AMERITAX PLUS LTD v. DENICE Y. FOSTER-HARRIS

DCCJ 3001/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3001 OF 2007

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J U D G M E N T

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Introduction

1.  This case concerns tax consultancy services rendered by Ameritax Plus Limited (“the Plaintiff”) through Mr. Dirk Rommeswinkel (“Dirk”) to Ms. Denice Y. Foster-Harris (“the Defendant”).

2.  The Plaintiff says that after the provision of such services, there remains an outstanding amount of US$80,000 which has become due but not paid by the Defendant in relation to the two invoices dated 31 January 2006 and 2 February 2006 (“the January invoice” and “the February invoice” respectively). The amount demanded in the January invoice is US$7,500 whereas the amounts demanded in the February invoice are a sum of US$64,000 and a sum of US$8,500.

3.  The Defendant, while admitting that these two invoices have been received, says that there were never any agreements as to the outstanding amounts charged. Further, the Defendant claims that she is not personally liable for any fees in respect of the services provided by the Plaintiff to the Defendant in her capacity as the personal representative of the Estate. By way of counterclaim, the Defendant states that Dirk had acquired dominion over her mind so that she had handed over cash amounting in excess of US$300,000 to the Plaintiff/Dirk and she therefore seeks, in the counterclaim, a declaration as to the exercise of undue influence by Dirk over her; the taking of an account; and the payment of such sums as are found due following the taking of an account.

4.  In the course of this trial, the Defendant made the following applications. Firstly, after the Plaintiff had opened the case, Mr. Hart for the Defendant applied to amend the counterclaim by including an alleged breach of fiduciary duty. Mr. Hart said that the application was prompted by what Mr. Li, counsel for the Plaintiff, contended in his opening address, that is, undue influence cannot be a proper cause of action. The Plaintiff opposed the application, saying that such was a very late application and it did not only impact upon the pleadings, but also the preparation for the case, including the consideration as to what evidence was to be adduced at trial. After hearing both parties, I refused the Defendant’s application for amendment.

5.  Secondly, on the last day of this trial, the Defendant applied to file a Notice Refusing to Admit Documents. The application was again opposed by the Plaintiff. It should be noted that by the time the application was made, the parties had already closed their respective cases and the Court was about to hear parties’ closing submissions. It is therefore clear beyond any doubt that if the application were to be granted, the prejudice caused to the Plaintiff and the delay caused to the trial would be huge. I therefore refused the application.

The Plaintiff’s Case

6.  Dirk, who was the Managing Director of the Plaintiff, testified on behalf of Ameritax Plus Limited. He was the only witness called by the Plaintiff.

7.  Dirk said that at all material times, he was a member of the American Institute of Certified Public Accountants and was licensed by the relevant authorities in California, USA. By the time he gave evidence, he had 27 years’ professional experience in advising clients on tax planning and tax compliance matters, including US income and estate taxes. He said that the Plaintiff is a company established by him in 1993, providing tax consultancy services to clients resident in Hong Kong and the Mainland.

8.  Insofar as his dealings with the Defendant are concerned, Dirk stated that he first came to know the Defendant in March 2002 through the introduction of a mutual friend Mr. Daniel L. Zigal (“Zigal”). According to Dirk, Zigal had told him that the Defendant would like to obtain his professional advice and assistance on tax matters relating to her late husband’s estate (“the Estate”).

9.  Therefore, a lunch meeting was arranged and during the meeting, Dirk said he had outlined to the Defendant the various US reporting and filing requirements that the Estate would likely have as her late husband was a US citizen living in Hong Kong. Dirk also stated that, during the same meeting, he had already told the Defendant the 3 ways in which he billed for his professional work. Firstly, an hourly rate of HK$4,000 for services such as research and planning; secondly, product billing which is priced according to market prices for the type of forms prepared in relation to routine compliance work; and thirdly, process services which are based on hourly rates of all the staff involved for work provided over an extended period of time. Dirk said, during the meeting, he had further informed the Defendant that he expected most of his work for the Defendant would be billed at the hourly rate of HK$4,000.

10.  Dirk’s evidence was that, after this initial meeting, the Defendant instructed him to advise and represent her on tax related matters, including dealing with other professionals. As the Estate had different assets in multiple jurisdictions, Dirk stated that he had worked on various matters in accordance with the Defendant’s instructions between March 2002 and December 2003. The invoices issued during this period were all settled by the Defendant.

