LIU ANISSA MEE LING v. LAM, LEE & LAI

HCMP 2186/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2186 OF 2008

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D E C I S I O N

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I. Introduction

1.  Madam Liu Anissa Mee Ling (“Liu”) was a former client of Messrs Lam, Lee & Lai (a firm of solicitors, “LLL”).  She petitioned for divorce and applied for ancillary relief against her husband (“Husband”) in matrimonial proceedings commenced on 10 April 2003 in FCMC 4097/2003 (“FC Action”).

2.  At all material times, Mr Simon Wong (“Wong”) was LLL’s assistant solicitor who had carriage and conduct of the FC Action on behalf of Liu.  He became a partner of LLL since 1 September 2007.

3.  LLL issued 8 office bills (“Bills”) for legal services rendered to Liu who made 10 payments to LLL (“Payments”).  Particulars of the Bills and Payments are set out in the schedule to this Decision (“Schedule”).  For easy reference, I adopt the abbreviations in the Schedule.

4.  Liu had settled and paid the 1^st to 6^th Bills.  On 20 December 2007, LLL commenced proceedings against Liu in DCCJ 5260/2007 (“DC Action”) to recover payment of the 7^th and 8^th Bills in the total sum of HK$362,391.00 with interest.

5.  On 30 January 2008, Liu through her then solicitors in the DC Action, Messrs Knight & Ho (“K&H”), filed her Defence averring inter alia as follows:

(a) Liu engaged LLL to act for her in her petition for divorce and application for ancillary relief on the basis of Wong’s oral representation on 11 January 2003 that the total legal costs and disbursements for such proceedings “would be around a gross sum of HK$60,000.00 to HK$70,000.00” (“Cost Cap” and “Cost Cap Agreement”);

(b) Liu was informed by her brother-in-law Mr Lee Yan Chung Richard (“Lee”) in December 2005 that after his discussion with Wong LLL only required Liu to pay a sum of HK$25,791.00 being LLL’s time costs for attending various court hearings in full and final settlement of all billed but unpaid as well as unbilled costs and disbursements to which Liu agreed (“Settlement Agreement”);

(c)  LLL issued the 8^th Bill in breach of the Settlement Agreement;

(d) Liu was thus not liable to pay the 7^th and/or 8^th Bills;

(e)  further or alternatively, the amount of each of the 7^th and 8^th Bills was unreasonable and/or excessive.

6.  Liu filed her 2 witness statements and Lee’s witness statement (“Lee Statement”) and LLL filed Wong’s 2 witness statements in the DC Action.

7.  On 5 November 2008, Liu commenced the present proceedings (“OS Action”) against LLL for referral of the Bills to taxation.  Liu filed her 2 supporting affirmations, and LLL filed Wong’s affirmation in opposition.  By her 2^nd affirmation, Liu abandoned her application for taxation of the paid 1^st to 6^th Bills.

8.  On 6 May 2009, it was ordered in the OS Action inter alia that the 7^th and 8^th Bills be referred to taxation on solicitor and own client basis.  On 17 June 2009, LLL filed their taxation bill of costs (“Taxation Bill”).  On 10 July 2009, Liu filed her List of Objections.

9.  On 15 September 2009, it was ordered in the OS Action inter alia that (a) the DC Action be stayed until completion of the OS Action, (b) the Taxation Bill be adopted for the reference to taxation, and (c) LLL shall be bound by the total amount in the 7^th and 8^th Bills if the eventual taxed costs (if any) shall be higher.

II. Preliminary Issues

10.  For the hearing of the preliminary issues in respect of the reference to taxation before me, it was agreed (a) there was no written retainer between the parties, (b) the Cost Cap Agreement (which LLL denied) was not reduced into writing, and (c) Liu had received but not paid the 7^th and 8^th Bills.  The true issue in dispute was whether the parties had entered into the Settlement Agreement in December 2005.

11.  Ms Chung, counsel for Liu, invited me to infer the Settlement Agreement from inter alia the following:

(a) Wong’s oral representation to Liu through Lee that legal costs and disbursements for divorce proceedings would be about HK$30,000.00 to HK$40,000.00 (“Initial Cost Range”);

(b) the existence of the Cost Cap and the Cost Cap Agreement (which Liu waived or no longer insisted by the time of the Settlement Agreement);

(c)  LLL’s breach of the Cost Cap Agreement such that they would have agreed to settle on apparently unfavourable terms under the Settlement Agreement;

(d) the circumstances surrounding the 8^th Bill including its lateness which rendered it more probable than not that the parties made the Settlement Agreement.

12.  Ms Chung also invited me to infer the Settlement Agreement from the allegedly excessive and unreasonable nature of the costs charged in the Bills, but she eventually accepted that I should not (a) consider Liu’s item-by-item List of Objections which exercise should be reserved for the taxation of the Taxation Bill and/or (b) re-open any satellite challenge to the paid 1^st to 6^th Bills when Liu had abandoned referral of such Bills to taxation.

III.  Evidence

13.  Liu, Wong and Lee gave oral evidence. In assessing witnesses’ credibility, I bear in mind not only their demeanour in court but also the intrinsic value of their evidence upon considering the totality of their evidence against the chronology of events, the documentary evidence, and inferences based on inherent probabilities and/or undisputed facts.[1]

14.  Wong was unshaken in cross-examination on the core issues, and on balance I accept his evidence, which sat well with the factual matrix and documentary evidence.  Unfortunately, the same could not be said for Liu who impressed me as a stubborn, difficult and demanding client who was unwilling to compromise in any material respect.  It was only when the litigation outcome turned against her that she lost heart and tried to negotiate with the Husband for an overall settlement in order to extricate herself from what had escalated into a costly exercise.  Even so she still had to incur further costs to lever herself into a better bargaining position. But in the meantime Liu (in my view) had no scruples about stalling and eventually refusing to pay for legal services rendered by LLL.  Her evidence was not credible or reliable, and I reject her evidence where it differed from that of Wong.

15.  It was Lee who introduced Liu to Wong who eventually handled her divorce and ancillary relief applications.  As Liu’s relative and Wong’s friend/client, it was embarrassing for Lee to be caught in their crossfire in the DC and OS Actions.  Issues arose over the English Lee Statement filed in the DC Action, which Lee declined to adopt when he gave evidence before me, and his Chinese note dated 4 March 2009 (“Lee Note”), which he adopted when he gave evidence.  On the analysis below, I prefer on balance Lee’s oral evidence as to the circumstances of the Lee Statement and the Lee Note.

IV.  Initial Contact

16.  In/about December 2002, Lee told Wong that Liu wanted some legal advice on family/matrimonial matters and asked Wong about legal costs for divorce.  An appointment was made for Liu to meet Wong in January 2003.

17.  The parties disagreed over what Lee told Wong on that occasion. LLL claimed Lee told Wong Liu might wish to seek legal advice on the Husband’s assaults on Liu and the children of the family (“Children”, ie a son (“Son”) and a daughter (“Daughter”)) (“Assault”) and the Husband’s transmission of sexual disease to Liu (“Disease”) that might include a divorce.  On the other hand, Liu claimed Lee told Wong she intended to claim for divorce from the Husband and ancillary relief for herself and the Children.

18.  The parties also disagreed over what Wong told Lee as to legal costs for divorce.  Wong and Lee claimed Wong said the cost range of normal uncontested divorce proceedings by consent could be about the Initial Cost Range but each case would be different.  Liu claimed she was under the impression that Wong told Lee the cost range for divorce proceedings would be within the Initial Cost Range.

19.  On balance, I prefer Wong’s evidence.  There was no or no satisfactory reason for Lee to have told Wong that Liu had a firm intention to commence divorce action.  After all, Lee as Liu’s brother-in-law was not the true protagonist in any divorce action between Liu and the Husband.  Further, at that stage Liu had not even described her family/marriage background to Wong let alone sought any preliminary legal advice from him.  Rather, I find on balance that Lee mentioned to Wong the more immediate problems of Assault and Disease for which Liu required legal advice.  This conclusion was also supported by Lee’s oral evidence and Wong’s on-line research through Westlaw concerning Disease on 7 January 2003.

20.  I also do not accept that Wong gave Lee a cost range of about the Initial Cost Range for any divorce proceedings.  At that stage, Wong was unaware of Liu’s family/marriage background, the complexity or otherwise of the issues involved and/or the Husband’s likely reaction.  On balance, I prefer Wong’s evidence that (a) he told Lee the cost range for normal uncontested divorce by consent would be about the Initial Cost Range with the caveat that each case would turn on its own facts, and (b) he expected Lee to so inform Liu.

V.  11^th January 2003

21.  On 11 January 2003, Liu had a meeting with Wong at LLL’s offices. The parties disagreed over what was discussed at the meeting.

22.  Liu’s case was that she had in mind a quick divorce for about the Initial Cost Range, but had no intention to engage LLL to deal with Assault and Disease.  She gave instructions to Wong on her family/marriage background with firm instructions to proceed with her divorce by the quickest route.  Wong orally represented to her that the total legal costs and disbursements for her divorce and ancillary relief applications would be approximately within the Cost Cap, which Liu considered reasonable and within her budget even though it was more than what she understood from Lee’s discussion with Wong.  Liu then engaged LLL on the above basis (ie the Cost Cap Agreement).

23.  LLL’s case was that although Wong discussed the general procedure for divorce and the strategies for claiming maintenance and division of assets with Liu, Assault and Disease remained the main focus at the meeting and Liu did not give LLL firm instructions to obtain a divorce from the Husband on 11 January 2003.  Wong claimed he told Liu at the meeting that (a) he would handle her case personally, (b) she would be charged on hourly rate basis, (c) his hourly rate was HK$2,500.00, (d) she would be asked to pay costs on account from time to time, and (e) LLL would from time to time issue interim bills for her settlement.  Wong fairly accepted that with hindsight it would have been preferable to have a written retainer with Liu.

24.  On balance, I prefer LLL’s case and reject Liu’s contentions.

25.  First, I have found Lee informed Liu that Wong had quoted the Initial Cost Range for normal uncontested divorce by consent (see paragraph 20 above), so Liu could not have in mind such cost range for any petition for divorce she might initiate against the Husband since she must have known it would not be by consent but premised on his alleged unreasonable behaviour.

26.  Secondly, Liu’s case was contradicted by the contemporaneous record in Wong’s handwritten attendance note made at the meeting on 11 January 2003 and in his electronic timesheet record (“E-Note”) entered into LLL’s on-line documents management system on 15 January 2003.  According to Wong, Liu gave him various documents in relation to the Husband’s earlier assault that led to her departure from the matrimonial home in 2001.  The above written records noted that the Husband continued with Assault in 2002 after she resumed cohabitation with him, so Wong advised Liu on possible application for, say, a non-molestation injunction order, and urged her to retrieve her police statements in respect of the 2 assault incidents in 2002.  In response to Liu’s query, Wong further advised that the Husband would be criminally liable if she could prove he knowingly transmitted sexual disease to her, and she promised to provide proof from her family doctor as soon as possible.

27.  In my view, Assault and Disease featured significantly at the meeting, which showed that at that point Liu had not yet made up her mind whether to petition for divorce and/or pursue other remedies for Assault and Disease, and Wong therefore took preliminary instructions from Liu (including instructions on Assault and Disease) on such basis.

28.  Thirdly, Ms Chung submitted that the first sentence of Wong’s E-Note of 15 January 2003 (ie “attending client at [LLL’s] office taking her instructions on her intended divorce and advising her on the procedure and strategy”) summarised Liu’s main intention at the meeting on 11 January 2003 was to obtain a divorce, and the rest of the record merely contained the parties’ historical dealings and not actions to be taken by LLL on Liu’s behalf.  I am not prepared to adopt a blinkered reading of the above E-Note. Plainly, neither the single paragraph nor its first sentence in the above E-Note was intended to be a comprehensive record of all discussions at the meeting that lasted almost 2½ hours (see also paragraphs 26-27 above).

29.  Fifthly, Ms Chung submitted that since Liu did not make enquiry as to the cost of other legal work (eg cost of obtaining non-molestation injunction order against the Husband) prior to the meeting on 11 January 2003, she must have in mind nothing but a divorce when she attended the meeting.

30.  I disagree. Liu was a well-educated and experienced businesswoman. Between 1983 and 2004 she worked at Lexmark International (China) Limited (“Lexmark”) and was its Planning Manager from mid-2000 to about April 2004.  Ms Chung aptly described Liu as a “savvy consumer”.  In such circumstances, I find it improbable that Liu would have decided on what legal course of action she would take (ie obtain a divorce from the Husband) before the meeting on 11 January 2003 without even letting Wong understand her personal/family/marriage background or receiving any preliminary legal advice on her options/remedies.  In my view, Liu would not have committed herself to any particular course of action at the meeting on 11 January 2003, which conclusion was consistent with the written record in paragraphs 26-27 above as well as Wong’s subsequent E-Note record that confirmed Liu gave instructions for divorce on 13 January 2003 (see paragraph 35 below).

31.  Sixthly, I reject Liu’s case that she agreed to engage LLL pursuant to the Cost Cap Agreement, and that she considered the Cost Cap reasonable and within her budget even though it was more than what she understood from Lee’s discussion with Wong.  Given the unreliability of Liu’s evidence on what was discussed at the meeting on 11 January 2003, and without (a) committed instructions from her as to the course of action to be adopted, (b) comprehensive understanding of the magnitude and/or complexity of the matters to be canvassed and/or (c) any expectation of the Husband’s reaction (even though she had described the Husband’s personality to Wong), I find it improbable that Wong would have offered any Cost Cap and/or agreed to any Cost Cap Agreement at the first meeting with the consequence that LLL would be at risk on costs and disbursements in excess of HK$70,000.00.

32.  In any event, Liu’s case was inherently unconvincing.  If she thought Wong gave Lee the Initial Cost Range for her intended divorce proceedings (which I disagree), I find it inexplicable that she would have accepted the Cost Cap without question when the Cost Cap almost doubled the Initial Cost Range offered by Wong.  As “an experienced businesswoman and a savvy consumer”, Liu would have raised such obvious query irrespective whether the Cost Cap was reasonable or within her budget or not.

