QUE JOCELYN CO t/a SCENTED DELIGHTS v. BROADAIR EXPRESS LTD.

HCA3477/96

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.3477 OF 1996

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HCB612/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO.612 OF 1999

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Re : QUE JOCELYN CO

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J U D G M E N T

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Background

1. This is a case that gives the legal profession a bad name. The Plaintiff instructed Finley & Co., Solicitors ("Finley") to recover for her $34,608.05 from the Defendant. On 26th March 1996, a writ with an indorsement of claim was served. One year later, on 29th April 1997, and before any progress had been made in this case, she was ordered by the Master to pay indemnity costs to the Defendant ("the First Order"). The costs were taxed at $254,431.83. These costs were incurred because Finley did not comply with an Unless Order on the service of the Statement of Claim. Based on the First Order, the Defendant issued bankruptcy proceedings against the Plaintiff.

2. In March 1998, Finley ceased to be the solicitor for the Plaintiff. The Plaintiff's present solicitor advised her to recover the costs against Finley personally. On 8th January 1999, a summons was issued under O.62, rr. 7 and 8 of the Rules of the High Court and the inherent jurisdiction of the Court asking Finley to pay the costs of the First Order to the Defendant. The Master declined jurisdiction. On appeal, Yuen J held that the Master did have jurisdiction to hear the matter and the case was remitted to the Master for hearing. After hearing the matter, the Master ordered Finley to pay the costs awarded under the First Order to the Defendant and to refund the legal costs paid by the Plaintiff relating to the First Order to the Plaintiff ("the Second Order"). Finley now appeals.

3. The hearing of the Defendant's bankruptcy petition against the Plaintiff is also before me. The two matters were heard in Chambers. I now hand down the decision in Court.

Costs against solicitors personally

4. The jurisdiction of the Court to make solicitor personally liable for costs is well established. One does not need to look further than Ho Lee Man v. Wong Wai Kai (No. 2) [1993] 1 HKC 193 in which Litton JA (as he then was) described the source of jurisdiction, regulated by O.62, r.8 (1), as the inherent jurisdiction of the Court to exercise control over its own officers including solicitors. The jurisdiction has to be exercised with care and discretion and only in clear cases. The test is whether the conduct of solicitors amounts to a serious dereliction of duty. In that case, the Court of Appeal, at the conclusion of an appeal, ordered costs in favour of the Respondent to the appeal. It then asked the solicitors for the Appellant to show cause why an order should not be made against them personally in respect of the costs under the provisions of O.62, r.8(1). After hearing the solicitor, the costs order was made against the solicitor personally.

Order 62, r.8(1)

5. Order 62, r.8(1) is as follows :

"(1) Subject to the following provisions of this rule, where in any proceedings costs are incurred improperly or without reasonable cause or are wasted by undue delay or by any other misconduct or default, the court may make against any solicitor whom it considers to be responsible whether personally or through a servant or agent an order -

(a) disallowing the costs as between the solicitor and his client; and

(b) directing the solicitor to repay to his client costs which the client has been ordered to pay to other parties to the proceedings; or

(c) directing the solicitor personally to indemnify such other parties against costs payable by them."

Although the Plaintiff relies on O.62, r.7 as well, in my view it is O.62, r.8(1)(a) and (b) that are of relevance to this case.

Existence of two orders

6. There is no restriction on the time in which the application is to be made under O.62, r.8. The Master clearly has jurisdiction to order costs against Finley if the test is satisfied. However, what is unusual in this case is that the First Order remains in existence after the Second Order was made. The First Order was not discharged or varied to enable the Second Order to take effect. While this may not be a problem in some other cases, the existence of these two orders do create a problem because the Plaintiff is relying on the Second Order to oppose the bankruptcy petition presented by the Defendant. As the Second Order impeded upon the rights of the Defendant, Findlay J granted leave to the Defendant to take part in this appeal.

