Disputes Over Legal Fees

The recent case of Fung Hing Chiu v. Henry Wai & Co [2018] HKCFI 31 confirms that the High Court’s power to order the taxation of a solicitor’s bill, pursuant to s. 67 of the Legal Practitioners Ordinance (Cap. 159), does not prevent a solicitor and a client agreeing to include an arbitration clause in their letter of engagement.

For solicitors and their clients the judgment is important. Where a client, acting in the course of a business, and a solicitor enter into a letter of engagement that contains a model arbitration clause, or where they subsequently agree in writing to arbitrate a dispute over legal fees, as a matter of legal principle the arbitration clause or agreement is valid.

In this case, the solicitors’ two engagement letters contained comprehensive arbitration clauses. The engagement letters were signed by an individual client and on behalf of a corporate client (of which the individual was a director). A dispute arose as to the solicitor’s outstanding fees alleged to be owed by the two clients. The solicitors commenced separate arbitration proceedings against both clients.

The clients, in turn, commenced separate court proceedings seeking (among other things) to stay the arbitration proceedings and to refer the dispute to a taxing master of the court. The solicitors applied for the legal proceedings to be stayed to arbitration, pursuant to s. 20 of the Arbitration Ordinance (Cap. 609).

The court’s judgment is a good review of the relevant legal principles. A number of points are worth noting:

  • there is no public policy which prevents disputes relating to a solicitor’s legal fees from being decided by arbitration. Indeed, while acknowledging the supervisory jurisdiction of the court, pursuant to s. 67 of the Legal Practitioners Ordinance, the judgment is another testament to the Hong Kong courts’ pro-arbitration stance;
  • depending on the wording of the arbitration agreement, it is not only disputes as to legal fees that are arbitrable. Allegations of breach of contract or claims in tort against a solicitor’s firm are arbitrable;
  • the arbitration of a dispute over legal fees does not deprive a client of protection. An arbitrator can apply the same taxation principles as a court and can usually award reliefs that could have been ordered by a court had the dispute been subject to court proceedings (“Award of remedy or relief” – s. 70 of the Arbitration Ordinance);
  • where a solicitor is retained in contentious proceedings by a commercial client and charges hourly rates based on the guideline rates used in court proceedings, it is difficult to see how an arbitrator could decide that those rates are unreasonable;
  • if a party to an arbitration concerning legal fees is dissatisfied with a tribunal’s award that party can apply to the court to set aside the award or seek appropriate relief. The court’s supervisory jurisdiction is not impacted, although (as readers will appreciate) seeking to challenge an arbitration award or an arbitration agreement in Hong Kong is difficult. While such challenges are not supposed to be the norm they are not unusual. Unsuccessful challenges are visited with indemnity costs against applicants. Whether this is a deterrence is a moot point;
  • a party that engages a solicitor in the course of a business is not acting as a “consumer”, so s. 15 (“Arbitration agreements”) of the Control of Exemption Clauses Ordinance (Cap. 71) is not engaged*;
  • whether a solicitor’s firm should include an arbitration clause in (for example) its standard terms of business is a matter for the firm. There are plenty of “model clauses” to choose from.

* Requirement for “written consent signified” after a dispute has arisen.


Partner, RPC

Senior Consultant, RPC