CHIN YUK LUN FRANCIS AND ANOTHER v. MESSRS LO & LO (a firm)

HCMP 1142/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1142 OF 2005

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Dates of Hearing: 22 November 2005 and 8 - 9 May 2006

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D E C I S I O N

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Background

1.  There are two summonses before me.  By their originating summons issued on 3 June 2005 (the “Plaintiffs’ Summons”), the Plaintiffs seek an order under section 67 of the Legal Practitioners Ordinance (Cap 159) for, inter alia, the taxation of nine bills of costs delivered to them by the Defendant, i.e. bills No CB1, CB2, CB5, CB6, CB8, CB9, CB10, CB11 and CB12.  CB10 was withdrawn by the Defendant on 3 June 2005 on the date of issue of the Plaintiffs’ Summons.  The Defendant does not object to taxation of CB9, CB11 and CB12.  By its summons, filed on 4 August 2005, the Defendant seeks to strike out (1) the Plaintiffs’ application to tax the first five bills on the ground that the said bills were issued and paid in full more than twelve months before the issue of the Plaintiffs’ Summons and (2) the Plaintiffs’ application to tax CB10 as it was withdrawn on the date of issue of the Plaintiffs’ Summons (the “Defendant’s Summons”).  These are also the grounds for resisting the Plaintiffs’ application for taxation.

2.  The 1^st Plaintiff is a university professor.  The 2^nd Plaintiff is his wife who is an investment consultant.  They had the fortune to invest in a property in Redhill Peninsular which they sold to Plus Lucky Limited at the height of the property market at $15.1 million but the misfortune to be thus involved in a series of long and wasting legal battles since 1998. 

3.  First, Plus Lucky Limited sought to back-out from the purchase and with the help of its solicitors, Ms Ma So So, engineered a default which they alleged was the Plaintiffs’ and they sued the Plaintiffs for return of deposit (the “Plus Lucky Action”).  The Plaintiffs were represented by the Defendant and succeeded in the Plus Lucky Action.  On 10 August 2001, Deputy High Court Judge Woolley awarded the Plaintiffs $4.3 million on their counterclaim and costs.  Deputy High Court Judge Woolley passed comments which were critical of Ma So So’s conduct as solicitor in the conveyancing transaction.  Second, Plus Lucky Limited filed a Notice of Appeal on 23 August 2001 (the “Plus Lucky Appeal”).  Third, the Plaintiffs issued a summons against Ma So So under Order 62 rule 8 to recover the Plaintiffs’ costs in the Plus Lucky Action (the “Order 62 Application”).  The Plus Lucky Appeal was dismissed with costs by the Court of Appeal on 11 March 2002.  On 12 July 2002, Deputy High Court Judge Woolley ordered Ma So So to bear the Plaintiffs’ costs of the Plus Lucky Action on solicitor-and-client basis and the Plaintiffs’ costs of the Order 62 Application on an indemnity basis.  Fourth, on 25 October 2002, the Plaintiffs petitioned the winding up of Plus Lucky Limited (the “Winding Up Action”).  Fifth, on 11 June 2003, Ma So So appealed against the order of Deputy High Court Judge Woolley in CACV 382/2002 (the “Order 62 CA Appeal).  The appeal was dismissed by the Court of Appeal on 21 June 2003.  Sixth, on 8 October 2003, Ma So So filed a Notice of Appeal to the Court of Final Appeal in FACV 15/2003 (the “Order 62 CFA Appeal”).  That appeal was dismissed by the Court of Final Appeal on 16 September 2004.

4.  After seven years, the legal battles are now over and the 2^nd Plaintiff has qualified or about to qualify herself as a member of the legal profession.  The Plaintiffs now seek to have their solicitors’ bills taxed.

5.  At the hearing before me, I was asked by Mr Liang, counsel for the Defendant, to hear the Defendant’s striking out summons first.  If I would allow the Defendant’s summons, there would be no need to hear the Plaintiffs’ Summons.  In my view, the two summonses represented the two sides of a coin and involved ultimately the question whether there was any merit in the Plaintiffs’ Summons.  The only practical difference would be the order of speech.  There was no reason to justify the change in the order of speech.  It was appropriate to hear the two summonses in the chronological order in which they were filed.  Hence, I refused Mr Liang’s submission.  I proceeded to hear the Plaintiffs’ Summons first which would have the effect also of disposing of the Defendant’s Summons.

The issues

6.  The legal basis of the Plaintiffs’ application for taxation was section 67(1) of the Legal Practitioners Ordinance.  They contended that the five bills formed a series of bills together with CB10, which was rendered within one month of the issue of the Plaintiffs’ Summons.  Hence, all the six bills are taxable under section 67(1).  As against that, the Defendant argued that CB10 had been withdrawn on the date of issue of the Plaintiffs’ Summons and the position is the same as if CB10 had never been issued and the Plaintiffs had lost the right to taxation of the five bills which had been paid for more than 12 months before the issue of the Plaintiffs’ Summons.  Alternatively, the Defendant argued that insofar as the Court might allow the Plaintiffs to place any reliance on CB10, the five bills were essentially separate bills and there were obvious natural breaks in the work covered respectively by the five bills.  The legal basis on which the Defendant objected to the taxation was section 67(2). 

7.  Section 67 provides as follows:

“(1) On the application, made within 1 month of the delivery of a solicitor’s bill or a foreign lawyer’s bill, of the party chargeable therewith the Court shall, without requiring any sum to be paid into court, order that the bill shall be taxed and that no action shall be commenced thereon until the taxation is completed.

(2) If no such application is made with in the period mentioned in subsection (1), then, on the application of the solicitor or the foreign lawyer 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, or if the bill has been paid, or if a verdict has been obtained or a writ of inquiry executed in an action for the recovery of the costs covered thereby, 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.

 …”

8.  Under section 67(1), the party chargeable under a bill, i.e. the client, has an unquestionable right to taxation if an application is made within one month of delivery of the bill.  Under such circumstances, the court is under a mandatory duty to order taxation.  Pursuant to proviso (i) of section 67(2), if the application is made outside the one month period but within 12 months of delivery or payment of the bill, whether to order taxation is entirely a matter of discretion of the court.  The court may order taxation in special circumstances upon such terms as it thinks fit, which usually are full or partial payment of the costs billed.  Pursuant to proviso (ii) of section 67(2), if 12 months have lapsed from the date of payment, no taxation may be ordered.   In other words, a bill is final 12 months after the date of payment.  The basis on which the Defendant resisted the application for taxation of CB1, CB2, CB5, CB6 and CB8 fell within proviso (ii) of section 67(2), i.e. all those bills had been paid for more than 12 months before the issue of the Plaintiffs’ Summons and the Court has no jurisdiction to order taxation.

9.  The issues I have to determine are (1) what is the effect of the Defendant’s withdrawal of CB10 and if it is subject to taxation despite its withdrawal; and (2) in the light of my finding in (1), whether the five bills were separate bills such that the Plaintiffs’ application fell within provision (ii) of section 67(2) or they formed one series of bills ending with CB10 which was issued within a year of the application for taxation as to bring all the bills within section 67(1).