7. The reason given for the matter being pursued in this manner is because the Plaintiff does not have the money to pay the Defendant's costs. In any event, it would be unjust that she has to pay the money first and seeks to recover it from Finley later on. Mr Pedruco, Counsel for the Plaintiff, initially argued that the Plaintiff is entitled to have these two orders. He relied on the cases of Brown v. Burdett [1888] 37 CH 207 and In re Scowby, Scowby v. Scowby [1897] 1 CH 741. These two cases do not support his arguments. In the first case, the judge had previously made an order for taxation of costs. Subsequently, another judge ordered an enquiry be made on whether the parties or solicitors had caused delay in the prosecution of the case, and the solicitor for the plaintiff should attend before the master to show cause. It is clear from the decision of the Court of Appeal that the second judge had the jurisdiction to make the enquiry. However Lindley LJ pointed out :

"What is to be done when the inquiry is answered is quite another matter. In this particular case care will have to be taken in making an order with respect to the costs, but we have not got so far as that at present."

8. In Scowby, the Court of Appeal held that though the Court had no jurisdiction to alter or vary an order after it has been passed and entered, yet it may make a supplemental order; such as an order directing that the party benefited by the previous order shall not be entitled to receive any benefit under it except on certain conditions. This case clearly does not help the Plaintiff because the Second Order is not a supplemental order. This order is inconsistent with the terms of the First Order.

Amending the summons

9. Mr Pedruco further submitted that as the appeal is by way of re-hearing, I can vary the order and make the appropriate order. He, however, on the second day of the hearing, accepted my suggestion to amend the summons by seeking an alternative relief that the costs in the First Order is to be paid by Finley to the Plaintiff. This amendment is not opposed by Mr Finley who only ask for the costs relating to the amendment to be reserved for argument.

10. I find that even if the liability of Finley is established, the Master is not entitled to make the Second Order which is inconsistent with the First Order. The appropriate order is for Finley to indemnify the Plaintiff or to pay the costs to the Plaintiff. I grant leave to the Plaintiff to amend the summons.

The First Order

11. As the Statement of Claim was not served within time, the Defendant obtained an Unless Order on 7th October 1996 that unless the Statement of Claim was served on or before 4.15 p.m. on 22nd October 1996, the Plaintiff's claim was to be dismissed. On 22nd October 1996, the Plaintiff served the Statement of Claim but not within the time specified in the Unless Order. The Defendant issued a summons seeking judgment on the costs of the action on the ground that the action had been dismissed. The Master, after hearing evidence, held that the Statement of Claim was served outside the time limit imposed by the Unless Order but granted leave to the Plaintiff to serve it out of time. The Master ordered the Plaintiff to pay the costs of the Defendant on an indemnity basis.

The Plaintiff's case

12. It is the Plaintiff's case that she left the management and conduct of the action to Finley. She only knew for the first time that there had been delay in the filing of the Statement of Claim when she received a letter from Finley dated 23rd November 1996. She accepted that Finley had supplied her with a letter from the Defendant's Solicitor, Dibb Lupton Alsop ("Dibb") proposing to resolve the matters regarding the filing of the Statement of Claim. However, Finley had never advised her as to the possible consequences should she adopt or not adopt the proposal. She entrusted the matter with Finley and, to her shock, at the end of April 1997 she received a letter dated 29th April 1997 from Finley sending her the Decision of the Master in which she was asked to pay the costs of the Defendant.

Finley's case

13. Mr Finley appeared for his firm in this proceeding. He stated that the Plaintiff was a demanding and difficult client but he had tried to serve her as best as he could. He denied that he had not properly kept her informed or advised her. On the contrary the Plaintiff took an extremely active role in all matters even to the extent of consistently rejecting his firm's advice. On the first day of the hearing relating to the Defendant's application for costs of the action, the Master had stood the matter down for him to take instructions from the Plaintiff. But the Plaintiff would not compromise. The matter was part heard and during the adjournment, he tried to get her to settle the case. Again, the Plaintiff refused to accept the advice and the matter proceeded. Mr Finley also submitted that since he had commenced an action in which he is seeking a declaration that he is not negligent, question of his liability for the costs awarded under the First Order should be dealt with in that case and not in the present proceedings.

