HCMP 2285/2019
[2022] HKCFI 3382
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
MISCELLANEOUS PROCEEDINGS NO 2285 OF 2019
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| | IN THE MATTER OF Section 60, 63 and 67 of the Legal Practitioners Ordinance, Cap 159 |
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BETWEEN |
| | MARK RICHARD CHARLTON SUTHERLAND | Plaintiff |
| | and | |
| | CRB (a firm) | Defendant |
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Before: Hon Au-Yeung J in Court
Date of Hearing: 5 May 2022
Date of Judgment: 4 November 2022
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J U D G M E N T
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A. INTRODUCTION
1. CRB was the firm of solicitors acting for Mr Sutherland in his Family Proceedings in the Family Court. CRB delivered 9 bills of costs (“the Bills”) totalling about $1.6 million to Mr Sutherland, of which only one has been paid in full. CRB commenced proceedings in the District Court (“DC Action”) to recover the outstanding amount under those Bills. Mr Sutherland denies liability and counterclaims for damages in negligence against CRB. That is strenuously opposed by CRB. The action has been transferred to the High Court (“Writ Action”).
2. In parallel, Mr Sutherland issued an originating summons (“OS”) in the present proceedings for an order that the Bills be taxed.
3. CRB opposes the application on the following grounds:
(1) The first 8 Bills were final bills and over 12 months have elapsed since delivery of the bills. No special circumstances have been shown to justify an order for taxation.
(2) Bill no.8 has been paid in full and so no order for taxation should be made.
(3) In respect of the 9th bill, should the Court grant an order for taxation, the Court should impose terms.
4. This is the substantive hearing of the OS. At this hearing, instead of an order for taxation, Mr Sutherland asks for an order, as a matter of case management, that the OS be stayed until after disposal of the Writ Action. This is opposed by CRB.
5. The core matters in dispute are:
(1) What, if any, were the terms of the retainer between CRB and Mr Sutherland?
(2) Were the bills interim or final bills?
(3) Was CRB negligent in handling the Family Proceedings?
(4) Should an order to tax be made?
(5) Should there be a stay of the OS pending resolution of the Writ Action?
6. Separately, there are preliminary matters that need to be dealt with: (i) late filing of 4th affidavit of Mr Sutherland (“Sutherland-4th”); and (ii) late submission of hearing bundles by Mr Sutherland.
B. UNDISPUTED FACTS
7. Mr Sutherland was initially represented by Hampton, Winter & Glynn (“HWG”) in the Family Proceedings (being FCMC 6134/2017 and FCMC 9098/2018). He transferred his representation to CRB when Ms Jain Brown, a former partner of HWG, set up CRB together with other solicitors. CRB issued 9 Bills to Mr Sutherland over a period of about 1½ years. The 8th Bill was settled from monies on account provided by Mr Sutherland for that purpose. The rest of the Bills have not been paid and the outstanding amount is $1,612,795.70.
Table of Unpaid Bills
| No. | Date | Bill No. | Amount | Counsel’s Fees Included | Total Unpaid |
| 1 | 31 Oct 2017 | 170004 | $52,441.70 | Nil | $52,441.70 |
| 2 | 30 Nov 2017 | 170080 | $216,515.80 | $65,000.00 | $151,515.80 |
| 3 | 29 Dec 2017 | 170199 | $95,279.70 | Nil | $95,279.70 |
| 4 | 2 Feb 2018 | 170286 | $390,254.40 | $100,000.00 | $290,254.40 |
| 5 | 5 Mar 2018 | 170350 | $308,615.50 | $30,000.00 | $278,615.50 |
| 6 | 6 Apr 2018 | 180002 | $342,749.80 | $60,000.00 | $312,749.80 |
| 7 | 26 Apr 2018 | 180010 | $103,119.00 | Nil | $103,119.00 |
| 8 | 5 Sep 2018 | 180343 | $250,000.00 | $125,000.00 | Nil |
| 9 | 30 Mar 2019 | 180747 | $328,819.80 | Nil | $328,819.80 |
| | Total: | | | | $1,612,795.70 |
8. CRB issued the DC Action in DCCJ 4528/2019 on 21 August 2019 against Mr Sutherland, seeking payment of the outstanding Bills, premised on a written agreement dated 18 October 2017 and entitled “Professional Fees, Engagement Terms & Data Privacy Notice Agreement” made between CRB and Mr Sutherland (“the Retainer”). The Retainer was attached to an email of the same date from CRB’s partner to Mr Sutherland (“the Email”). CRB applied for summary judgment, which was fixed for hearing on 19 December 2019.
