RAYMOND CHU & CO v. KWOK CHIN WING

HCA 98/2008

(Consolidated with HCMP 2298/2008)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 98 OF 2008

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J U D G M E N T

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Introduction

1.  There has been a falling out between Raymond Chu & Co. (“RC”), a firm of solicitors, and their former client Mr Kwok Chin Wing.  From February 2006 until July 2007, Mr Kwok had retained RC to act for him and his companies in a number of actions in the High Court and in other related proceedings.  Mr Kwok’s daughter Liane had being engaged to be married to Mr Raymond Chu who is the principal of RC.  They are no longer engaged and this may have contributed to some of the difficulties in these matters.

2.  This action in which RC is Plaintiff is a claim for unpaid fees in the sum of $344,329.40 relating to 14 unpaid bills presented to Mr Kwok.  The claim when the writ was issued on 7 September 2007 was based on an alleged oral agreement made in February 2006 to the effect that Mr Kwok would pay RC $200,000 each month as a fixed fee for RC’s professional work on his behalf plus disbursements.  Leaving aside the enforceability of such an “agreement”, Mr Kwok denies having entered into such an arrangement.  He says that the agreement was on the usual approved basis for the instruction of a solicitor by a client which is payment on presentation of properly itemised bills.  He has paid RC $4,800,000 and counterclaims $2,219,858 which is the balance that he says is owing to him after deducting $2,580,142 which is the total of the bills presented to him for payment by RC.

3.  On 17 November 2008 Mr Kwok, as Plaintiff, issued an Originating Summons against RC asking for delivery of itemised bills of costs from RC in respect of the 14 cases, a cash account of payments by Mr Kwok to RC and, for an order that RC’s bills be taxed.  This Originating Summons reflects Mr Kwok’s position as Defendant in RC’s claim that there was no fixed fee agreement between them and that he is perfectly willing to pay RC for all work done by it on his behalf on the basis of properly drawn bills presented to him for payment which he requires to be taxed by the court.  There has now been a consolidation of RC’s action and Mr Kwok’s Originating Summons.

4.  The parties have most unfortunately adopted deeply entrenched positions and are almost certainly arguing over a relatively small amount whilst spending a great deal of money in costs doing so.

5.  What I now have before me is an Order 14A summons taken out by Mr Kwok in RC’s action seeking answers to certain questions under sections 58, 60, 63, 65 and 66 of the Legal Practitioners Ordinance (“LPO”) which relates to the validity of the alleged oral fixed fee agreement.  This summons is dated 12 February this year and really goes to support Mr Kwok’s Originating Summons by seeking to eliminate from this dispute any suggestion that the fixed fee agreement can have any validity which could form a basis for the way in which RC can charge Mr Kwok for its work.  The summons, as is usual for one under Order 14A, seeks answers to a series of questions which in this case are based on what are said to be the relevant sections of the LPO governing the way in which a solicitor is entitled to charge his client.

6.  Miss Gwilt, who appears for RC, really takes two points.  Firstly, the very fundamental one which is that these questions are not an appropriate way of engaging Order 14A and the summons should therefore be dismissed.  Secondly, that even if Order 14A is available to Mr Kwok the summons is meaningless and should never have been taken out because RC is not relying on the fixed fee agreement and it now accepts that it should present bills for the work that it has done which can be taxed by the court.  This having been said, Miss Gwilt submits that the fixed fee agreement in this case has in fact two aspects.  The first relates to the means by which RC was to be remunerated for its professional work at $200,000 a month all-in for which it gave Mr Kwok a discounted rate due to the fact that Mr Chu was engaged to Miss Kwok and the second aspect relates to the agreement that Mr Kwok would pay all of RC’s disbursements in acting for him, the most important element of which relates to counsel’s fees.  Miss Gwilt submits that there is nothing wrong with the latter aspect although RC is not now relying on the principal aspect of the fixed fee agreement based as it was on a monthly all-in payment of $200,000.

7.  Miss Cheung, for Mr Kwok, says that it is all well and good for Miss Gwilt to say that no reliance is placed on the $200,000 a month basis of charge but that this concession is not apparent from the pleadings nor from the correspondence, although she accepts that Miss Gwilt had made her position clear to the Registrar on 8 December 2008 when the Originating Summons was called on for directions.  I propose to deal with these matters in three phases.  Firstly, to decide whether the summons under Order 14A is a good one in terms of what it seeks to achieve given the purpose of the Order.  If I rule that the subject matter of the summons is appropriate for resolution under Order 14A then I will proceed to deal with it on its merits.  If I uphold Miss Gwilt’s submission I would then dismiss the summons.  Lastly, in either of those cases I propose to give directions to advance this sorry state of affairs to a conclusion.  It is highly regrettable that the parties have reached such an impasse on what should have been a straightforward matter.

