WONG & FOK (a firm) v. RONSTAR (ASIA) LTD

HCA 1476/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1476 OF 2009

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BETWEEN

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J U D G M E N T

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1.  The Plaintiff is a firm of solicitors. The firm is suing the Defendant, its former client, for outstanding legal fees. Its claim relates to 3 fee notes, being A/90548/07 dated 14 November 2007, A/90557/07 and A/90568/07 both dated 23 November 2007.

2.  The sum total of the Plaintiff’s claim is $37,640, plus interest.  The claim was first lodged in the Small Claims Tribunal on 7 December 2007.  It was later allowed to be discontinued with an order against the Plaintiff to pay $500 costs to the Defendant. 

3.  Subsequently on 16 June 2008, the Plaintiff issued proceedings in the Small Claims Tribunal again for the same claim.  By order of the Adjudicator, the claim was transferred to the Court of First Instance for trial.

4.  At the trial before this Court, the Plaintiff was represented by counsel, Mr Tsang.  The Defendant was not legally represented but its director, Mr Poon, had obtained leave to represent the company.  Some of the matters raised in the Defence were somewhat obscure. After hearing representations from the parties, it appeared to me that only 2 issues were appropriate for determination at this trial, namely:

(i)   What was the agreement as to the rate of fees to be charged by Mr Samuel Wong, a partner of the Plaintiff, and by other solicitors of the firm;

(ii)   Whether the Plaintiff was barred from pursuing the present claim when they had already “terminated” the first set of proceedings before the Small Claims Tribunal.

5.  I should mention that apart from these 2 issues, Mr Poon also sought to advance an argument that the Defendant was not under any obligation to pay the “interim bills” on the ground that such bills were not “statute bills”.  According to Mr Poon, 6 conditions – the “6 hurdles” as he put it – were required to be fulfilled before the bills became enforceable.  I had difficulty understanding the argument although I had given Mr Poon considerable allowance in the framing of the issue.  Notwithstanding Mr Poon’s submission that this point was encompassed under paragraph 9 of the Defence (which merely pleaded that the Defendant was “not obliged to settle the said un-established debt .... ”), I did not consider the point to have been properly raised in the pleading and accordingly I had disallowed the issue for the purpose of this trial.   

6.  There was yet another point concerning the Defendant’s challenge to “the time and value” of the Plaintiff’s work under the respective fee notes (paragraph 10 of the Defence).  It appeared to me – and both parties agreed – that such challenge should best be referred to a Taxing Master after I have given my decision on the 2 issues identified above. 

7.  I will proceed to deal with the 2 issues.

The Disputed Rate

8.  It is common ground that the Plaintiff’s retainer was not set out in a written agreement.  Mr Samuel Wong of the Plaintiff on the one hand and Mr Poon on the other gave different account of what the agreed rate of charge was. 

9.  Mr Wong said that he had informed Mr Poon at their first meeting (on 28 September 2007) that the Plaintiff would charge the Defendant on an hourly basis according to the High Court taxation rate. He informed Mr Poon that his hourly rate would be $4,000 and that the rates for his associates would range between $2,500 and $3,000 an hour depending on their seniority.

10.  Mr Poon’s recollection of the discussion was very different.  He said that Mr Wong had told him that the charge of the Plaintiff firm would be $4,000 per day, and that was the basis on which he agreed to retain the Plaintiff to act for the Defendant. 

11.  I will begin by setting out the background leading to Mr Poon’s meeting with Mr Wong. 

12.  The Defendant is a contractor in the construction industry.  At the time, the Defendant faced litigation brought by one of its material suppliers (“the High Court Action”).  Mr Poon wanted legal advice in relation to the litigation.   He had initially approached a solicitor, Mr Yeung, who had previously acted for the Defendant.  However, on this occasion Mr Yeung was tied up with other commitment and unable to help.

13.  Mr Poon called at the Plaintiff’s office as it was in the vicinity of his office.  He had not previously engaged the Plaintiff firm.

14.  At the Plaintiff’s office, Mr Poon was first received by a Miss Chan at the reception.  Accordingly to Mr Poon (whose evidence I accept on this point), he was told by Miss Chan that the charges for the first hour of a preliminary meeting with a solicitor would be $500, and in the event of Mr Poon deciding to engage the Plaintiff for the case, the $500 would be treated as the Defendant’s costs-on-account. 

15.  However, I do not accept that there was any specific mention that the preliminary meeting would be a “free” consultation.  An email dated 23 November 2007 from Mr Poon to Mr Wong made no mention of a complementary consultation.  That email is of some significance to the first issue and I will return to it later in this Judgment. 

16.  Instead, I believe it far more likely (and I find) that upon Miss Chan’s mentioning of treating the $500 as costs-on-account, Mr Poon was given the impression (which he believed) that he would not be charged for the preliminary consultation if the Defendant were to decide to engage the Plaintiff’s service – a belief which I think was justifiable in the absence of clearer indication from Miss Chan that the preliminary consultation would be subject to charge. 