11.  Now, for the February invoice, Dirk stated that it related to the Estate’s income/estate taxes. The Plaintiff’s case is that Dirk had already told the Defendant that the Plaintiff would be charging for the work in relation to estate tax at half of the resultant tax savings and it was on this basis that he agreed to research and develop the different strategies in order to minimize the Estate’s potential US taxes.

12.  As for the Estate’s income tax, Dirk said he had told the Defendant that the Plaintiff would be charging at the hourly rate of HK$4,000. Dirk said the Defendant had agreed to that.

13.  According to Dirk, the Defendant raised issues with him in December 2003 concerning the “half of the tax savings” charge but Dirk insisted that such was the charge he asked for. In the emails included in the trial bundles, there was one dated 21 December 2003 from the Defendant to Dirk, stating, inter alia, that,

“... I did not think that you were serious when you mentioned half of the proceeds. If I am going to give up half, I might as well give it to the girls!! Really, Dirk, I can’t believe you. ...”

14.  In the reply email sent by Dirk to the Defendant on the same day, it was stated that,

“... With respect to the U.S. estate filing, ... In delivering to you my ideas I mentioned that I wanted ½ of the TAX SAVINGS (resulting in fees of about $64,000); I never “mentioned half of the proceeds.” But I did mention that this would achieve much of Jack’s desired result of your receiving much of his estate. From all that I gather, you agreed to that understanding and said to go ahead and get Deborah DiNardo to go with my ideas. ...”

15.  Dirk said that as a result of these exchanges, the Defendant disengaged the Plaintiff’s professional services by way of an email dated 25 December 2003, which read,

“... I must admit I have never been placed in this situation before. I will need to perhaps discuss with other professional as to how I should proceed. ... I now have to find a tax professional to finish with the DiNardo work you started. ... At this point, any person wanting any information from or about the estate should be forwarded to me and I will decide what action should be taken. ...”

16.  Dirk said he replied to this email, trying to explain his fees again and to confirm that he would do as instructed by the Defendant, that is, to refer any further request concerning the Estate to the Defendant.

17.  It is the Plaintiff’s case that, about a month later, that is, on or around January 2004, their mutual friend, Zigal, called Dirk to tell him that the Defendant would like to have a better understanding of the strategies that Dirk had been developing. Dirk said he therefore sent to Zigal a spreadsheet which summarised the information Zigal sought from him as well as the Plaintiff’s professional charges for the work. The email and the spreadsheet disclosed had the references “1/2 the tax savings” and “$64,000 + disbursements” for “case 1” which, according to Dirk, was the option the Defendant eventually chose.

18.  According to Dirk, after the spreadsheet was sent, there were meetings between Zigal and Dirk as well as between Zigal and the Defendant. Further, there is no dispute between the parties that a meeting was held at the Defendant’s home on 4 February 2004 which was attended by Dirk, Zigal and the Defendant during which the different strategies and the spreadsheet were discussed.

19.  Dirk stated that, on or around 17 February 2004, the Defendant re-engaged the Plaintiff’s professional services. Dirk said that such was evident from an email sent by the Defendant to Mr. Albert Lam, who was the solicitor acting for one of the daughters of the late Mr. Harris. The email was dated 17 February 2004 and contained this, “I have re-engaged Mr. Dirk Rommeswinkel to handle the distribution matter once again. ... Please contact him directly for any estate matters ...’

20.  Dirk further said that on or around 5 March 2004, the Defendant called him to discuss the filing of the relevant form for the Estate’s estate tax return (Form 760NA). Dirk stated that as the Defendant had opted for the first of the strategies he had developed, he specifically reminded her that the Plaintiff would be charging her US$64,000, being half of the tax savings, for the work. Dirk said the Defendant had acknowledged that she understood such would be the case. Under cross-examination, Dirk agreed that there was no email in which the Defendant’s clear agreement to the fees charged was recorded but he maintained that there was such a verbal agreement.

21.  It is the Plaintiff’s case that after the tax savings had been achieved, the February invoice was issued to the Defendant based on the agreed sum of US$64,000 for developing the strategies for the Estate.

22.  As outlined above, the February invoice also included a charge in the sum of US$8,500 which was in relation to the preparation of the Estate’s income tax return form (Form 1041). The Plaintiff’s case is that between September and December 2005, the Defendant agreed to engage the Plaintiff’s professional services in preparing the income tax return forms for the Estate and for herself at the hourly rate of HK$4,000. The Defendant then provided the relevant information to Dirk for completion of the forms. According to Dirk, the work was done and for the service fees in respect of the Estate’s income tax return form, that was billed in the February invoice.

