SIMON SIU, WONG LAM & CHAN (A FIRM) v. CHEUNG YIU WING

HCA890/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 890 OF 2006

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J U D G M E N T

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1. By these proceedings the plaintiff, a Hong Kong firm of solicitors, claims $1,040,558.50 plus interest, being fees due to the firm for professional services rendered.

2. The defendant was the firm’s client.  In about 2000 he met Mr Simon Siu, the plaintiff’s senior partner, and instructed him to act for him in matters concerning King Pacific International Ltd (“KPI”) and other related matters.  KPI was a Bermuda company listed on the Hong Kong Stock Exchange in 1991.  The defendant was its founder and he and his family had significant shareholdings.  Much of the litigation involving the defendant and KPI stemmed from a boardroom battle between two groups of shareholders.  The defendant led one group and a Mr Cheng Chao Ming led the other.

3. From about 2000 onwards, the defendant became involved in many legal proceedings.  Many, but not all, were connected with his company KPI and/or one of its subsidiaries.  A flavour of his involvement can be shown merely by reciting some of the actions which have been referred to in this case, namely HCCW164/2002, HCA1732/2002, HCMP6457-60/2001, HCA177/2001, HCA4463/2002, HCA901/2001, HCA2598/2001, HCA4715/2001, HCA4997-5000/2001, CACV26/2003, HCCW202/2002, HCA1737/2002, HCA1694/2001, HCA10063/2000 and HCA1874/2002.

4. The claim for unpaid fees is in relation to three of the above actions plus fees arising from the calling of a Special General Meeting of KPI designed to restore the defendant as a director of the company, one battle in the war of the two shareholding groups.

5. A breakdown of the claim is as follows :

(i)  “Bill 8236” This bill was for $115,830 of which $49,213 remains outstanding.  There is no dispute over this bill but it has not been paid as the defendant seeks to set it off as part of his counterclaim.

(ii)  “Bill 8511” This bill was for $251,161 of which $214,961 remains outstanding.  It concerns the requisitioning of the SGM by the defendant’s group of shareholders (many of which were his family members and employees).  The defendant claims that the company, KPI, was the client, not himself and it is therefore KPI who should pay the bill.

(iii) “Bill 8056” This bill was for $533,569 of which $353,569 remains unpaid.  This concerned HCA1732/2002 and the cross-action HCA1874/2002.  These were injunction proceedings in which KPI challenged the validity of board appointments.  The defendant was a named defendant in the cross-action.  He says that KPI is liable to pay the bill, not himself.

(iv) “Bill 8172” This bill was for $472,814 of which $422,814 is outstanding.  It concerns HCCW164/2002 in which the defendant opposed the winding-up of KPI.

THE PLAINTIFF’S CASE

6. The plaintiff’s sole witness was Mr Simon Siu Chak Yu, the partner responsible for all the services rendered.  He explained some of the background.  The defendant had originally owned two companies called Yiu Wing Construction (“YMC”) and Ocean Palace Ltd (“OPL”).  In the early 1990 he and Cheng Chao Ming formed KPI which then held, inter alia, the defendant’s interests.

7. Mr Siu was first engaged by the defendant in relation to Bill 8236 (HCMP6457-60) in which he and his three sons were all defendants in miscellaneous proceedings designed to prevent them from acting as directors in the group.  Each defendant signed a letter of appointment, in late December 2001, making them severally liable for legal fees.

8. A crucial part of the plaintiff’s case concerns discussions which Mr Siu says he had with the defendant prior to the signing of this letter of appointment.

9. In mid 2001 the receivers which had been appointed over KPI produced a report.  It showed that KPI’s liabilities exceeded its assets by $304,185,099.  Not surprisingly Mr Siu was concerned about this.  It was also a fact that KPI’s shares were suspended in November 2000, KPI’s bank accounts had been frozen and the receivers stopped paying KPI staff their wages also in November 2001.

10. It was in this climate that Mr Siu, in about December 2001, spoke to the defendant and told him that he could only act for him if he agreed to be personally liable for payment of the legal fees.  Mr Siu’s evidence was that the defendant agreed.  At the time the defendant was in the throes of a contentious dispute with the other group of shareholders.  His personal and family shareholding was very valuable, he was the founder of the company, he regarded it as his family business.

11. This oral agreement is in the forefront of the plaintiff’s case.  In addition Mr Siu relies on the fact that in relation to two of the three bills in dispute the defendant signed retainer letters (similar to the 8236 letter).  The letter for Bill 8511 is dated 25 March 2002 and was sent to the defendant who signed it and returned it.  The letter for Bill 8056 is dated 25 April 2002 and was sent to the defendant and KPI.  It was signed and returned by both the defendant and a representative of KPI.

12. There is no retainer letter for Bill 8172.  The plaintiff relies solely on the oral agreement in December 2001 in respect of this bill.