17.  Mr Poon paid the $500 and a receipt was issued. Mr Poon was introduced to meet Mr Samuel Wong.  As it appears on the relevant fee note, that meeting lasted about half an hour.  Mr Poon was favourably impressed by Mr Wong’s background as Mr Wong was also qualified as a structural engineer and had experience in construction law and arbitration. 

18.  During the meeting, Mr Poon showed Mr Wong a copy of the writ in the High Court Action and a copy of the draft defence he had prepared.  In this regard, I accept Mr Wong’s evidence that he considered the case reasonably straightforward, but at the same time, he formed the view that Mr Poon’s draft defence would require a fair amount of revision.  Although he expected that the plaintiff in the High Court Action would move for summary judgment soon, Mr Wong considered himself well able to deal with such application and settle the defence.  Although he did not consider it necessary to engage counsel at the initial stage, he did discuss counsel’s fees with Mr Poon as it was an action in the High Court.  He told Mr Poon that counsel’s fees would range anything between $10,000 and 40,000 per day depending on seniority.

19.  Mr Poon decided to engage the Plaintiff.  It is not disputed that the Defendant paid a further $2,000 on account after the meeting.

20.  Regarding the central issue as to the rate of fees to be charged by the Plaintiff, it is noted first and foremost that Mr Wong’s version of the event was clearly borne out by the attendance note.  The note, according to Mr Wong and I accept, was prepared by him contemporaneously during his first meeting with Mr Poon.  Among other things, it set out specifically the hourly rate chargeable by him as well as the range of charges by other solicitors of the firm.  There is no suggestion, and in any event I consider it improbable, that Mr Wong would have inadvertently mis-communicated the rate as a daily rate when he had actually recorded it as an hourly rate in the attendance note.

21.  Mr Poon made several points to challenge Mr Wong’s version of the event.  First, he queried why Mr Wong did not require him (Mr Poon) to countersign the attendance note to signify his agreement to the rates of charge.  On this, I accept Mr Wong’s explanation that it was not his practice to ask the client to do so and I do not see anything exceptionable about that.

22.  Mr Poon next questioned why Mr Wong did not follow paragraph 4.02 of the Solicitors’ Guide to Professional Conduct to provide the Defendant promptly with a written record of the agreement on the fees.  In answer, Mr Wong did not agree that the particular provision in the Professional Guide was applicable because his reading of that paragraph applied only to “agreed fees” and not “agreed rates” of the fees.  It is not necessary to decide whether Mr Wong’s interpretation of the relevant provision was correct.  What is important (and I accept) is that at the time Mr Wong genuinely believed that he was not obliged to provide the Defendant or Mr Poon with a written record of the rates of the fees they had agreed at the meeting. Mr Wong frankly admitted that his firm had only begun the practice of sending their clients written confirmation of the terms of the retainer in 2008.  Prior to the dispute in this case, the Plaintiff firm had not experienced trouble with its clients over the rates of fees to be charged.  Mr Wong also accepted that insofar as the agreed rates were lower than those allowable on taxation, he would be bound to accept such rates as agreed. 

23.  Mr Poon further made the point that the costs-on-account required from the Defendant for the High Court Action totalled only $2,500 and if the agreed rate had been $4,000 an hour, the $2,500 would not even be enough for Mr Wong’s work on that day (28 September 2007).  In this regard, I would also accept Mr Wong’s evidence that at the time he intended merely to ask for a sum to cover the probable out-of-pocket disbursements.  It did not appear necessary to him at that stage to require advance payment to secure the profits costs for his firm because he expected to send interim bills to the Defendant periodically as the case progressed. 

24.  Mr Poon further questioned Mr Wong why he had not required a larger sum to cover counsel’s fees if the $2,500 was meant to cover disbursements.  As already noted, I accept Mr Wong’s evidence that at the time of the meeting on 28 September 2007, he considered the case reasonably straightforward and counsel’s involvement was not contemplated at the initial stage.  In this regard, I have not overlooked the comparison between the sum $2,500 required on account for the High Court Action and the sum $20,000 for the prospective arbitration proceedings (the subject matter of the fee note A/90557/07).  Again, I would accept Mr Wong’s explanation that a larger sum was required for the latter to make provision for the fees payable to the HKIAC and the deposit usually required by the arbitrator, both of which were items of disbursement. 

25.  In the event, the plaintiff in the High Court Action promptly applied for summary judgment.  It was Mr Poon’s evidence that on the day before the first hearing of the summons, he enquired with the Plaintiff whether he would need to pay additional costs-on-account.  His evidence was that a lady (who apparently was relating a message from Mr Wong) told him that there was no need to put the Plaintiff in more funds at that stage.  This message, I find, was entirely consistent with Mr Wong’s earlier explanation as to the relatively modest costs-on-account and that it was not his primary concern to secure his firm’s profits costs as he expected periodic fees notes would be rendered in due course. 

