ANGELA HO & ASSOCIATES (A FIRM) v. KWONG KA YIN t/a PHYLLIS K. Y. KWONG & ASSOCIATES

HCMP 1794/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1794 OF 2014

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JUDGMENT

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1. The plaintiff has brought these proceedings by way of originating summons to enforce a solicitor’s undertaking (“the Undertaking”) allegedly made by the defendant to pay counsel’s fees and the plaintiff’s fees in High Court Action No 2232 of 2013 (“the Action”).

BACKGROUND

2. The plaintiff, Angela Ho & Associates (“Ms Ho’s Firm”), and the defendant, Phyllis K. Y. Kwong & Associates (“Ms Kwong’s Firm”), are 2 firms of solicitors in Hong Kong.  Ms Angela Ho is the senior partner of Ms Ho’s Firm, and Ms Phyllis Kwong (“Ms Kwong”) is the sole proprietor of Ms Kwong’s Firm.

3. In March 2014, Ms Ho’s Firm was instructed by Ms Kwong’s Firm to take over the handling of the Action from Ms Kwong’s Firm for the 8^th to 12^th defendants.  The written retainer was signed by Ms Kwong’s Firm.  Since then, Ms Kwong’s Firm had remained in the case to coordinate the matter and instruct Ms Ho’s Firm on behalf of the ultimate clients.  The main person instructing Ms Kwong’s Firm was a Mr Nabulsi located in Jordan.

4. Ms Kwong is the 10^th defendant in the Action.  Because of certain undertaking given by her to the court, Ms Kwong had no further interest or involvement as a defendant in the Action as from 4 December 2013.

5. In preparation for the hearings scheduled to be heard on 20 and 29 May 2014, Ms Kwong’s Firm, on 27 April 2014, asked Ms Ho’s Firm to instruct counsel, Mr John Bleach, SC (“Mr Bleach”) and Mr Wilson Leung (“Mr Leung”), to appear for the ultimate clients in the hearings “as soon as possible”. In an email between Ms Kwong and Mr Nabulsi on the same day, Mr Nabulsi agreed to engage Mr Bleach as counsel and he would arrange the transfer of funds of US$75,000 in that week and another US$75,000 on or before 15 May 2014.

6. On 28 April 2014, Ms Ho’s Firm sent an email addressed to Ms Kwong (“the 1^st Email”)[1] in the following terms:

“Further to the telephone conversation with John Voon, Mr. John Bleach S.C. and Mr. Wilson Leung have made the following estimate of quote, SUBJECT TO SEEING THE PAPERS:-

The daily rate and daily refresher of Mr. John Bleach S.C. is HK$85,000 and Mr. Wilson Leung is HK$30,000 They estimate that the time required for preparing the two hearings on 20 May 2014 and 29 May 2014 is 12 days. Together with the 2 days for hearing, they estimate that the time required is 14 days.

Therefore, the estimate fee of Mr. Bleach S.C. is HK$1,119,000 and Mr. Leung is HK$420,000. However, the said amount is only an estimate of fee which is subject to them seeing the papers.

We had called the secretary of Mr. Bleach S.C., Mr. Caldas, this morning. Mr Caldas indicated that we need to confirm our instructions by signing Mr. Bleach’s backsheet in which we will be liable to his fee of an amount no less than HK$1,119,000. As the amount is substantial, we should be grateful if you and the client could give our firm a back-to-back confirmation that you and the client will pay 50% of the counsel fee within 7 business days and the remaining balance within 14 business days. We are not able to sign the backsheet without this written confirmation.

Additionally, we should be grateful if you could pay us the costs on account of HK$300,000 for our fee which covers the period until the end of June.

Many thanks for your understanding.”

7. On the same day, there was a telephone conference between Mr Maxwell Chan (“Mr Chan”) and Mr John Voon (“Mr Voon”) who were the trainee solicitors of Ms Ho’s Firm and Ms Kwong’s Firm respectively.  During such conference, Mr Chan had made it clear to Mr Voon that an undertaking to pay costs on account was required before Ms Ho’s Firm would issue the briefs to counsel[2]. There was also an email sent by Mr Voon to Mr Chan[3], discussing the terms of the proposed undertaking and expressing the clients’ concern about any request for further costs on account.

