UNITY PROFIT LTD v. LEE CHING LAM

HCA 2503/2017

[2020] HKCFI 2889

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2503 OF 2017

________________________

________________________

________________________

DECISION

________________________

1.  By a summons dated 6 May 2020 (“the summons”), the defendant (“D”) seeks the following order:

(1)  Messrs. K.C. Ho & Fong (“KCHF”) be restrained from acting for the plaintiff (“P”) in this action; and

(2)  P shall pay D his costs of an occasioned by this application.

2.  On 23 September 2020, the court directed that the summons would be determined on paper without an oral hearing.  The parties have provided to the court their respective written submissions and bills of costs, and I have considered the same.

The parties’ respective pleaded cases

3.  I would first briefly mention the parties’ respective pleaded cases.

4.  P’s pleaded case is as follows:

(1)  P is the registered owner of the following pieces of land in Demarcation District No. 169, Ma On Shan, New Territories:

(a)  Subsection 1 of Section A of Lot No. 359, the Remaining Portion of Section A of Lot No. 359, Subsection 1 of Section A of Lot No. 360, the Remaining Portion of Section A of Lot No. 360 and Section A of Lot No. 365 (collectively “Lots A”); and

(b)  Section B of Lot No. 365 (“Lot B”).

(2)  P as landlord and D as tenant entered into a tenancy agreement dated 9 January 2009 (“the 2009 Tenancy Agreement”), by which Lots A and Lot B were leased at a monthly rent of HK$15,000 for a fixed term of 1 year from 1 January 2009 to 31 December 2009.

(3)  Clause 2(a) of the 2009 Tenancy Agreement provided that D shall pay rent in advance to P on the 1st day of each and every calendar month.

(4)  The 2009 Tenancy Agreement expired on 31 December 2009.  No further written tenancy agreement was executed but D remained in possession of Lots A and Lot B.  There was a monthly tenancy under common law on the same terms since 1 January 2010.

(5)  D was in breach of the tenancy agreement by:

(a)  failing to pay rent from 1 June 2009 to 31 May 2017 and that the rent in arrears amount to HK$1,440,000.00;

(b)  failing to pay arrears of Government rent and rates in respect of Lots A and Lot B for the period from 1 June 2009 to 31 October 2017; and

(c)  building (or allowing to be built) unauthorised structures on Lots A and Lot B.

(6)  By a letter dated 2 February 2017, P through its solicitors demanded that D to demolish all the unauthorised structures on Lots A and Lot B within 7 days.

(7)  By a letter dated 22 May 2017, P demanded that D to pay HK$1,440,000 being arrears of rent.

(8)  As a result of D’s failure to pay rent despite P’s demand and request for payment, as from 1 June 2017 onwards, D has been occupying Lots A and Lot B without P’s consent and is a trespasser.

(9)  P is claiming for vacant possession of Lots A and Lot B, all the sums due by D to P under the tenancy agreement and mesne profits.

5.  D’s pleaded case is as follows:

(1)  Prior to the commencement of these proceedings, D has been in adverse possession of Lot B for more than 20 years.

(2)  In or around February 2000, D and Mr Ho Kwan Chu (“HKC”, acting as the legal representative and/or agent of P) entered into an oral agreement by which Lots A were leased by P to D at a monthly rent of HK$16,800 from 1 February 2000 to 31 December 2000.

(3)  Subsequently, Lots A were leased by P to D at a monthly rent of HK$16,800 in 2002-2003, HK$8,400 in 2003-2005 and HK$10,000 in 2006-2007.

(4)  From February 2000 to December 2007, D made the rental payments in respect of Lots A to KCHF.

(5)  By a written tenancy agreement dated 12 March 2008, P leased Lots A to D at a monthly rent of HK$12,800 for a fixed term of 1 year from 1 January 2008 to 31 December 2008.

(6)  D admits that he entered into the 2009 Tenancy Agreement with P.  However, the subject matter of the 2009 Tenancy Agreement is Lots A only.

(7)  D continued to occupy Lots A without paying any rent, rate and Government rent since about June 2009.  P took no action.  D has relied upon P’s conduct and acted to D’s detriment.  In the premises, P is estopped from obtaining any damages and/or mesne profits.

(8)  Alternatively, in May 2009, D had a telephone conversation with HKC (acting as the legal representative and/or agent of P), during which HKC represented that P would sell Lots A at a lucrative price for the purpose of columbarium development. P would refund to D the sum of HK$1,813,999.20 (i.e. the total amount of rental and Government rates and rent paid by D to P between 2000 and 2009).  In the meantime, D was permitted to continue occupying Lots A as a licensee without paying further monthly rental and Government rates and rent, but would have to deliver vacant possession at any time upon P’s request.  Relying upon these representations (“the 2009 Oral Representations”), D ceased to pay rent, rates and the Government rent since June 2009, and incurred and/or continued to incur significant expenditures on the maintenance of Lots A as a licensee.  In the premises, P is estopped from obtaining any damages and/or mesne profits.