13. The final ingredient in the plaintiff’s claim is what has been referred to as the “March 2003 settlement agreement”.  It is Mr Siu’s evidence that, after some correspondence and discussions, the defendant agreed to pay the outstanding fees by instalments and it was agreed that they would be at $100,000 per month.  During the remainder of 2003, five cheques for $100,000 were received pursuant to this agreement.  The admissibility of this evidence was challenged (it being submitted that it was privileged), it was agreed however that it could be adduced de bene esse.

ADMISSIBILITY

14. It is convenient to deal with this matter of law at this stage.

15. The sole reference to the matter being “without prejudice” is in the plaintiff’s letter to the defendant dated 18 July 2003.  The letter is not headed “without prejudice” but it contains the following sentence “we fully appreciate that the economic climate in Hong Kong is slow in picking up and hence your proposal of settling the outstanding debit notes by monthly instalment of $100,000 was accepted on a without prejudice basis”.  Naturally, this means that it was accepted without prejudice to the plaintiff’s right to sue for the full amount should the defendant default.  Moreover the correspondence, and the evidence, shows that at the time the quantum of the bills was not being disputed.  The defendant was not trying to negotiate a settlement, he was merely asking for time.  The evidence is plainly admissible.

THE DEFENDANT’S CASE

16. The defendant denies the oral agreement in December 2001, he denies that he is bound by the retainer letters (because he cannot read English, did not read them and was misled as to their contents) and he denies the 2003 settlement agreement.

17. The thrust of his witness statements was that at all times it was KPI who was liable to pay legal fees and not himself.  There was never any agreement to be personally liable.  His 2^nd witness statement summarizes his position in these terms, “all along, Siu was representing KPI, not me, and the understanding was that Siu could recover P’s legal fees from KPI’s liquidators, if necessary … I merely introduced/referred Siu to KPI as its legal advisor”.  In his 1^st witness statement he had said in relation to the December 2001 agreement : “if the plaintiff had made such a request I would never have agreed to such an arrangement.”

CREDIBILITY

(i)  In general

18. This is a case where two witnesses, one for each side, have given starkly opposed evidence.  The issue of credibility is therefore of particular importance.  The witnesses must be judged on what they said both in writing and orally in court.  Mr Siu does not start with an advantage by virtue of being an experienced solicitor in Hong Kong.  At the outset they are treated equally.

19. Having heard both witnesses, I came to a firm conclusion about their respective reliability.  Mr Siu gave his answers in a measured, clear and straightforward way.  He was not evasive or vague at all.  I found his answers, both in-chief and in cross-examination, to be logical and credible.  In short, I found him to be an impressive and accurate and reliable witness.

20. Sadly, I cannot say the same for the defendant.  In cross-examination, and sometime in-chief as well, his answers were long, confused and bore little relation to the question.  When faced with indisputable facts, such as the fact that he was not a director of KPI for almost the first four months of 2001 (and therefore could not give instructions on their behalf), he evaded the issue with irrelevant responses.  When faced with contemporaneous documents which were inconsistent with his case, he repeatedly said that because he did not read English he was unaware of the contents of the document or that it had never been brought to his attention by his staff.  He was unwilling to face the reality that KPI was his alter ego and that he was the true driving force behind the litigation.  He, forlornly in my judgment, attempted to distance himself from his true position by saying that he was just an “employee” of KPI or just one of a group of shareholders, neither of which bears scrutiny.  For example he denied that it was he who requisitioned the SGM and that it was he who was the party responsible for those proceedings.  Common sense dictates that such denials were not credible.

(ii) In particular

(a) The December 2001 oral agreement

21. Given the parlous state of KPI’s finances in 2001, outlined above, of which Mr Siu was keenly aware, it is highly probable that he would want to ensure that he was not going to work for free.  It is fanciful to think that Mr Siu would have been content to go cap in hand to the receivers for payment of his legal fees.  Had he failed to ensure that the defendant realised he was to be personally liable for the legal fees, in all the prevailing circumstances, it would have been cavalier verging on reckless.  “Cavalier” and “reckless” are not adjectives that anyone would use to describe Mr Siu.  In his witness statement he has accounted for every cheque in connection with every action and has produced the necessary receipts and vouchers in support.

22. Criticism has been made of the lack of documentation from the material time evidencing the oral agreement.  I do not consider the lack of a letter at the time to dilute in any way what I consider to be the inherent probability.  The defendant was, at the time, the sort of new big client for which, in Mr Siu’s reasonable belief, a phone call would do.  Especially as the outcome of the phone call was unequivocal acceptance by the defendant.  In any event, a retainer letter in respect of HCMP6457 (Bill 8236) soon followed.  Later, when it was appropriate to do so, retainer letters also followed in respect of the matters covered by Bills 8511 and 8056.