33.  Ms Chung submitted that “[it] is believable that after [Liu] gave [Wong] some background information about her case, indicating her divorce may not go as smoothly as some (in particular taking into consideration the character and personality of [the Husband])”.  However, although Liu explained the Husband’s personality to Wong, she confirmed in evidence that she did not know whether the Husband would contest any petition for divorce or not.

34.  I find on balance there were no Cost Cap and/or Cost Cap Agreement, and Liu in fact engaged LLL as her solicitors on their charging basis and payment arrangements in paragraph 23 above.

VI.  Confirmed Instructions

35.  Wong attended Liu by telephone on 13 January 2003 (see Wong’s E-Note entered on 15 January 2003) and was informed that after discussion with Lee and his wife (ie Liu’s elder sister, “Sister”) Liu would only petition for divorce and not apply for non-molestation order.  The above E-Note also recorded that Liu told Wong she was looking for new accommodation so she could move out of the matrimonial home, and she would later confirm the date/time for their next meeting.

36.  When Wong followed up with Liu by telephone on 23 February 2003, she told him there was serious fighting between her mother-in-law and the Daughter, and Wong advised her to petition for divorce as soon as possible.  On the following day, Liu told Wong there was more fighting, so she would look for new accommodation and then come and see Wong.

37.  Liu came to LLL’s offices to meet with Wong and Ms Jenny Ma (ie LLL’s then trainee solicitor and current assistant solicitor, “Ma”) on 15 March 2003.  She brought with her police statements concerning the Husband’s assaults in 2002 and other supporting documents.  The meeting lasted for about 2½ hours and detailed instructions were taken on the Husband’s unreasonable behaviour and his assets for preparing (a) the petition for divorce and related documents and (b) an application for interim maintenance (see Wong’s and Ma’s handwritten attendance notes).

38.  Wong then prepared Liu’s petition for divorce and other documents.  On 22 March 2003, Liu signed those documents at LLL’s offices, and gave Wong a medical report of the same date from her family doctor.  Liu instructed Wong to withhold issuing and serving the petition and related documents pending further instructions because she wanted to move out of the matrimonial home with the Children first so as to avoid possible confrontation with the Husband’s family.

39.  In my view, the above account premised on contemporaneous E-Notes showed that Liu’s commitment to petition for divorce came about in March 2003 rather than on 11 January 2003.  I do not accept Ms Chung’s submissions that these contemporaneous records were incorrect. I am unable to discern any financial reason or other motive for Wong to create a series of incorrect records to postpone Liu’s instructions for commencing divorce proceedings.  In any event, Liu did not offer any satisfactory explanation why her petition for divorce was issued on 10 April 2003 (see paragraphs 42-43 below) if she gave committed instructions to proceed with her divorce action 3 months ago on 11 January 2003.

VII.  Initial Costs on Account

40.  On 24 March 2003,

(a) Wong by telephone and email asked Liu to pay costs on account in the sum of HK$30,000.00;

(b) Liu by email requested a “breakdown for costs incurred”;

(c)  Wong replied by email to advise that “[LLL’s] costs incurred so far on this case are $21,541 with breakdown as follows: [Wong’s] costs = 7 hours 43 minutes x $2,500 per hour = $19,291, [Ma] (trainee solicitor) = 3 hours 45 minutes x $600 per hour = $2,250”.

41.  Wong explained to Liu (but she could not recall) that “part of [LLL’s] costs incurred in taking instructions on later application like maintenance pending suit [“MPS”] and advising on application for injunction and assets division. [Wong] advised on the strategy to negotiate for out of court settlement like without prejudice meeting and do research on assets of [the Husband] before serving the Petition” (see Wong’s E-Note of 2 April 2003).

42.  Liu made the 1^st Payment in the sum of HK$21,500.00.  On 9 April 2003, LLL issued an official receipt for such sum as “costs on account”, and Liu confirmed instructions to issue and serve her petition for divorce. The petition was issued on the following day.  On 12 April 2003, Liu and the Children moved to their new accommodation.  On 14 April 2003, LLL served the petition and related documents on the Husband.

43.  The above account was premised on contemporaneous E-Notes which cogently explained why Liu’s petition for divorce was not issued until 10 April 2003 and which demonstrated the inherent implausibility of Liu’s contentions referred to in paragraph 22 above.

44.  Liu claimed that the amount of incurred costs as advised by Wong was impossible, and in any event the 1^st Payment was “a mere upfront payment” towards the Cost Cap.  Liu explained that in her work her customers often had to pay upfront before completing all the work, so she was not surprised Wong also adopted similar business practice. 

45.  On balance, I do not accept Liu’s contentions. Liu was informed of the nature of work done and time spent as well as anticipated future work according to Wong’s email of 24 March 2003 and his E-Note of 2 April 2003.  Subject to any objection on quantum at the eventual taxation of the Taxation Bill, I cannot say Wong’s breakdown for incurred costs in the sum of HK$21,541.00 for work done during the period from January to March 2003 was “impossible”.

46.  In coming to this view, I have taken into account Wong’s evidence that due to their misunderstanding neither he nor Ma entered any E-Note for time incurred in respect of the meeting with Liu on 15 March 2003 (see paragraph 37 above).  Such item of work was also omitted in the relevant Bill and in Wong’s breakdown for costs incurred in his email of 24 March 2003 since they were prepared by extrapolation of time cost data in the E-Notes.

47.  In my view, Wong’s breakdown for costs incurred calculated on hourly rate and not capped costs basis complemented his evidence (which I accept) on LLL’s charging basis and payment arrangements in paragraph 23 above.  Had there been a Cost Cap Agreement (which I disagree), given Liu’s forceful and demanding personality and her consumer savvy and business experience, I am convinced she would have queried and/or objected to LLL’s adoption of an hourly rate basis for calculating costs incurred.  I find on balance that she did not do so because she was unconcerned, and she was unconcerned because Wong’s breakdown accorded with her understanding of how LLL would charge her (see paragraph 23 above).

48.  Ms Chung submitted that LLL’s request for costs on account before any Bill was delivered rebutted their case that they would charge on hourly rate basis.  It was further suggested that “[if Wong] were really to be paid on his hourly rate, after making the initial payment of costs on account, [Liu] would not have to pay until bills setting out the hours used (multiplied by hourly rate) were sent to her, and she would have to make cheques out to the exact amount of the bills.  The fact that [Liu] made lump sum payments before bills were sent to her (and before she could verify the hours used by [Wong], [Ma] etc) show that there had been a fee-capped agreement”.

49.  In my view, such argument was misconceived.  Costs on account are in essence prepayments on account of incurred and/or future costs that have not been billed, and unless there are other arrangements agreed upon between solicitor and client, such prepayments on account of incurred and/or future costs will be set-off against eventual billed costs so as to reduce or extinguish the same.  Logically, it entails the transfer of the relevant sum from the client account (ie costs on account) to the office account (ie payment to the solicitor), and no separate cheque from the client is required unless the available costs on account are insufficient to cover the billed amount in which case the client will issue a cheque for the outstanding balance.  This methodology was reflected on the face of the 1^st to 6^th Bills.  To issue a cheque in the exact amount of the bill when there are already costs on account will render such prepayment on account of costs redundant.

50.  Once properly understood, it is clear that any request for and/or payment of costs on account do not depend on whether the eventual billing is on capped fee or hourly rate basis.  If the client successfully challenges any particular item of the billed costs (whether within the capped fee or on hourly rate basis), the solicitor will have to give credit and account to the client for the cost of such particular item by reversing transfer from office account back to client account.  In short, there is nothing untoward in asking a client for costs on account in a lump sum even though he will eventually be charged on hourly rate basis.

51.  On balance, I also reject Liu’s suggestion of “upfront payment” towards the Cost Cap. Given Liu’s initiative and concern in asking for a breakdown for costs incurred and on her being told that the incurred time costs amounted to HK$21,541.00, I find it implausible even on Liu’s own case (which I disagree) that she did not follow up to query the excessiveness of the costs incurred and of the upfront payment requested (ie LLL had already used up 30% of the Cost Cap when the petition for divorce had not even been issued).  Further, even though Liu and the Children were about to move to their new accommodation and Liu had to pay for the rent deposit and other costs and expenses occasioned by such removal, I do not accept she could pay not more and not less than HK$21,500.00 as costs on account, especially when she earned regular monthly income of HK$42,910.00 at the material time.  Liu was careful to ask Wong for a breakdown for costs incurred, and I find on balance she shrewdly chose to limit her payment of costs on account to a sum that matched the amount of incurred time costs calculated on hourly rate basis (HK$21,541.00) as disclosed by Wong, but declined to pay costs on account to cover work not yet done.  I reject Liu’s assertion of “upfront payment” within the Cost Cap on a capped fee basis.

52.  On balance, I do not accept Liu’s explanation that her reticence was due to (a) her business practice of not questioning any part payment from 10% up to 50% within any agreed fee cap made by any service provider or customer and/or (b) her trust in Wong “to charge appropriately and accordingly” because Lee never complained of any overcharging by Wong.  Such explanation did not sit well with her initiative in asking for a breakdown for costs incurred even though the requested costs on account (ie HK$30,000.00) was well within the Cost Cap.

53.  In an attempt to overcome this, Liu claimed she had exercised her right as consumer to know at least what kind of work Wong had done and how she was charged.  Liu further claimed that in her business experience there would be details/descriptions to show exactly what work was involved if there was an agreed fee with either a service provider or customer.  

54.  I do not accept that Liu’s claim that she had asked LLL for a formal bill in late March and/or early April 2003.  Her email of 24 March 2003 only asked for a breakdown for costs incurred (presumably to facilitate understanding of the make-up of the requested costs on account), and there was no follow up email request for a formal bill.  Since Liu admitted that she asked for the breakdown in order to know what work was done and how she was charged, I am not persuaded that such breakdown was merely “for reference only”.  It was also telling that she did not raise any query or protest against the calculation of costs incurred on hourly rate basis when it was patently obvious even on her own case (which I disagree) that 30% of the Cost Cap had been exhausted before issuance of her petition for divorce.

VIII.  Application for Interim Maintenance

55.  On 6 May 2003, LLL filed the Notice of Application for Ancillary Relief.  On the following day, he told Liu inter alia that such application would be served on the Husband shortly, and “also asked [her] to send a cheque of HK$10,000.00 for [LLL’s] further costs on account and [she] said ok” (see Wong’s E-Note of 7 May 2003).  Liu made the 2^nd Payment in the sum of HK$10,000.00 accompanied by her handwritten note addressed to Wong that “[this] is to cover service [Wong has] rendered”. On 21 May 2003, LLL issued an official receipt for such sum as “costs on account”.

56.  In my view, it was clear from the above handwritten note that Liu was not paying any upfront payment to cover future costs yet to be incurred.  Rather, she only paid costs on account to cover incurred but unbilled legal services already rendered by LLL (see the 1^st Bill dated 23 June 2003 that was settled by set-off against the 1^st and 2^nd Payments being costs on account paid by Liu).  Wong explained (and on balance I accept) that by reason of the inadvertence described in paragraph 46 above, the 1^st Bill failed to include the item of work being Wong’s and Ma’s meeting with Liu on 15 March 2003.

57.  On 11 July 2003, Liu asked for indulgence to pay further costs on account (see Wong’s E-Note of the same date).  On 16 July 2003, the Husband through his solicitors Messrs Gary Lau & Partners (“GLP”) filed his Answer and Cross-Petition alleging unreasonable behaviour on the part of Liu.  According to Wong’s E-Note of 17 July 2003, he advised Liu on the following matters:

“ 1. Costs implications on dispute of divorce petition and cross-petition.

2. Possibility for agreement to divorce by consent one year.

3. Need to reply to Answer & Cross-Petition.

4. Need to argue similar issues in main application for ancillary relief.

5. Instructions to make application for [MPS].

6. To register lis [pendens] in Canadian property of [the Husband].

9. Client will come back HK in early Sep.

10. Ask for further costs on account.

11. Ask for further documents and information to prepare application for [MPS] such as bank passbooks of [Liu] & children, employment letter, rental receipt and utilities receipt etc.

12.     To file consent summons on custody of [the Daughter]”

58.  In my view, it was abundantly clear from items 1 and 3 of the above E-Note that there was no Cost Cap or Cost Cap Agreement.  Liu knew that the incurred costs up to 24 March 2003 (ie before issuance of her petition for divorce) as advised by Wong were HK$21,541.00.  By July 2003, it was obvious that the Husband would vigorously contest Liu’s petition for divorce, and there was a real risk the litigation would become costly.  If Liu and LLL had entered into the Cost Cap Agreement such that any costs and disbursements in excess of the Cost Cap would be at LLL’s risk, there would have been no need for LLL to advise Liu on the cost implications of disputes arising from the petition and cross-petition.

59.  On balance, I accept Wong’s evidence that given the Family Court’s preference for a non-contentious resolution to matrimonial dispute in the interest inter alia of saving costs, he advised Liu to consider the option of uncontested divorce by consent on the basis of separation for 1 year (see item 2 of the above E-Note).  But Liu refused to compromise, and insisted that the Husband was telling lies and she was deserving of justice from the courts. So Wong had a lengthy meeting with Liu and Lee to take instructions for responding to the Answer and Cross-Petition (see items 3-4 of the above E-Note).  In my view, this explained why Wong asked Liu for further costs on account (see item 10 of the above E-Note).

60.  Liu recalled she had discussed items 5, 11 and 12 of the above E-Note with Wong.  Although she could not recall whether she had discussed item 6 with Wong, I find on balance she did (see also paragraphs 67-68 below).  In light of Liu’s suggestion in paragraph 137 below that Wong’s advice concerning possible registration of her petition for divorce against the Husband’s property in Canada (“H’s Property”) was a wholly distinct matter separate from her divorce and ancillary relief proceedings, which topic will be discussed in fuller detail below, I pause to note here that as early as in July 2003 this was already canvassed as a tactical or protective step for Liu’s application for interim maintenance and financial ancillary relief within the context of the FC Action.

61.  Liu made the 3^rd Payment in the sum of HK$10,000.00, and on 28 July 2003 LLL issued an official receipt for such sum as “costs on account”.  On 30 July 2003, LLL issued the 2^nd Bill in the sum of HK$10,000.00 which was partially settled by set-off against the 3^rd Payment being costs on account already paid by Liu.

62.  At a meeting on 7 August 2003, Wong advised Liu “on the costs implication for the application for [MPS]” (see also items 5 and 11 of the above E-Note).  Wong “[got] the feeling from [Liu] that she want to fight every single item of dispute with [the Husband] so [Wong] reminded her not to do so”. He further reminded Liu that the Family Court had wide discretion on costs and advised her to make a Calderbank offer and conduct her case reasonably otherwise she might not be able to recover costs even if she were awarded maintenance.  The above was contemporaneously recorded in Wong’s E-Note of the same date, and such uncertainty over inter partes costs demonstrated that it was implausible for Wong to have asked Liu to make “upfront payments” of costs towards the Cost Cap.

63.  On 11 August 2003, Liu came to LLL’s offices to inter alia give Wong some documents to prepare her response to the Answer and Cross-Petition, and Wong “also ask her to pay $2,000 costs on account” (see Wong’s E-Note of the same date).  Liu paid the 4^th Payment in the sum of HK$2,000.00, and on 12 August 2003 LLL issued an official receipt for such sum as “costs on account”.

64.  On 12 August 2003, LLL took out a summons for interim maintenance for Liu and the Children supported by Liu’s affirmation.  Wong said (and on balance I accept) that most of the costs on account and LLL’s time costs were absorbed by the application for interim maintenance, and Liu instructed LLL not to proceed with her petition for divorce for the time being.  This was also borne out by the account of subsequent events below showing active progress of the application for interim maintenance and little progress on the petition and cross-petition for divorce in the meantime.

65.  According to Wong, the Husband was not only late in filing his affirmation of means he also failed to properly disclose his means.  On 30 August 2003, LLL prepared written Opening Submission with schedules.  On 1 September 2003, Wong met with Liu for over 2 hours to advise her and to take her instructions on (a) various queries raised by GLP, (b) the draft supplemental opening submission, and (c) the Husband’s affirmation of means.  Later on the same day, LLL prepared the Supplemental Opening Submission.

66.  On 1 September 2003, Deputy Judge Woodcock adjourned Liu’s application for interim maintenance sine die with liberty to restore and directed the Husband to pay Liu and the Children at HK$10,000.00 per month commencing from 1 September 2003 and thereafter on the 1^st day of every subsequent month until further order.

67.  On 3 September 2003, LLL wrote to advise Liu that if she wished, she might send the Amended Petition re-filed on 2 September 2003 to her lawyer in Canada to take step to protect her interests in H’s Property, and to ask her for further costs on account in the sum of HK$26,722.00 (ie HK$6,772.00 being the outstanding balance of the 2^nd Bill and HK$20,000.00 being “part of [LLL’s] costs incurred so far”).

68.  Although Liu claimed she did not have any Canadian lawyer at that time, it was clear that LLL’s advice in the above paragraph given within the context of her matrimonial proceedings and not as a separate matter was a follow up on Wong’s earlier advice (see paragraphs 57 and 60 above).

69.  On 10 September 2003, Wong advised Liu to keep records of her own and the Children’s daily expenses, and to consider making a global offer of settlement, but Liu said she needed to know the Husband’s full assets first. In Wong’s E-Note of the same date, “[Liu] said she will pay [LLL] say $20,000 within two weeks as costs on account”.

70.  On 22 September 2003, Liu informed Wong inter alia that she would send certain requested documents to LLL for preparation of her affirmation of means and “a cheque tomorrow” (see Wong’s E-Note entered on 23 September 2003).  On 29 September 2003, LLL sent Liu copies of the affirmations from the Husband for her perusal and comments.  On 30 September 2003, Wong had a meeting with Liu who explained to him the further documents she provided.

71.  Liu then made the 5^th Payment in the sum of HK$12,000.00 accompanied by her handwritten note addressed to Wong that stated “[please] find enclosed cheque to cover part of the outstanding balance”.  On 3 October 2003, LLL issued an official receipt for such sum as “costs on account”.

72.  On 28 October 2003, LLL sent Liu copies of further documents for her perusal and instructions.  On 31 October 2003, LLL issued the 3^rd Bill in the sum of HK$13,070.00 that was settled by set-off against the 4^th and 5^th Payments being costs on account already paid by Liu.

73.  On 7 November 2003, Liu gave Wong instructions on the Husband’s affirmations, and she also approved the issuance of a summons to compel him to disclose his further means.

74.  Liu made the 6^th Payment in the sum of HK$20,000.00. On 26 November 2003, LLL issued an official receipt for such sum as “costs on account”.  On 29 November 2003, LLL issued the 4^th Bill in the sum of HK$20,000.00 that was settled by set-off against the 6^th Payment being costs on account already paid by Liu.

75.  By November 2003, Liu had paid the 1^st to 6^th Payments in the total sum of HK$75,500.00 that exceeded the Cost Cap.  A number of matters are of note.

76.  First, the above account clearly showed that (a) the Husband vigorously contested Liu’s petition for divorce and application for interim maintenance and (b) Liu insisted on fighting him all the way, including issuing formal application to compel disclosure of financial information by the Husband.  Plainly, the way both parties conducted the FC Action contributed to an escalation of legal costs and disbursements.  But it was recognised from the very beginning that such resistance by the Husband was a possible scenario, and I find it implausible for Wong/LLL to have offered, agreed and/or maintained any Cost Cap and/or Cost Cap Agreement.

77.  Secondly, I am unable to accept Ms Chung’s submissions that because Liu made the 1^st to 6^th Payments by way of lump sums that were not in accordance with the billed amounts in the 1^st to 4^th Bills, they were therefore “upfront payments”.  As explained in paragraphs 48-50 above, costs on account by their very nature are prepayments before a bill is issued (and hence before the bill amount is crystallised) otherwise they would not be “on account” of costs.  It is only natural that the requested and/or paid amount of the costs on account is not the same as the eventual billed amount.  Once properly understood, such prepaid costs on account of themselves do not support the leap in logic that they must necessarily be “upfront payments” towards a capped fee.

78.  Thirdly, the 1^st to 6^th Payments were described in LLL’s official receipts as “costs on account”, but they in fact covered incurred but unbilled costs and not costs for future work, so when the 1^st to 4^th Bills were issued shortly after receipt of the corresponding Payments the billed amounts therein were settled by set-off against the corresponding Payments.  It was telling that Liu did not raise objection to such billing and payment arrangements for 6 Payments and 4 Bills over an extended period.  In my view, this lent cogent support to LLL’s case set out in paragraph 23 above.  Further, the above account also demonstrated that LLL kept Liu informed of developments in the FC Action and that Liu was a proactive client who constantly took advice, gave instructions and made decisions in relation to the FC Action.  On balance, I find she made the 1^st to 6^th Payments well knowing the work done by LLL and their charging basis premised on hourly rate without any Cost Cap.

79.  In my view, it was also specious to suggest that because Wong did not expect Liu to write out a cheque in the exact billed amount in payment of any of the 1^st to 4^th Bills, such Bills were merely provided to Liu for her to see what work had been done.  Such argument ignored the billing arrangements as explained in paragraphs 23, 48-50 and 77 above.  The reality was that the 1^st to 6^th Payments were payments on account of costs to be charged by LLL pursuant to Bills to be issued, so when LLL formally issued the 1^st to 4^th Bills as solicitor office bills to Liu as client they were formally paid by set-off against costs on account already received.

80.  Fourthly, the 1^st to 4^th Bills were itemised bills that gave details of the items of work done with corresponding time spent on each such item, total time spent on all such items and the hourly rate(s) of the fee earner(s), all of which corroborated LLL’s case of charging Liu on an hourly rate basis but which did not sit well with Liu’s case of the Cost Cap under the Cost Cap Agreement.

81.  Fifthly, if there were any Cost Cap and/or Cost Cap Agreement (which I disagree), in my view Liu would not have paid costs on account under the 1^st to 6^th Payments in the total sum of HK$75,500.00 and/or allowed the 1^st to 4^th Bills in the total sum of HK$74,900.00 to be settled by set-off against such costs on account without any protest against LLL’s breach of the Cost Cap.  This plainly discredited Liu’s case on the Cost Cap Agreement.

82.  Liu confirmed in evidence that she understood the Cost Cap Agreement to mean she would not have to be out of pocket for any costs and disbursements in excess of HK$70,000.00 (ie any such excess fees were at LLL’s risk).  When challenged on her own case as to why she did not simply decline to make further Payments and refuse to allow further Bills to be settled by set-off against costs on account in excess of the Cost Cap, Liu was constrained to say that Wong assured her the 1^st to 6^th Payments were merely upfront or advance payments which she would recover from the Husband in the end since her case was strong, meritorious and likely to succeed.

83.  On balance, I reject Liu’s explanation.  If the parties did enter into the Cost Cap Agreement (which I disagree), Liu could easily have declined to make any payment in excess of the Cost Cap and reminded LLL of their responsibility for any excess costs and disbursements required for progressing the FC Action.  In short, there would have been no need for Liu to make any upfront or advance payments in excess of the Cost Cap irrespective of any future recovery from the Husband.  Further, in light of the findings in paragraphs 57-59 and 62 above, I am unable to accept Liu’s suggestion that she was never told her legal fees might not be recoverable from the Husband.

84.  Liu then tried to overcome this by saying that she was desperate for a divorce and did not want her divorce action to stop at that point, so she did what Wong requested her to do and paid upfront payments even in excess of the Cost Cap. She said she did not realise she could have asked LLL to bear such excess costs and disbursements, and she thought LLL would cease work on her case if she did not make any further upfront payment.

85.  I find such explanation unconvincing. I have found in paragraph 64 above that it was Liu who instructed LLL to withhold progress on her petition for divorce pending resolution of the application for interim maintenance.  This was corroborated by Wong’s E-Notes of 17 and 19 February 2004 in paragraph 99 below. But even on Liu’s own case (which I disagree), given her understanding of the Cost Cap Agreement and her business/working experience, she could hardly have thought she was required to pay or she should accede to LLL’s request to pay upfront payments beyond the Cost Cap. I find her suggested ignorance of being able to look to LLL for legal costs beyond the Cost Cap unbelievable.  In any event, as Ms Chung conceded, there was no evidence that LLL threatened to stop work on Liu’s case at all. Indeed, when questioned under re-examination as to what made her think her case would stop if she did not make any upfront payment, Liu’s answer was “I don’t know”.

86.  Liu in her evidence offered an alternative explanation by saying that Wong was aware that the Husband and Liu were not without assets, so “[Wong] can claim back the money …… [if Liu] owed him any money, because with the assets that we have, or whatever”.  She went on to say as follows:

“COURT: Madam, I thought that from the questions of counsel, by this time you have paid beyond $70,000. What is it that [Wong] can recoup from your assets? Please explain.

A: Say anything – any bills beyond that $70,000, [Wong] realized that I would have – I do have the assets.

COURT: Yes.

A: Which is the – I then show ability to recover whatever the cost.”

In my view, such evidence undermined Liu’s case of upfront payments recoverable from the Husband.  Her uncertain stance that wavered between LLL recouping costs and disbursements beyond the Cost Cap from the Husband and their recouping the same from her only served to underline the unreliability of her case.

87.  More importantly, on Liu’s case, the combined effect of the Cost Cap Agreement (ie Liu would not be liable for any costs and disbursements beyond the Cost Cap) and Wong’s assurances (ie Liu would recover her upfront payments to LLL beyond the Cost Cap from the Husband in due course) amounted to serious and persistent breach of the indemnity principle.  There was no sensible reason for Wong and/or LLL to commit such flagrant breach of the indemnity principle for a first-time client such as Liu, especially when Wong was clearly aware of the risk of adverse costs order against Liu in the FC Action if she did not act reasonably (see paragraphs 57-59 and 62 above).

88.  Sixthly, Liu complained that Wong failed to inform her about progress of the FC Action, and she claimed she was under the impression the divorce action was already half over when in fact her petition for divorce and application for interim maintenance were still in their early stages.  Liu claimed that because (a) she lacked information in respect of the FC Action, (b) Wong assured her of eventual recovery of the upfront payments from the Husband and (c) changing solicitors at that point would not be time and cost effective, so she continued to make upfront payments to LLL.

89.  On balance, I reject such contentions.  The above account of developments in the FC Action was supported by Wong’s contemporaneous E-Notes and attendance notes.  Further, LLL made regular reports to Liu via telephone, meetings and/or correspondence and by provision of copies of key documents to her. I am persuaded that Wong and LLL kept Liu reasonably up to date as to the progress of the FC Action.  I also prefer Wong’s evidence that at various stages of the FC Action either on his own initiative or at Liu’s request he informed her of the updated status of LLL’s incurred time costs.

90.  Seventhly, it was suggested that the mistakes in the Bills tended to suggest that LLL did enter into the Settlement Agreement.  As illustration, Ms Chung referred to 5 items of work in the 1^st Bill which seemed to have the same dates and descriptions as 5 items of work found in the 2^nd Bill.  However, in dealing with preliminary issues and not the taxation proper, I am unable to assume on the face of the 1^st and 2^nd Bills that there could only be, say, 1 telephone conversation between Wong and Liu on a particular day, or, say, Wong only worked on an identified task (eg approving draft affirmation) for only one time period on a particular day.  This could be illustrated by the following entries in the 1^st and 2^nd Bills:

“25/04/03	drafting a letter to [the Husband]	SW – 78 mins”	[1st Bill]
“25/04/03	drafting a letter to [the Husband]	SW – 34 mins”	[2nd Bill]

I am unable to appreciate Liu’s basis for saying that these 2 items of work were on the face of the 1^st and 2^nd Bills necessarily duplicated items.  I note that the corresponding time spent was different for these 2 items of work. As Wong explained (and on balance I accept), details of the items of work and the corresponding time spent by the fee-earner set out in the Bills were extrapolated from LLL’s electronic timesheet records.  Bearing in mind that the LLL’s fee-earner could input E-Note entries on the same day of work done or some time afterwards (see eg work done on 13 January 2003 and corresponding E-Note entered 2 days later in paragraph 35 above) and such fee-earner could have worked on the case at different time periods within the same day with different time sheet entries for the day (see eg 3 E-Notes by Wong on 27 August 2004 in paragraph 111 below), there was a real possibility that some entries for work done on a particular day would appear in one Bill and other entries for work done on that same day would appear in the next Bill.  In my view, Liu failed on balance to establish that the complained items were necessarily duplicated items of work on the face of the 1^st and 2^nd Bills.

