Kwok Hong Yee Jesse T/as Jesse H.y. Kwok & Co. v Tso Hon Leung And Another

DCCJ 5354/2018

[2020] HKDC 176

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5354 OF 2018

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DECISION

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INTRODUCTION

1. This is the 1^st and 2^nd defendants’ appeal against the decision made by Master B Mak on 19 August 2019, dismissing their summons dated 25 April 2019. In the summons, the defendants applied to set aside the default judgment entered against them on 19 March 2019 and the charging order nisi dated 22 March 2019, and to strike out the writ of summons and the statement of claim.

2. An appeal from a master to a judge under Order 58, rule 1(1) of the Rules of the District Court is by way of re-hearing. I should treat the summons as though it came before me for the first time: Hong Kong Civil Procedure 2020 at 58/1/2.

3. This action concerns the recovery of solicitor’s fees. The plaintiff is a solicitor practising as sole proprietor of a law firm. The firm was retained by the 1^st and 2^nd defendants to act in the High Court action numbered HCA 180/2011 from about February 2011 to May 2015. The plaintiff now claims against the defendants the sum of $589,000, which is the sum due on a bill of costs numbered 34918 and dated 8 January 2018 delivered in respect of the High Court action. I shall refer to the bill as “the second bill”, and the High Court action as “the original High Court action”, for reasons which will shortly become clear.

4. Although the defendants lodged an acknowledgment of service, they failed to file a defence. Judgment was entered in default of defence. Therefore, service of the writ is not in issue here. Instead, the defendants’ present application turns on merits. Their main contention is that the statement of claim ought to be struck out. Mr Tim Wong, counsel for the defendants, put forward three grounds:-

(a) The plaintiff was not entitled to deliver and rely on the second bill and hence his cause of action, which is based on that bill, must fail.

(b) Even if he was so entitled, he is barred from litigating on the second bill by cause of action estoppel or issue estoppel.

(c) Alternatively, his litigation based on the second bill constitutes an abuse of the process of the court.

5. There is no material dispute on the facts. If any of the above grounds succeeds, that would be a complete defence to the plaintiff’s claim. In that case, it ought to follow that the default judgment and its execution should be set aside, the writ of summons and the statement of claim struck out and the claim dismissed. Conversely, if none of the grounds succeed, the default judgment will stand.

FACTUAL BACKGROUND

6. The factual backdrop to the defendants’ contention stems from the original High Court action and another High Court action brought by the plaintiff against the defendants numbered HCA 2702/2015 to recover outstanding fees. I shall refer to the latter as “the second High Court action”.

The original High Court action

7. By letter dated 18 February 2011, the defendants retained the plaintiff as their solicitors in the original High Court Action. It contained the following provisions, among others, on fees and bills:-

“11. All out of pocket expenses, Court fees, expert fees (if any) and counsel fees (if any) shall be reimbursed by your company.

12. Our firm is entitled to issue interim bill(s) on our work done, counsel fees and other disbursements incurred at such interval from time to time as our firm may decide …”

8. Pursuant to the engagement letter, the plaintiff provided services to the defendants from February 2011 to May 2015. The plaintiff instructed two counsel to represent the defendants. In the end, the action was settled on the first day of the trial on 25 February 2014. The two counsel issued fee notes in the respective sums of $175,000 and $414,000 to the plaintiff which covered their briefs and unused refreshers, as well as the settling of translation and attending conference with clients. These two sums form the subject-matter of the present action.

9. On about 4 July 2015, the plaintiff issued a bill of costs numbered 32604 dated 26 June 2015 in the sum of just over $1,000,000 (after giving credit to payments held on account) to the defendants in relation to the services rendered throughout the original High Court action (“the first bill”). It covered works done from February 2011 (the issue of writ) to February 2014 (attending the trial). The two fee notes issued by counsel were included in the first bill as “Item 117” and “Item 120”. I shall refer to them as “the Two Items”.

The second High Court action

10. Notwithstanding repeated demands, the defendants failed to settle the first bill. The plaintiff commenced the second High Court action against them in November 2015, claiming the billed amount.