8. Later on the same day, Mr Voon sent another email to Mr Chan (“the 2^nd Email”)[4] which contained a written undertaking to pay the requested costs on account (“the Written Undertaking”).  The 2^nd Email reads as follows:

“Regarding the amount of the fees, we duly note that the fee quotes are ‘subject to seeing the papers’. This is not quite a definite enough indication for client. We would reiterate that the client needs to be assured that the number of days required by Counsel for reading of the papers and preparation of the hearing will include ALL reading and preparation time and that further fees will not be requested. It would be extremely difficult for client to again obtain further financing.

Given that our client is agreeable to the daily rate, however, we propose that you send the backsheet, instruction letter and all the papers to Counsel first thing tomorrow morning and have counsel, after having seen the papers, get back to you as soon as possible regarding the exact number of days required for reading and preparation. When we receive the exact global fee quote from you (including Senior Counsel, Junior Counsel and Solicitors’ fees), we will pass that on to our client who will then transfer the exact amount of fees according to your fee quote.

Please kindly also let us know how much costs on account are remaining so that we know the remaining balance that needs to be paid by client.

As for the undertaking requested by your firm, as spoken, the undertaking is as follows:

We undertake to pay the requested costs on account (inclusive of Senior Counsel’s, Junior Counsel’s and Solicitor’s fees) to your firm by way of 2 instalments.  The 1st instalment will be paid by close of business on Friday 9 May 2014 and the 2nd instalment will be paid on or before close of business on Tuesday 20 May 2014, the date of the hearing for discharge of the Injunction Order.”

9. In the morning on 29 April 2014, Mr Voon sent an email to Mr Chan to remind him to send out “the backsheet, instruction letter and bundle of documents” to Mr Bleach that morning.  Mr Voon also stated that the fund would be transferred to Ms Ho’s Firm by next Friday, 9 April 2014, as “per the undertaking”.  In another email sent out by Mr Voon a few minutes later, Mr Voon corrected that the payment date of the 1^st instalment should be 9 May 2014. 

10. Ms Ho and Ms Kwong also had a telephone conversation in the morning on 29 April 2014 the contents of which are very much in dispute.

11. According to Ms Ho, she had, during such telephone conversation, reinstated to Ms Kwong the necessity for an undertaking from Ms Kwong’s Firm before she would issue the briefs to counsel.  By that time, Ms Kwong reassured Ms Ho that her Firm would pay the legal costs as per the request contained in the 2^nd Email, and provided Ms Ho with an oral undertaking to that effect (“the Oral Undertaking”).

12. Ms Kwong disputes that she had given any undertaking to Ms Ho in the telephone conversation.  On the contrary, she told Ms Ho that: (i) the ultimate clients had not indicated to her that they would send the costs on account; and (ii) there was no guarantee that the ultimate clients would pay if the quotes of counsel’s fees remained unconfirmed.

13. On the same day, Mr Chan and Mr Voon worked together in drafting the briefs to counsel to both Mr Bleach and Mr Leung to include, inter alia, the appearance of counsel in the hearings on 20 and 29 May 2014. In the brief to Mr Bleach, the agreed brief fee and refresher were stated to be HK$1,105,000 and HK$85,000 respectively.  In the brief to Mr Leung, the agreed brief fee and refresher were stated to be HK$390,000 and HK$30,000.

14. Sometime in mid-May 2014, after skeleton arguments had been filed, the 8^th to 12^th defendants in the Action (including Ms Kwong as the 10^th defendant) instructed a new firm of solicitors, Tanner De Witt, who informed Ms Ho’s Firm of this on 15 May 2014 and filed a Notice of Change of Solicitors on 16 May 2014, which was only 4 days before the hearing on 20 May 2014.