Liability established

14. The parties had chosen not to call oral evidence at the hearing before the Master on whether Finley should bear costs personally. Affidavits with numerous exhibits were filed by both parties. Numerous submissions were exchanged. Emotional words were used by both sides in this litigation.

15. In the midst of all these, what stands out is that Mr Finley's responses to the Plaintiff's allegations are couched in vague terms. Giving the most careful consideration to the issues, in particular the fact that the professional reputation of a solicitor is at stake, I have nonetheless come to the view that the liability of Finley is established and Finley was in serious dereliction of duty towards the Plaintiff.

The case was started in the wrong forum

16. Despite the fact that the claim is only for about $34,000, a High Court action was commenced on the Plaintiff's behalf. The explanation given by Finley in response to the query by the Law Society as a result of the Plaintiff's complaint was that :

"... the writ was issued in the High Court upon client's specific instructions and with a view to maximising pressure on the Defendant, i.e, the action would appear in the South China Morning Post list of Writs. This in the expectation of inducing an early settlement. By the use of a Generally Indorsed Writ, not available in the District Court, it was also hoped that costs could in fact be saved without the need for drafting a full pleading. Client was aware of our use of this tactic to good effect in the past."

17. What has not been disclosed by Mr Finley is whether the Plaintiff was properly advised as to her potential exposure to the High Court scale of cost including counsel fees. Unless a client is specifically advised and agreed to the exposure to costs, a solicitor is wrong to issue a writ in the High Court, when the sum in dispute is within the bottom scale of the District Court jurisdiction, simply for the purpose of asserting pressure on the other party.

Fault of Finley not to issue Statement of Claim

18. It is equally clear that the failure to file and serve the Statement of Claim within time was not due to the fault of the Plaintiff. These are matters that a lay client would leave with her legal advisors.

Unless Order due to fault of Finley

19. It is further equally clear that the Plaintiff was not responsible for having an Unless Order made against her. Nor was it suggested that she was aware of the existence of an Unless Order.

Plaintiff "caused her own demise"?

20. Mr Finley submitted that the Plaintiff "caused her own demise". This is a truly astounding submission just like his other submission that the Plaintiff "gets what she paid for". The First Order arose directly from the failure of Finley to serve the Statement of Claim within time and to comply with the Unless Order within time. None of these was due to the fault of the Plaintiff.

21. Mr Finley said that on 22nd October 1996, which was the deadline fixed for the Unless Order, the Plaintiff was still discussing the Statement of Claim with his firm's trainee lawyer. However, the evidence shows that it was only on that day that the draft Statement of Claim was supplied to the Plaintiff for her approval. How could the Plaintiff be blamed for discussing the matter with the trainee lawyer?

22. Mr Finley further submitted that because the Plaintiff was concerned about the costs, a trainee solicitor of his firm was assigned to do the work. Mr Finley was under a duty to supervise the work of the trainee lawyer. The professional standard of a solicitor is not judged by the fees he charged on a case. To submit that the Plaintiff "gets what she paid for" is simply absurd.

Conflict of interest

23. On the same day of the service of the Statement of Claim, Dibb immediately stated that the document was served out of time. Thereafter there was a flurry of activities and exchange of correspondence between the two firms of solicitors. Finley threatened to obtain judgment in default of defence. Dibb issued two summons on 8th November 1996. The first asking for judgment on costs on the basis that the case had been dismissed pursuant to the Unless Order. The second was for extension of time to file the defence pending the determination of the first summons. Finley served two affirmations from his employees dealing with the service of the Statement of Claim.

