CATHAY PACIFIC AIRWAYS FLIGHT ATTENDANTS UNION v. CHEUNG & CHOY (A FIRM)

HCMP 1863 / 2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1863 OF 2007

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D E C I S I O N

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I. Introduction

1.  The Defendant is a firm of solicitors formerly acting for the Plaintiff in relation to an appeal under CACV 324/2005.   For these professional dealings, the Defendant had between the end of 2006 and August 2007 issued to the Plaintiff seven invoices in relation to their fees (inclusive of profit costs, disbursements and counsel’s fees).

2.  The Plaintiff has practically settled all these invoices.

3.  However, upon the Plaintiff’s initial application (which was contested), but later by consent, on 23 May 2008, the Court made a taxation order (“the Consent Taxation Order”) in relation to these seven invoices in the following terms:

(1)  The seven invoices nos. 2289, 2873, 2932, 2969(revised), 3055, 3063 and 3282 delivered by the Defendant to the Plaintiff be referred to a taxing master to be taxed and that the Defendant do refund what may appear on such taxation to have been overpaid;

(2)  Costs of the taxation to be paid according to the event of the taxation pursuant to the Legal Practitioners Ordinance;

(3)  Costs of [the application for taxation] be in the cause of taxation.

4.  I am now concerned with the Plaintiff’s application taken out in November 2008^[1] to (a) vary the Consent Taxation Order, or (b) alternatively seek a further direction under the Consent Taxation Order.   The variation or direction sought by the Plaintiff is respectively as follows:

(1)  Paragraph 1 of the ‘[Consent Taxation Order] be varied by adding the following words at the beginning:-

“The profits costs in the total sum of HK$249,483 and the law costs draftsman’s fee of HK$3,200 in”;or

(2)  Alternatively, a direction be given that the costs of the taxation pursuant to the said Order be paid for in the manner under Section 67(5) of the Legal Practitioners Ordinance, save that the extent of taxation shall be determined by reference only to the profit costs in the total sum of HK$249,483 and the law costs draftsman’s fee of $HK3,200.

5.  In effect, by the present application, the Plaintiff seeks to incorporate into the Consent Taxation Order the qualification (or clarification says the Plaintiff) that it is only those parts of the profit costs and law costs draftsman’s fees (in the total sum of HK$252,683) of the seven invoices that should be subject to taxation, but not the rest concerning counsel fees (which constitute the sum of HK$$324,077.50). 

6.  This may have an impact on the outcome as to who is likely to be required to bear the costs of the taxation, and also the costs of the Plaintiff’s initial application for taxation under these proceedings (as this would be in the taxation costs as provided under the Consent Taxation Order).   This is so because pursuant to s. 67(5) of the LPO, the taxation costs should be paid according to the taxation event, meaning that if more than one-sixth of the amount of the bill of costs is taxed off, the solicitor (in the present the Defendant) shall be responsible for the taxation costs.  If otherwise, the party chargeable (in the present case, the Plaintiff) shall pay.  This is usually referred to as the one-sixth rule.

7.  The Defendant opposes this application principally on the basis that: (a) since the Consent Taxation Order evidences an agreement between the parties, it cannot be so varied as the Plaintiff has failed to show any legitimate or justifiable grounds recognized by the law to do so; and (b) the further direction sought by the Plaintiff is in effect changing the substantive effect and nature of the Consent Taxation Order, and for the same reasons, the Court should not make the further direction. 

8.  On the other hand, the Plaintiff contends that the Consent Taxation Order is not an order evidencing an agreement but merely made upon the Defendant not objecting to it.  As such, there are no legal impediments to prevent the Court from varying it given the Plaintiff’s clear stance that it is to challenge only parts of the seven invoices on taxation.  Alternatively, even if the order is a result of an agreement between the parties, the circumstances of the matter justify the Court to make the further direction as sought.

9.  Given the above, the core issues I need to determine are thus:

(1)  Whether the Consent Taxation Order evidences an agreement between the parties or it was made merely upon the Defendant not objecting to it.

(2)  If it evidences an agreement:

(a)  whether the Court can and should vary it;

(b) whether the Court can and should provide the further direction as sought.

(3)  If it does not evidence an agreement, whether the Court can and should vary it or provide the further direction as sought.

10.  To put the issues and the parties’ contentions in proper context, I believe I should first briefly set out below the uncontroversial background leading to the making of the Consent Taxation Order and this application.