91.  In any event, as conceded by Ms Chung, Liu never complained or asked LLL to clarify these allegedly duplicated items or indeed any other item of work in any of the Bills until the DC and OS Actions.  Ms Chung submitted that such lack of complaint indicated that Liu did not examine the relevant Bills which further evidenced the existence of the Cost Cap Agreement.  Ms Chung claimed that under the Cost Cap Agreement details in the Bills would not have mattered to Liu’s overall costs so she had no need to examine the breakdown in the Bills in detail or to dispute individual items of work.  However, such submissions did not sit well with Liu’s own evidence that from the very beginning when Wong asked for initial costs of account she was insistent on having a breakdown for costs incurred in exercise of her right as consumer to know what kind of work LLL had done and how she was charged (see paragraph 53 above).  I am not persuaded that Liu as an experienced businesswoman and savvy consumer would have ignored the detailed breakdown in the Bills because of the Cost Cap Agreement.  I find on balance that she did not raise any query or complaint because the manner of billing in the Bills accorded with her understanding of LLL’s billing arrangements in paragraph 23 above.  In my view, Liu was unable to show any obvious error in the Bills on the evidence before me let alone any reasonable inference that LLL must have entered into the Settlement Agreement.

IX.  Hearing of the Application for Interim Maintenance

92.  On 10 December 2003, LLL requested Liu to pay costs on account in the sum of HK$20,000.00 for their further handling of the FC Action.

93.  On 17 December 2003, H H Judge Chu ordered the Husband to produce various bank account statements.  On 30 December 2003, Wong emailed a draft of Liu’s 2^nd affirmation for her comments.  On the following day, Wong had a meeting with Liu at LLL’s offices to discuss such draft.

94.  On 3 January 2004, Liu made the 7^th Payment in the sum of HK$20,000.00 accompanied by her handwritten note addressed to Wong that stated “[please] find enclosed check for the cost account”.  By such time, Liu had already paid total costs on account in the sum of HK$95,500.00 that well exceeded the Cost Cap.  I find on balance that Liu continued to pay costs on account because she knew further time costs were incurred as a result of LLL actively preparing for the adjourned hearing of her application for interim maintenance and not as upfront payments as she alleged.

95.  On 8 January 2004, LLL sent Liu (a) copy letter from GLP with enclosures, (b) the 1^st draft of her 3^rd affirmation of means, and (c) 2^nd Supplemental Opening Submission with schedule, and GLP also submitted written submissions on behalf of the Husband.  On the following day, LLL submitted Reply Submission with annexures.

96.  On 9 January 2004, Wong attended the hearing before H H Judge Chu, which hearing was adjourned part-heard.  On 26 January 2004, LLL sent Liu copy Supplemental Submission on behalf of the Husband with annexures for her perusal and instructions, and LLL also submitted the 3^rd Supplemental Opening Submission with revised schedule and list of authorities.  On 27 January 2004, LLL prepared Submission on Costs.

97.  After the part-heard hearing on 27 January 2004 before H H Judge Chu, Wong had a meeting with Liu at LLL’s offices to advise her and to take her instructions on the following matters (see Wong’s E-Note entered on 28 January 2004):

“ 1. Asked her insurance agent to prepare a summary of the necessary needs of 13 insurance policies.

2. Ask [the Daughter] to keep invoices/bills for various lessons.

3. Ask client’s father to keep all outgoings invoices.

4. Ask client to prepared summary of outgoings for Canada property and her and her father’s contribution.

5. Ask client to think about where to have divorce by one year consent.

6. Client instructed to deal with custody of [the Son] after his exam in mid April.”

Item 5 in the above E-Note showed that Wong was mindful of the costs implications discussed in paragraphs 57-59 above, and that he was careful to remind Liu again as the FC Action progressed.  But Liu did not heed such advice until much later (see paragraph 114 below).

98.  On 10 February 2004, H H Judge Chu varied the existing interim maintenance order by directing the Husband to pay each of the Children interim maintenance of HK$10,000.00 per month to commence from 1 January 2004 and thereafter on the 1^st day of each calendar month until further order with credit given for amounts already paid.  The question of costs was reserved for consideration either on a date to be fixed or at the hearing for financial ancillary relief.

99.  On 17 February 2004, after Wong advised Liu on the merits of an application for costs, she instructed Wong to fix a date for argument on costs, and she would consider “to proceed with Petition and ask for [LLL’s] advice” (see Wong’s E-Note of the same date).  On 19 February 2004, Liu instructed LLL inter alia to fix a date for argument on costs.  On 25 February 2004, Liu told Wong inter alia that “she will pay [LLL] $25,000 as further costs on account. [Liu] also instructed to file Reply & Answer to Petition & to proceed with petition” (see Wong’s E-Note of the same date).

100.  Liu made the 8^th Payment in the sum of HK$25,000.00. On 2 March 2004, LLL issued an official receipt for such sum as “costs on account”.

101.  The Husband applied for leave to appeal against the interim maintenance order and for stay of execution pending appeal.  On 8 March 2004, LLL sent Liu copy Submission on her behalf with list of authorities and copy Skeleton Argument by counsel for the Husband.  On 9 March 2004, LLL sent Liu copy Reply to the Respondent’s Skeleton Arguments.

102.  At the hearing on 9 March 2004 attended by counsel for the Husband and Wong for Liu, H H Judge Chu refused to stay execution but granted leave to appeal.  On 16 March 2004, GLP filed the Notice of Appeal, and Wong advised Liu on “the appeal procedure etc”.  The appeal was listed to be heard on 3 September 2004.

X.  9^th Payment

103.  On 30 April 2004, Liu informed Wong about the Son’s future study and career plan, instructed LLL to file the Reply to Cross-Petition, and said she “will send [LLL] further costs on account of $20,000 by mid May” (see Wong’s E-Note of the same date).

104.  Wong gave evidence (and on balance I accept) that on 30 April 2004 Liu told him she was planning to leave Lexmark and start her new career as an insurance agent, but she needed to pass a qualifying examination and build up her customer base before she could generate income.

105.  Through introduction by a friend, Liu decided to engage Mr Jimmy Kwong (“Kwong”) to appear as her counsel at the appeal.  On 20 May 2004, Wong reminded Liu to confirm Kwong’s availability and brief fee for the appeal, and “[Liu] instructed to settle custody issue of [the Son] first as she wanted to bring [the Son] to Canada in September for study after hearing.  [Liu] will make payment to [LLL] next week” (see Wong’s E-Note of the same date).

106.  On 24 May 2004, LLL issued the 5^th Bill in the sum of HK$45,000.00 which was settled by set-off against the 7^th and 8^th Payments being costs on account already paid by Liu.

107.  According to Wong’s E-Note of 10 June 2004, Liu instructed Wong “to send submissions to [Kwong] for his quotation of counsel fee. [Liu] will send [LLL] further costs on account today”.  On 14 June 2004, Wong attended the hearing on costs. Liu then made the 9^th Payment in the sum of HK$5,000.00 to LLL accompanied by her handwritten note addressed to Wong as follows:

“Simon:

Please accept this check for $5,000 as payment first. As I just started the new job this morning, and don’t expect to see any commission till later, likely be Aug or later.

Thank you for understanding and sorry for any inconvenience caused. As this case is really dragged too long and far exceeded my original budget.

   x     x     x    Thanks Anissa”

On 19 June 2004, LLL issued an official receipt for such sum as “costs on account”.

XI.  Appeal

108.  On 22 July 2004, Kwong advised Wong inter alia that his brief fee for the appeal was HK$15,000.00, and he would need to have a meeting with Liu in late August 2004.  By a letter dated 3 August 2004, LLL informed Liu that “[for LLL] to confirm [their] engagement of [Kwong] for the appeal hearing, [LLL] would be grateful if [Liu] could let [them] have HK$25,000 (HK$15,000 being counsel fee and HK$10,000 being [their] further costs on account) as soon as possible.”

109.  On 10 August 2004, Wong arranged a conference with Kwong and Liu to be held after 20 August 2004 and reminded Liu to send a cheque for HK$25,000.00 as costs on account as soon as possible (see Wong’s 2 E-Notes of the same day).  On 13 August 2004, Wong “[urged Liu] to pay counsel fee and advised [her] on the time estimated of say about 7 months for getting back the costs from [the Husband] if succeed the appeal.  [Liu] will enquire whether counsel agrees to defer sending fee note for say 6 weeks as [she] has no money to pay costs on account.  [Liu] will call back” (my emphasis and see Wong’s E-Note of the same date).  On 16 August 2004, Liu informed Wong inter alia that “she understand that Counsel agreed not to claim counsel fee for a period of 6 months” (see Wong’s E-Note of the same date).

110.  Although Liu’s evidence in respect of the Cost Cap agreed upon in January 2003 did not draw any distinction between counsel’s fees and other disbursements, she later gave evidence that counsel’s fees (ie Kwong’s fees) fell outside the Cost Cap such that only LLL’s request for HK$10,000.00 as costs on account for LLL’s costs and other disbursements and not the request for HK$15,000.00 as costs on account for Kwong’s fees fell within the Cost Cap.  Interestingly, Liu did not ask Wong to clarify the coverage of the Cost Cap or protest against breach of the Cost Cap when Wong asked for the costs on account in the sum of HK$25,000.00 in the paragraphs 108-109 above.  On balance, I find Liu’s evidence to be an unreliable afterthought put up to excuse her conduct in paragraphs 107-109 above.  Liu’s instructions to Wong to obtain Kwong’s quotation of his brief fee, LLL’s reluctance to confirm engagement of counsel until they had costs on account for counsel’s fees, and Liu’s efforts to defer Kwong’s fee note because she had no money for costs on account all contradicted Liu’s case of the Cost Cap and/or Cost Cap Agreement which should have left her unconcerned with these matters as she had already made Payments that exceeded HK$15,000.00 beyond the Cost Cap.

111.  On 20 August 2004, counsel for the Husband lodged his Skeleton Argument for the appeal with list of authorities.  It was recorded in Wong’s 3 E-Notes of 27 August 2004 that:

(a) Kwong advised that Liu should seriously consider compromising the interim maintenance at HK$17,000.00 per month with custody of the Son to her and divorce by consent on the ground of 1 year’s separation, but failing any agreement Kwong would lodge his skeleton argument with the court;

(b) the Husband offered to settle by (i) agreeing to pay HK$13,000.00 per month as interim maintenance, (ii) following the Son’s views as to who should have custody, and (iii) selling the property in Canada to share the net proceeds out of which “$200,000.00 [be] to [the Children] as school fee”;

(c)  after discussion Liu decided to counter-offer to the Husband “to accept $18,000 with [the Son] to her and postpone the settlement of assets” and “[Wong] advised [her] to ask [the Husband] to bear the costs of appeal’;

(d) the Husband only agreed to pay HK$15,000.00 which was rejected by Liu, so she instructed Wong to proceed with the appeal;

(e)  “[Wong] also advised [Liu] on the implication of the settlement of appeal on the costs of the application for [MPS].”

Kwong’s skeleton argument was lodged with the court on 31 August 2004.

112.  On 2 September 2004, there was no further progress with negotiations.  Liu informed Wong that in addition to being an insurance agent she also worked as a consultant by Lexmark doing “some consultancy work for setting up company business in PRC”.

113.  On 3 September 2004, the appeal was heard by the Court of Appeal.  By a judgment handed down on 13 September 2004, the appeal was allowed with the interim maintenance reduced to HK$8,000.00 per month for each of the Children, and each party was to bear his/her own costs of the appeal and of the hearing below.

XII.  Son’s Custody, 10^th Payment and 6^th Bill

114.  Wong gave evidence (and I accept) that Liu was upset by the appeal result.  On 20 September 2004, Kwong met Liu, Lee and the Sister in conference to explain about the appeal, and thereafter Wong advised Liu on post-appeal overall strategy including preparing a demand letter from Liu’s father (“Father”) to the Husband (see paragraph 97 above and paragraphs 116 and 139 below) and obtaining all supporting documents within 1-2 weeks.  Liu “agreed to consent to divorce for one year separation with consent”.

115.  On 2 October 2004, Liu informed Wong that the Husband had just gone to Canada and told the Father he was going to sell H’s Property, so Wong advised her to consult a Canadian lawyer to register a charge against such property.  On 4 October 2004, Liu told Wong the Father reported that the Husband was living at the jointly-owned Canadian property and selling H’s Property, so she would seek advice from her Canadian lawyer on registering the petition for divorce against such property.  On 18 October 2004, Liu told Wong her Canadian lawyer would register her petition for divorce (which should be notarised) against H’s Property for CAD6,000.00.

116.  On 2 November 2004, Liu instructed Wong to write to GLP to propose settlement of the Son’s custody, and she agreed to deal with the Father’s claim against the Husband for “arrears of maintenance fees and find time to sort out the documents for [LLL]”. “[Liu] would send [LLL] further costs on account” (see Wong’s E-Note of 2 November 2004).  So on 24 November 2004, LLL wrote to GLP to explore settlement by suggesting that the Son’s custody be granted to Liu with reasonable access to the Husband. Wong’s E-Note of 24 November 2004 recorded that “[LLL] should also be grateful if [Liu] could arrange to let [them] have $20,000 to settle part of [their] costs and disbursements.”

117.  Liu paid the 10^th Payment in the sum of HK$20,000.00 accompanied by her handwritten note addressed to Wong that stated “[please] find enclosed check of $20,000 to cover the partial costs.  Appreciate all your help & understanding”. On 2 December 2004, LLL issued an official receipt for such sum as “costs on account”.

