CHINA HEALTH GROUP LTD (formerly CHINA HEALTHCARE HOLDINGS LIMITED) v. CHIU & PARTNERS (A firm)

HCMP 1636/2017

[2019] HKCFI 216

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1636 OF 2017

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D E C I S I O N

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INTRODUCTION

1.  This is an application for amendment and discovery of bills issued by the defendant firm of solicitors (“the Firm”).

2.  The Firm was retained by the plaintiff (“China Health”) pursuant to a mandate letter and retainer mandate in 2015.  The Firm acted on behalf of China Health, including in 9 sets of legal proceedings.

3.  On 18 June 2016, China Health underwent a change in control.  Almost immediately thereafter, the new board replaced the Firm with its present solicitors (“JYJL”) and JYJL has taken over all legal proceedings. 

4.  Since then, JYJL had received 2 more bills (“the 2 Bills”) from the Firm, which form the subject matter of this originating summons.  China Health describes one of the 2 Bills dated 25 July 2016 as “the Last Bill”, although the other bill was apparently dated later, being 8 August 2016. Nothing turns on the definition of the Last Bill.

5.  From 30 June 2016 to 7 July 2017, JYJL had, for 5 times, requested the Firm to provide a copy of all bills issued before the Last Bill (“the Previous Bills”). 

6.  Finally, on 11 July 2017, the Firm replied, stating that it would collect $50,000 as costs on account before it would provide the copies.

7.  China Health issued the originating summons on 20 July 2017, just before expiry of the 12-month period from delivery of the Last Bill.

8.  It is the case of China Health that just for 5 months between January and May 2016, the Firm had charged an exorbitant amount of at least $23.9 million.  The Previous Bills and the Last Bill formed a series of interim bills to be treated as one single bill for the purpose of taxation.

9.  Because of the dispute with the previous board of directors, the new board could not have access to the Previous Bills.  Accordingly, China Health took out the present summons on 15 March 2018 for an order:

(1)   to amend the originating summons by also asking for taxation of the Previous Bills (“the Amendment Application”); and

(2)   discovery of the Previous Bills (“the Discovery Application”).

10.  The Firm opposed the summons, contending that it was a fishing application and the Previous Bills should not be subject to taxation because all bills were periodic final bills and the limitation period for taxation has expired.

LEGAL PRINCIPLES

11.  All amendments necessary for disposing fairly of a cause or matter or for saving costs should be allowed under Order 20, rule 5 of the Rules of the High Court, if no milestone date is affected.

12.  There is jurisdiction to order discovery if it is shown that the documents exist, are in the possession, custody or power of the defendant and are relevant to the matters in issue.  Once these 3 prerequisites for jurisdiction are established, the court has a discretion to order or not to order discovery.  The court will not order discovery unless the discovery sought is necessary either for disposing fairly of the cause or matter or for saving costs.  See Hong Kong Civil Procedure 2019, Vol 1, §24/7/2.

13.  Taxation of solicitors’ bills is governed by section 67 of the Legal Practitioners Ordinance Cap 159 (“LPO”).  In Li Shu Chung v Stevenson, Wong & Co (a firm) [2018] HKCFI 2372 (23 October 2018), DHCJ Le Pichon held at §§12-13:

“12.  Under section 67(1) of the Legal Practitioners Ordinance, Cap 159 (“LPO”), a party is entitled as of right to an order for taxation if the application is made within 1 month of the delivery of the solicitor’s bill.  Under proviso (i) of section 67(2), if the application is made outside the l-month period but within 12 months of delivery or payment of the bill, the court has a discretion whether or not to order taxation.  It may order taxation in special circumstances on such terms as the court thinks fit.  Under proviso (ii) of section 67(2), if more than 12 months have elapsed from the date of payment, no taxation may be ordered.

13.  If therefore the Further Bills are final bills, the applicant is barred from having them taxed as the Further Bills have been paid and the application was not made within 12 months of their payment.”