II.  Background

11.  At the end of August 2007, the Plaintiff instructed a new firm of solicitors in place of the Defendant to represent it under CACV 324/2005.  By then the Plaintiff had settled six out of the Defendant’s seven invoices, except the last one in the sum of some HK$6,000 odd.

12.  On 28 September 2007, under s. 67(1) of the Legal Practitioners Ordinance (Cap 157) (“LPO”), the Plaintiff took out these proceedings by way of Originating Summons asking for an order to refer six invoices^[2] of the Defendant to the Taxing Master for taxation.  The precise reliefs sought in the OS were as follows:

“(1) the six invoices nos. 2873, 2932, 2969(revised), 3055, 3063 and 3282 delivered by the Defendant to the Plaintiff be referred to the Taxing Master to be taxed and that that the Defendant do refund what may appear on such taxation to have been overpaid;

(2)  Costs of the taxation to be paid according to the event of the taxation pursuant to the [LPO];

(3) Costs of this application be in the cause of taxation.”

13.  The Defendant opposed the application. 

14.  Between October and December 2007, the parties then filed substantive affirmations respectively in support and in opposition of the Plaintiff’s application for taxation. 

15.  After the completion of the filing of the evidence, the matter then took a turn. 

16.  After exchanges of correspondence, the parties consented to certain orders being made under the Plaintiff’s application for taxation.  By a consent summons dated 22 May 2008, they sought the following orders:

“(1) the seven invoices nos. 2289, 2873, 2932, 2969(revised), 3055, 3063 and 3282 delivered by the Defendant to the Plaintiff be referred to a taxing master to be taxed and that that the Defendant do refund what may appear on such taxation to have overpaid;

(2) costs of the taxation be paid according to the event of the taxation pursuant to the [LPO];

(3) the hearing of this application for an order for taxation of the seven invoices before Deputy High Court Judge Gill, fixed for 29 May 2008 at 10:00 am be vacated; and

(4)  costs of this application be in the cause of taxation.”

17.  The Consent Taxation Order was then made by Deputy High Court Judge Gill on 23 May 2008, incorporating paragraphs (1), (2) and (4) of the consent summons.  The order was only subsequently sealed on 29 July 2008.

18.  After the sealing of the Consent Taxation Order, the parties started to engage in another round of dispute by correspondence on the question as to which party should be responsible to file the relevant bills of costs with the court, and to make an appointment for taxation. Each arguing that it should be the other side who should do it.  

19.  The debate lasted until October 2008, when they sought a determination by the Master attending the matter on paper.  On 13 October, the learned Master directed that the matter be set down for argument at a hearing.

20.  On the same day, the Plaintiff though its solicitors wrote to the Master and indicated that in order to save time and costs, it would lodge the appointment for taxation. 

21.  On 23 October 2003, the Plaintiff’s solicitors wrote to the Judicial Clerk’s Office, asking the Court to allow it to pay the taxing fee of HK$12,021 based on the sum of HK$252,683 (but not the total sum of HK$556,760.50) under the seven bills of costs, as it was only challenging the profit costs and law costs draftsman’s fee of HK$252,683, but not counsel fees of HK$324,077.50.

22.  The Defendant’s solicitors then wrote and objected to the Plaintiff’s solicitors’ suggestion, and contended that under the Consent Taxation Order, all the seven invoices were to be referred for taxation, and thus the taxing fee should be based on the total costs under the entire seven bills.

23.   The Plaintiff’s solicitors further wrote to the Court to set out their contentions in greater detail as to why the taxing fee should be assessed based on the challenged costs only.

24.  On 30 October 2008, the taxing Master directed that the taxing fee due be calculated on the full amount claimed in the seven bills of costs.

25.  Upon the learned Master’s direction, the Plaintiff’s solicitors wrote to the Defendant’s solicitors stating that they would now leave it to the Defendant’s solicitors to make the taxation appointment.  They further invited the Defendant to consent to applying to the Court to clarify the Consent Taxation Order that it covered only the profit costs and the law costs draftsman’s fees, as it was clear from the beginning that the Plaintiff was only challenging those parts of the bills. 

26.  This attracted another round of arguments by way of correspondence between the parties, where the Defendant insisted that it should be the Plaintiff who should proceed with the taxation, and that the Consent Taxation Order was clear that it was the entire seven bill of costs, but not only the parts of profit costs and law costs draftsman’s fees, which should be taxed.  The Defendant refused to consent to any application to clarify or vary the Consent Taxation Order as suggested by the Plaintiff.