9. Meanwhile, Mr Sutherland issued the OS on 12 December 2019.
10. By his decision in the DC Action, [2020] HKDC 624, 5 August 2020 (“Decision”), DDJ Hew dismissed CRB’s application for summary judgment, as he considered that there were triable issues as to whether, in order to become binding, the Retainer needed to be signed by both parties or at the very least by Mr Sutherland. DDJ Hew pointed out that CRB relied on unpleaded facts that the parties had waived the condition of signature and that the terms of the unsigned Retainer had been accepted by the parties’ subsequent conduct (at §§38, 41 to 44).
11. Subsequent to the Decision, Mr Sutherland filed his defence and counterclaim in the DC Action on 25 August 2020, alleging that CRB was negligent in the handling of his Family Proceedings.
12. On 9 November 2020, pursuant to the order of DDJ Hew, the DC Action was transferred to the Court of First Instance and is now under the Writ Action of HCA 1895/2020.
13. In respect of the OS, Mr Sutherland denies ever signing the Retainer. He asserts that he has not agreed to the hourly rates set out in the Retainer and asserts that CRB had no authority to issue any interim bills. He intends to sue CRB (and HWG) and his former barristers for their negligence. He also disputes the quantum (including the charge out rates of the 2 principal fee earners, Ms Jain Brown and Ms Anne Salt) and asks for taxation of all the interim bills and not only the 9 Bills.
C. PRELIMINARY MATTERS
C1. Late filing of Sutherland-4th
14. On 25 January 2022, Master Lai imposed an unless order for Mr Sutherland to file and serve his affidavit in reply by 4 pm on 8 February 2022, failing which he shall be debarred from doing so.
15. On 8 February 2022, Mr Sutherland’s then solicitor, Ms Janice Li, filed and served Mr Sutherland’s draft affidavit said to be approved by him. She explained that Mr Sutherland had to visit the UK on short notice to deal with a family emergency. He had been unable to fly back as all flights to Hong Kong were banned due to the coronavirus. He would have his draft affidavit sworn as soon as possible.
16. Despite that promise, the draft affidavit was not filed before a notary public in Blackburn, UK, until 2 months later on 4 April 2022.
17. To begin with, there was no summons to seek relief against the sanction imposed by the unless order. Janice Li’s affidavit did not explain when Mr Sutherland flew to UK, why he was unable to swear the affidavit before he left Hong Kong, why he was unable to swear the affidavit before a notary public in the UK before the deadline, and why it took him a further 2 months to swear Sutherland-4th eventually.
18. Further, Mr Sutherland had been in breach of an earlier unless order which required him to file his affidavit in opposition to CRB’s case management summons by 3 May 2021. The same reasons set out in paragraph 15 were given, on that occasion by a Mr Tsang. Mr Sutherland’s 3rd affidavit was only sworn, again before a notary in UK, and filed only on 7 June 2021, 5 weeks after the due date.
19. Breach of 2 unless orders indicated that Mr Sutherland showed no respect to the Court and his opponent. For the reasons given in Section C1, I decline to give leave to file Sutherland-4th out of time and exclude it from the evidence, save for the Email and the Retainer in Exhibit MRCS4-1. This is because those 2 documents featured prominently in the DC Action and was referred to at the present hearing without objections from any party. See a similar order made by G Lam J (as he then was) in Withers (a firm) v Antonia Basile[2019] HKCFI 325, §46.
C2. Late submission of hearing bundles by Mr Sutherland
20. Notwithstanding that this is the hearing of his own OS, Mr Sutherland has failed to comply with a series of procedural requirements. He failed to file his skeleton submission pursuant to PD 5.4. His then solicitors only notified CRB’s solicitors by email in the afternoon on Friday, 29 April 2022, after the deadline for filing his skeleton submission had expired, that he would act in person.
21. It was only on 4 May 2022 that Mr Sutherland lodged his own 5 bundles of documents (much duplicating CRB’s) and complained in his written submission that CRB has not included his affidavits dated 25 November 2019 and 1 June 2020 filed in the Writ Action in her hearing bundles.
22. Further, this OS and the DC Action have been characterized by Mr Sutherland’s repeated and intermittent change between acting through a firm of solicitors and in person, including in the midst of the part-heard summary judgment hearing in the DC Action.
23. The conduct in paragraphs 20-21 is an affront to the Court, in particular, in the light of the fact that Mr Sutherland had for years been a practising solicitor and then a practising barrister, before he became suspended from practice as a barrister for 3 years since 18 July 2019.
