KING WOOD v. WONG PUI FUN

HCA 297/2012

[2026] HKCFI 2271

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 297 OF 2012

(TRANSFERRED FROM LBTC 185 of 2012)

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BETWEEN

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JUDGMENT

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A. Introduction and Undisputed Background

1.  The Plaintiff (“P”) was at all material times a firm of solicitors in Hong Kong, originally of the name Arculli Fong & Ng (“AFN”) but changed its name to King & Wood on 15 July 2009.

2.  The Defendant (“D”) is a solicitor admitted in Hong Kong in 1991. She was employed as an assistant solicitor of Tang & So (“TS”), a firm of solicitors in Hong Kong, from 2 November 1993 and was a partner of TS from 1 January 1995 to 31 July 1999. D was then employed as an assistant solicitor at Wilkinson & Grist, a firm of solicitors, up to early 2003 and as a consultant at Simmons & Summons, another firm of solicitors, until late 2006. D commenced employment with AFN as a partner on 3 November 2006. From 1 July 2009, D entered into a contract of employment with P as a salaried consultant of P (“Contract of Employment”).

3.  In early October 2010, P was retained by Madam Chen (“Chen”) in respect of HCCW 322/2010 and related matters (“Chen’s Case”). Chen was introduced to P by D. The retainer letter between P and Chen dated 6 October 2010 (“Retainer Letter”)[1] recorded inter alia: (1) P’s solicitor in charge of Chen’s Case was D; (2) in the interest of saving Chen’s costs, P may delegate part of the works which were mechanical in nature or less complicated to P’s junior solicitors, trainee solicitors and/or legal executives/clerks; (3) it was proposed to use time as the principal factor in determining P’s fees; and (4) the hourly rates of D, junior solicitors, trainee solicitors and legal executives/clerks were stated but P reserved the right to increase the stated hourly rates from time to time.

4.  The 3 junior solicitors who assisted D in the conduct of Chen’s Case were: Brian Au-Yeung (“Brian”), qualified in November 2006, Cynthia Tsang (“Cynthia”) qualified in October 2009; and David Wong (“David”) qualified in November 2009 (collectively, “the 3 Juniors”).

5.  At all material times, P operated a firm-wide Internal Accounting System (“IAS”) for the recording of time spent on work. P’s computer system generated internal timesheets recording the work done and time spent in respect of each fee earner. For Chen’s Case, there were time records of D and the 3 Juniors recorded in the IAS. The records in the IAS included:

(1) The general time sheets generated by P’s internal computer system (“Time Sheet Reports”); and

(2) Narrative time sheets setting out the work performed by each fee earner (“Narrative Time Sheets”).

6.  On 29 November 2010, D issued the first bill to Chen for the total sum of HK$5,258,373 (“the 1^st Bill”)[2], which included profit costs of HK$3.9M calculated on the basis of 220 hours being spent by D, for the period from 28 September 2010 to 6 November 2010 (“the 1^st Bill Period”). D wrote off 183.83 billable hours from 403.83 hours as shown on the Internal Bill Guide for the 1^st Bill Period[3].

7.  On 18 January 2011, D tendered her resignation to P. Her resignation was to take effect on 19 May 2011. During this period, 28 hours of billable work in Chen’s Case was recorded in the Time Sheet Reports[4]. No item was recorded in D’s Narrative Time Sheets after the entry on 24 January 2011[5].

8.  On 29 April 2011, D issued a second bill to Chen for disbursements in the total amount of HK$5,118,973.50 between 7 November 2010 and 28 April 2011 (“2^nd Bill”)[6].

9.  On 16 May 2011, 2 days prior to D’s last day of employment with P, D issued a third bill to Chen (“3^rd Bill”)[7] which was labelled “Bill of costs & disbursements (Final)” under which Chen was charged the total amount of HK$3,638,304 comprising: (a) the sum stated as “Agreed Costs” for the professional charges for services rendered of HK$2,200,000 (writing off HK$7,959,975 out of the HK$10,159,975 by way of P’s profit costs/time costs that had been recorded in the Time Sheet Reports and Internal Bill Guide); and (b) disbursement of HK$1,438,304 for the period 7 November 2010 to 16 May 2011 (“the 3^rd Bill Period”).

10.  On 18 May 2011, her last day of employment with P, D wrote off the unbilled time costs and disbursements for Chen’s Case[8]. D also removed 20 boxes of files relating to Chen’s Case from P’s office which were subsequently transferred to TS.

11.  On 23 May 2011, the Notice of Change of Solicitors was filed by TS following which Chen formally instructed TS in place of P for HCCW 322/2010 and related matters. The 3 Juniors joined TS upon D’s recommendation.

12.  On 17 June 2011, P sent a draft Note of Fees dated 14 June 2011 to Chen for additional profit costs of HK$7,959,975 (i.e. the written off amount under the 3^rd Bill) [9] which was later adopted as the 4^th Bill on 20 July 2012 (“4^th Bill”).

13.  On 17 January 2012, P commenced an action in the Labour Tribunal against D for damages in the amount of HK$7,959,975 which was transferred to the High Court on 10 February 2012 and became the present action.

14.  On 27 January 2012, Chen commenced proceedings in HCMP 163/2012 (“the Taxation Proceedings”) in respect of the 1^st Bill, 2^nd Bill, 3^rd Bill and 4^th Bill.

15.  For the Taxation Proceedings, P engaged Mr Alfonso Fung (“Alfonso”), a law costs draftsman to assess the time costs for work done on Chen’s Case and filed an itemized Bill of Costs[10] (supported by a 637-page Schedule of Communication prepared by Alfonso[11]) on 3 July 2013 seeking profit costs of HK$20,297,960 which was subsequently revised to HK$20,166,018.33 (“Revised Bill of Costs”)[12] in total for the whole retainer period. For the 3^rd Bill Period, Alfonso assessed the profits costs at HK$15,964,036.67[13].

16.  In response, on 13 November 2012, Chen filed a 436-page List of Objections with 668 items of objections (“List of Objections”) which if upheld only entitled P to HK$1,682,431.67[14].

