ETC ENVIRONMENTAL TECHNOLOGY LTD v. ALVAN LIU & PARTNERS

cacv 259/2004

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 259 of 2004

(on appeal from HCMP NO. 1061 of 2004)

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J U D G M E N T

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Hon Rogers VP:

1.  This is an appeal against the judgment of Mr Justice Tang given on 7 July 2004.  The application before the judge was a hearing of an appeal from the order of the Master on an originating summons which sought taxation of the respondent solicitors’ bills.  The judge ordered the taxation of the bills.  At the conclusion of the hearing of this appeal judgment was reserved.

Background

2.  The solicitors’ work involved in this case related to a proposed listing of the applicant on the Growth Enterprise Market.  The parties signed what has been referred to as a mandate letter dated 21 March 2002.  The relevant parts of that letter as regards these proceedings are as follows:

“3.       Billing Policies and Payment

3.1      We have quoted a fee of HK$1,200,000.00 (excluding disbursements) for our services.  This does not include the fees payable to any foreign legal counsel you may request us to instruct.  The fee will be payable:-

(a) as to HK$300,000 upon your acceptance of this mandate letter;

(b) as the HK$300,000 at the time the formal Listing Application (A1) is filed with the Stock Exchange; and

(c) as to the balance of HK$600,000, on the date when dealings in the Company's shares commence or if the transaction is aborted or postponed (and subject always to paragraph 3.3 below) on receiving an invoice from us for our outstanding fees.

...

3.3      If our engagement is terminated due to the termination of the transaction or otherwise, our fees will be based on the number of hours devoted to this engagement, up to a maximum amount not exceeding the amount of HK$1,200,000.00.  Unless otherwise agreed, the transaction will be deemed to have been terminated if it is not closed within one year from the date of this letter.”

3.  Pausing there, it seems to me quite clear that there are 2 separate contingencies.  In the event that the listing were completed, the fee would be a set fee of HK$1.2 million.  It will be noted that the opening words of 3.1 referred to “a fee” and the final words before the subparagraphs referred to “The fee …”.  In the event that the transaction were terminated then the solicitors’ fees would be based on the time devoted to the work subject to a maximum of HK$1.2 million.

4.  As the judge recorded, 3 fee notes were issued:

(1)	The 1st bill, No. 4912, dated 21 March 2002.
	That was in the sum of $300,000.00 and worded:
	“1st payment for the agreed legal costs of referred to in the retainer dated 21.03.2002”.
	That was paid on or before 6 May 2002.
(2)	The 2nd bill, No. 5334, dated 12 August 2002.
	That was in the sum of $253,500.00 and worded:
	“2nd payment for the agreed legal costs referred to in the retainer letter dated 21.03.2002
	Agreed costs:    $250,000.00.”
	The $3,500.00 was in respect of disbursements.
	It is the respondent’s case that at the request of the applicant, the full amount of $300,000.00 which was payable under clause 3.1(b) was not billed at that time.  That bill was paid in 2 instalments: $125,000.00 on or about 12 August 2002 and the balance on or about 22 October 2002.
(3)	The 3rd bill, No. 6546, dated 19 June 2003
	That was in the sum of $652,000.00 and worded:

	“Balance of second payment for the agreed legal costs referred to in the retainer letter dated 21.03.2002:	HK$50,000
	Third payment for the agreed legal costs referred to in the retainer letter:	HK$600,000
	Total Agreed costs:	HK$650,000”
	$2,000.00 was billed as disbursements
	This bill has not been paid.  The 3rd bill is the subject of a District Court claim (Action No. 188 of 2004) brought by the respondent against the applicant, which was commenced on 13 January 2004.

5.  The judge came to the clear conclusion that the bills were not bills in respect of separate fees but should be considered as two separate parts of one fee.  For the reasons already stated above I consider that the judge is correct.  There would be a single fee if there were a completed transactions which would be a set figure.  The fee would be payable in instalments.  Naturally, whilst the transaction was still ongoing those instalments would have to be paid.  But if the transaction were terminated the provisions of clause 3.3 would then apply and the amount of costs would have to be calculated on the basis of the hours worked. 

6.  The judge considered whether clause 3.3 applied to payments made in accordance clauses 3.1(a) and (b).  He said that he considered it did.  First of all clause 3.3 was not qualified in any way, nor was there any indication that the payments made in accordance with clauses 3.1(a) or (b) once paid were not recoverable.  Clause 3.3 simply provided for a maximum in the event that the application was aborted but did not relate to a minimum.

7.  As the judge pointed out, whether under clause 3.3, or anywhere else, there was no indication of who would be undertaking the work or what the hourly charge would be in respect of the work.  All that the mandate letter provided was that if the application were terminated the respondent would be entitled to be paid on a time basis.  Drawing assistance from the reasoning of Lord Denning in the case of Chamberlain v Boodle & King [1982] 3 All ER 188, the judge came to the conclusion that the agreement constituted by the mandate letter could not be an agreement for remuneration for non-contentious business in terms of section 56 of the Legal Practitioners Ordinance, Cap. 159.  The mandate letter merely set out that in the event of termination the solicitors would be entitled to payment at an hourly rate for the work which they had done.  That is no more than saying that would be entitled to be paid.  Apart from the fact that there was a maximum ceiling on the amount that could be charged, the mandate was silent, as already stated.  Hence it did not constitute an agreement as to remuneration within the meaning of subsection 56(1).

8.  The next point taken at the hearing and on this appeal was that the 3 bills should be considered separate and distinct bills and not part of one bill.  For the reasons I have already stated it is clear that the agreement in clause 3.1 was an agreement as to a single fee which would be payable by instalments, so too was the fee that would be payable if there were termination.

9.  On this appeal, Ms Cheung, who appeared on behalf of the respondent both in this court and below, took the point that taxation was not open to the applicant because the order for the taxation had not been made within 12 months of the delivery of the bill.  As already noted, the bill was dated 19 June 2003.  The hearing before the judge below took place on 18 June 2004 albeit his judgment was delivered on 7 July 2004.  Quite simply, I consider that this argument is based on a misreading of section 67 of the Legal Practitioners Ordinance.  That reads:

“(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.”

10.  It will be noted that subsection (1) refers to the one month being from the date of delivery of the bill to the date of application.  Subsection (2) provides that if no such application is made within the period mentioned in subsection (1) there is a discretion in the court to order taxation on terms.  It is in that context that the first proviso commences with the words “if 12 months have expired from the delivery of the bill”.  Giving the section its proper construction and reading the proviso as part of the section, and not on its own without reference to the other parts of section, it is clear that the 12 months which is referred to in the proviso is the period from the delivery of the bill to the making of the application.

11.  In developing her argument Miss Cheung relied heavily on the decision of in Re A Solicitor [1961] 2 All ER 321.  However, it is clear on reading the judgment that Cross J was considering the second proviso as it existed in the legislation in the United Kingdom at that stage.  That proviso read “… in no event shall any such order be made after the expiration of 12 months from the payment of the bill.”  That is very far removed from the wording of the first proviso.  Hence, I do not find this case to be of assistance as an aid to statutory construction of the Hong Kong Ordinance as it exists at present.

12.  Even if I were wrong as to the statutory construction I consider that there would be “special circumstances” in this case, within the meaning of the proviso, which would warrant that taxation should be allowed.  As is clear, the hearing before the judge below took place within 12 months of the submission of the bill.  The hearing was completed on that day.  The fact that the judge wished to take time to put his judgment in writing does not constitute anything other than judicial caution.  Put in another way, there is no merit in the point being taken other than, if it were correct, a highly technical point.  Indeed, it would have been open to the judge, had he been told that his judgment had to be given prior to midnight on the day of the hearing, to have backdated his order to the date of the hearing.  It was not disputed that was within his power.  It clearly would not have been unjust.  It would have met the merits of the case.  Had it been necessary I consider that this court would have been in a position to exercise such a power on the judge’s behalf.

13.  In those circumstances I would dismiss this appeal and since the applicant did not appear on the hearing of this appeal I would order that there be no order as to costs.

Hon Le Pichon JA:

14.  I agree with the judgment of Rogers VP.

Hon Cheung JA:

15.  I agree with the judgment of Rogers VP. 

16.  I only wish to comment on the nature of the first and second bills.  Miss Cheung argued that the first and second bills to be self contained final bills issued pursuant to agreement.  In my view, on proper analysis they were not.  The effect of a final bill is that although they could be taxed subject to the time limit imposed by section 67 of the Legal Practitioners Ordinance, there can be no subsequent adjustment in the light of the outcome of the business : see Cordery on Solicitors 9^th Edition at Para. L305.  The author further observed that this type of bill is rare and during the currency of the retainer can only arise in only two ways : by natural break or agreement.  ‘Natural break’ is not in issue here.

17.  In Davidsons v. Jones-Fenleigh (1980) 124 Sol Jo. 204 where Roskill LJ held that :

“Before a solicitor is entitled to require a bill to be treated as a complete self-contained bill of costs to date, he must make it plain to the client expressly or by implication that that is his purpose of sending in that bill for that amount at that time.  Then of course one looks to see what the client’s reaction is.  If the client’s reaction is to pay the bill in its entirety without demur, it is not difficult to infer an agreement that the bill is to be treated as a self-contained bill of costs to date.”

18.  Bearing in mind that the mandate letter also envisaged that on termination of the transaction costs would be based on the actual hours of work done by solicitors, in my view the solicitor had not made clear in the mandate letter that any amount paid pursuant to the two interim bills would be final and not subject to further adjustment.  Despite the fact that these two bills had been paid, I am not satisfied that there was an agreement to such an effect.  The first two bills were accordingly separate parts of a single bill.

Hon Rogers VP:

19.  There will therefore be an order in terms of paragraph 13 above.