(9)  Further or alternatively, as a result of the 2009 Oral Representations, there was an oral licence agreement between P as licensor and D as licensee (“the 2009 Licence Agreement”).  The 2009 Tenancy Agreement was replaced by the 2009 Licence Agreement.  The 2009 Licence Agreement is subsisting and D is entitled to continue to occupy Lots A. 

(10)  D counterclaims for reliefs relating to the adverse possession of Lot B as claimed by D, and specific performance of the 2009 Licence Agreement.

6.  Discovery has been completed and witness statements have been filed.  P will call HKC to give factual evidence in the trial.  D’ witnesses would be himself and a Mr Wong.  Mr Wong is a friend of D, and Mr Wong’s evidence concerns the adverse possession of Lot B as claimed by D.

HKC’s role

7.  There is no dispute that:

(1)  HKC is a shareholder and a director of Profit Rising Investment Limited, which is a shareholder of P.  HKC had dealings with D in relation to the subject matter of P’s claim.

(2)  HKC is a partner of KCHF and a practicing solicitor.

8.  D argues that HKC is the solicitor supervising P’s conduct of this action.  The basis of this argument is the file reference used by KCHF in respect of this action is “CH/65455/17”.  D says that the initials “CH” refer to Casey Ho, ie HKC.  However, in his affirmation filed on 14 July 2020 for opposing the summons, HKC denied that he was the one handling this case in KCHF.  According to HKC, the handling solicitor is another partner in KCHF, Mr Ho Wai Fung.

D’s application

9.  I have to mention at the outset that the injunction sought in the summons may not be properly drafted.  The injunction sought is an injunction restraining KCHF from acting for P in this action. However, KCHF is not a party in these proceedings.  D has not explained on what basis an injunction can be made against KCHF in these proceedings without naming KCHF as a party herein.  Be that as it may, I am prepared to proceed on the basis that D is seeking an injunction against P.  D has served the summons and all the papers relating to the summons on P.  No doubt, D is seeking an order against P by the summons.  I take the view that in substance, D is seeking an injunction to restrain P from retaining KCHF to act as P’s solicitors in these proceedings.  The injunction sought by D is not an interlocutory injunction, but a permanent injunction.

10.  Counsel for D have fairly drawn my attention to Article 53 of the Basic Law, which provides:

“Hong Kong residents shall have the right to confidential legal advice, access to the courts, choice of lawyers for timely protection of their lawful rights and interests or for representation in the courts, and to judicial remedies.” (Emphasis added)

11.  The right enshrined by Article 35 is not by its nature absolute and may be subject to limitations.  Such limitations are valid if they pursue a legitimate aim, are proportionate to that aim and are not such as to impair the very essence of the right[1].

12.  D submits that KCHF should not be allowed to act as P’s solicitors in these proceedings, for “there is a real risk that the overriding duty of independency owed by every legal practitioner to the Court has been comprised in the instant case.”[2]

13.  This is denied by P.  P also argues that the summons should be dismissed for there has been inordinate and inexcusable delay by D in taking out the application.

Any real risk of comprising the duty of independency owed to the court?

14.  I accept that the court has jurisdiction to make an order to disallow a firm of solicitors to act for a party in a set of legal proceedings.  In Nishimatsu-Costain-China Harbour Joint Venture v Ip Kwan & Co, Rogers JA (as he then was) said[3]:

“I apprehend that the jurisdiction of the court to remove from the record solicitors who have a conflict of interest stems from the fact that solicitors are officers of the court and their conduct in legal proceedings which may affect the administration of justice is subject to this supervisory jurisdiction.”

15.  P submits that if there is any conflict of interest between P and KCHF while KCHF continues to act for P in these proceedings, that conflict has been tackled by the informed consent given by P to continue to retain KCHF as its solicitors in this action.  D’s complaint is that if KCHF continues to act for P in these proceedings, there would be a real risk that the duty of independency owed by KCHF to the court would be comprised.  D says that this risk cannot be absolved by the informed consent given by P, for the duty of independency is owed by the solicitors to the court.

16.  With no disrespect to counsel, I am not going to discuss the various authorities cited by the parties in their respective written submissions.  After all, each case depends upon its own fact.  I would examine the circumstances in this case and see whether the real risk as suggested by D exists or not.

17.  I agree with D that whether there is a real risk that the duty of independency owed by KCHF to the court would be comprised is to be objectively assessed, ie whether such a real risk exists in the eyes of an informed and reasonable bystander. 