17.  On 5 to 7 November 2014, 24 March 2015 and 20 April 2015, there was a hearing of preliminary issues in the Taxation Proceedings before Master Lai (“the Master”).

18.  On 21 March 2016, the Master handed down his decision which struck out the 4^th Bill and did not allow Chen to tax the 1^st to 3^rd Bills[15].

19.  The above background is taken from the Agreed Facts and/or Agreed Chronology, or are undisputed or indisputable. For the avoidance of doubt, I find them as facts.

20.  At the trial of this action, Mr Martin Kok, counsel, appeared for P and Mr Victor Dawes SC leading Mr Cedric Yeung, counsel, appeared for D.

B. The Parties’ Respective Case

21.  P alleges that various duties were owed as a matter of law and under the Contract of Employment. D accepted that she owed duties to P to: (1) perform her work with reasonable care, skill and competence; and (2) not to undermine the mutual trust and confidence between her and P. It was also accepted that there was a duty to carry out the job agreed faithfully and loyally, in the sense that she must have regard to the employer’s interest. However, D did not accept that there was a duty to act in the best interests of P.[16]

22.  P claims that there were serious breaches of duties owed to P by D. These can be broadly categorized into the claim that D: (1) undercharged Chen (“Undercharging Claim”); and (2) failed to keep proper records of Chen’s Case (“Improper Records Claim”).

23.  In respect of the Undercharging Claim, it is alleged that without consulting or authorisation from P:

(1) In respect of the 1^st Bill, D wrongfully wrote off 183.83 hours; and

(2) In respect of the 3^rd Bill, D wrongfully: (a) issued the 3^rd Bill marked as “Final”; (b) provided for Agreed Costs of only HK$2,200,000 by writing off HK$7,959,975; and (c) reduced her hourly rate from HK$7,500 to HK$5,200 and thus wrote off an additional HK$1,190,572.

24.  In respect of the Improper Records Claim, it is alleged that:

(1) D did not keep or maintain any detailed timesheet in relation to Chen’s Case after 24 January 2021;

(2) D failed to properly record the substantial work done and time spent on Chen’s Case but merely recorded 28 hours on P’s timesheet system;

(3) D failed to keep full and proper records of all documents related to or generated for Chen’s Case in P’s Document Management System (“DMS”);

(4) D failed to keep attendance notes of 52 meetings;

(5) On D’s departure, D removed 20 carton boxes of files relating to Chen’s Case to TS on 18 May 2011 without P’s authorisation; and

(6) D deleted all file data relating to Chen’s Case from the hard drive of her workstation in P’s office.

25.  As confirmed with Mr Kok in closing submissions, P’s claims against D are calculated as follows:

(1) The written off time in respect of the 1^st Bill (183.83 hours x HK$7,500): HK$1,378,725;

(2) The written off time in respect of the 3^rd Bill (HK$10,159,975 calculated on the basis of D’s internal rate of $5,200 less HK$2,200,000): HK$7,959,975;

(3) The additional write off of HK$1,190,572 (based on 517.64 hours’ time costs of D written off x HK$2,300 being the difference between the contractual rate and internal rate);

(4) The unbilled time costs for the 3^rd Bill Period (based on Alfonso’s Revised Taxation Bill HK$15,964,036.67 less HK$2,220,000 that had been charged, HK$7,959,975 and HK$1,190,572): HK$4,613,489.67;

(5) Costs of the Taxation Proceedings: HK$4,265,989.31; and

(6) Time costs for investigation: HK$442,000.

26.  As summarized in D’s Opening Submissions, D’s case is that:

(1) D had full authority to issue bills on behalf of P to her clients including to charge what she considered appropriate or reasonable and to waive fees and charges. There was never any requirement that she had to consult or seek authorization from P on these matters. Furthermore, it was conceded by P (through the evidence of Mr Yung (“Yung”), P’s Managing Partner) in the Taxation Proceedings that D had full authority to agree and negotiate fees and to write off fees;

(2) It was D’s billing practice that she would consider a range of factors and only charge fees that she believed would be allowed in taxation, not be unreasonable or excessive in time costs. Thus D wrote off time which she regarded as not properly chargeable;

(3) The transfer of files to TS was not wrongful;

(4) As to the alleged record keeping failures, there was no strict requirement for P’s partners or consultants to fill in a time sheet for every case which were not intended and could not be used as the basis for charging clients. She denies that she failed to keep proper records. She did not delete any computer records and had save all documents in the DMS; and

(5) In any event, it is denied that P suffered any loss as a result of D’s conduct.

C. The Issues

27.  Whilst parties had filed their own proposed list of issues for trial, the broad issues that need to be determined are (as submitted in P’s Closing Submissions):

(1) Issue 1 (D’s Duties owed to P): What were the duties and/or obligations owed to P by D (being employed by P as its consultant) at the material times?

(2) Issue 2 (D’s Breaches of Duties): Whether D breached her duties owed to P? Without limitation to the foregoing, did D have “authority” from P to perform the acts in question?

(3) Issue 3 (P’s Loss and Damage): Whether P has suffered loss and/or damage by reason of D’s breach of duties? What are the appropriate relief(s) and/or the quantum of loss and damage for P’s claims against D (if any)?

D. Applicable Principles on the Assessment of Witness’ Evidence

28.  The court’s approach in assessing the credibility of a witness’ evidence was not disputed. I adopt the helpful summary by DHCJ H Au-Yeung (as he then was) in Hu Lan v David Golden [2023] HKCFI 873 at §36:

“When I consider the credibility of various witnesses who had given evidence in court, I shall take the following matters into account:

(1) Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility;

(2) Importance should be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events;

(3) The court will also attach importance to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement;

(4) The court should consider a witness’ motive for deliberately not giving truthful testimony. For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest;

(5) It is essential to have regard to the entirety of a witness’ evidence. A witness can make mistakes, but the mistakes do not necessarily affect other parts of his evidence. Likewise, a witness may lie. However, lies themselves do not mean necessarily that the entirety of that witness’ evidence is to be rejected. A witness may lie in a stupid attempt to bolster his case, but the actual case nevertheless remains good irrespective of the lie;

(6) On the other hand, where it is shown that a witness has been discredited over one or more matters to which he has testified, this fact is relevant to the assessment of his overall credibility;

(7) While the court is entitled to take demeanour into account when assessing testimony, it should be borne in mind that demeanour can be deceptive and is therefore to be approached with care.”

