M.K. LAM & CO. (a firm) v. MING KEE SHIPPING SERVICE (FAR EAST) CO. LTD.

HCA20485/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.20485 OF 1998

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J U D G M E N T

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1. This is an action brought by the plaintiff, a solicitors firm, M.K. Lam & Co. ("the Plaintiff"), against the 1st defendant, Ming Kee Shipping Service (Far East) Company Limited ("the Company"), and the 2nd defendant, Mr Li Kam Ming ("Mr Li"), for legal fees alleged to be incurred when the plaintiff was acting for the Company in relation to a dispute that the Company had against China Light & Power Company Limited ("China Light").

2. What happened was that in 1994 China Light entered into a contract with the Company for the moving of certain transformers. The contract was awarded by China Light to the Company as a result of the active involvement by the Company's secretary, a lady by the name of Miss Chino Ng. The contract, however, soon after it had been awarded, had encountered substantial problems leading to a dispute between China Light and the Company.

3. On 21 July 1995, there was a major meeting between China Light and the Company attended by staff and people from China Light, and three persons on behalf of the Company, namely Miss Chino Ng, Mr Li, a director of the Company, and Mr Kam, a solicitor of the Plaintiff. That was a long meeting and after the weekend on 24 July 1995, the contract was terminated. I believe then the legal assistance of the Plaintiff (namely Mr Kam who was the solicitor throughout handling this matter on behalf of the Plaintiff) was sought. An action was commenced by the Company against China Light. This was a heavy piece of litigation which took some time. Eventually, it resulted in a judgment handed down on 28 July 1998 by me where I dismissed the claim of the Company against China Light and awarded costs against the Company.

4. The present dispute arose as a result of Mr Kam of the Plaintiff asking the Company to pay the purported balance of fees owing to the Plaintiff. I think it is common ground at this trial that some $700,000 odd had been paid by the Company to the Plaintiff over a period of time starting from the first payment in January 1996 with the last payment in June 1998, and that what the Plaintiff was seeking in this action is to recover the balance of some $500,000 odd pursuant to a substantial Bill dated 7 August 1998.

5. At the hearing of the trial, the dispute involved really only one issue and the issue is whether Mr Li had given an oral guarantee for the Company's liability for fees to the Plaintiff. Mr Kam of the Plaintiff gave evidence supplementing his earlier affidavits and witness statements that there was the initial giving of the oral guarantee on 27 July 1995 and that this oral promise to be responsible for the Company's legal fees was repeated by Mr Li on a number of occasions subsequently. Mr Li denied that he had ever given any oral guarantee or oral promise.

6. In order to understand whether the Plaintiff's version is true or not, we must first look at the relationship between Mr Kam and Mr Li. I think it is clear from the evidence that, in 1994 and 1995, when Mr Kam was acting and rendering legal services to Mr Li and his companies, Mr Li was a substantial businessman. He had many businesses and interests ranging from property development in Australia to a large project in Dalian and a number of other substantial business projects. I think Mr Kam had said to the court that before he started acting in this case in relation to China Light, he had already been rendering legal services in relation to other transactions. In my view, and I find it a fact, that Mr Kam regarded Mr Li as a valuable client and a valuable source for a great deal of future work. They went to Dalian together in relation to the Dalian project. There was a big party given in Hong Kong in which Mr Kam attended also in relation to entertaining Dalian delegates coming to Hong Kong. So there was good work that was coming in from Mr Li who ran a number of companies. When Mr Kam first attended the meeting of 21 July very urgently at the request of Miss Chino Ng, who was a friend of Mr Kam although the extent of the friendship is not clearly established before me, he was anxious to do work for Mr Li. Therefore, the answer to the question posed as to whether Mr Kam sought costs on account when he was first asked to act in relation to the proposed litigation against China Light is, in my view, no. Mr Kam says this is a heavy piece of litigation therefore he had asked for money on account and it was because Mr Li said "Oh, no money on account but you know you can trust me and I will give my personal guarantee" that was how the oral guarantee came about. I disbelieve Mr Kam on this but I accept the evidence of Mr Li. In my view, there was no seeking of money on account and no giving of oral guarantee in July 1995. That view of mine seems to me to be confirmed by the surrounding circumstances.

7. Amongst the surrounding circumstances is the admitted evidence that Mr Kam did not record this important oral guarantee that he alleged had been given by Mr Li. It is somewhat unusual, I think, for an oral guarantee to be sought by a solicitor from a director of a company. If that was the case and an oral guarantee was given, then common sense as well as good professional practice would dictate the necessity of having that recorded in some form even though it might not be in a form of a letter from Mr Kam to Mr Li setting out what had been agreed. Even a file note of some kind would have been expected. There was nothing recorded. In fact, the files of Mr Kam which were looked at in the course of the trial revealed an appalling lack of the necessary contemporaneous attendance notes. So, my view is that, there was simply no substantial credible evidence to indicate that there was such an oral guarantee. The primary case of the Plaintiff, therefore, fails.

8. The secondary case of the Plaintiff is that, on many subsequent occasions, the oral guarantee was repeated by Mr Li. The Plaintiff, after a long period of chasing by Mr Li's lawyers, eventually gave the Further and Better Particulars of the alleged dates when subsequent oral promises were alleged to have been made by Mr Li to be responsible for the fees of the Company. The Further and Better Particulars came, I believe, in September 1999 but before one comes to that, one should look at the history of the particularization of this case of the Plaintiff of oral promises.

