PANG SIU YIN v. TAM KEI WAI, GARY t/a GARY K W TAM & CO

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. The plaintiff Pang Siu Yin (Pang) was admitted as a solicitor of the Supreme Court of Hong Kong on the 15th of September 1990. Having worked as an assistant solicitor in the firm of Messrs. Woo, Kwan, Lee and Lo for a period of less than one year, he applied to join the defendant firm, Messrs. Gary K. W. Tam and Co. (Tam) as an assistant solicitor in or about June 1991.

2. Pang was accepted as an assistant solicitor of Tam and he started working for Tam on the 15th August 1991. He only worked there for less than 2 years until 30th May 1993 when he left Tam to be a partner of Messrs. Y. C. Leung and Co. which had since been renamed Messrs. Leung, Chan and Pang.

3. When he left, Pang took with him from Tam his personal secretary, Ms. Lu Sze Yuk. Shortly thereafter, a further 6 staffs of Tam out of about a total of 14, joined Pang in his new firm. Those staffs included a management clerk and a senior conveyancing clerk who together with another senior conveyancing clerk were responsible for bringing to Tam 85% of his conveyancing business.

4. According to Tam, after the departure of Pang from his firm, he checked all the files handled by Pang to ensure that everything was in order. He found for the first time that Pang had waived costs in connection with a number of them. In particular, 11 of those files were said to be transactions involving Pang personally, his close relatives or his friends.

5. In connection with those 11 files, Tam seeks to recover the waived costs from the following persons :

6. The total costs waived in connection with the 11 transactions were in the region of HK$150,000.

7. The attempt on the part of Tam to recover the waived costs led to a series of correspondence between Tam and the parties aforesaid.

8. The first letters were dated 20th or 21st of September 1993 addressed to the parties aforesaid, except Pang himself, together with copies of the relevant demand notes. Tam alleged that Pang had omitted to charge for the works involved and demanded for payment. The letter to Pang himself stated that Pang had only paid the disbursements without the prior approval or authorisation of Tam and settlement of the relevant bills was demanded.

9. In response to the letter from Tam, Pang stated that he had been given full discretion to handle all his files including billing or waiving costs without seeking prior approval or instruction from Tam and as the costs had been waived, he was not obliged to make payments. Tam denied the allegation. He also denied the suggestion that he raised the question of unpaid bills from Pang because Pang had left his employment.

10. As for the other 9 parties to whom Tam had demanded payments, their response to Tam's demand was identical. Their suggestion was that the costs in question had been waived by Pang. They also posted the rhetorical question as to whether Pang had been authorised to handle the matter in question and if not, the matter should perhaps be referred to the Law Society. They all denied liability on the bills sent to them.

11. Apparently after receiving the demand letters from Tam, they had consulted Pang and received some advice. Indeed the letters in response to Tam's demand were drafted by Pang himself.

12. Subsequently, Tam again wrote to all the 9 individuals in identical letters the full term of which was as follows :

13. It was Pang's case that the content of the letters sent out by Tam, in particular the content the letter aforesaid, constituted libel against him and hence the claim against Tam for damages for libel.

14. Tam on the other hand suggested that the letters in question did not contain any defamatory statement and the statement did not refer to Pang. He also suggested that the contents of the letters were true and hence the defence of justification. Further it was suggested that the statement was made on occasions of qualified privilege in that Tam was making demand for payment of legal fees waived by Pang without authority.

15. In addition, Tam also counterclaim against Pang for loss of professional charges in connection with the 11 transactions over which Pang had waived the costs.

16. It was perhaps convenient to deal with the counterclaim by Tam against Pang first. Tam's case was that there was in express or implied term of the contract of employment that Pang should not waive any legal charges of Tam without prior approval or authorisation.

17. Pang suggested that at the time of the interview with Tam in June 1991 when he applied for the job as an assistant solicitor with Tam, he had expressly raised with Tam the issue of whether he was to have absolute discretion in the handling of the files of this own clients including the power to waive costs. The suggestion was that Tam had expressly granted him such discretion.

18. The court had heard the evidence from a number of witnesses on the issue of authority. Apart from Pang and Tam, another solicitor Mr. Henry Chan who was a classmate and a partner of Pang in the firm of Messrs. Leung, Chan and Pang also gave evidence.

