LEE CHI ENTERPRISES CO LTD v. KC HO & FONG (a firm)

HCMP61/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.61 OF 2007

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J U D G M E N T

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1. By an Originating Summons dated 9 January 2007, the plaintiff sought taxation of five bills of costs rendered by the defendant, who were formerly the plaintiff’s solicitors in HCA2759/2004.  Details of the five bills are as follows :

(i)	1st Interim Bill No.C3513 dated 20 December 2004 for $160,345.00;
(ii)	2nd Interim Bill No.C3530 dated 23 February 2005 for $101,000.00;
(iii)	3rd Interim Bill No.C3539 dated 10 May 2005 for $266,594.72;
(iv)	4th Interim Bill No.C3572 dated 7 September 2005 for $27,922.00; and
(v)	Final Bill No.C3613 dated 9 January 2006 for $27,100.00.

2. On 3 May 2007, Master A. Ho ordered that the 1^st, 2^nd and 3^rd Interim Bills and the Final Bill (but not the 4^th Interim Bill) be referred to taxation.  The defendant now appeals the Master’s order.

Arguments on appeal

3. Section 67(1) and (2) of the Legal Practitioners Ordinance provides :

“	(1)	On the application, made within 1 month of the delivery of a solicitor’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 within the period mentioned in subsection (1), then, on the application of the solicitor …..,  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, ….. 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.”

4. The effect of the above provision was explained by Mr Recorder Jat SC in Re Miller Peart [2007] 3 HKLRD 125 at 139, which I quote as follows : 

“	64.	It is clear that the statutory scheme under s.67 is that:
		64.1	within one month of the delivery of the solicitor’s bill, the client may apply to have the bill taxed as of right, and no term or condition will be imposed: s.67(1);
		64.2	if the client does not apply for taxation within one month since the delivery of the bill, either the solicitor or the client may apply for taxation and the court may so order and impose any terms as it may think fit except terms as to the costs of the taxation: s.67(2);
		64.3	if 12 months or more have elapsed since the delivery of the bill or if the bill has been paid, the client must show special circumstances to justify his application for taxation and the court may impose any terms including terms as regards the costs of the taxation: s.67(2)(i).”

For convenience, I will refer to them as the first, second and third regime.

5. The Final Bill was apparently delivered to the plaintiff on or about 10 January 2006.  Mr Chong, appearing for the defendant, accepted that the Final Bill was delivered within 12 months before the commencement of these proceedings, and hence within the second regime.

6. The 1^st, 2^nd and 3^rd Interim Bills, on the other hand, were delivered more than 12 months prior to these proceedings.  Mr Chong argued that the plaintiff had failed to demonstrate any special circumstances to justify their reference to the Taxing Master for taxation.

7. I should mention that Mr Chong had informed the Court that no reliance would be placed on proviso (ii) of section 67(2) in the present case.

8. Ms Lok, appearing for the plaintiff, contended first, that all the bills in fact constituted a series of bills.  The time under section 67, therefore, did not begin to run until the presentation of the Final Bill.  As all the bills fell within the second regime, no special circumstances needed be shown before the plaintiff could apply for their taxation.  Secondly, Ms Lok argued that there were special circumstances which justified taxation in any event.

Series of Bills 

9. The plaintiff is a company listed in Taiwan.  The proceedings HCA2759/2004 was a claim by the plaintiff to recover certain assets from a Madam Hsiung and others.  Mr Lin was the Chairman of the plaintiff.

10. On the advice of the defendant, on 2 December 2004, the plaintiff obtained an ex parte Mareva injunction against Madam Hsiung and other defendants in the Action.  Since the making of the ex parte order, there were two other occasions when the court had ordered the injunction to be continued with variation to its terms.

11. The substantive hearing of the injunction was scheduled for April 2005.  However, sometime before early March, a question arose as to whether the proceedings had been properly commenced in the name of the plaintiff or whether the cause of action should in fact belong to Mr Lin personally.  Advice was given by the defendant as to the possibility of abandoning the existing proceedings and commencing a fresh action in the name of Mr Lin on the one hand, and substituting Mr Lin as the claimant in the existing action on the other.