(b) The retainer letters (for Bills 8511 and 8056)

23. The letters plainly make the defendant liable.  The first letter (25 March 2002) sets out seven paragraphs detailing the terms of engagement.  The second letter (25 April 2002) contains 14 paragraphs of terms.  In each case one of the terms is that the hourly rate for Mr Siu’s services will be $3,500.

24. The defendant’s account can be summarised shortly.  He accepted that the letters were received but, he said, he could not read them because they were in English and no-one in his staff read them to him or explained the contents.  Rather, he rang up Mr Siu to ask what they were all about and Mr Siu replied that it was only to let him know that the hourly rate was $3,500.  On the understanding therefore that the entire letters concerned this one matter he signed them and returned them to the plaintiff.  In such circumstances he was asked how it was that another part of the letters, namely, a request for money on account, was positively responded to exactly as requested.  The defendant said he was unaware of such matters and it must have been dealt with by his staff.  Such money on account came from the account of his own private company, “Yiu Wing Entertainments” with cheques signed by him.

25. It is of further significance that in relation to Bill 8511 the lion’s share of the work was done before the SGM when the defendant was not a director.  The very purpose of the SGM was to restore him as a director.  In response, in spite of his initial reluctance to admit that he was not a director, he was driven to suggest that KPI should pay the bill because he was acting on behalf of a group of shareholders or because he was an employee.

26. I have not found it difficult to reject the defendant’s evidence in relation to the retainer letters.

(c) The Bills

27. The Bills themselves (8511, 8056 and 8172) run to over 100 pages of itemised charges.  The defendant said that at the material time he did not see them, they were not brought to his attention, he cannot say if they were received and, in any event, he would not have known what they were because he did not read English.

28. This contention in itself is highly doubtful but more important is an analysis of his first written response to the plaintiff’s demands for payment.  Letters of demand in July 2003, December 2003 and April 2004 went unheeded.  In the context of this case the lack of response can be safely equated with a lack of complaint.  Indeed when the first response came in November 2004 following the plaintiff’s letter of 2 November 2004, it was simply a request for a full set of invoices some of which, the letter correctly stated, were for matters “a long time ago”.  The first time they were queried was December 2004.  The first time they were positively challenged was by a solicitor’s letter in October 2005.

(d) The settlement agreement, early 2003

29. The defendant denies any such agreement.  It follows therefore that it is a figment of Mr Siu’s imagination. 

30. Yet it is referred to in each of the plaintiff’s demand letters.  By his silence the defendant fails to challenge it and by his first written response, in November 2004, the defendant again fails to challenge it.

31. It is also apparent that not only did the defendant fail to challenge it, he requested a concessionary discount.  The plaintiff’s letter of 15 November refers to this request, which must have been oral, and declines to accede to it.  The defendant denies that he ever requested a discount.  If there was no such request this too must have been another figment of Mr Siu’s imagination or, worse still, a deliberate invention.  Why one would fabricate a request for a discount and then refuse to accede to it is difficult to understand.

32. Again, this issue must be resolved in the plaintiff’s favour.

(e) Other matters

33. The evidence, as a whole, touched on a variety of matters.  I consider the above issues, namely the December agreement, the retainer letters, the Bills themselves and the settlement agreement to be determinative of the entire claim.

34. One or two other matters, in further support of the plaintiff’s claim, however still merit brief comment.

35. It is a fact that a number of payment vouchers show that the defendant, through his own company YWE, did pay invoices which, if the defence in this claim is to have any credence, would have been the responsibility of KPI and not the defendant.  Examples include other invoices from the plaintiff, invoices from other firms of solicitors in relation to other actions and non-legal expenses for the SGM in April 2002.

36. It is a fact also that contrary to the defendant’s claim that he would have never have given a personal guarantee for KPI, he did just that in 1998 when securing a substantial loan for the company from the China State Bank.  He later denied it in court, but lost in CACV26/2003.

COUNTERCLIAM

37. In view of the court’s findings of fact outlined above, it is unnecessary to address the issues in the counterclaim.

38. In short, the defendant had claimed a refund of various sums paid to the plaintiff as costs on account in a variety of the actions in which he was involved.

39. In some detail the evidence tracked and traced each payment against each action.  The plaintiff produced an abundance of documentary evidence, particularly invoices, vouchers and receipts, in support.  Mr Siu also, in his 2^nd witness statement, meticulously accounted for each payment.

40. It is sufficient, in the circumstances, to state that had it been necessarily to consider the counterclaim it would have failed.

DECISION

41. There will be judgment for the plaintiff in the claimed sum of $1,040,558.50 plus interest to be calculated in accordance with paragraph 9 of the amended statement of claim plus a costs order nisi in favour of the plaintiff.