The law

10.  A retainer is normally an entire contract under which a solicitor is to do certain work for his client.  In the absence of a contrary agreement, the solicitor is not entitled to be paid until the work has been completed or the retainer has been terminated.  Thus, in a litigation which extends over a considerable period of time, the burden of financing the client’s litigation falls upon the solicitor.  To mitigate this harshness, the principle of natural break was evolved under which the solicitor becomes entitled to bill his client when a natural break occurs in the course of protracted proceedings even though the matter for which he was retained has not been brought to a conclusion.  Thus the question arises whether a number of bills issued in respect of a litigation are separate bills or whether they are a series of bills which together form one bill.  If they are separate bills, the client has to demand taxation within a month of delivery of each of the bills on him.  If they are a series which together formed one bill, his right to demand taxation on all the bills in the series is preserved as long as he demands taxation within a month of delivery of the final account, i.e. the last bill of the series.  Or, if he demands taxation within twelve months of delivery of the final account, the court may, in the exercise of its discretion, order taxation subject to terms.  This concept of treating a series of bills as a single bill was evolved for the purpose of overcoming statutory time-bars for taxation.  In course of time, another practice has also developed under which the solicitor’s right to demand interim payment is written into the retainer.  Thus, the approach nowadays is to look first at the retainer to see if the solicitor has the contractual right under the retainer to issue separate bills prior to conclusion of the matter for which he was retained.  If he has no, he may only issue final bills at natural breaks in the matter.

11.  If there is authority in the retainer for rendering bills prior to conclusion of the litigation, then it is a matter of construction of the retainer whether the bills, by whatever term they are called, though usually they are called “interim bills”, is a final bill or just a mere statement of how things were going on.  For this purpose, I respectfully adopt the meaning of the word “final” in the context of a solicitor’s bill of costs as defined by Cohen J in De Cotiis v Owen Bird [1998] 51 BCLR (3d) 272.  He held at 280:

“Some support for the interpretation advanced by the defendants, namely that a “final” account need not be the “last” account, or that there may be more than one “final” account, may be found in the case law on the taxation of solicitors’ bills.  In this context, a “final account” has been defined as an account which has two features; it will not be changed, and it covers all professional services performed within a certain time: McAlpine, Roberts & Co v Architectural Institute (British Columbia) (1982), 37 BCLR 332 (BC CA) at 335.  This definition was also cited with approval in Robertson, Ward, Suderman & Bowes v BC Transit (1987), 19 BCLR (2d) 1 (BC CA) at 8.

In this manner, “final” is not necessarily synonymous with “last” in reference to a lawyer’s bill, and accounts which are rendered periodically may nonetheless be final accounts.  This is so under circumstances such as those in Ray, Wolfe, Connell, Lightbody & Reynolds v Henry Electric Co (1982), 37 BCLR 203 (BC CA), where at p 208 Craig JA, Bull JA concurring, concluded that:

each account rendered by the respondent in this case, although periodic, related to all the professional services performed within the stipulated period and that each account was final in the true sense of the word.

Nevertheless, while it is not unheard of for the court to construe periodic accounts as final bills, it has been said that courts “should lean against” doing so: BC Transit at p 9.  The appropriate question to ask is “whether, having regard to the dealings of the parties and the circumstances, it can be concluded that the parties intended the accounts in question to be the law firm’s final account for the work they represented”: BC Transit at p 10.”

12.  Thus, in my view, “final” in the context of a solicitor’s bill of costs does not mean “last”.  It means finality, i.e. it will not be changed and it implies self containment.  It is final in respect of a certain stage defined in the retainer, whether by event or by time.  As a matter of construction of contract, it is possible to arrive at a construction authorising the issue of a number of periodical final accounts under a retainer, but the court should lean against such an interpretation.

13.  If there is no authority under the retainer for the solicitor to issue final bills before the conclusion of the matter, then he would have to rely on the authority to issue final bills at natural breaks.  If a number of bills have been issued, and the solicitor asserts that any one of those bills is a final bill, he has the burden of proving that bill is a separate and final bill and not one of a series of bills.  Romer & Haslam [1893] 2 QB 286 is the leading authority on how a court should approach the question of whether the bills are separate bills or a series forming one bill.  Lord Esher, MR said at 293:

“Now, with respect to the delivery of a solicitor’s bill of costs, in cases where in fact several accounts have been delivered, two points may be, and generally are, raised – one of law and one of fact.  If the solicitor insists that one of these accounts was a final bill of costs, the question of law arises whether at the time when he assumes so to deliver it it could be delivered as a final bill.  If a solicitor undertakes to carry through a legal transaction, the law is that he cannot send in a final bill of costs until that transaction is completed; the law on the point is the same in equity as at common law.  But in equity the nature of many of the suits is such that they can be divided into stages, and the Court may treat the legal transaction as finished although the suit has not been carried to its final conclusion; this is a most important feature of Chancery proceedings.  The ordinary procedure in equity is for the matter to go on to the stage of decree.  In many suits there may be successive decrees; but the decision or decree has to be worked out – a process which may take years; and it becomes obvious that one part of the legal transaction undertaken by the solicitor may have been determined when the decree is made, and that the working out of the decree may form a new and distinct part of the legal transaction.  In an ordinary common law action, the duties of the solicitor are completed when judgment is pronounced: the client gets nothing by the action until that time; though the circumstances of each action may differ, the law applicable to them is the same.  That is the law in such a case as the present, and it is therefore necessary to consider whether, even although a solicitor may intend a bill to be final, he has power to send it in as a final bill.

… But a solicitor cannot be said to have sent in a final bill if he has sent in something which neither party understood nor intended to be final.  Whether in the case of a series of bills each bill has been sent in as a final bill, or whether they are mere statements of account shewing how far the expenses have gone up to the time of sending them in, is a question of fact to be determined on the evidence in each case, and it is a question which cannot be determined in any case upon the finding of the Court in any other case.  The Court cannot lay down rules as to what is conclusive evidence binding subsequent Courts in subsequent cases; neither in equity nor in Common Law Courts can one judge bind another on a question of fact, whether the facts may or may not look exactly alike.

 …  A great fact in the case for our consideration is the nature of the bills sent in and the way in which they were treated by the parties.”

14.  At 298, Bowen LJ said:

“As to business which is not a common law action, but which may be a suit in equity, lengthy either by reason of the number of the parties or by reason of its comprehending a variety of really independent litigation, there may be natural breaks, and this is clearly laid down and explained by Jessel, MR, in In re Hall and Barker 9 Ch D 538.  It is not necessary in the present case to define the natural breaks which may occur in a Chancery suit.  There has here been a protracted arbitration, and we need not and cannot define the breaks which may take place in such a proceeding; there may, however, be some breaks which must be recognised as such.  When we have made up our minds that the solicitors had a right to treat any division of the proceedings as a natural break, we have to ask ourselves whether they exercised that right, for obviously they may have had the right and yet may not have intended to send in a bill of costs in exercise of that particular right.  If, however, we determine that the solicitors had no such right, we must ask ourselves the further question of fact whether both parties agreed to treat the documents as bills delivered under the Act.

… In determining whether a document has been delivered as a bill of costs, it must not be forgotten that the onus of shewing that it has been lies on the solicitor; he must make out as to each document of the series that there has been such a delivery of a bill of costs as to satisfy the law.”