15. Mr Bleach and Mr Leung were not provided with new briefs by Tanner De Witt because they were not put in funds in time for the hearing.  Mr Bleach and Mr Leung did not, therefore, formally appear in the hearing on 20 May 2014 before DHCJ Le Pichon because the solicitors’ firm that had issued the briefs to them was no longer instructed.  Nevertheless, they attended the hearing to offer an explanation to the court that there were not in a position to appear.  After that, Mr Bleach and Mr Leung issued fee notes to Ms Ho’s Firm for HK$1,105,000 and HK$390,000 under their briefs.

16. Mr Alder, counsel for Ms Kwong’s Firm, accepts that Ms Ho’s Firm is liable to Mr Bleach and Mr Leung for the payment of the said brief fees, though such liability did not accrue at the time of the delivery of the briefs but at some subsequent unspecified time.  To save the trouble of taxation, Mr Alder also accepts that Ms Ho’s Firm can properly charge a sum of HK$200,000 as their fees for providing their professional services in the conduct of the Action.

THE COURT’S SUMMARY JURISDICTION OVER SOLICITORS

17. The present application is brought under the court’s summary jurisdiction over solicitors.  The law in this area has been comprehensively set out in the English Court of Appeal’s decision in Fox v Bannister[5]. In particular, Donaldson MR said the following about such jurisdiction[6]:

“The jurisdiction is indeed ‘extraordinary’, being based upon the right of the court to see that a high standard of conduct is maintained by its officers acting as such … … … It is, in a sense, a domestic jurisdiction to which solicitors are only amendable because of their special relationship with the court and it is designed to impose higher standards than the law applies generally. Thus, for example, it is no answer to a complaint that a solicitor acted in breach of an undertaking given by him that there was no consideration for it … … …

Its summary character lies not in the burden or standard of proof, although it is only exercisable where there has been a serious dereliction of duty, but in the procedure whereby it is invoked.  This is normally by originating summons, although it can be by simple application in an action where the conduct complained of occurred in the course of that action, and will not automatically or usually involve pleadings, discovery or oral evidence, although the court can, in appropriate circumstances, require a definition of the issues (by pleadings or otherwise), discovery and oral evidence.”

18. Nicholls LJ also said the following[7]:

“It is a jurisdiction which is exercised, not for the purpose of enforcing legal rights, but for the purpose of enforcing honourable conduct on the part of the court’s own officers.”

19. As to how the court will enforce undertakings, Nicholls LJ said[8]:

“Where a solicitor, directly or indirectly, still has it in his power to do the act which he undertook to do, the court may order him to do that act. Where the solicitor does not have it in his power, he may be ordered to make good the loss flowing from his failure to perform the undertaking, as loss flowing from a breach of duty committed by a solicitor as an officer of the court.”

20. There is no disagreement between the parties about these legal principles.

21. The jurisdiction is summary in nature.  Despite that, there are quite a few factual disputes between the parties in the present case, in particular about the contents of the telephone conversation between Ms Ho and Ms Kwong on 29 April 2014.  On the day before the hearing, I have made enquiry with the parties as to whether the deponents of the affidavits should attend the hearing for cross-examination.  Despite such invitation, both parties agree for the court to resolve the factual disputes on paper without hearing the oral evidence.  In resolving the factual disputes, both parties also agree that the standard of proof is one of balance of probabilities.

22. In the hearing, Mr Alder has also asked the court to strike out certain parts of the affidavits of Ms Ho and Mr Chan which relate to the following matters:

(i) the subjective intentions of Ms Ho and Mr Chan when they discussed the terms of the alleged Undertaking with Ms Kwong and Mr Voon;

(ii) their belief about the legal effect of the documents; and

(iii) the private discussions between them relating to the alleged Undertaking.

