ERIC EDWARD HOTUNG v. HO YUEN KI AND OTHERS

HCA 571 of 2003 & HCMP 2820/2002
& HCMP 4511/2002 (consolidated)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 571 OF 2003

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AND

MISCELLANEOUS PROCEEDINGS NO. 2820 OF 2002

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BETWEEN

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AND

MISCELLANEIOUS PROCEEDINGS NO. 4511 OF 2002

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BETWEEN

(Consolidated by the Order of Deputy High Court Judge To
dated 10th April 2003)

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Dates of Hearing:  9, 14 & 18 April 2008, 18 & 28 July 2008, and 8 August 2008

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D E C I S I O N

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The issue

1. Yet another preliminary issue has arisen to be determined following completion of taxation of the lengthy bill of costs.  It is this.

2. Pursuant to the order for costs of Hon Tang JA (sitting as additional judge of the Court of First Instance) dated 17 June 2005, the unsuccessful Plaintiff, Mr. Eric Hotung, was ordered, inter alia, to pay the costs of the consolidated action to the 2^nd, 3^rd, and 5^th Defendants, respectively, Anthony Hotung, Sean Hotung and Sheridan Hotung, three of his four off-springs named in the suit.  The ensuing bill presented for taxation covers those costs.

3. The Plaintiff has now sought to argue that his liability for costs is indeed circumscribed and ought to be limited to a third of the total allowable costs, the solicitor client retainers of D2, D3 and D5 with their two sets of solicitors being in the nature several rather than joint contracts.

4. D2 advances a contrary position, contending that the retainers are not only joint but also joint and several on their true construction.  Accordingly, each of D2, D3 and D5 would be liable to their solicitors for all the costs and disbursement incurred in their defence.  Albeit D3 and D5 did not participate in the taxation (they having no interest in pursuing the costs order in their favour), D2 submitted that he was entitled to be indemnified for all their taxed costs as the solicitors may look to him and him alone for satisfaction of their entire costs.

5. The extent of the Plaintiff’s liability to indemnify and D2’s contractual obligations in particular under the retainers falls therefore to be decided on a true and proper construction of the retainers in question.

The principles

6. It is as well that one should be reminded of basic principles.

7. In Asia Television Ltd v Mak Chi Kin & Anor [2006] 4 HKC 347, at 350, 351 Cheung JA stated:

1. It is sufficient for the purpose of this judgment to give a brief statement on the nature of joint liability on one hand and joint and several liability on the other hand and also their respective consequences.

1)      Joint Liability

Joint liability arises when two or more persons jointly promise to do the same thing.  There is only one obligation, and consequently, performance by one discharges the others.  Joint liability is subject to a number of strict and technical rules of law.

2)      Judgment against one joint debtor

Among the technical rules is the effect of a judgment against one joint debtor.  At common law, the general rule was that a judgment against one joint debtor operated to bar an action against the others, even though the judgment was not satisfied.  (see King v Hoare (1844) 13 M & W 494 and Kendall v Hamilton (1879) 4 App Cas 504).  This was explained on the ground that the debt was merged in the judgment, and also on the ground that joint debtors had a right to be sued together; but neither ground was satisfactory, and the rule was capable of working hardship.  The rule has now been abrogated by s 5 of the Civil Liability (Contribution) Ordinance (Cap 377) which is based on s 5 of the English Civil Liability (Contribution) Act 1978.

3) Joint and several liability

Joint and several liability arises when two or more persons in the same instrument jointly promise to do the same thing and also severally make separate promises to do the same thing.  Joint and several liability gives rise to one joint obligation and to as many several obligations as there are joint and several promisors.  It is like joint liability in that the co-promisors are not cumulatively liable, so that performance by one discharges all; but it is free from most of the technical rules governing joint liability.

4)      Judgment against one joint and several debtor

When the liability is joint and several, a judgment against one debtor did not, even at common law, bar a several action against another.

(see Chitty on Contracts (29^th Ed) Vol 1 para 17-002, 17-003, 17-015 and 17-016)

8. On joint and several retainers, reference was made to Cordery on Solicitors, 9^th Ed at E/256 to E/257.  The pertinent passages follow:

[429]

Where the retainer is joint, each client is liable for the whole of the solicitor’s costs[1].  On a several retainer each client is only responsible for his own portion of the costs[2].  The advantage to the solicitor of a joint retainer is that he can recover all the costs from any solvent party. A judgment obtained against one party to a joint retainer will not bar a subsequent action against another party[3].