11. The defendants acknowledged service of the writ. No defence was filed. By summons dated 8 January 2016, they sought leave to tax the first bill, pursuant to section 67(2)(a) and (b) of the Legal Practitioners Ordinance, Cap 159, and Order 62 of the Rules of the High Court, Cap 4A.

12. The summons was heard by Master K Lo on 2 February 2016.

13. According to the transcript of the hearing, the defendants confirmed that they were not disputing the solicitor and client relationship or their duty to pay fees. In the course of submissions, parties consented to the bill being taxed, notwithstanding that the defendants’ application was out of time. (Under section 67(2)(a), leave is required to tax the bill if the application to tax is taken out one month after the delivery.)

14. Accordingly, master granted leave to tax the first bill and gave directions for that purpose. The order read:-

“1. The 1^st and 2^nd Defendants do have leave to tax the Plaintiff’s Bill of Costs as stated in the Statement of Claim herein;

2. The present Action be stayed;

3. The Plaintiff do revise the [first bill] in order to comply with the Practice Direction 14.3 within 28 days;

4. The 1^st and 2^nd Defendants do file and serve a List of Objections within 28 days thereafter;

… ”

15. On 1 March 2016, the plaintiff lodged a revised bill in compliance with para 3 of Master Lo’s order. The revised bill bore the same number as the first bill and was for the same amount. For present purposes, there appears to be no material difference between the two. That was followed by the filing of the defendants’ list of objections on 25 April 2016. In the list of objections, 10 preliminary arguments were raised.

Master Chow’s ruling

16. The hearing of the preliminary arguments came before Master Chow, who delivered her oral decision on 22 December 2016. Of present relevance is her decision upholding the defendants’ objection raised in preliminary argument no 6, namely whether the Two Items concerning counsel fees had been paid by the plaintiff. Master found that they had not. Applying Mong Man Wai v HH Lau & Co [2003] 4 HKC 587, she held that these unpaid items did not count as “disbursements” and could not be included in the first bill. The outcome was that the plaintiff could not proceed to claim them.

17. As drawn up, the ruling read:-

“2. Preliminary argument 6 of the Objection:

a) …

b) has to be decided in favour of the Defendants in respect of items 117 and 120”

18. As we shall see, the defendants rely on this ruling in support of their estoppel and abuse of process arguments. (I should also point out that under preliminary argument no 4, the defendants queried whether the plaintiff was entitled to claim the unused refreshers of counsel, which formed part of the Two Items. Master said that having found against the plaintiff on preliminary argument no 6, the plaintiff was not entitled to claim the unused refreshers.)

19. The taxation hearing was fixed for 8 January 2018 before Master KW Wong.

Master Wong’s first ruling

20. In light of Master Chow’s ruling, the plaintiff took steps in an attempt to “salvage” the Two Items so that they could be taxed together with the rest of the first bill at the taxation hearing.

21. On 5 January 2019, the plaintiff paid the counsel’s fees under the Two Items. Counsel issued receipts on the same day.

22. Also, on the same day, the plaintiff filed an affirmation deposing to the payment and inviting the court to allow taxation of the Two Items at the upcoming taxation hearing.

23. At the taxation hearing three days later, the plaintiff invited master to “reinstate” the Two Items in the first bill. He urged the master to take into account the change of circumstances since Master Chow’s ruling. It was argued on his behalf that the proposed reinstatement would be in the interest of the just and expeditious disposal of the taxation.

24. On the other hand, Mr Wong, who also appeared for the defendants at that hearing, contended that the issue was res judicata and the plaintiff was estopped from raising it again because Master Chow had already ruled against the plaintiff on the Two Items. He further submitted that if there was a change of circumstances by reason of the subsequent payment, the plaintiff should have appealed against the master’s decision by adducing new evidence on the payment.

25. The transcript of that hearing shows that Master Wong expressed reservation about the res judicata point but he did not make a ruling on it. In the end,...