19. Pang said when he saw Tam on the 11th of June 1991, he had specifically asked if he could waive costs and determine the legal fees for his own clients who were his friends or clients introduced by his friends. He said at first that in response Tam sounded "OK" or said, "It's OK." He then suggested that he was in fact unable to remember the exact words used by Tam but he came to the conclusion that Tam had in fact allowed him full authority to handle the files of his clients, prepare the bills and waive costs. Pang also said that before he attended the interview with Tam, he had a discussion with Henry Chan who was also attending an interview with Tam. His impression from talking to Chan was that Tam had also mentioned to Chan that he had the discretion to decide what fees to charge and whether to waive costs of files handled by him.

20. Henry Chan basically supported the evidence of Pang. In particular, he said he himself also attended an interview with Tam with a view to securing an employment. Before attending the interview, he had a conversation with Pang and they spoke of the matters to be discussed in the interview. He said one of their concern was their ability to waive costs of the files handled by them. He said he remembered Tam expressly indicated to him that he had complete discretion to decide what fee to charge and to waive cost.

21. At the outset, I must say I am not particularly impressed by the evidence of Pang and Henry Chan. I found it difficult to accept that at the very first interview with a potential employee, Tam would have indicated in such certain term that they would be allowed full discretion in waiving costs, costs being the bloodline of any solicitor firm.

22. I am inclined to accept Tam's evidence that when Pang asked him in the interview whether he would in certain cases waive mortgage costs for certain clients, his response was that "It depends on the circumstances" and Pang then said, "Then it is OK."

23. Pang might have taken the response of Tam as a positive one as according to Tam, he appeared to be quite happy with the reply he had got. Pang might have thought from the response of Tam that he would be given full discretion in waiving costs. But I do not accept that there was a positive and unequivocal agreement between Pang and Tam that Pang would be given absolute discretion in the waiving of costs of the files handled by him. On this aspect of the case, I found Tam a more credible witness.

24. Pang's evidence was that apart from the properties purchased in his own name, Yiu Ka Fung, Susan, was also his nominee in acquiring the property at South Horizons. He said it was his investment strategy. He said as he had already obtained mortgage and he might not be able to get another mortgage, and as Yiu had regular employment, he decided to use her name so that mortgage could be obtained if necessary.

25. Pang said the properties acquired in his own name and Yiu were meant to be joint venture investment by him and some friends, one of whom was Henry Chan. Apart from himself and his close family members, including his father and brother, the clients against whom he had waived costs fell into four categories.

26. Pang even suggested that for joint venture investment with his friend, had it not been for the fact that his friend had introduced business to his firm, he would have charged him the pro-rata share of the cost involved in the joint venture property investment.

27. Pang did not give details of the business introduced by his friends to justify his waiving of the costs involved in their property dealings. I have the greatest reservation about his suggestion that such friends introduced adequate business to justify the waiving of the entire costs in connection with their property dealings. I also find it difficult to accept that he would even contemplate charging his joint venture partner the pro-rata share of the costs involved in their joint venture investment had it not been for their introduction of business to the firm.

28. Looking at the entire background of the case, I am doubtful that when Pang was in the employment of Tam, he was acting in the best interest of Tam. It might not be too difficult to understand why he decided to waive costs in connection with the property dealings of himself, his close family members and perhaps his joint venture partners. The suggestion that he would waived costs on the property dealings of his friends because they had introduced business to the firm was difficult to be accepted. Perhaps he was trying to cultivate a good relationship with the clients which he might perceive to be advantageous to him when he started his own firm.

29. Nevertheless, the issue for the court to decide was whether there was an express or implied term that Pang should not waive costs on the files handled by him. The written contract of employment had made no mention of this. According to Tam, the only brief mention of the matter was when Pang asked him in the second interview if he could waive mortgage costs for certain clients when Tam said in response, "It depends on the circumstances." Mr. Tsang, on behalf of Tam, conceded that on the evidence before the court, there could not have been any express term prohibiting Pang from waiving costs.

30. We are dealing with a professional person, a solicitor who from time to time might find it necessary to have some degree of discretion over the question of cost in the proper discharge of his duties. It is difficult for the court to conclude that there must be an implied term in the contract of employment of a solicitor that waiving of professional fees by him was prohibited.

31. Indeed the answer by Tam that waiving of costs would depend on the circumstances suggested some degree of discretion.

