STEPHEN LAU & CO (a firm) v. QUAN & CO (a firm)

DCCJ 1247/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1247 OF 2010

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BETWEEN

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J U D G M E N T

1.  The Plaintiff (“Lau”) is a practising law costs draftsman. The Defendant (“Quan”) practised as a solicitor; and his firm ceased business in January this year. In this action, Lau claims against Quan for unpaid professional fees evidenced by 18 fee notes issued during the period between 2005 and 2009. By pleading, Quan admits liability in respect of 16 of them but dispute that in respect of the last 2 fee notes issued in 2009.

2.  Upon Lau’s application, judgment has been entered in respect of the claim under the 16 fee notes admitted by Quan.  Leave to defend was given in respect of the 2 fee notes in dispute; and hence this trial.

Undisputed background

3.  Quan was the sole legal practitioner in his firm.  Through the introduction of his litigation clerk, Mr Ip, Lau started to receive instruction from Quan for his professional service as law costs draftsman in 2005.  Lau never got to contact Quan directly.  Without exception, instructions to Lau were conveyed by either of the 2 litigation clerks of Quan, namely, Ip and a Mr Ho.

4.  The 2 invoices in dispute concerned the drafting of bills of costs respect of 2 related cases handled by Quan, namely, HCA 2676 of 2004 (“the HC Action”) and CACV 352 of 2006 (“the Appeal”).  Quan acted for the plaintiffs in these cases.

5.  In the HC Action, the court gave judgment in favour of Quan’s clients for damages to be assessed after trial.  The matter went on appeal and hence the Appeal, which Quan’s clients also won.  In the HC Action and the Appeal, Quan’s clients were awarded costs, to be taxed, if not agreed.

6.  In May 2007, Lau were approached for preparing bills of costs in the HC Action and the Appeal.  Some 2 and half years later, on 11 December 2009, Lau returned to Quan the case files of the HC Action and the Appeal together the bills of costs for taxation.  Lau also sent the 2 fee notes for the work done in the 2 matters respectively.

7.  The first formal letter of demand for the settlement of the 18 fee notes was dated 8 March 2010.  This prompted the reply of Quan a week later, asking for the details of the fee notes (including the court action numbers) so that he could check his own record.  Copies of the fee notes were forwarded to Quan on the following day.

8.  A week later, Quan wrote to the solicitors for Lau, denying having instructed Lau for the work covered by the 2 fee notes in question.  Quan also stated that he had no further instruction from his clients in the 2 cases.  As to the other 16 fee notes, Quan suggested that he was still checking his files.

9.  In April 2010, Lau commenced the present action.

The dispute

10.  Miss Chung for Quan submitted that her client accepted liability in respect of the other fee notes; and are resisting the claim in respect of the 2 in dispute as a matter of principle.  In my view, whether Quan is liable for the 2 fee notes is a matter of fact.  The fact to be ascertained is what happened after Lau received the instruction from Quan in May 2007 that caused Lau to tender the bills of costs only in December 2009.

Lau’s case

11.  According to Lau, upon the instruction, he as usual sent his staff to the office of Quan to collect the case files.  Upon subsequent perusal of the written judgment in the HC Action, Lau’s attention was caught by the comment made by the trial judge in the costs order.

12.  The learned Recorder who tried the HC Action noted in his written judgment dated 8 September 2006 that the parties in the action agreed that should damages to be awarded fall within the jurisdiction of the District Court, costs of the action would have to be taxed in accordance with the District Court scale.  In the circumstances, the learned Recorder ordered that the taxation of costs would have to await the outcome of the assessment of damages.

13.  Lau telephoned Ho and advised him of his observation about the costs order in the HC Action.  There was discussion of whether damages would likely be awarded on the High Court scale; and whether, in order to expedite the matter, the bill of costs should nevertheless be prepared on the basis of taxation on the High Court scale.  There was also consideration of whether the bills, when prepared, might be used for negotiation with the paying party in those cases.  In the event that the bill of costs needed revision because of the scale of taxation, adjustment was expected to be mechanical as most of the items of work done would be unaffected.  At the end of the discussion, Lau obtained Ho’s confirmation of the instruction to prepare the bills of costs.

14.  In court, Lau explained that there were some 6 to 7 box files of documents, which were disorganised, even messy.  As usual, Lau was never chased for handing in work for Quan.  He therefore had the tendency to set aside this brief from time to time, giving priority to many other relatively more urgent briefs undertaken.  The end result was that he sat on the files and did not put himself to finish the work until December 2009.

Quan’s case

15.  The pleaded case of Quan is that it was Ip who handled the HC Action and the Appeal.  Ip (and Ho as well) has left his firm and joined Messrs Au & Associates; and Messrs Au & Associates acted in place of Quan in the 2 cases since 4 September 2009. Reference is made to a letter from Messrs Au & Associates dated 10 June 2010.  It was apparently a reply to a letter of enquiry from Quan, though Quan’s letter was not disclosed.

16.  By their letter, Messrs Au & Associate suggested that according to the record kept in the files, Ip delivered the case files (in the HC Action and the Appeal) to Lau for the preparation of the bills of costs for taxation on or about 14 May 2007. However Lau called Ip shortly thereafter and informed Ip that he could not do so due to the terms of the judgment in the HC Action mentioned above.  As at the date of the letter, assessment of damages had yet to be concluded.

17.  Based on the letter, Quan pleaded that:

“therefore it is denied that [Quan] had given instruction to [Lau] to prepare the works as stated in the said two invoices and [Quan] denies that it he is liable to pay for the said two invoices ……”

18.  Quan’s evidence added nothing material to his pleaded case.

Discussion

19.  There is apparently dispute as to whether Lau talked to Ho or Ip when he raised his concern about the terms of the learned Recorder’s costs order in the HC Action.  Nevertheless, Quan’s case in this respect was not really put to Lau in court.  Quite on the contrary, Lau was cross examined on the basis that he then did talk to Ho as Lau recounted.

