KAO, LEE & YIP (a firm) v. DONALD KOO HOI-YAN AND OTHERS

HCA 8847/1993

 IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 8847 OF 1993

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R E P O R T

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I.       INTRODUCTION

1.  The background facts are summarised in my Judgment dated 23 December 2005.  On 23 May 2008 the Court of Final Appeal directed me to report on the truth or otherwise of certain paragraphs in Mr. Koo’s 19th and 21st Affirmations.  This is my report.

II.      BACKGROUND

2.  In the 19th Affirmation dated 3 August 2006, I was asked to look into §§24 and 25.  In those paragraphs, Mr. Koo stated the following:-

(1)     Mr. Koo had instructed his former solicitors (Tanner De Witt (TDW)) to review the covers of 1,017 files.  Those files had previously been described in exhibits “DK-8” and “DK-9” to previous Affirmations by Mr. Koo as having “No details provided”.

(2)     The review resulted in exhibits “DK-23” and “DK-24” to the 19th Affirmation.  The former identified and summarised instructions received and receipts issued on Bank of China (BOC) work done by Mr. Koo’s firm (KP).  The latter identified and summarised instructions received and receipts issued on files covering non-BOC work.

(3)     As at the time of the 19th Affirmation, “DK-23” and “DK-24” constituted the best information that Mr. Koo could give on the 1,017 files.

3.  In the 21st Affirmation dated 13 April 2007, I was asked to look into §§27-34 and 36.  In those paragraphs, Mr. Koo essentially stated the following:-

(1)     “DK-8” had been unable to provide information (“No details provided”) on some 700 BOC files opened between 1 October 1993 and 30 September 1994 (the period for which Mr. Koo was to account to Kao Lee & Yip (KLP)).

(2)     In fact, information had all along been available on those files. 

(3)     At the time KP had 2 computer systems to handle file management: a PPOS system and a Konto system. PPOS was a data management system, Konto an accounts treatment system.  In 1995 PPOS was upgraded to perform Konto functions as well as data management.

(4)     TDW had failed properly to understand KP’s file management system.  There had been:-

“a lack of communication between my [Mr. Koo’s] former solicitors [TDW] and the former staff of KP in failing to extract proper information from the records kept by KP”.

(5)     TDW may or may not have looked into the PPOS system for information about the 700 BOC files when assisting Mr. Koo to prepare “DK-8”.

(6)     In any event, TDW’s staff had wrongly described the 700 BOC files as having “No details provided”.  If the staff had actually consulted PPOS, then they must have focused too mechanically on the “Matter” box in the relevant PPOS entry for a file.  Where the “Matter” box was empty, TDW’s staff appears to have simply listed the file in “DK-8” as having “No details provided”.

(7)     In so doing, the staff ignored the fact that, although the “Matter” box in the PPOS system may have been blank, other boxes (such as “File Type”) had relevant information.  Indeed, in respect of some of the PPOS entries for the 700 files, there was a wealth of information about the status of a file.  From the “File Type” boxes and from any available status reports, it would have been possible to deduce the nature of a file even if the “Matter” box had been left blank.

(8)     Nonetheless, it remains the case that some 68 of 2,000 files opened during the period continued to be missing. This was despite safeguards implemented by KP for the maintenance and storage of files.

4.  As a result of a recount of the files listed in “DK-8” and “DK-9,” it is now known that the previous figure of 1,017 was erroneous.  Only 1,012 files are in fact described as having “No details provided” in “DK-8” and “DK-9”.

5.  I ordered that KLY be allowed to inspect the 1,012 files. In fact, KLY was only able to inspect 921 files.  This was because 86 files (77 BOC files and 9 non-BOC files) had been disposed of, while 5 files could not be located at all.

6.  According to Paul Hastings Janofsky & Walker (PH) (the agent appointed to handle KP’s work when KP ceased practising on 5 August 2006) the 86 files appear to have been wrongly destroyed by PH. 

7.  The Law Society’s guidelines permit a firm to destroy non-conveyancing files after 7 years.  However, the 86 files deal with conveyancing matters.  They should have been retained for at least 15 years.  PH believes that the 86 files may have become wrongly mixed up with old non-conveyancing files and have been inadvertently destroyed along with the latter.  PH has since put in place new procedures to ensure that such mix-up does not recur.

III.     DISCUSSION

8.  Mr. Koo made himself available for cross-examination on the relevant paragraphs. 

9.  In response to questions from Mr. Lawrence Li (appearing for KLY), Mr. Koo said that, when he had originally been shown “DK-8”, he was concerned by the many files said to have “No details provided”.  He consequently ran a spot check on 1 or 2 such files in PPOS.  He found that the “Matter” boxes in the PPOS records checked were left blank.  He therefore accepted “DK-8” as accurate.