23.  Concerning the service fees (US$7,500) in respect of the Defendant’s own income tax return form (Form 1040), a separate invoice, that is, the January invoice, was issued. Under cross-examination, Dirk explained that work in relation to the Defendant’s income tax return actually started in January 2004 as pleaded in the Amended Statement of Claim but he did not bill those hours as he regarded those to be promotional time.

24.  According to Dirk, when the Defendant was reminded of the two outstanding invoices in March 2006, her initial response by email dated 29 March 2006 was that she had a sum of US$250,000 paid to the Plaintiff to be held in escrow and that money could be taken from that sum to settle the invoices. Dirk, however, told the Court that the Plaintiff had never received any sum from the Defendant to be held in escrow and following the receipt of the Defendant’s email, he immediately wrote back to her, telling her that she was mistaken. The two invoices, however, remain unpaid.

25.  At trial, much of the cross-examination of Dirk centred on the basis upon which the Plaintiff billed the Defendant and the amount of time spent by Dirk on the work during their previous encounters. Dirk accepted that the Defendant had made various payments to Private Investments Limited (“PIL”) of which Dirk was the sole owner and beneficiary. However, Dirk stated that during their previous dealings, he had done a lot of work for the Defendant in relation to different matters concerning the Estate. Dirk said that the payments made to PIL had nothing to do with the current proceedings as the invoices now remain outstanding are in respect of different matters, that is, concerning the Estate’s estate tax and income tax returns as well as the Defendant’s personal income tax return.

26.  It was also put to Dirk during cross-examination that cash not relating to the payment of invoices was handed over by the Defendant to Dirk or to the staff of the Plaintiff. It was said that such payments were made because of undue influence exerted on the Defendant by Dirk. The allegations were denied by Dirk. He also denied the claim that he had over-charged the Defendant.

The Defendant’s Case

27.  The Defendant gave evidence at trial. She did not call any other witness. She said that she was born in the United States. After leaving school, she worked as a flight attendant and had 16 years’ experience in the field. In 1995, she moved to Hong Kong and met her husband here. However, her husband passed away in Hong Kong on 11 February 2002.

28.  The Defendant said that, around March 2002, she came to know Dirk through the introduction of Zigal. She confirmed that after meeting Dirk, she had engaged Dirk/the Plaintiff to advise and represent her in respect of various tax matters in Hong Kong and the United States, both in her individual capacity and in her representative capacity as the administrator of the Estate. However, she stated that she had never agreed to pay the Plaintiff half of the tax savings for work done in relation to the filing of the Estate’s estate tax return. She said that the required forms were prepared by an attorney in the United States (“DiNardo”) and that Dirk merely selected one of those forms and duplicated it for her signature. Moreover, she claimed that, as instructed by Dirk, she had asked DiNardo to deal directly and freely with Dirk.   

29.  The Defendant insisted that there were no agreements with the Plaintiff as to any fees and/or charging rate regarding the work provided by the Plaintiff to her, whether in her individual capacity or representative capacity of the Estate. She also made the point that there was no written retainer and/or engagement letter detailing such.

30.  As mentioned above, there is no dispute between the parties that a meeting took place on 4 February 2004 which was attended by the Defendant, Dirk and Zigal. The Defendant said that this meeting was conducted at her home upon her request and the meeting was about “spreadsheet showing tax consequences of various filings and discussing tax filings strategies”. The Defendant, however, stated that Dirk did all of the talking and used technical terms when he explained the strategies to her. After the meeting which was an informal one mixed with personal dialogues, the Defendant said that she was left even more confused about what had been discussed.

31.  The Defendant claimed in her statement, the contents of which had been adopted as her evidence-in-chief, that, “the death of the Deceased marked an all-time low in my life. I lost control of my life and in view of my poor emotional state, Dirk acquired dominion over my mind so that I could not make the right decisions. Dirk had exerted undue influence over me, giving me a false sense of security and leading (or more correctly stated “misleading”) me into believing that I had no reason whatsoever to seek independent and competent advice to administer the Estate and my personal matters.”

