Li Shu Chung v. Stevenson, Wong & Co (A Firm)
Read the full judgment text of HCMP 3367/2016 on BabelCite. This High Court CFI judgment was delivered on 3 October 2018.
1. This was an appeal by Li Shu Chung (“the applicant”) from the order of Master S Lo dated 5 March 2018 dismissing the applicant’s summons dated 14 August 2017 (“the 1 st summons”) and further summons dated 29 September 2017 (“the 2 nd summons”). The summonses sought leave to refer 13 additional gross sum bills (“the Further Bills”) to the Taxing Master for taxation. The respondent to the summonses is the solicitors’ firm Stevenson Wong & Co (“the firm”). At the conclusion of the hearing, the a
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HCMP 3367/2016 [2018] HKCFI 2372 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO 3367 OF 2016 _______________
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______________________________ REASONS FOR DECISION ______________________________ 1.This was an appeal by Li Shu Chung (“the applicant”) from the order of Master S Lo dated 5 March 2018 dismissing the applicant’s summons dated 14 August 2017 (“the 1st summons”) and further summons dated 29 September 2017 (“the 2nd summons”). The summonses sought leave to refer 13 additional gross sum bills (“the Further Bills”) to the Taxing Master for taxation. The respondent to the summonses is the solicitors’ firm Stevenson Wong & Co (“the firm”). At the conclusion of the hearing, the appeal was allowed with written reasons to be handed down later which I now do. BACKGROUND FACTS 2.The applicant engaged the firm to act as his solicitors in various matters and proceedings. The relationship started with the firm being retained to represent Luen Tat Watch Band Manufacturer Limited (“Luen Tat”) in HCCW 497/2009. The retainer dated 3 November 2009 (as to which see §16 below) was signed by the applicant as sole director on behalf of Luen Tat. Since that date, the firm has acted as the applicant’s solicitors until early 2016 when the applicant instructed another firm to act in place of the firm. 3.On 8 November 2016, the firm delivered 10 gross sum bills for payment and on 1 December 2016, the applicant issued an originating summons seeking taxation under sections 56 and 63 and 67 of the Legal Practitioners Ordinance, Cap 159. 4.A further bill was delivered by the firm on 6 January 2017. On 10 February 2017, Master S Lo made an order by consent allowing thisadditional bill to be referred to the Taxing Master for taxation together with the 10 gross sum bills (collectively, “the 2016/2017 Bills”) listed in the originating summons. 5.While the 1st summons originally covered 12 bills, as clarified in §2(b) of the applicant’s 2nd affirmation dated 13 March 2018, it erroneously included a bill that was listed in the originating summons. Accordingly, the 1st summons covered only 11 bills and the 2nd summons 2 additional bills. The Further Bills thus comprise 13 bills in total. 6.In the written submissions of Mr Anson Wong SC, leading counsel for the firm, the Further Bills have been dubbed the “09-15 Bills”. No doubt this was a reference to the dates spanned by the Further Bills, theearliest being dated 9 December 2009 and the last being dated 3 December 2015. 7.Whilst one might gain the impression that the Further Bills are‘stale’ bills, Mr Bernard Man SC, leading counsel for the applicant, dispelled that impression. He referred to the table in §11 of the affirmation of Hui Yee Osbert filed in opposition to the present application which (for ease of reference) is reproduced here:
8.It is apparent that the first bills ever delivered to the applicant since the retainer in October 2009 consisted of 9 of the 11 Further Bills all of which were delivered on 15 May 2014[1]. In other words, a bulk delivery of bills was made that day by email for legal services rendered from 29 October 2009 to 26 February 2014. The remaining 2 Further Bills were delivered in early February 2015, a month or so after the dates of each of those bills. 9.§12 of Mr Hui’s affirmation set out the dates on which each of the Further Bills was settled. The firm’s evidence (Hui at §13) made reference to the ‘practice’ adopted by the parties to the effect that the applicant would pay lump sums as further costs on account once the then existing costs on account were exhausted or about to be exhausted upon the request of the firm and the firm would settle its bills with the applicant’s costs on account. 10.In broad terms the Final Bills going to taxation amount to $4.5 million. The Further Bills involve about a further $7.5 million. If all the bills are taxable, the aggregate amount will be in the region of $12 million. THIS APPEAL 11.The principal question that arises is whether the applicant is entitled to have the Further Bills also referred to the Taxing Master for taxation as part of a series together with the 2016/2017 Bills. That issue turns on whether the Further Bills are final bills or interim bills. TAXATION OF BILLS 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 1-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.A useful discussion of the applicable principles in determiningwhether a bill is interim or final for the purposes of solicitor and own clienttaxation is to be found in the Decision of DHCJ To in Chin Yuk Lun Francis v Lo & Lo, unreported, HCMP 1142/2005, 7 July 2006 at §§10 – 18. The key principles discerned may be summarized as follows:
