EVERPRIDE PHARMACEUTICAL (HK) CO LTD v. LI & PARTNERS (a firm)

HCMP4079/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.4079 OF 2002

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J U D G M E N T

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1. The defendant is appealing against the decision of the Master in referring three bills of costs, charges and/or disbursements, namely Bills Nos. 0830, 0912 and 1077 rendered by the defendant to the plaintiff, to be taxed by the Taxing Master under section 67(2) of the Legal Practitioners Ordinance (Cap. 159).

2. The Master ordered that the items of disbursements in Bill No. 0830 only be referred to a Taxing Master and we are not concerned with the profits costs element of that bill. In Bill No. 1077 the defendant is not appealing against the order for taxation as such, but only to the extent that the Master had refused to make payment in as a term of the order.

Background

3. The defendant is a firm of solicitors. On 30 March 2000, the defendant was retained by the plaintiff to act for the sponsor, DBS Asia Capital Limited, relating to the listing of a company, Everpride Biopharmaceutical Company Limited, in the Growth Enterprise Market of the Hong Kong Stock Exchange. The parties have entered into an agreement in Chinese which, inter alia, provided for the payment of fees. With due deference, I refer to the judgment of Lok DJ in Li & Partners v. Everpride Pharmaceutical (HK) Company Limited, DCCJ 2558/2002, dated 15 August 2002, for the English translation of clause 7 of the agreement:

"3. Clause 7 of the Agreement can be translated as follows:

'Regarding the legal fees, both parties agree that:

(i) if the Intended Listing Work is completed before 30 September 2000, the Defendant shall pay the Plaintiff a sum of HK$1,000,000 as the legal fees of the whole legal services provided in the Intended Listing. Further, the Defendant shall reimburse the Plaintiff all the disbursements actually incurred in the Intended Listing work such as expenses incurred in business trips, long-distance call charges, fax charges, photocopying charges, etc. The fees of other legal services provided shall be determined by the Plaintiff and the Defendant in a fair and reasonable manner in accordance with the trade practice of the Hong Kong solicitors;

(ii) the Plaintiff shall complete its works diligently in accordance with the stipulations in timetable. If, not owing to any cause for which the Plaintiff is responsible, the Intended Listing work cannot be completed before 30 September 2000, the Defendant agrees to pay the Plaintiff an additional sum to be determined/decided to enable the Plaintiff to continue and complete the whole legal work for the Intended Listing;

(iii) in respect of the sum of HK$1,000,000 mentioned in clause 7(i) of this Agreement, the Defendant agrees to pay to the Plaintiff's designated account respectively each on the signing of the Agreement and the filing of the Intended Listing application form a sum of HK$300,000. The remaining HK$400,000 shall be settled within 7 days (which shall not be later than 30 September 2000) of the actual listing date.'"

4. The original target for the listing was 20 September 2002. Listing was not achieved by then. The defendant continued to provide legal services, and listing eventually took place in July 2001.

5. Bill No. 0830 was rendered on 20 June 2001. It related to the profits costs of $400,000 being the third instalment of the agreed fees of $1 million and the disbursement of $35,710. The profits costs portion was paid 26 July 2001. By 31 July 2001, the plaintiff has paid the defendant $1 million.

6. Bill No. 0912 was rendered on 31 July 2001 for disbursement of $37,665.

7. Bill No. 1077 was rendered on 20 October 2001. It related to the profits costs of $300,000 and disbursement of $818 for work done after 30 September 2000.

8. On 25 April 2002, the defendant brought the action in DCCJ2558/2002 to recover the fees of $300,000 under Bill No. 1077, and total disbursements of $89,818, or alternatively, for reasonable remuneration on quantum meruit.

9. On 16 July 2002, the defendant waived disbursement claims of overtime secretarial payment and reduced the photocopying charges from $5 per copy to $3, and the total disbursement claim became $36,040.

10. On 15 August 2002, Lok DJ entered interlocutory judgment against the plaintiff under Order 14 of the Rules of the District Court and deferred assessment of damages until after taxation proceedings under the Legal Practitioners Ordinance to be instituted by the plaintiff, providing if the plaintiff failed to take out such proceedings by 15 August 2002, the defendant be at liberty to enter judgment for $36,040.

11. On 8 October 2002, the plaintiff issued the originating summons herein.

12. Section 67 of the Legal Practitioners Ordinance reads as follows :

"(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 within 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 enquiry 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."

13. The first two bills, i.e. 0830 and 0912, for disbursements, were delivered over 12 months as at the date of the originating summons. Mr Mak for the defendant submitted that special circumstances had to be made out in order for an order to have the bill taxed.

14. Ms Wan for the plaintiff submitted that where the solicitor has delivered a series of bills, time under section 67(2) does not start to run until the delivery of the final bill. Whether the bills are separate or they form a series of bills for continuous work is a question of fact. I was referred to Wang Yeoh Yu Ruth v. Chan Victoria [1988] HKC 687 per Mayo J (as he then was) which contained the proposition submitted by Ms Wan. At p.690B to E, his Lordship cited the judgment of Lord Denning in Chamberlain v. Boodle & King [1982] 1 WLR 1443 at 1446:

"The next point in the case is whether the bills were four separate bills or whether they were one. If they were four separate bills, the client would have to demand taxation of each within a month of receipt. If they were one bill, divided into separate parts, as long as he demands taxation within a month of the final account, then he has a right to taxation.