24. By 8th November 1996, if not earlier on 22nd October 1996, Finley was clearly in a position of a conflict of interest. On one hand there was a serious allegation that the Statement of Claim was not served within time with the consequence that the action was dismissed. The default was caused entirely by the staff of Finley. On the other hand, Finley was still acting for the Plaintiff and had to continue to advance her interests. In circumstances such as these, one would expect Finley to disclose fully and frankly what had transpired so far, so that the Plaintiff could appraise of the situation and decide for herself what steps to be taken. After all, Rule 3 of the Solicitors Practice Rules provides that :

" A solicitor shall not, in the course of practising as a solicitor, do or permit to be done on his behalf anything which compromises or impairs or is likely to compromise or impair-

(a) ...

(b) ...

(c) his duty to act in the best interests of his client;

(d) ..."

To act in the best interest of the Plaintiff must involve telling her what actually had happened and to advise her to seek independent legal advice.

25. Further, under the Hong Kong Solicitors' Guide to Professional Conduct:

"A solicitor is under a duty to keep his client properly informed and to comply with reasonable requests from the client for information concerning his affairs." (para.5.17)

A solicitor must be both honest and candid when advising a client." (para.5.18")

"If a client makes a claim against his solicitor or notifies his intention of doing so, or if a solicitor discovers an act or omission which could reasonably justify such a claim, the solicitor is under a duty to inform his client that he should seek independent advice." (para 6.02)

Deliberate underplaying of the seriousness of the consequence

26. What transpired thereafter was a deliberate underplaying by Finley of the steps taken by the Defendant and the seriousness of the consequence of not complying with the Unless Order. Finley's letter of 21st November 1996 to the Plaintiff stated that :

"Your Statement of Claim was filed on 22nd October 1996. However, since the said pleading did not reach the handling solicitor until in fact 4:13 p.m., the Defendant's solicitors have decided to bring the matter to Court alleging that we had not served the Statement of Claim in accordance with the Master's Order i.e. before 4:15 p.m."

No explanation was given of the consequence of not complying with the Unless Order. Then the letter referred to the extension of time to file defence by the Defendant and the letter concluded that :

"I trust you will understand that this is simply due to the vagaries of the Court system and a very determined Defendant."

27. The Defendant may well be determined but how could the Court system be described as "vagaries" when the Plaintiff was not even informed of the Unless Order that had been made against her?

Mr Finley's own view

28. Mr Finley admitted that in his letter he had underplayed the steps taken by the Defendant regarding the Statement of Claim but he said that at that stage, he had the affidavits from two of his staff confirming that the Statement of Claim was served within time. He further stated that the authority was that so long as the failure to comply with an Unless Order was not intentional or contumelious then extension of time to comply with the order would be granted : Chow Kai Sang v. Toi Samul and Others [1996] 4 HKC 230.

29. The issue is not about what Mr Finley considered to be the legal position but what information should be provided to the Plaintiff for her to make a considered decision. Clearly no full disclosure was made.

Proposal to settle

30. On 4th February 1997, Dibb wrote to Finley offering to resolve the problems between the parties. In my view, this is a most reasonable approach and credit should be given to Dibb. The letter reads :

"We have tried to resolve this particular aspect with you amicably without success. You have been unwilling throughout to compromise. We have now reached a position where in effect there will be a mini trial with witnesses to be called and cross examined over what is relatively a straight forward matter. No doubt the Courts will look rather dimly on the parties and their solicitors. Whatever the outcome, given the costs involved, our respective clients will be the losers.

As you will appreciate, if your clients are in beach of the Unless Order of Registrar Betts, your clients' claim is automatically dismissed. It cannot be revived by us and can only be revived by the Court. The most sensible way forward would be for your clients to apply to the Court for leave to file and serve the Statement of Claim out of time. Our clients would not oppose such an application and would additionally agree to the hearing in March being vacated although our clients maintain that your clients are in breach of the Unless Order. This offer of compromise has been made simply to save time and costs for our respective clients."

This proposal was sent by Finley to the Plaintiff by letter dated 4th February 1997. No advice was given in this letter on the offer and the Plaintiff was simply asked to comment on the letter.