Is this a proper case for resolution under Order 14A

8.  Miss Gwilt submits that this is a meaningless exercise because it will not bring an advantage to these joined proceedings which must still go to a final hearing in irrespective of the outcome of the summons.  Nevertheless, it is right to say that the Order has wide application in the sense that the question to be determined by the court does not need to be one which is finally determinative of the whole action.  The Order can also apply so as to finally determine an issue within the proceedings without the need for that issue going to trial.  The court’s approach when considering whether to proceed to hear an Order 14A summons was discussed by Mr Recorder Ma SC (as he then was) in Rockwuin Enterprises Limited v Shuie Yee Limited & Others (unrpd) HCA 19629/1999.  The learned recorder said this:

“The court’s approach in applications under Order 14A

17.    Order 14A, rules 1(1)-(3) state as follows:

“Determination of questions of law or construction (O.14A, r.1)

1.  (1)    The Court may upon the application of a party or of its own motion determine any question of law or construction of any document arising in any cause or matter at any stage of the proceedings where it appears to the Court that-

(a)   such question is suitable for determination without a full trial of the action; and

(b)   such determination will finally determine (subject only to any possible appeal) the entire cause or matter or any claim or issue therein.

(2) Upon such determination the Court may dismiss the cause or matter or make such order or judgment as it thinks just.

(3) The Court shall not determine any question under this Order unless the parties have either-

(a) had an opportunity of being heard on the question; or

(b) consented to an order or judgment on such determination.

18.    Once seized of an application under Order 14A, the court’s approach is essentially a three-step approach :

(1) the relevant question one of law or of the construction of a document?

(2) If so, is that question one that should be determined under the Order 14 A procedure?

(3) If the answer to (2) is “yes”, what is the determination of that question and what orders should the court make as a consequence of determining that question?

19.    Usually, step (1) will cause little difficulty for the court to ascertain.

Step (2) requires the court to be satisfied of the following:

(a) That the question of law or construction is one that is suitable for determination without a trial.  In other words, the court has all the necessary facts and matters before it in order to determine the question of law or construction.

(b) That if so suitable and should it be determined by the court, that it will finally determine (subject to a possible appeal) the entire cause or matter or any issue or claim therein.

(c) Even if the above two conditions are fulfilled, that the court in its discretion is satisfied that the question is one that ought to be determined under Order 14A.

21.    It is clear that the court has a residual discretion whether or not to embark on a determination of a question under Order 14A even where the first two requirements (set out in paragraphs 20(a) and (b) above) are fulfilled.  This is clear from the word “may” in Order 14A, rule 1 (1) and from the authorities.”

This way of approaching the Order was confirmed by the Court of Final Appeal in Shell Hong Kong Limited v Yeung Wai Man, Kiu Yip Company Limited & Anr. FACV 1/2003.  At para. 23 of his judgment, with whom the other judges agreed, Chan PJ held as follows:

“23.    In cases which involve the determination only of a question of law or the construction of a document or where the whole case largely depends on the resolution of a question of law or the construction of a document, the Order 14A procedure is often adopted to put an early end to the entire case.  However, it can be seen that under the condition in (b), this procedure can be invoked for the purpose of finally determining not only the entire cause or matter but also “any claim or issue” in the cause or matter.  It is not necessary for the making of an application under Order 14A that the determination of a question of law or construction of any document would finally determine the whole action.  Such a requirement would be wrong as a matter of “interpretation of the order and as an exercise of discretion”.  See Leggatt LJ in Korso Finance Establishment Anstalt v. Wedge & others, unreported, February 15, 1994, CA Transcript, at p.7 (in which it was held that an issue of construction was still suitable for determination under Order 14A even though a determination of this issue would not finally determine the entire action between the parties).

It is sufficient if an issue in the case can be disposed of using such procedure.  However, it is not contemplated that the parties would submit a trivial matter for determination under Order 14A.  This would not only be contrary to the spirit and purpose of this procedure, but may also lead to possible abuse, resulting in unnecessary expense and delay and wastage of judicial time.  No judge would accede to that sort of request or application in the proper exercise of his discretion.”

9.  What is plain therefore is that the court can determine a single issue provided it is capable of such determination on the basis of the affidavits and there are no disputed issues of fact that require resolution before an answer can be provided to the question.

10.  In this case there is no doubt that this issue raises a clean point of law to be decided on the basis of the provisions of the LPO.  Miss Gwilt seems to accept this but her real objection is that this decision is a meaningless one because even if I answer these questions, as Miss Cheung requires me to, there is no advantage for either party.  RC now accepts that it must prove its claim by presenting detailed itemised bills which will be taxed.  The fixed fee agreement is now a dead letter save as to disbursements which in any event, subject to taxation, Mr Kwok would have to pay.

11.  Miss Cheung says that where RC is showing an ambivalent attitude which appears to run counter to what Miss Gwilt may have said about reliance on the alleged oral fixed fee agreement and that even now, Miss Gwilt says that the fixed fee agreement has a second aspect to it which relates to the payment of disbursements, this summons must therefore serve a real and practical purpose.  Additionally, no steps have been taken to remove the references and reliance on the fixed fee agreement from the statement of claim.  The matter therefore remains extant and I should now address it under summons.

