GENT-YEAR METAL FOUNDRY LTD v. CHAN, LEUNG & CHEUNG (a firm)

HCMP3610/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.3610 OF 2003

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REASONS FOR JUDGMENT

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1. The defendant is a firm of solicitors. The plaintiff was its client. By an Originating Summons dated 19 August 2003 the plaintiff applied for an order for taxation under section 67 of the Legal Practitioners' Ordinance, Cap.159 of a bill of costs presented by the defendant on 17 October 2002. The plaintiff opposed the application. Mr Registrar Chan on 13 January ordered taxation on terms of payment into court and the filing within 21 days of a list of objections to the bill. The defendant appealed. I dismissed the appeal. I now give reasons.

2. The plaintiff was the plaintiff in District Court Civil Case No.22376 of 2001. The defendant acted as the solicitors for the plaintiff in that matter until June 2002, when the plaintiff instructed Messrs Leung Kin & Co. instead. By a letter of 17 October 2002 the defendant delivered a bill of costs dated 23 September 2002 in the total sum of $51,464.50 to Messrs Leung Kin & Co. But the plaintiff considered that it had been overcharged. In particular, it claimed that Mr Andy Hung, a partner in the defendant, had told its managing director, Madam Chan that the defendant's charges would be no more than the $20,000.00 paid on account. So it complained to the Law Society by a letter dated 24 October 2002. The Law Society replied on 30 October 2002 suggesting that the plaintiff should have its bill taxed, and at the same time wrote to the defendant, which set out its answers to the complaint in a letter dated 12 November 2002, and also suggested that the bill should be more appropriately referred to a taxing master for taxation. However the plaintiff chose not to apply for taxation.

3. On 27 December 2002, the defendant sued the plaintiff on its bill in the Small Claims Tribunal. Its claim was for $30,924.00, giving credit for $20,000.00 paid on account. The plaintiff wrote further letters of complaint to the Law Society and filed a defence in the Small Claims Tribunal proceedings.

4. It appears that the Tribunal Officer suggested that the bill be taxed but by a letter to the Tribunal dated 17 April the defendant set out its reasons for refusing the taxation, which were primarily the alleged agreement that the total of the defendant's costs would be $20,000.00. It was also suggested that Mr Fung's charging rate of $3,000.00 per hour was excessive and other general complaints about overcharging on different items were advanced.

5. Ultimately the plaintiff's defence took issue with individual items of the itemised bill filed with the Tribunal. The matter came for hearing on 6 August 2003 before the Adjudicator, Mr Ronald Cheung Wai Tat. The transcript was before me, but no translation had been made. The Adjudicator expressed his concerns about the appropriateness of findings by the Tribunal on the items in a solicitor's bill but said that he applied taxation principles. He then made findings in the following terms, as translated in gist by counsel. For clarity I will call the plaintiff in these proceedings Gent-Year and the defendant CLC :

(1) There was a retainer of the CLC by the Gent-Year. The Adjudicator did not accept Gent-Year's contention that it had intended only to retain one Kelvin Cheung, a partner in CLC.

(2) The Adjudicator found for the CLC on the question of whether it could issue proceedings after Kelvin Cheung had left the firm, and whether CLC could sue in the name of the firm.

(3) The Adjudicator found that there had been no agreement to cap the fees at $20,000.00 as alleged by Gent-Year. There had been no unequivocal promise for such a cap. The letter from CLC asking for $20,000.00 on account was neither here nor there.

(4) CLC had not waived the right to recover fees when it sent the documents to Leung Kin & Co. before presenting its bill.

(5) The Adjudicator found against Gent-Year on various items which it alleged had been done without its consent.

6. The Adjudicator then proceeded to make an order nisi for the Gent-Year, as defendant in those proceedings, to pay CLC as claimant $30,914.00 with interest at the judgment rate and costs of $1,500.00. He gave the parties until 26 August to come back to the Tribunal "to give the defendant (i.e. Gent-Year) one more chance to give the court some submission or indication as to why this order nisi should not be converted to an order absolute" and to deal with any further dispute on costs. He concluded (again I am using counsel's translation) :

"There is more or less 21 days, not exactly 21 days, but almost 21 days. If the defendant still wishes to apply to the High Court for taxation or examine the amount to be charged by the solicitors' firm, it should do so within the time. If you do so, I would probably consider not granting the order absolute on 26 August, but if you do nothing, folding up your hands and legs, most probably I will make this order nisi the order absolute."

7. Then on 8 August the Adjudicator initiated a review of his own decision under section 27A(2)(a) of the Small Claims Tribunal Ordinance, Cap.338, i.e. of his own motion and with notice in the prescribed form to the parties. He heard the review on 26 August. In the meantime, however, on 19 August 2003 the plaintiff filed the Originating Summons herein. The Adjudicator on 9 September 2003, having given lengthy reasons written in English set aside the order nisi dated 6 August 2003, and adjourned the claim sine die with liberty to restore.

8. It is necessary to set out some parts of the Adjudicator's reasons, in particular paragraphs 4 and 5 :

"(1) As far as my finding of facts is concerned, I maintain the same findings as I have already made in my oral Brief Reasons delivered on 6 August 2003. On top of that, I would add the following: (1) I do not believe the assertion by the defendant, raised for the first time on the review, that the former partner of the Claimant Mr Kelvin Cheung has objected to the commencement of and the continuation of this claim against the Defendant. (2) I accept that Mr Fung Shu Wah of the claimant did in March 2003 inform the Defendant of the basis of the Claimant's charge would be on an hourly basis and his own rate would be about $3,000.00 per hour but I am not prepared to find that before that point in time the Claimant had informed the Defendant of the Claimant's basis or charge. (4) The Claimant was negligent in the circumstances as disclosed in Paragraph 6 of the Affidavit of Fung Shu Wah sworn on 24 April 2002 and filed in DCCJ 22376/2001 on the same date. The negligent act of the Claimant has however caused no damage to the Defendant. The Defendant has filed no Counterclaim in the Small Claims Tribunal. (5) I am not prepared to say that the amount of remuneration claimed by the Claimant is patently and entirely reasonable.

(2) This case illustrates the difficulties faced by the Small Claims Tribunal when there is a claim for a solicitor's remuneration the amount of which is disputed by the client. Certainty of the law is a good thing. As I see it, the questions that need to be addressed are (1) Whether the Small Claims Tribunal has the power to assess what should be the proper amount of a solicitor's remuneration payable by his client, and (2) assuming that the Small Claims Tribunal does not have that power, what should the Small Claims Tribunal do when there is a dispute on the amount of a solicitor's remuneration."

9. The Adjudicator went on to make various points, in particular that the Taxing Masters of the High Court have the expertise to assess what should be the proper remuneration of a solicitor, while the Tribunal does not have that expertise. Following Kao Lee & Yip v. High View Properties Ltd & Anor, Civil Appeal No.127and 128 of 1997, the Tribunal has no power to make an order for the taxation of a solicitor's bill of costs. The High Court however does have such power. At the same time, solicitors' claims for costs are not uncommon in the Tribunal.

10. The Adjudicator expressed the view that :

"... the Small Claims Tribunal does not have the power to assess what a solicitor's remuneration should be unless the amount claimed is so patently and entirely reasonable that in effect no assessment is really called for. I stand to be corrected by the Appellate Court."

11. He went on to consider what he should do when faced with a solicitor's claim for costs which is not patently and entirely reasonable, when neither the solicitor nor the client has proceeded with taxation in spite of advice from the Tribunal to do so. He referred to the case of Chan & Kong v. Sky Blue Investment Ltd in which his own decision to in effect to direct a claimant firm to apply for taxation of its bill, though he had no power to order that taxation had been appealed to the High Court which set it aside on the basis that since he had not specified which party had the obligation to take the bill to taxation, his order would not be carried out and the matter would be left in limbo. He does not seem to have come to any clear conclusion, but simply made the order setting aside his order nisi and adjourning the case sine die. He concluded :

"I would advise the Defendant to continue with its taxation proceedings already launched. Should the Defendant fail to do so, I would advise the Claimant to do so, to avoid the matter being left in limbo. The Claimant is always entitled to tax its bill. For the avoidance of doubt, what I say in this paragraph is not my order or direction."

12. What the Small Claims Tribunal should do in the circumstances is obviously a matter to be decided by a High Court Judge sitting on an appeal from an order of the Tribunal, but I have a lot of sympathy with the Adjudicator's view that, in effect, taxation should be a matter for the taxing masters. But that is not the point here. The point is that, as at 6 August 2003, rightly or wrongly the parties were being told to go away and get the bill taxed.

13. The defendant's first ground for saying that the plaintiff should not be allowed to go to taxation is that the plaintiff, having opted in the first place not to do so, has not given any reason for its change of mind. While subsection (1) of section 67 of the Legal Practitioners' Ordinance provides for mandatory taxation where it is applied for within one month of the presentation of the bill, subsection (2), which applies here, gives the court a discretion to order taxation, on terms, where the period is longer and indeed provides that special circumstances must be shown if the period is greater than twelve months. Here the court has a discretion but in effect the plaintiff has not shown any good reason why it should be exercised.

14. The second ground, as I understand it, is that the plaintiff having elected not to go to taxation has waived its right to do so, or is estopped from doing so. The third ground is that in applying for taxation after the Adjudicator's order of 6 August 2003 the plaintiff is in effect seeking to re-litigate the Adjudicator's findings or making a collateral attack on them and so is abusing the process of the court.

15. The parties agree that the court has an unfettered discretion under section 67(2) to order taxation and to impose terms as indeed the Registrar did in this case. They also agree that the High Court has a common law power, in any case where a solicitor is suing a client for his costs, to refer the bill to taxation. The court's discretion will usually be exercised in favour of the client, if the client seeks taxation; see Greaterchinaherbs.com Ltd v. Deacons, unrep, HCMP1079/2002. It is true that, in order to move the court to exercise discretion, some good reason should be put forward; but it seems to me that that reason may be inferred from the fact that, on 6 August 2003, the Adjudicator effectively tried to push the plaintiff to go to taxation. The plaintiff had been advised to do that by the Law Society and the Tribunal and it is not unreasonable to say that at last it saw sense.

16. I turn to the question of waiver or estoppel. I do not understand Mr Li, counsel for the defendant to be saying specifically that waiver or estoppel applies but rather that the plaintiff's election is to be taken into account in applying my discretion to order taxation. Again it seems to me that in the situation where the Adjudicator has invited the plaintiff to change its mind, that change of mind should not be held against it.

17. The third point is that of a collateral attack on the Adjudicator's findings, or an attempt to get round the principle of res judicata. That principle of is founded upon the twin principles that there should be an end to litigation and that justice demands that the same party shall not be harassed twice in the same cause. Certainly if the Adjudicator had simply made the findings, and given a judgment based on them, it could be said that in applying for taxation rather than appealing the Adjudicator's decision the plaintiff was mounting a collateral attack. This is particularly so because appeal from the Tribunal's decision lies only on a point of law or jurisdiction, under section 28 of the Small Claims Tribunal Ordinance. It is true that in his reasons for review the Adjudicator maintained his findings of fact and added others. I do not think the question of whether there was an agreed cap on costs of $20,000.00 would be a matter for taxation, but in the absence of agreement, the solicitor's charging rate would be, and that is attacked in the List of Objections. So is the application made in the District Court proceedings to strike out the Defence; the plaintiff says that the solicitors did this without instructions. This appears to be a matter on which the Adjudicator made a finding for the purpose of his order nisi.

18. The fact is however that whatever findings the Adjudicator may have expressed on the facts, at the end of the day, he reviewed himself and set aside the order nisi. Counsel for the plaintiff refers to Spencer Bower, Turner and Handley on The Doctrine of Res Judicata, 3rd Edition at page 18 where the authors give as one of the examples of "decisions not amounting to res judicata" "a verdict or judgment which has been set aside". In support of this the authors refer to Roe v. R.A. Naylor Ltd (1918) 87 LJKB 958, CA. This was a case in which, after a judgment of the County Court had been set aside and a new trial ordered. At page 963 Swinfen Eady MR said :

"Counsel for the appellants sought to rely upon some finding of the Judge in the first trial of the action. In my opinion, he is not entitled to do that. This action was sent for a new trial, and the second trial superseded the first, and any finding in the first action was got rid of when the action was sent for a new trial."

19. Though the order nisi was not set aside on appeal to a superior court but by the Adjudicator under his statutory power of review, I think the position is exactly the same. If the Tribunal proceedings were re-opened there would have to be a new trial. The effect of setting aside the order was to get rid of the findings. So the defendant cannot be harassed twice by any finding which the taxing master may make.

20. For these reasons I considered that the order for taxation was a proper one, and dismissed the appeal.