24. In the interests of justice, I accept his bundles for this hearing but, regardless of the outcome of this OS, all the costs arising out of submission of those bundles (including the costs of CRB’s consideration of the contents) shall be borne by Mr Sutherland.
D. LEGAL PRINCIPLES RELATING TO TAXATION OF SOLICITOR-CLIENT BILLS
25. The OS relies on sections 60, 63 and 67 of the Legal Practitioners Ordinance, Cap 159 (“LPO”). Of relevance is also section 58.
“58. Power to make agreements
A solicitor may make with his client an agreement in writing as to his remuneration, in respect of any contentious business done or to be done by the solicitor for the client, which provides that the solicitor shall be remunerated either by a gross sum or by salary, or otherwise, and at either a greater or a less rate than that at which he would otherwise have been entitled to be remunerated.
60. Enforcement of agreements in respect of contentious business
(1) No action shall be brought upon any such agreement as is referred to in section 58, but the court may, on the application of any person who is a party to, or the representative of a party to, the agreement, or who is, or who is alleged to be, liable to pay, or who is or claims to be entitled to be paid, the costs due or alleged to be due in respect of the business to which the agreement relates, enforce or set aside the agreement and determine every question as to the validity or effect thereof.
(2) On any such application the court—
(a) if it is of opinion that the agreement is in all respects fair and reasonable, may enforce it;
(b) if it is of opinion that the agreement is in any respect unfair or unreasonable, may declare it void and may order it to be given up to be cancelled and may order the costs covered thereby to be taxed as if the agreement had never been made;
(c) in any case, may make such order as to the costs of the application as it may think fit.
(3) If the business covered by any such agreement is business done, or to be done, in any action, the amount payable under the agreement shall not be received by the solicitor until the agreement has been examined and allowed by a taxing officer of the court, and, if the taxing officer is of opinion that the agreement is unfair or unreasonable, he may require the opinion of the court to be taken thereon and the court may reduce the amount payable thereunder, or order the agreement to be cancelled and the costs covered thereby to be taxed as if the agreement had never been made.
(4) When the amount agreed for under any such agreement has been paid by or on behalf of the client or by any person entitled so to do, the person making the payment may at any time within 12 months after payment apply to the court and the court, if it appears to it that the special circumstances of the case require the agreement to be reopened, may, on such terms as may be just, reopen the agreement and may order the costs covered thereby to be taxed and the whole or any part of the amount received by the solicitor to be repaid by him.
…
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:
...
67.Taxation of bills on application of party chargeable or solicitor or foreign lawyer
(1) On the application, made within 1 month of the delivery of a solicitor’s bill or a foreign lawyer’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 the foreign lawyer, 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, or if a verdict has been obtained or a writ of inquiry executed in an action for the recovery of the costs covered thereby, 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 (“First Proviso”);
(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 (“Second Proviso”).
(3) Every order for the taxation of a bill shall require the taxing officer to tax not only the bill but also the costs of taxation and to certify what is due to or by the solicitor in respect of the bill and in respect of the costs of the taxation.
…
26. The effect of s.67 LPO is that:
(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 will be imposed: s.67(1);
(2) If the bill has been delivered for more than one month but less than 12 months, either the solicitor or the client may apply for taxation and the court may give an order to tax and impose any terms as it may think fit except terms as to the costs of the taxation: s.67(2); for cases falling within this category, subject to any terms that may be imposed, the Court will generally be inclined to order taxation: Lee Chi Enterprises at §21.
(3) If 12 months or more have elapsed since the delivery of the bill or if the bill has been paid, no order to tax shall be made on the application of the client except in special circumstances and the court may impose any terms including terms as regards the costs of the taxation: First Proviso.
(4) If the bill has been paid, no order to tax will be made if the application is made more than 12 months from the date of payment: Second Proviso.
China Health Group Limited v Chiu & Partners[2020] HKCFI 319, §§9-11, Au-Yeung J, citing Lee Chi Enterprises Company Limited v K.C. Ho & Fong (a firm), HCMP 61/2007, 13 September 2007, Recorder A Ho SC.
E. WHAT, IF ANY, WERE THE TERMS OF THE RETAINER BETWEEN CRB AND MR SUTHERLAND?
27. There is no dispute that Mr Sutherland had retained CRB for the Family Proceedings. In the DC Action, Mr Sutherland admitted before DDJ Hew that he was liable to pay CRB’s fees subject to quantum to be assessed by the Taxing Master (Decision, §§29(2), 30, 48 and 51; and Annex 1). What divided the parties was whether the retainer was in writing (CRB’s case) or oral (Mr Sutherland case).
28. According to CRB, the agreement was contained in and/or evidenced by the Retainer. The agreement was emailed to Mr Sutherland and was “implied by [his] continuing conduct in instructing [CRB] to carry out the work for him at various periods between 3 October 2017 and 19 March 2019.”
29. On CRB’s own evidence, Mr Sutherland should have signed the Retainer because:
(1) The Email contained these paragraphs:
“To finalise your transition to [CRB from its predecessor firm…] you will need to sign a new Engagement Form with [CRB].
I therefore, attach this for your further action. Please review it and let me know if you have any queries. If you have no queries, then please sign and date it where indicated and please tick the box indicating how you would like to receive your accounts from [CRB], and then return a scanned copy to me and the original in the post at your convenience.”
(2) Clause 23 of the Retainer provided as follows:
“If there are any terms in this agreement which are not clear to you, please raise such queries with us as soon as possible. If you accept the above terms and agree to be bound by them, please sign this Agreement in the place provided and return it to us.”
(underlines added)
30. Mr Sutherland has never signed the Retainer. Nor is there proof that CRB had signed it.
31. However, in my view, section 58 LPO does not impose a statutory requirement for signing. Contrast section 56(3) LPO which requires an agreement on solicitors’ remuneration in non-contentious business to be in writing and signed by the person to be bound; and rule 5D(a) of the Solicitors’ Practice Rules (Cap 159H) which requires a firm of solicitors, in a client’s criminal litigation, to secure the written and signed agreement to the fee to be charged by the solicitor and counsel or an estimate thereof. Section 63 LPO anticipates solicitor’s remuneration not being the subject of a written agreement as well.
32. According to commentary no. 2 to §4.02 of the Hong Kong Solicitors’ Guide to Professional Conduct, Vol 1 (“the Guide”), the effect of sections 58-62 LPO “is to restrict a client’s right to challenge a bill, subject to safeguards”.
33. Hence, lack of a signed agreement does not bar a solicitor from recovery of costs for contentious business. It just means eg that:
(1) The solicitor has to prove the existence of an offer as to his remuneration and his client’s acceptance by conduct.
(2) Or if the solicitor cannot prove an agreement but he/she has done work on behalf of the client, the solicitor may only be able to recover costs on a quantum meruit basis instead of what he/she thought to be an amount(s) under an agreement.
34. Mr Sutherland had received a copy of the draft Retainer when he changed from instructing HWG to CRB. It was just that he did not reply to it (§10 of his first affidavit). The bills issued by CRB were consistently issued for 1½ years based on the hourly rates set out in the Retainer. Any increase in hourly rates will be subject to proof before a Taxing Master that CRB has given advance notice to Mr Sutherland under clause 2 of the Retainer.
35. CRB also asserts that Mr Sutherland had signed several costs estimates which were filed with the Family Court, acknowledging and confirming the estimated amount of costs incurred by him. He has not raised objections with regard to the amount of costs incurred and owed when he signed. With respect, whilst I accept that as Mr Sutherland’s admission of there being a retainer, that cannot constitute admission of the hourly rates, as the costs estimates have not been produced in the evidence.
36. For the reasons given in this Section, I have no hesitation in finding that there was a retainer and that the hourly rates in the unsigned Retainer have been accepted by Mr Sutherland by conduct. Mr Sutherland has not suggested that the hourly rates were unfair or unreasonable within the meaning of section 60 LPO.
37. Assuming I am wrong and CRB cannot establish an agreement over the terms in the Retainer, CRB can still recover costs on a quantum meruit basis. Mr Sutherland has not explained why the claimed hourly rates for someone with Ms Brown and Ms Salt’s post-qualification experience were excessive, or suggested any suitable hourly rates. If I have to determine the hourly rates on a quantum meruit basis, I would have granted the same rates as in the Retainer.
F. WERE THE BILLS INTERIM OR FINAL BILLS?
38. This issue is relevant to whether or not Mr Sutherland has applied for an order to tax within 12 months of the delivery of the Bills.
39. To distinguish an interim and final bill, the court has to ask 2 questions: whether the solicitor had the power to send it as a final bill and whether it had been delivered as a final bill. The court has to determine whether the bills were issued at natural breaks. As a matter of law and policy, the court should lean against an interpretation that authorizes the issuance of a number of periodic final accounts under a retainer. See China Health Group §24; following Li Shu Chung v Stevenson, Wong & Co (a firm)[2018] HKCFI 2372, DHCJ Le Pichon, at §14; Chin Yuk Lun Francis v Lo & Lo (unrep, HCMP 1142/2005, 7 July 2006) DHCJ To, at §§10-18.