32.  The Defendant listed in her witness statement a number of matters which she said evidenced the control/undue influence exerted over her by Dirk between 2002 and 2006. Such included helping her to purchase a home for her mother in the U.S.; referring to her a Hong Kong lawyer to deal with the legal matters of the Estate; assisting her to set up a company for the manufacturing of handbags; instructing her to make a personal loan of US$130,100 to a business partner introduced by Dirk; trying to talk her into purchasing an industrial laser printing/cutting machine; advising her to look at purchasing a home in Dongguan; trying to convince her to invest with him as a partner in a pizza restaurant in Dongguan; tying to talk her into buying land in Thailand with him as a partner; and advising her to transfer all the Estate’s assets as well as her own to Gulf Corporation which the Defendant said was solely owned and operated by Dirk. The Defendant said in her statement that, “... but my faith in him quickly diminish when I realized that he was serious about the insistence of me blindly following his aforesaid instructions.”

33.  The Defendant said that during the time when the Plaintiff  was engaged by her and upon the Plaintiff’s request, she had, at the time when Dirk acquired dominion over her mind, handed over cash in excess of US$300,000 to Dirk on various occasions.

34.  During cross-examination, the Defendant admitted that she had quite a lot of experience in dealing with people as she had been a flight attendant for 16 years and she admitted that she was quite a self-reliant woman at that time. She stated that Dirk was his friend; she admired him; she respected him; and she found him to resemble her late husband in many ways.

35.  Insofar as the charges are concerned, the Defendant said she could not remember whether Dirk mentioned the hourly rate at any time. When shown the documents in the trial bundles which consisted of an email dated 10 September 2002 sent by her to Dirk, stating that, “I also want to make payment to you. I just need to get your hourly rate again.” and the reply from Dirk saying that his billing rate was HK$4,000 per hour, the Defendant said she could not recall if she had written or seen those emails. She maintained that given her state of mind at that time, she would have paid whatever Dirk had asked. The Defendant, however, admitted that Dirk was not the only professional engaged by her. She accepted that she had engaged other professionals in respect of the Estate matters and she agreed that DiNardo was recommended to her by her late husband’s former colleague. 

36.  When counsel for the Plaintiff went through with the Defendant emails which were sent from her email account to that of Dirk and which either contained instructions given to Dirk or showed that the Defendant was actively involved in matters, the Defendant claimed that she did not remember/write those emails. She further denied having received those emails sent from Dirk’s email account to her account which were shown to her by counsel during cross-examination. The Defendant claimed that she had destroyed the emails she had with Dirk a long time ago. When put to her that she was lying and such could not be the case as she had disclosed some of those email exchanges in her own list of documents, the Defendant then said she deleted the majority of the emails.  

37.  When shown the email exchanges between Dirk and her concerning half of the tax savings of the Estate, the Defendant said she could not remember those emails but admitted that they were going back and forth about the fee at that time. She further admitted that, at one time, she had told Dirk to refer all requests to her. The Defendant also accepted that at some point in time, she had asked Dirk to stop working for her. When shown the email concerning the re-engagement of Dirk, the Defendant agreed that she had re-engaged Dirk/the Plaintiff but claimed that it was not discussed how she should pay him after the re-engagement. The Defendant said she thought it would be like before but she did not clarify the matter when she re-engaged Dirk.

Preliminary Point 

38.  Mr. Hart for the Defendant contends that as the Plaintiff did not apply for leave to add the personal representative of the Estate as a defendant under Order 15 Rule 6 of the Rules of the High Court, the claims made against the Defendant in her representative capacity are defective.  

39.  Mr. Li for the Plaintiff, however, says that the present form is the correct form. Mr. Li makes reference to paragraph 15/1/3 in the Hong Kong Civil Procedure 2010 which reads, “The name of a person who is a party in more than one capacity, e.g., in a personal and a representative capacity, must be inserted only once in the record. A note will be added that he sues or is sued both personally and ‘as trustee of the will of –’ or as the case may be …”

40.  Mr. Li says that, in any event, since the Defendant has taken steps in the action, she has waived any alleged irregularity.

41.  To dispose of this preliminary point, it is enough for me to say that I find no merit in the Defendant’s argument and I find that the writ, in its present form, is correct, clear and sufficient.     

Issues

42.  In respect of the original action, the issue before this Court is whether there were agreements as to the fees charged, that is, the hourly rate of HK$4,000 and the amount of US$64,000, being half of the tax savings. If the Plaintiff succeeds in proving on a balance of probabilities that there were such agreements, then the Plaintiff succeeds in the claims and the Defendant cannot now refuse to make the payments because she now finds those to be unreasonable fees. Whether the fees charged were reasonable is not an issue before this Court. The issue is whether there were those agreements as stated by the Plaintiff.

