XCHRX SOUTH HORIZONS INTERNATIONAL PETROLEUM LTD. v. MESSRS CRUMP & CO. (a firm)

HCMP 2750/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2750 OF 2001

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J U D G M E N T

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1. This is an appeal from a decision given by Master Jones on 23 May 2001 in which he ordered that the bill of costs delivered to the plaintiff by the defendant, a firm of solicitors, on 25 July 2000 should be referred to the Taxing Master for taxation and for that purpose, the defendant should provide the plaintiff with a bill of costs on an itemised basis covering the work done, the time spent thereon and by whom. It is contended by the defendant on this appeal that the bill should not be referred to taxation because the plaintiff has not established "special circumstances" for such a reference to be made within the proviso to section 67(2) of the Legal Practitioners Ordinance, Cap. 159.

2. The relevant facts may be set out as follows.

3. Between 21 January 2000 to 31 July 2000, the plaintiff retained the defendant as its solicitors to collect outstanding bunker fees in the amount of US$242,100.00 and for this purpose to bring an arrest action against M.V. "Thiseas". As the defendant had received notification from the plaintiff that the vessel was likely to call at Panama and later Miami in the United States, the defendant contacted their correspondents in these places. Arrest papers were eventually served on the vessel in Miami and there were court proceedings in Florida as well as in the Maritime Court in Panama. There was no litigation in Hong Kong. However, throughout, the defendant had advised on the legal proceedings conducted abroad, liaised with their correspondents in Panama and Miami, given instructions to them on behalf of the plaintiff after considering the advice given by the foreign lawyers, and had corresponded with the foreign lawyers on the merits from a Hong Kong law point of view. It would appear from the narrative in the bill that some of the work done was on an urgent basis and because of the time difference between Hong Kong, Panama and Miami, there were occasions when the defendant had to work round the clock to respond to communications received from the foreign lawyers.

4. The bill in question was an interim bill for seven months' work carried out by the defendant. It was dated 25 July 2000 and in the covering letter of the defendant to the plaintiff dated 26 July 2000, the defendant had inquired whether it would be in order for them to deduct the amount of their charges and disbursements in the bill from the funds they were then holding on the plaintiff's behalf. The bill gave a narrative of the work done by the defendant for each month but there was no itemised breakdown of the work done in respect of the time spent, who had carried out the work, and the hourly rate of the fee earner. At the end of the bill, a gross sum of HK$210,000.00 was given of the fees charged followed by disbursements in the sum of HK$3,351.00 making a total of HK$213,351.00.

5. On receipt of the interim bill on 26 July 2000, the plaintiff sent a fax to the defendant requesting a "detailed breakdown of work done in hourly cost for [the plaintiff's] management approval". In that fax, the plaintiff also instructed the defendant to accept the payment of US$53,004.00 offered by the opposite parties in full and final settlement of the plaintiff's claim for bunker fees and while the plaintiff was waiting for the detailed breakdown and the approval from its management of the defendant's interim bill, the defendant was requested to remit into the plaintiff's bank account the balance of the funds in the sum of US$20,264.56 after deducting the defendant's "proposed" bill.

6. On 1 August 2000, the plaintiff appointed another firm of solicitors to act for it in place of the defendant and the defendant was duly informed on the same day. Upon receiving this notification, the defendant wrote to the plaintiff and to the new solicitors on 1 August 2000 stating that they would issue a final invoice and when the final invoice had been paid, they would make their files and documents relating to the matter they had acted for the plaintiff available for collection by the new solicitors.

7. On 2 August 2000, the plaintiff wrote to the defendant in these terms:

"In relation to final settlement of our balance fund, you are requested to submit us the final invoice and the detailed breakdown of work done of the interim invoice which we previously asked on 26 July before 7 August, 2000. Failing which we are [sic] no alternative but have to report this matter to the Law Society."

8. The defendant replied on 3 August 2000 and maintained that the bill dated 25 July 2000 had contained sufficient details. It was further stated that if the plaintiff should require a more detailed breakdown of the work done, it would be necessary for the defendant to instruct a law costs draftsman, whose charges would be for the plaintiff's account. The plaintiff was requested to let the defendant know whether a law costs draftsman should be instructed.

9. The plaintiff wrote back on the same day and repeated its request for a detailed breakdown of work done in hourly cost for the approval of its management. It was further stated that if the defendant should consider that the bill had contained sufficient details and a law costs draftsman would have to be instructed if a more detailed bill was requested, the plaintiff would seek clarification from the Law Society on the matter. The plaintiff sent another fax to the defendant on 3 August 2000 in which it requested a detailed breakdown in hourly cost of the final bill as well as the interim bill before 7 August 2000.