THE RETAINER LETTER OF 3 NOVEMBER 2009 15.It is common ground that the terms of the retainer letter issuedin relation to HCCW 497/2009 extended to cover all legal services rendered by the firm to the applicant until the termination of the firm’s retainer. 16.For present purposes, in pertinent part, the retainer letter provided as follows:
WHETHER THE FURTHER BILLS ARE INTERIM BILLS OR FINAL BILLS 17.In determining whether a bill is a separate bill or one of a series of bills the two Questions posed in the Chin case (namely those set out in §14(f) and (g) above) arise for consideration. (A) Was the issuance of interim final bills authorised? 18.The applicant quite naturally placed reliance on the stated purpose set out in clause 2.2 of delivering interim bills to enable the clientto “monitor and budget for costs”. The retainer contemplated that interim bills would be submitted from time to time with a final reckoning on completion of the case. It maintained a distinction between “interim” bills and the “final” reckoning, implicitly acknowledging the clear possibility that the interim bills could be changed upon final reckoning. 19.The firm downplayed the significance of clause 2.2 and instead, relied heavily on clause 3, and identifying 6 characteristics that are said to be present in each of the Further Bills. It was said that each of the Further Bills (i) was a detailed and particularised bill; (ii) stated to be subject to taxation; (iii) contained a clear demand for payment; (iv) provided for the imposition of interest on unpaid amounts; (v) provided for a lien for non-payment; and (vi) provided for a right to apply costs on account to settle bills. 20.It was stressed there was no difference in the form of the FurtherBills and the 2016/2017 Bills, that each was in respect of a distinct period[2]and that they went beyond mere statements of account showing how far the expenses have gone up to the time of sending them in. The firm also made the point that none of the 2016/2017 Bills contained a statementof adjustment which one would expect if the Further Bills were interim billsand part of a series of bills culminating in the final bills being the 2016/2017 Bills. 21.Mr Wong submitted that while the starting point of the analysiswould be the terms of the retainer, it was permissible to look into the terms of the bills themselves and the course of conduct between the parties. Moreover, it was said that the agreement could be inferred as well as express, citing Abedi v Penningtons[2000] Costs LR 205 (at 218) and the following passage (at 219):
22.In so far as there was any suggestion that the Further Bills werepaid promptly by the applicant and without demur by reference to the table in §12 of Mr Hui’s affirmation nothing could be further from the truth. That table shows that for the most part the settlement date is the same as the date of the relevant Further Bill. This was because ‘payment/settlement’ occurred through the firm appropriating the amount shown due from costs on account that the applicant (upon request) topped up from time to time rather than through any overt act on the part of the applicant. In fact, the applicant could not and would not have been aware of the particulars of the Further Bills until the date of the bulk delivery. 23.What the evidence reveals is that 9 of the Further Bills were settled before the applicant had had sight of any of them. It is a far cry from a case where upon receipt of each bill demanding payment, the applicant promptly writes a cheque in settlement of the same. Hence, factually, the Abedi case[3] is distinguishable. 24.As earlier noted, settlement was effected through appropriations made by the firm from the applicant’s costs on account. The bulk delivery by email in May 2014 was the first occasion when the applicant had sight of any bill since retaining the firm. The bills comprised in the bulk delivery related to legal services rendered that not only spanned a period of 52 months from 29 October 2009 to 26 February 2014 and ran to over 250 pages but covered multiple files as appears from the covering email of 15 May 2014 from Mr Hui to the applicant. 25.The covering email to the bulk delivery merely drew attentionto the fact that there had been transfer of costs on account between different files (listing 10 different files) from time to time. It did not make any request for payment as the applicant had a credit balance on his account. While it didmention the right to taxation, nothing was said as to when that had to be done. 26.The applicant has analysed the dates covered in relation to each bill in §11 of its written submissions. They show overlapping time periodsof the various bills for the same subject matter and that the 2016/2017 Bills sought to vary the Further Bills by adding new items to the previous time periods. 