26.  The first of the 3 disputed fee notes was sent to the Defendant on 20 November 2007.  According to Mr Poon, this was the first time he became aware that the rates of charge were computed on hourly basis. He called Mr Wong on 22 November and I have earlier alluded to an email from him of 23 November 2007.  It is relevant to note that in the email he described their difference as a “misunderstanding” of both parties.  He went on to say that daily rates of $4,000 or $2,000 were the normal charges he used to pay for legal services in other cases and he regarded those daily rates to be reasonable.

27.  I have taken note of Mr Poon’s explanation in cross-examination that the description of their difference as “misunderstanding” was merely a polite way of trying to reach a compromise with the Plaintiff.  He further explained that he was in a predicament and a change of solicitors at that time would not be feasible.   It was also Mr Poon’s evidence that his previous solicitor, Mr Yeung, did not charge him hourly rates.  I am prepared to accept that Mr Poon was generally satisfied with the service provided by the Plaintiff at that time.  He was anxious not to upset the working relationship with Mr Wong on account of the dispute over fees. I believe that his description of the situation as a “misunderstanding” in the email was a genuine reflection that he was unable to confidently refute Mr Wong’s version that the rates quoted to him at their first meeting were indeed hourly rates.  By describing it as a “misunderstanding”, he accepted the possibility that it was he who had misheard or misunderstood Mr Wong’s quotation of the rates. 

28.  I also find it probable that the “misunderstanding” on Mr Poon’s part was at least partly induced by his previous experience of not having been charged at hourly rates by his former solicitor.  Having considered all the circumstances, I accept Mr Wong’s evidence (and I find) that what he told Mr Poon at their first meeting was that his own rate of charge would be $4,000 per hour while the charges for his associates would range between $2,500 and $3,000 an hour depending on seniority.  Mr Poon, on behalf of the Defendant, had obviously signified agreement to engage the Plaintiff.  Insofar as Mr Poon had laboured under any “misunderstanding” as to the rates of fees chargeable by the Plaintiff, such misunderstanding on his part alone – which is not known in any way to Mr Wong – could not in law relieve the Defendant from the contract which, objectively, had been concluded on Mr Wong’s terms.  As Goff LJ said in Allied Marine Transport Ltd v Vale do Rio Doce Navegacao SA [1985] 1 WLR 925 at 936G (quoted in Chitty on Contracts, 30^th edition, volume 1, para. 5-067):

“...... if one party, O, so acts that his conduct, objectively considered, constitutes an offer, and the other party, A, believing that the conduct of O represents his actual intention, accepts O’s offer, then a contract will come into existence, and on those facts it will make no difference if O did not in fact intend to make an offer, or if he misunderstood A’s acceptance, so that O’s state of mind is, in such circumstances, irrelevant.”

In my view, the principle applies in the same way where the mistaken state of mind was that of the party accepting the offer rather than of the party making the offer as in Goff LJ’s example above. 

29.  As to the court’s approach on the assessment of the evidence when a dispute arises on the retainer, Mr Poon referred me to the following observation by Denning LJ (as he then was) in Griffiths v Evans [1953] All ER 1364 at 1369:

“On this question of retainer, I would observe that where there is a difference between a solicitor and his client on it, the courts have said for the last hundred years or more that the word of the client is to be preferred to the word of the solicitor, or at any rate, more weight is to be given to it: see Crossley v. Crowther (1851) 9 Hare 384, per SIR GEORGE J TURNER, V-C; Re Paine (1912) 28 TLR 201, per WARRINGTON J. The reason is plain. It is because the client is ignorant and the solicitor is, or should be, learned. If the solicitor does not take the precaution of getting a written retainer, he has only himself to thank for being at variance with his client over it and must take the consequences.”

30.  On Denning LJ’s statement above, Underhill J explained in Manches LLP v Green [2008] EWHC 917(QB) as follows:

“I do not read that as propounding a rule of law that the word of the client must always be preferred, but there is obvious justice in the proposition that in applying the (flexible) civil standard of proof I should take into account the fact that the primary responsibility for spelling out the terms of the retainer must be on the solicitor.”

I respectfully agree with this view.

31.  The circumstances of each case vary and the weight to be attached to the client’s evidence when the retainer is not in writing must be assessed in the light of the totality of the evidence.  While it makes sense to say that one expects a prudent solicitor to have a written record of the agreement with his client, it is not an immutable rule that in the absence of a written retainer the word of the client should always prevail.  In any event, the present case is not one where there is complete absence of written record.  The contemporaneous attendance note made by Mr Wong at their first meeting is in my view a material piece of evidence to which much weight should be, and was, attached.