40. Clause 4 of the Retainer provides as follows:
“CRB shall submit accounts to you on a regular basis to cover CRB’s time charged under the terms of this Contract. All disbursements incurred and all fee notes of Counsel or other experts will be included where practicable. Please note that photocopying charges will be charged in accordance with the Law Society’s Regulations provided from time to time. A final account will be sent to you when all outstanding matters have been resolved or upon CRB’s ceasing to act for you, as provided for herein. These accounts are payable upon delivery. If you have any objections to a bill, you should raise your concern in writing to the partner who is supervising your matter within 30 days from the date of delivery.” (underline added)
41. In my view, Clause 4 did not, on its proper interpretation, authorize the issue of multiple final bills. The underlined words anticipated that services to be rendered by CRB would not just be covered by one bill and a final account would be supplied. The client could raise objections to a bill but Clause 4 did not say that if no objections were raised, the amount would become final. Applying China Health Group, the Court would lean against an interpretation that authorized the issuance of a number of periodic final accounts under Clause 4.
42. More fundamentally, quite unlike hourly rates which have been consistently applied by CRB in the Bills, there is nothing to show that Mr Sutherland has accepted Clause 4 by conduct.
43. Further, the Bills did not show on their face whether they were interim or final bills. A Bill stated the period of work covered and that the Bill was due on a particular date. The covering email stated that Mr Sutherland could contact CRB if he had any questions. Neither the Bill nor the email stated something like, if payment was not made or no questions were raised, the Bill would be regarded as final and unchangeable.
44. Accordingly, I decline to find that CRB could issue a number of final bills whilst the retainer subsisted.
45. However, the Bills did show natural breaks. Before the 7th Bill was issued, Mr Sutherland had filed a notice to act in person dated 13 April 2018 in FCMC 6134/2017. Before the 8th Bill was issued, another notice to act in person dated 22 August 2018 was filed in FCMC 9098/2018. The 8th Bill was paid in full on 14 September 2018. The 9th Bill was a final bill as the solicitor-client relationship had ceased on 11 September 2019 before this Bill was issued.
46. Therefore, I find that the first 6 Bills were interim bills but the 7th, 8th and 9th Bills were final bills.
G. WAS CRB NEGLIGENT IN HANDLING THE FAMILY PROCEEDINGS?
47. If negligence is established, the solicitor would be deprived of some or all his costs in relation to the relevant proceedings. The solicitor would also be unable to recover disbursements or have to repay any disbursements received from the client. He may also have to bear costs of the other party. See Baker & McKenzie (a firm) v The Grande Holdings Ltd [2011] 3 HKC 510, §§15-17, DHCJ Au-Yeung (as she then was).
48. The allegations on negligence as pleaded in the Writ Action are wide ranging and disputes various steps taken by CRB in the Family Proceedings. These allegations cannot be summarily dealt with by this Court or a taxing master, even in the light of Mr Sutherland’s admission of liability to pay subject to assessment of quantum before DDJ Hew, and Mr Pirie’s suggestion that negligence was not an issue, “not relevant” for the summary judgment proceedings and it had been “dropped for the purpose of the Order 14 application” (Decision, §§30, 48, 51, and Annex 1). This is also evident by the fact that CRB has not sought to strike-out but answered those allegations with full pleadings.
49. The present case is distinguishable from Baker & Mckenzie, where the defendant client gave evidence of the alleged negligence and the plaintiff solicitor was able to refute the allegation by evidence. The Court there was able to deal with the issue summarily and ordered the bills to be taxed, with interim payment of the solicitor’s costs pending taxation.
50. I decline to make a finding on negligence under the OS.
51. The existence of an issue of negligence affects the Court, in this case, (i) in deciding whether to make an order to tax subject to terms; and (ii) in managing the Writ Action and this OS.
H. SHOULD AN ORDER TO TAX BE MADE?
52. In respect of the 7th Bill (and all the prior interim Bills), the OS was issued about 20 months since delivery of that Bill. Mr Sutherland has to show special circumstances before an order to tax will be made.
53. “Special circumstances” in Proviso 1 is a very flexible concept that depends on the Court’s assessment of the facts and circumstances of the particular case. The discretion is a wide one. They are those which appear to the judge so special and exceptional as to justify taxation. They are not capable of precise definition or exhaustive enumeration. The following constitute special circumstances:
(1) they are something out of the ordinary, something serious to justify not only an ordinary taxation but a special one;
(2) the discretion to extend the limitation is a wide one and a liberal interpretation should be given to the words “special circumstances”;
(3) each case will depend on its own facts;
(4) overcharging and false charging are well-established special circumstances; and
(5) lack of particularity in the bill also constitutes a special circumstance.