118.  On 3 December 2004, Wong informed GLP that Liu would like to settle the custody issue as soon as possible. On 10 December 2004, LLL issued a letter to GLP to invite a response to Liu’s proposal.

119.  On 31 December 2004, LLL issued the 6^th Bill for the total sum of HK$25,000.00, ie HK$2,107.00 being disbursements and HK$22,893.00 being profit costs, which was paid and settled by set-off against the 9^th and 10^th Payments being costs on account already paid by LLL.  By a letter of the same date, LLL forwarded the 6^th Bill to Liu and informed her there was no response from GLP.

XIII.  Cost Cap and Upfront Payments?

120.  From the above account, a number of matters are of note and they all tended to show the unreliability of Liu’s case.

121.  First, as seen above, Liu never complained about making the 7^th to 10^th Payments, all of which exceeded the Cost Cap.  The 7^th, 9^th and 10^th Payments were accompanied by Liu’s handwritten notes addressed to Wong.  In my view and as explained in paragraphs 127-131 below, the contents of the handwritten notes contradicted Liu’s case because they together with the 7^th to 10^th Payments and the 5^th and 6^th Bills plainly showed that Liu was well aware LLL was actively working on the FC Action and generating time costs on hourly rate basis for which costs on account were required.

122.  Secondly, the above account also demonstrated that Liu’s financial constraints following her departure from Lexmark combined with the disappointment of the appeal decision marked the turning point in her litigation attitude.  After the appeal, the key outstanding matters were the petition and cross-petition for divorce, the Son’s custody and the financial ancillary relief. Previously Liu chose not to compromise or consider any uncontested divorce on the ground of 1 year’s separation (see paragraphs 59, 62, 69, 97 and 111 above) and paid the 7^th and 8^th Payments with a view to fight the Husband all the way, which stance necessarily entailed effort and hence time costs (on hourly rate basis) on the part of LLL.  But after the appeal, Liu lost heart and took the initiative to send overtures to the Husband for overall settlement of the outstanding issues (including the Son’s custody, divorce by consent, etc) (see paragraphs 114, 116 and 118 above and paragraphs 144 below).  In my view, the progress of the FC Action was essentially dictated by Liu’s litigation strategy which changed over time, and this had impact on costs and billing as discussed below.

123.  Thirdly, Wong claimed (but Liu denied) that Liu requested LLL to slow down their billing due to her unstable income after April 2004 following her change of job (see paragraphs 104, 107 and 122 above), and that LLL complied with such request because at that stage they still considered her to be a person of integrity with good earning ability.  Indeed, Liu admitted that after April 2004 she did not have stable income and her financial budget was tight, and she asked Wong for time to pay costs on account and to accept part payment.  On balance, I accept Wong’s evidence.

124.  The above was borne out by the Schedule which showed that LLL billed Liu at reasonably regular intervals for the 1^st to 4^th Bills each of which covered items of work for the past 3-5 months, and that LLL regularly asked her for costs on account.  I do not believe (as Liu claimed) that she was unaware such fact until she was cross-examined by Mr Wang, counsel for LLL, even though she had already received the 1^st to 4^th Bills and made the 1^st to 6^th Payments.  On 27 May 2004, LLL issued the 5^th Bill that covered work for the period from 12 July to 5 August 2003 (see paragraph 106 above), and on 31 December 2004 LLL issued the 6^th Bill that covered work for the period from 6 August 2003 to 31 December 2004 (see paragraph 119 above).  Plainly there was a slowing down in LLL’s billing after April 2004, which I find was the result of LLL’s accommodation of Liu’s request due to her financial difficulties.

125.  Fourthly, I do not accept that Liu believed she was a victim of Wong’s miscalculation of the costs required for the FC Action such that she could only afford to pay HK$5,000.00 as costs on account by the time of the 9^th Payment.  Even on Liu’s own case (which I disagree), although she was in financial difficulties, she knew she had made Payments well in excess of the Cost Cap, so if she felt she was forced to put up costs on account due to Wong’s miscalculation, there was no satisfactory reason why (even according to Liu) she merely protested against the amount and timing of the costs on account sought by LLL by paying a sum of HK$5,000.00 (and not HK$20,00.00 as requested) in June 2004 (and not in May 2004 as requested), but did not complain against the very need to pay further costs on account in excess of the Cost Cap itself.  On balance, I reject Liu’s evidence and find that she never made any protest at all because LLL’s requests for costs on account and their Bills were in accordance with what she knew to be the billing arrangements in paragraph 23 above save and except for LLL’s accommodation in slowing down their billing at her request.

126.  Fifthly, Liu tried to explain she was under the impression that the upfront payments were necessary for proceeding with her petition for divorce and that she would be able to recover such upfront payments from the Husband in due course.  But such argument was discussed and rejected in paragraphs 82-86 above.  Liu also claimed that at that time she desperately wanted a quick divorce so as to have access to the matrimonial assets and monies (see paragraph 84 above).  But as evident from paragraph 64 above, it was Liu who put her petition for divorce on hold pending disposal of the application for interim maintenance, and she only revived her petition for divorce in/after February 2004 (see paragraph 99 above).

127.  Sixthly, Liu’s handwritten note that accompanied the 9^th Payment also contradicted the Cost Cap Agreement.  Ms Chung argued that the reference therein to “this case is dragged too long and far exceeded my original budget” was in fact Liu’s protest against Wong’s requests for further costs on account that exceeded the Cost Cap.  I find this to be an unnatural misreading of the objective tenor of the above handwritten note.

128.  When Liu sent the above handwritten note to Wong, she was only able to pay HK$5,000.00 out of the requested sum of HK$20,000.00 as costs on account not as a protest but because she was unable to earn any commission income from her new job as an insurance agent until August 2004 or later (see paragraph 107 above).  Consequently, the tone of the above handwritten note was apologetic (ie “[thank] you for your understanding and sorry for any inconvenience caused”), which would have been inexplicable if such note were meant to be a complaint or protest.

129.  Liu further explained that she paid a smaller sum as costs on account because the divorce proceedings were more costly and took longer than she expected (ie “this case is really dragged too long and far exceeded my original budget”).  The reference to “my original budget” (my emphasis) at most referred to Liu’s own expectations and could not be a reference to any Cost Cap agreed upon by the parties.

130.  The same apologetic tone was adopted in Liu’s handwritten note that accompanied the 10^th Payment (ie “[appreciate] all your help & understanding”) (see paragraph 117 above), which went far beyond mere business courtesy and etiquette as suggested by Liu.  In my view, the above handwritten notes did not contain any protest on the part of Liu.  On the contrary, they affirmed that she fully recognised the need to pay costs on account but had difficulty in meeting such requests.

131.  Seventhly, by the handwritten note that accompanied the 10^th Payment Liu acknowledged that such payment was intended to “cover partial costs” (see paragraph 117 above), which meant that more payments and more charges well in excess of the total paid sum of HK$145,500.00 let alone the Cost Cap were expected and which in turn did not sit well with Liu’s allegation of the Cost Cap Agreement.

132.  In summary, by December 2004 the 1^st to 10^th Payments in the total sum of HK$145,500.00 clearly demonstrated that Liu fully understood LLL charged and would charge her on hourly rate and not capped fee basis. This was corroborated by her lack of protest against LLL’s charging basis, by LLL’s requests for costs on account and/or by LLL’s Bills.  I reject Liu’s contentions of any Cost Cap and/or Cost Cap Agreement or of complaints in relation thereto.

XIV.  After December 2004

133.  Liu claimed that “…… the whole thing [ie the divorce proceedings] is not going anywhere” and she became concerned over LLL’s incessant demands for costs on account even though Wong assured her that her upfront payments would be recoverable from the Husband in the end.  She said that she became fed up with the entire situation, so she complained to LLL by her handwritten note that accompanied the 9^th Payment (which I disagree, see paragraphs 127-129 above), and told Wong over the telephone in late 2004 or early 2005 that she would not pay any more legal costs and disbursements.  Liu assumed no further work would be done after November 2004 and in fact Wong did not further communicate with her or inform her of any progress of the FC Action.  So Liu was amazed that LLL issued the 7^th Bill in November 2004, which reflected LLL’s unreasonableness in their billings.

134.  On balance, I prefer Wong’s evidence that Liu never told him she would not pay further Bills or make further Payments.  First, I have discussed and rejected Liu’s contentions as to (a) the Cost Cap Agreement and (b) Wong’s assurance that her upfront payments would be recoverable from the Husband in the end.

135.  Secondly, my findings in relation to Liu’s handwritten note that accompanied the 10^th Payment in paragraphs 130-131 above plainly showed that Liu’s suggestion that she was fed up with the entire situation and so refused to pay any more legal costs was unreliable.

136.  Thirdly, it was not correct for Liu to say that Wong did not further communicate with her on the progress of the FC Action after November 2004.  But in fact, even after November 2004, Wong continued to actively advise Liu over the issues of inter alia (a) the Son’s custody and (b) the registration of Liu’s petition for divorce against H’s Property (collectively, “Related Matters”).

137.  Liu claimed she asked Wong to stop work on the FC Action and only to follow up on the Related Matters which she claimed to be separate and distinct from the FC Action.  As will be seen below, although Liu criticised the quality of LLL’s work in preparing her power of attorney in favour of the Father for registering her petition for divorce against H’s Property in Canada, she accepted that LLL was entitled to charge for the above work that fell outside the Cost Cap. Liu added that she would not have engaged LLL to act for her on the Related Matters had she been aware there were still substantial amount of unbilled legal costs.

138.  On balance, I do not accept Liu’s contentions and find that the Related Matters were in fact related to the FC Action.  After all, the Son’s custody must be resolved before the divorce could be finalised, and the couple’s respective assets and means must also be looked into before the financial ancillary relief could be resolved.  According to Liu,

(a) she was all along desperate for a quick divorce;

(b) by December 2004 the decree nisi had not been granted but she had already paid LLL costs and disbursements in the total sum of HK$145,500.00 which was more than double the Cost Cap agreed upon;

(c)  the parties still maintained a cordial professional working relationship after December 2004 in respect of the Related Matters (see paragraph 137 above).

I find it incredible that Liu would have asked LLL to stop all work on the divorce action.  Even on Liu’s own case (which I disagree), all she had to do was to remind LLL of the Cost Cap and of their responsibility for any excess costs and disbursements beyond the Cost Cap and then require them to get on with the FC Action to obtain a divorce nisi at their own risk as to costs.  In my view, it was telling that Liu did not do so.

139.  In my view, the only credible and plausible explanation was that Liu never asked LLL to stop work on her divorce action, but she simply lost heart after the appeal and adopted alternative strategy to invite an overall settlement covering maintenance, the Son’s custody and uncontested divorce by consent on 1 year’s separation (see paragraph 122 above), so she was anxious to gain tactical leverage in the negotiations for overall settlement by registering her petition for divorce against H’s Property and by having the Father claim against the Husband for arrears of maintenance fees (see paragraph 114 above).  In my view, this was the key reason why the divorce action did not progress much further after the appeal.

140.  Further, it was also clear that the Son’s custody was a material and relevant consideration that was canvassed from an early stage within the context of the divorce action (see paragraphs 57 and 97 above).  Further, as explained in paragraphs 116 and 118 above and paragraph 141 below, proposals concerning maintenance, the Son’s custody and divorce by consent were all raised as part of Liu’s overtures to the Husband for an overall settlement.  I disagree that the Son’s custody was a separate and distinct matter.  Likewise, Wong gave evidence (and I accept) that Liu wanted to register the petition for divorce as a caution against H’s Property “in order to force him to have overall settlement of this case.  That is the latest strategy adopted by [Liu] at the end – the later part of the proceedings”.  Again, such tactical/protective step could not be any separate or distinct matter (see paragraphs 57, 60, 67-68, 115 and 137 above and paragraphs 141-144 below).

XV.  7^th and 8^th Bills and Settlement Agreement

141.  On 17 February 2005, Liu told Wong that her Canadian lawyer would help her register the petition for divorce.  Wong advised Liu to find out whether the power of attorney for such purpose in favour of the Father for use in Canada had to be notarised. Liu also instructed Wong to respond to the Husband’s proposal made in mid-January 2005 for joint custody of the Son, so on the same day LLL sent a letter to GLP and reported to Liu with a request for “$20,000 to settle part of [LLL’s] costs and disbursements of this case at [her] earliest convenience”.

142.  On 18 February 2005, Liu reported to Wong that her Canadian lawyer advised that the power of attorney should not only be notarised but should specifically give power to the Father to provide instruction and to sign all necessary documentation for placing the caution.  On the same day, Wong sent draft power of attorney and sealed copy of the petition for divorce to Liu for onward transmission to her Canadian lawyer “for comments and reference.  Please let [Wong] know whether [Liu’s] Canadian lawyer finds the draft Power of Attorney in order for [her] purpose”.

143.  On 19 February 2005, Liu received engrossment power of attorney from her Canadian lawyer.  Wong made arrangements for Liu to execute the same before a notary public on 21 February 2005.  On 21 and 22 February 2005, Wong advised Liu and Liu’s Canadian lawyer responded through Liu on the nature of the caution and whether the Husband could oppose it.  On 11 March 2005, Liu’s Canadian lawyer reported there was trouble with the caution because the subject property was not the matrimonial home.  Between 11 and 30 March 2005, there were email communications between Wong and the Canadian lawyer (through Liu) on how to resolve this.

144.  It was plain from the above that Liu wanted to register the petition for divorce against H’s Property as a tactical step to press the Husband for an overall settlement (see paragraph 122 above).  In my view, subject to the itemised objections raised in Liu’s List of Objections in the eventual taxation of the Taxation Bill, it was not unreasonable for LLL to charge Liu for work done in relation to the power of attorney.  Indeed, Liu agreed that such work was in principle chargeable as being outside any Cost Cap.