23. Ms Kwong’s Firm should have taken out a proper summons for such application.  However, it is clear that the subjective intentions of Ms Kwong and Mr Chan are not relevant for the court to construe the legal effect and the contents of the alleged Undertaking. For the internal discussions between Ms Ho and Mr Chan, they were included in the affidavits for the purpose of completing their evidence about the whole chain of events leading to the making of the alleged Undertaking.  Such kind of discussions would not add any further weight to their own evidence about the contents of their conversations with the representatives of Ms Kwong’s Firm.  Their belief about the legal effect of the documents is also irrelevant.  The court will only focus on the contents of the documents and the conversations between the relevant parties, but not those between Ms Ho and Mr Chan, in determining whether Ms Kwong’s Firm is obliged to honour the alleged Undertaking.  After I have made these observations clear to Mr Alder, he does not insist for the court to strike out the objectionable parts in their affidavits.

WHETHER THERE WAS AN ENFORCEABLE UNDERTAKING?

24. Ms Ho’s Firm brought the present proceedings against Ms Kwong’s Firm to enforce the Undertaking in respect of the payment of the requested costs on account, which consisted of HK$1,190,000 and HK$420,000 to cover the brief fees of Mr Bleach and Mr Leung respectively and HK$300,000 to cover the professional fees of Ms Ho’s Firm.  However, since the counsel’s fees actually charged by Mr Bleach and Mr Leung are in the sums of HK$1,105,000 and HK$390,000 respectively and the professional fees of Ms Ho’s Firm are only in the sum of $200,000,  Ms Ho’s Firm is claiming against Ms Kwong’s Firm for these lesser amounts.  It is the case of Ms Ho’s Firm that had Ms Kwong’s Firm honoured the Undertaking in making the payment, there would have been sufficient funds in the costs on account to pay for such legal fees. 

25. Ms Kwong’s Firm disputes the claim on the following grounds:

(i) Ms Ho’s Firm had to supply the final quotes of counsel’s fees to Ms Kwong’s Firm and the ultimate clients before the Written Undertaking would take effect;

(ii) Mr Voon, being only a trainee solicitor, had no authority to give the Written Undertaking on behalf of Ms Kwong’s Firm; and;

(iii) Ms Kwong did not give the Oral Undertaking to Ms Ho in their telephone conversation on 29 April 2014.

26. In the hearing, Mr Alder indicates to me that his client would not rely on the defence based on the lack of authority.  In other words, I only need to determine the legal effect of the Written Undertaking and whether Ms Kwong had given the Oral Undertaking on 29 April 2014.

(i)  The meaning and the effect of the Written Undertaking

27. In my judgment, the meaning of the Written Undertaking is clear.  Ms Kwong’s Firm would have to pay the requested costs on account in 2 instalments, and such undertaking is not subject to any condition such as confirmation of the quotes of counsel’s fees.  The Written Undertaking was contained in a specific paragraph in the 2^nd Email, and there was no condition attached to the specific undertaking in that paragraph.  Furthermore, Mr Voon confirmed, in no uncertain terms, in subsequent emails that the 1^st instalment of the requested costs on account would be paid to Ms Ho’s Firm on or before 9 May 2014, and so there is no ambiguity that Ms Kwong’s Firm has to honour such Written Undertaking.

28. Mr Alder argues that the contents of the 1^st and 2^nd Emails, when properly construed, can only mean that the Written Undertaking was subject to an express condition which was confirmation of the quotes of counsel’s fees, or that the Written Undertaking was only a draft.

29. In the 1^st Email, Ms Ho’s Firm had informed Ms Kwong’s Firm that the quotes of counsel fees were “subject to seeing the papers”.  In the 2^nd Email, Mr Voon had made it clear to Ms Ho’s Firm that the fee quotes were not quite enough for the ultimate clients. Mr Voon also stated that after receiving the exact global fee quotes from Ms Ho’s Firm, Ms Kwong’s Firm would pass that on to the ultimate clients who would then transfer the exact amount of the fees according to the fee quotes.  Hence, Mr Alder submits that the Written Undertaking was subject to the confirmation of the fee quotes.