32. Over the period of about 20 months when Pang was in the employment of Tam, he had handled over 100 files under his name. In connection with quite a number of those files, some items of costs had been waived. Tam in fact was quite ready to accept that it was common practise among solicitors to waive cost on the preparation of the sale and purchase agreement in a conveyancing matter and he himself was quite willing to do so if any client was to ask for it.

33. Tam claimed that he had no knowledge about the 100 odd files handled by Pang until after Pang left and he had no idea about the waiving of costs in connection with some of those files. I find such suggestion difficult to accept.

34. Tam might well be very busy at the material times. There might be loopholes in the management of his firm as he himself admitted. But there were over 100 files all of which were kept in the office. There were bills issued in respect of each of those files. Those bills prepared by Pang's secretary had to go through the accounting procedures. Some of those bills in fact bore Tam's signatures. In connection with those files, cheques had to be made out which cheques were more often than not signed by Tam himself.

35. After the departure of Pang, Tam had taken no action in respect of the waiving of costs in connection with those files other than the 11 files in issue. The difference between those files and the 11 files in issue was that with the other files only individual items of costs were waived and there was still profit costs to the firm whereas the entire costs of the 11 files in issue were waived.

36. In my view, Tam's complaint against Pang was not so much the discretion to waive costs. His real complaint was that Pang had not properly exercised his discretion in waiving costs in connection with the property dealings of his own, his close family members and his friends to the detriment to Tam.

37. It might not be difficult to appreciate Tam's concern and anxiety arising out of Pang's conduct during his employment. But insofar as Tam's counterclaim against Pang rested on the express or implied term that Pang had no discretion in waiving costs, such counterclaim had not been made out and had to be dismissed.

38. I shall now deal with Pang's claim of damages for libel. Mr. Hingorani, on behalf of Pang argued that the letters in question suggested not only that Pang had waived costs without authority. They also suggested collusion in trying to evade payment as well as the obtaining of pecuniary advantages by Pang against Tam arising out of the waiving of the costs in question. Such statement suggested corruption, dishonesty and improper practice in the course of his profession and was calculated to disparage Pang in his profession and such defamatory statement would therefore be actionable per se.

39. Mr. Tsang suggested that the word "collusion" referred only to the collusion in writing identical letters to Tam, letters drafted by Pang and the obtaining of pecuniary advantages referred only to the obtaining of pecuniary advantages against Tam's firm arising out of the waiver of costs. It did not suggest that Pang had been benefited financially from the waiving of costs of the others.

40. It was well established that in determining whether a statement was defamatory or not, the approach was not that of an interpretation of a legal document as laymen would read into words an implication more readily and freely than a lawyer. The test was what meaning would the words convey to an ordinary person in the light of his knowledge and experience of worldly affairs. To quote from Lord Reid's judgement in Lewis v. Daily Telegraph Ltd. [1964] A.C. 234 at Page 259 :

"The leading case is Capital and Counties Bank Ltd. v. Henty & Sons. In that case Lord Selborne L.C. said:

'The test, according to the authorities, is, whether under the circumstances in which the writing was published, reasonable men, to whom the publication was made, would be likely to understand it in a libellous sense.'

Each of the four noble Lords who formed the majority stated the test in a different way, and the speeches of Lord Blackburn and Lord Watson could be read as imposing a heavier burden on the plaintiff. But I do not think that they should now be so read. In Nevill v. Find Arts & General Insurance Co. Ltd. Lord Halsbury said :

'...... What is the sense in which any ordinary reasonable man would understand the words of the communication so as to expose the plaintiff to hatred, or contempt or ridicule ...... it is not enough to say that by some person or another the words might be understood in a defamatory sense.'

These statements of the law appear to have been generally accepted and I would not attempt to restate the general principle."

41. I have considered the letters sent by Tam demanding for payments of fees, in particular the following sentences in the second letters, namely

42. The letter was badly drafted and ambiguous. It did not indicate what exactly was the alleged collusion. It did not point out the extent of the alleged collusion and whether Pang was part of the collusion. It also failed to point out who in fact obtained the pecuniary advantages against Tam's firm.

43. In my view, however, looking at the letters in their entirety, an ordinary reasonable person to whom the letters were sent, reading between the lines, would conclude that Pang was alleged to be part of the 'collusion' and that he had obtained pecuniary advantages arising out of the waiving of costs in question. Such allegation constituted an allegation of professional misconduct and even dishonesty.