31. On 10th February 1997, Finley wrote to Dibb stating that they were taking instructions from client and would revert to them in due course. On the same day, Finley sent a draft letter to the Plaintiff seeking her approval. The letter maintained that the Statement of Claim was properly served and the applications by Dibb were misconceived and wasteful of costs. The terms that were counter-offered were that the summonses be withdrawn, the defence be filed and served within 14 days and costs be in the cause. An attendance note dated 10th February 1997 revealed a telephone conversation with the Plaintiff on the draft letter. The note stated "OK to issue". The conversation lasted seven minutes.

32. On 11th February 1997, Finley sent the letter to Dibb. On 12th February 1997, Dibb again offered to resolve the matter by inviting the Plaintiff to apply for leave to serve the Statement of Claim out of time which would not be opposed by the Defendant. A response came on the same day from Finley stating that :

"We maintain our position as per our letter and see no reason to apply to Court for leave in file and serve our Statement of Claim out of time and wonder how further time and costs can be saved in the circumstances."

33. Surely any prudent lawyer would have recognised that the costs of a consent application would be minimal as contrast with the exposure to the costs of a contested hearing. The matter, however, soldiered on.

Finley's case inherent improbable

34. The Plaintiff said that Mr Finley had telephoned her and simply told her that he would take care of matters as they related to his office and that he was convinced that the Statement of Claim had been served on time. She denied that she had forced him to proceed with the hearing. She said that Finley did not advise her the best course to take in meetings or over the telephone.

35. Mr Finley said that on the first day of the hearing, he had called the Plaintiff from outside court. However, she would not compromise. During the adjournment, the issue of costs was discussed with the Plaintiff and figures of $100,000 for solicitors and $100,000 for counsel were mentioned as potential exposure but the Plaintiff refused to accept the advice. Mr Finley went as far as to say that he was forced to proceed with the hearing.

36. What Mr Finley said is inherently improbable. Mr Finley had chosen not to give the details of the advice he had given to the Plaintiff. Apart from exhibiting some handwritten notes which he said were notes of meetings, one is at a loss as to what was discussed between the parties.

37. The Plaintiff was someone who, when first approached Finley, had expressed her concern on the amount of legal fees to be incurred in that case. It is an incredible assertion that being her concern, she would go into a contested hearing knowing her exposure to costs of $200,000.

Contemporary documents

38. What is more important is that the contemporary documents just do not support Mr Finley's case that he was forced to go into the contested hearing. The letter of 29th April 1997, in which Finley sent the written Decision of the Master to the Plaintiff, stated this :

"In summary, please note the following :

(1) We were effectively given liberty to file the Statement of Claim out of time;

(2) The action will therefore proceed;

(3) Significantly, however, costs were awarded against you on an indemnity basis.

For your information, my view is that since the application before the Court was an application for judgment eg. See paragraph 1 of the Decision, then since judgment was not entered, and if, as the Master opines in the penultimate paragraph of her Decision, 'costs should follow the event', then you should be awarded your costs.

As such, I do not agree with the costs award and would therefore recommend that we appeal this element of the decision.

I now look forward to your comments."

Mr Finley trying to vindicate his own interest

39. Anyone who read the decision will know that the Master find as a matter of fact the Statement of Claim was not served within time and was in breach of the Unless Order. Instead, Mr Finley said "we were effectively given liberty to file the Statement of Claim out of time, the action will therefore proceed". He disagreed with the costs order made by the Master against the Plaintiff. He said that the Plaintiff should be awarded her costs and he even encouraged her to appeal against the order for costs.

40. These are not the words of a solicitor who had advised his client on her potential risk to costs but who had chosen to ignore his advice. This is not someone who was forced to go into a contested hearing by an intransigent client. This is someone who went into the contested hearing without the interest of his client at heart. What was written was totally consistent with the Plaintiff's allegation that Finley had informed her that he would take care of matters as they related to his office and he was convinced that the Statement of Claim was served on time.

41. Mr Finley was more concerned with vindicating his own position than ensuring his client would not face the consequence of the costs as a result of his own conduct. This attitude had already been reflected in his earlier letter of 4th February 1997, in which he informed the Plaintiff the Court order requiring the Defendant to file the defence 14 days after the determination of the Defendant's further application for dismissal of the action to be heard in March 1997. The letter stated that :

"However, perhaps significantly the Master reserved the question of costs pending the hearing in March, and therefore I remain confident that your interests will ultimately be vindicated in due course."

42. At that stage, the Plaintiff had done nothing whatsoever which would require her interest to be vindicated. If there is any vindication, it must be the contention of Finley that the Statement of Claim was served within time by his firm.

The Plaintiff's response

43. What transpired after the Plaintiff was informed of the Decision of the Master is equally revealing. She wrote to Mr Finley on 2nd May 1997 making allegations of inefficiency and negligence of the staff of his firm. She said that the costs order should be made against his staff and not her and the failure to file the Statement of Claim within time was due to the solicitors' conduct. The Plaintiff wrote :

"SCENTED DELIGHTS COULD ASSIST S FNLEY AND COMPANY FOR APPEAL OF THE DECISION BUT WITH NO OBLIGATION FOR ALL THE COSTS INVOLVED."

44. The Plaintiff behaved like any person who had been wronged would behave. The response from Mr Finley on 5th May 1997 merely stated that :

"The contents are duly noted, I am now carefully considering the matter and will revert further very shortly."

He did not immediately say that he had properly advised her of the risk involved, but she had insisted to press on and that was the result of her own decision. He did not respond to this letter until he was asked by the Law Society to answer the Plaintiff's complaint. To submit now that the Plaintiff caused her own demise reflects badly on the professional integrity of Mr Finley and underlines the serious dereliction of duty in his conduct of the proceedings on behalf of the Plaintiff. There are clearly evidence to support a finding of liability against Finley.

Taxation of fees

45. Mr Finley complained that while he was asked to pay for the fees charged by Dibb, he was not given an opportunity to object to the fees. The Plaintiff was represented by another firm of solicitors at the taxation hearing. Mr Finley said that no objection was taken as to the Plaintiff's own liability for the costs. Reference was made to O.62, r.9(6) in which a taxing master may order a solicitor to bear costs personally. It is said that the question of his personal liability for costs could be raised by the Plaintiff before the taxing master.

46. The order for costs against the Plaintiff was on an indemnity basis. The paying party had hardly any room to challenge the costs. Nonetheless, objections were raised by the Plaintiff's then solicitors on the bill of costs. The costs were then taxed and assessed by the taxing master. In my view, the Plaintiff had taken proper steps to challenge the costs submitted by the Defendant. Order 62, r.9(6) does not enable the Plaintiff to seek recovery of the costs made under the First Order against Finley. It is clear from the wording that the power of the taxing master to order the solicitor to pay costs personally is in respect of matters done in the taxation proceedings. The substantive power of the Court to order the solicitor to bear costs personally is found in O.62, r.8 itself.

47. The bills of costs were submitted by Dibb to Finley on 9th December 1997, yet Finley did not disclose the bills to the Plaintiff until March 1998 - on the same day when he ceased to act for her. Neither did he advise her on what possible objections could be made to the bill. The boldness that Mr Finley asserts that he was unjustly treated is truly breath-taking. I see no merit in this argument.

Master's decision affirmed with variation

48. I affirmed the Master's decision that Finley is to be responsible personally for the costs of the Defendant except that I will set aside the order that he is to pay the costs directly to the Defendant and instead, I will order Finley to pay the costs to the Plaintiff. The amount has been quantified and demanded by the Defendant. I see no point in merely ordering Finley to indemnify the Plaintiff after she had paid it to the Defendant. The order should be for Finley to pay the costs to the Plaintiff so that she could repay the Defendant. I will deal with the terms of the order later on.

Repayment of legal costs

49. The Plaintiff also asked for the costs that had been paid to Finley to be repaid to her. Finley had rendered two bills, one for $13,433 and the other for $56,276.20. She paid the fees. The second bill was paid in order to obtain the paper of this case from Finley. In Heywood v. Wellers [1976] 1 QB 446 in which a client sought to recover costs paid by her to her solicitor, Lord Denning stated that :

"The contract of the solicitors was an entire contract which they were bound to carry on to the end; and not having done so they were not entitled to any costs..."

Lord Denning held that if the solicitor was not entitled to costs and the money paid by the client was on a consideration which had totally failed, she was entitled to recover it as of right. The other reason given by Lord Denning that the client was entitled to recover the costs was because the work which the solicitor did was totally useless.

50. In the summons before the Master, the Plaintiff was merely asking for the refund of the costs received by Finley insofar as they were occasioned by the summons of 8th November 1996. The Master made an order in those terms. The Plaintiff in the appeal asked for the return of all the costs paid by her to Finley. Finley was given an opportunity to address me on this issue and all that he had submitted was Heywood was distinguishable because the present action is still proceeding.

51. Mr Hingorani, Counsel for the Defendant/Petitioner, submitted that the cause of action of the Plaintiff is misconceived because the Plaintiff should have sued the principal and not the Defendant who was merely an agent. This is a matter that has to be tried. I should refrain from expressing any views on the merits of the case.

52. Although the action is still proceeding, it is clear that many of the work in the second bill were totally useless because they were related to the First Order. However, the case needs not be decided on this ground because the contract between Finley and the Plaintiff was clearly an entire contract. There was no agreement for interim payment of costs. Finley had applied to cease to act before the entire contract was performed. He was not entitled to charge the Plaintiff for the work done. The Plaintiff can recover all the money she had paid from Finley.

Orders

53. The orders I am going to make in the appeal are as follows :

(1) Finley is to pay to the Plaintiff $254,431.83 being the taxed costs relating to the summons of 8th November 1996.

(2) Finley is to repay the money that it received from the Plaintiff by way of costs.

(3) Finley is to pay the money in paragraphs 1 and 2 into Court within 14 days.

(4) Upon payment in, the sum of $266,780.63 is to be paid to the Defendant in satisfaction of the debt owing by the Plaintiff to the Defendant in Bankruptcy No.612 of 1999.

(5) The balance of the money is to be paid to the Plaintiff.

Costs

54. Mr Finley reserved his position on the costs of the amendment of the summons. The matter has to be adjourned for argument. The only thing I like to say at this stage is that Finley's argument in the Court below and in this appeal is simply that he should not be liable for the costs occasioned by the summons of 8th November 1996 at all. He did not advance any submission that if he is found liable, then the order should be for him to pay the costs to the Plaintiff instead of to the Defendant directly. He merely adopted the submission of Mr Hingorani on the validity of the Second Order. In this regard, Mr Hingorani's client obviously has a personal interest concerning the validity of the Second Order.

55. On the costs of the appeal as a whole, I would also adjourn it for argument. I would like to state clearly, least there is any misunderstanding of my order, that in effect, I am affirming the decision of the Master. I am only varying the order on who the money should be paid in order to overcome the problem of the two orders.

The bankruptcy petition

56. The bankruptcy petition is based on the failure of the Plaintiff to comply with the Statutory Demand issued by the Defendant to pay the taxed costs together with interest. Application by the Plaintiff to set aside the Statutory Demand was unsuccessful. The only defence raised in the bankruptcy petition is based on the Second Order of the Master, namely that it is Finley who is liable to the Defendant and not the Plaintiff and that the Plaintiff is insolvent.

57. In my view the Defendant was clearly entitled to issue the Statutory Demand based on the First Order and present the bankruptcy petition. As the Second Order is now varied by me, the Plaintiff has no defence to the bankruptcy petition. However, considering the circumstances of the case, it would be unjust to make a bankruptcy order against the Plaintiff. What I will order is to stay the petition conditional upon the Plaintiff paying the Defendant within 28 days the money under the Statutory Demand.

58. I grant leave to the parties to restore the matter before me in the event that the Plaintiff is unable to fulfill the condition for the stay of the petition. I will hear the parties on the question of costs relating to the bankruptcy petition.