XCHRX KAO LEE & YIP (a firm) v. CAREY & LUI (a firm)

MP 882 of 1996

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 882 OF 1996

____________

____________

_______________

J U D G M E N T

_______________

1. This is a review of taxation. The question which arises is whether, following a taxation ordered under section 67 of the Legal Practitioners Ordinance (the Ordinance) in which the solicitor has been awarded the costs of taxation, the solicitor can recover the cost of preparing a fully itemised 2-column bill for the purpose of that taxation.

2. The parties are both firms of solicitors. The Defendant had been acting for the Plaintiff in a number of pieces of litigation. Between August and November 1995, the Defendant rendered 7 office bills to the Plaintiffs. These bills were for a gross sum but contained a degree of detail of the work which had been carried out. The Plaintiff then gave instructions for the files on which the Defendant was working to be transferred to another firm of solicitors. The Defendant claimed a lien on the files for payment of the costs. The Plaintiff paid the Defendant in full before issuing an originating summons on 15th March 1996 for the bills to be taxed pursuant to section 67 of the Ordinance.

3. On 6th May 1996, Master Jones ordered that the bills be taxed. It seems to be common ground that at the time he directed the Defendant to file "breakdowns" although this is not recorded in the formal order which was drawn up. It also seems to be common ground that although "breakdown" means no more than the provision of sufficient particulars of the bills so that the taxation can sensibly be conducted, it has become the practice for solicitors to prepare a full 2-column bill. It is also asserted on the part of the Defendant that, if a breakdown is not provided, a taxing master will almost certainly refuse to tax a gross sum bill.

4. The Defendant was unable to provide breakdowns because the files had by then been transferred to other solicitors. By summons dated 13th August 1996, the Plaintiff applied for an order that the Defendant serve the breakdowns on which it intended to rely within 7 days. On 10th September, Master Cannon made an order that the Defendant should serve breakdowns on which it intended to rely within 21 days. The Defendant was still unable to comply. Nonetheless, by summons dated 15th October 1996, the Plaintiff applied for an order that the Defendant's bills be struck out for failure to comply with Master Cannon's order. By summons dated 16th October 1996, the Defendant sought an order that the Plaintiff's application to tax should be struck out unless within 7 days the Plaintiff provided the Defendant with the relevant files. On 28th February 1997, Master Cannon brought some order to the proceedings. She gave directions for the Defendant to obtain the files and then ordered

"that within 21 days of receipt of the said files, the Defendant do file and serve upon the Plaintiff the breakdowns in support of the scheduled bills based on the said files."

5. In April 1997, the Defendant provided the necessary breakdowns. The taxation took place before Master Betts on 19th November 1997. Master Betts gave the costs of the originating summons proceedings to the Defendant and directed that it file a fresh bill of costs for this purpose within 21 days. That bill was taxed by Master Betts on 4th February 1998 when he disallowed the Defendant's costs of preparing the breakdowns in the form of 2-column bills. Upon review on 28th April, Master Betts confirmed his decision. In his written reasons, Master Betts made reference to the order made by Master Cannon on 10th September 1996 and said

"It is important to note this is not an order requiring the Defendant to prepare a fully itemised three column bill as is required for a party and party taxation. Such orders as this are commonly so interpreted as demonstrated here where there was a subsequent application for an Unless Order. But that is not what the order says or means. It remained for the Defendant to decide how much detail to provide. If in the event it gave too little it would run the risk of having it's bill reduced. The practice has emerged for solicitors to prepare fully itemised bills in these circumstances."

6. Master Betts' interpretation of that order is, of course, correct. Further, he appeared to accept the practice to which I referred earlier. Unfortunately, either he was not referred to or he overlooked the later order made by Master Cannon in which she did require the Defendant to serve breakdowns.

7. Having discarded an authority to which he was referred as being unhelpful, Master Betts then went on

"An even older authority, cited on, 52 of Cook on Costs was, however, more helpful as it set out criteria that I hold are still good today and in Hong Kong. What Cook says is:-

"A bill of costs must contain sufficient particulars to enable the client to judge the fairness of the charges. There are a number of decisions relating to this and surprisingly the most succinct warning of the danger of computer printouts was in fact a case heard in 1857, Haigh v Ousey 7E & B578, which held the bill ought to be drawn so as to enable the client to judge it's fairness, a solicitor to advise on it and a taxing officer to judge the propriety of the various items of which it is compared."

I do not entirely share the author's surprise at the lack of a more modern decision as a principle so self evident seldom needs repeating.

With that principle in mind the meaning of the words I have emphasised in paragraph 2 of the Order of 10 September 1996 are quite clear. If the Master had intended a fully itemised bill to be prepared she would have said so. The form of the order is permissive so far as the format of the breakdown of costs is concerned. In my view the law is that the client is entitled, without further payment, to an account sufficiently detailed to meet the requirements set out in Haigh v Ousey. It is not open to the solicitor to go a great deal further and then charge the client for that additional work."

8. The final word in the passage from Cook should be "composed".

9. Again unfortunately, Master Betts was apparently not referred to the decision in Haigh v Ousey itself. That decision by 4 judges of the Court of Common Pleas goes no farther than to state that a bill should give reasonable information. At p.583 Lord Campbell C.J. said

"I do not think that the Legislature intended to throw on a solicitor the burthen of preparing a bill such that another solicitor on looking at it should, without any further statement, see on the face of the bill all information requisite to enable him to say if the charges were reasonable."