9. In August 1998, after the judgment had been handed down, whereby the Company had lost its case against China Light, there was a little bit of communications and discussions as to the possibility of taking the judgment on appeal. At that stage, the position was that the Company had paid out already some $700,000 odd to the Plaintiff, in respect of its claim against China Light for the contract sum of some $800,000 odd, of which some $300,000 odd had already been omitted. So, in relation to a claim for some $500,000 odd, the Company had already paid to Mr Kam some $700,000 odd. In August 1998, Mr Kam was seeking against the Company some additional $500,000 odd, namely that the total costs for the modest claim of $500,000 would be something like $1.3 million. In addition, if there was to be an appeal, some additional $1 million would be required from the Company. I think it was understandable that, at that stage, Mr Li who had hardly ever communicated much with Mr Kam over the costs of the litigation was up in arms and wanted to change solicitors. It was as a result of the change of solicitors that there started a series of correspondence.

10. There was the first demand in the letter dated 21 August 1998 by Messrs So & Company, acting for Mr Li and the Company, writing to the Plaintiff at p.169 of Bundle B asking for particulars of any oral agreement that might have been made between the Plaintiff and Mr Li. No particulars were given except by a letter dated 24 August 1998, Mr Kam on behalf of the Plaintiff wrote that Mr Li had guaranteed the Plaintiff but no details whatsoever was given.

11. The second demand was the letter dated 17 September 1998 at p.175 of Bundle B by Messrs So & Company. The demand could not have been more specific in that it said :

"... could advise [us] as to whether the alleged guarantee is made orally or in writing. If the guarantee is made orally, please state who, when, where and the manner by which the guarantee is made; and if it is in writing, please supply us with the copy of the written agreement(s)."

And, the surprising answer that came back at p.174 is that :

"In so far as your enquiry on the particulars of Mr. Li's guaranty is concerned, it is best for you to ask him."

Coming from a solicitor in relation to a formal demand for full particulars of alleged oral guarantee that Mr Kam was relying on to demand payment of very substantial fees, it is to say at least surprising that an answer would be given in such terms. Mr Kam told me in evidence that he answered in that way because he was angry. This was in September, a month already after the first demand. I must say I do not believe a single word of what Mr Kam said.

12. The third demand was made by a letter of 21 September 1998 at p.176 at para.3 that :

"... it is therefore your obligation to give us full details to enable us to verify the same from Mr. Li."

No particulars were given by its following letter of 5 October 1998 at p.177. In fact, para.3 gives a nonsensical answer.

13. The position is not improved even by the start of proceedings. The Statement of Claim which was filed, I believe, in December 1998 did not contain the requested full particulars. I think para.5 of the pleadings refers to a guarantee given in July without specifying the exact date in July, and paragraph 10 refers to oral promises made during the period from July 1995 to July 1998. The first time, some form of particulars was given was in the Further and Better Particulars of 11 September 1999. So the course of the particularization of the Plaintiff's case of oral guarantee really took a tortuous path. It should be noted that even subsequent to the giving of particulars (Particulars at p.91 consist of seven particulars under para.10) and even after the filing of subsequent affirmations, the position did not substantially improve. It was only at the first hearing in January of this year, upon my insistence, that the second supplementary witness statement of Mr Kam was then prepared and the full case now particularized and relied on by Mr Kam, then emerged. I think the above account of the progression of the improvement of Mr Kam's case shows how little the court can rely on the truth of such allegation, not supported by any attendance notes.

14. In my view, therefore, the case of the Plaintiff both on the substantive initial oral guarantee of July 1995 and the subsequent oral undertakings alleged to have been given by Mr Li on the various occasions from 1996 to 1998, were not to be believed or accepted. I therefore, reject the case of the Plaintiff.

15. In my view, what had happened really was a firm of solicitors in the form of Mr Kam who had skillfully acting as solicitor for a substantive client, by regular obtaining or extraction of payments from the client managed to keep himself reasonably covered, at least as far as counsel's fees were concerned.

16. The summary of Table annexed to the Second Witness Statement of Mr Kam shows the progressive obtaining of money allegedly in the guise of payment on account of disbursements. Three payments of $50,000 each were secured in 1997 and then more monies thereafter were obtained as shown in the Table.

17. The position at the time of the delivery of judgment in July 1998 was that sufficient money had been paid to the solicitors as to cover more than adequately all disbursements. There were a lot of controversial evidence given in the course of the trial by both sides on contacts and conversations on the obtaining of money, and on the rendering or not rendering of bills. It is not necessary for the purpose of this judgment to go into details as to these but in so far it may be necessary, I find as a fact that Mr Li is the truthful witness and I reject the evidence of Mr Kam. It struck me that notwithstanding the many lapses of Mr Li's memory that Mr Li is a truthful witness and that his evidence is far more truthful and to be preferred to that of Mr Kam. Mr Li's daughter also gave evidence and she is without doubt a truthful witness.

18. My conclusion, therefore, is that the case of the Plaintiff for enforcement of an oral guarantee is not made out and is hereby rejected. Therefore the Action of the Plaintiff against Mr Li must be dismissed with costs.