1 Burridge v Bellew (1875) 32 LT 807.

2 Elingsen v Det Skandinaviske Compani [1919] 2 KB 567, CA.

3 Civil Liability (Contributions) Act 1978, s 3.

[430]-[440]

Where a solicitor is acting for joint litigants the retainer is presumed to be joint until the contrary is shown1. A retainer which is joint may be construed to be joint and several, for example, where a solicitor is retained by two tenants in common2. If the matter is unclear the question of whether a retainer is joint or several is to be decided by the court in an action or on a reference to a taxing master3.

1 Starving v Cousins (1835) 1 Gale 159.

2 Furlong v Scallan (1875) IR 9 Eq 202.

3 Burridge v Bellew (1875) 32 LT 807.

9. Halsbury’s Laws of England 4^th Ed, Vol 44 at para. 89 helpfully summarized the position of legal retainers as follows:

Joint and several retainers.  Retainers by two or more persons may be either joint or several, depending upon the intention of the parties and the nature of the business1. In the former case each party is liable for the whole of the costs incurred for the benefit of himself or any of the other parties to it2, while in the latter case each party is only liable for his proportion of the costs incurred on behalf of all3. Where, however, a retainer joint in form is in fact joint and several, and the work done enures for the benefit of all, for instance in a partition suit, each party to it will be liable for the whole costs incurred4.

1 See e.g. Hall v Meyrick [1957] 2 QB 455, [1957] 2 All ER 722, CA, where a man and woman who had lived together for fifteen years instructed a solicitor to prepare wills conferring mutual benefits, and there were held to be several retainers.

2 Burridge v Bellew (1875) 32 LT 807

3 Re Colquhoun, ex parte Ford (1854) 5 De G M & G 35; Re Allen, Davies v Chatwood (1879) 11 Ch D 244; Ellingsen v Det Skandinaviske Co [1919] 2 KB 567, CA; Keen v Towler (1924) 41 TLR 86. Cf. para. 182, post (taxation).

4 Furlong v Scallan (1875) 9 IR Eq 202.

The Retainers

10. I turn then to consider the retainers of which there are two sets, one with the former solicitors, Messrs Stevenson, Wong & Co. (“SW”) and the other with the current legal advisors, Messrs Oldham, Li & Nie (“OLN”).  They appear at page 158 et seq in the Bundle of Court Document and Correspondence.

11. A common feature of both sets of retainers is the total absence of any direct reference to the precise nature of the clients’ liability under the contracts.  The liability of D2, D3 and D5 to SW and OLN for costs though clearly spelt out has not in any way been qualified by the use of the terms joint liability, or several liability, or joint and several liability.  Accordingly, the intentions of the contracting parties shall have to be construed as best one can by examining the retainers in light of the attending circumstances.

12. A copy each of D2’s and D3’s retainers with SW has been made available.  D5’s retainer has not been exhibited.  The SW retainers both dated 12 September 2001 and in identical terms, came into existence before the current suit was launched.  The retainers were in relation to the business of Hotung Enterprises Limited and Hotung Investment (China) Limited.  They appear to have been signed once by the same partner and then emailed separately to D2 and D3 who were resident in different parts of the world at the time for their acceptance, signature and return.  This they duly did.  Each retainer addressed to both D2 and D3 bore an identical file reference.

13. Mr. Egan on behalf of D2 contended that in respect of the SW retainers, there was but one file, essentially one retainer letter, and one joint contract between SW on the one hand and D2 and D3 on the other hand.  He made essentially the same argument when dealing with the OLN retainers, of which more later.

14. D3 though not a party before the court has filed a number of affirmations.  In his first affirmation, he deposed to the fact that D5 had assigned all her interests in certain shares in Hotung Enterprises Limited and in Hotung Investment (China) Limited to him and therefore he had the authority to represent D5 in the consolidated action.  Following from that, Mr. Egan stated that when D3 signed and returned the SW retainer, he was acting for himself and D5.  He further submitted that all three defendants with their common interest represented but one client as far as SW were concerned.  With a common purpose, they had come together to instruct SW as a single client or entity and in the process undertook a joint liability for their costs to that firm.

15. Mr. Egan has also made some play of clause (G) of the SW retainer.  It stipulated:

In addition to solicitors’ fees, during the course of your case other costs will be incurred for which you will be responsible.  Those costs which are separately billed to you are items such as barrister’s fees, court filing fees, costs of service of process, secretarial overtime, outside messenger fees, international long distance telephone and fax, photocopying (@ HK$3 per copy), transcripts of court proceedings, etc.  You are immediately and separately responsible for all costs incurred in your case.  We do not advance costs on behalf of our clients. ……..