10. On 10 August 2000, the plaintiff again wrote to the defendant and requested the defendant to provide "sufficient information" such as dates, work done, fee earners and their hourly rate, time engaged, etc. to identify the matter to which the interim bill related and cited paragraph 4.10 of the Solicitors' Guide to Professional Conduct. The plaintiff also complained that it had not received the defendant's remittance of the balance of the funds after deduction of the proposed bill and gave notice that unless it was to receive the remittance and the details as to the bill by close of business on 11 August, it would take necessary action including referring the matter to the Law Society. In the last paragraph of that letter, it was stated that "all our [the plaintiff's] interests and rights in this matter are expressly reserved".

11. The defendant replied to this letter by a letter of the same date and maintained that they had already provided a detailed breakdown of the costs in the bill and they were not prepared to provide any further breakdown. They asked the plaintiff to state whether it was its intention to tax the defendant's costs, if so the defendant would make the necessary arrangements.

12. On 16 August 2000, the defendant sent their final bill of costs to the plaintiff. The plaintiff's response came on 22 August 2000 in which they again requested a breakdown of the work done on specific dates, fee earners and their hourly rate, time engaged, etc. for the final bill.

13. On 22 August 2000, the defendant sent a fax to the plaintiff enclosing their receipts relating to the interim bill and the final bill, their cheque for the balance of the funds after deduction of the amounts on the interim bill and the final bill, and a statement of account. Thus, by making the deduction on or about 22 August 2000, the bills of the defendant were paid. The defendant also wrote on 22 August 2000 stating that the breakdown as set out in the final bill was sufficient and they did not propose to provide the plaintiff with a further breakdown.

14. On 31 August 2000, the plaintiff sent a fax to the defendant acknowledging receipt of the cheque for the balance of the funds and reiterated its request for a detailed breakdown of the interim and final bills. Prior to this, and on 14 August 2000, the plaintiff had lodged a complaint against the defendant with the Law Society alleging inter alia that the defendant had failed to provide the plaintiff with sufficient information relating to the interim bill. On 2 February 2001, the Law Society notified the parties that the Investigation Committee had considered the matter and had resolved that there was no professional misconduct regarding the defendant's failure to give details in the interim bill. On 18 May 2001, the plaintiff issued the originating summons herein seeking an order that the interim bill be referred to taxation and the matter came before Master Jones who granted the relief sought in the originating summons on 23 May 2001.

15. If the plaintiff had applied to tax the interim bill within a month of the delivery of the bill, the plaintiff would have been entitled to an order for taxation as of right by virtue of section 67(1) of Cap. 159. As it had not done so and the interim bill had been paid, it would have to satisfy the court there are "special circumstances" for the court to exercise its discretion in favour of the plaintiff to order taxation of the bill under section 67(2) which provides as follows:

"(2) If no such application is made within the period mentioned in subsection (1), then, on the application 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;

...

Provided that -

(i) if 12 months have expired from the delivery of the bill, or if the bill has been paid, ... 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."

16. As stated by Lopes L.J. in Re Norman (1886) 16 QBD 673 at 677, the words "special circumstances" in the context of the equivalent legislation in England are "wide, comprehensive, and flexible" and he further stated as follows:

"I think that the legislature intended them [the words "special circumstances"] to be so, and that no court can or ought to lay down any exhaustive definition of them. Charges which in one case would be special circumstances, in another would not be such. It is for the discretion of the judge to say what are special circumstances in a particular case."

17. What then are the special circumstances relied on by the plaintiff? Mr Christopher Lam submitted for the plaintiff that the primary case of the plaintiff is that the plaintiff had expressly reserved its right to object to the defendant's interim bill before and at the time that the deduction was made. He drew my attention to the decision of the Court of Appeal in Clayton Wong & Co. v. Springbok Shipping (HK) Ltd [1997] 3 HKC 710 in which it was held that an express reservation of the right by the client would amount to "special circumstances" under section 67(2) (see 714A-B, 714H-715F, and 715H-I). I am inclined to agree with him that looking at the correspondence between the parties that I have set out above, the plaintiff had expressly reserved its right to object to the defendant's bill even though the plaintiff had not expressly stated that it had reserved its right to tax the defendant's costs. It was with the view of objecting to or disputing the bill that the plaintiff had made repeated requests for an itemised breakdown of the work done as related in the interim bill, otherwise the requests would not have served any purpose. On the authority of the Clayton Wong case, express reservation alone would be sufficient to amount to a special circumstance to justify the exercise of the discretion in the plaintiff's favour.

18. Mr Lam has also relied on the lack of particularity in the interim bill which did not give an itemised breakdown but merely contained a narrative with a gross sum. Mr Christopher Kerry of the defendant submitted that as none of work done by the defendant had involved litigation in the courts of Hong Kong, the work done was not "contentious business" in Cap. 159 and the plaintiff would have no right to ask for an itemised bill under section 63 of Cap. 159. The relevant parts of section 63 read as follows:

"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; ..."