27.  Hence, on 17 November 2008, the Plaintiff took out this application to seek to vary the Consent Taxation Order.  With leave of this Court, the Summons is amended by adding the alternative relief as set out above.  

III.    Discussion

IIIA.  Applicable principles

28.  It is common ground that the following general principles concerning the Court’s power to vary a consent order apply:

(1)  A consent order may evidence a contract between the parties, in which case the court has no power to set it aside or vary its terms unless the usual grounds recognised in law to set aside or interfere a contract, such as fraud, mistake or misrepresentation, are established:  Leung Yee v Ng Yiu Ming [2001] 1 HKLRD 309 (CA), 321H-J per Woo JA; Purcell v FC Trigell Ltd (t/a Southern Window & General Cleaning Co) [1971] 1 QB 358, 365F-G per Winn LJ.

(2)  However, a consent order may only mean the parties to it not objecting to the order being made, in which case, the court has a discretion to vary its terms according to normal principles:  Leung Yee, supra, 321H-J; Siebe Gorman & Co Ltd v Pneupac Ltd [1982] 1 WLR 185; CY Tsun Investment Co Ltd v The Incorporated Owners of Hoi To Court (unrep., HCSA 16/2003, 2 July 2004, A Cheung J), paras 30-32.

29.  Bearing these principles in mind, I now move on to deal with the issues arising under this application.

IIIB.  Whether the Consent Taxation Order evidences an agreement

30.  In determining whether the Consent Taxation Order evidences an agreement between the parties or not, the Court should objectively look at all the circumstances of the matter leading to the making of it.

31.  Mr Benny Lo (counsel for the Plaintiff) submits that the Consent Taxation Order is merely a result of the Defendant not objecting to it being made but not of an agreement because:

(1)  It was stated in one of the Defendant’s letters leading to the consent order that it consented to it being made so as to “expedite proceedings and to limit further costs”.

(2)  The terms of the Consent Taxation Order are effectively the same as those sought under the Originating Summons.

32.  Mr Lo explains that the above show that, in consenting to the Consent Taxation Order, all that the Defendant did was simply not objecting to the reliefs sought by the Plaintiff under the Originating Summons, and this involved no substantive negotiation and bargaining of any rights or obligations.

33.  I do not accept Mr Lo’s submissions.

34.  In my view, in deciding whether the Consent Taxation Order evidences an genuine agreement reached between the parties, the Court should take into account, and the mattes mentioned by Mr Lo should be assessed in the context of, the above chronology of events and the following objective facts:

(1)  The Defendant initially contested the Plaintiff’s application for a taxation order.  As I said above, the parties had filed substantive evidence in relation to the application.  Legal costs (perhaps not insignificant ones) had therefore been incurred by both parties in the application.

(2)  The parties had all along been represented by their respective legal advisers, and (unless otherwise shown) must be taken to have been fully advised as to their legal rights and obligations, including the costs implications, in relation to the contested application for taxation, and the prospective taxation of the invoices.

(3)  In considering the final terms of the draft consent summons, the Defendant had accepted the Plaintiff’s suggestion to amend the Defendant’s original draft by adding the specific reference that “costs of the taxation be paid according to the event of the taxation pursuant to the [LPO]”.

35.  When all these are viewed together, they support objectively that the Consent Taxation Order was made as a result of the parties (having full knowledge of the relevant materials before them) consciously making a decision to agree to its terms, after having fully considered and assessed their legal positions, rights and obligations, including potential costs implications, in relation to the application for a taxation order, and the prospective taxation event.   It was not a case where the Defendant simply not objecting to the order sought by the Plaintiff.

36.  I therefore conclude that the Consent Taxation Order evidences a genuine agreement between the parties. 

IIIC.  Can and should the Taxation Order be varied as sought

37.  Given my above conclusion that the Consent Taxation Order evidences a genuine agreement between the parties, applying the general legal principles set out above, the Court cannot vary the Consent Taxation Order as now sought by the Plaintiff.  It is not the Plaintiff’s case that the Consent Taxation Order was made under any recognized vitiating factors or grounds.

38.  However, the Plaintiff has an alternative submission. 

39.  Mr Lo submits that on the evidence filed in the original application for a taxation order, it is clear that the Plaintiff had always been and would only be challenging the profit costs parts of the seven invoices.  This is thus also the objective intention of the agreement reached for the consent order.  The variation now sought is only to clarify and reflect the true intention of the agreement but not a real variation of it terms.