12. At the hearing on 22 April 2005, the injunction was discharged.  The application of substituting Mr Lin as claimant was adjourned sine die.  The Judge expressed the view that it might well be inappropriate to pursue the substitution application because similar proceedings were already afoot in Taiwan and the protagonists in the Action were Taiwanese: see defendant’s letter to the plaintiff dated 22 April 2005.

13. HCA2759/2004 was eventually discontinued on 29 April 2005.

14. As already noted, the defendant issued five bills of costs to the plaintiff.  Mr Chong argued that they were five separate bills representing distinct parts of the proceedings.  He contended that the 1^st Interim Bill issued after the ex parte injunction marked the first break in the litigation.  The 2^nd Interim Bill related to the inter partes stage including the filing of pleadings, and the third break came after the discontinuance of the Action when the defendant advised that a new file would be opened for the personal claim of Mr Lin.  The Final Bill, said Mr Chong, concerned the taxation of costs in the Action which was a different and separate matter altogether.

15. I do not agree with Mr Chong.  The series of steps in the Action, beginning with urgent application for the ex parte injunction to the eventual discontinuance of the proceedings, followed one another closely in time.  Also, they were steps that led one onto another and it would be artificial to regard them as distinct breaks in the litigation.  Furthermore, it is clear that the 1^st, 2^nd and 3^rd Interim Bills were issued to cover a continuous period of the defendant’s work.  As is apparent from the description set out in the bills, the 1^st bill reflected the charges for work up to 16 December 2004.  The 2^nd bill covered the period immediately following, i.e. from 17 December 2004 to 23 February 2005, and the 3^rd bill from 24 February to 3 May 2005.  Evidently, the three bills were issued in respect of a continuous period of work undertaken in the same piece of litigation. 

16. Adopting the words of Lord Denning in Chamberlain v. Boodle & King (a firm) [1982] 1 WLR 1443, at 1446 :

“

… this was one continuous dealing and work done by a solicitor, not dividing itself naturally or otherwise into any breaks at all.  When the bills were delivered, they were delivered each time as part of the running account – ‘account rendered’ being carried on in each to the next. …[This] should be regarded as one bill in respect of one complete piece of work, although divided into parts.”

17. As for the Final Bill, it is clear to me that dealing with taxation of the bills of the opposite parties in the Action is a process so closely connected with that it must be regarded as an integral part of the injunction application and the Action as a whole.  As Ms Lok put it, it dealt with the “aftermath” consequent upon the discharge of the injunction and the discontinuance of the Action.  It is also worthy of note that the work in the Final Bill spanned the period from 13 May to 31 December 2005 which, of course, followed very closely from that covered under the 3^rd Interim Bill. 

18. In this connection, it may be added (although not itself a weighty factor) that all the bills bore the same heading with reference to “HCA No.2759 of 2004” and the “Application for Mareva Injunction”.  This, of course, is entirely consistent with the view that the bills were in fact parts of one entire series. 

19. I wish to deal with one further point raised in Mr Chong’s Skeleton Argument.  As an argument in support of a break in the proceedings, he initially contended that the work covered under the 3^rd and 4^th Interim Bills as well as the Final Bill related to services rendered for Mr Lin personally and not the plaintiff.  I have difficulty seeing how that argument assisted the defendant because if Mr Chong’s contention was indeed the case, then absent any special arrangement between the parties, the plaintiff should never have been liable to those costs or presented with those bills.  In the end, I think Mr Chong realized the difficulty with the argument and did not really press it in his submissions.

20. For the foregoing reasons, I have come to the view that the 1^st, 2^nd, 3^rd Interim Bills as well as the Final Bill were all parts of an entire bill, and as the last part of it was delivered within 12 months of the present Originating Summons, all of them were liable to taxation.

Exercise of discretion

21. For cases falling under the second regime, subject to any terms that may be imposed, the Court will generally be inclined to order taxation.  However, I think Mr Chong is correct that the Court does retain a general discretion to refuse taxation in an appropriate case.  While accepting that in the case of the second regime it was not necessary for the plaintiff to show special circumstances, Mr Chong nevertheless contended that the discretion should be exercised against ordering taxation for three reasons.

22. First, Mr Chong argued that in view of the profits costs totalled only about $370,000, it would be a waste of judicial resources to allow taxation of the relatively insubstantial sum.  The second reason was that there had been substantial delay in the plaintiff’s application.  Thirdly, he argued that there was nothing in the bills to call for taxation, and even if there were allegations of negligence against the defendant in the conduct of the proceedings, it would be unlikely that the Taxing Master would be concerned with them.

23. I will first deal with the question of delay.  The second regime under section 67 clearly entitles one to make an application any time within the 12-month period without having to demonstrate special circumstances.  Thus, the fact that an applicant has left the application to the last moment before the expiry of the 12-month period should not, without more, be taken as a factor against him.  Insofar as the defendant in the present case had suggested that the application was motivated by the plaintiff’s desire to delay payment, I am not inclined to draw that inference on the materials before me.  As will be mentioned in the next paragraph certain aspects of the Interim Bills would, I think, justify the plaintiff in having them examined by the Taxing Master.  However, on the other hand, Mr Chong is right to draw attention to the fact that the defendant had rendered statements of account to the plaintiff who had not, at least prior to May 2005, raised any query on them.  This fact, in my view, is best dealt with when I come to consider what terms, if any, to be imposed in grating taxation.

24. As to the third point made by Mr Chong, while I agree with the submission that the Taxing Master would unlikely be concerned with allegations of negligence, I fail to see how that submission would assist the defendant.  The plaintiff’s compliant in the present case was not confined to negligence but included questions over the alleged higher than usual rates charged by a partner and excessive number of hours charged without sufficient particulars.  These are matters best suited for examination by the Taxing Master and it suffices for me at this stage to say that I am unable to dismiss these complaints either as groundless or wholly unmeritorious. 

25. As for amount of the bills, I do not agree with Mr Chong that the sums involved were so insubstantial as not to justify a reference to taxation.

26. In this connection, I think it is worthy also to bear in mind the following observations of Mr Recorder Jat SC in Re Miller Peart :

“	67.	Also, it is not disputed that in addition to the statutory jurisdiction under s.67, the Court retained the ‘ordinary jurisdiction’ in dealing with contested claims for solicitors costs:  see Re Park (1889) LR 41 Ch D 326 at p 332 per Stirling J; Harrison & Another v. Tew [1990] 2 AC 523; Turner & Co v O Palomo SA [2000] 1 WLR 37.  This jurisdiction is recognized in s.66.  Hence, when a solicitor sues a client for outstanding costs, the client is entitled to challenge the reasonableness of the sum claimed in the ordinary way.
	68.	Ms Cruden very fairly accepted that if taxation of Miller Peart’s solicitors and client bills as sought by the amended originating summons were refused, … there would in all probability be a trial to determine quantum.  She acknowledged that the process would not be the same as a formal taxation, and that a trial of quantum by a judge might well take materially longer than taxation by experienced taxing masters.”

27. Having regard to all the circumstances, given my finding that this is a case falling within the second regime, I am not persuaded that there are sufficient reasons to refuse taxation of the four bills in question.

Special circumstances

28. In the light of my conclusion above, the question of special circumstances does not arise for consideration and given that some of the complaints may well have to be determined by the Taxing Master in due course, I would prefer not to express any views on the issue.

Conclusion

29. I would affirm the Master’s order to refer the 1^st, 2^nd and 3^rd Interim Bills and the Final Bill to taxation, but subject to a condition that the plaintiff shall pay into court within 21 days hereof the sum due under the 4^th Interim Bill and also half of amount outstanding under the other four bills.

30. Subject to the above, the other parts of the Master’s order are to stand.

31. As the plaintiff has substantially succeeded in resisting the appeal, I would make an order nisi that the plaintiff shall have three-quarters of the costs of this appeal, to be taxed if not agreed.