E. The Witnesses and General Observations on their Evidence

E1. Barbara Chiu (“Chiu”)

29.  P’s first witness was Chiu, a seasoned litigator in practice for over 20 years. She frankly admittedly that she joined P as a partner on 11 August 2011, i.e. after D had resigned and left P, and therefore had no personal knowledge concerning the management or internal practice of P before she joined nor the work done by D on Chen’s Case.[17]

30.  In her witness statement (“Chiu’s WS”)[18], adopted as her evidence in chief, Chiu primarily gave evidence concerning the Taxation Proceedings (and how the Master had rejected D’s evidence in those proceedings), D’s alleged breaches of duties, the requirement to fill in time sheet which applied to partners and consultants, the reasonableness of the additional costs of HK$15,142,761.67 sought to be charged in Chen’s Case and the loss suffered by P as a result of D’s alleged breaches.

31.  It is plain that Chiu relied heavily on Alfonso’s assessment in her evidence that D had undercharged Chen[19], as she admitted that she was not in a position to know the work done by D on Chen’s Case. Whilst her evidence was that Alfonso was a professional with the relevant expertise in assessment of costs, she accepted that there is nothing which prevented P from calling Alfonso as a witness to explain his assessment but the legal team decided it was not necessary.[20] Thus whilst Chiu made a number of submissions why D had undercharged, based on the documents, Chiu’s evidence in this respect does not carry any independent weight.

32.  Chiu also confirmed in oral testimony that it was not P’s case that D did not save her emails in the DMS (which she said was automatically done if saved to the email server) but that without her work station, which was deleted when D left, it would be very difficult to retrieve the emails relevant to Chen’s Case from the “vast ocean” of the DMS[21].

33.  Whilst it was submitted by Mr Dawes that Chiu was an evasive witness and her evidence contradicted the documentary evidence, although there were some blemishes in her evidence (for example, her evidence that emails were stored in a system separate from the DMS which is contradicted by P’s IT policy which states that the DMS serves as the firm’s sole archiving system for client documents which includes electronic documents and email[22]), I do not regard her as incredible and unreliable. Nonetheless, she was clearly a guarded witness and to some extent, I do agree that her evidence should be treated with caution given her interest in the outcome of these proceedings.

34.  In any event, given her admission that she only joined P after D had left, and much of her evidence really amounted to submissions, I found her evidence of limited assistance.

E2. Yung

35.  P’s second witness was Yung, another very experienced solicitor who at the time was a partner and the managing partner of P. Yung also frankly admitted in cross-examination that he had no personal involvement in Chen’s Case nor personal knowledge of the work done by D and the 3 Juniors on Chen’s Case[23]. Again, his evidence in so far as it is based on reading of documents and submissions should not carry any independent weight.

36.  Having considered his evidence holistically, regrettably, I did not find him to be a credible and reliable witness.

37.  A material aspect of P’s case is whether D had the authority to agree fees with Chen, issue invoices and write off fees. His previous evidence, as can be gleaned from the transcript of his cross-examination during the Taxation Proceedings, was that D had full authority to sign the Retainer Letter and no one supervised her issuing of invoices and writing-off of fees, which given D’s seniority and experience, is not surprising.[24] However, in this action, he retracted on or provided qualifications to his earlier evidence in the Taxation Proceedings during his cross-examination.

38.  His evidence in this action was that D had authority to compute fees as per the Retainer Letter, and D had to act reasonably and in the interest of P. It is his evidence that D had no authority to bill Chen by waiving a substantial amount of time costs in variance with the Retainer Letter to the significant detriment of P which was unreasonable in view of all the circumstances.[25] In his oral testimony, he further clarified that as D was only a consultant and not a partner, she did not have “full” authority to issue any feenote without seeking authority from a partner. He said that D should have consulted him or other partners.[26] However, all these were never previously mentioned in the pleadings and witness statements and he gave no good explanation for not having mentioned so until his court testimony.

39.  Yung is also a witness who is not disinterested in the outcome of this action. He was one of the partners responsible for this action. He claimed to not have looked into the details of the timesheet prior to this action. When shown entries stating 36 hours was spent on travelling per day, he came up with the excuse that it could have been a long-haul flight.[27] Yet that cannot explain how 36 hours a day is possible. It does demonstrate that he was prepared to bolster or defend P’s case without properly considered basis.

E3. D

40.  Regrettably, holistically considered, I also did not find D to be a credible and reliable witness. Whilst it was submitted that her evidence on immaterial matters has been nit-picked, I disagree. I regard that there was inconsistency in her evidence which are on material matters and certain aspects of her evidence were contradicted by the contemporaneous documents which undermined her credibility.

41.  For instance, she did not agree that the emails sent to all including consultants and partners by Ching Wo Ng (“Ng”), a partner of P, to enter time accurately on time spent on billable and non-billable matters and strictly enforce time sheet system, were applicable to her.[28] That is plainly contradicted by the clear terms of those emails said to apply to all staff. See:

(1) Ng’s email of 5 August 2010[29] sent to associates, consultants, partners and trainees entitled “billable hours/performance review”:

“Dear all,

I have on many occasions emphasized the importance of keeping good record of time spent on both billable and non-billable matters. An accurate record will allow the firm to decide on the costs to the firm on a specific matter, the work load of a colleague, whether our fee quote on a matter has been accurate, the efficiency of a colleague working on a matter, annual performance review, and other matters. I would therefore would like to remind everyone one more time that one should enter all time you spent each day accurately on your time dockets.