145.  By mid-2005, although Liu had made the Payments in the total sum of HK$145,500.00 and there was no decree nisi as yet, pending taxation of the Taxation Bill, I am unable to say that the Payments and the 1^st to 6^th Bills were unreasonable and excessive.  I bear in mind that the petition for divorce and the application for interim maintenance were hotly contested and even taken on appeal.  The above account of events also demonstrated that LLL and Wong did fair amount of work on the case.  I am unable to say that in charging Liu a total sum of HK$507,291.00 as legal costs and disbursements for the FC Action would be on the face of the Bills prima facie excessive, unjustified and unreasonable.

146.  Further, Wong’s E-Note of 16 April 2005 made clear that Liu never told Wong to cease all work in the FC Action and/or that she would not make any further payments to LLL.  According to such E-Note, Wong had a telephone conversation with Liu and on being told by Liu that she would bring the Son to study in Canada he advised her to wait until the Son settled down in Canada before “proceed to petition and [he] asked [Liu] for further costs on account and [she] agreed to pay some”.  Liu’s lack of protest against Wong’s request for costs on account and her willingness to pay further costs on account contradicted her case that she would not make further payments after December 2004.  Wong’s advice to Liu to proceed with the petition for the Son settled down in Canada also did not sit well with Liu’s case that she had told Wong not to work on the FC Action after December 2004.

147.  I accept that eventually the FC Action could not progress because Liu did not give further instructions to LLL and/or failed to pay any further costs on account.  As a result, LLL issued the 7^th Bill in the sum of HK$30,000.00 on 14 June 2005.  No payment was forthcoming from Liu, so 4 reminder letters were sent to her on 8 July, 25 July, 8 August and 8 September 2005 warning that LLL would commence legal action if payment were not received shortly.  But even with the threat of legal action, it was interesting to note that Liu still made no protest or complaint of breach of the Cost Cap Agreement, which she could easily have done by telephone, email and/or handwritten note (ie her usual modes of communication with Wong).

148.  In/about October 2005, Liu also instructed LLL to (a) prepare a power of attorney to be executed by the Father in Liu’s favour to deal with the Father’s Hong Kong property, and (b) handle the administration of the estate of Liu’s deceased mother. LLL issued separate bills on these 2 matters and they were settled and paid by Liu in October 2005 and March 2006.  I accept these matters were separate and distinct from Liu’s divorce and ancillary relief proceedings.  In my view, they demonstrated that Wong was still in touch with Liu professionally in 2005 and early 2006 but for her own reasons Liu chose not to (i) pay any costs on account and/or the 7^th Bill and/or (ii) give instructions to progress the FC Action.

149.  More importantly, if according to Liu she was not told and did not expect further costs after December 2004, I find it strange that she did not complain to Wong about the 7^th Bill when she still had on-going solicitor-client relationship with LLL at least from October 2005 to March 2006 as explained above.

150.  In mid-November 2005, LLL’s accounts clerk informed Wong that the 7^th Bill was still outstanding. Wong said (and I accept) that when he was finally able to reach Liu by telephone, she wanted to know the total amount of outstanding legal costs so she could work out how to prepare and arrange for payment.

151.  Liu’s answer to all this was there was no basis for LLL to issue the 7^th Bill because she had told Wong to stop work on the FC Action after December 2004.  I find this unconvincing (see paragraphs 139 and 146 above).

152.  According to Liu, she was not liable for legal costs and disbursements in excess of the Cost Cap (apart from counsel’s fees), and Wong assured her she would recover her upfront payments from the Husband.  But by December 2004, Liu had not recovered any costs from the Husband, and she could not hope to recover such costs from the Husband by asking LLL to stop work on the FC Action.  Liu’s stance was therefore self-contradictory.

153.  In overcome this, Liu claimed (but Wong denied) that in/about late November 2005 she told Wong she wanted to have back all the papers concerning her divorce and ancillary relief proceedings as she planned to move back to Canada with the Children.  She knew that by pulling the papers from LLL she would little or no chance to recover costs from the Husband, but at that time she wanted “to get out of this mess”, move to Canada and restart her divorce proceedings there.

154.  On balance, I am not persuaded by Liu’s evidence in this respect, which never featured in either her witness statements in the DC Action or in her affirmations in the OS Action.  I am convinced that it was nothing but a desperate last-ditch attempt by Liu to address an inherent weakness in her case.  In any event, I am unable to discern any tactical, time or cost advantage for Liu by pulling the papers from LLL without proper closure of her divorce proceedings in Hong Kong and restarting all over again concurrent divorce proceedings overseas but with a caution premised on Liu’s extant petition for divorce in Hong Kong against H’s Property.

155.  On 29 November 2005, Wong sent email to inform Liu as follows:

“As spoken and requested, [Wong] would like to inform [Liu] that according to our time sheet records, [LLL’s] total unbilled hours for this case is about 100 hours (inclusive of the time covered by [the 7^th Bill] dated 14/6/2005). The remaining costs of this case is therefore about $2,500 x 100 hours = $250,000. Since [the Husband] was ordered to pay [LLL’s] costs in relation to his stay application, [Wong estimates] that about 8 hours out of the above total 100 hours of [LLL’s] costs, i.e. $20,000 ($2,500 x 8 hours) will be paid by [the Husband] to [LLL] at the end of the trial of this case.

[Wonghopes Liu] would appreciate that the following time has been spent just for attending the various court hearings for [Liu]:

Before H H Judge Chu for [MPS] application on 1/9/03	2 hrs 27 mins
Before H H Judge Chu for [MPS] application on 21/7/03	4 hrs 25 mins
Before H H Judge Chu for stay application and leave to appeal application on 9/3/04	1 hr 21 mins
Before H H Judge Cheung and Judge Woo for appeal on 3/49/03	2 hrs 6 mins
10 hrs 19 mins (= $25,791)

The above time does not cover [LLL] spent on taking [Liu’s] instructions, preparing and drafting [her] various Affirmations, the various written submissions, list of authorities, doing legal researches and reviewing and considering legal authorities and numerous documents and materials.”

156.  Liu claimed it was the first time she was informed about LLL’s unbilled legal costs and disbursements, and she was absolutely furious when she read the email.  She claimed she could not understand how HK$250,000.00 of unbilled costs came about because Wong had not contacted her over the past year except on unrelated matters and she assumed no further work would be done by LLL after December 2004.  By reason of the matters discussed in paragraphs 133-139 above, I reject these contentions.

157.  Ms Chung submitted that it was only after Liu told Wong that she wanted to take back the papers as she was going to move to Canada that Wong sent the above email.  Had Liu not made enquiries about the divorce action, Wong would not have informed her about the unbilled costs.  No formal bill was prepared at the time, so the purpose of such email from Wong was to get as much money as possible from Liu one final time.

158.  I disagree. In fact, Wong had given a credible explanation for the above email in paragraph 150 above.  In any event, I have rejected Liu’s evidence that she wanted to take the papers from LLL (see paragraph 154 above), so the above argument could not stand.

159.  Liu claimed that in/about early December 2005, having studied the above email, she complained to Lee by telling him how ridiculous this entire thing had become.  But she conceded (and told Lee) that the time costs for court appearances in the sum of HK$25,791.00 in the above email seemed reasonable, and she asked Lee to voice her objections to LLL and to negotiate with Wong.  Lee later informed her that after speaking with Wong it was orally agreed that LLL would only require her to pay for their time costs for attending court hearings in the sum of HK$25,791.00 in full and final settlement of all outstanding billed and unbilled legal costs and disbursements (ie Settlement Agreement).

160.  Ms Chung submitted that given that Wong had breached the Cost Cap Agreement and Liu had already paid double the amount of the Cost Cap, when Liu agreed to make 1 final payment of HK$25,791.00 through Lee to settle the matter once and for all Wong jumped at the chance.  Furthermore, the sum of HK$25,791.00 was sufficient to cover disbursements allegedly still owed being counsel’s fees of HK$15,000.00 and HK$150.00 for postage and copying.  The rest merely pertained to LLL’s profit costs.

161.  But even on Liu’s case (which I disagree), she was already upset with LLL for issuing the 7^th Bill in breach of the Cost Cap Agreement, and she knew that pulling the papers from LLL would mean there was little hope of recovery of her upfront payments to LLL (which were more than double the Cost Cap) from the Husband.  Yet the Settlement Agreement still called for further payment of a sum of HK$25,791.00 that was undoubtedly well in excess of the Cost Cap.  There seemed to be little reason for Liu even on her own case not to insist on the Cost Cap and instead be willing to pay for LLL’s time costs for court attendances.

162.  Liu made 2 points. First, she contended that since the divorce action had dragged on for too long and she would restart her divorce claim in Canada, she was prepared to make some payment purely to get her papers back.  Secondly, although she knew the settlement sum of HK$25,791.00 being incurred time costs for court attendances in excess of the Cost Cap should not be paid, by the time of the Settlement Agreement in/about December 2005, she waived or no longer insisted on the Cost Cap because she was “[prepared] to pay the sum just to get hope”.

163.  But such arguments had their own inherent difficulties.  First, I have already found Liu’s claim of retrieving the papers from LLL to be an unconvincing afterthought mentioned with a view to deal with a difficult point (see paragraph 154 above).  Secondly, if Liu considered that LLL’s incurred time costs for the court attendances reasonable, there was no logical or commercial reason why LLL would be prepared to only accept HK$25,791.00 for their court attendances and forego payment of all necessary items of work done (eg time costs for preparing skeleton submissions for use at such court hearings) and disbursements (eg counsel’s fees) for the court hearings without any demur.  Thirdly, even on Liu’s case (which I disagree), given that the settlement sum of HK$25,791.00 was intended for LLL’s incurred time costs for court attendances which Liu considered reasonable and further given Liu’s confirmation that counsel’s fees were outside the Cost Cap and hence Liu’s (and not LLL’s) responsibility, there was no discernible reason why LLL would have agreed to pay Kwong’s fees of HK$15,000.00 out of the sum of HK$25,791.00 as suggested by Ms Chung.

164.  On balance I prefer Wong’s evidence.  I find it incredible that Wong as an employed assistant solicitor would be able to waive a substantial part of his employer’s incurred but unbilled time costs being HK$250,000.00 – HK$25,791.00 = HK$224,209.00 without first having to discuss and obtain prior approval from LLL’s partners just because Liu through Lee complained of excessive costs.

165.  Further, Lee and Liu were first time clients of LLL. According to LLL’s firm records, by the end of 2005 the total billed costs generated from Lee were less than HK$20,000.00 so there was little commercial or other justification for LLL to give substantial discount to Liu because of their previous business dealings with Lee.

166.  The Plaintiff was a proactive and demanding client.  With her business experience and consumer savvy, I find it improbable that she would have relied on Lee’s oral report of the Settlement Agreement without seeking any confirmation, oral or in writing, from Wong.  This could have been easily done via email or handwritten note which were her usual modes of written communication with LLL, especially when LLL were still performing legal services for her during such time (see paragraph 148 above).

167.  In the circumstances, I am unable to accept the Settlement Agreement to the effect that after paying LLL the sum of HK$25,791.00 there would no longer be any outstanding legal fees.  Having rejected the underlying basis for the Settlement Agreement, I also cannot accept that Liu just waited for LLL to issue a revised bill of costs for the agreed settlement sum. 

168.  On balance, I prefer Wong’s evidence that some time in 2006 he received a telephone call from Lee who asked him whether LLL would allow Liu to just pay for those costs relating to attending court hearings first and then give her time to settle the remaining balance later.  Since Wong did not agree, Lee asked Wong to discuss directly with Liu.  Wong said Lee never complained about excessive costs, and he never offered any discount of LLL’s outstanding legal costs through Lee.  Lee’s evidence is discussed below, but suffice to state here that it generally corroborated LLL’s case and undermined Liu’s case.

169.  Wong recalled (and on balance I accept) that he had on 3-4 occasions between mid-2006 and early 2007 talked to Liu on the telephone asking her to settle the 7^th Bill.  Each time she told Wong she was unemployed and asked Wong to give her more time to solve the problem. Wong reported to the partners of LLL, and they agreed to allow Liu more time to pay.  Out of sympathy towards Liu’s situation and on the understanding that Liu would make arrangements for part payment of the 7^th Bill from time to time, LLL was willing to give her more time to pay and not issue further bill to her yet.  In/around mid-2007, Wong learnt from Lee that Liu had resumed working, but she still did not settle the 7^th Bill. Wong asked LLL’s accounts clerk to chase Liu for settlement of the 7^th Bill, but she ignored the requests.  Wong informed LLL’s managing partner who finally decided to cease to act for Liu in the FC Action and to recover payment of the outstanding costs and disbursements against her.

170.  By 23 June 2007, LLL wrote to Liu demanding payment of the 7^th Bill and inviting her to sign and return a Notice to Act in Person, but Liu neglected such letter.  On 12 July 2007, LLL wrote to warn Liu they would apply to court to cease to act for her, but she still failed to respond.  On 31 August 2007, H H Judge Chu granted leave for LLL to cease to act for Liu in the FC Action.  On 30 January 2008, K&H filed a Notice of Change of Solicitors to act for Liu in the FC Action. Liu did not offer any satisfactory explanation as to why even after receipt of such letters she still did not raise any objection in writing or raise objection to the court at the hearing of LLL’s application for an order to cease to act for her.  In my view, this suggested that Liu’s case on the Settlement Agreement was unreliable.

171.  LLL issued their 8^th Bill dated 19 November 2007 in the sum of HK$332,391.00 and sent it to Liu for settlement.  Liu claimed that the 8^th Bill was issued in breach of the Settlement Agreement and amounted to excessive overcharging.  But notwithstanding Liu’s claim that she was waiting for a revised 7^th Bill that reflected the Settlement Agreement, and the 8^th Bill was certainly not the bill she was waiting for, Liu did not refer to the Settlement Agreement to object or complain until the DC and OS Actions.

172.  Ms Chung submitted that the 8^th Bill did not reflect work actually done and hence it was more probable than not that the parties entered into the Settlement Agreement.  I am unable to say the difference between the estimated unbilled costs in the sum of HK$250,000.00 in Wong’s email of 29 November 2005 and the billed amount of HK$332,391.00 in the 8^th Bill necessarily supported the suggestion that there was an unreliable inflation of about 33%.  I prefer Wong’s evidence that his email of 29 November 2005 only gave a rough estimate and did not represent with precision the entirety of actual time costs.  As regards the profit costs of HK$376,712.00 in the Taxation Bill, it was agreed that any eventual taxed costs would be capped by the amounts of the 7^th and 8^th Bills (see paragraph 9 above), so I am not persuaded that Liu’s criticisms were suggestive of any Settlement Agreement.