15.  To determine whether a bill is a separate bill or one of a series of bills, the court has to ask two questions: first, whether the solicitor has the power to send it in as a final bill and second, whether the bill has been delivered as a final bill.  The answers to both questions must be in the affirmative if a bill among a number of bills is to be treated as a separate final bill of costs. The burden of proof in respect of both questions is on the solicitor. 

16.  The first question has always been regarded as a question of law, but in my view, it could be a mixed question of law and of fact.  In the absence of any contractual provision in the retainer giving the solicitor the power to issue final bills, he has to prove that the bill was rendered at a natural break in the litigation.  There is an absence of authority as to what constitutes a natural break.  In Romer & Haslam, Bowen LJ said such breaks could not and need not be defined.  I certainly would not try to attempt to do what the distinguished judge did not do, but there are some features in such a break which could be identified.  I think a natural break is not synonymous with the conclusion of a distinct and separate matter.  A litigation involves many distinct and identifiable stages: pre-trial interlocutory stage, the trial itself, enforcement, execution and of course taxation of the successful party’s costs.  It is never difficult for a solicitor to split up a litigation into separate and distinct matters or stages.  He can even treat each interlocutory application, such as an Order 14 application or an interlocutory injunction as a separate and distinct matter.  However, in reality when a client embarks on a litigation, he relies on his solicitor for the conduct of the litigation.  A lay client has no idea about the niceties of distinct and separate matters or stages and the number of matters involved.  He consults his solicitor and gives instructions to him as and when the need arises.  He is more concerned if the litigation is on-going and if there are steps to be taken or if the litigation is going to be dormant.  Usually, a client considers the litigation as just one matter starting with his first instruction to his solicitor and ending with his obtaining the fruits of the litigation or a confirmation that he has no right to enforce.  In the absence of an agreement to the contrary or special circumstances, it cannot be right to treat these separate component matters of a litigation as distinct matters and to treat the conclusion of each of these distinct and separate matters as a natural break to entitle a solicitor to issue a final bill.   In my view, the conclusion of a distinct and separate matter is but one feature of a natural break and not the sole determining feature. 

17.  In my judgment, to constitute a natural break there must be either (1) a physical break in the litigation process of such a duration as would entitle a solicitor to say to his client that the matter is going to be inactive for an indefinite period or for a foreseeably long period that it is appropriate to square or finalise the account for the time being or (2) a break in the nexus between one component matter and another in the litigation.  Thus, the conclusion of a distinct and separate matter in a litigation by itself is not a natural break.  It may well mark the natural beginning of another distinct and separate matter.  The conclusion of a distinct and separate matter in a litigation only makes a break natural if there is a break.  For example, if after obtaining a quia timet injunction, the parties were satisfied with the status quo and did not progress further for damages or permanent injunction and the action went dormant for some time which was resurrected when another threaten act of infringement occurred, then one may say there was a natural break when the interlocutory injunction was granted.  But, if the litigation progresses spontaneously with discovery and then progresses to trial, there is no break in the nexus between the interlocutory injunction and the trial.  Under those circumstances, the interlocutory injunction and the trial are one matter despite they are made up of two distinct and separate ones.  While as Bowen LJ said a natural break may not be capable of precise definition, it certainly has either of the above features or a combination of the above features to various extent.  That is why I consider the first question could be a mixed question of law and fact.

18.  The second question is a question of fact.  There are two elements here.  The solicitor has to deliver the bill intending it to be a final bill and it is also intended and understood by the client to be a final bill.  This question has to be answered by looking at the intention of the solicitor and the client, their conduct, the reaction of the client upon receipt of the bill and the form the bill took.  No assistance could be derived from any decided case.

The facts

19.  Twelve bills of costs were issued by the Defendant to the Plaintiffs. The present applications are related to six of the bills.  CB1, CB2 and CB6 were related to the Plus Lucky Action.  CB5, CB8 and CB10 were related to the Order 62 Application.  Except for CB10 which was described as “Final Bill” and CB8 which was described as “Disbursement Bill”, the other four bills were described as “Interim Bills” for specified periods. 

20.  CB3 and CB4 were related to the Plus Lucky Appeal.  CB7 was related to the Winding Up Action.  No request for taxation had been made in respect of those bills.  CB9 and CB11 were related to the Order 62 CA Appeal.  CB12 was related to the Order 62 CFA Appeal.  The Defendant agreed to have those bills taxed.

21.  The six bills in issue were issued under the following circumstances.  The Plaintiffs signed a letter of retainer with the Defendant on 28 March 1998 instructing the Defendant to defend the Plus Lucky Action on their behalf.  Mr Hilbert Ka and Mr Alan Cheung are solicitors of the Defendant who had conduct of the matter.  On 16 June 1999, the Defendant issued CB1 in the amount of $249,485.  A discount of $40,867 was offered.  The Plaintiffs succeeded in the Plus Lucky Action and was awarded damages on their counterclaim against Plus Lucky Limited.  On 24 September 2001, the Defendant issued CB2 in the amount of $1,413,071. After deducting costs on account, a sum of $347,878.67 was outstanding.  There was some misunderstanding between the Plaintiffs and the Defendant as to how this outstanding amount was settled.  There was no dispute that CB2 was settled and all the money paid by the Plaintiffs had been accounted for.  For the purpose of the present applications, there is no need for me to go into the details of the misunderstanding.  The misunderstanding is wholly irrelevant.

22.  The Plus Lucky Appeal was dismissed by the Court of Appeal on 11 March 2002.  In April 2002, the Plaintiffs’ costs against Plus Lucky Limited in the Plus Lucky Action was being taxed.  The Plaintiffs came across a letter from the law costs draftsman of Plus Lucky Limited commenting that the hourly rate of $4,500 charged by Mr Hilbert Ka was excessive.  At a meeting on 11 April 2002 with Mr Ka, the Plaintiffs requested for reduction of the bills and Mr Ka’s hourly rate.  On 14 April 2002, the 1^st Plaintiff repeated their request for reduction in Mr Ka’s hourly rate, pleading that the 2^nd Plaintiff was out of work.  The Plaintiffs now accepted that Mr Ka’s hourly rate had been agreed under the terms of  the retainer and could not be re-negotiated, but they argued that what happened as a result of the discussion on Mr Ka’s hourly rate was relevant.  According to the Plaintiffs, Mr Ka replied by telephone that he would make a global adjustment to the bills in due course.  Mr Ka denied to have made that promise.  His evidence was that he had a telephone conversation with the 1^st Plaintiff on 24 April 2002.  He explained that the party and party costs against Plus Lucky Limited was due to be taxed on 7 May 2002 and the Order 62 Application was scheduled to be heard on 25 June 2002 which might result in another set of taxation hearing if the Plaintiffs were successful.  Hence, Mr Ka told the 1^st Plaintiff that he could not agree to any reduction of the hourly rate as agreed in the retainer letter and told him to wait for the outcome of the pending taxation.  Mr Ka insisted that he had never used the term “global adjustment”.

