KAO, LEE & YIP v. JOHN RICHARD EDWARDS

IN THE COURT OF APPEAL

1993, No. 97
(Civil)

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D E C I S I O N

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Litton, J.A. (giving the decision of the court):

1. On 5 October 1993 we dismissed an appeal by the appellants Messrs Kao, Lee & Yip against a judgment of Jones J. whereby he held that a restrictive covenant in a "salaried partnership agreement" was against public policy and void. We have now before us an application for leave to appeal against that judgment to Her Majesty in Council.

2. Although the matter was determined by Jones J. on the basis of a preliminary point of law, it is common ground between the parties that the judgment he gave was a "final judgment" for the purposes of the Rules set out in the Hong Kong (Appeal to the Privy Council) Order in Council, 1909. The appellants put their argument under both limbs of Rule 2 namely, that:

(a) They have an appeal as of right because the "matter in dispute" is of the value of $500,000 or upwards, or the appeal involves, directly or indirectly, a "civil right" amounting to or of the value of $500,000 or upwards; and, in any case,

(b) the court should exercise its discretion in their favour because the question involved in the appeal is of "great general or public importance".

Rule 2(a)

3. Mr. Andrew Li, QC, counsel for the appellants, put the matter in this way: The "matter in dispute" is the enforceability of the restrictive covenant; if the appellants' contention be found correct that, in law, the restrictive covenant is enforceable at the suit of the appellants then the damages which the respondent would be liable to pay would amount to over $500,000.

4. Because the matter was determined upon a preliminary point of law, before the close of pleadings, the appellants are unable to accurately quantify at this stage the extent of the damages incurred. However, Mr. Li submits, the appellants are able to point to admissions made by the respondent on affidavit which, the appellants contend, show that he would be liable for very substantial damages if the appeal should succeed. The appellants rely, in particular, upon work done by the respondent for a client of the appellants, the Bank of America, where for one piece of litigation alone (referred to in the papers as the "Zanda Action") the billings made by the respondent's present firm amounted to $1.62 million; if one took 30% as an accurate estimate of the profit element in the billings, then the damages on that one piece of work alone would amount to nearly $500,000.

5. However, when the matter is looked at more closely, a fatal flaw is revealed in the appellants' case. They are quite unable to show that even if there were a technical breach of the restrictive convenant by the respondent, and the respondent has rendered legal services to the Bank which he should not have done, such breach has caused loss to them. Such evidence as there is before the court tends to show that the work might well not have remained with the appellant firm whatever happened. The liability for damages is highly speculative. Moreover, the 30% profit element could turn out to be an exaggeration. Further, in relation to four other former clients of the appellants, they have sworn affidavits and each, in slightly different terms, has expressed dissatisfaction with the services rendered by the appellants: in those instances, the appellants would be totally unable to show that any breach by the respondent of the restrictive convenant has caused them loss.

6. Rule 2(a) of the Privy Council Rules requires this court, at the time of the application for leave, to be satisfied that there is a matter in dispute of the value of $500,000 or upwards or that there is some civil right in question amounting to or is of the value of $500,000. In our judgment, the appellants are unable to show this.

Rule 2(b)

7. The appellants say that the question of law in issue, namely the enforceability of the restrictive convenant, is of general interest to the legal profession in Hong Kong; "salaried partnership agreements" are in widespread use and the enforceability of the restrictive covenant is of general public importance. In our judgment, this argument is unsound. All that the court is concerned with is the enforceability of a clause in a particular private agreement. There is no evidence before us that this is, in any way, a "standard clause" or that, in other "salaried partnership" agreements concerning solicitors, restrictions of the same scope and duration have been devised. There is no suggestion that the Council of the Law Society, the governing body of the solicitors' branch of the legal profession, is interested in the result of this case.

8. In our judgment, the matter involved in the appeal is a private one as between the parties and is not of great general or public importance.

Conclusion

9. For the reasons given above, we would dismiss this application and make an order nisi that the appellants pay the costs of this application.