173.  LLL issued the 7^th Bill on 14 June 2005 which covered items of work for the period from 29 August to 15 September 2003, and the 8^th Bill on 19 November 2007 which covered items of work for the period from 16 September 2003 to 16 June 2005.  Ms Chung submitted that if Liu truly owed LLL unbilled costs, Wong would have sent Liu a bill soon after the email of 29 November 2005, and if necessary could have given Liu time to pay. But given my findings that (a) Liu requested LLL to slow down their billing to accommodate her delayed earnings, (b) LLL promised to revive the action and pay costs on account in April 2005 (see paragraph 146 above), and (c) LLL allowed Liu time to pay the 7^th Bill which had been outstanding for some time (see paragraph 169 above), I do not find it surprising that LLL did not issue any further bill until the 8^th Bill shortly after they ceased to act for Liu in the FC Action in order to conclude the matter.  Consequently, Liu could hardly criticise LLL for non-compliance (if any) with the general guidance in principles 4.06 and 4.09 of The Hong Kong Solicitors’ Guide to Professional Conduct.

174.  Liu also complained that the delay rendered it hard for her to verify the items of work in the 8^th Bill when some items were done 4 years ago.  In fact, most of the items of work in the 8^th Bill related to Wong’s attendances on Liu by telephone or in meeting from time to time to give advice and to take instructions.  From time to time Liu was also informed of progress of the FC Action until LLL ceased to act for her. LLL also sent her copies of the more important documents and correspondence with GLP.  Further, Liu was actively involved in the preparation for the court hearings, and she well knew what happened.  In any event, if Liu had any doubt, all she had to do was to seek clarification from Wong. It was therefore telling that during the whole FC Action up to the commencement of the DC Action she did not do so.

175.  Still further, it was suggested that the breakdown in the Bills appeared to contain petty details, eg “leaving a message to Gary Lau” for 1 minute on 7 August 2003, “leaving a message with you” for 1 minute on 31 October 2003, “reviewing fax informing date of the hearing of the Summons” for 1 minute on 19 November 2007, “attending a telephone conversation with secretary to Counsel” for 1 minute on 16 September 2004, and “drafting a telephone conversation with you” for 3 minutes on 7 July 2003, which were similarly and repeatedly found throughout the Bills.  It was submitted on behalf of Liu that since these details would not help identify and explain what the actual work consisted of, it was suggestive of LLL unreasonably overcharging Liu in their demand for legal fees.  In my view, I cannot say that on the face of the 7^th and 8^th Bills that such minor items of work were necessarily reflective of unreasonable overall charging that rendered it more probable than not LLL entered into the Settlement Agreement.

176.  In summary, I find Liu’s case of an oral Settlement Agreement unbelievable and unconvincing, and I reject the same.  This conclusion was also supported by Lee’s evidence which I shall discuss below.

XVI.  Lee’s Evidence

177.  Since Liu alleged that she entered into the oral Settlement Agreement with LLL through Lee, Lee’s evidence would be relevant in assessing the reliability of Liu’s assertions as to the Settlement Agreement.  However, Lee by the Lee Note (which he adopted when he gave evidence) retracted from the Lee Statement. In the end, I prefer his oral evidence and disagree that his evidence should be ignored.

178.  On 14 October 2008, K&H on behalf of Liu filed and served the Lee Statement in the English language signed by Lee in the DC Action, but such statement did not have any duly executed translation clause to show that its contents had been translated to Lee in the punti language before he signed.

179.  Lee did not adopt the Lee Statement when he gave evidence.  I set out below the gist of the Lee Statement for easy understanding of its difference with the contents of the Lee Note:

(a) Lee had constant business dealings with Wong who was Lee’s legal consultant for probate and employee’s compensation matters at that time. (para.3)

(b) There was an occasion when Lee asked Wong on a casual basis the charges for divorce proceedings.  Lee explained to Wong that Liu wished to commence divorce proceedings against the Husband, and Wong said “divorce proceeding would cost around HK$30,000.00 to HK$40,000.00”.  Wong said he would be glad to help Liu and asked Lee to invite Liu to attend his office for discussion. (para.4)

(c)  Liu was looking for a lawyer at that time and Lee thought he could refer her to Wong whom he thought was a competent lawyer from previous dealings. Lee reported to Liu his conversation with Wong. (para.5)

(d) Liu later told Lee she instructed Wong to handle her divorce matters.  From then on, Liu would casually mention the status of her divorce proceedings from time to time, but there were no discussions of great depth due to the sensitivity of the subject. (para.6)

(e)  In/about 2004, Liu complained to Lee about the costs incurred that far exceeded the original range.  Lee expressed Liu’s concern to Wong and asked Wong to directly explain and justify to Liu “for all the excess costs”. (paras.7-9)

(f)   In/about December 2004, Liu complained to Lee that she had paid legal costs in a total sum of HK$145,500.00 which far exceeded the Cost Cap agreed upon, and she was still required to pay further interim bills.  Liu was furious and indicated to Wong that she did not wish him to carry on the proceedings any further. (para.10)

(g) Since then Lee did not hear further from Liu and assumed “everything was dealt with”. (para.11)

(h) In/about late 2005, Liu informed Lee she had received an email from Wong. “[Lee] read the email [himself] and was in disbelief.  According to the email, there was a total of HK$250,000.00 of unbilled costs coupled with HK$25,791.00 of various courts hearing attendance.  [Lee] simply did not understand how the costs of the divorce proceedings ended up to have far exceeded the original range, particularly when a decree nisi has still not been obtained.  Moreover, items like “attending a telephone conversation with you for 1 minute” sounded bizarre and unreasonable. [Lee] never expected [Wong] to charge by the minute”. (para.12)

(i)   “Given that [Lee] was the one who referred [Liu] to [Wong], [he] felt responsible for this cost situation.  [Lee] telephoned [Wong] and complained about the excessive costs.  [He] demanded for discount and negotiated for settlement.  Towards the end of the telephone conversation, it was agreed that [Liu] would only be required to settle the costs for attending the various court hearings.  Further, the said costs would be in full and final settlement of the unbilled legal costs.  [Lee] then reverted the conversation back to [Liu].” (paras.13-14)

(j)   “Wrongfully and in breach of the [Settlement Agreement], [LLL] by [the 8^th Bill] retracted from what had been agreed and demanded [Liu] for a further sum of HK$332,391.00 being the purported service rendered from 16^th September 2003 to 15^th June 2005.  [Lee] did not understand why [Wong] retracted from the [Settlement Agreement].  In any event, [LLL] should not be entitled to its claim for the sum of HK$362,391.07.” (para.15)

180.  On 4 March 2009, Lee signed the following note in Chinese addressed to Liu’s solicitors which stated that some of the contents of the Lee Statement did not reflect what he meant:

“[Lee]上星期五從[Wong]處獲得[Lee]在[DC Action]一案中於2008年7月12日簽署的英文書面[Lee Statement]。經理解其翻譯後，發現[Lee Statement]的內容並不能反映[Lee]的真實意思。[Lee]確認有關的事實應為：

1. 在介紹[Liu]的案件給[Wong]前，本人曾向[Wong]詢問過離婚案件一般的收費如何。[Wong]的回答是如果沒有任何爭議，一般離婚案件的律師費約為$30,000至$40,000。

2. [Wong]只在簽署[Lee Statement]當天才看過[Lee Statement]第12段中提及的電郵。

3. [Wong]從來沒有在任何電話中與[Lee]，無論是否代表[Liu]，達成任何協議使[Liu]只須要支付[LLL]出席不同法庭聆訊的費用作為永遠地和最終地放棄所有未發出律師費單的所有其他費用。

4.         [Lee]只曾經在上述訴訟其間在閒談間向[Wong]提出希望[Wong]體諒[Liu]的經濟困難，可以讓她先支付[LLL]出席不同法庭聆訊的費用，餘下費用容許其稍後才支付。[Lee]希望並建議[Wong]直接與[Liu]商討。”

181.  Pursuant to the order of Master C Lee dated 21 May 2009 in the DC Action, Liu filed her 3^rd witness statement to respond to the Lee Note. Liu said she did not know why Lee retracted from what he said in the Lee Statement which was drafted on the basis of what he told Liu and K&H (ie Liu’s then solicitors in the DC Action) and which was interpreted and explained to Lee by K&H’s solicitor Ms Deanna Tam (“Tam”) on 12 July 2008 at K&H’s offices in Liu’s presence.

182.  According to Liu, Lee attended K&H’s offices with her twice.  On the first occasion, Liu, Lee, Tam and K&H’s legal executive Eric Lau (“Lau”) were present.  Lee gave instructions in the punti language, and Tam took notes in Chinese.  Some days later, after the Lee Statement was typed up in the English language, Liu and Lee returned to K&H’s offices.  Tam read out the contents of the Lee Statement to Lee in English with additional explanation in the punti language in Liu’s presence.  Lee agreed with the contents and signed on the Lee Statement.

183.  Liu claimed that she only read the Lee Note when she received Wong’s affirmation of 10 March 2009 in the OS Action.  She tried to contact Lee to seek clarification, and when she got hold of him Lee told her his new solicitors acting for him in his compensation claim advised him to make the Lee Note to avoid being cross-examined in the OS Action which might have adverse effect on his compensation claim.  Liu did not understand the explanation and doubted Lee’s truthfulness.  But given Lee’s retraction of what he said in the Lee Statement, Liu considered he was not a person to be trusted and decided not to call him as her witness.  Liu did not give any explanation on the difference between the Lee Statement and the Lee Note in her 2^nd affirmation in the OS Action because she left it to her legal representatives to decide whether, when and how to give such explanation.

184.  On the other hand, Lee said he recalled that Liu complained to him that LLL’s fees were expensive (to which Lee replied that as an uninvolved party he did not know how they discussed fees), and that Wong also told him LLL would apply to cease to act for Liu in the FC Action because she would not pay LLL’s outstanding bills. Lee said that “咁[Wong]當時就我响電話同佢講過，就話「如果你哋兩個咁樣係一路咁拗落去，咁我都會做個證人出嚟同你證實呢件事既發展，咁即係呢幾樣嘢都係我同[Wong]口頭即係第一次同[Wong]講嘅”.

185.  According to Lee, Liu knew he had an injury on duty claim arising from a traffic accident on 13 June 2006 (see Lee’s application for employees’ compensation in DCEC573/2008 filed by LLL on his behalf on 13 May 2008).  Liu told Lee she would introduce a lawyer to him and urged him to come with her to K&H’s offices so that he could seek advice on the handling of his compensation claim and he could explain how he introduced Liu to Wong and the subsequent developments.  Although he could not remember clearly due to lapse of time, Lee believed he attended K&H’s offices with Liu probably 1-2 or 3-4 times.

186.  Lee said that on the first occasion Liu and Lau were present.  A girl was also present, but he did not know her name and she did not identify herself as a solicitor.  Lee chatted with them casually on what was said about the cost of divorce proceedings at the time when he introduced Liu to Wong, but he made clear that as a non-involved party he did not know how much costs Liu had to pay to LLL.

187.  The statement was already typed up when Lee returned to K&H’s offices with Liu on a subsequent occasion.  He did not quite understand the English language, so the girl translated the contents apparently paragraph by paragraph to him in the punti language.  But Liu said some paragraphs were only broadly explained to him (eg “佢就話「呢啲即係幾時介紹嗰啲，咁你—大約你都知架喇」咁樣……”) But when the girl translated paragraph 12 as well as the subsequent paragraphs in the statement to him, Lee discovered a problem because these paragraphs “就話我可以差唔多話好似話同[Wong]講話淨你畀$25,791嗰個唔知係咩嘢上庭費用呢，咁就其他嗰啲可以唔使找架刺，咁我話「咁樣講唔得個喎」我話，我話「咁變咗你呢個數我又唔知係咩嘢數，係咪?」你搵我上嚟咁樣話，咁我真係唔可以做到呢啲嘢架嘛 ……” and “即係同我個意願唔同咗喇，我冇可能可以話—話你哋找幾多錢，咁就可以找幾多錢[Wong]嘅……”

188.  Lee gave evidence that “咁我就叫佢，我話「你呢段你係應該刪咗佢，同埋要修改。咁同埋你爭幾多錢，你咁打落去就好似唔係幾喀」，咁佢話「個啲冇問題，因為[Wong]係開呢個數，所以我哋一樣係照打落去架喇，咁即係證明係你介紹畀[Wong]，即係介紹[Liu]，即係[Liu]畀[Wong]做呢個離婚嘅啫，咁所以就係咁簡單嘅嘢嚟架咋」咁樣”.

189.  Further, paragraph 12 of the statement referred to an email, but Lee said “…… 「我都冇睇呢個e-mail，我係上到你律師樓先睇喎，你點可以話我之前我係睇過你個e-mail呢?」咁樣 ……”

190.  Lee’s main focus at that time was on paragraph 12 of the statement which he said should be amended. The girl then took away the 3^rd page of the statement saying she would amend it.  At this point, there was a telephone call from Lau who said he had already got a table for lunch.  The girl said “……「你可以簽咗先，就到時更改咗一份就畀番[Liu] keep住，咁你到時上堂照番呢一份嘢，咁照睇就得架喇」咁樣”.  Liu also urged Lee to sign first. Lee then signed on the statement because he did not think that Liu as his relative would double-cross him.  After he signed the statement, they went to have lunch with Lau.

191.  Lee said the page that was taken away for amendment looked different from the 3^rd page in the Lee Statement shown to him when he gave evidence.  He could not fully understand the contents of the Lee Statement, so it was translated to him in the punti language when he gave evidence.  Lee confirmed that the contents as translated to him by the court translator were different from what girl had told him at K&H’s offices.  He disagreed with the contents of the Lee Statement. He had not seen the email of 29 November 2005 or the Bills issued by LLL.  He only knew that when he introduced Liu to Wong, Wong said the legal costs for normal uncontested divorce by consent would be within the Initial Cost Range.  Lee personally did not know how much Liu’s divorce proceedings actually cost or whether LLL and Liu made the Cost Cap Agreement.  The Lee Statement was not amended in the way he indicated it should.

