands, but instead agreed for $2 million to be provided to the Wife with the offset condition.  She said that upon being queried by her after the hearing, the Firm advised her that it was still a good outcome and that the legal costs would be sorted out at the end of a trial.  $2 million legal funding was received from the Husband on this basis. 

(5) For their part, the Firm said that the Wife agreed to the offset condition in February 2015 following advice.  It was said that she was reminded of Senior Counsel’s advice in 2014 but also advised by the Firm that she should accept $2 million with the offset condition. This was on the basis that it would be open to her to seek adjustments to the distribution of assets in the final ancillary relief determination to reflect costs issues, and that if the lump sum payment was not agreed the court could not impose it but could only award a monthly sum, such as $250,000 which could well be insufficient for the scale of the litigation.  The Wife was advised agreeing to the offset condition “would probably on balance be a price worth paying given that there was a real risk that she may no longer have sufficient funds to continue to instruct Withers”.  The Firm also said that the law was not as certain as the Wife now claimed it was, and that in fact having regard to the Court of Appeal’s decision in HJFG v KCY [2012] HKFLR 27 it was considered then that the law was in favour of the offset condition, there being no material at that time to distinguish HJFG v KCY until it was supplied by English counsel in September 2015.

(6) Referring to the agreement to the offset condition in February 2015, the Firm said subsequently to the Wife (at a meeting on 15 October 2015):

“ At the time, we decided on balance it is better to go for offsetting, you were owing Withers a lot of money.”

The Wife said that this shows that the Firm decided to accept the condition by itself in order to serve its own interests.  The Firm disagreed, saying that the decision was made by the Firm and the Wife together in February 2015, and that the fact that she owed a lot of money to the Firm was only part of the reason why she agreed to the offset condition.

(7) In June 2015, the Wife instructed the Firm to ask the Husband for legal funding in the sum of $3 million without the offset condition, but the Husband insisted upon it.  The Wife said she was advised by the Firm to accept it, and she had no choice but to agree, given the precedent of the February payment.  $3 million was received on this basis.

(8) On 24 August 2015, the Firm sent to the Husband’s solicitors for execution a consent summons for legal funding in the sum of $3 million subject to the offset condition.  The Wife complained upon seeing it, and the Firm admitted it had been sent out without her approval.  The consent summons was eventually withdrawn without being put into effect, though the Wife was upset and complained about it to the Firm at the time.

(9) The Wife asked the Firm to obtain a second counsel’s opinion on the offset condition.  On 3 September 2015, English Queen’s Counsel advised that it was “wrong in principle for W to agree (or have agreed) to any such qualification or condition attaching to any litigation funding payments being made to her” and said he did not wish this to be repeated if it could be avoided.

(10) The Wife therefore instructed the Firm to ask the Husband for monthly legal funding of $800,000.  This was rejected by the Husband, leading to the need for another MPS hearing on litigation funding which was held on 27 October 2015.

(11) Prior to the hearing, on 22 October 2015, Hong Kong Senior Counsel referred to the acceptance of the offset condition in February 2015 as an error and advised the Wife and the Firm that “that error should not be perpetuated”.

(12) The Family Court handed down its decision on legal funding on 8 December 2015 in which the judge referred to the “inherent unfairness” in the situation as follows:

“ … the husband is paying for his legal costs from capital, which means that the size of the matrimonial pot is potentially diminishing, but the husband is not likewise required specifically to account for his own legal cost expenditure. The net result theoretically is that the matrimonial pot may be reduced by the husband’s legal costs, which in turn means that the wife’s potential share of the assets is less than it would have been otherwise. This inherent unfairness is then arguably compounded by the fact that the monies advanced to the wife for litigation funding are then to be deducted from her share of the assets as of right.”

In the end her Honour did not find it reasonable to expect the Wife to accept the offset condition for the further $3 million offered by the Husband in this round.  Following the decision, the Husband paid $3 million to the Wife by way of legal funding in December 2015.

29.  There are disputes of fact in this context, including (but not limited to) whether Senior Counsel’s advice given in 2014 was withheld from the Wife, whether the Wife agreed the offset condition prior to the Firm agreeing it with the other side at the hearing on 10 February 2015, and whether in agreeing to the offset condition and advising the Wife to agree to it in February and June 2015 the Firm was seeking to promote its own interests. 

30.  Needless to say, in proceedings such as the present, the court is not in a position to determine disputed facts on affidavit evidence.  Nor can or should I in the present context determine or even express any view on whether the Firm’s conduct was negligent. Understandably the Master likewise pointed out that he could not decide within the context of this application whether the Firm did its job properly or gave the Wife wrong advice.[3]

31.  It would appear, however, even on the Firm’s account, that its advice to the Wife to agree to the offset condition was contrary to Senior Counsel’s advice in 2014; that agreeing to such condition was “wrong in principle” according to subsequent advice from specialist leading counsel; that such condition meant that the Wife’s legal expenditure was treated on a different footing from that of the Husband; the condition was found by the Judge to be unreasonable and to have arguably compounded the inherent unfairness on the Wife; and that the Firm stood to benefit from the course advised (though I say this without in any way deciding that the course adopted was against the Wife’s interests or that the Firm had breached any duty to her).  Further, although the amount subjected to the condition in February 2015 was $2 million, the same condition was applied to the $3 million in June 2015 and, had the Wife not intervened, would have applied to a further $3 million under the unapproved consent summons in August 2015.  In my opinion this dispute between the solicitors and client contributed to the special circumstances of the present case.