See Withers (a firm) v Antonia Basile §§10-11, citing Ding Xiaohung v King & Wood [2013] HKC 245, §32, DHCJ Lok (as he then was).
54. The only special circumstance that Mr Sutherland can rely on is his claim in negligence. Mr Baker submits that that is not an established special circumstance that would justify leave to tax a solicitor’s bill, but he has not cited any authority in support. With respect, his submission can hardly stand in the light of Baker & McKenzie.
55. However, I have also taken into account the following matters:
(1) Mr Sutherland has never explained why it took him more than 12 months since delivery of the 8 Bills to issue the OS.
(2) Any reasonable person would find it strange that despite a long story of CRB’s alleged negligence occurring over about a year from October 2017 to September 2018, Mr Sutherland had re-instructed CRB after the 7th and 8th Bills.
(3) Despite his allegations against the barristers instructed to represent him, no proceedings have been commenced by Mr Sutherland against those barristers.
(4) CRB says that at no stage had Mr Sutherland complained about any aspect of the legal services provided by CRB until he formally alleged in his defence and counterclaim in the DC Action. On the other hand, Mr Sutherland asserted in §195 of his affidavit filed on 25 November 2019 in the DC Action that on divers dates between November 2018 and April 2019, he had expressed grave concerns to Ms Brown about the mishandling of his case and that he would not be making payments. In that regard, he produced an email dated 3 April 2019 he had with Ms Brown (Exhibit MRCS1-28). However, that email seemed to be referring to the location where a meeting was to be held and did not support his assertion.
56. There are thus reasons for CRB to submit that the allegations are no more than spurious, unsavoury, scandalous and cynical attempts to postpone payment of her fees for as long as possible. In fact, that postponement ranges from 3-5 years since delivery of the Bills and is serious.
57. Taking all circumstances into account, the claim in negligence can constitute special circumstances in this case but I shall make an order to tax subject to full payment of the 1st to 7th Bills. There is no suggestion that CRB will not be in a position to repay if the negligence claim is established. CRB has not applied for a term as to payment of the costs of taxation and I make no order.
58. In respect of the 8th Bill, the OS was issued 15 months after full payment on 14 September 2018. By virtue of Proviso 2, no order to tax shall be made.
59. In respect of the 9th Bill, the OS was issued beyond 1 month but less than 12 months of the issue of the 9th Bill. I repeat my comments in paragraph 55(2)-(4) above. I grant an order to tax subject to Mr Sutherland’s payment of 60% of the Bill to CRB and the balance into Court pending taxation.
I. SHOULD THERE BE A STAY OF THE OS PENDING RESOLUTION OF THE WRIT ACTION
I1. A two-stage procedure
60. Broadly speaking, an application for taxation of a solicitor-client bill involves 2 stages: (i) making of an “order to tax” and (ii) the taxation itself after an order to tax is made. Stage 1 usually determines issues of liability. Stage 2 determines the quantum of costs under Order 62, rule 12(1)(c), although a master may also deal with some issues of liability if they are summarily disposable.
61. It is important to distinguish between the 2 stages, not only because of the need to manage the proceedings properly, but also because it would affect an aggrieved party’s channel of taking the matter further. For resolution of issues in Stage 1 by a judge, it is a final judgment made under the OS and the aggrieved party may appeal. For resolution of issues in Stage 2, there is a review procedure by the taxing master and by a judge under Order 62, rules 34 and 35 RHC: Tin Wan Tung v Wong See Yin & others and Full Pacific Development Limited v Wong See Yin & others, HCA 167/2011 and HCA 1801/2010, §§9-14, Wilson Chan J, 17 January 2017, citing CKF v LLL [2003] 3 HKC 190, at 193, Cheung JA.
I2. Stage 1
62. By virtue of §3(6) of PD 14.2, the OS shall be placed in the first instance before a master. The master may summarily dispose of the OS or direct that the matter be referred to a judge. It is thus of utmost importance that the parties identify the issues in Stage 1 to help the Court decide whether a master or a judge should deal with them and how to deal with them.
63. Solicitor-client taxation poses difficulty in issue identification because, most often, a solicitor-client bill is in a lump sum or chronological form, with details (like the present Bills) as to dates, fee earners, hourly rates, brief notes of what was done and time spent. And yet the bill gives little idea to the Court or the new legal representative of the client as to the scope of work undertaken.