23.  The position take by Mr Ka is understandable.  As the matter then stood, there was a strong likelihood in view of the comments of Deputy High Court Judge Woolley and of the Court of Appeal that the Plaintiffs would recover a higher scale of costs from Ma So So.  The Plaintiffs would not benefit from any reduction in Mr Ka’s hourly rate at that stage and any reduction out of the goodwill of the Defendant would only benefit Ma So So.  I accept Mr Ka’s evidence as more credible.  He had a logical reason for the advice he gave and the course he took.  The term “global adjustment” might have been a short-hand impression of what the Plaintiffs assumed Mr Ka to have conveyed to them.  Whatever version is the truth, the effect is the same.  The upshot of those discussions was that Mr Ka had told the Plaintiffs to wait for the outcome of the pending taxation.  On any objective view, he must be taken to have promised that there will be an adjustment for CB1 and CB2 at a later stage (see paragraph 34 below).  As for how and how much, that will have to be determined after the Order 62 Application and taxation had been finalised.

24.  The circumstances leading to the issue of CB5 and CB6 needs more elaboration.  On 11 April 2003, two earlier versions of CB5 and CB6 were rendered (“CB5a” and “CB6a” respectively).  They were described as “Interim Bill 3” and “Interim Bill 4” respectively.  CB5a was in respect of the costs of the Order 62 Application, while CB6a was in respect of the Plus Lucky Action.  Those bills were rendered for the purpose of facilitating the taxation of the Plaintiffs’ costs against Ma So So in the Order 62 Application because it was not uncommon for a taxing master to view the solicitor and his own client bills to ensure that the indemnity principle had been complied with.  Those bills were subsequently cancelled and reissued.

25.  On 17 April 2003, the Plaintiffs’ costs against Ma So So in the Order 62 Application were taxed before Master de Souza.  The Defendant presented two taxation bills, one in respect of the costs of the Plus Lucky Action (“TB1”) taxed on a solicitor and client basis; and the other in respect of the costs of the Order 62 Application (“TB2”) taxed on an indemnity basis.  Prior to the taxation hearing, Mr Cheung requested the Plaintiffs to sign a letter stating that the amounts in TB1 and TB2 were reasonable for the purpose of facilitating the taxation process.  The parties were in dispute as to whether TB1 and TB2 had been shown to the Plaintiffs.  Even if they had been shown, I do not consider the letter signed by the Plaintiffs for that purpose an acknowledgement as between the Plaintiffs and the Defendant that the fees were agreed and indisputable.

26.  The costs claimed on behalf of the Plaintiffs in TB1 was $1,841,468.  Essentially, it comprised of items in CB1, CB2, CB6a and some disbursement items in CB8.  The amount allowed upon taxation on a solicitor and client basis was $1,548,434.50 excluding taxing fee. The amount paid by the Plaintiffs in respect of CB1 and CB2 was $1,662,556.  Thus, the Plaintiffs felt they had been overcharged.

27.  The costs claimed on behalf of the Plaintiffs in TB2 was $338,861.30.  It comprised of all the items in CB5a and some of the disbursement items in CB8.  The amount allowed upon taxation on an indemnity basis was $248,904.50 excluding taxing fee.  The amount paid by the Plaintiffs in respect of CB5 alone was $305,399.30.  Again, the Plaintiffs felt they had been overcharged.

28.  During the taxation hearing, the Plaintiffs expressed concern to Mr Cheung about having to pay the amounts that were being taxed off but were assured by Mr Cheung that the matter would be taken care of.  This is some evidence that the parties did not consider those five bills as final and not subject to change (see paragraph 34 below).

29.  On 14 January 2004, the Plaintiffs had a meeting with Mr Ka and Mr Cheung.  According to the Plaintiffs, they were given a draft statement of account showing a net balance payable of about $800,000 and they discussed with Mr Ka about the various bills rendered.  As the parties were unable to reach agreement, the parties eventually agreed to put aside the discussion provided that the disbursements were paid.   Then on 17 February 2004, the Defendant issued a letter to the Plaintiffs enclosing (i) particulars of costs billed and amount settled; (ii) a statement of account showing a net payable balance of $231,232.61; and (iii) CB5, CB6, CB8 and CB9.  On 1 March 2004, the Plaintiffs settled the bills in full after discounting one item of disbursement in an earlier bill, CB2.  That item was in respect of professional fee to Jones Lang La Salle Limited which they had settled direct with Jones Lang La Salle Limited.  There was no further correspondence between the parties about the bills until 14 April 2005 when the Plaintiffs wrote to the Defendant complaining about overcharging.  In the meantime, the Plaintiffs acted in person in the Order 62 CFA Appeal with the assistance of the Defendant.

30.  However, according to the Defendant, the meeting on 14 January 2004 was to discuss legal issues and the Plaintiffs’ intention to act in person in the Order 62 CFA Appeal with the Defendant assisting in procedural matters and it was after discussing on legal matters that the Plaintiffs requested discussion of CB5a and CB6a.   The Plaintiffs pleaded their financial hardship and requested discount on CB5a and CB6a.  Mr Ka explained to them about the indemnity principle and that since the costs in the Order 62 CA Appeal had not yet been taxed, their bills could not be less than the figures stated in any of the further taxation bills to be prepared.  Hence, Mr Ka explained that it would not serve the Plaintiffs’ interest if the Defendant gave significant discounts to them at that stage.  Obviously any discount given would not benefit the Plaintiffs but would only benefit Ma So So instead and at the expense of the Defendant.  Mr Ka asked the Plaintiffs to take a “broad-brush approach” and look at the overall satisfactory results of the taxation of their bills and the concessions he was going to propose to them rather than to waste time in scrutinising each of the items in CB5a and CB6a.  The concessions which Mr Ka proposed were: (1) the Defendant would only issue disbursement bills and would withhold issuing bills for profit costs in respect of forthcoming steps until much later; (2) the Defendant would waive all profit costs under CB6a; and (3) the Defendant would give a small discount for CB5a by charging an agreed fee of $200,000 as their profit costs.  In respect of the future costs referred to in concession (1), Mr Ka said he indicated that he would be prepared to give the matter an overview and to deal with it after all taxation and recovery actions were completed.  As for the costs he waived under CB6a, Mr Ka said he thought those costs would not form the subject matter of any future taxation as they were in respect of work undertaken on behalf of the Plaintiffs in communicating with the Commissioner of Inland Revenue, the ICAC and the Law Society and in drafting statement of claim for some intended proceedings against Ma So So and others.  According to Mr Ka, the Plaintiffs agreed to his proposal.  Though the Plaintiffs did not request revising CB1 to CB4, he told the Plaintiffs that any revision of those bills was out of question because the Plaintiffs had on the basis of those bills recovered their costs from Plus Lucky Limited and any reduction in those bills would amount to a fraud on Plus Lucky Limited.   

31.  In her affirmation in reply to Mr Ka’s affirmation, the 2^nd Plaintiff criticised Mr Ka of distorting the truth of what happened particularly during the meeting on 14 January 2004, of overcharging and the flaws of the Defendant’s advice in relation to the Order 62 CFA Appeal.  She even referred to a heated telephone conversation between the Plaintiffs and Mr Ka afterwards.  Most of her allegations were irrelevant to the matter I have to decide.  The 2^nd Plaintiff sought to draw support for her case from Mr Cheung’s affirmation, which she said reflected the truth more than Mr Ka’s.  But in my view, Mr Cheung’s affirmation is more supportive of Mr Ka’s and indeed it was filed in support of the Defendant’s case.   