As indicated in prior meetings, our firm is gradually moving our pay scale to match those of international firms, and in so doing the firm will expect our colleagues to contribute at a level matching those in international firms, both in terms of quality of work, and time spent on billable matters. In performance review in the future, your annual billable hours will be a significant factor to be taken into account in your bonus and increase.

It is the firm’s expectation that starting 1 June 2010, our colleagues will put in at least 1600 billable hours per annum; this translated to about 6.5 hrs per day, assuming a 250 working day per year, the statistics for June and July seem to indicate that many of our colleagues are working less hours than expected. If you are not docketing your time accurately, you should from hereon record all time spent on a specific matter, as well you should record time spent on non-billable matters. In short at the end of the day, you should be able to record 8 to 10 hours of your time, either as billable or non billable;

If you are not able to docket a full day’s time, either you have not recorded your time accurately or you do not have sufficient work on your hands; IN THE LATTER SITUATION, YOU SHOULD IMMEDIATELY APPROACH PARTNERS, CONSULTANTS OR SENIOR COLLEAGUES TO ASK FOR MORE WORK. IT IS INCUMBENT ON YOU TO ENSURE YOUR TIME IS FULLY OCCUPIED WITH MEANINGFUL WORK.

Kind regards”

(2) Ng’s email of 22 October 2010 to “All” entitled “Office Discipline/URGENT”[30]:

“Dear all,

I have noticed for sometime a very disturbing (at least to me) phenomenon; many of our staff, including trainees, associates, are coming to work at totally arbitrary and discretionary hours; it is not uncommon for junior associates to come in after 10 am…

We are moving our firm towards a first tier firm within the next few years, and this is not achievable without all of us, each one of us, pulling together as a whole team. Other than giving their staff higher pay and better benefits, the first tier firms are run very tightly, with centralized corporate style management, very high demand and expectation is placed on their staff, e.g., 2500 billable hours per annum, very high quality of work, disciplined working team, and of course high quality clients. Our firm has adjusted our pay scale to narrow the difference in pay scale with larger firms, and would do so repeatedly in the next few years, with an ultimate aim of reaching the same level. However, our staff would need to understand that come with higher pay and higher benefits, is the higher costs for the firm, and to cover the higher costs, our staff need to have higher output higher efficiency, higher quality of work, higher independence in work style, and higher billings; it could not be otherwise.

I have already mentioned many times that many trainees and associates have very low billable hours per day, and yet when being asked to take on new matters, the routine answer has been that he or she is too busy to take on new work. As management, I have to wonder where the 10 hrs a day been spent.

I would like to make it absolutely clear, assuming that I have not done so before, that from now on, for all staff, your performance, your pay scale, your raise, your bonus, and to be very blunt and frank, your continuance in this firm, will be substantially influenced by your billable hours and your regular attendance at the office.

I should also note that the comments above apply to partners and consultants; in fact, the Management Committee has decided to strictly enforce time sheet system amongst partners and consultants firm wide, starting Nov 1, and I have been assigned to be one of the four enforcers; no mercy this time; straight from Wang Junfeng; We need to run our firm as a larger business enterprise. …”

(collectively, “Ng’s Emails”).

42.  The fact that D said the requirement to keep timesheets did not apply to her is also inconsistent with the contemporaneous records which shows that she did keep time sheets and narrative time sheets up until 24 January 2011, shortly after her tendering of resignation[31]. Her explanation in her oral testimony that she was too busy after she had resigned[32], not only was never mentioned in her witness statement, is also inconsistent with the undisputable background that she was always very busy handling many big cases besides Chen’s Case. She also offered another explanation why only 28 hours were recorded in the Time Sheet Reports in that it was a kind of an adjustment as she had billed too much in the 1^st Bill but this was not mentioned in her witness statement.[33]

43.  D also gave evidence which was plainly internally inconsistent. One example is the various explanations for the write off in respect of the 3^rd Bill:

(1) By email from Jeff Lane to D on 31 May 2011[34], it was noted that on 18 May 2011 “you discounted the WIP by approximately 80%, or approximately HK$8 million” and D was asked inter alia to “advise by what authority, as an employee of the firm, you gave such a huge discount, and for what reasons, as none are evident from the feenote or supporting billing advice”;

(2) In D’s reply to Jeff Lane by email on 1 June 2011[35], she stated that initially she gave a fee quote of Chen that the fees including disbursements could be in the region of HK$5-6M but in around November 2010 it turned out the all-in fee quote was unrealistic. In the end it was agreed that the total amount of legal expenses be increased to about HK$14M which left P with a case with time costs and disbursements in the respective aggregate sums of HK$6.1M and HK$7.9M. Thus it would appear there was no consideration or assessment whether the time spent was excessive or whether there was duplication and whether the fees were reasonable;

(3) In the Taxation Proceedings, her witness statement stated that she considered that it would be in the best interest of P to reach an agreement with Chen on the total amount of profit costs so to ensure she would not subsequently dispute the fees. She considered the time costs and disbursements already charged under the 1^st and 2^nd Bills, the work undertaken by her team but as there were substantial duplication and excessive time spent by the different fee earners, a considerable part of their time as recorded in the timesheets should be written off. She came to the view that it would only be reasonable and appropriate to charge Chen no more than HK$2.2M[36]. It was not said that there was any negotiation or discussion with Chen; and

(4) In this action, in D’s witness statement[37], she maintained that she had considered it in the best interest of P to reach an agreement with Chen on the total profits costs, given the time costs and disbursements already charged in the two interim bills and the hours that could properly and reasonably charged as profit costs was about HK$2M. She further mentioned that she on behalf of P agreed with Chen that the total profit costs of P to be about HK$6M and so a total of HK$6.122M was charged over the entire 7-month retainer.

44.  Another example concerns her hourly rate as stated in the 3^rd Bill. In the Taxation Proceedings, she said that the hourly rate for herself stated to be HK$9,500[38] was an error[39]. However, in this action, D claimed that she positively increased her hourly rate from HK$7,500 to HK$9,500 to minimize any possible dispute with Chen over the number of chargeable hours[40].

45.  I would place greater weight on the contemporaneous document and undisputed background as I did not find D’s evidence reliable and given her obvious self-interest in this action.

F. What were the duties owed by D to P?

46.  As already mentioned above, it was not disputed that D, as a salaried consultant and an employee, owed duties to P to: (a) perform work with reasonable care, skill and competence; and (b) not to undermine the mutual trust and confidence between them. Mr Dawes also accepted that D owed a duty of loyalty, good faith and fidelity in that D should have regard to P’s interest but not that she owed any duty to act in P’s interest.[41]

47.  In accepting a duty of loyalty and good fidelity was owed, I have no doubt that this required D, as an employee, to be loyal to P, her employer, and to act in the interest of P or at least to do her best to look after P’s interests though it may not be a single-minded or exclusive duty of loyalty: see Helmet Integrated Systems Ltd v Tunnard [2007] FSR 16 at §36; Crump and Pugsley, Contracts of Employment, 7^th Edn, §10.04 citing Sanders v Parry [1967] 2 All ER 803.

48.  As for the duty to keep proper records of work done and the time spent whilst there may not be any standalone duty as a matter of law, I do not believe that it was contested that it may be part of D’s duty of loyalty, good faith and fidelity and duty to exercise reasonable care skill and diligence to do so. At the very least:

(1) The keeping of time sheets would enable P to consider what could be charged to (but no doubt this may still be subject to taxation) and assist in the recovery of fees from the client[42] (especially where it has been agreed with clients that they will be chargeable based on time spent) which would be in the commercial interest of P. Accurate and comprehensive record keeping would enable P to justify its fees and reduce possible disputes with clients about fees leading to taxation proceedings and loss of reputation if upon taxation the firm is found to have overcharged;

(2) The keeping of proper records of work done by fee earners would also enable P to assess their workload, efficiency and performance, all of which will also be in P’s commercial interest[43]; and

(3) The existence of such duties is consistent with and reinforced by Ng’s Emails and P’s policy that all matter-related files and documents shall be stored in the DMS permanently and cannot be deleted by users[44].

G. Whether D breached her duties owed to P?

49.  In respect of the Undercharging Claim, as already mentioned, P complains that: (1) in relation to the 1^st Bill, D wrote off 183.83 hours without any valid reason; (2) in relation to the 3^rd Bill, D wrote off HK$7,959,975 without proper basis and reduced her hourly rate to HK$5,200 meaning that there was a further write off of HK$1,190,572; (3) the 3^rd Bill also did not include the unrecorded time costs due to D’s failure to keep proper time sheets after tendering her resignation; and (4) D wrongfully issue the 3^rd Bill as a Final Bill. The latter on its own plainly cannot amount to any breach of duty. It must be premised on the write off in the 1^st Bill and 3^rd Bill and the reduced hourly rate in the 3^rd Bill as well as not charging for unrecorded time and work being wrongful, which would have entitled P to issue a fourth or final bill.

50.  Essentially, what P says D should have done in discharge of her duty of loyalty, good faith and fidelity and her duty to exercise reasonable care, skill and competence was to charge Chen in full for all time spent as recorded on the Time Sheet Reports at the agreed hourly rates stated in the Retainer Letter and to include further time which had not been recorded in the Time Sheet Report since tendering her resignation as reconstructed by Alfonso. Whilst Mr Kok was at pains to disavow this, in substance, this must be P’s case. See P’s Closing Submission where it was said that, “However, it is P’s position that the timesheets contemporaneously recorded by P’s fee earners (including D) provide cogent evidence of the time spent on the case, which in turns provides the basis for P to properly charge Madam Chen on a time basis pursuant to the Retainer Letter” (§97) and “P submits that the timesheets (including Narrative Timesheets) provide helpful contemporaneous evidence in support of the time spent by P’s fee earners on Madam Chen’s case.” (§98)

51.  However, Yung accepted in cross examination, he himself would write off or adjust the time recorded as spent if the work done was unsatisfactory or if excessive time had been spent[45]. Chiu also admitted that charging Chen for HK$3.9M although the time costs was HK$4,405,470 (according to the internal Bill Guide) i.e. 11.5% reduction for the 1^st Bill, was reasonable and justifiable[46]. I do not accept that the failure to charge for every hour recorded on the Time Sheet Reports would in itself amount to breaches of duty owed to P.

52.  I agree that the time recorded as spent in any time sheets properly kept should prima facie be contemporaneous evidence of the time spent on Chen’s Case and that would be a basis to charge Chen. However, it has been clearly demonstrated by Mr Dawes that there were many entries in the Time Sheets Reports relied upon by P which are obviously improper and not chargeable.

53.  In respect of the 1^st Bill, the Time Sheet Reports for D recorded 403.83 billable hours from 28 September 2010 to 6 November 2010 (for the 1^st Bill Period) for work done on Chen’s Case by D[47]. However, entries such as that recording 130 hours of work on 5 November 2010 by D[48] plainly demonstrate the timesheets are not reliable or were not properly kept. Even for the many entries showing over 12 hours a day being spent by one fee earner just working on Chen’s Case are plainly excessive and it cannot be right per se to charge the client for them[49].

54.  In respect of the 3^rd Bill, again there are also time entries which cannot be rightly charged to client, e.g.: (1) Brian’s entries of 32 hours for perusal on 12 November 2010[50]; 30 hours for correspondence on 9 December 2010[51]; 36 hours for travelling on each of 9, 10, 13 and 14 January 2011[52]; and 28 hours for correspondence on 4 April 2011[53]; and (2) David’s entries of 36 hours for travelling on each of 9, 10, 13, 14 and 15 January 2011[54]. There were also many entries by Brian and David over 12 hours[55].