40.  In support of his submissions, Mr Lo relies on:

(1)  The Plaintiff’s solicitors’ letter dated 21 September 2007 sent to the Defendant seeking its consent to tax the invoices before taking out the Originating Summons, stating that:

“We are instructed by our client to give (without prejudice to our client’s view that your invoices are excessive in the sense that the time spent on many items are excessive) a short reply to your said letter.” (emphasis added)

(2)  Paragraph 2 of the Affirmation of Lee Tat Kong filed in support of the Originating Summons, which reads as follows:

“The Plaintiff disputes that, taking into account of the time the Defendant may reasonably be expected to have spent, the amount charged for quite a number of the items in the invoices are unreasonable and overtly excessive.  Without limiting to the Plaintiff’s position aforesaid, and by way of example, the Plaintiff set out some of the unusual items as follows…”  (emphasis added)

(3)  The fact that the Plaintiff has only cited in its affirmation evidence examples of excessive profit costs, without any examples of disputes on counsel’s fees.

41.  Mr Lo says the use of the phrases “the time spent” in the above pre-action letter, and  “taking into account of the time the Defendant may reasonably be expected to have spent” in Mr Lee’s Affirmation shows that the Plaintiff’s objections to the Defendant’s invoices were, and would, only be directed at the Defendant’s profit costs but not others.  The subsequent examples cited in the evidence in support of the Originating Summons further demonstrated to the Defendant this clear intention.

42.  I am not persuaded by Mr Lo’s submissions.  

43.  The above phrases and examples must be looked at against the proposed order sought by the Plaintiff in its application and the evidence as a whole.

44.  Objectively construed, it is clear to me that the proposed taxation order sought by the Plaintiff in the Originating Summon (which is in the same terms as the ones incorporated into the Consent Taxation Order) carried the meaning that it was the entire seven invoices (but not part of them) that were to be referred for taxation.  If otherwise, it is not necessary for the Plaintiff to take out the present application. 

45.  Faced with an application for such an order for taxation, it is reasonable for the Defendant (or any reasonable person reading the application objectively) to believe that the Plaintiff intended to tax the entire seven invoices, but not only certain specific parts or items therein.  It is particularly so, as these proposed orders in the Originating Summons were drafted by the Plaintiff’s legal advisers, and one should assume that they were drafted with care and after thorough consideration.  One would also assume that in drafting the relief in the Originating Summons, the Plaintiff and its legal advisers had taken into account of the one-sixth rule, as it specifically asked for the costs of taxation be paid in accordance to the event of the taxation pursuant to the LPO.

46.  Further, in support of the application for taxation, paragraph 1 of Mr Lee’s Affirmation says as follows:

“I … make this affirmation in support of the Plaintiff’s application to refer the bills, altogether 6 invoices [as the initial mistaken position] delivered by the Defendant to taxation as of right under Section 67(1) of [LPO].  They are now produced and shown to me marked “LTK-1” copies of the said 6 invoices… which were delivered by the Defendant to the Plaintiff as a running account in respect of one continuous dealing, namely CACV No. 324 of 2005…”

47.  This again suggested expressly that the Plaintiff asked for the entire invoices mentioned to be referred for taxation.  There was also never any express or clear qualifications set out in Mr Lee’s Affirmation or the Plaintiff’s later reply affirmation that the Plaintiff was only going to challenge the profit costs and law costs draftsman’s fees (as is now the Plaintiff’s position) set out in the seven invoices.

48.  At the same time, I do not think the matters referred to above by Mr Lo assist the Plaintiff:

(1)  Viewed against the proposed order of taxation, the opening remarks in Mr Lee’s Affirmation and the general absence of any express qualification in the supporting evidence, the references to “time spent” in the pre-action letter and paragraph 2 of Mr Lee’s affirmation do not objectively change the overwhelming and clear tone made in the Plaintiff’s original application that it intended to tax the entirety of the seven invoices.   

(2)  In particular, the use of the words “taking into account” denotes the meaning that the Defendant’s reasonable time spent was but one of the considerations (perhaps a more significant one) that had been taken into consideration by the Plaintiff in disputing the invoices. This does not suggest clearly or unequivocably that it represented the only basis of objection. 