32.  The difference between the Plaintiffs’ and the Defendant’s version of what happened during the meeting of 14 January 2004 is this.  According to the Plaintiff, the parties agreed to defer the discussion about reducing the bills provided that all disbursement bills were paid.  As compared with Mr Ka’s version of the meeting, that was only one of the concessions offered by Mr Ka (concession (1)).  According to Mr Ka, as a quid pro quo for the Plaintiffs waiving their right to dispute those bills and in view of the Plaintiffs’ misfortune and their relationship with the Defendant established during the years, the Defendant agreed to waive certain costs (concessions (2) and (3)) and withhold issuing bills for profit costs in respect of forthcoming steps leaving those costs to be reviewed after taxation and recovery while disbursement bills would continue to be issued (concession (1)).  The Plaintiffs alleged Mr Ka of distorting the agreement reached at the meeting by adding qualifications, while the Defendant alleged the Plaintiffs of over-simplifying or misunderstanding what had been agreed at the meeting. 

33.  On balance, I find Mr Ka’s account of the meeting on 14 January 2004 more credible and the Plaintiffs’ inherently improbable.  On an objective view, it is improbable that at the end of an one hour discussion, the parties would have agreed to defer indefinitely discussion about the profit costs if only the disbursements were paid.  It is also improbable that in the absence of any agreement that the dis-satisfied party would settle all the bills and remain silent for over a year without resurrecting the discussion about the bills.  More fatally against the Plaintiffs is that CB5 was not a disbursement bill as it should have been according to their case.  It was a bill in respect of profits and disbursement costs for the Order 62 Application.  It was a fresh bill dated 17 February 2004.  Consistent with what Mr Ka said, the profit costs of $233,693 was replaced by agreed costs of $200,000 representing a discount of 14.42%.  The Plaintiffs paid that bill without complaining that Mr Ka did not keep his promise of issuing disbursement only bills.  In my view, CB5 completely destroyed the credibility of the Plaintiffs’ assertion that the parties failed to reach any agreement about the costs except to agree to put aside the discussion provided all disbursement bills were paid.  Also consistent with what Mr Ka said, CB6 was in fact a re-issue of the former CB6a bearing the original issue date of 11 April 2003 but with all profit costs deleted and initialled.  Thereafter, the Defendant’s conduct was consistent with Mr Ka’s promise, until the Plaintiffs accused the Defendant of overcharging after which CB10 was issued.  Though it is not the function of this Court in hearing this kind of application to conduct a mini trial on affirmations, it is very clear that Mr Ka was telling the truth about the meeting of 14 January 2004 and the Plaintiffs were not.  I consider the scenario as described by Mr Ka which was supported by Mr Cheung logical and probable.  I accept their account of the meeting on 14 January 2004.  But as I shall demonstrate, that has no effect on the conclusion that I am about to reach.

34.  Thus the agreement reached at the meeting on 14 January 2004 were (1) that CB1 and CB2 were not reviewable because to do so would amount to a fraud on Plus Lucky Limited or Ma So So; (2) CB5a and CB6a were reviewed and reduced to the amount to be billed in CB5 and CB6; (3) no bills for future profit costs would be issued and the Defendant would give future profit costs an overview and deal with them after all the taxation matters and recovery actions were completed.  While it was argued on behalf of the Defendant that the fees charged under CB1, CB2, CB5 and CB6 were agreed and settled in full, in my view, agreement or payment as such has no bearing on a client’s application to have the bills taxed.  This is because a client’s right to taxation is a statutory right which overrides the agreement between the client and the solicitor.  If despite the agreement and payment, the client’s demand for taxation is made within section 67(1) or proviso (i) of section 67(2) an order for taxation shall or may be made.  The questions to be decided are whether the solicitor had power to issue a final bill and whether the bill was delivered as a final bill.  Subsequent agreement and payment do not have any retrospective effect on the solicitor’s power and the parties’ intention at the time of delivery of the bill.  That is why I said my finding of what happened at the meeting on 14 January 2004 has no effect on the conclusion that I am about to reach.

35.  The 2^nd Plaintiff took great pains to argue on what Mr Ka meant by taking an “overview” in respect of future costs.  It is unnecessary for me to make any finding on that question.  What Mr Ka said was applicable to future costs which were billed under CB9, CB10, CB11 and CB12 which have either been withdrawn or do not form the subject matter of these applications.  Probably, in view of the long established relationship and the Plaintiffs’ misfortune in the whole affair, Mr Ka meant he would give a further discount on the profit costs over and above that which the Defendant would be entitled to charge or would be allowed on taxation if the bills were to be taxed.  The discount would probably depend on what the Plaintiffs could not recover from their opponents.   But this is only speculation on my part.  The promise is so uncertain that, as a matter of contract law, it is void for uncertainty and incapable of enforcement.  The Plaintiffs are left with their statutory right to tax those bills and the Defendant did not oppose to have those bills taxed except for CB10.

36.  Returning to the facts, on 14 April 2005, the 1^st Plaintiff wrote to Mr Ka and complained about overcharging.  Firstly, they requested for a revision of CB1, CB2 and CB5 in line with the amounts allowed upon taxation of TB1 and TB2.  On that basis, they alleged that they had been overcharged $114,121.50 in respect of CB1 and CB2 and $56,494.80 in respect of CB5.  Secondly, they complained about the Defendant’s conduct of the Plus Lucky Appeal alleging that had the inter partes summons returnable on 26 November 2001 been properly drafted, they could have recovered costs on a solicitor and client basis.  They complained that the fee charged was excessive.  They asked for a reduction of CB3 by $340,000.  Thirdly, they complained that the fee charged in CB8 was excessive.  At the end of the letter, the 1^st Plaintiff wrote that if the bills were rectified, the Plaintiffs would “treat the overcharges as oversights, rather than deliberate overcharges which warrant the attention of the Law Society and/or other procedures” and that “they reserved their rights in respect of taxation or otherwise.”  The Defendant refused to revise their bills and immediately ceased to act for the Plaintiffs. 

37.  On 5 May 2005, the Defendant rendered CB10 which was described as “Final Bill”.  Then the Plaintiffs issued the Plaintiffs’ Summons on 3 June 2005.  On the same day, the Defendant withdrew CB10.

Issue (1):  Effect of withdrawal of CB10

38.  It is convenient to consider the effect of the Defendant’s withdrawal of CB10 as it has an effect on the conclusion that I am to reach as to the nature of the other bills.  This bill was rendered together with other bills with which this hearing is not concerned.  CB10 is entitled “Final Bill for HC Action No A4645 of 1998 (Application for Costs Order against Ma So So Josephine and related matters)”.  The services rendered under this bill were mainly connected with the Order 62 Application and some related matters such as investigating and considering alternative parties against whom damages awarded against Plus Lucky Limited could be enforced.  The fee charged under this bill was in the sum of $143,623 after discounting a credit of $12,000 given under CB3.

39.  The Defendant’s position is that there was simply nothing in CB10 for taxation as it was withdrawn.  Insofar as the Plaintiffs sought to place any reliance on CB10 as forming one series of bills with any or all of the other five bills, namely CB1, CB2, CB5, CB6 and CB8, the Defendant argued that those bills had been paid more than one year and were now not subject to taxation.  The Plaintiffs argued that despite its withdrawal CB10 is still subject to taxation as the last bill in the series and the effect of its withdrawal is only to reduce the amount chargeable to nil treating the bill as having been fully paid on the date of its withdrawal.