32.  Mr Poon also referred to Allen v Bone (1851) 4 Beav 493.  It suffices for me to say that our present case is not concerned with the question of the solicitor’s authority to act.  I do not find the case relevant for the present purpose. 

33.  I now come to the rates applicable to the arbitration proceedings (the subject of the second disputed fee note).  On this question, I would also accept Mr Wong’s evidence that at the meeting on 3^rd October 2007 when Mr Poon consulted him on the Defendant’s potential claim against China State Construction, he informed Mr Poon that the charges would be the same as in the High Court litigation.  It is noted that soon after the meeting Mr Wong commenced work on the drafting of the arbitration notice and other preliminary work on the case.  He did not immediately require the Defendant to put the Plaintiff in funds.  While it is true that it was Mr Poon who subsequently enquired with the Plaintiff on 6 November 2007 whether costs-on-account would be required, it remained the fact that the Plaintiff (through Mr Wong) had been prepared to undertake work until such time when disbursements would be incurred, in this case the deposits for the arbitration centre and for the arbitrator.  This, again, lends support to Mr Wong’s evidence that he primarily intended the costs-on-account to cover disbursements and not the Plaintiff’s profit costs.

34.  As for the rates applicable to the drafting of the demand letter to Hong Kong Construction (the subject of the third disputed fee note), I would also accept Mr Wong’s evidence that he had received instructions from Mr Poon in relation to the claim against Hong Kong Construction on 6 October 2007.  During the telephone conversation, he had informed Mr Poon that the Plaintiff’s charges would be the same as in the High Court litigation and in the arbitration. 

35.  In summary, I find in favour of the Plaintiff on the first issue.

Discontinuance of the previous claim

36.  As already mentioned, the Plaintiff’s claim for the outstanding fees was first lodged in the Small Claims Tribunal on 7 December 2007.  Leave to discontinue the claim (中止申索) was granted by the Adjudicator on 27 May 2008.  Subsequently, the Plaintiff brought proceedings for the same claim on 16 June 2008.   

37.  On this question, I accept Mr Tsang’s submission that the discontinuance of the earlier claim, unlike a dismissal, is not a bar to issuing subsequent proceedings for the same cause of action: Hong Kong Civil Procedure 2010, volume 1, para 21/5/12.  There is nothing in the Adjudicator’s order to preclude the commencement of the present claim. 

38.  On the second issue, I would also hold in favour of the Plaintiff. 

Further argument – section 58

39.  In his written Final Submission, Mr Poon referred to section 58 of the Legal Practitioners Ordinance.  The argument seemed to question the enforceability of the agreement on fees for the High Court Action (being contentious business) when the agreement was not signed by the party sought to be bound by it.  As the point travelled beyond the two issues identified at the beginning of the trial, I have directed further submissions to be filed as to whether the point should be allowed to be raised, and if so, its implications.

40.  Mr Tsang was no doubt correct to submit that the point was not properly raised in the pleadings.  However, if it was solely a point of law I would have been inclined to allow it. 

41.  Yet, I do not believe I can deal with the application of section 58 without also having regard to section 60 of the Ordinance.  Section 60 provides that no action shall be brought upon any agreement as is referred to in section 58, but at the same time the section confers on the court a discretion to give effect to such an agreement if it is of the opinion that the agreement is in all respects fair and reasonable.  The fairness or reasonableness of an agreement in any particular case is of course facts-sensitive.

42.  I am therefore not disposed to allow the point to be raised without proper pleading or opportunity for the parties to canvass the matter in evidence. 

43.  In the circumstances, I do not propose to express any view on how sections 58 and 60, if applied, would have affected the outcome of the case.  It suffices to record that it is not open to the Defendant to set up the lack of writing or absence of his signature as a ground for challenging the agreed rates of fees chargeable by the Plaintiff in relation to the work covered under the 3 disputed fee notes in question. 

Conclusion

44.  I have found in favour of the Plaintiff in relation to both issues:

(i)     There had been an agreement between the Plaintiff and the Defendant as to the rates of fees to be charged by Mr Wong (that is, $4,000 an hour) and by other solicitors of the Plaintiff firm (that is, between $2,500 and $3,000 depending on seniority);

(ii)    The Plaintiff is not precluded to commence and pursue the present claim against the Defendant, notwithstanding that an earlier claim in the Small Claims Tribunal in relation to the same subject matter had been discontinued.  

45.  This court makes no finding as to “the time and value” of the Plaintiff’s work covered under the disputed fee notes (paragraph 10 of the Defence).  Such dispute, if appropriate, is to be determined by a Taxing Master.

46.  I will make an order nisi that the Defendant shall pay the Plaintiff’s costs of the Action incurred to date, to be taxed if not agreed.