43.  In respect of the counterclaim, the Defendant’s case relies on actual undue influence, not any presumed undue influence. That has been accepted and confirmed by Mr. Hart for the Defendant. Mr. Hart further accepts that if actual undue influence is not proved, then the Defendant’s counterclaim must fail.

Findings

44.  I find Dirk an honest witness and I accept his evidence. Insofar as the Defendant is concerned, I reject her evidence and I find her to be an evasive and unreliable witness who was not prepared to tell the truth concerning the matters before this Court.

(a)             The Hourly Rate

45.  The email exchanges between the parties were disclosed in these proceedings and were included in the trial bundles. Dirk’s evidence is clear. He said that he had told the Defendant his hourly rate of HK$4,000 at an early stage. Dirk further told the Court that during the Plaintiff’s dealings with the Defendant, various other invoices, mostly basing on the hourly rate of HK$4,000, were issued to the Defendant and were settled.

46.  Dirk’s account of events is consistent with what was revealed from the emails. For instance, in the email dated 10 September 2002 sent from the Defendant’s email account to Dirk’s account, there was this sentence, “I just need to get your hourly rate again.” There was then a reply from Dirk’s email account to the Defendant’s email account which stated, “My billing rate is HK$4,000 per hour.”

47.  Although the Defendant denied writing this email, I reject her claim that she was not aware of the hourly rate. It should be remembered that the Defendant’s own evidence was that, after the death of her husband, she engaged Dirk, whom she had not met before, to represent her in various tax matters. To suggest that she did not even ask about Dirk’s hourly rate before engaging the work of the Plaintiff is, in my view, inconceivable for, generally speaking, when one engages some professional services, what first comes to mind would probably be the professional fees involved.

48.  Moreover, we are not talking about a very minor work here. According to the Plaintiff’s own evidence, she engaged Dirk/the Plaintiff “to advise and represent (her) in respect of various tax issues in Hong Kong and US in the following two separate capacities : (a) in (her) individual capacity; and (b) in (her) representative capacity as the administrator of the estate of the Deceased.” By whatever standard, such could not be described as a simple one-off matter but rather a relatively long-term engagement. The Defendant’s saying that she did not ask about Dirk’s hourly rate before engaging the Plaintiff for an assignment of this scale could not be true.

49.  Further, if it were true that the Defendant had never been made aware of Dirk’s hourly rate, then she should be asking the rate for the first time when she was about to make payment. However, the relevant email read, “I also want to make payment to you. I just need to get your hourly rate again.” (emphasis added) Such was a request for confirmation of, not a first-time enquiry about, the hourly rate.

50.  On the evidence before me, I find that the hourly rate had been made clear by Dirk to the Defendant during their initial discussions and had been accepted by the Defendant as the basis upon which the Plaintiff would charge her for the work done, except the “half of the tax savings” matter which I shall deal with in a moment. I also accept Dirk’s evidence that around December 2005 and before proceeding with the work regarding the filing of the Defendant’s income tax return and the Estate’s income tax return, he had reminded the Defendant that the Plaintiff would be charging her at the usual hourly rate of HK$4,000 for such work. I find that the rate had been accepted by the Defendant when she, after Dirk’s reminder of the hourly rate, sent to Dirk the information which was necessary for the work to proceed.

51.  In other words, I find that there was an agreement between the Plaintiff and the Defendant concerning the adoption of the HK$4,000 hourly rate as the basis for the charges in relation to the income tax returns matter. I find that, pursuant to this agreement, the Plaintiff is entitled to receive and the Defendant is required to pay US$7,500 and US$8,500, charged at the hourly rate of HK$4,000, as demanded in the January and the February invoices. The payments previously made to PIL are not relevant to these claims as I accept Dirk’s evidence that such payments were in relation to the services rendered on different matters. In any event, it is not the Defendant’s defence that payment has already been made previously regarding these two sums. Her defence, which I reject, is that there was no agreement as to the hourly rate at which the work in relation to the income tax matter was to be billed.   

(b)             Half of the Tax Savings

52.  Insofar as the “half of the tax savings” matter is concerned, the email dated 12 December 2003 issued from the Defendant’s email account to Dirk’s email account began with this, “Dirk, I need you to send me your bill and I need a receipt from the last payment. I will not make one single payment to the girls until I get this added on the spread sheet. You cannot fairly represent the amount the girls will get until your cost is included. I need this statement right away I also need the papers that Deborah sent and all documents that you have that involve the estate. ... ” and ending with “I would like to finish up with you as soon as possible. Again, please take a moment and finalize our business by giving me a bill reflecting what is due til present.”