55.  In respect of the time written off in the 1^st Bill and 3^rd Bill, D’s case is that she exercised some sort of a “self-taxation”. In D’s WS, she said that, “When charging clients, I would refer to such factors as the time necessarily spent on the matter by myself and other fee earners of P’s firm, the quality of work and efficiency of junior solicitors who assisted me, whether any time spent was reasonable or proportionately chargeable or what a competent solicitor would have spent on the preparation and perusal of certain documents, etc. I would charge for time costs incurred by other fee earners if the related works done are necessary (such works delegated by me to these fee earners) but would not charge for unreasonable or excessive time costs. Nor would I charge clients for time spent on matters such as client care, internal administration, briefing junior solicitors on the case, internal review of junior solicitors’ works for the case, and attending queries about the case or legal issues from these junior solicitors”.[56]

56.  Although D admitted that she did not have a detailed breakdown or computation to justify the write off and no contemporaneous record of such, given Yung’s evidence also disavowed the approach of charging every item recorded on time sheets and agreed with the principles D adopted when deciding how much to bill (including that they should bill a reasonable amount that would reflect the amount of professional work done, unreasonable or excessive time costs should not be charged, matters such as internal administration, client care and training juniors are not chargeable, duplication would not be charged and even if a client were to be charged on a time basis, the supervising solicitors should still review the propriety or reasonableness of time entries and make adjustments)[57], I see no reason not to accept that she had done some broad brush assessment and it was proper for her to do so. It was not disputed that in the 4.5 years no client had ever complained about D’s billing of fees nor had P before the present case[58].

57.  Specifically, in respect of the 3^rd Bill, in D’s WS, her evidence was that:

(1) In order to avoid duplicity of costs charged (on excessive time spent on familiarizing oneself with Chen’s Case, internal briefing, internal discussion, reviews of drafts prepared and charged by external lawyers) and charges for duplication of work done by fee owners of other unjustifiable items, she had considered the time costs and disbursements under the previous two bills[59];

(2) The billable hours that could be properly charged would be substantially less than those shown on the internal bill guides[60];

(3) She considered that about HK$2M (as profit costs) may be reasonably charged under the final bill after balancing the respective interests of P and Chen[61];

(4) She increased the hourly rate for herself and 3 junior solicitors so as to minimize any possible disputes with Chen over the number of chargeable hours and in turn the billed profits costs[62]; and

(5) Eventually, she agreed with Chen that a total profits costs of about HK$6M (HK$2.2M for the 3^rd Bill) and therefore the 3^rd Bill was so issued[63].

58.  I have not overlooked, as mentioned already, that this justification was not the one initially put forward when she was asked by Jeff Lane. In cross-examination, D gave various explanations saying it would be understood that she had done some self-taxation exercise, there were many things to be said in her email which was already lengthy and she responded quickly and there was no use to going into the details about what was billable, the duplications etc. but just to give the ball park figures, but these are not very convincing. Nonetheless, there is some contemporaneous document to record that she wrote off fees for Chen’s Case because clients should be reasonably charged and not all time entries were properly chargeable but they were for reference only and she would write off time costs for internal discussion, training, duplications, work not done on client’s instructions and work done for administrative/supervision work[64].

59.  Based on all the evidence available before me, I am not satisfied that P has satisfied me that the extent of the writing off for the 1^st Bill and 3^rd Bill was unreasonable and/or D acted in breach of duties in doing so.

60.  As for the failure to charge for the unrecorded time and costs incurred by D and recorded time for other fee earners in the 3^rd Bill, P relied on Alfonso’s Revised Bill of Costs that assessed the total profit costs for the 3^rd Bill Period at HK$15,964,036.67[65]. Whilst Mr Kok submitted that D should not be allowed to rely on the List of Objections, as ultimately D did not apply for permission to refer to it as she said she would in D’s WS, the fact of the matter is that the List of Objections has been discovered and included in the evidence before this Court and plainly, D intended to rely on it.

61.  D had pleaded in her defence that: (a) the amounts claimed by P in respect of Chen’s Case were excessive and extortionate[66]; (b) the timesheets involved substantial duplications and excessive time spent by different fee earners and was contrary to the Retainer Letter which did not allow duplications[67]; (c) not all time spent shown on the Bill Guides (such as the costs of internal administration and the 3 Junior’s learning time) were chargeable[68]; and (d) P is not entitled to charge its claimed costs against Chen and it has the obligation to justify its claims for the billed amount[69].

62.  In D’s WS, she stated inter alia:

(1) The total sum of profit costs/time costs claimed under the 4^th Bill is in any view extortionate. This is particularly so when during the 7-month retainer period, she and her juniors were also working on other cases and matters and her juniors did not exclusively work for her and had work assigned to them by P[70];

(2) Not all time spent/shown on the bill guides are chargeable, for example it is not proper to charge for learning time of fee earners at the clients’ expense[71];

(3) Profits costs sought to be charged on Chen must be supported by the work actually performed by fee earners of reasonable competence and acting on client’s instruction and those time not properly chargeable were written off accordingly[72];

(4) All the court work done and court appearances were assigned to a team of senior and junior counsel for advice, drafting and handling, P and her were only able to advise on matters within local jurisdiction. The majority of the work was handled by the local and UK barristers and external professionals and she was involved with the liaison work amongst them and strategic discussion with them[73];

(5) As shown in the time sheets for Chen’s Case and the Taxation Bill of Costs, there was substantial duplication of work, duplicitous and excess time spent by different fee earners. For work spent on the same documents, P seeks to charge a lot more than those charged by counsel/barristers who drafted and settled the documents[74];

(6) As noted from the List of Objections, P seeks to charge profit costs of 3 or 4 fee earners who purportedly spent about the same amount of time on work of the same description on each of these incidences[75];

(7) Other examples include charging over HK$4,000 for the time spent by P’s messenger on delivering some papers from its office at Hutchison House (10 Harcourt Road) to counsel at Pacific Place in Admiralty. That actually involved a walking distance of about 15 minutes only. And there were also a few fee earners included in the Taxation Bill of Costs, who had never been requested to work on Chen’s Case;

(8) She was informed that Chen filed her List of Objections to persuade the court in the Taxation Proceedings to disallow a very substantive part of the HK$28M as appeared in the Taxation Bill of Costs and if necessary, would apply for permission to refer to the List of Objections, P’s itemized Taxation Bills and Schedule of Communications[76]; and

(9) If P was right, it would mean that she had to bill and collect as much as HK$70M on an annual basis including other cases she had billed, and on average HK$3M or 4M per month for Chen’s Case alone[77].