19. Mr Kerry argued that the interim bill had related to "non-contentious business". He drew my attention to the interpretation provision in section 2(1) of Cap. 59 and the relevant sections read as follows:

"'contentious business' includes any business done by a solicitor in any court, whether as a solicitor or as an advocate;

'non-contentious business' includes any business connected with sales, purchases, leases, mortgages and other matters of convencying;" (emphasis supplied)

20. The word "court" in the definition of "contentious business" is not defined in Cap. 159. There is however a definition of the word "Court" in the interpretation section of Cap. 159 and that means the Court of First Instance. Mr Kerry submitted that for the meaning of the word "court" in the definition of "contentious business", one should look at the definition in section 3 of the Interpretation and General Clauses Ordinance, Cap. 1 and this provides as follows:

"'court' means any court of the Hong Kong Special Administrative Region of competent jurisdiction;"

21. Thus, Mr Kerry submitted that applying the definition of "court" in Cap. 1, "contentious business" in Cap. 159 would mean any business done by a solicitor in any court of Hong Kong and as the work done by the defendant was done outside the jurisdiction of the courts of the Hong Kong, such work would not be "contentious business" under Cap. 159 and there was no requirement on the defendant's part to provide an itemised bill notwithstanding the plaintiff's request, as section 63 would have no application.

22. I reject Mr Kerry's submissions. As pointed out by Mr Lam, the word "includes" is used in the interpretation section regarding "contentious business". Secondly, it was provided in the interpretation section that this includes any business done by a solicitor in "any court" and these words should be given their ordinary and natural meaning to include any court outside Hong Kong. Thirdly, a distinction is drawn between "Court" in capital letter, which is defined as the Court of the First Instance, and "court" in lower case in Cap. 159. Fourthly, one should read the definition of "contentious business" with the definition of "non-contentious business" in the interpretation section and it is clear from the way that the two terms are defined that work in the nature of litigation carried out by the defendant here must be within "contentious business" as defined.

23. For the above reasons, I hold that the plaintiff would have been entitled to an itemised bill under section 63 of Cap. 159 as the bill had related to remuneration in respect of "contentious business". The plaintiff's requests for an itemised breakdown were not met by the defendant, contrary to section 63. That, in my judgment, would also constitute a special circumstance for the court to exercise its discretion to order taxation of the bill under section 67(2).

24. The third and last matter relied on by Mr Lam relates to overcharging. In the affirmation of the plaintiff's director, the point was made that as much of the work was actually done by the law firm in Miami who had charged the plaintiff separately, the defendant would not need to spend so much time on the matter. Mr Lam developed this point in his submission that some of the work done by the defendant in terms of research and legal advice might have been unnecessary. Taxation of costs payable to a solicitor by his own client is not on the basis that such costs are "necessary". Under Order 62 rule 29(1) of the Rules of the High Court, on the taxation of a solicitor's bill with his own client with respect to contentious business, all costs shall be allowed except insofar as they are of an unreasonable amount or have been unreasonably incurred. I have been taken by Mr Lam to various items of work as described in the narrative in the interim bill and it was submitted that there might be overcharging as there were repetitious items. This seems to me to be a matter of speculation on the available information appearing in the bill. Looking at the bill with the limited information in the narrative and without an itemised breakdown, I do not think I could have come to the view that this is an overt or clear case of overcharging. However, I do not think the plaintiff would need to show that there was overcharging by a wide margin, adopting the approach of Cross J, as he then was, in Re A Solicitor [1961] 1 Ch 491 at 504:

"At one time it was thought that the only circumstances which could justify an order to tax a paid bill were pressure accompanied by over-charges or over-charges so gross as to be evidence of fraud, but in In re Norman (1886) 16 QBD 673 the Court of Appeal rejected the idea that there were any hard and fast rules on the subject. That does not, of course, mean that a judge can properly send a paid bill for taxation without regard to the state of mind of the client when he paid it simply because he thinks it contains or may contain some over-charges. He must take into account the circumstances of the payment on the one hand and the size of the over-charges or possible over-charges on the other hand. Broadly speaking, I think it would be true to say that the more pressure or protest there was at the time of payment, the smaller the over-charges need be to justify an order to tax, while conversely the less pressure or protest there was, the larger the over-charges or possible over-charges must be."

25. Given that the plaintiff had expressly reserved its right to object to the charges in the interim bill, I do not think the plaintiff would need to show an excessive element of over-charging to justify an order for taxation. I accept that the plaintiff has shown a possibility that there might be a reduction for some of the items of work in the narrative and that the gross sum in the interim bill might appear somewhat expensive.

26. For the above reasons, I have come to the view that "special circumstances" have been made out under section 67(2) of Cap. 159 and that the discretion of the Court to order taxation should be exercised in the plaintiff's favour. I therefore dismiss the appeal against the order of Master Jones and I make an order nisi that the defendant should pay the plaintiff's costs of this appeal.