TSE YUN LAM ARIES v. C & T LEGAL LLP (a firm)

HCMP 1044/2024

[2025] HKCFI 2342

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1044 OF 2024

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REASONS FOR DECISION

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1.  By originating summons dated 19 June 2024 (“OS”), Tse Yun Lam Aries (“P”) seeks an order for taxation of the bill of costs and the breakdown thereof (the “Bill”) delivered to P by her former solicitors, C & T Legal LLP (a firm) (“D”) pursuant to section 67 (2) of the Legal Practitioners Ordinance Cap 159 (the “Ordinance”) and consequential relief. At the conclusion hearing, I dismissed the OS. My reasons appear below.

Relevant background

2.  The Bill relates to an injunction against a listed company whose name at that time was China Investment Development Limited (the “Company”) and demands payment of $1,580,407.50.

3.  P’s father is Tse Shiu Hoi (“Mr Tse”). P’s younger sister is Tse Yi Kit Gigi (“Gigi”). P was interested[1] in 253,522,000 shares in the Company (“Tse’s Shares”). “The Tse family” is a reference to Mr Tse and his family. It is D’s case that P was at all material times the nominee holding the Tse Shares on trust for Mr Tse or the Tse family.

4.  Lee Kwok Wa (“Mr Lee”) is a consultant of D.

5.  On 12 January 2023, Yang Weixu (“Yang”) and P made a voluntary general offer (“VO”) for the shares of the Company. Trading of the Company’s shares was halted the following day.

6.  On 17 January 2023, the Company made an announcement to allot shares to two 3^rd parties by means of false and backdated extensions of lapsed agreements. If implemented, the allotments would have frustrated the VO.

7.  Gigi’s friend, Raymond Chan (“Raymond”), introduced her to Mr Lee on 18 January 2023, 3 days prior to Chinese New Year (CNY) which fell on 22 of January 2023.

8.  Below is a short chronology of events that led to the injunction granted on 25 January 2023:

(i)  On 18 January 2023, Mr Lee met with Mr Tse, P and Gigi and advised on strategy.

(ii)  On 19 January 2023, D prepared the NEDs’ letters of complaint of breach of the Takeover Code. These were sent to the Hong Kong Stock Exchange (“HKEx”) and the Securities and Futures Commission (“SFC”).

(iii)  Late on 20 January 2023, the Company announced its application to resume the trading of its shares immediately after the CNY holidays, ie on 26 January 2023. That rendered it imperative for P and Yang to obtain an injunction to restrain the purported allottees from disposing of the shares so allotted and the Company from implementing the same before the resumption of trading.

(iv)  On 22 January 2023 (CNY 1^st), Mr Lee updated Mr Tse at his home on the proposed injunction application to be issued by P and Yang. Gigi said that P and D agreed junior counsel’s fees at $250,000.

(v)  On 23 January 2022 (CNY 2^nd), senior counsel was engaged.

(vi)  On 24 January 2022 (CNY 3^rd), the NEDs’ emails were sent to the SFC and HKEx.

(vii)  On 25 January 2022 (CNY 4^th) after a hearing of the ex parte on notice application attended by legal representatives of the Defendants in HCMP 138/2023 (“HCMP 138”), Linda Chan J granted the interim injunction (the “Injunction Order”) at around 6 pm.

(viii)  Prior to the resumption of trading the following morning (26 January 2025), it was imperative that D (a) serve the Injunction Order on HKEx, SFC, Hong Kong Securities Clearing Company Limited, Sunwah Kingsway, Union Registrars Ltd and the 1^st and 2^nd defendants in HCMP 138, and (b) make the Injunction Order known to all securities firms in Hong Kong.

(ix)  On 26 January 2023, P and Yang issued the OS in HCMP 138. On the same day Mr Lee met with the Tse family to discuss the Judge’s directions for the next steps.

9.  It is D’s case that from inception he was asked to take instructions from Mr Tse and his family members and his partners and agents. Mr Tse’s decisions were mostly communicated via Gigi and/or Raymond and/or Thomas to Mr Lee.

10.  The Company strenuously opposed the injunction and sought its discharge. It caused affirmations dated 10 February 2023 to be filed, making serious allegations of, inter alia, material non-disclosure, “presenting a false picture to the Honourable Court”, and obtaining the Injunction Order by fraud and that the action was an abuse of process.

