CHAN, LEUNG & CHEUNG (a firm) v. CHU WAI LAN

DCCJ4770/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4770 OF 2003

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Judgment

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Introduction

1. This is an appeal from a judgment of Master Ko dated 20th January this year by which he refused to stay this action until inter alia a Mr Kelvin Cheung has been joined as a Defendant by the Plaintiffs. The action is brought by the Plaintiffs (a firm of solicitors) for the unpaid amount of their bill of costs by the Defendant whom they had previously represented in a medical negligence action. Mr Cheung is a former partner of the Plaintiffs who had acted for the Defendant in that action whilst he was a partner of the Plaintiffs.

2. The basis of the argument before me has concerned the authority of a former partner in a firm of solicitors to agree a bill of costs with their former client for whom he had acted whilst he was a partner in that firm. That having been said the appeal has also raised an important pleading point which has been taken by the Plaintiffs although it has not occupied much of the argument itself. Nevertheless, as will be come apparent in due course, having reflected on the matter, I consider this to be a crucial point in the resolution of this appeal.

The Background

3. The facts which give rise to the action can be briefly stated. In May 2000 the Plaintiffs were instructed by the Defendant to act for her in a medical negligence claim. As I already indicated Mr. Cheung, one of the partners, had the carriage of her case. He issued a writ on her behalf of 17th November 2000. Mr Cheung left the partnership on the 23rd February 2002 and started his own firm of solicitors Kelvin Cheung & Co., taking the Defendant with him as a client. He gave notice of this to the Plaintiffs on the 15th April 2002. On the 3rd May 2002 he wrote to the Plaintiffs to ask them for their account and for delivery their files in the case. On 15th May 2002 the Plaintiffs tendered their detailed account to Mr Kelvin Cheung, as principal of his new firm and as the solicitor now representing their former client (the Defendant in this action). The account was a substantial one in the sum of $198,000.00. On the 21st June 2002 Mr Cheung wrote to the Plaintiffs informing them that the Defendant intended to exercise her right under section 67 of the Legal Practitioners Ordinance to have their account taxed and he also took the opportunity, I suppose as an alternative course, to ask the Plaintiffs for a discount in lieu of the trouble and expense of a taxation. Correspondence was then exchanged between Mr Cheung concerning aspects of the bill particularly the reference to the expert's fee. There was an impasse and on 30th June 2003 the Plaintiffs wrote to Mr Cheung's firm demanding payment of their account. Payment was not forthcoming and the Plaintiffs then issued their writ which they did on the 13rd August 2003.

4. The firm of Fung, Wong, Ng and Lam were instructed by the Defendant in place of Kelvin Cheung & Co. to represent her in this action. This was on the 13th September 2003. They filed their defence on the 15th September 2003. The defence takes a number points most particularly that the Plaintiffs, as presently constituted, did not represent the Defendant in the medical negligence claim, this having regard to the dissolution of their partnership on the 22nd February 2002 when Mr Kelvin Cheung left the partnership. There are also defences based on specific aspects of the account which go to the reasonableness of the charges and therefore to quantum.

5. On the 27th September 2002, the Defendant's solicitors wrote to the Plaintiffs to ask them to provide the names and the addresses of its partners. There was a reply on the 7 October 2003 which gave the names of the partners at the time that the cause of the action purportedly accrued which included the name of Mr Kelvin Cheung. It is therefore in that capacity that Mr Cheung is one of the Plaintiffs in this action. On the 10th October 2003 the Defendant's solicitors wrote a rather tendencious letter to Mr Cheung which appeared to advance a case that as he was the solicitor in charge of the Defendant's case when he was a partner with the Plaintiffs that he, and only he, could know the proper and correct costs chargeable to the Defendant - this to the exclusion of any of the other partners? On this basis, he was asked to say what the correct charges should be (see D46-49).

6. Mr Cheung replied on the 14th October 2003 (D48-65) to the effect that the Plaintiffs account was "exaggerated and overstated". He then performed his own "taxation" of the account, the detail which is in his letter (D48 et seq ; supra) and concluded that what was now outstanding was $29,900.00 which could be paid to his new firm, Kelvin Cheung & Co., for which he would acknowledge receipt on behalf of the Plaintiffs partnership as then constituted with him as one of its partners.

7. He also raised the point, not currently pleaded in the defence, that he had not authorized the action against the Defendant in his capacity as one of the partners of the Plaintiffs at the time that the action is said to have accrued.

8. On the following day, the 15th October 2003, the Defendant's solicitors sent a cheque for $29,900.00 to Kelvin Cheung & Co. and asked for a receipt for it from the Plaintiffs. On the same day (P60-61) the Defendant's solicitors wrote to the Plaintiffs to say that they considered this action "premature", on the basis that Mr Kelvin Cheung, as one of the relevant partners, had not been consulted and his consent had not been obtained for the bringing of the action. The letter also referred to the fact they had settled what was outstanding with Mr Cheung, as the then relevant partner, in the sum of $29,900.00.

The Amended Summons and the Issues Arising From it

9. There are, following its amendment, three limbs to the summons. All are said to support a stay of the action. Firstly, that the Defendant's liability has been discharged upon the payment of $29,900.00, this amount having been "adjudged" by Mr Kelvin Cheung to be the proper sum due and owing to the Plaintiffs. Secondly, that the action lacks authority, absent Mr Cheung's consent - based on the premise that his consent is necessary. Thirdly, that there should be a stay until an indemnity is offered to and accepted by Mr Cheung or, alternatively, until he has been made a party by being made a Defendant to the action by the Plaintiffs, presumably on the assumption that no indemnity will be forthcoming or if it is, that Mr Cheung declines to accept it.

10. Mr Simon Lam for the Defendant submits that she has been caught in the cross-fire of a dispute between Mr Kelvin Cheung and his former partners. She has paid what he has said is properly due to the Plaintiffs for work that was actually and reasonably done by Mr Cheung, the relevant partner at the time. In such circumstances that must conclude the matter as between herself and the Plaintiffs. If they are now dissatisfied with what Mr Cheung did to the bill then they must to sue him for the balance, either by separate action, or in any partnership action following the dissolution of the former partnership. This is no concern of hers. Alternatively, they must first seek his consent to bring the action. If he refuses, then they must join him as a Defendant.

11. Whilst this poses what may be difficult and interesting points it seems to me that I can only dispose of this summons and therefore this appeal on the basis of the matter as it is currently pleaded. As presently drafted the defence has little to do with the matters that are now advanced in argument in support of the amended summons and the appeal.

12. There is nothing pleaded to the effect that Mr Kelvin Cheung as a partner at the time of the accrual of the cause of action had the authority to bind the other partners by reducing the bill in such way that only $29,900.00 became outstanding which amount has subsequently been paid. It is right to say that all of this post-dates the filing of the defence. The defence dated 15th September 2003 and the payment was effected on the 15th October 2003 following Mr Cheung having written on the previous day to say that this lesser amount was all that was properly due from the Defendant. It is perfectly clear therefore that without this having been pleaded I am not in position to consider the defence of discharge and all that follows from that point which is whether Mr Cheung could bind his former partners.

13. I would have thought this is an essential and material averment which needs to be specifically pleaded before I am able to entertain it on an application such as this.

14. In beginning this judgment I had drawn attention to the fact that the question of the inadequacy of the Statement of Claim as presently pleaded although are taken in Mr C Y Li's skeleton argument and referred to briefly in his address to the court has not been argued in any detail in the course of the appeal. Mr Lam has accepted that his pleadings will in due course require amendment. Now that I have been able to reflect further on the matter it seems to me that this pleading point does assume crucial importance.

15. There is a badly drafted paragraph 15 of the Statement of Claim to the effect that ; "the action .... is an abuse of the court process as it is evaluated (sic.) and confirmed by Mr Kelvin Cheung the handling partner solicitor of the then solicitors of the Defendant that the sum should be below $49,000.00." I am not prepared to spell out of that plea the points on discharge and authority to bind former partners. All this says is that the Defendant's case is that the claim should be one of less than $50,000.00 and that the proper forum is the Small Claims Tribunal and not this court. This is of course begs the question of what is the proper quantum of the claim which can only be decided by a trial of the action. This plea cannot therefore be of any avail to the Defendant at this stage.

16. The other matter of substance which is that Mr Cheung has not consented to the bringing of the action and without whose his consent the matter cannot proceed is also a highly material averment which requires an express plea to this effect in the defence. I have read and re-read the defence to see whether even by possible implication I might be able to spell out such an averment but there is none. Consequently, this argument, whatever the weight of its merits as a matter of law cannot be argued unless and until the defence has been amended. If it is shown that Mr Cheung's consent is required and is not forthcoming then I would have thought that the Plaintiffs will be required join him as a Defendant in order that the action may validly proceed against the present Defendant and Mr Cheung. Without such a plea it seems to me that I am not able to properly rule on the argument which Mr Lam has advanced.

17. I have been troubled by this matter where both counsel have advanced highly persuasive arguments one way and the other on the merits of a defence which as a matters presently stand it simply not before the court. Without a properly pleaded defence I am not disposed to rule on these issues with the result that the amended summons and this appeal must stand dismissed.

18. I have also decided not to rule on these matters in the event of an appeal on what would be a theoretical or academic basis so that the Court of Appeal may know my view and therefore pronounce on it. In my judgment the case will need to be put in proper order by amendment of the defence before a court can be properly seized of what it is that the Defendant wishes to say.

19. I fear that what has happened here is that the Defendant's solicitors did not go to counsel until after they had drafted the defence. Had they done so earlier the pleading might have been more felicitously worded. This misfortune is also compounded by the fact that the purported discharge by payment of $29,900.00 only occurred a month after the drafting of the defence and it is this payment which has provided the real argument (albeit unpleaded) on authority to bind former partners. I regret that an amendment of the defence was not applied for before the summons was taken out in this original form on the 30th October 2003 and certainly before the amended summons on the 15th January 2004. Even in this court, where perhaps such matters of form may be approached most leniently and less rigidly I consider that the failure to plead the essence of the case cannot be overlooked on issues such as these. Once these defects are corrected the Defendant may be in a position to come again with the same argument. This is another reason why I have purposely decided not to rule on the merits of Mr Lam's submission thereby avoiding any suggestion that the matter has already been decided on its merits. My dismissal of this appeal is based entirely on the narrow ground that I have declined to entertain a draconian application for a stay based on facts and matters which should have been specifically pleaded and which have not.

20. It is now for the Defendant to consider whether to amend her defence so as to bring these arguments into play and press on to trial on the basis of the amended pleading or having made the appropriate and necessary amendments to come again with a similar application for stay. In saying that I appreciate that the Master below had been disposed to dismiss the application on the merits of the argument as advanced before him and that I have decided the appeal on a wholly different and essentially procedural basis which relates to the need to plead such matters before they can be canvassed. In any event as matters presently stand the Plaintiffs must now be free to proceed with this action and the learned Master's other order giving directions as to its conduct will now take effect together with any other orders for the amendment of the defence which may be applied for and granted by him.

Costs

21. Where the Plaintiffs have succeeded they must have their costs in any event together with certificate for counsel. I make this an order nisi.