16. He contended that the use of the words ‘separately responsible’ was indicative of each client having additionally undertaken a several liability for all the solicitor’s costs.  I do not find that the provision can fairly and reasonable lend itself to such an interpretation.  Perhaps inelegantly drafted, the clause was intended to convey no more than the client’s obligation to pay for disbursements and other items of profits costs such as telephone attendances in addition to the solicitors’ professional charges for advisory and drafting work and court attendances, etc.

17. Counsel for the Plaintiff, Mr. Chain conceded that it is open to the parties and their lawyers to enter into joint retainers as a matter of contract but submitted that such a course is an exception rather than the rule.  He stated that such a situation would generally not arise unless the clients’ interest are truly joint in the legal sense as distinct from merely sharing common characteristics for example in their defence.  Even in such a scenario, a joint retainer must be intentionally contracted.  In developing his contention, he referred to a number of authorities, in particular Longreach Oil Ltd v Southern Cross Exploration NL 1988 NSW Lexis 9762, unreported and Burridge v Bellew (1875) 32 LT 807.

18. From Longreach Oil Ltd v Southern Cross Exploration NL supra, Mr. Chain extracted the following passage in support of his case for separate rather than joint contracts in this case.  It reads:

 ….. just because solicitor or counsel appear for a series of parties does not indicate that those parties have jointly retained the solicitor.  Indeed, it very often occurs that parties realize that the court will not entertain more than one set of costs for defendants in the same interest and so a series of people in no way connected each retain the same solicitor.

19. One can have no quarrel with that statement as a matter of principle.  Indeed, Mr. Egan also agreed with the principles of law and practice enunciated in the various decisions referred to by Mr. Chain.  His response on the cases cited is that they are facts sensitive and therefore not particularly helpful in construing the retainers in question.  With that I agree.

20. In Burridge v Bellew, supra, the court opined that “… the mere fact that the several defendants appear by the same solicitor, that they join in putting in the same answer, join in the same affidavits, and attend joint consultations, would not, to my mind, amount to evidence that there was any joint retainer.”  Mr. Chain contends that much the same situation obtains in the present case.  Unless there is unambiguous evidence of a deliberate intent on the part of D2, D3 and D5 to make a single promise to their solicitors and so enter into joint contracts, the resulting retainers must be several in nature.  In the circumstances of the case, Mr. Chain argued that there was no compelling reason for any of the defendants to agree to pay all of their solicitors’ fees.  That in essence is his argument on both sets of retainers.

21. When D2, D3 and D5 terminated by written notice from each of them the services of SW, they turned to OLN.  The three retainers that resulted are all dated 1 December 2004.  Each was addressed to all three defendants, had the same reference or file number and identically captioned but separately sent to them as they were still living in different parts of the world.  Mr. Peaker, the handling partner and instructing solicitors of Mr. Egan had in fact created a single document which he signed but once before dispatching a copy to each of the three defendants for their acceptance.  Needless to say, the three retainers contained identical terms of engagement.  Each of the three defendants signed on his or her own copy before returning it to OLN.  Deposits were paid and bills were issued by OLN to all three Defendants.  Throughout, and this has been substantiated by the evidence, both oral and on affidavit from Mr. Peaker that he treated all three Defendants as a single client.

22. As was the case with the earlier retainers, the words joint or several no where appear.

23. In the consolidated action, the Plaintiff sued for declaratory relief that the trusts created for his children were revocable by him during his lifetime and that he had legitimately exercised that right.  In the event, the court found against him.  As Mr. Egan submitted, the reliefs the Plaintiff sought against his children were identical in nature.  The children were concerned to uphold the trusts under which they had virtually identical interests.  There was commonality in their interests and in their defence against the action.  D2, D3 and D5 were represented by the same counsel and solicitor at trial and D2 was the sole defence witness.  While it is wholly accepted that these factors on their own on the authorities are in themselves not determinative of the issue, there was more.  There is cogent and uncontradicted oral and affidavit evidence from D2 and affidavit evidence from D3 that their liability for costs was not only joint but joint and several in nature.  Mr. Peaker’s evidence was to like effect.  From the Plaintiff, there was not a scintilla of evidence suggestive of a contrary position.

24. On the evidence adduced, I am able to infer that the legal effect of the retainers with SW and OLN was as Mr. Egan has urged.  The retainers created joint and several liabilities and I so rule.

Representations: