WONG SUI-KWAN v. CHEONG PUI FAN

cacv 145/2007 AND CACV 146/2007

CACV 145/2007

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 145 OF 2007

(on appeal from DCCJ NO. 4987 of 2004)

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CACV 146/2007

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 146 OF 2007

(on appeal from DCCJ NO. 5879 of 2004)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.   This was an appeal from a judgment of Deputy District Judge K W Wong given on 27 October 2006.  The matter before the judge was a claim and counterclaim by solicitors in respect of matters which arose during the course of and following the termination of the plaintiff’s engagement as a consultant by the defendant.  The plaintiff’s claim was in respect of commission which he said was outstanding and a claim that the defendant should be restrained from using the name of the firm which included the plaintiff’s name.  The defendant counterclaimed alleging that the plaintiff had passed off the business which he started after leaving the defendant’s firm.

2.   The judge dismissed the greater part of the plaintiff’s claim.  He granted a limited order in relation to the claim for an account.  The judge dismissed the plaintiff’s claim in relation to the name of the firm and he also dismissed the defendant’s counterclaim.

3.   At the conclusion of the hearing of this appeal, this court dismissed the plaintiff’s appeal reserving one point as to the wording of the order for the account.  This court ordered that the defendant should have the costs of the appeal.

Background

4.   The plaintiff established his own solicitors firm in October 1983.  At that stage he was the sole proprietor.  Another solicitor joined him in January 1984 and they traded under the name S. K. Wong & Lee.  In November 1992 the plaintiff ceased to be a partner of that firm but became a consultant.  The firm then continued in existence and from time to time other solicitors became partners and ceased to be partners.  It would appear that at least from the early 2000’s the firm’s business did not fare well.  Eventually in the summer of 2003 all the other partners resigned, leaving the defendant as the sole proprietor.  There were discussions about the formation of a new partnership and, it seems, the plaintiff was to be part of that, but those discussions obviously came to nothing.  There is no doubt that the plaintiff stayed on and worked as a consultant in the defendant’s business from September 2003 until he finally left in August 2004.  The major dispute between the parties is as to the terms upon which he remained.

5.   Prior to August 2003 the plaintiff had received commission based on a sliding scale.  The minimum commission was 25% in respect of the profit costs received on account of the plaintiff’s billing.  That was payable even if the business as a whole made no profit.  When the business was profitable the plaintiff’s commission would range between 30% and 50% depending upon the income generated from the plaintiff’s billing.  This was referred to as the “Rider A” formula.  It was contained in an old handwritten note.  It was the plaintiff’s case that he remained as a consultant on the basis that he would receive commission according to the “Rider A” formula.

6.   The defendant denied that there was any oral agreement alleged by the plaintiff that he would receive commission according to the “Rider A” formula.  She said that after the last partner had left the firm on 31 August 2003 the plaintiff had not left the business.  He had stayed on but the agreement as to the rate of commission that he would receive was only reached in October.  They had agreed a flat rate of 25% in or about October 2003.  In the months of March and April 2004 when the plaintiff’s billing was good and the financial position of the business appeared to be more sound on the plaintiff’s request the defendant agreed to pay the plaintiff commission at 30%.  As regards the question of the name under which the business was carried on the defendant denied the existence of any agreement as alleged by the plaintiff that she would cease using the plaintiff’s name in the name of the business should he cease to be a consultant.  Although there were other issues at the trial, it is these matters that remain in dispute on this appeal.

7.   The judge was clearly not favourably impressed with the evidence of either the plaintiff or the defendant.  Nevertheless, he considered all the evidence both oral and written with considerable care taking into account the submissions which were made by counsel on both sides.  In respect of the defendant he said at paragraph 24:

“

She was in the witness box for four days and was under heavy cross-examination for three days.  Her performance in the witness box is unsatisfactory.  She is obviously over-cautious and evasive.  One of these examples is revealed when she was referring to the two notes in her handwriting in pages 699 and 700 of the Documents Bundle.  When she was cross-examined, she initially regarded the two notes contained her scribbles for brain storming only and were meant to be informal.  However, it was also her evidence that both she and the Plaintiff had in the course of that discussion stated what had been exchanged was subject to contract.  It will be difficult to envisage that when two persons were engaged in a really informal discussion, they would care to say to each other from the outset what would say was “subject to contract”.  She has given me the impression that she will try to play down the importance of whatever evidence relied on by the Plaintiff.  Like the Plaintiff, she also tried to avoid answering sensitive questions.  Furthermore, many of her answers in relation to the two notes were not contained in her witness statements and came out for the first time in the cross-examination.  Some of these answers even changed as the trial went along.  Having observed her in the witness stand for four days, she gives me the impression that she is evasive and non-committal as to her answers and is too smart to avoid answering sensitive questions.  However, for reasons that I shall discuss in the context of the existence of such agreement, I still prefer to accept the Defendant’s version on the commission arrangement between the parties.  In considering the truthfulness of a witness’s evidence, as I have stated above, such evidence will be tested, as far as possible, against undisputed or unchallenged contemporaneous documents.  I will not merely placing reliance on a witness’s performance in the witness box.”

8.   I have cited this passage in full because it is clear that the judge considered the evidence carefully.  He did not simply accept one party’s evidence and reject the other’s.  Bearing in mind that it was for the plaintiff to establish his case, it appears to me that the judge did carefully and conscientiously come to the conclusion which was articulated particularly in paragraph 130 of the judgment that whilst the defendant did admit that in addition to agreeing to the 25% commission rate there was an understanding between the parties that if the market improved they could discuss again about raising the rate.  Nevertheless, whilst the judge stated explicitly in that paragraph that he found the defendant’s evidence unsatisfactory he went on to say:

“

As discussed above, I have to say that the Plaintiff’s evidence on the oral agreement was so unbelievable that even I find many of the Defendant’s evidence unsatisfactory, I have to reject that part of the Plaintiff’s evidence in respect of the oral agreement.  After some doubt and hesitation and after taking into consideration all the evidence in this case, including the analysis of evidence set out in the closing submission filed on behalf of the Plaintiff, I prefer to believe that the Defendant’s version on the commission arrangement. The Defendant’s version of story on the commission arrangement is not inconsistent with the documents disclosed, while the Plaintiff’s version is.”

9.   Faced with those findings Mr Ho SC, who appeared on behalf of the plaintiff, clearly had a very difficult task on this appeal in seeking to overturn the judge’s findings.  His primary argument was that the judge had not taken into account uncontradicted evidence.  In this regard he referred to the notation “subject to verification” which the plaintiff had written on the receipt which he was asked to sign for the commission which was paid for November 2003.  The judge had dismissed that as something that the plaintiff might have written because he was annoyed that he had been asked to acknowledge receipt.  Whether the judge’s surmise in this respect was correct does not, it would seem to me, take the matter very much further.  The plaintiff may well have wished to have verification of the figures that were contained in the receipt but there is no indication, as such, that those words were directed to the question as to whether the 25% was correct and as to whether it should have been another percentage.  As regards the November commission payment the plaintiff also relies on an obscure “ ? ” which he wrote in his own personal notes about profit costs.  Those notes were never shown to anybody else and in reality they carry the matter no further.

10.   Perhaps the attendance note written by the plaintiff after a 10 minute meeting with the defendant on 3 January 2004, which was timed at 12:30 p.m., can be said to be more clearly directed to the percentage of the commission.  It has to be observed, however, that this was, again, a note which the plaintiff wrote for his own purposes and was not shown to the defendant.  Importantly, although it does show that the plaintiff was seeking commission of 30% it does not show a concluded agreement as to that and, importantly, there is no reference to the “Rider A” formula which the plaintiff contends was applicable.  As regards the judge’s conclusion as to the plaintiff’s evidence, as was pointed out, the judge clearly was aware of this document and when he said he took the documentary evidence into account in reaching his conclusion I see no reason to doubt that.

11.   Although the note of 12 March 2004 which the plaintiff made following a lunch with the defendant does refer to the plaintiff having told the defendant that when he left the firm his name would have to be taken out from the name of the firm, that note does not make any reference to the rate of commission.  A copy of the note was given to the defendant, but, again, it does not show an agreement to that effect and it was something which no doubt the judge was entitled to consider not conclusive.  Likewise, in my view the judge was entitled to discount any effect which might come from the correspondence between the parties shortly prior to the issue of these proceedings.  At that stage no doubt there was a certain degree of animosity and the fact that the defendant did not challenge allegations made by the plaintiff, at that stage, was not indicative that she accepted the veracity of any of the allegations.

12.   Quite simply this is a case where success of the plaintiff’s appeal depended upon the ability to overturn the findings of fact by the judge.  That was sought to be achieved in two ways.  The first was by specific reference to those matters referred to above and then by arguing that the various matters taken together showed that the judge’s conclusions were at fault.  In my view, the judge was clearly entitled to reach the view which he did.  He did so in an entirely logical and careful way and I would not disturb the findings.  In my view the appeal in respect of the defendant failing to change the name under which she traded after the plaintiff ceased to be a consultant was, if anything, less meritorious than the appeal in respect of commission.

13.   The only matter remaining was the wording of the order as to the taking of the account.  The judge set that out in paragraph 242 of the judgment.  The account to be taken was limited to the profit costs which arose under files which had been opened under reference “SKW” between 1 September 1999 and 30 August 2004.  Those dates were taken from paragraph ii) of the order sought by the plaintiff.  It is clear that the judge considered that there should be no account taken of profits costs received during the period 1 September 2003 to 30 June 2004 since he was satisfied that the plaintiff had received what he was entitled to in that respect.  The defendant did not dispute that the plaintiff was entitled to commission on the profit costs received in August and September 2004.  Whilst it was suggested that the matter should go back to the judge for clarification, it would seem to me to be an exercise which would merely increase the costs.  I do not consider that the judge intended to exclude profit costs generated by the plaintiff himself in the period 1 July 2004 to 30 August 2004 even if the file had been opened prior to 1 September 1999.  The limitation to the dates 1 September 1999 and 30 August 2004 was in respect of profit costs that would be accrued before 30 September 2004 but received after that date.  I would therefore consider that the order should be amended to delete the words:

“	of the files under reference “SKW” opened by the Firm between 1st September 1999 and 30th of August 2004”

as they appear at present an and reinsert them at the beginning of subparagraph b) of the order in the manner suggested by Kwan J in paragraph 28 of her judgement.

Hon Sakhrani J:

14.   I agree with the reasons for judgment given by my Lord the Vice President.  I also agree that the judge’s order for the taking of accounts should be varied in the manner as set out by Kwan J at paragraph 28.

Hon Kwan J:

15.   I agree with the judgment of the Vice President.

16.   Mr. Ho, SC sought to get around the difficulty of reversing the findings of fact made by the learned Deputy District Judge by contending that the findings were reached through a process of inference and not substantially based on the assessment of the credibility of witnesses.  In the 16-day trial, the plaintiff was cross-examined for almost 4 days and the defendant for 3 days.  I do not think it could rightly be said that the credibility of witnesses did not play an important part in arriving at the findings of fact.

17.   The plaintiff has the burden of establishing an oral agreement with the defendant to found his case for commission at the rates he contended and for an injunction and damages arising out of the continued use of the firm name by the defendant.  After a careful analysis of the evidence, the judge declined to accept the plaintiff’s evidence on this and preferred the defendant’s evidence, notwithstanding he did not have an entirely favourable view of the defendant’s testimony and rejected her evidence in some respects.  The judge had expressly mentioned the importance of credibility and reliability of witnesses in resolving the conflict of two diametrically different stories.  Not having the advantage of the trial judge of receiving the evidence at first hand, the Court of Appeal should be very slow to interfere with his conclusion on findings of fact.

18.   Complaint was made that the judge had overlooked the plaintiff’s note of a conversation he allegedly had with the defendant on 3 January 2004.  It is entirely understandable that in the course of analysing the evidence, the judge did not refer specifically to each of the documents he had considered.  In his lengthy judgment, he did say at the outset that the evidence of a witness would be tested, as far as possible, against undisputed or unchallenged contemporaneous documents.  In reaching his conclusion he preferred to believe the defendant’s version on the commission arrangement and he stated that he had taken into consideration all the evidence in the case, including the analysis of evidence set out in the closing submission filed on behalf of the plaintiff.  In any event, the weight of that piece of evidence relating to the plaintiff’s note was a matter for the trial judge.  There was no evidence that a copy of it was ever given to the defendant.

19.   As for the complaint that the judge drew an adverse inference from one of the pages of the handwritten records of commission kept by the plaintiff, it does not appear to me there was procedural unfairness here.  The plaintiff’s records should have been produced in the entirety when discovery was given.  Only part of the records was disclosed.  It was in the course of the plaintiff’s examination in chief that the defendant’s counsel inspected the original records and requested to put in 5 additional pages when the plaintiff was cross-examined the next day.  One of these additional pages related to the period from July 2003 to May 2004, which is clearly relevant and should have been disclosed from the start.  These are the plaintiff’s own records, the figures speak for themselves.  He was not ambushed by the late production.  Although the plaintiff was not cross-examined on these additional pages, Mr. Ho could have sought leave to examine the plaintiff on them.

20.   Mr. Ho was trying to pick holes in the judgment.  He was unable to demonstrate the judge clearly went wrong in analysing and weighing the evidence.

21.   The judge made an order for the taking of accounts in these terms:

“	i)	The following accounts be taken, that is to say, of the files under reference “SKW” opened by the Firm between 1 September 1999 and 30 August 2004:
		a)	an account of all the profit costs received under those files between 1 July 2004 and 30 August 2004;
		b)	an account of all the profit costs received under those files, except:
			A)	for the period from 1 September 2003 to 30 June 2004;
			B)	those covered under (i)(a) above; and
			C)	those profit received prior to 1 September 2003;
			Provided that no profit costs are required to be accounted for if such profit costs accrued after 30 September 2004; and
		c)	an account of all the commissions due to the Plaintiff arising from the profit costs in (a) and (b) above at the rate of 25%;”.

22.   Mr. Ho contended the judge was in error and asked for an order that accounts be taken in these terms:

“	i)	all the profit costs received between 1 September 2003 to 30 August 2004 under the files with “SKW” file references (both dates inclusive);
	ii)	all the profit costs received under files opened between 1 September 1999 and 30 August 2004 with “SKW” file reference, except:
		a)	those covered under (i) above; and
		b)	those profit costs received prior to 1 September 2003; and
	iii)	all the commissions due to the Plaintiff arising from the profit costs in (i) and (ii) above.”

23.   His point is that the judge’s order had limited the plaintiff’s commission on profit costs from the files with “SKW” file references opened between 1 September 1999 and 30 August 2004, and had thereby excluded profit costs received from such files opened before 1 September 1999.  This is inconsistent with the findings in the judgment that the plaintiff was entitled to commission on the profit costs generated from such files regardless of when such costs accrued.  In the form of the order proposed by Mr. Ho, paragraph (i) would cover all the profit costs received for the period between 1 September 2003 to 30 August 2004 under the files with “SKW” reference, regardless of when such files were opened.

24.   Having read the exchanges between the judge and Mr. Ho concerning the accounts sought, it seems to me that the judge might have been under some misunderstanding.  He had thought that in proposing a commencement date of 1 September 1999, Mr. Ho was seeking accounts only in respect of files opened between 1 September 1999 and 30 August 2004 (paragraph 233 of the judgment).  That was not the case.

25.   The accounts sought by Mr. Ho were in two parts.  Part (i) was in respect of all profit costs received between 1 September 2003 to 30 August 2004 under the files with “SKW” reference, regardless of when such files were opened. Part (ii) initially was in respect of all profit costs received under files opened on or before 30 August 2004 with “SKW” reference, and after the judge’s indication that this was too wide and should be cut down with a commencement time and ending time, 1 September 1999 was proposed by Mr. Ho as the commencement.

26.   The judge had found that the plaintiff is entitled to be paid commission for all the files introduced by him to the firm (paragraph 232 of the judgment).  This is regardless of when such files were opened.  There should not be a commencement date in respect of the account to be taken under paragraph (i)(a) of the judge’s order, which is equivalent to paragraph (i) proposed by Mr. Ho.  The period covered here is a short one – profit costs received between 1 July 2004 and 30 August 2004 as ordered by the judge, or profit costs received between 1 September 2003 to 30 August 2004 as proposed by Mr. Ho.

27.   I do not think there is any need to order an account of profit costs received between 1 September 2003 to 30 June 2004 as contended by the plaintiff, as the judge had found that the plaintiff was satisfied with his payment of his commissions for the months from September 2003 to June 2004 (paragraph 131 (xi) of the judgment).  So except for what I have indicated earlier, paragraph (i)(a) of the judge’s order should stand. 

28.   The order on the taking of accounts, as varied, is in these terms:

i)	The following accounts be taken, that is to say:
	a)	an account of all the profit costs received between 1 July 2004 and 30 August 2004 under the files with “SKW” file references;
	b)	an account of all the profit costs received under files with “SKW” file references opened between 1 September 1999 and 30 August 2004, except:
		A)	for the period from 1 September 2003 to 30 June 2004;
		B)	those covered under (i)(a) above; and
		C)	those profit costs received prior to 1 September 2003;
		Provided that no profit costs are required to be accounted for if such profit costs accrued after 30 September 2004; and
	c)	an account of all the commissions due to the plaintiff arising from the profit costs in (a) and (b) above at the rate of 25%.

Hon Rogers VP:

29.   The court will therefore make the further order in addition to that made on 29 January 2008 namely that the order on taking the accounts be varied as set out in paragraph 28 above.