(3)  The fact that the Plaintiff had cited in its affirmation evidence only items of excessive time spent allegedly charged by the Defendant is neither here nor there, as it was made clear in the evidence that these were cited as “examples” only.   The message was that these examples should not be treated as exhaustive or comprehensive. 

49.  For the above reasons:

(1)  I come to conclusion that objectively looked at, at the time of its original application, the Plaintiff intended to ask for an order to tax the entire seven invoices.

(2)  I do not accept the Plaintiff’s submissions that the agreement between the parties was to refer only the profit costs and law costs draftsman’s fees in the seven bills for taxation. 

50.  I therefore refuse to vary the Consent Taxation Order as sought by the Plaintiff.

IIID.  Can and should the further direction as sought be made under the Consent Taxation Order

51.  In light of my above conclusion that the Consent Taxation Order is a result of an agreement reached between the parties to refer the entire seven invoices for taxation, the direction sought by the Plaintiff if granted would in my view substantively change the nature of the agreement and the effect of the Consent Taxation Order.

52.  The proposed “direction” is thus in nature and substance not a mere direction as to the mechanics of implementation or for the purpose of carrying out the effect of the Consent Taxation Order, but a variation of it.

53.  As such, and short of an appeal, I doubt whether this Court has jurisdiction to change the nature and effect of its own order, as it has become functus officio concerning the taxation order. 

54.  Further, if a consent order evidences an agreement, even where the consent order provides expressly for the liberty to apply, the Court cannot provide any further direction or order the effect of which would be to change or vary the substantive nature of the consent order:  Wing Fai Construction Co Ld v Fitzroya Finance Co Ltd [2006] 1 HKLRD 229, 227G, para 10 per Deputy High Court Judge Saunders (as he then was).

55.  In the premises, in my view where there is no provision of liberty to apply in the original order (as in the present case), a fortiori the Court would not grant a further direction which would vary the substance of the Consent Taxation Order.

56.  I will therefore also refuse the Plaintiff’s alternative application to provide the further direction under the Consent Taxation Order.

IIIE.  If the Consent Taxation Order does not evidence an agreement, can and should the Court vary it or provide the further direction as sought

57.  Since I have found above that the Consent Taxation Order evidences an agreement, I would only deal with this very briefly.

58.  Even if I had found that the Consent Taxation Order did not evidence an agreement, I would not have varied it or provided the direction as sought by the Plaintiff.  This is so because:

(1)  Given that the variation or direction sought is effectively changing the substantive nature and effect of the Consent Taxation Order, as I mentioned above, I doubt whether this Court (being functus officio) has jurisdiction to do so.

(2)  Further, the Consent Taxation Order links the costs of the original taxation application to the taxation event of the seven invoices.  As I have found above that it was the Plaintiff’s original intention to refer the entirety of the seven invoices for taxation, the fact that it has now decided to limit the taxation to the lesser portion of these invoices does not provide justification, in my view, to change the substantive position of the costs implication in the original taxation application which has been made into a consent court order.  Thus, even if the Court still retained the jurisdiction to vary it or to provide a further direction as sought, I would not have exercised my discretion to accede to the Plaintiff’s application, as I do not think it is just and fair in all the circumstances to do so.

IV.    Conclusion

59.  For the reasons given above, I dismiss the Plaintiff’s application.

60.  Parties agree that costs should follow the events, and that there should be gross sum taxation.

61.  The Defendant submitted its statement of costs in the total sum of HK$138,100.  

62.  This strikes me to be obviously excessive for a half day hearing of an application of this nature.

63.  Having regard to the nature and degree of complexity of this application, with evidence (including court documents) occupying one small lever arch hearing bundle, I grossly assess the costs at HK$52,900.00 as follows:

(1)  I would allow HK$20,000 as reasonable counsel’s fee of Mr Tibbo’s experience (called in 2005), instead of HK$80,000 as stated in the statement of costs.

(2)  I would allow HK$10,800 (3 hours) for fee earner’s costs involved in the works described as communications set out in the statement of costs.

(3)  I would allow HK$21,600 (a total of 6 hours) for fee earner’s costs involved in works described as professional work as set out in the statement of costs.

(4)  I would allow in full HK$500 the other disbursements.

64.  In the premises, I further order that costs of this application be to the Defendant, grossly assessed at HK$52,900.00.

[1] That is about 6 months after the making of the Consent Taxation Order.

[2] It is the Plaintiff’s evidence that the reference to six instead of seven invoices in the Originating Summons was a result of its oversight.