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Zhang Lan And Others v Herbert Smith Freehills (A Firm)

Judgment Cited authorities 2 Cited in Precedent Map Related
Vincent
Judgment Date03 March 2017
Year2017
Judgement NumberHCMP285/2016
Subject MatterMiscellaneous Proceedings
CourtHigh Court (Hong Kong)
HCMP285/2016 ZHANG LAN AND OTHERS v. HERBERT SMITH FREEHILLS (A FIRM)

HCMP 285/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 285 OF 2016

____________

IN THE MATTER of Section 67(2) of Part VI the Legal Practitioners Ordinance, Cap. 159
and
IN THE MATTER of Order 106 rule 2 of the Rules of High Court
and
IN THE MATTER of Herbert Smith Freehills, Solicitors of the High Court of the Hong Kong Special Administrative Region

____________

BETWEEN
ZHANG LAN 1st Applicant
GRAND LAN HOLDINGS GROUP 2nd Applicant
(BVI) LIMITED
SOUTH BEAUTY DEVELOPMENT 3rd Applicant
LIMITED
and
HERBERT SMITH FREEHILLS (A FIRM) Respondent

____________

Before: Hon Lok J in Chambers
Dates of Hearing: 23 June 2016 & 2 February 2017
Dates of Reasons for Decision and Decision: 3 March 2017

________________________________________

REASONS FOR DECISION AND DECISION

________________________________________

1. This originating summons is about an application for taxation of the solicitors’ bills by their own clients under s 67 of the Legal Practitioners Ordinance, Cap, 159 (“LPO”).

2. On 22 April 2016, Master Chow (“the Master”) ordered, amongst other things, that the bills in issue (“the Bills”) be referred to Taxing Master to be taxed on the condition that, within 21 days from the date of the Order, the Applicants pay: (a) by way of interim payment, 40% of the total sum of the Bills to the Respondent plus interest; and (b) by way of payment into court, 20% of the total sum of the Bills less the sum of HK$500,000 already paid by the Applicants as costs on account. In addition, the Master ordered that, upon satisfaction of such payment condition, no action shall be commenced on the Bills, and any action already commenced be stayed, until the completion of the taxation.

3. The Applicants lodged an appeal against the said Order (“the Master’s Order”) which was heard by me on 23 June 2016. In the hearing, I denied the Applicants’ application for unconditional leave for taxation. However, I varied the payment condition such that the Applicants only had to make an interim payment, within 28 days, of 40% of the total sum of the Bills to the Respondent plus interest but less the sum of HK$500,000 already paid by way of costs on accounts. I now give my reasons for such decision.

4. Before I hand down the Reasons for Decision on the appeal, the Respondent took out another summons (“the Lifting of Stay Summons”) to lift the stay of the related arbitration proceedings so that the arbitrator can proceed to give the decision on costs. The Lifting of Stay Summons was heard by me on 2 February 2017. I now also give my decision on such application.

BACKGROUND

5. The Applicants engaged the Respondent, a firm of solicitors, to handle their dispute with La Dolce Vita Fine Dining Group Holdings Limited and La Dolce Vita Fine Diving Company Limited (together referred to as “CVC”) relating to the sale of a restaurant business. On 26 February 2015, CVC obtained injunctions in Hong Kong and Singapore freezing each of the Applicants’ assets up to the value of US$286 million (“the Injunctions”) and thereafter commenced 2 parallel CIETAC arbitrations on 5 March 2015, making serious allegations of fraud in relation to the sale of the restaurant business against the Applicants who were the sellers of the business.

6. The Respondent was engaged by the Applicants in late April 2015. The Applicants paid a sum of HK$500,000 as costs on account.

7. The Respondent started to provide its service on 24 April 2015. In the period from 29 May to 24 December 2015, the Respondent issued the 12 bills to the Applicants (the Bills) in the total amount of about HK$23.4 million.

8. Apart from the costs on account, the Applicants have not paid the Respondent any of the fees charged in the Bills. Since there is an arbitration clause in the engagement letter signed by the parties, the Respondent commenced an arbitration on 25 January 2016 for payment of the Bills (“the Arbitration”). In response, the Applicants commenced the present proceedings on 4 February 2016 applying for taxation of the Bills out of time.

9. On 22 April 2016, the Master granted conditional leave for taxation. The Applicants lodged an appeal on 25 April 2016 against the Master’s Order and ask for unconditional leave for taxation. On 26 April 2016, the Applicants also took out a summons applying for an injunction restraining the Respondent from proceeding with the Arbitration (“the Stay Summons”). This was heard by L Chan J on 29 April 2016 who adjourned it to be heard together with the appeal against the Master’s Order.

10. In this appeal, the Applicants argue that the fees charged by the Respondent are “astronomical” considering that the active period of engagement was only about 5 months. The Applicants have also referred me to certain items in the Bills with a view to show that the fees charged by the Respondent are unreasonable and excessive. Further, the Respondent had all along been prepared to offer substantial discounts to the Bills if the Applicants paid the discounted fees within certain times. According to the Applicants, this clearly showed that the Respondent had inflated their fees in the Bills.

11. The Applicants also complain that the Bills are not itemised without the provision of a breakdown of the services provided. They say that this would also be a ground for the court to carry out serious investigation about the propriety of the Bills.[1]

12. The Respondent puts forward various reasons to justify the fees charged by them. The Applicants had instructed the Respondent to undertake extensive works in multiple jurisdictions including the Mainland, Hong Kong, Singapore and Cayman Islands. CVC were parties with substantial financial resources who were prepared to pursue their claims in a vigorous manner. The conduct of the litigations required different tasks and substantial time for fact-finding, legal research, review and preparation of the voluminous documents and affidavits. It also required the Respondent to contact and liaised with the various other legal firms engaged by the Applicants. The Applicants were well aware of the size and complexity of the litigations. Further details of the works undertaken by the Respondent can be found in the Affidavit of Julian Mark Copeman made on 7 March 2016.

13. According to the Respondent, the Applicants did raise concern about the amounts of the fees. Every now and then there were discussions between the parties, and the Applicants offered to pay upon the giving of certain discounts by the Respondent. However, the Applicants did not honour their promise even to pay the discounted fees.

14. As the parties agree that the court should not conduct a microscopic examination of the Bills at this stage, I do not propose to address in details the merits of the complaints by the Applicants. At this stage, it is suffice for me to say that, bearing in mind the length of the time for the provision of the legal services, the fees charged by the Respondent in the Bills deserve serious investigation by the court.

15. Under s 67 of the LPO, the client has the right to tax his own solicitors’ bill if the...

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