30. I disagree.  Although counsel had yet provided the finalised fee quotes, Ms Ho’s Firm, in the 1^st Email, had made it clear to Ms Kwong’s Firm that: (i) once the backsheet was delivered to Mr Bleach, Ms Ho’s Firm would be liable to pay Mr Bleach’s fees of an amount no less than HK$1,119,000; and (ii) Ms Ho’s Firm would not be able to sign the backsheet without the written confirmation of Ms Kwong’s Firm.  Knowing full well such concern about liability for costs, Mr Voon nevertheless instructed Ms Ho’s Firm to send the briefs to counsel and agreed to provide the Written Undertaking as stated in the 2^nd Email.

31. As mentioned above, the Written Undertaking was provided in a self-contained paragraph in the 2^nd Email.  The 2^nd Email was written by Mr Voon himself, and he was free to insert whatever condition in the Written Undertaking as he considered appropriate.  Yet, no such condition was inserted.

32. Mr Alder argues that, prior to the confirmation of the final fee quotes, Ms Kwong and the ultimate clients would not have agreed to give the Written Undertaking because it would expose the clients to unlimited liability on costs if counsel came back with unrealistic fee quotes.

33. I again have to disagree.  It seems from the correspondence that the ultimate clients had already accepted to pay the requested fees stated in the 1^st Email.  At the very least, the email between Ms Kwong and Mr Nabulsi dated 27 April 2014 shows that the ultimate clients were willing to pay the quoted fees of Mr Bleach.  The main concern of the ultimate clients was that there would be further request on costs, as they might have difficulty in obtaining further funds to finance the costs of the litigation.  However, it is also common ground that there was great urgency to send the briefs to counsel to secure their attendance at the hearings.  In such circumstances, it would be up to Ms Kwong’s Firm and the ultimate clients to decide, in view of such urgency, whether to commit to the Written Undertaking by that time.  As I see it, Ms Kwong’s Firm had made such commitment.

34. From the point of view of Ms Ho’s Firm, there was no such urgency for them to send the briefs to counsel.  As indicated in the correspondence, their main concern was to cover their own liability for the payment of counsel’s fees.  On the other hand, any further delay would only hurt the interests of the ultimate clients.  As counsel had already supplied their fee quotes, though they might not be the final ones, it was quite possible for Ms Kwong’s Firm and the ultimate clients to provide the Written Undertaking as they already had had a rough idea about the amount of legal fees and they agreed “the daily rate” of counsel[9]. Once the Written Undertaking was given, the appearance of counsel at the hearings could then be secured.  Both Firms also worked together in drafting the briefs to counsel with the agreed brief fees and refreshers expressly stated in the backsheets.  Coupled with the fact that Mr Voon had confirmed in subsequent emails that the 1^st instalment would be paid on or before 9 May 2014, Ms Kwong’s Firm had made a firm commitment for the payment of the requested costs on account.

35. Furthermore, if there was any ambiguity in the meaning of the Written Undertaking, which I do not accept it to be the case, such ambiguity should be construed in favour of Ms Ho’s Firm.

36. Paragraph 14.05 of the Solicitors Code of Conduct provides:

“An ambiguous undertaking is generally construed in favour of the recipient.”

37. Such approach is also consistent with the high standard of duty that the court expects a solicitor to discharge in the course of his work and the contra proferentem rule.  Hence in my judgment, Ms Kwong’s Firm has no meritorious defence to the claim of Ms Ho’s Firm based on the Written Undertaking.

(ii)  The making of the Oral Undertaking

38. The above reasons are already sufficient for Ms Ho’s Firm to enforce the Undertaking as to payment of costs on account. However, I also find, on the balance of probabilities, that Ms Kwong did provide the Oral Undertaking to Ms Ho on 29 April 2014.

39. The evidence of Ms Ho and Mr Chan is clear and straightforward, and I cannot find any doubt or ambiguity in their evidence.  On the contrary, I have great reservation about the credibility of Ms Kwong’s evidence.