40.  I think the Defendant’s argument disingenuous. The Defendant issued CB10 on 5 May 2005.  On 20 May 2005, the Plaintiffs’ then solicitors wrote to the Defendant requiring taxation of all the bills relying on CB10 as the last bill in a series comprising of the other eleven bills including CB1, CB2, CB5, CB6 and CB8.  The Plaintiffs’ solicitors rightly quoted the case of Ruth Yoeh Yu Wang v Victoria Y Chan [1988] HKCFI 44 in support of their proposition.  Then upon the Plaintiffs issuing the Plaintiffs’ Summons, the Defendant withdrew CB10.  The obvious purpose was to pre-empt the Plaintiffs’ reliance on the Ruth Yoeh Yu Wang v Victoria Y Chan argument.  Leaving aside the Defendant’s purpose for withdrawing the bill, as a matter of fact, the bill issued does not disappear like a puff of smoke upon withdrawal as if it had never existed before.  The bill contained representation of the nature and extent of work which had been done for the Plaintiffs and the fee due to the Defendant for their services.  The work could not be undone by the withdrawal of the bill, though the fee could be waived.  All the circumstances surrounding the issue of the bills including CB10 could not be changed by the withdrawal of the bill.  Those surrounding circumstances did not disappear as did the Plaintiffs’ liability to pay under CB10.   I shall bear those circumstances in mind when I come to consider the second issue.

Issue (2):  Question 1(a): Whether Defendant had power under the retainer to deliver the two sets of bills as final bills prior to conclusion of the matter

41.  In his affirmation, Mr Ka said that the Defendant had right to demand payment in accordance with the terms of the retainer signed by the Plaintiffs on 28 March 1998.  I shall first consider whether the Defendant had power under the retainer to deliver final bills in respect of each of those six matters.  The following clauses relating to billing and payment are pertinent:

“2.  Billing

If the matter should become protracted, interim bills will be rendered to you from time to time - usually at intervals of about three months.  Otherwise only one final bill will be issued upon completion of the matter.  Our interim bills are self-contained bills covering costs and disbursements over a specified period of time.  All our bills (interim or final) will contain a brief description of the work undertaken, though not a detailed narrative.  If you need any further explanation or details thereof, we will be happy to provide you with the same.

3.  Payment on Account

Prior to work being carried out on your behalf, we would require funds to be placed with us in advance to cover both our fees and to defray disbursements.  Requests will be made for further sums on account as the matter progresses and initial funds becomes exhausted. …

5.   Payment of Bills

Our bills are due for payment upon presentation.

In the event that a bill remains outstanding for longer than one month from its date of issue, interest will be charged on the outstanding amount from the date of the bill until payment in full at the rate of 2% over the prime lending rate for Hong Kong dollars quoted from time to time by Hongkong & Shanghai Banking Corporation.

It should be noted that the letter of retainer expressly provides for interim bills and final bill, that the bills are due for payment upon presentation and that interest will be charged if payment is overdue for a month.  It is also important to note that no separate retainer has been entered in respect of each of the six matters. 

42.  Under the terms of the retainer, the Defendant has power to issue interim bill and demand payment in a protracted litigation and final bill upon completion of the matter.  From Clause 2, it is obvious that there would only be one “final bill” which would be the last one to be issued upon completion of the whole matter.  This final bill must therefore be the last and final bill in the sense that it cannot be changed.  “Interim bill” was not defined under the retainer.  However, in the context of the retainer, it cannot be doubted that the payments demanded under the interim bills are intended to mean periodic payments.   I bear in mind that it is open to me to construe interim bills as periodic final bills or periodic final accounts.  However, apart from mentioning that the interim bills will be issued at intervals of about three months covering costs and disbursements over a specified period of time, the retainer is totally silent as to whether the interim bills are final in the sense that they are not subject to revision or change.  They bear no relationship with any identifiable stage of the litigation.  The only factor which determines their issue is the interval of about three months if the matter becomes protracted.   The interval was not clearly defined.  Even ignoring its label, I am unable to construe the interim bills referred to in the retainer as meaning final periodic accounts.  I find therefore that the power the Defendant had under the retainer to issue interim bills was not a power to issue them as final periodic bills.  The Defendant is only be entitled to issue final bills at natural breaks or the last bill at the conclusion of the matter for which it is retained.

Issue (2):  Question 1(b):  Whether Defendant had power to deliver the two sets bills as final bills at a natural break prior to conclusion of the matter

43.  Mr Liang argued that the twelve bills pertained to six distinct matters which I have outlined above and the two sets of bills were in respect of two distinct and separate matters, i.e. CB1, CB2 and CB6 in respect of the Plus Lucky Action and CB5, CB8 and CB10 in respect of the Order 62 Application.  He submitted that on a proper perusal of the two sets of bills it would be readily clear that each set of bill relates to specific, distinct and separate work done in a particular period. 

44.  On the law as I have found, a solicitor may only issue a final bill at a natural break.  I have also found that the conclusion of a distinct and separate matter within the subject matter for which a solicitor was retained as such does not entitle the solicitor to issue a final bill unless that conclusion represents a natural break.  To constitute a natural break, there must be either (1) a physical break in the litigation process of such a duration as would make it appropriate for the solicitor to issue a bill to finalise the account for that stage of the litigation or (2) a break in the nexus between one component matter and another in the litigation.  I have no doubt that the two matters were distinct component matters, but I am far from being satisfied that they were separate component matters from the other four component matters.  The six component matters were litigated spontaneously.  Plus Lucky Limited started the action and the Plaintiffs defended and counterclaimed.  Judgment against Plus Lucky Limited was handed down on 10 August 2001 and Plus Lucky Limited lodged Notice of Appeal on 23 August 2001.  At the same time, in the light of the comments of Deputy High Court Judge Woolley, the Plaintiffs started the Order 62 Application on 1 November 2001.  The hearing of the Plus Lucky Appeal, the Order 62 Application, the Order 62 CA Appeal and the Order 62 CFA Appeal progressed along side the enforcement proceedings, namely the Winding Up Action and the taxation hearing against Plus Lucky Limited and Ma So So.  All the other five component matters arose out of and were related to the Plus Lucky Action.  The Order 62 Application arose out of the Plus Lucky Action.  It was an application made under that action.  All the six matters were spontaneously litigated.  There was no physical break in continuity of the litigation in respect of any of the six component matters.  There was no break in the nexus between each of the component matters and the succeeding or preceding one.  The Plaintiffs were not asked to enter into a separate retainer in respect of each component matter.  In the particulars of costs billed and amount settled and in the statement of account enclosed in the Defendant’s letter to the Plaintiffs dated 17 February 2004 demanding payment of CB5, CB6, CB8 and CB9, it is clear that the Defendant treated all the six matters as one (see paragraph 51).  I find that there was no natural break in the litigation.  Therefore, the Defendant has no authority to issue the two sets bills as final bills.  This would be sufficient to dispose of the two applications.  However, I shall go on to consider the second question assuming, contrary to what I have found, that the two sets of bills were issued at natural breaks.

Issue (2):  Question (2): Whether the bills had been delivered as final bills

45.  The issue here is whether when the two sets of bills were delivered, the Defendant intended to deliver them as final bills and that when they were received by the Plaintiffs they understood and intended them to be final bills. 