64. Worse still, with a view to saving costs and court time, many practitioners (out of good intention) seek an order to tax by consent, only to find out in stage 2 that the issues involve substantial factual investigation that cannot be resolved by a taxing master.
65. It is not the norm for the court to order a firm of solicitors to give a breakdown of its bill. Much depends on the details already disclosed and information available to the client: China Health Group §36. However, it is sometimes unreasonable for a solicitor to say that he/she has returned all the papers to the client for the latter to ascertain what work has been done to justify the amount on the bill of costs. For example, in China Health Group, at §38, there were 59 boxes of documents.
66. A one-page narrative statement often helps the Court and the parties to ascertain the real issues. The narrative statement can concisely set out information in broad terms, eg:
(1) The agreed terms of the retainer (enclosing a copy, if any);
(2) The period covered by the retainer;
(3) The type of work done, eg
(a) for non-contentious business: negotiation with the developer on the terms of sale, communication with regulators, compliance with corporate regulations, drafting agreements;
(b) for contentious business: the litigation involved, whether it was one or more than one case, what interlocutory applications were done;
(c) Whether counsel had been instructed and who acted in which part of the proceedings; and
(d) The fee earners involved, and who was responsible for what. For example in China Health Group, §39, the solicitor informed the Court that he was the team leader doing most of the work, whilst the other 4 fee earners did company secretarial work, litigation, corporate service and one trainee solicitor was there to assist.
67. Such a narrative statement helps the Court, in one glance and with its experience in taxation, to have an impression of whether or not the costs show signs of overcharging (paragraph 53(4) above) and whether there are obvious issues that spring to mind.
68. With the narrative statement, the client and his/her new legal representative may then decide what issues to raise or further raise; and the legal representative can give proper advice on conduct of the proceedings or on settlement.
69. Even where the parties file a consent summons for an order to tax, a master should, before making an order to tax, consider directing:
(1) The solicitor to file and serve a narrative statement; and/or
(2) A draft list of objections.
The draft list of objections may assist the Court in identifying the issues as a matter of active case management.
70. What are the common issues in Stage 1? One has to bear in mind that a retainer is effectively a contract between the solicitor and client for the former to provide professional services. Like any contract, the terms of the contract have to be established to enable the Court to enforce it. Accordingly, the least that a solicitor needs to prove would be the existence of the retainer, the terms thereof, service of the bill of costs and any grounds of objection to payment that the solicitor is aware of.
71. On the other hand, it is for the client (which term includes any person liable to pay the solicitor) to raise issues for determination in his/her affirmation. I set out some of the issues on liability below but the list is not exhaustive:
(1) Was there a retainer at all? This may raise issues like no intention to create legal relationship, or that someone from a company had no authority to instruct the solicitor;
(2) If there was a retainer, what was its form – oral, in writing, signed or otherwise complied with statutory requirement?
(3) What was the scope of work covered by the retainer? What were the terms of remuneration – lump sum, hourly rates, a cap on fees? Were there implied terms? Had there been changes to the terms (eg increase in fees)?
(4) What was the period of the retainer? There may be a dispute eg as to whether any termination was communicated to the client/solicitor and when the termination took effect.
(5) Was there a settlement or discount on costs?
(6) Was there a term in the retainer for issuing interim or multiple final bills?
(7) Is taxation as of right or is leave required for taxing the bill(s)?
(8) Should terms be imposed for taxing the bill(s)?
(9) Were there vitiating factors that would have affected the right of the solicitor to recover fees, eg misrepresentation, negligence or mistake?
72. Whether a master or a judge should deal with the issues depends on nature of the issues and there is no hard and fast rule. In general, a master can deal with issues that can be summarily disposed of: PD 14,2. §§3(6) and (4). The more substantial issues involving multi-factual and legal disputes, discovery and cross-examination of witnesses should be handed by a judge. In the case of issues under §71(9), it may even be necessary to hive off the issues to a writ action or stay the OS/taxation pending disposal of the writ action.
73. One can imagine that if eg issue (9) is left to the taxation stage, the taxing master may find himself in a difficult situation of having to adjourn in order to deal with substantial disputes on facts. (This may be the situation if DDJ Hew had acceded to Mr Sutherland’s suggestion of taxing first, setting off damages for negligence later.) Worse still, if a party has instructed a law costs draftsman to appear at the taxation, he/she may not have the qualification or ability to handle the issues.
