GOOD HARVEST INVESTMENT CO. LTD. v. JEWKES CHAN & PARTNERS

HCMP 4770/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 4770 OF 2000

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J U D G M E N T

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The case came before me in the form of two summonses in the 3 minutes chambers list: one taken out by the Plaintiff and the other by the Defendant. As usual, I did not have the chance of reading the file beforehand. Nor did I have the time to consider the summonses in detail but after brief submissions by the parties I realised that procedurally the case was mishandled. At an earlier time I had made an order and hoped that the parties could sort out the matter among themselves and amicably resolve the dispute. This practical approach did not work; hence, the parties took out the two summonses. I take this opportunity to make my view known and wish that the points and procedure set out in paragraph 18 are noted and followed in respect of this type of cases.

2. The Plaintiff was a former client of the Defendants, a firm of solicitors. The latter undertook to prosecute a High Court action on behalf of the Plaintiff as plaintiff in that action. I believe that after some time the Plaintiff decided to terminate the retainer with the Defendant. I use the word "believe" because I have no information about the background of that case. As expected, after termination a bill was given by the Defendant to the Plaintiff which was dated 30 June 2000. I believe it was a gross sum bill. The bill cannot be found in the Court file and I have no idea what the bill was like and when it was delivered.

3. The first document that appeared in my file was an originating summons taken out by the Plaintiff in Form 10 under Section 67 of the Legal Practitioners Ordinance (Cap. 159) pursuant to Order 106 rules 2 and 5 of the High Court Rules (Cap. 4A). It did not specify under which Subsection of Section 67 the summons was taken. It was served on the Defendant. Acknowledgement of Service was filed by the Defendant. On 27 October 2000, the return day of the Originating Summons, parties appeared before Master B. Kwan and agreed upon certain terms. The order was made accordingly.

"It is ordered that:-

1. the call-over hearing of the bill of costs and disbursements delivered by the Defendant to Mr. Wong Hung for and on behalf of the Plaintiff, dated 30th June 2000 and numbered 2780, be referred to the Taxing Master not later than 3 months from the date hereof, and that the Defendant give credit for all sums of money received by it from or on account of the Plaintiff (if any) and refund what (if anything) it may on such taxation appear to have been overpaid;

2. the Taxing Master do tax the bill of costs and disbursements mentioned above and certify what shall be found due to or from either party in respect of the bill of costs and disbursements mentioned above and the costs of these proceedings shall be charged according to the event of the taxation pursuant to the Legal Practitioners Ordinance, Cap. 159;

3. the Defendant shall not commence or prosecute any action or suit on the bill of costs and disbursements mentioned above pending the result of the taxation; and

4. costs of this application be in the taxation"

4. At that time both parties had not thought about what the dispute was, and blindly followed the common practice i.e. referring the bill to a Master for taxation in the usual manner. Having the opportunity of hearing the submissions by both parties, I understand that the main contention is whether on 14 April 1999 the Plaintiff had terminated the retainer and had asked the Defendant not to pursue the case further so as to prevent incurring further costs. I doubt very much that such dispute could be resolved without filing affidavit evidence, not to mention taking oral testimonies from the parties. The proper course is to invoke Order 28 rule 1A(1) which states as follows:

"(1) In any case or matter begun by Originating Summons (not being ex parte summons) the plaintiff must, before the expiration of 14 days after the defendant has acknowledged service, ...... file with the Court the affidavit evidence on which he intends to rely."

5. The Plaintiff in this action never thought about it. Neither did the Defendant request it to be done until the time after the objections to the itemised bill had been filed. The Defendant had every right to ask the Plaintiff to frame the issues and why the Plaintiff objected to the gross sum bill which was mentioned in the Originating Summons.

6. The Order does not mention anything about itemised bill. Clause 1 simply states that "the bill ..... dated 30th June 2000 and numbered 2780, be referred to the Taxing Master ..." Clause 2 states that "the Taxing Master do tax the bill of costs and disbursements mentioned above". My reading of the order is that the gross sum bill should be taxed, not an itemised bill. There is a general misconception by practitioners that a gross sum bill cannot be taxed. I must clarify this. According to Section 63 of the Legal Practitioners Ordinance my understanding is that either the gross sum bill or an itemised bill can be taxed. The Court is not bound to order for preparing an itemised bill in lieu. It will order an itemised bill if certain conditions are fulfilled as set out in Section 63:

"63 Form of bill of costs for contentious business

Where the remuneration of a solicitor in respect of contentious business done by him is not the subject of such an agreement as is mentioned in section 58, the solicitor's bill of costs may at the option of the solicitor either contain detailed items or be for a gross sum:

Provided that-

(a) at any time before service upon him of a writ or other originating process for the recovery of costs included in a gross sum bill and before the expiration of 3 months from the date of the delivery to him of the bill, the party chargeable therewith may require the solicitor to deliver to him in lieu thereof a bill containing detailed items, and the gross sum bill shall thereupon be of no effect."