44. I do not believe Tam meant to directly express such allegations against Pang personally. But the meaning that such words would convey to ordinary persons rendered the contents of the letters defamatory against Pang.

45. It was not Tam's intention to justify any allegation of dishonesty and the attempt to justify the allegation of professional misconduct arising out of the unauthorised waiving of costs must also fail by reason of the finding of the court pertaining to the counterclaim by Tam.

46. The only remaining issue was therefore one of privilege. In Toogood v. Spyring 1 C. M. & R. 181, Parke, B., in speaking of the publication of statements false in fact and injurious to the character of another, said at p. 193 :

"The law considers such publication as malicious, unless it is fairly made by a person in the discharge of some public or private duty, whether legal or moral, or in the conduct of his own affairs, in matters where his interest is concerned. In such cases the occasion prevents the inference of malice, which the law draws from unauthorized communications, and affords a qualified defence depending on the absence of actual malice. If fairly warranted by any reasonable occasion or exigency, and honestly made, such communications are protected for the common convenience and welfare of society; and the law has not restricted the right to make them within any narrow limits"

47. The letters in question were sent by Tam's firm to people who were previous clients of his firm, demanding for fees that Tam claimed to have been waived by his assistant solicitor without authority. Quite apart from the fact that the letters were communication between solicitors and clients, Tam was writing the letters in furtherance of his interest that he claimed to have been prejudiced and the recipients of the letters had a corresponding interest in the matter. Prima facie, the defence of qualified privilege was available to Tam.

48. Mr. Hingorani argued that the letters in question were not genuine letters of demand for fees. Mr. Hingorani suggested that the letters were only dressed up as letters of demand and were in fact sham. The only purpose of such letters was to defame Pang. In support of such argument, Mr. Hingorani pointed out that under Section 66 of the Legal Practitioners Ordinance Cap. 159, a solicitor cannot take any action to recover costs unless the bill had been signed by the solicitor and as the bills in question had not been signed by Tam, no action to recover costs on the bills could be maintained.

49. I do not accept Mr. Hingorani's suggestion that the letters in question were sham and that Tam's only purpose for writing the letters was to defame Pang at all.

50. Tam was a solicitor and had been in practice for 15 years in Hong Kong. It was difficult to believe that he would write letters to previous clients in order to defame a former assistant solicitor of his.

51. The 11 files in question were picked clearly because all items of costs had been waived. There were other files in which individual items of fees had been waived. Tam had not taken any action in relation to the other files. If the only intention of writing the letters was to defame Pang, there was no reason for Tam to pick the 11 files in question and not any of the others.

52. The letters were directed to Pang himself, his family members and others who happened to be Pang's good friends, some of whom were in joint property venture with Pang. If the intention was to defame Pang, why target at this group of people? What impact would such defamatory statement have on people who were Pang's close family members and good friends? If Tam's sole purpose of writing the letter was to defame Pang, would he not have chosen people who were perhaps more receptive to such defamatory statement and hence the impact would be more significant.

53. I rejected Mr. Hingoran's argument on this point and accept Tam's evidence that he was in fact unaware of the provision under section 66 of the Legal Practitioners Ordinance.

54. Mr. Hingorani further argued that in any event, the content of the letters far exceed their intended purpose if they were meant to be letters of demand.

55. It is well established that the test of relevance is not whether the statement complained of is strictly necessary for or logically relevant to the discharge of the duty or protection of the interest which is the foundation of the privilege. Where the statement has any reference to the subject-matter of the privilege, or is in any way pertinent or germane to it, it is material only as evidence of malice to take the case out of the privilege.

56. Lord Esher M.R. in Nevill v. Fine Arts Co. [1985] 2 Q.B. at p.170 :

"There may be an excess of the privilege in the sense that something has been published which is not within the privileged occasion at all, because it can have no reference to it ...... . But when there is only an excessive statement having reference to the privileged occasion, and which, therefore, comes within it, then the only way in which the excess is material is as being evidence of malice. In none of the cases on the subject, so far as I know, has it been held that the privilege is taken away when there has been such an excessive statement, unless the jury has found that there was malice ...... . A man may use excessive language and yet have no malice in his mind"

57. Lord Dunedin made similar observation in Adam v. Ward [1917] A.C. 309 :

"If the defamatory statement is quite unconnected with and irrelevant to main statement which is ex hypothesis privileged, then I think it is more accurate to say that the privilege does not extend thereto than to say, though the result may be the same, that the defamatory statement is evidence of malice. But when the defamatory statement - though not really necessary to the fulfilment of the particular duty or right which is the foundation of the privilege - is, so to speak, part and parcel of the privileged statement and relevant to it, then I think that the only way in which the statement is material is as evidence of express malice."

