CLYDE & CO (a firm) v. MARANTA ENTERPRISES LTD.

HCA 752/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 752 OF 2002

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J U D G M E N T

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1. In this action the plaintiff, a firm of solicitors, sues its former client for outstanding professional fees incurred for services rendered in relation to some arbitration proceedings in London as well as related proceedings in Hong Kong, involving, principally, the defendant as well as a company related to the defendant.

2. At one stage there was an allegation of professional negligence against the firm of solicitors. A generally endorsed writ was issued and there was even an application for consolidation of the present action with the negligence action, but eventually the application for consolidation was dropped and the action discontinued.

3. In this hearing for summary judgment taken out by the plaintiff against the defendant, the defendant, through counsel, informed the court that it does not rely on the previous allegation of professional negligence in defence of the present application for summary judgment or, alternatively, in support of its application for a reference of the solicitors' bills for taxation pursuant to the Legal Practitioners Ordinance (Cap.159).

4. Given the nature of the claim in question, and bearing in mind that the bills are less than 12 months old, counting from the date of delivery, I am minded to refer the bills to taxation, subject to the imposition of terms which I will deal with shortly; but in this regard I should say that I do not accept the argument of Mr Lam, counsel for the defendant, that the bills have not been delivered to the defendant. In my judgment, based on the material before me, the bills were delivered to the related company of the defendant in December last year at the latest, which acted as the defendant's agent in the matter or, put another way, it being a joint retainer of the two companies. So I see nothing in this purely technical point raised by the defendant.

5. So far as the imposition of terms is concerned, I have heard arguments on the jurisdiction of the court to impose terms. First, I note the practice as set out in Hong Kong Civil Procedure 2002, Vol. 1, paragraph 14/4/31, which refers to a Practice Form 17 (PF17), called by the learned editors "the usual form of order."

6. Apart from that, I note that the court does have jurisdiction to impose terms under section 67(2) of the Legal Practitioners Ordinance which deals with the situation where a bill has been delivered for more than one month but less than 12 months. In that case the court may, upon such terms, if any, as it thinks fit, not being terms as to the costs of the taxation, order that the bills in question be taxed. Now, there is a proviso to the subsection to the effect that if 12 months have expired from the delivery of the bill or the bill has been paid, then there should be no order for taxation on the application of the client except in special circumstances.

7. I have no doubt that under section 67(2) the court has an unfettered discretion to impose terms; and further, quite apart from section 67(2), the court does have the jurisdiction under Order 29 to order interim payment. The court also has the general jurisdiction under an Order 14 application to impose terms, if it is minded to give conditional leave to defend. All this may be combined together or utilised separately to achieve the end result of doing justice in the case.

8. I should also add that, in fact, it is quite open to the court in this sort of applications to give partial final judgment on some of the items included in the bill and then give interlocutory judgment on liability regarding the rest of the bill subject to taxation, and then order interim payment in relation to those items of the bill in respect of which interlocutory judgment has been ordered to be entered. All this is quite open to the court.

9. Mr Lam argues about the background or the rationale behind section 67 of the Ordinance and the general position of solicitors. He argues that the court should be reluctant to exercise any jurisdiction to impose terms under section 67(2), and he implicitly argues that if the case falls within section 67(2), the court should refrain from exercising its ordinary jurisdiction under Order 14 or Order 29 relating to the imposition of terms or interim payment. He says that he can find no authorities or reported cases relating to the imposition of terms by the court in a case falling within 67(2).

10. In my judgment, the matter must be looked at on the merits. If a client owes a solicitor money and there is no real defence to the claim of the solicitor, I see no reason why the solicitor should not be allowed to get payment from the client immediately just because he happens to be an officer of the court.

11. As I see it, section 67(1) is already a statutory concession to consumers of legal services in that if the bill is challenged within one month by an application for taxation, the court would have no discretion but to order a taxation of the bill without requiring any payment into court or, still less, a payment of any part of the bill to the solicitor.

12. In my judgment, that is already a concession to consumers of legal services because of the peculiar nature of the office of a solicitor. I see no reason why, in relation to subsection (2), such a straitjacket as suggested by Mr Lam should be imposed on the court.

