George Y C Mok & Co. (a firm) v. Trade Advisers Co. Ltd.

DCCJ18479/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 18479 OF 2001

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J U D G M E N T

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1. The plaintiffs are a firm of solicitors. The defendants, who are property developers, were their clients in a very substantial civil action in the High Court.

2. This claim is for the balance of the fees which the plaintiffs say are still owing to them by the defendants for their professional services on their behalf in that action.

3. The plaintiffs seek summary judgment under order 14. They allege that there can be no defence to this claim.

4. This is all very regrettable. The claim is only for $71,449.95, having been amended down from $151,487.85 after, rather late in the day, the plaintiffs discovered that they should have given the defendants credit for a further sum of $90,000 which they had been paid.

5. In a moment I must say something more about the background to this matter, but before I do so, I should observe that the claim is brought for this relatively modest amount, where the costs in the action were in excess of $3 million.

6. The action itself was tried in three parts. It concerned a right of way in the New Territories. Advice was sought from Queen's Counsel in the Temple and two Hong Kong leading counsel were also briefed to appear for the defendants at different stages of the litigation, in which the defendants were substantially successful.

7. No complaint is made by the defendants about the quality of service that they received from the plaintiffs.

8. The claim is contested on the basis that the agreement reached between the parties as to the manner in which the plaintiffs were to charge the defendants was different to that contended for by the plaintiffs. In the event, the defendants say that the plaintiffs have, if anything, been overpaid by them, and there is a counterclaim to recover amounts said to have been overpaid. I must return to consider the issues with more precision presently.

9. Much of this difficulty has arisen because the plaintiffs had in the past done quite a lot of work on the defendants' behalf, mostly non-contentious work such as conveyancing and drafting. The defendants, as property developers, would have had a steady stream of instructions for solicitors. That being the case, they wished to engage solicitors who would be prepared to do this work at the most competitive fees; in other words, as cheaply as possible.

10. By way of example, Mr Graham, who appears for the defendants, has referred me to a letter dated 24 March 2000 from the plaintiffs to his clients which gives an insight into the way the plaintiffs would charge the defendants for work done on their behalf. On the occasion referred to in this letter, the defendants appear to have driven a hard bargain which the plaintiffs were prepared to accept on certain terms referred to in the letter.

11. Unfortunately, there is no such letter in this action which records the basis of the plaintiffs' charges. What is certain is that the plaintiffs agreed to conduct the litigation which gives rise to this action for much reduced charges.

12. It should be remembered that there has been a drop in conveyancing practices amongst solicitors, which requires them to reduce their fees in order to obtain instructions.

13. Their fee notes in this matter frequently refer to 40 or 50 per cent reductions on their usual charges. There is nothing in writing which identifies an agreed basis for the plaintiffs' charges, but it is accepted by them that they agreed to charge less than they would ordinarily do, and this is confirmed by their fee notes to this effect.

14. Before I turn to the detail of the case, I should also explain how the dispute has actually arisen. Once the plaintiffs presented their final bill for settlement, the defendants reacted very strongly to it. They took the view that they had paid all that was due and then, on further inspection of the detail of it, complained that many of the charges were false, particularly in relation to attendances charged for by Mr George Mok, the plaintiffs' principal, at consultations with leading counsel or other conferences with junior counsel at which he was not in fact physically present.

14. Mr Mok then sought to explain his absences at the time of the conferences and the basis of these charges by virtue of the fact that he was required to discuss the matters raised during the conferences with counsel on the telephone after it had taken place, and then further discuss the advice of counsel with the lay client, often extensively, on the telephone, on occasions well after office hours.

15. Additionally, he had explained that these bills had been professionally drawn up by a costs draftsman and, at the request of the other party, taxed by the Taxing Master. These explanations did not impress the defendants, who then made a complaint to the Law Society about these charges in a manner that called into question the plaintiff's integrity. This angered Mr Mok, whose conduct was being called into serious doubt.

16. I have seen the correspondence between the parties and between them and the Law Society. It does not make happy reading. The Law Society did not feel able to resolve the parties' differences.

17. The plaintiffs have now resorted to these proceedings, and a writ for libel has also been brought by them in respect of the defendants' complaint to the Law Society.

18. For their part, the defendants are now contemplating a separate action for the return of papers held by the plaintiffs which relate to other instructions given by them to the plaintiffs, which do not refer to matters covered by this dispute, over which the plaintiffs are purporting to exercise a lien until these fees have been settled.

19. It is against this unhappy background that I now need to decide this summons. Miss Fung, on behalf of the plaintiffs, has very helpfully taken me in some detail through the documents which bear on this matter. In the action itself in which the defendant was substantially successful, three separate orders for costs were made against the other party in differing proportions. Firstly, it was ordered to pay 50 per cent of the defendants' costs on a party and party basis up to 28 January 2000. These were taxed by Master Kwan at $765,589.40, 50 per cent being $382,794.70. The next order was that the opposing party should pay 75 per cent of the defendants' costs from 28 January 2000 up to 17 October 2000. These were taxed by Master Wong at $338,756.20, 75 per cent being $254,067.15. Lastly, the other party was required to pay 100 per cent of the defendants' costs from 18 October to 7 November 2000. Taxed, these amounted to $73,766.60.

20. Therefore, the full amount of the defendants' taxed party and party costs came to $1,178,112.20. Bills were issued to the defendants by the plaintiffs for these amounts, and in addition three other bills not included in the Masters' taxed costs. These were $10,000 for the plaintiffs' attendances at the taxations, a further account for $10,000 for work done on the defendants' behalf after the trial had concluded on 7 November 2000, and lastly, an account for $35,000 relating to professional services after the trial, including the preparation of a deed of mutual grant of rights of way.