3 such instances have been highlighted which are not disputed by the firm. 27.Moreover, while a distinct period is stated in the opening description of one of the 2016/2017 Bills, upon closer examination, that bill did not commence with the stated date but, rather, extended to and included a period several months earlier that had already been covered by one of the Further Bills. Such overlap undermines the accuracy of the firm’s submission that each of the bills whether Further Bills or the 2016/2017 Bills covered distinct periods. 28.As explained in the Chin case Hong Kong approach (which, incidentally, reflects the English approach as to which see the Abedi case (at 207)) is to lean against a construction that permits interim final bills to be issued. That approach, coupled with the factors mentioned in §§24 – 25 above strongly supports a conclusion that the retainer did not so authorise. 29.In so far as there is any suggestion that an agreement so to authorise could be inferred from conduct of the parties, there is no scope forsuch an inference. No such assertion can be found in Mr Hui’s affirmation. 30.For the reasons stated, I do not consider that the firm was authorised to issue periodic final bills. 31.If (contrary to my view) it did so authorise and the firm were correct in submitting that the Further Bills are final bills, it would result in a situation where the applicant (the client) hadno more than a month from the date the bill was delivered to request taxation. Viewed objectively, it would mean that the client had to review the bulk delivery running to over 250 pages of description of work done by the firm over a period of 52 months involving multiple files within a single month. It is highly unattractive as a proposition especially when coupled with the considerations mentioned in §35 below and is hardly a conclusion that any court would willingly arrive short of the law and the surrounding circumstances being so clear as not to admit of any alternative construction. 32.That aside, significantly, while the retainer mentions the rightof the client to have the costs taxed, nothing in the letter informed that clientthat it had to be done with in a window of a month from the date of delivery of the bill. As noted in §25 above, the covering email made no mention of that either. 33.I agree with the applicant’s submission that what is important is whether those characteristics are indicative of a final bill. What it may provide could very well be neutral in character and may well be found in a bill whether such bill be interim or final. Further, as regards §19(ii), the reference made to taxation falls far short of what is required. 34.It is the firm that has burden of showing that the Further Bills were delivered as final bills. In my view, those matters alone pose insuperable hurdles in the firm’s path. 35.It has to be appreciated that when the bulk delivery happened in May 2014, the client relationship was still very much ongoing. It did not terminate until early 2016. The list provided in the covering email demonstrates that the applicant was involved in a prolific number of actions and relied on the professional assistance of the firm. Is a lay client realistically expected not only to fight his opponents in litigation but also his own legal advisers by querying/challenging their bills when he has to rely on their professional expertise in dealing with his opponents? 36.In my view, it is typically the kind of situation that brought about the concept of treating a series of bills as a single bill in order to overcome statutory time-bars for taxation. 37.Further, the firm’s attempt to explain away the overlapping time periods do not fly and fall to be rejected. In the face of undeniable facts emerging from the bills themselves, the firm sought to downplay its significance, pleading that only 3 of the 13 Further Bills were affected. With respect, that explains nothing at all. The fact that there was any overlap is good reason for subjecting the Further Bills to scrutiny. 38.Next, the firm complained of having been deprived of the opportunity of explaining the overlap because the point had not been raised earlier on the evidence. But one must proceed on the basis that when the 2016/2017 Bills were prepared, the firm must have undertaken the exercise of going through work done covered by the Further Bills before it was in a position to identify a host of additional items. It is particularly lame for the firm now to say that the addition of items in the 2016/2017 Bills to a period already covered by a Further Bill is equally explicable on the basis of their having been included through mere inadvertence. Seriously? One of the 3 overlapping situations identified by the applicant involves an overlap extending to several pages of entries over a six-month period. That kind of situation simply cries out for taxation. 