46.  I shall first consider the set of bills comprising CB1, CB2 and CB6.  CB1 was described as “Interim Bill No 1”.  It was issued on 16 June 1999 in the amount of $249,485.  In his letter dated 28 June 1999 enclosing payment for the bill, the 1^st Plaintiff thanked the Defendant for the discount and wrote:

 “… We hope for a then bigger discount on the final bill based on the current Hong Kong economic environment and our being victimised in this case.” 

The Defendant did not respond.  Impliedly, the Defendant admitted there were more bills to come in respect of this matter.  This is clear indication that both the Plaintiffs and the Defendant did not intend CB1 to be a final bill.  In addition, the Plaintiffs were clearly anticipating a final bill at the conclusion of the matter, whether it be for the entire litigation or just for the Plus Lucky Action.  Mr Liang submitted that by that letter, the Plaintiffs were only expressing an expectation of a greater future discount and not a revision of CB1.  Even accepting that argument, it is clear that the Plaintiffs considered CB1 was one bill in a series and not final in the sense that it was not subject to change and they anticipated further bills would be issued when the amount charged would be negotiated or reviewed. 

47.  CB2 was described as “Interim Bill No 2” and was in the amount of $1,413,071.  It was issued on 24 September 2001.  In enclosing his payment, the 1^st Plaintiff appended the following note dated 26 October 2001 on a complementary slip:

“So far we’ve paid $1.3 million for our case and the financial burden is no more small on us.  Anyway, we have cleaned up several accounts and can come up $180K at the moment.  I hope that you can give us special consideration and allow us to settle the final bill upon the completion of the whole case which, we hope, can be completed within the next couple months.”

What transpired from the 1^st Plaintiff’s note is again that the Plaintiffs anticipated a final bill.  Their intention when they received and paid CB2 was that it was not final and was subject to adjustment when the final bill was issued.

48.  CB6 is important as it was the last bill in that series.  Whether the series is taxable depends on whether CB6 was delivered by the Defendant and received by the Plaintiffs as a final bill.  CB6 was described as “Interim Bill 4” and was issued together with CB5, CB8 and CB9 on 17 February 2004.  All four bills were settled on 3 March 2004.  CB6 was in effect a disbursement bill in the amount of $30,088.    It was a re-issued of CB6a dated 11 April 2003 with all the profit costs deleted and waived pursuant to Mr Ka’s promise at the meeting on 14 January 2004.  

49.  CB1, CB2 and CB6 were all described as “interim bills”.  The term “Interim Bill” was not defined in the retainer.  In the context of Clause 2 of the retainer, the meaning it conveys to a reasonable reader is that it means periodic bills which may or may not carry with them the feature of finality.  Adopting the approach of Cohen J in De Cotiis v Owen Bird, I would construe “interim bills” as periodic bills which are not final.  Thus CB1 and CB2 were not final bills. 

50.  CB6 was described as “Interim Bill 4”.  Despite the agreement at the meeting on 14 January 2004, the Defendant did not refer to CB6 as “Final Bill”.  Because it was an re-issue of the earlier CB6a bearing the original date but with the profit costs deleted, I assume in favour of the Defendant that the failure to describe this bill as “Final Bill” might be an oversight.  On the evidence of Mr Ka which I accept, an overall agreement in respect of all past costs had been reached at that meeting.  The Plaintiffs agreed that CB1 and CB2 were not open to adjustment and Mr Ka waived all profit costs under CB6.  Mr Ka considered the costs in respect of the Plus Lucky Action had been finalised.  He certainly thought he had the right to issue CB6 as a final bill, but the issue is whether the Defendant intended to deliver it as a final bill.

51.  CB6 was delivered together with CB5, CB8 and CB9 under a covering letter dated 17 February 2004 which read as follows:

“Re: High Court Action No 4645 of 1998, CACV 382 of 2002 and FCAV 15 of 2003   

We refer to the recent discussion between your goodself and our Mr Hilbert Ka regarding our bills in relation to the above actions.

We would like to enclose herewith :-

(a) Annexure A – Particulars of costs billed and amount settled;

(b) Statement of Account;

(c) our Interim Bill 3 under No. 0401423 dated 17 February 2004 for the period from 23-8-2001 to 7-10-2002;

(d) our Interim Bill 4 under No. 0302143 (amended) in which we have waived our costs;

(e) our Disbursement Bill No. 5 under Bill No. 0401422 for the period from 26-9-2002 to 18-11-2003; and

(f) our Disbursement Bill No. 6 under Bill No. 0401421 for CACV 382 of 2002 and FCAV 15 of 2003.

We shall be obliged if you will arrange a cheque in the sum of $231,232.61 to be sent to us to settle the above bills at your earliest convenience.”

Despite what Mr Ka had agreed with the Plaintiffs at the meeting on 14 January 2004, CB6 was described as “Interim Bill 4”.  It was sent along with other bills which are not final, namely CB9.  The heading of the letter quoted the Plus Lucky Action, the Order 62 CA Appeal and the Order 62 CFA Appeal.  In Annex A and the Statement of Account, the Defendant treated all the six matters as one account.  There was no mention that CB6 was issued as a final bill. 

52.  The way the Defendant’s letter dated 17 February 2004 was understood is reflected by the 1^st Plaintiff’s letter dated 1 March 2004 enclosing their payment.  The 1^st Plaintiff wrote:

“With reference to your letter of 17 February 2004, I am enclosed a cheque of $216,012.61 for the billed amount.  Note that the professional fee to Jones Lang La Salle Ltd ($15,220) in Bill 2 has been deducted from the billed amount because we have settled the amount directly with Jones Lang.  In view of this, although we are paying the bills in full, this does not imply we agree with every item of the bill.”

The Plaintiffs argued that this letter is an expression that they did not consider the bills as final bills and not subject to change.  However, Mr Liang submitted that the disagreement as expressed in the letter only referred to the professional fee to Jones Lang La Salle Ltd because the words “in view of this” in the last sentence must refer to the professional fee in the preceding sentence.  I think otherwise because the Plaintiffs have clearly expressed reservation of their right to dispute “every item of the bill” and not just the professional fee to Jones Lang La Salle Ltd.  I think it is clear that when the Plaintiffs settled the four bills sent under the cover of the Defendant’s letter dated 17 February 2004, they have reserved their rights to dispute those bills and accordingly when they received those bills they did not intend to receive them or any of them as final bills. 

53.  Considering the Defendant’s letter dated 17 February 2004 even in the light of the meeting on 14 January 2004, I find that the impression conveyed by that letter and its enclosure is that all the six matters were one and that the Statement of Account is a statement of account in respect of one single matter showing how far the expenses have gone up to the time of issue and not a statement of account of individual final bills.  Even assuming the Defendant intended CB6 to be final and had the power to send it as a final bill, the way it was sent was such that neither party understood nor intended it to be final.  On the evidence of the Plaintiffs, they certainly did not consider CB6 as a final bill.  Accordingly, even assuming that the Defendant had the power to deliver CB6 as a final bill, that it did so upon a natural break and it intended to deliver it as a final bill, CB6 was in fact not so delivered by the Defendant and understood or intended by the Plaintiffs as a final bill.