18.  D submits that:

(1)  Given that KCHF was retained and involved in the dealings between P and D, it is inevitable that the firm’s acts and omissions will come under close scrutiny and criticism at trial, including in respect of the following matters:

(a)  if the lease between P and D covered not only Lots A but also Lot B, why did KCHF fail to include any express reference to Lot B in the 2008 and 2009 Tenancy Agreements and the 2 February 2017 and 23 May 2017 letters;

(b)  if there continued to be a tenancy relationship between the P and D after 2009, why did KCHF not:

(i)  make arrangements for P and D to execute any written tenancy agreement after the 2008 and 2009 Tenancy Agreements;

(ii)  forward to D the quarterly demand notes for Government rates and rent starting from June 2009 (as had been the practice until that point);

(iii)  mention any alleged arrears of rent in the 2 February 2017 letter (which only asked D to demolish unauthorised structures in Lots A); and

(iv)  send any demand letter to D for allegedly outstanding rent during the 8-year period starting from June 2009 up until the Plaintiff sent the 23 May 2017 letter.

(2)  In view of the initials “CH” in the file references used by KCHF at all material times in respect of matters involving P and D, it is to be inferred that HKC was the supervising partner of all these matters, including this action.

(3)  HKC controls P and is its indirect owner through a corporate vehicle. HKC would himself stand to benefit from any eventual award of damages and order for possession made against D.  HKC therefore has a personal stake in the outcome of this action.  The stake is not merely financial, but also reputational.

(4)  In view of the above, there is a substantial prospect of embarrassment arising at trial.  There is a real likelihood that HKC will be placed in an irreparably compromised position where he will be forced to defend his acts/omissions (in his capacity as a practising solicitor) when he gives oral evidence as the P’s only factual witness.

19.  With respect, I am unable to agree that there is a real risk that the duty of independency owed by KCHF to the court would be comprised if the firm continues to act for P in these proceedings.

(1)  According to D’s pleadings, HKC is a key person in respect of the 2009 Oral Representations and the 2009 Licence Agreement. Naturally, P would have to call HKC to give evidence at the trial.  No matter whether KCHF would act for P in these proceedings or not, HKC would be P’s factual witness.

(2)  HKC will be cross-examined by D in the trial.  D is entitled to ask HKC questions relevant to the issues in dispute in these proceedings during cross-examination, and HKC would have to answer those questions.

(3)  As a matter of fact, the matters raised by D as summarized in [18(1)] above are matters handled by KCHF at the material times. Whether P is represented by KCHF or not, HKC would have to face questions concerning those matters during cross-examination at the trial.  If HKC would be embarrassed by those questions, the embarrassment would be there, no matter P is represented by what firm in the trial.

(4)  D says that HKC may well have a personal stake in the outcome of this action.  In my view, that does not mean that there would be a real risk that KCHF would not discharge the duty of independency owed to the court.  There is no allegation, let alone evidence, suggesting that KCHF have done or are likely to do anything in breach of the duties owed by them to the court by reason of HKC’s personal interest in these proceedings.

20.  As to whether HKC himself is the solicitor supervising this action in KCHF, there is a dispute on this factual issue.  It would not be appropriate for me to resolve this dispute on paper.  However, as matter of fact, there is no allegation that KCHF have done anything improper in these proceedings.  Discovery has been completed and witness statements have been filed.  This case would proceed to trial very soon.  The trial will be handled by P’s counsel[4]. For the sake of arguments, even assuming that HKC is in fact the solicitor supervising this case, I do not see any legitimate concern that KCHF may do something improper to hinder the due administration of justice in these proceedings if they remain to be the solicitors acting for P herein.

21.  P has a constitutional right of having its own choice of lawyers, unless a valid objection is shown.  D’s objection is that there would be a real risk that the duty of independency owed by KCHF to the court would be comprised if the firm is allowed to continue to represent P in these proceedings. For the reasons set out in the above, in my judgment, the real risk as alleged by D is not shown. Accordingly, P’s right of having its own choice of lawyers cannot be deprived.  The summons must be dismissed.

Delay

22.  Even if I were wrong on the above, I would still dismiss the summons on the ground of delay.  In my view, there has been inordinate and inexcusable delay by D in taking out the summons.

23.  There is no dispute that delay is a factor which should be taken into account in considering whether an injunction should be granted to restrain a solicitor from acting for a party.

(1)  In Bahonko v Nurses Board of Victoria (No.3)[5], Middleton J said:

“[2] The Court’s jurisdiction to restrain a legal practitioner from acting in proceedings is an exceptional one and discretionary. It must be exercised with appropriate caution and due weight must be given to the public interest in a litigant not being deprived of the legal practitioner of its choice without due or good cause: Grimwade v Meagher & Ors [1995] 1 VR 446 at 452; Geelong School Supplies Pty Ltd v Dean [2006] FCA 1404 at [35] and [51]. The cost, inconvenience or impracticality of requiring a legal practitioner to cease to act may provide a reason for refusing to grant relief: Geelong School [2006] FCA 1404 at [51]; Kallinicos v Hunt (2005) 64 NSWLR 561; Black v Taylor [1993] 3 NZLR 403 and Bowen v Stott [2004] WASC 94.