Costs deducted from funding provided by Husband

32.  In relation to Bills 5 to 10, it can be seen from the materials as summarised in the Appendix that:

(1) Bills 5 to 7 were paid from the $3 million received by the Firm from the Husband in June 2015;

(2) Bill 8 (other than the part written off) was paid from the $600,000 deposited by the Wife on 7 October 2015;

(3) Bill 9 was paid in part from the $3 million received by the Firm from the Husband in June 2015; in part from the $600,000 deposited by the Wife on 7 October 2015; and in part from the $3 million received by the Wife from the Husband in December 2015; and

(4) Bill 10 was paid out of the $3 million received by the Wife from the Husband in December 2015.

33.  For the bills paid from money held by the Firm on account, the mechanics involved was that the Firm “took over” the relevant sums from its clients account towards payment of the bills in question.  It appears that, upon request, the Firm provided the Wife with reconciliations (for example, on 28 May, 30 September and 28 October 2015) to show how the money on account had been spent.

34.  Mr Hughes accepted it is not uncommon in matrimonial disputes for one side to have to provide legal funding to the other side, and that where that occurs the funds are usually paid directly to the receiving side’s solicitors.  I do not therefore consider that the source of funding or mechanism of payment in this case are in themselves special circumstances, although they provided the background of the disputes about legal funding management.

Complaints

35.  The Wife made a number of complaints to the Firm regarding its billing practices, the question of the level of legal expenditure which she considered unsustainable, and the management of legal funding.  The Master in paragraph 30(c) of his decision referred to her emails of 18 August, 24 August and 6 October 2015 respectively.  It appears that there was also argument on fees in the telephone conversation on 5 November and the meeting on 6 November 2015.  Not surprisingly, when the Wife finally terminated the retainer on 22 January 2016, she also raised complaints on fees in her letter.

Nature of proceedings and amounts

36.  In itself I do not consider the fact that there was a highly contentious matrimonial dispute with both parties engaging city firms and senior counsel is a special circumstance.  Mr Lui in fact relied on this as part of the context in which the level of fees should be approached.  In Ding Xiaohong, the court found that an amount of over $17 million in fees for work covering 10 months was a factor that warranted investigation.  While the amounts are not as high in the present case, it is of note that Bills 5 to 10, together with OS Bills 1, 2 and 3, charged fees and disbursements of $5.88 million for the 8‑month period from end of April to December 2015. 

Taxation of other bills

37.  In his decision, the Master referred to the fact that the parties had agreed to the taxation of 5 OS Bills and further referred to the observations of Deputy Judge Lok (as he then was) in Ding Xiaohong, supra, at §33.  It was a case where the judge considered that the legal costs charged ($17 million for work over 10 months) warranted serious investigation.  There was also a lack of particulars in the bills resulting in difficulty in assessing the reasonableness of the firm’s work.  It was in those circumstances that the judge said:

“ … as the court will tax the 5^th Bill in any event, it would be grossly unfair to the plaintiffs if, after the court finds that there is any instance of overcharging or false charging for the items in the 5^th Bill, the court is not allowed to investigate the propriety of the fees charged in the earlier bills and to adjust the figures accordingly. In my judgement, these considerations amounted to special circumstances to justify the taxation of the 1^st and 2^nd Bills without any condition, and they are also factors which favour the exercise of the discretion to order taxation of the 3^rd and 4^th Bills.”

38.  I do not think that the learned judge intended by his decision to lay down any general rule that once taxation is to take place between the parties in relation to certain bills, that in itself would be a special circumstance sufficient to justify taxation of other, earlier bills pursuant to s 67(2)(i).  Mr Lui submitted that there would be serious ramifications otherwise:

(1) Solicitor firms would be very reluctant to take the initiative to seek or to consent to taxation of any unpaid bills for fear that the mere fact of such taxation would invariably expose other bills or previously paid bills to taxation.

(2) The separate regimes under s 67 (see Re Miller Peart [2007] 3 HKLRD 125, §64) apply to distinct scenarios where the burden on the client seeking taxation increases progressively.  If the mere fact that taxation of one bill would constitute a “special circumstance” justifying taxation of other bills, a client may be able to obtain taxation for all the bills simply by referring a new bill for taxation under s 67(1) within one month.  This would be against the legislative intent in having separate categories and would obliterate the distinctions made within the current scheme.