10.  Mr. Koo admitted that, in the course of his spot check, he would have noticed that other information (for instance, “File Type” and status reports) would have been available on files described in “DK-8” as having “No details provided”. 

11.  But, possibly because he was under pressure, Mr. Koo did not realise at the time of his spot check that information about “File Type” (for example, that a file related to a “Mortgage”) or about a file’s status (for example, that a legal charge had been executed on a certain date) provided the missing details about a file’s nature.

12.  Thus, it did not occur to Mr. Koo that information in other PPOS boxes could be used to supplement the information in “DK-8” until much later.  It was as a result of that realisation that “DK-23” was compiled.

13.  I accept Mr. Koo’s oral evidence which I have just summarised.

14.  As a result, in my view, the relevant paragraphs of his 19th and 21st Affirmations ought to be qualified insofar as those refer to a “mis-communication” between TDW and KP staff. On the basis of Mr. Koo’s oral evidence, it must follow that Mr. Koo himself contributed to the “mis-communication” between TDW and KP.

15.  A reasonably competent solicitor would have realised that, even if the “Matter” box in a PPOS record were empty, other PPOS boxes contained details on the 700 files.  That should have been obvious upon looking at even 1 or 2 PPOS records.

16.  For whatever reason, Mr. Koo did not realise this during his spot check.  He instead instructed TDW to lodge “DK-8” with the Court.  In so doing, Mr. Koo would have reinforced any misapprehension that TDW may have been under in relation to files ostensibly having no details.  Mr. Koo had the opportunity to correct any mistake that TDW were labouring under.  But he did not do so, because he failed to realise the significance of the information contained in boxes other than the “Matter” box in PPOS records.  Mr. Koo says (and I accept) that he failed to realise the significance of the PPOS information because he concentrated too much on the accuracy of the amounts billed to BOC (for which he had to account).

17.  Mr. Li points out that, in some 50 cases, even though the “Matter” box of a PPOS record was empty, someone had managed to provide a description of the file in “DK-8” by referring to the “File Type” box in the PPOS record.  Mr. Li observes that Mr. Koo’s explanation does not account for this.  In some cases, someone realised the significance of the totality of information contained in PPOS boxes.  Mr. Li invites me on this basis to find that Mr. Koo’s explanation is not credible.

18.  It may be that some of TDW’s staff were more industrious than others when assisting in the compilation of “DK-8”.  The more diligent staff may have considered the totality of information in a PPOS record, not just the “Matter” box.  One cannot know this for sure.  But this strikes me as the most likely reason for the 50+ discrepancies highlighted by Mr. Li.  If so, I do not think that the discrepancies mean that I should reject what Mr. Koo has said in the witness box.

19.  I accept then that Mr. Koo’s Affirmations (as now supplemented by his oral evidence) may not explain every detail or anomaly in “DK-8”.  But, to my mind, that does not detract from its essential veracity.

20.  The discrepancies which Mr. Li has noted do mean, however, that the 4th sentence of §32 of Mr. Koo’s 21st Affirmation needs to be qualified.  The sentence reads:-

“Therefore, whenever the ‘Matter’ row was left blank in the PPOS template, the file was described as ‘No details provided’”.

It is now clear that “in the majority of cases” should be substituted for “whenever” in the sentence.

21.  In relation to the 68 missing files (some of which were later found), Mr. Li invites me to infer that Mr. Koo had a “casual attitude” to the storing of files.

22.  In §36 of his 21st Affirmation, Mr. Koo deposes to having “caused a stringent system to be installed with respect to the closing and storage of files”.  Mr. Li submits that could not have been the case because files went missing.  This (Mr. Li says) was despite Mr. Koo having an obligation to keep client-related documents safe.

23.  I am unable to deduce from the mere fact that 68 files went missing that a “stringent system” was not in place. 

24.  As Mr. Godfrey Lam SC (appearing for Mr. Koo) has countered, “stringent” does not mean “perfect”.  Even with the best will or system in the world, files can still go missing.  This is especially where (as in the case of KP) offices repeatedly moved from one place to another over the course of a number of years.

25.  Consequently, on the 68 missing files, I would not qualify the evidence in the relevant paragraphs of Mr. Koo’s 19th and 21st Affirmations.

IV.     CONCLUSION

26.  I find that the relevant paragraphs in Mr. Koo’s 19th and 21st Affirmations are essentially correct.  But I find that, to give a more complete picture, Mr. Koo’s statements should be supplemented by his oral evidence summarised above.  From that oral evidence, I draw the inferences made in §§14-16 above.  Finally, Mr. Koo’s Affirmations should be corrected as stated in §§4 and 20 above.