ERIC CHAN & CO. (A FIRM) v. WONG KWOK WANG, WARREN

CACV 92/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 92 OF 2013

(ON APPEAL FROM DCCJ NO. 1155 OF 2008)

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JUDGMENT
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Hon Cheung JA :

I. The appeal

1.1  Mr Eric Chan is a solicitor and the proprietor of the plaintiff.  The defendant was his former client.  Mr Chan claimed that service had been rendered by his firm to the defendant.  The plaintiff claimed for the sum of HK$695,496 against the defendant.  H H Judge Chow decided that the defendant was liable to the plaintiff and ordered the amount of the claim to be assessed by a District Court Master for the purpose of determining its reasonableness.

1.2  With certain concessions by the plaintiff, Master Ian Wong assessed the amount recoverable by the plaintiff at $505,488.  The plaintiff was dissatisfied with the assessment and sought leave to appeal from the Master. On 22 April 2013 the Master granted the plaintiff leave to appeal in respect of two sums, namely, $1,667 and $13,667.  He also allowed under the slip rule a sum of $2,733 to be added back to the assessed figure of $505,488, giving an amended sum of $508,221.  On the same date when the Master delivered his judgment on the leave application, he further issued another order amending the assessment to $509,888 by adding the sum of $1,667 (for which he had earlier granted leave to appeal) to the amended assessment of $508,221. 

1.3  The plaintiff, however, was still dissatisfied with the Master’s decision and sought leave to appeal from this Court in respect of other items disallowed by the Master.  This Court refused the application.  A notice of appeal was then served by the plaintiff in respect of the sums of $1,667 and $13,667.

II. Background of this appeal

2.1  Prior to Mr Chan setting up his own firm in July 2005 he had worked in two other firms namely, Messrs Au-Yeung, Cheng, Ho & Tin, Solicitors (‘AYCHT’) and Huen & Partners (‘Huen’). 

2.2  In December 2002 while Mr Chan was working in AYCHT he was instructed by the defendant who faced criminal investigation by the Independent Commission Against Corruption (‘ICAC’).  The defendant was subsequently charged with the offence of conspiracy in the High Court (‘the criminal case’).  

2.3  In December 2003 Mr Chan left AYCHT and joined Huen.  He took the criminal case with him to Huen.  On 1 March 2004 the defendant entered into a written retainer with Huen in respect of his criminal case for an agreed fee of $700,000.  This covered fees and disbursements for Huen up to the conclusion of the trial of the criminal case and retrial, if any. 

2.4  However Mr Chan’s association with Mr Huen did not work out.  He tendered his resignation on 16 August 2004 which was to take effect two months later on 16 October 2004.  He then withdrew this resignation but on 6 October 2004, he tendered his resignation again which was to take effect on 6 December 2004.  But before he worked out this notice period, he was summarily dismissed by Huen on 20 October 2004.  Mr Chan then rejoined AYCHT. 

2.5  In anticipation of this move back to AYCHT, the defendant on 15 October 2004 retained AYCHT to represent him in the criminal case in place of Huen.  

2.6  The defendant’s criminal case was to commence in the High Court on 18 October 2004.  At that time through no fault of the defendant there was a dispute between Huen and Mr Chan on the fees concerning the criminal case.  Without going into details, Huen had refused to use the money paid by the defendant on account for the discharge of counsel’s fees. In a meeting held on 16 October 2004 Huen informed the defendant and Mr Chan that it was entitled to charge the whole of the $700,000 immediately.  On 18 October 2004, Huen issued a fee note for the sum of $700,000 and returned a balance of $10,000 to the defendant.  This is a most astonishing fee note because according to the retainer, the $700,000 is a fee that Huen would charge for the criminal case up to the conclusion of the trial or any retrial.  The fee note was dated 18 October 2004 which was the first day of the trial.  

2.7  Mr Chan advised the defendant to challenge Huen’s fee note.  On 23 October 2004 the defendant retained AYCHT for the purpose of the challenge.  On 2 November 2004 the defendant commenced HCMP 2843/2004 seeking, among other things, taxation of the amount of the money due to Huen (‘the taxation proceedings’).  

2.8  In the meantime the criminal case which had begun, continued until 14 January 2005, resulting in the defendant being convicted and sentenced to a term of imprisonment.  