[3] The Court must be careful not to intervene unless it is absolutely required in the circumstances of the case. Further, the Court should be mindful that sometimes applications for restraining legal practitioners may be misused or quite inappropriately pursued by a party to proceedings. In Freeman v Chicago Musical Instrument Co 689 F2d 715 (1982), the Court observed at 722:

We do not mean to infer that motions to disqualify counsel may not be legitimate, for there obviously are situations where they are both legitimate and necessary; nonetheless, such motions should be viewed with extreme caution for they can be misused as techniques of harassment.” (Emphasis added)

(2) In Mitchell v Burrell[6], Brereton J said:

“3. ……. the timing of the application may be relevant, in that the cost, inconvenience or impracticality of requiring lawyers to cease to act when proceedings are well advanced may provide strong reason for refusing to grant relief.” (Emphasis added)

(3)  In Re IPM Group Pty Ltd[7], Black J said:

“64. In Colonial Portfolio Services Ltd v Nissen above, to which I drew Counsels’ attention in submissions, and as to which the parties had an opportunity to make supplementary submissions, Rolfe J emphasised the significance of principles of acquiescence (which is not relevant here), delay, waiver and election in any application to restrain a solicitor from acting. Both Muir J in South Blackwater Coal and Rolfe J in Colonial Portfolio Services Ltd v Nissen (at [171]) accepted, as common sense would suggest, that, although much of the cost of work done by a former solicitor would not be thrown away if a party had to engage new solicitors, it was inevitable that a substantial amount would be, and that there would be delay in prosecution of the action and loss of a party’s time taken up in briefing new solicitors as to matters within its knowledge. ……” (Emphasis added)

24.  P submits that:

(1)  P filed and served the statement of claim on 2 November 2017.  On the statement of claim, it has been clearly stated that P’s solicitors are KCHF.

(2)  D filed and served his defence and counterclaim on 3 January 2018, in which he raised, inter alia, the 2009 Oral Representations and the 2009 Licence Agreement. Given HKC is a key person in the matters relating to the 2009 Oral Representations and the 2009 Licence Agreement, D would have to anticipate that P would call HKC to give evidence to meet D’s case at the trial.

(3)  P filed and served the reply and defence to counterclaim on 12 April 2018.

(4)  D did not take any step to seek to restrain KCHF from acting for P in these proceedings until May 2020.  No explanation has been offered by D as to why no such step has been taken for more than 2 years.

(5)  By May 2020, discovery has been complete and all witness statements have been filed. Subject to determination of the summons, the case is ready to proceed to trial.

(6)  If KCHF were restrained from acting for P at this stage of proceedings, substantial inconvenience and wasted costs would inevitably result as P would be left no choice but to engage another firm of solicitors, which will have to review the case afresh, incurring further time and costs.

(7)  There is a case management summons which will be heard on 27 January 2021. Given the time constraint, if D’s application as per the summons is allowed, the case management summons would have to be adjourned, and it would be more uncertain as to when the present case could eventually be set down for trial.

25.  D submits that the witness statements were exchanged on 12 December 2019.  It became clear only after the exchange of the witness statements that HKC would be the sole witness to be called by P at the trial.  The court registry was closed due to the general adjourned period from 29 January 2020 to 8 March 2020 and from 23 March 2020 to 5 May 2020.  When the registry opened on 6 May 2020, D took out the summons on the same day.  In view of all these, there cannot be said that there has been any delay in taking out the summons.

26.  I agree with P and refuse to accept D’s submissions.  From the pleadings, it is plain and obvious that HKC would be an important witness at the trial.  As said by P, at the pleadings stage, D has already known that P’s solicitors in these proceedings are KCHF.  With respect, the explanation concerning the delay offered by D is unconvincing and I refuse to accept the same.  In my judgment, there has been inordinate and inexcusable delay by D in taking out the summons.  I also agree with P that if D’s application is allowed, P would suffer the prejudice as mentioned in P’s submissions.

27.  By reason of all these, I would exercise my discretion against D and refuse to grant the injunction sought by D.

Disposition

28.  I dismiss the summons.

29.  Costs should follow the event.  I order that costs of the summons be paid by D to P forthwith[8].  Having considered D’s bill of costs and P’s comments thereon, I summarily assess those costs at HK$150,000.

30.  Lastly, it remains for me to thank counsel for the assistance rendered to the court.