39.  There is in my view considerable force in Mr Lui’s submission.  Indeed, Mr Hughes accepted that the fact that the 5 OS Bills had to be taxed under the Firm’s own application would not in itself suffice to justify taxing the 6 bills now in question.  In the circumstances of this case, I would not place weight on this factor.

Conclusion on special circumstances

40.  For the above reasons, and despite Mr Lui’s valiant and comprehensive effort, it seems to me that having regard to the prospects of establishing over-charging and duplication, the pressure felt by the Wife in making payments out of her own capital notwithstanding the Firm was responsible for advising her on the question of legal funding, her grievance concerning the offset condition and her complaints and misgivings voiced from August 2015 onwards, there are sufficient special circumstances to justify taxation under s 67(2)(i).

Timing

41.  Mr Lui made the point that the Wife did not apply for taxation of the 10 Paid Bills until after the Firm had issued its originating summons.  I do not think this is sufficient to warrant any adverse inference against the bona fides of her application, as she had to face the FDR with the Husband in late February 2016 and the continuing litigation thereafter.  Further, while the Firm in its email of 6 February 2016 advised the Wife that if 12 months had expired after delivery of the bill taxation would only be ordered in special circumstances, it did not inform her that no order could be made under s 67 for taxation if the bills had been paid for over 12 months.

Appeal against refusal to admit late affidavit

42.  The Wife’s first affidavit in support of her application was filed on 30 June 2016, together with her summons. Pursuant to directions given on 12 July 2016, the Firm filed 2 affidavits in opposition, namely that of Ms Ser and of Mr Dearle, both on 31 October 2016.  The Wife’s affidavit in reply was filed on 6 February 2017.  There was a direction that no further evidence could be filed without prior leave of the court.

43.  Apparently without substantial prior notice and shortly prior to the hearing before the Master (which was scheduled for 30 October 2017), the Firm applied by summons on 20 October 2017 for leave to adduce further evidence, in the form of a draft second affidavit of Mr Dearle (“Dearle 2^nd”).  On 26 October 2017, the Wife applied for leave to adduce her 3^rd affidavit in response to Dearle 2^nd in the event the Master admitted it, exhibiting inter alia a report from Mr David Law, a senior law costs draftsman.  On 27 October 2017 the Wife took out a further summons to adduce the affirmation of one Albert Lam, which is no longer relied upon.  The Firm subsequently produced, during the adjourned hearing before the Master on 28 February 2018, a slightly amended version of Dearle 2^nd.

44.  Despite that the parties were allowed to refer to the late evidence de bene esse and that the hearing had taken a second day held on 28 February 2018, the Master eventually refused to admit the late evidence.  The Firm’s position now is that Dearle 2^nd should be admitted, and if it is admitted the Firm does not oppose the admission of the Wife’s 3^rd affidavit except the law costs draftsman’s report.  The Wife opposes the appeal but takes the position that if the Firm is given leave to rely on Dearle 2^nd, then she should be permitted to rely on her 3^rd affidavit.

45.  On the late affidavits, the Master said at paragraph 18 of his decision:

“ Upon thought, I have decided to dismiss all the 3 late summonses. After Civil Justice Reform, late or last minute application should not be allowed without good reasons. Parties had their usual directions for filing and serving of usual affidavit evidence. It was completed in February 2017. They went before the listing clerk about 2 months later in April. Both of them however took more than half a year and only issued the summonses shortly before the scheduled hearing. There is no reason why those evidence should not have been obtained earlier. The plaintiff is a firm of solicitors. The defendant has been legally represented since February 2017. In any event, with the first round of affidavit evidence, all key documents regarding the dispute, including in particular the retainer and the ten bills have been placed before the court. Further round of affidavit evidence including arguments and comments from law costs draftsman or solicitor on the 10 bills does not assist or assist too much this court in deciding the argument.”

46.  There is nothing wrong in the Master’s reasoning with which I agree.  There was little justification for trying to put in a 29-page closely typed affidavit (Dearle 2^nd) more than 8 months after the close of evidence and only days before the hearing.  I have also allowed the parties to refer to the evidence de bene esse and have read it myself.  The only change is that by now a lot more time has passed since the production of the late affidavits.  But I do not think it is automatically a “free‑for‑all” when there is an appeal against a Master’s refusal to admit late evidence, otherwise the object of “effecting a change of culture so that parties should prepare their application properly at the earliest possible opportunity”[4] would be undermined.  I would however allow the copy of the retainer to be adduced, to which the Master himself referred, which was actually first exhibited to Dearle 2^nd as “MDCD 2-16”.

Disposition

47.  For the foregoing reasons, I take the view, like the Master, that there are special circumstances in this case such that Bills 5 to 10 should be referred to taxation under s 67.  The appeal is accordingly dismissed, save that leave is granted to the Firm to rely on exhibit “MDCD 2-16” to Dearle 2^nd.  There will be an order nisi that the Firm is to pay the Wife the costs of the appeal.

APPENDIX