2.9  Mr Chan’s association with AYCHT again did not last long and in July 2005 he left AYCHT and set up the plaintiff. 

2.10  On 4 August 2005 the defendant signed a retainer with the plaintiff in respect of the taxation proceedings. 

2.11  On 2 September 2005 Mr Chan visited the defendant in prison with a solicitor from Tong and Tsoi (‘T & T’) and as a result the defendant retained T & T to represent him in the taxation proceedings and the defendant verbally instructed Mr Chan to assist T & T. 

2.12  On 25 April 2007 a Consent Order was reached between the defendant and Huen concerning the taxation proceedings.  Huen was ordered to refund $640,000 to the defendant together with costs.

2.13  On 4 July 2007 the plaintiff tendered a bill of $711,511 to the defendant in respect of its fees for the taxation proceedings.  AYCHT had assigned to the plaintiff its entitlement to the fees in respect of the taxation proceedings.

2.14  On 17 March 2008 the plaintiff commenced the present action against the defendant for the recovery of $695,496 which was the difference between $711,511 and the refund of balance of deposit taxing fees. 

III. The disputed sums

3.1  The first disputed sum is $1,667.  By a letter dated 18 October 2004 AYCHT demanded Huen to, among other things, release all the papers relating to the criminal case to AYCHT.  The papers were returned on 5, 9, and 15 November 2004 respectively.  A sum of $1,667 was charged by the plaintiff for the perusal of the covering letters by Huen for the delivery of these documents.

3.2  The second disputed sum of $13,667 is in respect of the fee charged by Mr Chan for visiting the defendant on 2 September 2005.

IV. Overview

4.1  The case puts the legal profession in a bad light.  The pursuit of mercenary gains had blinded the lawyers from, first, seeing some plain and obvious facts which disentitled them to charge for the fees and, second, the trouble they had caused to their client who had relied upon them for advice and guidance.

4.2  I have already commented on Huen, who by one stroke, had taken away from the defendant the whole of $700,000 when its service had yet to be fully rendered in respect of the criminal case.  The Consent Order which required it to refund $640,000 to the defendant is the best evidence as to the extent of Huen’s work in relation to the criminal case up to then. 

4.3  As to Mr Chan, while Judge Chow had ruled in his favour on the issue of liability, he seems to have forgotten that the fees that he earned from the defendant in the taxation proceedings only arose because of the dispute he had with Huen which saw his departure from that firm and the defendant being forced to change from one firm of solicitors to another in order to retain his service.  If not for Mr Chan’s own dispute with his former employer and his departure, Huen would continue to serve the defendant, the issue of fees would not have occurred because there would be no immediate transfer of work to AYCHT which necessitated the billing from them and the defendant would not have to incur extra expenses to challenge Huen’s fee for which Mr Chan had remunerated himself on top of the fees he had charged for the criminal case.  All this is in the context of a client who had to face a very serious criminal charge in a trial then soon to begin in the High Court and in which he was eventually convicted and imprisoned.  In such circumstances, one would expect Mr Chan to act with restraint in his dealings with the defendant when he was awarded $505,488.  But it was not to be and he pursued two leave applications (in one of which he failed totally) and lodged this appeal which involved two extremely small sums.

V.  Perusal of letters

5.1  It was due to Mr Chan’s change of firm to AYCHT that documents of the criminal case were required to be released by Huen to AYCHT.  While the taxation proceedings had by then commenced, the fees in respect of the covering letters for the transfer of documents must have been incurred under the criminal case which had shortly begun and not under the taxation proceedings.  Had he had these documents for the criminal case, he would not have required them again for the purpose of the taxation proceedings.  I just do not see how Mr Chan is entitled to the $1,667.

5.2  A hurdle which apparently stands in the way is that the Master who had granted leave to appeal on this sum had also amended the assessment to allow this sum as well.  If this is the case, there really would be nothing to appeal against in respect of this sum although Mr Chan still pursued this item with vigor.