54.  As for Mr Ka’s argument and worry that CB1 and CB2 could not be revised otherwise it would be a fraud on Plus Lucky Limited, I think the true position is this.  If the Plaintiffs and the Defendant agree to revise the bills to a level below what has been allowed upon taxation, it would amount to a fraud on Plus Lucky Limited and the Court.  But this is not what the Plaintiffs were seeking to do.  They were asking the Defendant to reduce CB1, CB2, CB6 and CB8 (or part of it) to the amount as allowed upon taxation of TB1.  Certain amounts had been taxed off.  Presumably those were mainly in respect of work performed upon the instruction of the Plaintiffs which were unnecessary for the purpose of the litigation and should not allowed on a party and party costs taxation, albeit on an indemnity or solicitor and client basis.  Those costs would have to be borne by the Plaintiffs.  There is no reason why revision in respect of those items disallowed upon party and party taxation could not be made.   A revision in respect of those costs could not amount to a fraud on Plus Lucky Limited or Ma So So or the Court.  In respect of identical items in CB1, CB2, CB6 and CB8 which had been allowed in the taxation of TB1, I do not think in reality a lower figure will be allowed upon a client’s taxation of his solicitor’s costs.   For the above reasons, I do not think the indemnity principle would prevent a client from exercising his right to have his bills taxed pursuant to section 67 of the Legal Practitioners Ordinance.

55.  I now turn to the second set of bills.  CB5 was described as “Interim Bill 3”.  It was in the amount of $305,399.30.  It covered work done from 23 August 2001 to 7 October 2002 in respect of the Order 62 Application.   It was followed by CB10 issued on 5 May 2005 which was withdrawn on 3 June 2005.  I have held that despite its withdrawal, I am entitled to take into account all the surrounding circumstances relating to the issue of this bill when I consider whether the earlier bill, namely CB5, was a final bill.  CB10 was described as “Final Bill for HC Action No A4645 of 1998 (Application for Costs Order against Ma So So Josephine and related matters)”.  The total amount charged in this bill prior to its withdrawal was $143,623 after setting off a credit of $12,000 from CB3.  It covered work done from 26 September 2002 until conclusion, which overlapped with the period covered by CB5 by eleven days.  The work was in relation with the Order 62 Application, taxation of costs awarded under that application and enforcement of the award.  There was no physical break between the stage of the work covered by CB5 and that covered by CB10 or between the Plus Lucky Action and the Order 62 Application.  There was no break in the nexus between the two lots of work or between the Plus Lucky Action and the Order 62 Application.  The Defendant had no power to issue CB5 as a final bill.  I have already reached that conclusion in answering Question (2) under Issue (2).

56.  However, even if I were to treat the Order 62 Application as a distinct and separate matter from the other five matters and that it constituted a natural break (which I must emphasise is not the case), it could not have been the intention of the Defendant at the time CB5 was rendered that it was final.  Plainly, as evinced by CB10 which the Defendant described as “final bill”, the Defendant must have anticipated back on 17 February 2004 that more work had been done and for which the Plaintiffs would be billed.  Though “final bill” is not synonymous with “last bill”, the fact that more work had already been done and not yet billed must mean that the matter had not yet been finalised and what had been billed must be subject to review in the light of all that had been done and to be billed.  Apart from the fact that there was an overlap of eleven days between CB5 and CB10, all the work covered by CB10 had been performed long before 17 February 2004 when CB5 was rendered.  Howsoever one looks at CB5, it could not have been intended by the Defendant to be a final bill when it was rendered.  Certainly, in view of the Plaintiffs’ letter dated 1 March 2004, the Plaintiffs did not understand or intend to receive it as a final bill. 

57.  CB8 is a disbursement bill in the amount of $159,496.  It was treated by the Defendant as part of the costs in respect of the Order 62 Action.  In fact, it also covered disbursements of taxation fee in the Plus Lucky Action.  Ignoring that and treating it on a similar basis as CB5, I find that the Defendant had no power to issue it as a final bill and it was not rendered as a final bill by the Defendant nor was it understood or intended to be a final bill by the Plaintiffs when they received it.

Conclusion

58.  For the above reasons, I find that CB1, CB2, CB5, CB6 and CB8 were not final bills.  The Defendant had no power to issue them as final bills, nor were they delivered by the Defendant as and understood or intended to be final bills by the Plaintiffs.  There is no dispute that CB10 was a final bill.  The Plaintiffs have demanded taxation of CB10 within one month of its delivery.  In the circumstances, the Plaintiffs are entitled to treat all the above bills as one series and to demand their taxation pursuant to section 67(1).  Therefore, I shall order taxation of all the six bills, namely CB1, CB2, CB5, CB6, CB8 and CB10, providing that the Plaintiffs’ liability upon taxation of the six bills shall be the total amount allowed after their taxation or the total amount charged under CB1, CB2, CB5, CB6 and CB8 before taxation, whichever the less.

59.  Despite I find in favour of the Plaintiffs, I do not consider their demand at all reasonable in all the circumstances.  They reached agreement with the Defendant in respect of their costs in CB1 and CB2.  As a result, the Defendant waived their profit costs under CB6, reduced their costs under CB5 to an agreed costs.  Upon seeing the result of the taxation of TB1 and TB2, they turned around and demanded that their costs should be reduced to the same level as allowed under TB1 and TB2.  Despite her remarkable intelligence as an academic and her subsequent legal training, the 2^nd Plaintiff obstinately refused to acknowledge that the basis for taxing costs as between parties to a litigation is different from that for taxing costs between a client and his own solicitor.  Both are based on reasonableness but the latter is also based on contract.  The difference is not altogether removed even if her party and party costs against her opponent are ordered to be taxed on a solicitor and client basis or indemnity basis.  She obstinately refused to acknowledge that there was work which she had instructed the Defendant to perform and which was irrelevant as between the parties to the litigation and which must be disallowed on a party and party taxation but not on a client’s taxation of his solicitor’s costs.  She also obstinately refused to acknowledge that her solicitors never guaranteed that she would recover all her costs of litigation against the unsuccessful party even if indemnity costs or solicitor and client costs taxation is awarded.  In addition, she also had the benefit of the Defendant waiving all costs under CB10. 

60.  It is unfair that after having obtained those benefits or discounts, the Plaintiffs asked for the net bills to be taxed.  To address this situation and while respecting their right to have the bills taxed, I think it is fair and just that I should make an otherwise order under section 67(5)(b) in my order for taxation.  Accordingly, I make an order that the Plaintiffs should bear the costs of the taxation if the total costs allowed upon taxation of all the six bills, including CB10, without any discount or waiver is not less than five-sixth of the total amount they were chargeable under CB1, CB2, CB5, CB6 and CB8, but otherwise the Defendant shall pay the costs of taxation.

61.  Though the Plaintiffs are successful in respect of their Summons, in view of paragraph 60 above, I think they should only have their costs if they are also successful in the taxation.  Accordingly, I order that the Defendant shall pay the Plaintiffs’ costs of the Plaintiffs’ Summons if the Defendant shall be ordered to pay the costs of the taxation, otherwise, there shall be no order as to costs.  Such costs are to be taxed if not agreed.

62.  In view of the outcome of the Plaintiffs’ Summons, the Defendant’s Summons must be dismissed with costs.  Such costs are to be taxed if not agreed.