14.  Bills may be interim or final and it is a matter of construction.  The court should lean against an interpretation that authorises the issuance of a number of periodical final accounts.  The concept of treating a series of bills as a single bill was evolved for the purpose of overcoming statutory time-bars for taxation.  See Li Shu Chung, §14, following DHCJ To in Chin Yuk Lun Francis v Lo & Lo, unreported, HCMP 1142/2005, 7 July 2006 at §§10-18.

The Amendment Application

15.  The proposed amendment (as underlined) is as follows:

“All bills issued by the Defendant to the Plaintiff since and/or pursuant to the Plaintiff’s engagement of the Defendant’s legal services by Mandate Letter (中国卫生控股有限公司：法律代表服务) dated 3 December 2015 and Retainer Mandate (常年法律顾问服务协议) dated 4 December 2015, including (but not limited to) the profit costs in the sum of HK$2,055,769.24 (exclusive of the disbursements therein) of the Defendant’s office bill No.16-0475 and the profit costs in the sum of HK$87,000.00 (exclusive of the disbursements therein) in the sum of the Defendant’s office bill No.16-0555 which were delivered to the Plaintiff by the Defendant on or about 8th August 2016 and 25th July 2016 respectively and all other Defendant’s office bill(s) issued against the Plaintiff (whether such bills relate to the matters stated in the aforesaid two office bills or otherwise), to be disclosed by the Defendant, be referred to the Taxing Master to be taxed, …”

16.  Without disrespect, the Discovery Application contains the seed of destruction of the Amendment Application.  It is plain that China Health is not even aware of how many Previous Bills there were.  That is why it needs the discovery.

17.  The court would not grant a wholesale order to tax an unknown number of unidentified bills.  This is because the court cannot even determine, on a provisional basis, whether those bills were interim bills or final bills.

18.  The court should, of course, lean against interpreting the mandate letters as authorizing issuance of periodic final bills: Li Shu Chung, §14(d). However, even assuming the Previous Bills were all interim bills, China Health has a duty to identify the ones that it would apply for taxation.

19.  Further, all the Previous Bills have been paid. The last payment was dated 27 May 2016.  More than 12 months had elapsed since payment of the Previous Bills by the date of the summons. No taxation may be ordered at all under proviso (ii) of section 67(2) LPO. 

20.  The Amendment Application is dismissed for not even disclosing a cause of action.

The Discovery Application

21.  There is no dispute that the Previous Bills had been delivered but the copies meet the test of existence and possession.  However, once the Amendment Application is dismissed, the discovery sought could not be relevant to taxation of the 2 Bills.  Otherwise, the court would be taxing the Previous Bills through the back door to see if the Firm had been overpaid and hence reduce the amount payable under the 2 Bills.  The Discovery Application made under Order 24, rules 3 and 7, the Rules of the High Court is dismissed as well.

22.  China Health has no other factual or legal basis for seeking copies of the Previous Bills.

23.  The Discovery Application is dismissed.

CONCLUSION

24.  I dismiss the summons.

25.  Costs should follow the event and be to the Firm.  However, I was informed that the Firm had insisted on having this summons heard together with the originating summons which Master Chow had, rightly in my view, rejected. It caused a call-over hearing on 8 June 2018 to be wasted.  The Firm should bear costs of that hearing but should otherwise get the costs of this summons.  I make an order nisi accordingly.

26.  Summary assessment of costs is adjourned to 22 January 2019 to be dealt with on the papers without attendance.  The Firm and China Health shall file and serve a costs statement respectively by 28 January 2019.  Grounds of objection shall be filed and served by 30 January 2019.

27.  I direct the parties to provide to this court, within 14 days of the handing down of this decision, a joint set of proposed directions, for the purpose of setting the originating summons down for hearing before me.

28.  I thank Mr Wong, Mr Chiu and Mr Fenn for their assistance.