39.The answer to the 2nd Question is clear: I have no hesitation in concluding that the firm has failed to discharge its burden of showing that it intended the Further Bills to be final and that they were understood by the applicant to be final. NATURAL BREAK 40.There remains the question of whether, in the present case, the natural break principle can be invoked for issuing the Further Bills. The firm sought to contend that one of the Further Bills (bill number 83300 being one of the 2 additional bills in the 2nd summons) was issued at a natural break which occurred after the end of the trial in HCA 1711. That Further Bill dated 24 September 2015 covered the period from 1 April 2014 to 31 October 2014. According to Mr Hui’s affirmation at §15, it was delivered on 4 December 2015. It is the firm’s contention that it was issued after the natural break that occurred at the end of the trial. 41.It is apparent from the judgment dated 9 December 2015 that the last day of the trial happened over a year earlier, on 15 August 2014. Itis immediately obvious when one peruses page 23 of the bill that subsequent to the entry dated 15 August 2014, the firm carried on providing legal services in that matter that took up a further 3 pages of entries before the last entry dated 10 October 2014, to be found on page 26 of the bill. 42.It is my view that reliance on the natural break argument is misplaced and doomed to fail. OTHER DEFENCES 43.Two somewhat technical points that featured at the forefront of the firm’s defence will now be addressed. (a) The jurisdictional point 44.It was said that as the originating summons did not seek any order to refer the Further Bills to the Taxing Master for taxation, the court has no basis upon which to vary the final relief embodied in the consent order dated 10 February 2017. It was emphasised that the originating summons involves a two-stage process: the first stage is to identify the bills to go to taxation and the second stage is the taxation process itself. 45.Given the court’s conclusion that the Further Bills are interim in nature and therefore not “final” and thus susceptible of subsequent of change, they were only “finalised” upon delivery of the 2016 Bills which was in November 2017 which must have had the effect of confirming the finality of the Further Bills. 46.Viewed as a series of bills culminating in the 2016/2017 Bills which must be final bills since the applicant and the firm had parted company some 10 months earlier, the present application serves to clarify and delineate the scope of taxation of the 2016/2017 Bills which are within the originating summons. It would be a travesty of justice to hold that the Further Bills are outside its ambit. (b) Functus officio 47.It was said that the consent order was a product of negotiationand compromise and therefore the court has no jurisdiction to vary its terms. 48.The notion that the consent order was a product of negotiationand compromise is far-fetched because the applicant was entitled as of right to an order for taxation. There was simply nothing to compromise and negotiate. The consent order reflected nothing more than the pragmatic view taken since the applicant was bound to succeed in his application. 49.If, as this court has held, that the Further Bills formed part of a series of bills culminating in the 2016/2017 Bills, there is really no scopefor entertaining any argument that the court was rendered ‘functus’ by reason of the consent order. 50.Mr Man emphasised that the technical points are completely new and were never raised below. He submitted that they should not be allowed to be raised at this stage because the firm’s failure to raise them earlier has occasioned real and substantial prejudice to the applicant in the following way. 51.If (as I have held) the Further Bills are interim bills, and as the summonses were issued within 12 months of delivery of the 2016/2017 Bills, the applicant would have been able to apply for taxation under section 67(2)(b)(i) of the LPO had the firm taken the point earlier. He would also have been entitled to contend that the Further Bills had not been“paid” in the relevant sense in which case the courts would have discretion to grant leave for taxation: see 52.The court’s attention was also drawn to the fact that it is the firm’s own evidence (filed in opposition to the applicant’s applicationfor specific discovery in the present case) that their computer time recording system is not reliable, and was not relied on as an exhaustive record of time spent. Where the reliability of the Further Bills is itself called into serious question, the possibility of that consideration constituting “special circumstances” as would warrant the grant of leave for taxation cannot be excluded. 53.The prejudice point is not fanciful. It reinforces the conclusion that the technical defences belatedly raised should not be allowed to be advanced. 54.Accordingly, for all the reasons stated above, the appeal must be allowed with costs (to be taxed if not agreed), and with certificate for two counsel.
Mr Bernard Man SC, leading Mr Justin Lam, instructed by Johnnie Yam, Jacky Lee & Co, for the applicant Mr Anson Wong SC, leading Mr Alexander Tang, instructed by Stevenson, Wong & Co, for the respondent |
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