We were referred to one or two cases on this point. First, Re Romer & Haslam [1893] 2 QB 286, and the latest was a case in this court on 6 March 1980 of Davidsons v. Jones-Fenleigh v. (The Times, 11 March 1980). Putting it quite shortly, as Bowen LJ said in [1893] 2 QB 286, 298, it is a question of fact whether there are natural breaks in the work done by a solicitor so that each portion of it can and should be treated as a separate and distinct part in itself, capable of and rightly being charged separately and taxed separately. Applying that simple test, it seems to me that over this short time - the end of November 1978 to the beginning of May 1979 - this was one continuous dealing and work done by a solicitor, not dividing itself naturally or otherwise into any breaks at all. When the bills were delivered, they were delivered each time as part of the running account - 'account rendered' being carried on in each to the next. I agree with the judge on this point too that this should be regarded as one bill in respect of one complete piece of work although divided into parts. As this is one bill and the client demanded taxation within a month, he is entitled to have the whole of it taxed."

15. Mr Mak did not disagree with the principle, but he submitted that the facts in this case are different. This case is not concerned with contentious business, nor with any running account or account rendered, and there is at least one natural break in the matter, that is 30 September 2000. One should not simply be looking at the one subject matter of the listing.

16. I note that the defendant has filed affidavit evidence that it has continued to provide legal service until the listing was completed in July 2001. There was no detailed description of the stages of work taken, save listing was delayed and the work continued until completion. Since listing was delayed, 30 September was not a natural break of work at all, it was only a milestone for billing. Continued work must have been undertaken with the view of getting the company listed and it must have been extricably connected with the entire exercise as opposed to distinct work. Hence, I find there is no natural break and there are a series of bills ending in Bill No. 1077.

17. Having said that, the first two bills were still referred to taxation over a month of its delivery, and it is within my discretion as to whether they should now have been taxed.

18. Clause 7(i) of the fee agreement provides that the defendant shall reimburse the plaintiff all the disbursements actually incurred in the intended listing work such as expenses incurred in business trips, long distance call charges, fax charges, photocopying charges, etc. Looking at the first two bills, they are, in substance, photocopying charges, and prima facie they fall within clause 7(i) of the fee agreement.

19. Ms Wan submitted that, prima facie, the amount of about $36,000, which is about 3 per cent of the fees charged, was not an excessive amount. However, in the circumstances of this case, the defendant was suspected of overcharging. She referred to two instances: first, charging $5 per photocopy as opposed to $3 under the rules, and the defendant has reduced the claim before the District Court; and secondly, the claim for secretarial overtime pay, which has also been withdrawn. It is submitted that although the overcharging item had now been withdrawn, the bills are still tainted with overcharging. As the court cannot be sure of no overcharging, they must be examined. Ms Wan submitted that overcharging amounted to special circumstances for taxation of bills for over 12 months old and, a fortiori, they must affect the court's exercise of discretion for bills coming within section 67(2).

20. Mr Mak has produced before me a set of the listing documents. They amounted to, on a very rough reckoning, about 2,000 pages. Mr Mak submitted that in the listing exercise, multiple parties were involved: the Stock Exchange, the underwriter, the sponsor, the financial advisor and the company itself. Prima facie, 10,000 pages of photocopying, which is more or less the amount now claimed, cannot be unreasonable.

21. Ms Wan objected to such production because of lateness. However, when invited by the court to comment on the documents, Ms Wan said she had no experience in listing matters and could not give any further comment.

22. Mr Mak said the number of pages photocopied had been given to the defendant long before, and it cried out that they had not condescended into particulars of the objection but simply saying that there were too many photocopies.

23. I have borne in mind that the amount involved is $36,040. In all the circumstances of this case, I think the only just and equitable order is, having considered the costs and benefits of the matter, to refuse the exercise of discretion to allow the taxation of such photocopying charges.

24. There is another matter: the payment in, in relation of the taxation of Bill No. 1077. Mr Mak has conceded that no determination or decision nor agreement as to additional fees was made under clause 7(ii) of the fee agreement, and he is claiming under quantum meruit. I note that in quantum meruit the party making the claim must prove its case. On the other hand, Mr Mak submitted that the defendant was playing delaying tactics. They had done so once at the District Court and it was dismissed by the District Judge.

25. At some earlier stage, in the skeleton argument, the plaintiff had tried to resurrect the argument that the $1 million was the fees covering all services rendered. All they could produce was a board resolution dated 23 July 2001 resolving unilaterally to that effect. This is no longer a live issue as liability to pay beyond 30 September 2000 has been decided by the District Judge as to which no appeal has been lodged.

26. Before me, the consideration is whether the defendant is likely to receive payment, and if so, what amount I should be using for the payment in. Mr Mak submitted $200,000, which was an offer made by the defendant to the plaintiff, or alternatively, the figure of $100,000, which was the counter-offer by the plaintiff.

27. Ms Wan pointed out that the $100,000 offer was meant to include the previous claim for disbursement of $89,000; hence, the profits costs element was only $11,000.

28. I am satisfied that the defendant has rendered continued services and some fees are likely to be due to them. However, $300,000 was charged or claimed on the basis that listing was 10 months on from 30 September 2001. I have no idea what work was done during these 10 months, or whether most work was carried out substantially before that date. But from the offer of the plaintiff, I can see that some money must be due from the plaintiff to the defendant. At that stage the plaintiff was willing to offer $100,000 even on the basis that they were disputing the disbursement sum of $89,000. Now the disbursement sum has been reduced to $36,040, and on this basis I will assess the payment in at $60,000.

29. Hence, I will set aside the order of the Master in ordering taxation of Bill Nos. 0830 and 0912. I will confirm the order that Bill No. 1077 is to be taxed by the Taxing Master. The plaintiff is to make payment in of $60,000. All further proceedings in DCCJ2558/2002 is to be stayed pending the outcome of the taxation.