53.  On the same day, there was a reply email sent from Dirk’s email account to the email account of the Defendant which read, “I have not done a bill for October, November and December through today as I haven’t completed the work for the distribution. But the hours to date on this work has been 28.5 hours (HK$114,000/US$14,650) and I already added that to the updated spreadsheet. Should I invoice now? Then there are the professional hours that I have spent on the U.S. estate tax filing which I said (it) would be ½ of the tax savings for coming up with the strategy for filing to save on the U.S. tax and for minimizing additional disclosure of the other beneficiaries. ...”

54.  Subsequently, an email was sent from the Defendant’s email account to Dirk’s account on 21 December 2003, which read, “Hi Dirk, Just got this E-Mail today. Sorry for the delay. ... I did not think that you were serious when you mentioned half of the proceeds. If I am going to give up half I might as well give it to the girls!! Really Dirk I can’t believe you. ... I guess I am not in the mood to be foolish right now I have lost enough on your last little caper. ...” One point to note about this email is that although the Defendant said she did not write/remember this email, such was disclosed in her own list of documents. As such, I find it more probable than not that she must have sent this to Dirk at the time and she must have received the above-mentioned email from Dirk when she asked for the bill.

55.  Pausing here, the following are the observations I make concerning these email exchanges. Firstly, in the email sent by Dirk in response to the Defendant asking for his bill, he referred to 28.5 hours of work for which he was charging HK$114,000. That was equivalent to HK$4,000 per hour. This is another example to show that the Defendant was aware of the hourly rate concerned.

56.  Secondly, in respect of the “half of the tax savings” matter, Dirk referred to “I said (it) would be ½ of the tax savings for coming up with the strategy for filing ...”. The Defendant’s reply was, “I did not think that you were serious when you mentioned half of the proceeds ...” I find that Dirk and the Defendant must have had some previous discussions about this “half of the tax savings” matter for, if not, they would not have written in this way.

57.  My third observation is about the alleged undue influence said to have been exerted on her by Dirk at the time. According to Dirk, these email exchanges took place in December 2003. The Defendant’s case is that during the period between 2002 and 2006, Dirk had exerted undue influence on her and had given her instructions on a number of matters. However, an examination of these email exchanges did not support such a claim. The Defendant was asking for bills and receipts, was taking care of her own affairs, and was commenting that she could not believe Dirk. Such did not sit with her claim that she was under undue influence exerted on her by Dirk. I just set out here this observation I make in respect of the email exchanges for the sake of convenience and I shall later come back to her claim regarding undue influence.    

58.  Now, as Dirk said in his evidence, after these email exchanges, the Defendant disengaged the Plaintiff. That, according to Dirk, was evident from the email sent by the Defendant dated 25 December 2003. This email was disclosed by the Defendant. I find that she must have written and sent this although she denied having seen or written it.

59.  Dirk’s evidence, which I accept, was that as matters developed, the Defendant later re-engaged the Plaintiff. That was in February 2004 and there is not much dispute that re-engagement indeed took place. What the Defendant contends is that there was no agreement as to the “half of the tax savings” charge upon the re-engagement. The evidence she gave in Court was that, “It was not discussed how I should pay him after re-engagement. I thought it would be like before. I didn’t clarify when I re-engaged him.”      

60.  To say the least, it would be highly unlikely for the Defendant to have left this matter so unclear and unsettled upon the re-engagement. It should be recalled that the parties’ differences concerning this “half of the tax savings” was what led to the disengagement in the first place. In the circumstances, one would expect the matter of fees should receive full attention and should be fully settled before any re-engagement took place. To suggest that such did not happen and there was no clarification on the fees charged is, in my view, inconceivable and I reject the Defendant’s claim.

61.  On the evidence before me, I find that the Defendant had been reminded by Dirk of the fees of US$64,000 and had agreed to that charge before Dirk continued with the work in question. In fact, given that Dirk was very insistent about this “half of the tax savings”, there would not be any reason for the Plaintiff to continue with the work if no agreement on the fees had first been secured from the Defendant.  

62.  In any event, it was the Defendant’s own evidence that, upon re-engagement, she thought that matters would be like before. If so, then it would have been apparent to her that “half of the tax savings” was what she would have to pay to Dirk for the work in question. If that reference were merely to mean that, like before, she did not agree to the “half of the tax savings” charge, then one would expect her to raise or clarify the matter in her dealings with Dirk which immediately followed but nothing like that happened.

63.  All in all, I do not accept the Defendant’s account of events.

64.  I find that, as stated by Dirk, the Plaintiff and the Defendant had reached an agreement about the charge of “half of the tax savings” (US$64,000) on which Dirk insisted before the Defendant re-engaging the Plaintiff and the Plaintiff agreeing to continue with the work in question. This agreed sum was what the Plaintiff billed in the first part of the February invoice when the Estate filing matter had been concluded. The Plaintiff is therefore entitled to receive and the Defendant is liable to pay this sum of US$64,000.

(c)      The Alleged Undue Influence

65.  The general principles on undue influence are (see Goff & Jones, The Law of Restitution, 7^th ed.) :

“11-003 : … If actual undue influence is alleged, it is necessary for the claimant to prove affirmatively that the wrongdoer exerted undue influence on the complainant to enter into the particular transaction which is impugned. In the view of the Court of Appeal in BCCI v Aboody :

           “... a person relying on a plea of actual undue influence must show that : (a) the other party to the transaction (or someone who induced the transaction for his own benefit) had the capacity to influence the complainant; (b) the influence was exercised; (c) its exercise was undue; (d) its exercise brought about the transaction.”

For its exercise to amount to undue influence the party relying on the plea must show specific (or overt) acts of persuasion.

... It is then for the complainant to prove affirmatively that he is the victim of undue influence which induced him to enter into the impugned transaction. In discharging this burden, she may be able to demonstrate that she is a vulnerable person and the other party a domineering, forcible character. If, on the balance of probabilities, the party influenced would have entered the transaction in any event, it will not be set aside.

...

11-010 The circumstances in which a claimant may lose his right to set aside a transaction on the ground of undue influence are similar to those which may bar a claim for rescission or rectification....

In Allcard v Skinner it was said that the party influenced must object within a reasonable time; if he does not, he is deemed to have affirmed the transaction. In Mutual Finance Ltd v Wetton the critical time was said to be the date when the influence ceased to operate. ...”

66.  In the present case, the transactions sought to be set aside are the various handing-over of cash in the total sum of about US$300,000 by the Defendant to the Plaintiff/Dirk. Although the Defendant’s evidence was unclear as to the specific time-frame within which such payments were said to have been made, it would appear that the time must have been before the Plaintiff sought payments for the January and February invoices. The reason is that subsequent to the Plaintiff’s demand for payments, the relationship between Dirk and the Defendant had turned somewhat sour.

67.  As revealed in the documents, the Defendant did not raise the issue of undue influence when first pressed for the payments. She mentioned money held in escrow and she later had other reasons not to pay. It was in 2007, 1 year after the Plaintiff started chasing the Defendant for payments, she then indicated undue influence in reply to the demand letter sent by the Plaintiff’s solicitors.

68.  This delay is difficult to understand. If, as alleged by the Defendant, she had handed over such a huge sum of money because of Dirk’s undue influence, one would expect her to immediately raise that with Dirk when she “became herself” again.

69.  On the evidence before me and for the following reasons, I find that the Defendant has failed to prove on a balance of probabilities that any undue influence was exercised on her by Dirk.

70.  Firstly, as admitted by the Defendant herself, she is a relatively self-reliant person and she supported herself during her 16-years’ work as a flight-attendant. She also admitted having a lot of experience in dealing with people. One would expect that a person with such maturity and life experience would guard her interest jealously, especially when talking about financial matters and when strangers are involved.

71.  While the Defendant said that the death of her husband marked an all-time low in her life so much so that she had lost control of her life, it is hard to understand how Dirk, who was a complete stranger to her prior to the introduction by Zigal and who was apparently introduced to her merely as a consultant to help handling her tax matters, could have the capacity to influence her. According to the Defendant, her husband passed away on 11 February 2002. She met Dirk in March 2002. Dirk then started working for her. However, it is not disputed and it is clear from the documents that other professionals/persons were involved in these tax matters. In other words, the Defendant could, if she had wanted to, have easily sought advice from others regarding the work being handled by Dirk. There were also the Zigals who were nearby as they were the Defendant’s neighbours. Although the Defendant said that the Zigals did not give her any professional advice as they were her friends, this did not detract from the fact that the Defendant was, at the time, not being left alone with no one to turn to other than Dirk.