13. Moreover, I note that in the proviso to subsection (2), i.e. if the bill has already been paid or if the bill is more than 12 months old, the section actually says that the court should not order taxation except in special circumstances. So I can see a gradation, as it were, in the arrangement of the provisions in section 67 and, as a matter of principle, I see no reason why, as I say, where money is really due and owing to a solicitor, the client should be allowed to delay making payment by utilising the mechanism of taxation with its entailing delay in the procedure to avoid making immediate payment to a solicitor.

14. So, for all these reasons, I am minded to impose terms. But what are the terms? As I say, I am sure that whether under section 67(2), under Order 14 or under Order 29, I have an unfettered discretion to impose terms of whatever type to suit the justice of the case.

15. In this case, I am minded to impose two terms: (1) in relation to the disbursements; (2) in relation to the rest of the bills. Now, first in relation to disbursements, by that I mean the payments already made by the solicitors on behalf of the defendant to counsel and experts. The amounts have been set out in paragraph 4 of the Statement of Claim. In relation to these amounts, on the material put before the court, there is really no dispute from the defendant's side. I see no reason why the plaintiff should be out-of-pocket in relation to these amounts which have already been paid. I do not accept for a moment the argument of the defendant based on the fact that the payments were made after determination of the retainer. The defendant has had the benefit of the payments made by the solicitors and they must pay for it or reimburse the solicitors. So the first term I will impose is that the defendant should reimburse the solicitors for the amounts paid to counsel and the experts as set out in paragraph 4 of the Statement of Claim. Subject to what Mr Lam may want to say, I would impose a time limit of 28 days for the payment of the amounts in question. This is term No. 1.

16. Now, in relation to the second term, that deals with the rest of the bills in question. The bulk of it consists of professional charges, the rest of it consists of some other items of disbursements. According to the material put in by the defendant, it says that there is a chance of getting a 30 per cent discount upon taxation on the professional costs and the remainder of the disbursements now claimed in the bills. In addition, the defendant also argues that in relation to some other bills that have already been paid and that do not form the subject matter of the present action, they have taken out an Originating Summons asking for an order under section 67(2) proviso for taxation, failing which they ask in the alternative for an order for taxation under the ordinary jurisdiction of the court as mentioned by the Court of Appeal in Turner & Co. v O Palomo SA [1999] 4 All ER 353, and it has put in a law costs draftsman's estimate or opinion that there is a chance of knocking off 30 to 40 per cent of the bills in question. Therefore, the defendant asks me to bear all this in mind in fixing the amount of payment in in relation to the remainder of the bills in question.

17. I bear all this in mind. I bear in mind, in particular, that all these suggested discount percentages are merely estimates by the law costs draftsman. As regards the format of the bills in question, they set out item by item the work done, the time expended and the fees charged, etc. They are much more detailed than many of the bills that I have seen before.

18. So, in the exercise of my discretion, I think it is simply fair for me to order that there be a payment into court of 60 per cent of the remainder of the bills, i.e. the total amount of the bills less the amounts paid to counsel and experts referred to in paragraph 4 of the Statement of Claim. So, again, subject to what Mr Lam might want to say, I would order that the payment in be made within 28 days from the date hereof.

19. Now, in relation to the second term in question, I would give the defendant an option to provide a bank guarantee in satisfactory terms in lieu of the payment in. In case of disagreement about the bank guarantee, whether in relation to the identity of the bank providing the guarantee or the terms thereof, the matter shall be referred to a Master for final decision.

20. So that is basically the terms that I would impose for referring the matter to taxation. By the nature of the terms that I impose, I am excluding the disbursement items of experts and counsel from the taxation itself.

21. I should mention one matter, for the sake of completeness, that was argued at the hearing, i.e. that there was a letter written by the solicitors within one month after the delivery of the bills reserving the right to taxation. Now, in my judgment, that does not by itself extend the one month period laid down in section 67(1) of the Ordinance, but that is indeed a relevant factor to be taken into account by the court in considering under section 67(2) whether it should order taxation and, if so, whether any terms should be imposed, although I would have thought the matter is more relevant to the first question than the second question; and I should add that I have already taken that into account in the exercise of my discretion in the matter.