12.  I take the view that I ought to deal with the summons on its merits simply because no steps have been taken to exclude reliance on this alleged fixed fee agreement on an unequivocal basis.  This is an issue that is eminently capable of resolution under Order and if I answer these questions as Miss Cheung is asking me to, the case will be left on the basis of itemised bills as presented by RC to Mr Kwok.

The questions

13.  In the circumstances these can be dealt with very shortly.  Firstly, because the answers to these questions are plain on a proper interpretation and application of the relevant sections of the LPO to which I have already referred and secondly, and quite rightly, because Miss Gwilt has not sought to suggest otherwise, her argument being confined to persuading me that I should not entertain the summons.

14.  Mr Kwok’s position is, and always has been, that he is prepared to pay RC for work done on his behalf subject to proper itemised bills being presented to him and then taxed by the court.  Miss Cheung submits that there is no basis in law which entitles a firm of solicitors to claim its fees without valid bills and on the basis of an alleged oral agreement.  Miss Cheung is correct in submitting that if, as here, the dispute is one of quantum then the matter should go for taxation by the court after the solicitor has issued his bills.

15.  Turning to the statutory provisions under sections 58, 60, 63 and 66 of the LPO, RC is precluded from bringing its claim on the basis of an oral agreement for remuneration.  It must first deliver its bills to Mr Kwok, which should be itemised and which, at Mr Kwok’s option, can be taxed.  The matter is so clear that it cannot admit of any serious argument.  See In re Bayliss [1896] 2 Ch 107 where the English Court of Appeal held that a retainer by a solicitor of a sum of costs is not payment of his bill within the meaning of the Solicitors Act 1843 [the provisions are similar to the LPO on this aspect] and does not affect the right of taxation, although the sum’s retained for costs have been entered in the accounts settled and approved by the client [see headnote to the report].  Further, that where there had been a verbal agreement that the solicitor should be paid his costs for obtaining loans at a percentage of the amounts borrowed and those costs were referred to as “costs as agreed” in the accounts which the client had paid and signed for, such reference related to the verbal agreement as a result of which there was no written agreement signed by the client entitling the solicitor to those sums as his remuneration.  It follows from this case that no claim for remuneration can be brought by a solicitor based on an oral agreement for payment of his fees.

The answers to the questions posed in the summons

16.  Accordingly, I propose to answer the questions in the summons in the following way:

  Question 1

By reason of sections 58, 60, 63 and 66 of the LPO, the Plaintiff is not entitled to bring its claim for recovery of fees (as appearing in paras. 3(c) and 7 of the statement of claim and para. 9(a) of the amended reply and defends to counterclaim on the basis of an oral agreement for remuneration.

  Questions 2 and 3

The Plaintiff is not entitled to seek recovery of its fees for the period between January and July 2007 without first having delivered bills to the Plaintiff and the Defendant is entitled to request detailed itemised bills from the Plaintiff and to have these taxed.

Consequential Orders

17.  Miss Cheung has asked in her summons for a stay of the action until the detailed bills for work done after January 2007 have been presented and for the bills to be taxed.  I take the view that it is not necessary to stay the action but the delivery of the bills and their taxation is the obvious way forward given the way that I have answered the questions in the summons.  The mechanics of this had been canvassed by Miss Gwilt sometimes ago and these have now largely been agreed by both parties.  I therefore propose to make these directions which are based on the fact that RC say that Mr Kwok and his daughter have removed important documents which RC needs to see before it can prepare properly itemised bills.  I therefore direct as follows:

(i)  RC do within 7 days file with the court and serve on Mr Kwok a list of missing documents which it requires to prepare its bills;

(ii) within 14 days thereafter Mr Kwok do serve on RC all the documents in RC’s list and in circumstances where he does not now have them in his possession an affidavit setting out what has happened to those documents;

(iii)    upon delivery of the documents as aforesaid, RC within 56 days thereafter do deliver a final itemised bill(s) charging Mr Kwok on a full and actual basis with liberty to apply for an extension thereof on proper cause being shown for such an extension; and

(iv)    the said bill(s) to include a list of items that RC cannot particularise due to a lack of documentation which had last been in Mr Kwok’s possession, custody or control.

18.  It seems to me that this hearing and the directions that have come from it will I hope effectively put an end to this litigation (the action and the Originating Summons).  This case has always been about the proper presentation of bills for taxation.  The directions that I have just given serve that purpose.  Although I have not formally stayed the action, on a practical basis the directions will now take precedence over the litigation itself.  What the parties should now concentrate on is getting the bills out and then having them taxed.

Costs

19.  I take the view that the Defendant has succeeded in that I have answered the questions that Mr Kwok has posed in the summons in the way that he has asked me to.  Accordingly, I will make an order nisi that the Defendant is to have his costs of the summons including, of course, the costs of hearing itself.  The costs of carrying into effect the directions will be costs in the cause of the Originating Summons, to which they are most appropriately related, given the nature of the relief sought in the Originating Summons.