58. Clearly the allegation of "collusion" and "obtaining of pecuniary advantages" were part and parcel of the claim that Tam should be entitled to the payment of the waived costs.

59. In Groom v. Crocker [1937] 3 All E.R. 844. Hawke J. stated the following:

"But when I have ruled that the occasion was privileged, and no one seems to doubt that I was right about that. I certainly have not any doubt about it, and, therefore, however defamatory the letter might have been in its terms, the plaintiff will not be entitled to succeed upon the issue of libel unless he had proved - the onus being upon him - that the persons who wrote it were actuated by malice or an indirect motive. An indirect motive, of course, is only a manifestation of the thing which, amongst lawyers, stands as malice."

60. I, therefore, have to decide whether Pang had satisfied me, on a balance of probability that in writing the letters in question, Tam was actuated by malice.

61. I have considered all the evidence as well as counsel's submission carefully. In particular, I have considered Tam's evidence and the manner in which he gave evidence and I was able to form some view on his character and personality.

62. Mr. Hingorani suggested that when 6 of his former employees joined Pang in his new firm, shortly after Pang's departure, Tam wrote the letters in avenge of his anger towards Pang.

63. I reject such suggestion. Tam might well be annoyed at the conduct of Pang and it might not be too difficult to understand why. Pang only worked in his firm for less than two years as an assistant solicitor. Pang not only left with his secretary, out of a total of 14 staffs, 6 of them joined Pang in his new firm within two months after he left, including one management clerk and a senior conveyancing clerk who were responsible for bringing in a major part of his conveyancing practise. Pang claimed that he had not done anything to entice any of those staffs. Such assertion was difficult to accept on the background of the case from an objective point of view and particularly so from the point of view of Tam. Soon after the departure of Pang, Tam found out that there were eleven files involving over $150,000 of legal fees that Pang had waived. When Tam tried to recover such fees, he received identical letters from various individuals which letters could not be described as friendly letters.

64. Having said all those, it did not necessarily mean that when writing the second letters demanding for payment of fees, Tam was actuated by malice.

65. I have considered all the evidence as well as counsel's submission carefully. I am firmly of the view that at the material times Tam genuinely believed that Pang had not properly exercised any discretion in waiving the fees in issue and that he had valid reasons to try to recover such waived fees. On receiving identical letters after his letters of demand, he had valid reason to believe that the group of persons whose fees had been waived were acting in concert to the detriment of his firm.

66. The second letters were written to state the view that he had and the statements therein were made in the belief that they would enhance his chance of recovering fees that he believed to have been improperly waived.

67. If he had acted malciously, Tam would have targeted the letters at other people than Pang's family members and friends.

68. The statements in the letters might convey to the mind of a reasonable person a defamatory impression. I am not satisfied that they were made maliciously. The defence of qualified privilege prevailed. Pang's claim against Tam for libel must therefore fail.

69. Even if the court were to find in favour of Pang on the question of liability, I would only award nominal damages to Pang. In reaching such conclusion, I have taken into account the conduct of Pang whose conduct would no doubt give rise to grave suspicion that he had not been acting in the best interest of Tam in the course of his employment. The letters in question were only sent to a limited and selected number of persons who were either Pang's closed family members or good friends.

70. There was no dispute after their having received the letters. They all consulted Pang and accepted his explanation and advice. The 'defamatory statements' in question could not have any real impact on Pang's family members and his good friends.

71. One of Pang's witnesses, Wong Shun Yun, suggested that after the incident in question, he had stopped using Pang's legal service and referring friends to him for legal advise. I found his evidence on such aspect highly artificial and most unconvincing and I rejected them all. I doubt that such letters would in anyway affect their views of Pang at all.

72. On the other hand, Tam's conduct in the entire dispute, apart from the unnecessary mentioning of the 'defamatory matters' in the letters, was reasonable and his reaction understandable.

73. The conclusion reached by the court must necessarily mean that both Pang's claim and Tam's counterclaim are dismissed.

74. I also think the proper order to make on costs is that there will be no order as to costs.

75. The order on costs is an order nisi to be made absolute 14 days after the handing down of the judgment.