10. At p.587 Erle J. said

"The bill should give reasonable information; if the client wants more, he may demand it."

11. At p.589 Crompton J. said

"I think it would be a very dangerous rule to require the description to be such as to enable a person of competent skill on reading the bill to say, ex facie, whether it is reasonable. I think it should be sufficient if it contains such reasonable information as, coupled with what the client must be able to tell him, would be sufficient to enable him to judge."

12. Master Betts was wholly misled. His decision cannot be supported by reliance upon either the earlier order of 10th September 1996 or the passage from Cook. But does that mean that there is no "principle so self evident"?

13. For the Defendant, it was argued that it is not customary for solicitors to provide voluntarily the amount of detail now required by masters. So, the existing practice is a good one because it helps the client to discharge the burden of showing that an amount charged or item of work done was unreasonable. It also helps the taxing master who would otherwise find the task difficult if not impossible. The solicitors should not, however, be saddled with the costs involved in preparing detailed bills.

14. Mr. Bartlett, however, rather drew the sting from his submission when he took objection to Master Betts' description of the Defendant's bills as "scanty in the information they contained". He maintained that substantial particulars were contained in the bills. With that submission, I tend to agree. The bill numbered 13118 for profit costs of HK$367,475.00 contained 5 pages of particulars. Although I would be reluctant to disagree with a taxing master of this experience, I do venture to suggest that it would not have been unduly difficult or onerous to have taxed that bill as it stood.

15. Mr. Godwin, for the Plaintiffs, took the view that a client should not have to pay for information which should have been provided in any event to enable him to come to some assessment of whether to challenge the bill.

16. In my judgment, there is a basis for the principle which can be found in section 63 of the Ordinance:

"63. Form of bill of costs for contentious business

Where the remuneration of a solicitor in respect of contentious business done by him is not the subject of such an agreement as is mentioned in section 58, the solicitor's bill of costs may at the option of the solicitor either contain detailed items or be for a gross sum:

Provided that -

(a) at any time before service upon him of a writ or other originating process for the recovery of costs included in a gross sum bill and before the expiration of 3 months from the date of the delivery to him of the bill, the party charge able therewith may require the solicitor to deliver to him in lieu thereof a bill containing detailed items, and the gross sum bill shall thereupon be of no effect;

(b) where an action is commenced on a gross sum bill, the court shall, if so requested by the party chargeable therewith before the expiration of 1 month from the service on that party of the writ or other originating process, order that the bill shall be taxed;

(c) if a gross sum bill is referred to taxation, whether under this section or otherwise, nothing in this section shall prejudice any rules of court with respect to taxation, and the solicitor shall furnish the taxing officer with such details of any of the costs covered by the bill as the taxing officer may require."

17. The client, therefore, has a statutory right to a detailed bill provided the requirement for it is made within the time limit. The provision of the detailed bill will not be at cost to the client. The client, and certainly any independent solicitor he may consult, will be in a position to determine whether or not to apply for taxation.

18. In the event of taxation of a gross sum bill, for example, under section 67, the master as taxing officer plainly has power to require details. Equally plainly, however, the statute does not justify the indiscriminate requiring of full details of every gross sum bill in every taxation. It seems to me plainly to have been within the contemplation of the Legislature that a gross sum bill should largely be capable of taxation without additional information.

19. I note, of course, that it is the taxing officer who may require details. That does not mean, however, that the client, particularly if he is represented, may not indicate to the taxing officer where clarification is required. The client will, of course, be furnished with any details which are provided to the taxing officer.

20. I am satisfied, therefore, that if a client chooses to seek taxation of a gross sum bill, he must run the risk as in any contested proceedings that he may be ordered to pay all of the costs involved in the exercise. There appears to me to be no reason why the taxing master should not have a discretion to give the solicitor the costs of providing details where they are required. How that discretion will be exercised is a matter for the taxing master having regard to all the circumstances.

21. The law, as I find it to be, is that a gross sum bill should meet the 3 requirements set out in Cook on Costs. I accept that this may mean a measure of adjustment on the part of solicitors in preparing a client's gross sum bills. There is no need, however, for wholesale panic. As I have already said, the Defendant's bills in this case seemed to me to be not inadequate.

22. The existing practice, if it be the practice, of a master requesting or directing a "breakdown" as a matter of routine must cease. If a master decides to order a taxation pursuant to section 67 of the Ordinance, the master must scrutinise the bill and decide what, if any, details are necessary and make a formal order to this effect.

23. As far as the present case is concerned, I accept that the matters to which the bills related were of exceptional weight and gravity; that there is an accepted practice that a solicitor will prepare a fully itemised bill where a taxation is ordered; and that there was an order for "breakdowns" in this case. It being also my view that the bills themselves were not impossible of taxation, I reverse the decision of Master Betts and direct that, in principle, the Defendant should be allowed the costs of preparing the formal bills. If it is thought necessary, I will, upon application of either party, make an order that the matter be remitted to a taxing master for a detailed taxation of the items disallowed.

24. I make an order nisi that the Defendant should have the costs of this review.