It is quite clear that the solicitor has the option. Client has only the right to demand for an itemised bill at any time before action taken against him and before expiry of three months from the date of delivery of the bill. In Carlton v Theodore Goddard & Co [1973] 2 All ER 877 Megarry J. ruled that the Court should tax the gross sum bill instead of the itemised bill because client did not make any specific request for an itemised bill to replace the gross sum bill. In the present case, the Master did not have any information whether any recovery action had been commenced and when the bill had been delivered. She was entitled to know all this information but was not informed. Neither did she know that any specific request had been made for an itemised bill.

7. If an affirmation had been filed by the Plaintiff the Court would have known the dispute and, I am sure, Master Kwan would not have made the directions which she had made. She would first consider whether an itemised bill should be ordered, and would have further asked the parties to file affidavit evidence and made directions for hearing. The two summonses before me would not have been necessary.

8. The itemised bill lodged with the Court, which is dated 20 January 2001, covers a period from 1st February 1999 to 15th May 2000. If the Court could dispose of the issue whether the retainer had been terminated on 14th April 1999, the main difficulty concerning the bill would have been removed. The Defendant would have known whether they would be entitled to costs covering the period after 14th April 2000 i.e. more than half of the costs in that bill. I doubt the necessity of having an itemised bill prepared.

9. To determine the issue when the retainer was terminated we have to look at the background, for example, whether there was any written retainer, how it was given, its terms, the way it operated, how it could be terminated, the circumstances leading to the alleged termination etc. As I have stated earlier, we need affidavit evidence. The parties did not realise this until they came before Master Wong on 27th March 2001 i.e. five months after the appearance before Master B. Kwan. On that occasion, both parties were represented by Law Costs Draftsmen. It seemed to me that it was by agreement that Master Wong made the following orders:

"1. leave be to the Plaintiff to file and serve affidavit evidence within 28 days from the date hereof;

2. leave be to the Defendant to file and serve affidavit in reply, if necessary, within 14 days thereafter;

3. leave be to the Plaintiff's Solicitors and its appointed Law Costs Draftsman to inspect all the documents as stated in the Defendant's Bill of Costs at the office of the Defendant within 14 days from the date hereof at a time convenient to both parties;

4. the matter be adjourned to a date to be fixed not earlier than 6 weeks from today for argument with 1 day reserved; and

5. costs be reserved."

10. On 10th April 2001 the Defendant, not the Plaintiff, made an application for extension of time to inspect all documents stated in the bill at the Defendant's office by 21 days. The purpose was to extend the period to make the Plaintiff file the affirmation first before inspection. It was obviously wrong by way of Order 3 rule 5 asking for extension of time. What he should have done was to appeal against Master Wong's decision. He did not do so. On the other hand he was right in principle that the factual issues should be clearly framed before discovery. But, he had taken the wrong procedure: he should have appealed against the order. Notwithstanding this with the best intention to save the parties' costs of appeal I made the following unusual order which, I believed, would have given the parties sufficient indication that they should sort out the matter instead of wrangling with the procedural issues.

"(a) The time for the Plaintiff's solicitor or his appointed law costs draftsman to inspect all documents stated in bill at the Defendant's office be extended by 21 days; and

(b) Costs in the cause."

11. Unfortunately, the parties did not take hint and neither did the Plaintiff appeal against my order. Instead, each of them respectively took out an application requesting for different unless orders. The Defendant asked me to debar the Plaintiff from filing any affidavit evidence if the Plaintiff did not file the affidavit by a certain time whilst the Plaintiff asked me to debar the Defendant from proceeding with taxation if the Plaintiff was not given access to inspect the documents first.

12. The key issue before me, and no one took the irregularity points I have mentioned earlier, is whether I should grant inspection before the Plaintiff filed its affirmation evidence. This time the Plaintiff is not represented by a law costs draftsman or solicitor but by an experienced counsel Mr. Paul Lam. His main argument is that the tests for discovery is whether the documents are "relevant" and "[in the Defendant's] possession". He argues that there is no reason to reverse the sequence made by Master Wong.

13. Mr. Robinson maintained that if the Plaintiff wanted to make accusations about its former solicitor he should do so prior to inspecting the Defendant's file. It was a serious allegation against the solicitor firm for doing work without authority. It was not for a short time but for a period more than a year from 14th April 1999 to 15th May 2000. Although the allegation was briefly summarised in the list of objection, the issues were not clearly set out. He suspected that the Plaintiff was fishing for evidence.

14. I must say I share Mr. Robinson's view. Mr. Lam did not point out to me under which rule I should order inspection of documents before the issues are clearly framed. We have pre-action discovery under Order 24 rule 7A which obviously does not apply in this case. The short paragraphs as appear in objection nos. 9 and 16 can hardly be treated as pleadings. They lack the necessary particulars. I have the greatest hesitation to grant an order for inspection before the factual issues are clearly framed.

15. I could have given this judgment at the time of hearing, if not for some points that worried me. I invited parties to address me on the points of client's right to have access to documents in a file relating to his own case, ownership of the documents and solicitor's lien for non-payment. They were caught by surprise and were not prepared to address me on these points. I invited them to make written submission thereon within a week. They have kindly complied with my request.

16. Mr. Lam for the Plaintiff rightly concedes that ownership of a document in question generally speaking not relevant in the context of discovery. He further admits that if a lien exists in theory a solicitor is not bound to give copies of documents and as a general rule the client has no right of inspection. But, in the present case, he argues, it has not been denied that the documents are relevant and the production and inspection thereof is necessary for the taxation hearing. I accept all this argument. But, he does not address me why this is the appropriate time for discovery. Alternatively, he offers an undertaking by Messrs. Johnson Stokes & Master to settle the Defendant's costs to the extent of $380,854.55 in order to remove the lien.

17. Mr. Robinson argues that the undertaking is not acceptable for at least the following two reasons:

(a) The undertaking does not cover the costs of the taxation if the final outcome is that the Plaintiff has to bear them;

and (b) There is no special circumstances e.g. like those in Re Gallant (1885) 31.ChD.296 that the Plaintiff would suffer considerable injury if papers were not delivered.

18. I do not intend to make any ruling on the point of lien and undertaking at this stage without hearing oral submission. Nor do I need to decide on them before making my decision on the two summonses. I find that it is not the right time to make discovery. The parties have not followed the procedure as laid down by the rules. I must say this is not an isolated incident. This is the second case I have had in the recent months. For the sake of clarity I set out the procedure which this type of cases should follow:

(a) An application for taxation of the bill under Section 67 should be made by way of Originating Summons in Form No. 10 (Order 106 rule 2 and rule 5).

(b) Acknowledgement of Service with Notice of Intention to defend within the period specified in Order 12 rules 5 and 9.

(c) The Plaintiff should file with the Court and serve on the Defendant the affidavit evidence he intends to rely on, at least, setting out the issues and exhibiting the bill pursuant to Order 28 rules 1A(1) and (3).

(d) Whether the Defendant needs to file any affidavit evidence and whether the Plaintiff has to file further affidavit evidence thereafter pursuant to Order 28 rule 1A(4) and (5) depend very much on the circumstances and the issues raised.

(e) At the appointed time as set out in the Originating Summons before the Master the parties should bear in mind and consider at least the following issues:

(i) whether the application is made under Subsection (1) or Subsection (2) of Section 67 of the Legal Practitioners Ordinance;

(ii) whether an itemised bill should be ordered (Section 63);

(iii) whether certain issue should be heard and disposed of before the substantive taxation hearing;

and (iv) what are the appropriate directions sought.

19. In the present case it is quite obvious that the parties had not given sufficient thought to the steps to be taken when they appeared before Master Kwan and later before Master Wong. It is only proper for me to ask the parties to follow the procedure.

20. For reasons given above I make the following orders:

1. The time for the Plaintiff to file and serve affidavit evidence in compliance with the Order of Master Wong dated 27th March 2001 be extended by 28 days from the date of this order;

2. I dismiss the applications made under paragraphs 1 and 2 of the Summons dated 9th May 2001 taken out by the Plaintiff; and

3. I dismiss the Defendant's application taken out on 7th May 2001.

21. As to the costs of and incidental to the preparation of and the hearing of the two summons, except those I have otherwise ordered, I make an order nisi that there be no order as to costs.

22. I am fully aware that I have not made any order for inspection. The orders made by Master Wong and myself in that regard have lapsed. I am sure that the Plaintiff will re-apply after the filing of the affidavit evidence has been completed if they are denied access.

23. I have asked the parties whether they have any objection to the publication of this judgment as I intend to remind practitioners not to take the taxation proceedings under Section 67 of the Legal Practitioners Ordinance as a matter of routine exercise i.e. submission of itemised bill and filing a list of objections. My experience is that there are always factual disputes giving rise to certain misunderstanding between the solicitor and his former client. The earlier the factual issue is determined, the quicker the taxation process can be finalised. As I have received no response to my question I take it that the parties have no objection to the publication of this decision. I direct that a copy of this judgment be sent to the Law Society and the Association of Law Costs Draftsmen respectively for their reference and if they find appropriate, for distribution to their members.