20.  As to what was said during that telephone conversation, the only extent of a positive case that Quan put forward rests upon the letter from Messrs Au & Associate.  But that is multiple hearsay evidence.  It is unknown why neither Ip nor Ho was called to testify.

21.  The fact is that there is no direct evidence called by Quan to contradict Lau’s evidence in respect of what was conversed between him and Ho during that telephone conversation.  The evidence that it was during that telephone conversation when Lau had confirmation of instruction to proceed with the drafting of the bills of costs is not effectively contradicted.

22.  However I am asked to draw inference from the circumstances of the case that Lau’s evidence per se is inherently incredible.  Do the primary facts support such an inference?

23.  First, it was Lau who took the initiative to draw the attention of Quan (through Ho) to the comment by the learned Recorder in his costs order in the HC Action.  Lau would not have cared to do so, had he been minded to do the work in order to get paid regardless.

24.  Second, the concern about the deferred taxation in the HC Action never arose in the Appeal.  In other words, there was never any reason why Lau could not proceed with the brief to draft the bill of costs in the Appeal but too would have to await the conclusion of the assessment of damages in the HC Action.

25.  Third, Quan and his counsel argued that preparing the bills of costs for the purpose of negotiation for settlement is a practice unheard of.  Indeed this would have been.  Yet this is an unfair interpretation of the evidence of Lau.  Lau referred to that as a possible use of the bills of costs, if nevertheless prepared, as one of the considerations actually discussed with Ho.  The matters discussed between Lau and Ho mentioned above in my view is not inherently incredible.

26.  Fourth, it has been more than 2 years before Lau produced the draft bills of costs in 2009; but the bills record that Lau charges for a total of 50 working hours for the work.  It was suggested that the substantial delay could not be explained, had it not been the withholding of the instruction to Lau.

27.  Indeed the substantial delay demands explanation.  Lau did explain.  According to him, in line with the previous dealings with Quan (through his clerks), he was never chased for the work.  As mentioned above, he admittedly sat on the files and took his time.  Notwithstanding the time span, he charges for reasonable number of hours for his work, and hence 50 hours.

28.  It was argued that nevertheless the delay was still unreasonable.  However, there is no issue of whether and how Lau’s entitlement should be affected by failure to finish his work within a reasonable time.

29.  Fifth, it was suggested that Ho confirmed the instruction to Lau on his own accord.  Alternatively, he did so for and on behalf of his then employer, Messrs Au & Associates, in about August 2009.  Neither suggestion forms part of Quan’s pleaded case.  Nor is there evidential basis for such suggestions.  Had the situation been as alleged by Quan, the picture would have become clear upon Messrs Au & Associates’ confirmation.  The letter from Messrs Au & Associates mentioned above is completely silent on that.

30.  In any event, Quan admitted in court that he normally gave instruction to his clerks who would be responsible for relaying the same to Lau.  There was never any direct contact between Quan and Lau.  That was the course of dealings between Lau and Quan (through his clerks).  The apparent authority of the clerks could not be disputed.

31.  According to Lau, he had never been requested to return the case files.  Nor had he ever been informed of the change of solicitors acting in the HC Action or the Appeal until the present dispute.  There is no evidence or basis to infer that Lau either knew or was put on enquiry as to the authority of Ho in confirming the instruction to proceed to draft the bills of costs in May 2007; or as to any change in circumstances involving revocation of instruction since May 2007.

32.  Last, Quan claimed to have not seen the letters from Lau dated 11 December 2009 enclosing the case files and the 2 fee notes in issue until the receipt of the formal letter of demand in March 2010 mentioned above.  The undeniable fact was that Quan’s firm acknowledged receipt of these documents by the firm’s chop on that day.  Quan explained that his messenger or receptionist might have forwarded the same direct to the handling clerk.  In response to the formal letter of demand in March 2010, Quan requested for the details of the fee notes and the related court action numbers; and indicated that he had to check the record.  The fact was that Quan somehow let the professional fees of Lau, not just under the 2 fee notes in issue but also since 2005, go into arrears.

33.  All these lead me to suspect the extent of personal attention of Quan to the matters handled by his subordinates, notwithstanding his emphasis on his supervision of his clerks’ practice when he gave evidence.  Dispute like the present case should not have happened, had the confirmation of instruction been properly and adequately put into writing.  The fact was that not a single letter relating to the instruction to Lau has ever existed.

34.  Considering all the circumstances, I accept the evidence of Lau; and find Quan’s defence fails.

35.  It is clear that the quantum is not really disputed.  Lau is entitled to judgment in the sum claimed.

36.  As to costs, it was argued on behalf of Lau that unlike the ordinary lay litigants, Quan should know better whether the defence put forward could stand the test.  I was asked to consider an order for indemnity costs in the circumstances.

37.  I am not prepared to draw that conclusion yet, in the absence of suggestion that the defence was indeed put forward as an affront to the court or an abuse of process.  Nor do I possess any further information, such as the applicability of the considerations under O.22 or O.62, rr.3 and 5, that may affect the court’s exercise of discretion as to costs.  I will at this stage make the usual nisi costs order.

Order

38.  I give judgment in favour of Lau in the sum of HK$80,000 together with interest thereon at the judgment rate from the date of writ until full payment.  I make a nisi order that subject to any previous costs order already made, Lau shall have the costs of this action, including any costs reserved.  Costs shall be taxed, if not agreed.  Parties have 14 days to apply to vary the nisi order, if desired, or the same shall become absolute.