74. One can readily see that dealing with issues in Stage 1 may delay the process of recovery of legal fees. Until the taxation is completed, no action shall be commenced on the bill and any action already commenced may have to be stayed: s.67(2) LPO. The Court concerned should exercise proper case management to ensure expeditious disposal of the OS and/or a writ action and prevent abuse by a party.
I3. Stage 2
75. After an order to tax is made, the taxation should be handled by a taxing master with all the powers under Order 62. He/she may give directions as to how best to carry the taxation forward.
I4. Application of the principles
76. Mr Sutherland complains about CRB’s failure to seek a stay of the Writ Action. That complaint is unjustified given his own stance that without a determination of the issues in negligence, CRB is not entitled to recover her costs. In any case, Mr Sutherland could have applied for a stay himself, if he was minded to. In the light of CRB’s failure to seek a stay of the Writ Action, a Master has rightly proceeded to set this OS down for substantive hearing.
77. Mr Sutherland now turns to ask for a stay of the OS pending resolution of the Writ Action. In fact, his previous solicitors, Bowers, had invited a Master to do so before but the Master has not acceded to it.
78. I see no reason for staying the OS and the Master was right not to do so. All the issues raised in stage 1 have been dealt with above. However, Mr Sutherland has not identified which parts of the Bills are related to his negligence counterclaim and which parts are not. In order not to waste the efforts and costs of taxation if Mr Sutherland is successful in his counterclaim, it is stage 2 that should be stayed.
79. To ensure that the taxation will not be held in abeyance, there should be expeditious pursuit of the Writ Action. It would not be appropriate for CRB to take the lead even though she is the plaintiff because she can hardly enter judgment before completion of the taxation: s.67(2)(b) LPO. However, the counterclaim need not be stayed and the obligation is on Mr Sutherland to take the lead in its prosecution.
80. There has been enough time since filing of the DC Action 3 years ago for Mr Sutherland to consider his counterclaim. The court shall by separate directions proactively manage the Writ Action. Meanwhile, stage 2 of this OS shall be stayed on the term that Mr Sutherland do take out a case management summons in the Writ Action within 21 days and that the Writ Action is disposed of. This will ensure expeditious disposal of the counterclaim and hence the taxation.
J. CONCLUSION
81. I order that:
(1) There be no leave to Mr Sutherland to file Sutherland-4th out of time and the same is excluded from the evidence, except for the Email and the Retainer in Exhibit MRCS4-1;
(2) All the costs arising out of lodging of Mr Sutherland’s bundles (including the costs of CRB’s consideration of the contents) shall be borne by Mr Sutherland;
(3) No order to tax is granted in respect of the 8th Bill;
(4) Subject to fulfillment of the following terms, the 1st to 7th Bills be referred to a taxing master to be taxed:
(a) That within 21 days of this order, Mr Sutherland do pay CRB the full amount of the 1st to 7th Bills;
(b) That within 21 days of this order, Mr Sutherland do take out a case management summons in the Writ Action; and
(c) That the counterclaim in the Writ Action is disposed of.
(5) Subject to fulfillment of the following terms, the 9th Bill be referred to a taxing master to be taxed:
(a) That within 21 days of this order, Mr Sutherland do pay CRB 60% of the 9th Bill to CRB and the balance into Court pending taxation;
(b) That within 21 days of this order, Mr Sutherland do take out a case management summons in the Writ Action if he has not already done so under sub-paragraph 4(b) above; and
(c) That the counterclaim in the Writ Action is disposed of.
(6) Failure to comply with the terms in paragraph (4) or (5) shall bar Mr Sutherland from taxation of the relevant Bill(s) and that part of the OS shall be dismissed with costs to CRB.
(7) CRB do give credit for all sums received by them from or on account for Mr Sutherland and shall refund what CRB may on such taxation appear to have been overpaid;
(8) The taxing master do tax the costs of the references and certify what shall be found due to or from either party in respect of the Bills and the costs of the reference to be charged according to the event of taxation; and
(9) There be liberty to apply.
82. CRB is in substance the winner. Mr Sutherland is grossly out of the 12-month period in seeking an order to tax. He is not successful in resisting the making of an order to tax. The Court has imposed terms on him. On a nisi basis, I order him to pay costs of the OS up to this hearing to CRB, summarily assessed at $500,000.
83. I thank Mr Baker for his assistance.
| | (Queeny Au-Yeung)
Judge of the Court of First Instance
High Court |
The Plaintiff appeared in person
Mr Josh Baker, instructed by Norton Rose Fulbright, for the Defendant