72.  Apart from the absence of any special or long-term relationship between the Defendant and Dirk, it is noted that there was also the question of geographical distance. Dirk was residing in Dongguan at the time and the Defendant was living in Hong Kong. The suggestion that a new acquaintance who was merely engaged to deal with one’s tax matters and who was living in the Mainland could somehow exert undue influence on one in Hong Kong so much so that cash of about US$300,000 was handed over is, in my view, quite beyond comprehension.

73.  I also note that while the letter of administration was granted to the Defendant in January 2003, it was not until August 2003 that an email was sent from the Defendant’s email account to that of Dirk, informing him of the same. This, in my view, again shows that the Defendant was able to and was indeed managing her own affairs. She decided when and what to divulge to Dirk. Such conduct did not support her claim that she was under the undue influence of Dirk.

74.  Moreover, I have observed the Defendant giving evidence in Court. She is mature and, as admitted by her, she certainly has had quite a lot of life experience. She did not appear to be a vulnerable person. There were also the emails which I mentioned above and which showed how the Defendant reacted to different situations and how she conducted her different affairs. I do not accept that the Defendant was subject to any undue influence exerted by Dirk which caused her to be incapable of making independent and informed judgments. Quite the contrary, I find that the Defendant was in control of her own affairs and was the one issuing directions and instructions. No doubt, she looked to Dirk for advice and assistance on tax related matters but that was it. She did not lose control of herself and did not, as she claims, became a victim of undue influence and blindly followed Dirk’s instructions.    

75.  Having considered all the evidence before me, the conclusion I reach is that the Defendant’s evidence is not credible and I reject her claim of undue influence.

Conclusion

76.  For the reasons set out above, the Plaintiff succeeds in this action and I give judgment in favour of the Plaintiff to recover the sum of US$7,500 from the Defendant in her personal capacity and the sum of US$72,500 in her capacity as the personal representative of the Estate, with interest thereon from the date of the writ until payment.

77.  Since the Defendant has failed to prove her case of undue influence, the counterclaim is dismissed and the taking of an account is refused.

Costs

78.  In his closing submissions, Mr. Li for the Plaintiff asked for costs on an indemnity basis. The reasons put forth are that the defence and the counterclaim are hopeless and without merit and that, during the trial, we had to deal with two very late applications made by the Defendant, as well as that the Defendant’s reasons for not paying the outstanding invoices keep changing.

79.  The principles governing the making of a costs order on an indemnity basis were set out by the Court of Appeal in Choy Yee Chun v Bond Star Development Ltd [1997] HKLRD 1327. Stock J (as he then was) said at 1336 :

“… the principles apply equally to those who not only institute proceedings but who defend them. If a plaintiff has been forced to institute proceedings by a defendant whose conduct has been not only hostile in the normal litigious sense, but oppressive and with base ulterior motive, and if the pursuit of a defence constitutes conduct which is part of an oppressive game plan, then invocation of the power to award costs on an indemnity basis may well be justified. Of course there will in most litigation be evidence which a court rejects, and it is far from rare that a court will find that evidence has been deliberately untruthful. Such a finding will not necessarily in itself warrant an order for costs upon either of the bases alternative to party and party taxation. But there will be cases - and it is true that they will be the exception and not the rule - where the conduct of a party in a case is of a more venal kind, where the conduct of the litigation has in some sense been wicked, and in such a situation the exceptional power can quite properly be applied.”

80.  In the present case, I reject the Defendant’s case on a balance of probabilities as I found her evidence generally untruthful and unreliable, being inconsistent with and contradictory to some of the emails disclosed, and did not accord with common sense. These findings are not at all rare in many of the cases tried by the Court when rejecting a witness’s evidence. Insofar as the applications made at trial by the Defendant are concerned, they were no doubt late but they did not cause any substantial delay to these proceedings and did not take up much time. Although I did not allow those applications, Mr. Hart had explained what prompted the Defendant to make the applications and I do not find them to amount to oppressive conduct.   

81.  As is clear from what was quoted above, the fact that a party pursues a claim that is later found by the Court to be unmeritorious does not, in itself, call for a costs order on an indemnity basis which is one of an exceptional and unusual nature.

82.  I therefore refuse the Plaintiff’s application for costs on an indemnity basis.

83.  The costs order which I am going to make is that the Defendant is to pay the Plaintiff’s costs in this action, on a party and party basis, to be taxed if not agreed, with a certificate for counsel.