11.  The deadline for filing the reply affirmation required by the Injunction Order was 24 February 2023. On 14 February 2023, having obtained junior counsel’s quotation of his fees of $180,000 for advising and preparing an affirmation in reply for the inter partes hearing, D sent it to Raymond who, according to D, orally confirmed that it was accepted by Mr Tse shortly thereafter.

12.  On 15 February 2023, Yang made a notarised declaration (the “Yang Declaration”) alleging that he never instructed D to commence HCMP 138 and the Injunction Order was obtained without his authority, that his signatures in all relevant documents were forgeries and demanded the discharge of the injunction. The Yang Declaration was brought to Mr Lee’s attention by the Company’s solicitors on 20 February 2023.

13.  The seriousness of the allegations and their potential legal and criminal liabilities were conveyed to Raymond who in turn made them known to the Tse family. Urgent and intensive negotiations followed.

14.  Yang was determined to terminate HCMP 138 and for the injunction to be discharged.

15.  It is D’s case that Yang agreed to acquire the Tse Shares for a sum in excess of HK$62 million (which was at a significant premium per share) subject to conditions precedent, namely:

(i)  the discharge of the Injunction Order;

(ii)  the discontinuance of HCMP 138;

(iii)  the withdrawal of the VO;

(iv)  P’s agreement to assume full legal liability and pay all the relevant legal fees; and

(v)  D’s waiver of any legal liability and fees against Yang (“D’s Waiver”)

(collectively, “Conditions”).

16.  Given Yang’s denials of knowledge of HCMP 138 and the VO, Mr Lee and the Tse family demanded that Yang retrospectively sign the engagement letter dated 13 February 2023 which he did in Raymond’s presence on 23 February 2023.

17.  On 1 March 2023, Raymond sent Mr Lee a draft of the SPA, the terms of which tally with Conditions and D’s Waiver.

18.  Pursuant to Condition (v), at P’s request, D waived Yang’s liability as part of the consideration provided by P for the sale of her shares to Yang.

19.  P had never disputed her sole liability in any pre-action correspondence until her affirmation dated 18 June 2024.

20.  By an order by consent dated 12 April 2023, the Injunction Order granted on 25 January 2023 was discharged with no order as to costs and leave was granted to P and Yang to discontinue HCMP 138 with no order as to costs.

21.  On 24 April 2023, sent P its Final Invoice with a description of each of 29 items of legal services provided for the sum of $728,000. That sum together with senior and junior counsel’s fees and disbursements, copying charges, travelling expenses and miscellaneous give a grand total of $1,580,407.50.

22.  On 3 August 2023, D paid senior and junior counsel’s fees totalling $650,000 for the injunction application.

23.  P maintains that she is only liable for 50% of the fees.

24.  On 21 March 2024, just shy of 11 months from the date of the Final Invoice, in response to D’s letter demanding payment of the outstanding fees, P’s new solicitors (“TCL”) requested a copy of the engagement letter and, on 8 April 2024, requested a breakdown of time for work done, expressed in hours and minutes etc. which D provided on 15 April 2024.

25.  P issued the OS on 19 June 2024.

Applicable legal principles

26.  The basis of solicitor-client taxation is set out in RHC Order 62, rule 29 (2):

“on the taxation of the solicitor’s bill to his own client … all costs shall be allowed except in so far as they are of an unreasonable amount or have been unreasonably incurred.”

27.  Section 67 (1) of the Ordinance deals with a party’s application for the taxation made within one month of the delivery of a solicitor’s bill. Section 67 (2) provides as follows:

“67. Taxation of bills on application of party chargeable or solicitor or foreign lawyer

(1) …..

(2) If no such application is made with in the period mentioned in subsection (1), then, on the application of the solicitor … or 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;

(b) that, until the taxation is completed, no action shall be commenced on the bill, and any action already commenced be stayed:

Provided that—

(i) if 12 months have expired from the delivery of the bill … 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;

…”

28.  The issue for determination is whether any special circumstances exist within the meaning of section 67 (2).

29.  The words “special circumstances” arose for consideration in a number of cases. In the present context, I consider the following cases to be particularly relevant.

30.  In Springbok Shipping (HK) Ltd v Clayton Wong & Co [1998] 1 HKLR 225, Mortimer VP opined (at 228F) that:

“it seems to me that the special circumstances which must be found by a judge must be something which are out of the ordinary. There must be something which is a serious and which justifies not only an ordinary taxation but a special one.”

31.  In his view, overcharging[2] was a “special circumstance”: (at 228H).

32.  In Sutherland v CRB (a firm) [2023] 1 HKLRD 1, Au-Yeung J held at §53 that:

“‘Special circumstances’ in Proviso 1 is a very flexible concept that depends on the Court’s assessment of the facts and circumstances of the particular case. The discretion is a wide one. They are those which appear to the judge so special and exceptional as to justify taxation. They are not capable of precise definition or exhaustive enumeration. The following constitute special circumstances:

(1) they are something out of the ordinary, something serious to justify not only an ordinary taxation but a special one;

(2) the discretion to extend the limitation is a wide one and a liberal interpretation should be given to the words “special circumstances”;

(3) each case will depend on its own facts;

(4) overcharging and false charging are well-established special circumstances; and

(5) lack of particularity in the bill also constitutes a special circumstance.

See Withers (a firm) v Antonia Basile §§10-11, citing Ding Xiaohung v King & Wood [2013] HKC 245, §32, DHCJ Lok (as he then was).”

33.  In Wong Chi Ping v Fung Wong Ng & Lam, unrep., HCMP 1487/2010, 8 April 2011 (at §§12 and 18-19) the plaintiff sought to substantiate his complaint that the bill was excessive and thus he had been overcharged. He referred to possible duplication of work, possible wasteful work, possible items of work are charged for but not done and so on.

34.  DHCJ Burrell noted that whereas a taxing Master would consider each item, this court in its appellate function should take a more overall view and explained his approach as follows:

“21. As to its quantum it does not seem to me to be so unreasonable as to merit special consideration. It seems to be the sort of ordinary Bill which if subjected to taxation might in the ordinary course of events be reduced. Maybe a taxing Master would disallow some items or reduce the number of hours spent in some categories of work. If so, 10%-20% might be discounted.

22. However, that is the “ordinary” approach for an application for taxation within time. The fact that it might have been reduced in the ordinary course of events does not seem to me to be a “special” circumstance requiring a ‘special’ taxation.”

P’s case

35.  In his written submissions, Mr Raymond Lau, counsel for P relied on the following matters as constituting “special circumstances” for the purposes of section 67 (2):

(1) the Bill lacks particularity and the breakdown was only given in mid-April 2024;

(2) overcharging in the Bill;

(3) the Bill includes the not-yet-paid counsel’s fees including the sum of $180,000;

(4) there is a dispute as to the sum of counsel’s fees; and

(5) D failed to advise P of her right to tax the Bill.

(1)  Particularity and breakdown

36.  The final invoice dated 24 April 2023 starts with a description of three distinct periods of legal services rendered. A description of 29 items of work performed between 19 January 2023[3] and 23 April 2023 is then given.

37.  D provided a breakdown of time costs of all D’s fee earners (the “breakdown”) on 15 April 2024, within a week of P’s solicitors’ request for the same. Until then, P had made no such request. There is no basis for any implicit criticism of D for delay in providing the breakdown.

38.  The breakdown shows three fee earners: Mr Lee, Senior Consultant (qualified in 2003); Rachel Leung, 2^nd year trainee and Angela Chow, 1^st year trainee and their hourly rates. It provides particulars of time spent on each of the items of services rendered by each fee earner.

39.  At the hearing P submitted that it was D’s duty to provide the breakdown of time costs when it rendered the Bill. No authority was provided to substantiate that assertion.

40.  Having perused the descriptions given in the Bill, I do not consider it lacking in particularity. Further particulars are not required.

(2)  Overcharging

41.  P commented on items 1, 8, 11, 16, 18, 22, 28, 29 and 32 to illustrate overcharging when no services were actually provided for an item and through duplication of work and carrying out work that is clerical in nature that does not require any legal expertise.

42.  Item 1 of the breakdown refers to attendance at a meeting on 18 January to advise and to take instructions. Mr Lau then made reference to the final invoice that described the services as commencing from “19” January 2023 impliedly suggesting that charge for rendering advice on 18 January 2023 should not have been made. As earlier noted[4], the reference to ‘19 January 2023’ was a typographical error for ‘18 January 2023’. There is simply no basis for P to take issue with item 1.

43.  It is important not to lose sight of the fact that two of the three fee earners were 1^st and 2^nd year trainee solicitors. Mr Lee would be in dereliction of his professional duties if he did not exercise proper supervision over his trainee solicitors.

44.  Given the nature of the underlying transaction being a hostile takeover offer of a listed company involving millions of dollars, as Ms Amanda PS Lee (counsel for D) pointed out, the urgency and importance of the injunction application (a task that had to be accomplished within a week and over the CNY holidays) was an ‘all hands on deck’ situation.

45.  As the injunction restraining the implementation of the allotment was pivotal in forestalling the possible frustration of the VO, the suggestion that Mr Lee need not have attended the hearing of the injunction application is beyond comprehension.

46.  By being involved at the outset and at the hearing itself, the trainee solicitors were able to meaningfully assist in arranging service of the injunction papers, arranging service of the Injunction Order and making it known to as many securities firms as possible[5] prior to the resumption of trading the following morning at 9:30 am.

47.  P cited the observation of Mayo J in Wang Yeoh Yu Ruth v Chan Victoria [1988] HKC 687 (at 691E-F) (which concerned the taxation of 6 bills costs for work done in connection with the financial provisions agreed between the plaintiff and her husband) that:

“… it is evident from the text of the subject matter of the bills that the defendant has included a large number of items of what I think can best be described as clerical duties or functions”.

48.  P sought to suggest that those observations were apt to describe the work carried out by the 3 fee earners described in §46 above.

49.  It is singularly unhelpful for an observation extracted from another case involving an entirely different factual context as applicable to the matters at hand. In the present case, arranging service of the injunction papers and arranging service of the Injunction Order may appear to be clerical tasks but the success of the injunction hinges on its proper and effectual enforcement. In those circumstances, they are not tasks that one could responsibly delegate to trainee solicitors.

50.  P also cited from the decision of Godfrey Lam J (as he then was) in Withers (a firm) v Antonia Basile [2019] HKCFI 325 where, in the context of highly acrimonious and contentious matrimonial litigation with legal fees running into millions, the Judge noted (at §17) that the 6 bills (in respect of which the wife sought an order for taxation under proviso (i) to section 67 (2) of the Ordinance) contained:

“… a number of entries where a partner was simply said to have worked on documents, without further particulars; substantial number of hours were entered for a partner to compile and check bundles; a very considerable amount of time was charged for internal communication between fee earners — an area with scope for argument; attendance at hearings by more than two fee earners; potential duplication including for instance the handling partner charging for reading emails when another partner had been arranged to cover him while he was away …”

51.  It is unclear how the extract set out in the preceding paragraph can assist P in the present case.

52.  In the context of duplication, it is salutary to bear in mind Master Lai’s observation in Chen Ningning v King & Wood (A Firm) HCMP 163/2012, 21 March 2016 (at §186) that it is wrong to think that when counsel and other professionals are engaged, the solicitor would only need to act as a messenger or post-box. The solicitor has his role to play even when counsel or other professionals are engaged.

53.  Adopting the approach set out in Wong Chi Ping (see §34 above), I do not consider that there is any substance in P’s complaint of overcharging.

(3)  Counsel’s fees post–injunction

54.  This relates to junior counsel’s fees in relation to post-injunction work, to prepare an affirmation in response to the Company’s affirmations filed in opposition to the interim injunction and for its discharge. The deadline for the reply affirmation was 24 February 2023.

55.  Plainly, counsel’s fees for the injunction application do not cover post-injunction matters necessitated by opposition to the continuance of the injunction.

56.  P’s objection[6] to counsel’s fees of $180,000 is on the basis that D is not entitled to recover counsel’s fees not yet paid before delivery of the Bill.

57.  Friston on Costs 4^th Edn at §36.37 states:

“Unpaid disbursements The fact that disbursements may not have been paid at the time the bill was delivered has been held to amount to a special circumstance[7]. Non-payment of counsel’s fees by a solicitor agent has been held not to constitute special circumstances[8].”

58.  In Hong Kong, solicitors are personally liable for payment of counsel’s fees. Principle 12.04 in The Hong Kong Solicitors’ Guide to Professional Conduct Volume 1 provides:

“In the absence of reasonable excuse a solicitor is personally liable as a matter of professional conduct for the payment of a barrister’s proper fees. Failure to obtain funds on account of a barrister’s fees shall not itself constitute reasonable excuse.”

59.  P’s objection is misplaced.

60.  In his reply, Mr Lau clarified that his objection is based on Re Y & Co [2004] 1 HKLRD 247 at §§41-43 and is only applicable in the event that a taxation is ordered and the Court is minded to impose conditions such as the payment of counsel’s fees.

61.  Given the outcome of the OS, the point becomes irrelevant.

(4)  Counsel’s fees for the injunction hearing

62.  There is no dispute over senior counsel’s fees for the injunction hearing. P appears to take issue of junior counsel’s fees. She had agreed to a sum of $250,000 but the fees billed and paid was a sum of $300,000, a difference of $50,000.

63.  It should be borne in mind that the injunction application had to be prepared over the CNY holidays with a view to obtaining the injunction prior to resumption of trading on 26 February 2023. While client’s agreement is a relevant factor, it is not the only determining factor of the reasonableness of counsel’s fees.

64.  Given the urgency and complexity of the application, I do not consider that it has to be shown that the fees paid are unreasonably incurred and the amount unreasonable.

(5)  D did not inform P of the right to taxation

65.  That ground also arose in Wong Chi Ping. The Judge considered that the point had little or no merit when a different firm from before the presentation of the disputed bill had legally represented the plaintiff.

66.  P engaged TCL to advise her after receiving a reminder in February 2023 to settle the Final Invoice rendered on 24 April 2023 which was still outstanding. While the Bill in the present case was presented before TCL were instructed, it was more than a month before the expiration of the 12 month period in section 67 (2) of the Ordinance.

67.  Against the backdrop of TCL’s role and timing, there was ample time prior to the expiration of the 12 month period for TCL to render relevant advice to P. In those circumstances, I agree that this complaint per se does not constitute “special circumstances”.

68.  In any event, whether the fact that D did not advise P of her right to have the Bill taxed amounts to “special circumstances” is another matter. In GreaterChinaHerbs.Com Ltd v Deacons, HCMP 1079/2002 6 August 2002, DHCJ Woolley (at §6”) referred to the statement in Wilkinson and Sandor’s The Professional Conduct of Lawyers in Hong Kong (at p 151) that the duty to inform the client of the right to apply to have the Bill taxed is activated upon a query about the bill, and certainly upon any dispute as to its contents. He opined that:

“the query should be in the nature of a complaint before this duty arises … it is a complaint which gives rise to the duty, not an innocent enquiry short of a complaint.”

69.  P never raised any complaint concerning the Bill with D prior to her engaging TCL. Accordingly, D’s duty to inform P of the right to taxation was never activated.

Disposition

70.  For the reasons stated above, no “special circumstances” has been made out to warrant an order for taxation pursuant to section 67(2)(i) of the Ordinance. Accordingly, at the conclusion of the hearing, I dismissed the OS.

71.  The issues remaining resolved are liability issues:

(i)  whether P is solely liable or jointly liable with Yang with respect to the Bill (“Sole Liability Issue”);

(ii)  whether Raymond and/or Thomas are agents of Mr Tse , P and her family (“ Agency Issue”); and

(iii)  whether

(a)  P agreed to D’s waiver by conduct and/or

(b)  P should be bound by the acceptance of the waiver by Raymond and/or Thomas (“Waiver Issue”).

72.  Those issues should be resolved in the District Court proceedings (“DCCJ 7621/2024”). As to the conduct of those proceedings, they are best left to the Judge hearing the case.

Costs

73.  After hearing the parties, I ordered that the costs of OS be to D, with certificate for counsel, such costs to be summarily assessed and payable forthwith with directions that D’s statement of costs be lodged within 14 days of the Order and P’s list of objections (limited to 2 pages) be lodged within 7 days thereafter.

74.  Summary assessment will take place in Chambers.