5.3  It has to be said that the starting point is that the Court has no power to amend or to correct any defect or error in any judgment or order (Order 20, rule 8(2) of the High Court Rules).  The exception is the slip rule provided by Order 20, rule 11.  However, in my view, the slip order in the present case cannot stand.  While the Master has jurisdiction to amend the assessment on his motion, the exercise of the slip rule can only be made in respect of errors arising from an accidental slip or omission, for example, when there is an error in arithmetical calculation.  As pointed out repeatedly, the error or omission must be an error in expressing the manifest intention of the Court (see paragraph 20/11/1 Hong Kong Civil Procedure 2015).  In the present case, there is no accidental slip or omission or any error in expressing the manifest intention of the Court.  The Master disallowed $1,667 in the first place because he held it was related to the criminal case.  When he granted leave, he considered the ‘reasonable prospect of success threshold’ was satisfied in that the fees were incurred in respect of the taxation proceedings because Mr Chan informed him that the taxation proceedings had by then commenced.  From being satisfied with this threshold requirement to an actual decision on the nature of the fees is a quantum leap which in my view the Master was not permitted to make.  While the Master has jurisdiction to reopen a case before the order is sealed (even so, this should be sparingly done), the Master must at least afford the defendant a chance to address him before actually allowing this item.  There is a jurisdictional lacuna which vitiates the slip order.  Although the defendant has also not challenged the slip order, in view of the Master’s lack of jurisdiction, I would set aside the amended assessment and dismiss the appeal of this sum.

VI. Legal visit

6.1  As to the fee for the legal visit, my view is that the Master was correct to disallow it as being an unreasonable sum.  Mr Chan’s arrangement with Huen was that he was to receive a 50% commission from the fee of $700,000.  After the dispute with Huen, he was retained by the defendant to challenge Huen’s bill.  Huen in its first affirmation filed on 13 December 2004 in opposition to the defendant’s taxation proceedings, relied on its letter of 13 December 2004 to AYCHT which stated expressly that Mr Chan ‘is almost inevitably going to be a most material witness and if so it may not be appropriate for your firm to continue to represent the plaintiff in these proceedings’.

6.2  Huen repeated the challenge in its 2^nd affirmation of 14 April 2005 when Mr Chan’s conflict of interest arising from his entitlement to the 50% of the costs was again raised.

6.3  Mr Chan must have been aware by then, if not earlier, that his representation of the defendant would be subject to challenge.  In order to meet this challenge, he had asked the defendant to sign an authorization on 26 April 2005 which stated :

‘ I am Wong Kwok Wang Warren, the Plaintiff of the above case (“the taxation case”).

I have read the 2^nd Affirmation of Huen Yuen Fun, the Affidavit of Sun Po and the Affirmation of Wong Fu Kam all filed on 14^th April 2005.

Despite Mr. Chan Hing Wing would be entitled to 50% of commission on the costs of the Defendant in respect of the ICAC case No. HCCC 321/2003, in which I was the 1^st defendant, I confirm that I have instructed and authorized him to handle the taxation case for me all the same.

I also confirm that Mr. Chan Hing Wing has advised me that I have the right to seek independent legal advice in this matter.’

6.4  By the time Mr Chan asked the defendant to sign the retainer with the plaintiff on 4 August 2005, he must have been of the view that he could properly represent the defendant.  Yet, less than a month later, he visited the defendant in prison and asked him to instruct yet another firm of lawyers to represent him.  Mr Chan might well wish to play safe with the question of representation and he said it was T & T who volunteered to him to represent the defendant in his place, but I do not see why his client, the defendant, should pay for this visit when the question of representation ought to have been properly thought out when he asked the defendant to sign the retainer with the plaintiff.  Mr Chan had certainly not told the defendant that he would charge for this visit.  The Master was correct to disallow this sum.

6.5  Although Mr Chan has invited this Court to clarify how the ‘reasonableness’ of the fees in a non taxation challenge discussed in the Turner & Co. v O. Palomo S.A. [2000] 1 WLR 37 line of cases is to be considered, I would refrain from dealing with this because of the lack of assistance from the parties.  In any event, the present case does not call for a determination of this issue.  Mr Chan himself recognized that this issue is not determinative of the sum of $13,667.

VII. Conclusion

7.  Accordingly I would dismiss the appeal on both sums.

VIII.  Costs

8.  Although the Court had indicated that a costs order nisi would be made, Mr Chan in fact stood up and submitted that in the event his appeal is dismissed, the Court should consider not allowing the whole of the costs of the defendant’s written submission which ran to over 40 pages.  As Mr Chan had chosen to make submissions on costs, it is no longer necessary to make any order nisi. There is no reason to disallow any part of the defendant’s costs relating to his written submission.  I would order the plaintiff to pay the defendant’s costs of the appeal to be taxed if not agreed.

Hon Yuen JA :

9.  I Agree.

Hon Poon J :

10.  I Agree.

Hon Cheung JA :

11.  Accordingly the appeal is dismissed with costs to the defendant.