40. Firstly, Ms Kwong states on oath that the ultimate clients had not yet indicated they would send the requested costs on account and there was no guarantee the clients would pay the fees if the exact quotes remained unconfirmed[10]. This is contradicted by her own evidence.  The email dated 27 April 2014 between Mr Nabulsi and Ms Kwong clearly shows that Mr Nabulsi had agreed to pay the counsel’s fees of at least Mr Bleach in the total sum of US$150,000 (roughly equivalent to his quoted counsel’s fees) in 2 instalments before the specified payment dates.

41. Secondly, Ms Kwong maintains that her Firm had no interest after she had passed the conduct of the Action to Ms Ho’s Firm. The role of her Firm was only to act as a coordinator or facilitator to pass on any instructions between the ultimate clients and Ms Ho’s Firm.  Under such circumstances, there was no reason for her to pledge her Firm’s personal credit for the payment of the requested costs on account, whether by way of the Written or the Oral Undertaking[11].

42. Again, this allegation may not be correct. According to the retainer letters signed by the ultimate clients, they each had to pay a further sum (the exact sums are unknown as the figures had been covered in the exhibits) to Ms Kwong’s Firm “upon dismissal of the case, or upon [the Action] won by [the ultimate clients]”[12], which were some kind of contingency fee agreements.  There is no suggestion that such agreements ceased to have effect after Ms Kwong had passed over the conduct of the case to Ms Ho’s Firm, in particular the ultimate clients, under the terms of the retainers, would have to pay monthly fees to Ms Kwong’s Firm until conclusion of the Action and Ms Kwong continued to provide services to the ultimate clients by acting as a coordinator between Ms Ho’s Firm and the ultimate clients.  Hence, I have great reservation about Ms Kwong’s allegation that her Firm had no further interest in the matter.

43. Thirdly, the absence of follow-up correspondence about the confirmation of the final fee quotes tends to support Ms Ho’s allegation relating to the Oral Undertaking.

44. It is common ground that, due to the limited time before the hearings, Ms Kwong’s Firm was eager for Ms Ho’s Firm to send the briefs to counsel as soon as possible.  On the other hand, it is also clear from the correspondence that Ms Ho’s Firm was trying to secure the Undertaking from Ms Kwong’s Firm so that the former would be covered as far as the liability for counsel’s fees is concerned.  If there was no firm undertaking given on 29 April 2014 as alleged by Ms Kwong, Ms Ho’s Firm should have been keen to get the final fee quotes from counsel as soon as possible and there should have been further correspondence between the 2 Firms relating to the confirmation of the fee quotes.  Quite surprisingly, both Firms had no further correspondence on such subject after 29 April 2014.  In my judgment, this is only consistent with Ms Ho’s case.  If there had been a proper undertaking given by Ms Kwong’s Firm, there was no necessity, or at least no urgency, for both Firms to take any further actions relating to the confirmation of the fee quotes.  I find it to be the case here.

45. For the above reasons, I accept as a matter of fact that Ms Kwong did provide the Oral Undertaking to Ms Ho in their telephone conversation on 29 April 2014.  Hence, Ms Ho’s Firm is entitled to enforce the Undertaking as to the payment of the requested costs on account.

46. Ms Ho’s Firm has yet paid the fees to both counsel.  I have already indicated to the parties that I will give them further opportunity to argue on the final wording of the order if necessary.  I therefore make the following order nisi:

(i) counsel’s fees of HK$1,105,000 and HK$390,000 be paid by the defendant to Mr. John Bleach, SC and Mr Wilson Leung through the plaintiff, and the defendant do pay the plaintiff’s fees of HK$200,000; and

(ii) costs of this action be to the plaintiff on an indemnity basis.

47. The order nisi shall be made absolute 14 days after the date of the handing down of this Judgment.

48. Since there is evidence before the court to show that Ms Kwong’s Firm had made contingency fee agreements with the ultimate clients, I consider it my duty to report the matter to the Law Society.  But since the professional integrity of a solicitor is at stake here, I would give an opportunity to Ms Kwong to address me before I do so.  I would therefore direct Ms Kwong to submit written submissions to me, if any, within 14 days as to why I should not refer the matter for investigation.