63.  In my view, D should not be precluded to rely on the List of Objections which she clearly has adopted as her own objections in her witness statement and placed in evidence before me.

64.  In the Fourth Affirmation of Chen[78], also in evidence in this action, Chen made numerous objections to the Bill of Costs in the Taxation Proceedings.

65.  Firstly, Chen had complained that about excessive or unusual charges for work. She gave as examples which included: (a) that P’s clerk had charged 2 hours for delivering documents from Hutchison House to Pacific Place which should not have taken more than 10 minutes on foot[79]; (b) she was charged 4 hours for copying and binding of bundles[80]; (c) a total of 74 minutes were charged for 2 one-line emails stating “FYI” and “Please see attached”[81]; (d) she was charged for the same work twice[82]; (e) she was charged for meeting even before Chen had retained P[83]; and (f) she was charged for internal communications amongst P’s fee earners totaling HK$3.5M[84].

66.  Secondly, she complained that over 85% of the Taxation Bill of Costs involved repetition of work or duplication of charges. It is plain that according to the Retainer Letter, D was allowed to delegate her work to more junior solicitors in order to save costs. Any duplication would have the contrary effect of inflating costs. There were many examples of more than one fee earner working on the same work such as being charged by 4 separate fee earners for reading an email[85].

67.  Thirdly, Chen complained that she was being charged for 6 minutes by two fee earners[86] for internal communications such as from P’s receptionist about the arrival time of staff[87] which plainly should not be chargeable.

68.  Fourthly, Chen complained that she was being charged for Jeff Lane’s work[88]. The Retainer Letter clearly stated that delegation to more junior solicitors were permissible but Jeff Lane was a partner.

69.  In my view, none of these complaints and the List of Objections which appears valid to me have been adequately answered in this action. Without evidence from Alfonso or the underlying materials to support the items in the Revised Bill of Costs, I simply cannot be satisfied of P’s case that D breached her duties by not charging Chen in total HK$21M profit costs.

70.  It was not disputed that eminent senior and junior counsel were heavily involved in Chen’s Case and took care of the heavy-lifting and court work whereas D’s role was confined to liaison work and strategic discussion with the legal team[89]. Against this undisputed background, P’s claim of that it was reasonable for D (and/or D acted in breach of duties not to do so) to charge Chen approximately HK$21M as its total profit costs, 5 times the combined fees of counsel is difficult to sustain.

71.  In all, having considered all of Mr Kok’s submissions and the available evidence before me, in the circumstances of this case, I am not satisfied that D acted in breach of her duties owed to P by not charging Chen for HK$15,964,036.67 as profit costs in the 3^rd Bill.

72.  As for the reduced hourly rate charged in the 3^rd Bill, I do not believe that there is any merits to this complaint. After all, the Retainer Letter did not say that the hourly rates were fixed in stone and P retained the right to review or increase the rates and inform her of any changes (which would be done in the Schedule to the bills issued to Chen).

73.  For completeness, I would find that D had full authority to issue, write off fees and vary the applicable hourly rates under the 1^st Bill and 3^rd Bill without consulting any partner. This is consistent with Yung’s evidence before the Taxation Proceedings and I do not accept his attempt to retract his earlier evidence. Besides, Yung ultimately accepted that if D acted reasonably, she did have the authority to write off fees[90]. Thus as I do not find that D acted unreasonably or in breach of duties, the issue of authority falls away.

74.  As for the Improper Records Claim, as already mentioned, P complains that D: (1) failed to keep narrative timesheets to record the details of her work and time spent on Chen’s Case; (2) failed to record the full amount of time spent on Chen’s Case; (3) did not keep attendance notes of 52 meetings; (4) did not upload all documents relating to Chen’s Case to the DMS; (5) transferred 20 boxes of files relating to Chen’s Case without P’s authorisation; and (6) deleted data relating to Chen’s Case from the hard drive of her workstation.

75.  In respect of the failure to keep narrative time sheets, there is no evidence that it was an internal requirement to keep narrative time sheets (as opposed to timesheets). In any event, it is clear that the failure to do so has not caused any loss and damage to P when based on the timesheets that were kept and other records of work done in P’s possession, Alfonso was able to reconstruct the work that was allegedly done by D and other fee earners on Chen’s Case. There is no evidence before the court what additional costs were incurred by P from the absence of narrative timesheets.

76.  Similarly, in respect of the failure to keep time sheets after tendering her resignation, whilst I would find that she had failed to do so contrary to Ng’s Emails and had breached her duties owed to P, this plainly has not caused any loss and damage to P for the reasons mentioned in the preceding paragraph.

77.  As for the complaint that D had failed to keep attendance notes of meetings, there was no evidence of any internal requirement to keep attendance notes. In any event, again the lack of attendance notes has not prevented Alfonso to reconstruct the work done included conferences that took place so I am not satisfied there was any loss and damage caused to P by any such breach of duty.

78.  As for the complaint that D did not upload all documents relating to Chen’s Case to the DMS, in Chiu’s cross-examination, she confirmed that she never alleged that D had failed to upload the emails relating to Chen’s Case onto the DMS. In Chiu’s cross-examination, as already mentioned, she only complained that it was very difficult to retrieve the relevant emails from the “vast ocean” of the DMS without D’s workstation which had been deleted. However, in so far as there was any difficulty or it is said that documents were not saved on the DMS, on 7 March 2012, D had provided a copy of the DVD containing the email records to P (amounting to 100 box files of documents in hard copies) and thus no prejudice could have been suffered in the Taxation Proceedings.

79.  As for the deletion of her workstation, I am not satisfied on a balance of probabilities that it has been proved that D (as opposed to other staff of P) had deleted her workstation and this was done prior to leaving P’s employment. All P could rely on is the evidence of P’s IT manager of having checked D’s workstation after her departure and found the hard drives were very clean. Besides, based on D’s unchallenged evidence, her workstation was only used temporarily to save documents that she was drafting or revising and all such documents would be circulated by email which would be in P’s email system or stored in the DMS. To the extent there was any difficulty retrieving any document in the DMS, again that difficulty would have been removed by the provision of the DVD to P.

80.  Lastly, in relation to the transfer of 20 boxes of files to TS, it was recorded contemporaneously by D’s email on 1 June 2011 that P “through its Management confirmed that I may take away the case after I told Rupert, Ronald, Simon and Jeff that I will spend a lot of my time on working for Ms. Chen upon my departure… there is express consent that the files may be transferred in the way Ms Chen so wishes.”[91] In any event, no loss and damage was caused to P when P acknowledged that the outstanding fee notes had been settled by Chen and the files may be released to TS by letter dated 24 June 2011[92]. There is no evidence of any loss and damage to P between 18 May 2011 and 24 June 2011 caused by the removal of the files.

H. Whether P has suffered loss and/or damage by reason of D’s breach of duties and what relief should be granted?

81.  Even if D had breached her duties to P, I am not satisfied that it has been demonstrated that P had suffered any loss or damage by reason of D’s alleged breaches of duties.

82.  P would have to prove that all time spent recorded on the time sheets or as reconstructed by Alfonso would have been chargeable and recoverable. As I found that the Time Sheets Records are unreliable as they were not properly kept by D and other fee earners, and Alfonso’s Taxation Bill was based on the Time Sheet Records, and given Chen’s objections now adopted by D in this action had not been adequately addressed, P has failed to prove its loss of HK$15,142,761.67 for the alleged undercharging of profit costs was caused by breach of duties by D.

83.  To the extent that P has sought the unbilled time costs for the 3^rd Bill Period to be assessed, I agree with Mr Dawes that notwithstanding P was in a position to do so (having had 195 box files of documents which Alfonso had reviewed and used as the basis of the Revised Taxation Bill), P did not tender Alfonso as a witness to justify his Revised Bill of Costs or any fall back to claim some lesser sum of damages, if the court does not accept all the items in the Revised Bill of Costs are chargeable.

84.  Whilst I would accept that where it is clear that the claimant has suffered substantial loss but there are evidentiary difficulties in quantifying the loss, the court will assess damages as best as it can on the available evidence and by “exercise of sound imagination and the practice of the broad axe” (see e.g. One Step (Support) Ltd v Morris-Garner and another [2019] AC 649, §§37-38), this is plainly not one of those case. This is, as Mr Dawes submitted, “a run-of-the-mill matter for taxing masters” and the court would no doubt be able to quantify P’s entitlement to costs if the evidence was properly put before it. The cases relied upon such as One Step (Support) Ltd (concerning the assessment of fees for a hypothetical release from non-compete obligations), 廈門新景地集團有限公司v Eton Properties Limited & Ors [2024] HKCFI 1291 (on the assessment of a party’s lost profits in a project which it did not take part in), Lam Rogerio Sou Fung v Tan Soon Gin George (unrep) CACV 85/2011, 17 January 2012 (damages for diminution in value of damaged Chinese antiques), ICI Swire Paints Ltd v Techi Motor Engineering & Trading Co [2003] 3 HKC 432 and IRT Oil and Gas Limited v Fiber Optic Systems Technology (Canada) Inc [2009] EWHC 3041 (QB) (damages for loss of profits for wrongfully terminated agreements) are clearly distinguishable.

85.  I also do not accept that even if there were breaches of duties by D in failing to keep time sheets after her resignation, that this had prevented and impeded P from adducing relevant evidence and the court can make presumptions in favour of P (relying on One Step (Support) Ltd, §38). As already mentioned, as demonstrated by the Bill of Costs produced by Alfonso, there was plainly no difficulty created by the failure to keep time sheets by D.

86.  Accordingly, in the present case, even if I was wrong and loss/damages was shown to have been suffered as a result of the breaches of duties by D, given the lack of satisfactory evidence before me as to its amount, which makes it virtually impossible for me to assess damages, I would have only awarded nominal damages to P.

87.  As for the costs incurred in the Taxation Proceedings, even if D did not commit the alleged breaches and if she had billed according to the Time Sheet Records and for the unrecorded time, it must be self-evident that Chen would have commenced the Taxation Proceedings and P would have incurred costs of the Taxation Proceedings. Chen had made it clear, contemporaneously, that she objected to the “ludicrous” billing approach[93] and as demonstrated from her objections when she was presented with the draft 4^th Bill[94] and her stance in the Taxation Proceedings.

88.  In so far as P might have incurred less costs if full and proper records had been kept by D, I also accept as submitted by Mr Dawes that given the invoices of Alfonso are heavily redacted and do not show what fees relate to what items (for example if additional time was incurred in the reconstruction work because of the lack of time sheets or missing records), and he has not given evidence on what extra costs were incurred as a result of the lack of time sheet or other records, there is no basis for D to claim what fees could have been avoided. It certainly cannot be the full legal costs as claimed. I do not accept the submission from the Bar table in closing submissions by Mr Kok that had proper time sheets been kept by D, it would not have been necessary to engage a law costs draftsman.

89.  As for the time costs for investigation in the sum of HK$442,000, whilst it was asserted in Chiu’s WS that this was the time costs incurred, she confirmed in cross-examination that P did not adduce any evidence to substantiate this claim[95]. P has not proved that it is entitled to this sum.

90.  In all, I am not satisfied that P had proved on a balance of probabilities the sums claimed as damages.

I. Conclusion and Orders

91.  By reason of the foregoing, I would dismiss this action with costs to D.

92.  I make a costs order nisi, that P should pay to D the costs of this action (including all reserved costs) to be taxed if not agreed. Any application to vary the costs order nisi should be made within 14 days from the handing down of this Judgment.