RICHARDS BUTLER (A FIRM) v. BOLTON GROUP (INTERNATIONAL) LTD AND ANOTHER

DCCJ703/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 703 OF 2004

______________________

J U D G M E N T

______________________

1. The Plaintiff ’s claim is for work done and services rendered as shown in their two fee notes to the 1^st Defendant respectively dated 17^th May 1996 and 15^th January 1997, the former for the sum of HK$190,348.20, and the latter for HK$539,391.37, and the total claim was for HK$729,739.57.

2. The claim against the 2^nd Defendant had been wholly discontinued.

3. The trial was against the 1^st Defendant and the 1^st Defendant did not show up for the hearing. The Plaintiff proceeded to prove their claim.

4. The Plaintiff called one witness, Mr. Andrew Biggs, who was then a partner and the handling solicitor for the Plaintiff firm in handling and carrying out the work done for and on behalf of the 1^st Defendant. His statement on pages 27- 40 in the Plaintiff Bundle of Pleadings and Witness Statements was adopted as his evidence in court.

5. The Defence  of the 1^st Defendant was that their board of directors had not given instructions to retain the Plaintiff firm to act for them in November 1995 or at any other time, and that the instruction given by Mr. Mico Chung to the Plaintiff was not given in his capacity as a director of the 1^st Defendant but Mr. Mico Chung was acting in the capacity  as a director of the 2^nd Defendant, and if Mr. Mico Chung had acted as a director of the 1^st. Defendant in instructing the Plaintiff, Mr. Mico Chung had a conflict of interest and the Plaintiff knew or ought to have known that  he had no authority to act on behalf of the 1^st Defendant.

6. The statement of Mr. Biggs detailed the background and nature of the work done for the 1^st Defendant, he described how he obtained instruction from the 1^st Defendant and how he subsequently issued the two fee notes to the 1^st Defendant for their settlement. References were made to a number of documents which amply showed that the Plaintiff was instructed by the 1^st Defendant and not the 2^nd Defendant to act for them. Notably was a letter from the Plaintiff  dated 23^rd November 1995 which expressly confirmed that the Plaintiff was instructed to act for the 1^st Defendant. In this letter, Mr. Biggs also set out the scope of the work to be undertaken by the Plaintiff, and these included (1) approving on behalf of the 1^st Defendant the terms of the sale of assets to be purchased;  (2) advice on the acquisition of assets; (3) advice on circulars of the 1^st Defendant to shareholders in London and assisting in the preparation of these documents; and (4) advice in relation to takeover code implications.  Other documents and correspondence between the Plaintiff and the 1^st Defendant as well documents of third parties who were related to the work carried out by the Plaintiff for the 1^st Defendant also showed clearly that the Plaintiff was acting for the 1^st Defendant. A letter dated 16^th. August 1996  written by Ms. Catherine Ma, a director of the 1^st Defendant, on 1^st Defendant’s note paper, to Mr. Biggs set out the nature of the work to be carried out by the Plaintiff and it set out the intended flow of communication and information to other professionals, it appeared to contemplate the 1^st Defendant to be the client giving instruction to the other professionals.

7. There were no issue taken whether the works were properly carried out by the Plaintiff and on the amounts stated in the two fee notes which were due and remained unpaid. The only issue was whether the Plaintiff was instructed by the 1^st Defendant, and whether the instruction given by Mr. Mico Chung was given with proper authority.

8. Although Mr. Mico Chung and Ms. Catherine Ma, a director and Secretary of the 1^st Defendant who also gave instruction to the Plaintiff, were also directors of the 2^nd Defendant, the correspondence, faxes, and the documents prepared by other professional firms relating to the work done by the Plaintiff had all referred to them as representatives of the 1^st Defendant only.

9. The 1^st Defendant was not a registered company in Hong Kong and the 2^nd Defendant held almost 30% of its shares at the time, and the 2^nd Defendant had effective control of the 1^st Defendant. It was a fact that all correspondence to the 1^st Defendant was then sent to the 2^nd Defendant care of the 2^nd Defendant’s address and this was done on the instruction of Mr. Mico Chung.  The fact that the 1^st Defendant was then using the 2^nd Defendant’s address in Hong Kong did not alter the fact that the Plaintiff was acting for the 1^st Defendant.

10. The very nature of the work done by the Plaintiff also showed that the work was carried out for and on behalf of the 1^st Defendant. The 1^st Defendant was a company listed on the London Stock Exchange and it was intended that certain China assets of the 2^nd Defendant would be injected into the assets of the 1^st Defendant by the 2^nd Defendant in return for shares and cash.  The work done by the Plaintiff, a firm of solicitors, would involve submitting relevant documents like preparing responsibility letters, schedules of interests, and powers of attorneys in respect of each of the 1^st Defendant’s directors to the London Stock Exchange. These works are normally undertaken by the solicitors acting for the purchaser (1^st Defendant) and not the Vendor (2^nd Defendant).

11. In light of the documents which showed the Plaintiff to be acting for the 1^st Defendant and Mr. Biggs’ evidence that he was instructed to act for the 1^st Defendant, it has been clearly shown that the instructions given to the Plaintiff by Mr. Mico Chung and Ms. Catherine Ma were given on behalf of the 1^st Defendant.

12. Instructing a firm of solicitors to act for a listed company which purports to buy some valuable assets is within the usual authority of a director.  Ms. Catherine Ma was not only a director but also the secretary of the company. Both Ms. Ma and Mr. Chung would have the usual authority to instruct the Plaintiff to act for the 1^st Defendant. The actual purchase of valuable assets might require the resolution of the board of directors. However the giving of instructions to solicitors to act is a different matter and is well within the power of a company director. The solicitor instructed would also expect the company director to be acting within his usual authority.

S.12(2) of the Bye-laws of the 1^st Defendant  provided that:

“Any person contracting or dealing with the company  in the ordinary course of business shall be entitled to rely on any written or oral contract or agreement or deed, document or instrument entered into or executed as the case may be by any two of the directors acting jointly on behalf of the company and the same shall be deemed to be validly entered into or executed by the company as the case may be and shall, subject to any rule of law, be binding on the company”. 

The evidence before the court has shown that Mr. Biggs was receiving instructions from both Mr. Mico Chung and Ms. Catherine Ma, both being directors of the 1^st Defendant.  Mr. Biggs would clearly have dealt with two directors who under the bye-laws or Articles of Association of the 1^st Defendant had power to instruct him, and the contract of work Mr. Biggs entered into with the 1^st Defendant would also be binding on the 1^st Defendant.

13. For the reasons above, I find for the Plaintiff that the Plaintiff was instructed by the 1^st Defendant to act for the 1^st Defendant, and the instructions given were given within the proper and usual authority of director/s of the 1^st Defendant. The works had been done for the 1^st Defendant and there is no reason why the Plaintiff should be deprived of its fees.

14. Judgment is therefore entered for the Plaintiff against the 1^st Defendant for amount of HK$729,739.57. 

15. Interest would be ordered as follows.  (1) 4% interest on the first fee note for the sum of HK$190,348.20  from  17.5.1996 to the date of Writ;  and  4%  interest on the second fee note in the sum of  HK$539,391.37 from 15.1.1997 to the date of writ;  (2)  interest on the whole judgment sum of HK$729,739.57 at judgment rate from date of writ to date of judgment; and  (3)  interest on the whole judgment sum of HK$729,739.57 at judgment rate from date of judgment to the date of payment.

16. Costs order nisi ordered for costs be to the Plaintiff with Certificate for Counsel against the 1^st Defendant, to be taxed if not agreed.