HAMPTON, WINTER AND GLYNN (a firm) v. VILUMS ROLANDS JANIS

DCCJ820/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 820 OF 2014

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DECISION

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1. This is the plaintiff’s application for summary judgment against the defendant for outstanding legal fees.

Background

2. On 2 June 2011, the defendant signed a retainer agreeing to retain the plaintiff as his solicitors to handle the divorce proceedings.

3. From 30 August 2013 to 30 January 2014, the plaintiff sent to the defendant a total of 6 bills of costs (“the Outstanding Bills of Costs”). The total outstanding amount is $514,491.80.

4. The defendant disputes his liability to pay the 6 Outstanding Bills of Costs on the following grounds (though only the first two grounds are mentioned in his Defence):-

(1) There are errors in the Outstanding Bills of Costs;

(2) There was an agreement that the defendant would pay the plaintiff $20,000 per month for legal fees.  Any about above $20,000 would not be paid until the settlement of the ancillary relief and the sale of the matrimonial home.

(3) By a letter dated 5 December 2013 (“the Letter”), the plaintiff agreed it would continue to represent the defendant on the condition the defendant pay $66,000 and the settlement of the remaining sums of the Outstanding Bills of Costs will be deducted from the sale of the matrimonial, which would be sold within 2 to 3 months.

(4) The plaintiff provided erroneous and/or negligent legal advice resulting in the defendant’s ouster from his home and incurring further legal costs to rectify the situation.

5. The plaintiff adamantly denies the allegations at paragraphs 4(1), (2), and (4). The plaintiff’s arguments in respect of the allegation at paragraph 4(3) are set out in the relevant section below.

The Law

6. It is trite law that in applications for summary judgment made under Order 14 Rules of District Court, it is for the defendant to satisfy the court there is a triable issue or there ought to be a trial for some other reason (See paragraph 14/4/3 Hong Kong Civil Procedure 2015, Vol. 1).

7. In order to show there is a triable issue, the defendant must show he has a real and bona fide defence.  Any allegation he makes must be credible and believable (See paragraph 14/4/9 Hong Kong Civil Procedure 2015, Vol. 1).

The errors in the bill of costs

8. I have considered the submissions of the plaintiff’s counsel and the defendant.  I have also considered the evidence in this regard.

9. The issue of possible errors in the Outstanding Bills of Costs is only relevant to quantum and not to the question of liability to pay.  I do not find the defendant’s assertions in this regard to amount to a defence to the plaintiff’s application for summary judgment. There is no real and bona fide defence raised by the defendant on this ground.

The agreement to cap legal fees at $20,000 per month

10. Having considered the submissions and evidence on this issue, I do not find the defendant to have raised a real and bona fide defence on this ground.

11. The preamble of the order made by Deputy Judge S Lo (as he then was) sets out the undertakings of the defendant and his ex-wife. In clause E(c), the defendant undertook to utilize $20,000 per month as legal expenses. There was nothing mentioned about the capping of legal fees in the said order.

12. There is no documentary evidence to support the defendant’s assertion of the purported agreement.  In fact, the documents show that when confronted about this purported agreement, the plaintiff immediately denied there was such an agreement.  In absence of any documentary evidence supporting the defendant’s assertion of the purported agreement, I find his assertion to be a bare assertion. I therefore find the defendant has failed to raise a real and bona fide defence on this ground.

Erroneous or negligent legal advice

13. It is not disputed the defendant was ousted from his premises and it is not disputed the plaintiff had not filed an affirmation for or on behalf of the defendant at the hearing in which the learned judge made the relevant order.

14. Although I am satisfied this issue is relevant to the question of liability, I am not satisfied the evidence filed at this stage raises any real and bona fide defence on erroneous or negligent legal advice.  There is no evidence before me to show the plaintiff deliberately or negligently omitted to take action causing the ouster order to be made against the defendant.

15. In respect of the defendant’s email correspondence that purportedly shows he had sent his final draft of the affirmation concerning relocation, I note the chain of email correspondence produced at the hearing is incomplete. Hence I am unable to determine whether the plaintiff was negligent in failing to finalize the affirmation in a timely manner.

16. Having considered the evidence and submissions of the parties, I find the defendant has not raised a real and bona fide defence on this ground.

The plaintiff’s breach of agreement on 5 December 2013

17. I have considered the evidence and submissions of both parties on this matter.

18. The Letter, signed by the defendant, states the following:-

“I confirm that we have agreed to continue to act for you on the basis that we will have full settlement of all our outstanding costs in the near future of the next 2 or 3 months. Our agreement to remain on record is on the following basis:-

1. We will deliver a backsheet brief to Giles for the hearing to commence on Friday 6 December 2013;

2. You will transfer the sum of HK$66,000 to my firm forthwith once we have sent a copy of our backsheet to Giles to you;

3. As you anticipate, you will be able to sell the property at Flat 2A, 48 Crestmont Villa, Discovery Bay, Hong Kong (“the Crestmont Property”) within December 2013 or January 2014. You will settle all our outstanding legal costs with the net proceeds of sale of the Crestmont Property or assets distributed to you in the ancillary relief trial, whichever is the earlier.” (own emphasis added)

19. Having considered the terms of the Letter, I am of the view there is a triable issue raised by the defendant for the reasons given below.

20. Firstly, there is a triable issue on the true meaning or interpretation of the terms set out in the Letter. 

21. Counsel for the plaintiff argues the terms of the agreement more properly understood meant the Outstanding Bills of Costs would be settled in December 2013 or January 2014.  However I disagree that is the only interpretation of the terms of the agreement.

22. Paragraph 3 of the Letter clearly states the sale of the matrimonial home was only anticipated by the defendant.  It was not made a condition or a term of the agreement that the legal costs must be settled within 2 – 3 months or even by a specific date.  The second sentence of paragraph 3 only mandates the defendant to settle the payments on the occurrence of 2 events, whichever is the earlier:-

1)     The sale of the matrimonial home; or

2)     When assets are distributed to the defendant at the ancillary relief trial.

23. The Letter does not mandate the settlement of the Outstanding Bills of Costs be completed in 2 – 3 months regardless of the 2 pre-conditions.  The fact that the plaintiff’s counsel sought to argue another interpretation based on the intention of the parties at the time of drafting the agreement indicates there is a factual issue which must be resolved at trial.

24. I am of the view that another viable interpretation of paragraph 3 of the Letter is there are only 2 pre-conditions for the settlement of the Outstanding Bills of Costs, neither of which limit the settlement of the outstanding sums to be completed within 2 or 3 months of the Letter.  

25. Secondly, there is a triable issue on whether the plaintiff had wrongfully terminated the retainer.

26. It is not disputed that at the time the parties signed the agreement, the parties believed the defendant’s ex-wife would agree to sell the matrimonial home.  However the ex-wife subsequently changed her mind at the hearing of 6 December 2013.  This caused the plaintiff to terminate the retainer by sending to the defendant an email dated 14 January 2014.

27. Counsel for the plaintiff sought to argue the sudden withdrawal of consent to sell the matrimonial home by the ex-wife is an event which changes the nature of the agreement as contemplated by the parties.

28. The test for frustration, to paraphrase, is whether the supervening event has fundamentally changed the nature of the obligation and/or contractual rights of the parties from what the parties could reasonably have contemplated at the time: see paragraph 23-013 and 23-014, Chitty on Contracts, Vol. 1, 31^st Ed.

29. Pursuant to the terms of the Letter, the obligation of the defendant was to pay $66,000 upon receipt of counsel’s backsheet and to fully settle all outstanding sums upon the occurrence of the events set out in paragraph 3 of the Letter. The plaintiff’s obligation was to continue to represent the defendant upon the transfer of $66,000 into its accounts. The fact that the ex-wife withdrew her consent to sell the matrimonial home could not be regarded as a frustration of the agreement because the performance of the agreement has not been rendered impossible.  The settlement of the Outstanding Bills of Costs could still be made when assets are distributed at the ancillary relief hearing, albeit it was subsequently adjourned to 23 June 2015.  Though the time for the performance of the defendant’s obligation may have been postponed, his obligations were not postponed indefinitely nor had the nature of his obligations changed so as to render the obligations fundamentally different.

30. Assuming the interpretation of paragraph 3 of the Letter is as I had set out hereinabove at paragraph 22, the ex-wife’s refusal to sell the matrimonial home would not have frustrated the agreement. In such circumstances, the plaintiff had wrongfully terminated the retainer.

31. I have considered Counsel’s submission that the agreement was based on the understanding of the parties that the matrimonial home was to be sold within 2 – 3 months.  I have considered whether it would be open to the plaintiff to argue that the said understanding could be regarded as a common mistake.  

32. The elements for common mistake are set out in paragraph 5-037, Chitty on Contracts, Vol. 1, 31^st Ed. One of the elements is that the mistake (the non-existence of the state of affairs) must render performance of the contract impossible.

33. However, for reasons set out above, even if this understanding could be regarded as a mistake, this mistake does not render the performance of the agreement impossible. It is clear that at the time the plaintiff terminated the retainer, neither of the pre-conditions had occurred so as to render the defendant’s failure to settle the Outstanding Bill of Costs a breach of the agreement. Furthermore, the defendant had already honored his part of the agreement by transferring $66,000 to the plaintiff.

34. In all such circumstances, I find there is a triable issue as to whether the plaintiff had wrongfully terminated the retainer. The wrongful termination of the retainer is a defence and counterclaim to the plaintiff’s claim. I therefore find the defendant has a real and bona fide defence to the plaintiff’s claim.

Conditional leave to defend?

35. I have considered plaintiff’s counsel submission that if the defendant is given leave to defend, it should be conditional.  However, for reasons given above, I am of the view the plaintiff may have wrongfully terminated the retainer.  This goes to the root and propriety of the plaintiff’s claim.  In such circumstances, I am of the view the defendant should be given unconditional leave to defend.

36. Hence I make the following orders:-

1) The plaintiff’s summons dated 13 February 2015 be dismissed.

2) Unconditional leave be granted to the defendant to defend the plaintiff’s claim.

3) Leave to the defendant to amend Defence to include the issues raised in his written submissions dated 11 June 2015. The defendant shall file and serve his amended Defence within 21 days from the date of this decision.

4) The plaintiff shall file and serve its Reply within 28 days thereafter.

37. I am of the view that the costs of the defendant should be summarily assessed. Since the defendant is a litigant in person, he is entitled to costs at $200 per hour (see paragraph 62/App/56, Hong Kong Civil Procedure 2015, Vol. 1). The hearing lasted for approximately 3 hours. Having read the defendant’s submissions, I am of the view that 1 hours’ preparation time should be awarded. Hence I summarily assess the defendant’s costs at $800 (4 hours x $200).

38. I make a costs order nisi that the plaintiff do pay the defendant’s costs of the plaintiff’s application summarily assessed at $800, to be paid forthwith. Unless any party applies to vary the costs order within 14 days hereof, the costs order shall become an order absolute.