21. The total amount, after adjusting the $90,000 for which credit has now been given and acknowledged by the amended statement of claim, amounts to $1,233,112.20. This does not include a sum of $1,831,867.75 for disbursements, being substantially counsel's fees, all of which have been settled by the defendants. Of the $1,233,112.20, the plaintiffs say that all, save for $71,449.95, has been settled by the defendants, a small proportion, therefore, of a total account of $3,064,479.95.

22. The plaintiffs' case is perfectly straightforward. All these amounts are evidenced in the bills presented to the defendants. The payments received have been acknowledged, leaving the shortfall now sued for. Each bill has been itemised and has been prepared by an experienced costs draftsman. The bills have in turn been taxed by the Master, the taxation hearing having lasted six hours, in one instance, at the insistence of the opposing party, who were disposed to challenge a number of items.

23. Supported by this evidence, Miss Fung submits that there can be no room for disagreement about the matter, and therefore asks for judgment.

24. Mr Graham, for the defendants, whilst accepting the general tenor of the plaintiffs' case, so much of the plaintiffs' bills having already been settled, has focused his attention on the terms of the plaintiffs' amended bill M18711 dated 22 May this year upon which this action is now based. This account claims for "final professional charges for services rendered since the interim bill L18142 dated 14 November 2000".

25. This appears at page 154 of the court bundle. At page 159 he has drawn attention to these words in the bill:

"Our usual costs on a time charge basis will be over $250,000. However, we reduced our costs to only $188,000 on our agreement that we would bill you later the total taxed costs (the defendant will pay you 75 per cent hereof) if the taxed costs are over and above the costs that you have paid us....".

26. What Mr Graham seeks to get from this is that this further bill purports to be based upon an alleged agreement that the plaintiffs would charge the defendants for taxed party and party costs. If those taxed costs in fact came to more than the defendants had paid on account, then the plaintiffs would be able to charge the defendants an amount to bring their payment up to the amount obtained on taxation. From that, Mr Graham says that such an arrangement would be in breach of the principle that a solicitor on a party and party taxation can only claim what he has charged his client. He would not be entitled to seek to recover from the opposing party more than he has actually charged his client. This would amount to professional misconduct against the opposing party, and it would also amount to professional misconduct towards his own client by seeking to enter into such an arrangement with him by charging him a reduced amount, and then waiting to see if he could obtain more on taxation and charging a further amount after taxation to make up the difference.

27. Miss Fung denies that the passage that I have referred to in the bill is capable of bearing that meaning. I am afraid, in my judgment, that the construction contended for by Mr Graham is highly arguable. For present purposes, it is not necessary for me to go so far as to say that it is the right construction or the only construction, but I am bound to say that the words would appear to bear out what Mr Graham has suggested. It seems to me, and this is most unfortunate, that the plaintiffs have allowed themselves to fall victim of their own generosity towards the defendants, who seem to have driven a hard bargain.

28. I have no doubt, when one looks at all these bills, the way that they have been drafted, and the previous pattern of billing even before this High Court action started, that the plaintiffs have charged out their services to the defendants on a cut-price basis. They have expressed this final account in a most infelicitous way only in order to accommodate the plaintiffs as best they could so as now to permit the construction relied upon by Mr Graham.

29. This being the case, a highly triable issue arises as to whether the court should countenance such an agreement on costs so as to allow the plaintiffs to sue on it. I appreciate that the plaintiffs deny that such an agreement was arrived at, but this is a matter which can only be determined at a trial. It certainly calls for an explanation by the plaintiffs.

30. There is also the other matters raised by Mr Graham concerning the validity of some of the charges relating to Mr Mok's non-attendance at consultations and conferences for which he has charged. Miss Fung submits that Mr Mok's explanations are sufficiently compelling to deal with his absences from these conferences, and that where the bills have been taxed, that there can be no room for further argument on the matter.

31. Whilst there is every reason to suppose that Mr Mok has given full value for his services to the defendants in the way that he has dealt with this complex litigation, it is most unfortunate that the bills were worded in this way, suggesting, as they do, Mr Mok's actual presence. Whilst this can only be a subsidiary matter when compared to Mr Graham's main point, it does provide a further ground for giving unconditional leave to defend.

32. Accordingly, the defendants must have such leave.

33. Given the unhappy circumstances of this dispute, which has been allowed to escalate in a most disproportionate way, I should make clear that my decision to let the action go to trial does not for one moment imply that Mr Mok has been shown to be guilty of any wrongdoing. The ruling is limited to the extent that the defendants have shown that there are serious issues to be tried and that it would be wrong to shut them out only on paper. They have demonstrated an arguable defence worthy of trial.

34. I am indebted to both counsel, but particularly to Miss Fung, for having set out the matter in a careful and detailed way. She has also gone to the trouble of referring to a number of the leading authorities concerning the test to be applied in order 14. I have not found it necessary to make reference to these authorities in this judgment, but I have had regard to them in coming to my view that the defendants have shown that they have a properly arguable defence which should go to trial. Unconditional leave to defend.

(Discussion re necessity for directions and discussion re costs)

35. So far as order 14 itself is concerned, I take the view the plaintiffs' case, as I indicated, is obviously well documented. It has been looked at by a Taxing Master. But at the end of the day I have found two areas where there is a highly arguable point which has caused me to give unconditional leave to defend. It is nothing like the way it has been portrayed by Miss Wong.

36. I take the view that the correct order is costs in the cause. Whoever ultimately wins this unfortunate and rather unnecessary litigation will get their costs.

37. There will be certificate for counsel for the hearing on the main argument.