192.  After receipt of the Defence in the DC Action, Wong asked Lee about the Settlement Agreement.  Lee was surprised as he did not know anything about the alleged settlement sum of HK$25,791.00.  He confirmed to Wong he had never told Liu he had entered into the Settlement Agreement on her behalf.  Lee confirmed that Wong did ask him to be his witness because he introduced Liu and Wong to each other and any subsequent developments he was involved in.  But Lee felt very embarrassed and did not want to confront Liu, so he declined and said there was no need for him to be a witness as he only introduced them to each other. He further said “你哋兩個都唔好搵我做證人”.

193.  Wong said that after being served on 1 August 2008 with copy of Liu’s affirmation in support of her application for leave to file and serve inter alia the Lee Statement in the DC Action, he telephoned Lee and translated to him the contents of the Lee Statement.  Lee confirmed the Lee Statement contained many errors and did not reflect his true intention (as summarised in items 1-4 of the subsequent Lee Note).  Wong therefore urged Lee to correct the errors through Liu’s solicitors as soon as possible, and for such purpose arranged for Lee to attend LLL’s offices the following morning so that LLL could help Lee draft the corrigendum for correcting the errors.

194.  But Lee did not so attend LLL’s offices on 2 August 2008.  On the same day, LLL sent a letter to Liu by double registered post referring to the telephone conversation between Wong and Lee the day before (see the above paragraph) and urged him to discuss this matter with his relatives and inform Liu’s solicitors of the errors in the Lee Statement.

195.  Lee said that after he received the above letter, he noted the errors in the Lee Statement and made an appointment to attend LLL’s offices.  At the meeting, Wong explained the contents of the Lee Statement to Lee, and Lee considered there was a need to clarify the discrepancies which Wong helped him to reduce into writing as the Lee Note.  Lee signed the Lee Note and sent the same to Liu’s solicitors with copy to LLL for record.

196.  In fact, Wong wanted Lee to provide a witness statement or affirmation.  Lee subsequently gave a witness statement to LLL to confirm what he said was true and correct.  But he told Wong it should not be used unless it was absolutely necessary and required by the court because he felt embarrassed to be caught in the conflict between Wong (ie his lawyer and friend) and Liu (ie his sister-in-law).

197.  Ms Chung submitted that it was 8 months later that Lee tried to retract from the Lee Statement.  She criticised Lee’s veracity because as an adult Lee should be held responsible for any document he signed and should have known the consequences of signing a statement that contained untruths.  It was argued that if Lee had really asked K&H to amend his witness statement as alleged, he would not have signed it before reviewing the amendments and/or verifying that the whole of the contents was true.

198.  However, on balance I accept Lee’s and Wong’s explanations as to how Lee came to sign the Lee Statement and Lee Note.  The lapse of time between the 2 documents was because Lee was unaware that the contents of the Lee Statement was erroneous and/or did not fully reflect his instructions (note there was no suggestion that a copy was given to Lee after he signed the Lee Statement).  I also accept on balance that Lee signed the Lee Statement without verifying whether it would be amended in the way he intended because he expected that proper amendments would be made upon his informing Liu and K&H the inaccuracies and further because Liu (which is his sister-in-law and whom he trusted) urged him to sign.

199.  There was no dispute that some translation was given to Lee at K&H’s offices, but I am not persuaded that it was as full and accurate as Liu would have the court believe.  First, I do not accept that the translator took the trouble to read out the statement in English and then give additional explanation in the punti language.  Lee was unfamiliar with the English language; he gave instructions in the punti language and his instructions were recorded in Chinese.  I find it implausible and pointless to read out the contents of the statement in English to Lee, which lent weight to Lee’s account.  Secondly, I accept Lee’s evidence that some parts of the statement were only broadly explained to him, which probably explained why his complaint was focused on paragraph 12 of the statement that contained reference to something Lee could understand, ie the alleged settlement sum of HK$25,791.00 in Arabic numerals.  Although the court rules did not require a translation clause for a witness statement, the fact remained there was no confirmation from the translator that verified full and accurate translation to Lee. Thirdly, the contents of the Lee Statement could not have been accurate as they contradicted my findings of fact above. 

200.  Fourthly and more importantly, the contents of the Lee Statement on its face showed that it could not have been a true reflection of what Lee said.  Liu in her evidence never mentioned showing either Wong’s email of 29 November 2005 or any of the Bills to Lee.  But Lee Statement’s on its face stated that Lee had read such email even though Lee denied this in the Lee Note and in his oral evidence.  Significantly, there was no evidence to contradict Lee’s confirmation that he had never sighted any of the Bills.  In the circumstances, it was strange and inexplicable for paragraph 12 of the Lee Statement to state that “…… items like “attending a telephone conversation with you for 1 minute” sounded bizarre and unreasonable.  I never expected [Wong] to charge by the minute”.  Such reference to “attending a telephone conversation with [Liu] for 1 minute” could only have been extracted from 1 of the Bills and not from the email of 29 November 2005. Liu did not give any or any satisfactory explanation why Lee would be able to speak to such specific item of work from the Bills at all. Interestingly, the criticism against such form of billing was in fact Liu’s complaint against LLL (see paragraph 175 above), which immediately raised question as why Liu’s own complaint would feature in the Lee Statement as Lee’s protest against the manner of billing in Bills that he had never sighted.

201.  Quite irrespective of whether I accept Lee’s account of how the Lee Statement came about and how he came to sign the same, I am convinced that Liu’s case in this respect was inherently implausible and must be rejected.  Turning to Lee’s account, Ms Chung submitted that it was tantamount to a serious allegation that Liu acted in concert with K&H to trick and deceive Lee into signing a document that contained false statements, which would be illogical and farfetched. But, as seen from above, Lee’s account of what he told K&H was consistent with my findings of fact as to what happened. There is no need for me to and I do not speculate (especially in light of the analysis in paragraph 200 above) as to what passed between Liu and K&H that resulted in the present Lee Statement after Lee signed on the understanding that the then statement would be properly amended.  But even if I were wrong and (as Ms Chung submitted) Lee’s evidence should be ignored, the Lee Statement not having been adopted by Lee was not evidence before me, and I am also unable to place any weight on Liu’s account of how the Lee Statement came about. 

202.  Liu agreed that on her case (which I do not accept) Tam was the best person to state what actually transpired at the 2 meetings at K&H’s offices, but she did not call or subpoena Tam to give evidence.  Although Tam was no longer with K&H at the time of the hearing before me, Liu all along knew Tam that was/is still a practising solicitor in Hong Kong and as such there would be no difficulty in locating her.  Liu was all along legally represented, and I am unable to accept her assertion that she did not know Tam could give evidence on relevant matters.

203.  In my view, there was no satisfactory reason why Tam was not called or subpoenaed to give evidence.  In this respect, I refer to and rely on the maxim omnia praesumuntur contra spoliatorem [2], which “…… is a simple rule of thumb that a court is likely to draw adverse inferences against a party who fails to produce an item in circumstances where the item should have been produced and an adequate explanation for its non-production is not forthcoming” [3], which in light of paragraph 200 above, left Lee’s case unreliable and wanting.

204.  I turn to Liu’s final point. She was skeptical of Lee’s intention in making the Lee Note, and suggested that Lee retracted from the Lee Statement because of their dispute over a business deal at about that time.

205.  Liu claimed that in early January 2009 Lee (who knew the vendor) proposed that she purchase and start a war games business. Liu asked him to provide more details for consideration.  Eventually a provisional agreement was prepared and presented to the vendor via Lee.  The arrangement was that Lee would look after marketing and operation, and Liu would handle accounting and financial matters that included provision of initial capital, identification of prospective investors, etc. Lee proposed that the ideal “deal closing date” should be no later than 17 January 2009.  On Saturday (10 January 2009), Lee, the Sister and Liu went to the war games site to meet the vendor. At the meeting, Liu felt it was not a sensible investment particularly when the vendor refused any price concession, required ⅓ of the asking price as deposit, and altered some other terms that would make the investment riskier than before. So Liu asked for extra time until the following Monday (12 January 2009) to consider as she had to further discuss the matter with the potential investor.  In the afternoon of 12 January 2009, Liu told the Sister she would call off the investment as the potential investor decided not to go ahead.  On 19 January 2009, Lee telephoned Liu to say the vendor was still interested in selling the business and agreed to reduce the price, but Liu was not interested.  Lee then asked her to lend him HK$2,000.00 to HK$3,000.00, but Liu refused saying she had no money.  On 2 March 2009, Lee called again to ask her to lend him HK$3,000.00, and again Liu refused.  Liu claimed that Lee retracted from the Lee Statement because he was upset with her over the war games deal.

206.  On the other hand, Lee said Liu had no work for some time and was looking for business investments.  Lee knew the vendor of a war games business and proposed such business for Liu’s consideration.  Liu actively considered investing in such business, prepared a business proposal and invited a friend to invest in the business.  Liu, Lee and the Sister paid a first visit to the war games site.  The vendor insisted on a ⅓ deposit (HK$50,000.00) but agreed to tidy up the war games site and display over 100 sets of equipment for due diligence inspection within a week.  Liu was interested in the business and asked K&H to prepare an agreement which was sent to the vendor for consideration.  After a week Lee asked the vendor to prepare the war games site and equipment, and said he would accompany Liu to visit the site again to confirm the deal.  The vendor insisted on having the deposit so that he could engage workers to prepare the site.  Lee said there was no such need because the full price of HK$150,000.00 would be paid when they make the further visit to complete the deal.  Liu, Lee and another woman whom Lee addressed as “師母” then visited the site, and Liu brought with her HK$150,000.00 in cash for completing the deal if everything was alright.  But on such visit Liu insisted on having extra time to consult the soothsayer at Wong Tai Sin.  It was embarrassing for Lee but nothing could be done. The vendor complained and asked for HK$5,000.00 for having employed workers and equipment to tidy up the war games site for the inspection.  Lee asked Liu who said she had no money.  Lee asked her to make part payment in the sum of HK$2,000.00 to HK$3,000.00 first, but she refused.  About 2 days later, Lee told Liu the vendor had called again, and he proposed that if Liu would complete the deal he would pay HK$150,000.00 upfront to the vendor so that Liu could repay HK$130,000.00 to him by instalments, which meant that Lee would contribute HK$20,000.00 to complete the deal in order to save his reputation.  Liu refused and the deal fell through in January 2009. But by March 2009 the vendor was still chasing Lee.

207.  On balance, I prefer Lee’s evidence about the war games deal. Liu was unable to provide any satisfactory explanation on her case (which I disagree) as to why after the deal fell through Lee would ask for a loan of HK$2,000.00 to HK$3,000.00.  Lee gave a convincing account of the events and I accept his evidence.

XVII.  Conclusion

208.  In the circumstances, I conclude that Liu failed on the preliminary issue in that the there was no Cost Cap, Cost Cap Agreement and/or Settlement Agreement, and LLL was/is entitled to proceed with taxation of the Taxation Bill pursuant to the reference to taxation.  There is no reason why costs should not follow event, and I grant a costs order nisi that Liu do pay LLL costs of and occasioned by the preliminary issue (including all costs reserved, if any, in respect of the preliminary issue) with certificate for counsel to be summarily assessed.  I therefore also make the following consequential directions:

(a)       unless an application is made to vary the above costs order nisi within 14 days from the date hereof, LLL do within 21 days from the date hereof lodge and serve statement of costs pursuant to Practice Direction 14.3;

(b)      if application is made to vary the costs order nisi within 14 days from the date hereof, both parties do lodge and serve their respective statement of costs pursuant to Practice Direction 14.3 no later than 7 days before the hearing of the application to vary the costs order nisi.

209.  Such conclusion meant that the taxation of the Taxation Bill under the reference to taxation should proceed as soon as possible.  Solicitors for LLL are directed to fix a date with the Listing Clerk within 14 days from today for taxation of the Taxation Bill with oral hearing before myself and the estimated length of the taxation hearing is 1 day.  Unless application is made to vary the costs order nisi in which case the aforesaid summary assessment of costs shall be heard at the same time as the hearing of such application with 1 hour reserved, the aforesaid summary assessment of costs shall be heard at the same time as the taxation hearing.

210.  I bear in mind that the hearing of the preliminary issue in respect of the reference to taxation was open to the public, so in the ordinary course this Decision should be published.  However, Liu did not give evidence on and Ms Chung did not inform this court as to the status of progress of the FC Action, and it was unknown whether such proceedings had been finally concluded.  If not, there is a risk that publication of this Decision may cause prejudice by disclosing privileged material.  In the circumstances, I direct that there be an embargo on the publication of this Decision pending further directions by the court.  In the meantime, within 14 days from today, Liu’s solicitors are directed to write to my clerk with copy to LLL (a) to advise on the status of progress of the FC Action and (b) to address on the question whether and if so when this Decision should be published.  Likewise, LLL are also directed to write to my clerk with copy to Liu’s solicitors within 14 days from today to address on the matter in (b) above.  Both parties should constructively confer before reporting to my clerk in writing. Further, a joint response by both parties to my clerk on (a)-(b) above within the prescribed time in lieu of separate responses is permitted. Upon receipt of the above reports or failing receipt of any or both such reports within the prescribed time, the court may in due course grant paper directions or, where necessary, call for a oral hearing to deal with the issue of publication of this Decision.

211.  Last but not least, I thank both counsel for their industry and assistance.

_________________

[1]     see principles set out by Chung J at para.12 of Star Glory Investment Ltd v Kai Tua (H.K.) Technology Ltd & ors HCA 3523/2002 (unreported, 13 August 2005)

[2]     Tullett & Tokyo International Securities Ltd v APC Securities Co Ltd [2001] 2 HKC 713

[3]     PC International Marketing Limited v Best Power Enterprises Limited CACV208/2004 (unreported, 10 May 2005) per Rogers VP

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