CHINA ROYAL FOODS CO LTD v. DEACONS

HCSA42/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 42 OF 2004

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J U D G M E N T

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1.  This is an appeal against a judgment of the Small Claims Tribunal on the payment of legal fees.

2.  The 2nd defendant had a meeting with a solicitor of the plaintiff on either 25 or 27 February 2002.  The plaintiff said that the 2nd defendant sought legal advice in the meeting on the transfer of certain trademarks by a Teck Soon Hong Limited to a Perfect Lead Holdings Limited.  The 2nd defendant also gave the plaintiff’s solicitors a number of documents for her to peruse.  The solicitor said in evidence that she had been asked by the 2nd defendant to send the advice to Perfect Lead, but to send the bill to the 1st defendant.  She also said that the 2nd defendant did not give her a business card at the meeting.

3.  On 5 June 2002, the 2nd defendant telephoned the solicitor and told her to proceed with the transfer of trademarks.  The plaintiff, on 6 June 2002, sent Perfect Lead a letter for the attention of the 2nd defendant.  The letter contained some preliminary advice on the steps to be taken for the transfer as well as the rate of charge for the work.  It also sought some costs on account from the 2nd defendant.  There was no response to this letter.  The plaintiff then issued an invoice to the 1st defendant for legal fees at $3,120.  The 1st defendant did not pay and the plaintiff sued it in the Small Claims Tribunal.  In fact, the plaintiff had also sued the 2nd defendant in a later claim, No. SCTC 022960/2004 in the Small Claims Tribunal for the same sum.  This action was dropped on 11 May 2004 and the claim against the 2nd defendant was added to the claim against the 1st defendant as an alternative.

4.  On 26 March 2004, the 1st defendant filed a defence saying that it had not engaged the plaintiff’s service or authorised any company or person to do so.  On 10 June 2004, the 2nd defendant also filed a Defence.  He said he was representing Perfect Lead to seek some advice from a good friend, one Mr Guan who was then working in the plaintiff.  He was then referred to the lady solicitor through another staff of the plaintiff, one Mr Gao.  He gave the lady a name card bearing the name, address and telephone and fax numbers of the 1st defendant because, according to him, he did not have a name card bearing the name of Perfect Lead with him.

5.  The learned adjudicator of the Small Claims Tribunal at the end of the trial gave judgment against the 1st defendant.  She said in paragraphs 29 to 32 as follows:

“	29.	According to the defendant’s first witness, the 2nd defendant had been a director of the 1st defendant since the 1st defendant’s incorporation although the 1st defendant allegedly knew nothing of the 2nd defendant’s actions.  The tribunal does not accept this evidence.
	30.	The tribunal accepts that the 2nd defendant is and had held himself out to be the 1st defendant’s director to the claimant’s first witness with apparent authority to bind the 1st defendant.
	31.	The claimant’s first witness could not be faulted for accepting the 2nd defendant’s instructions as to the billing arrangements.  The initial advice was sent to the 2nd defendant by fax, the number of which was allegedly the same for the 1st defendant and Perfect Lead.  There is no other evidence of Perfect Lead’s presence in Hong Kong.
	32.	The tribunal accepts the claimant’s evidence that there had been legal services rendered and that the 2nd defendant had instructed the claimant in his capacity as the 1st defendant’s director.  There is no evidence that the 2nd defendant had held himself out to be personally liable.”

6.  On that basis, the learned adjudicator gave judgment for the claimant against the 1st defendant in the sum of $3,182.50 and costs of the application assessed at $940.

7.  The 1st defendant, on 24 September 2004, applied for leave to appeal on the ground that there was no business connection between the claimant and the 1st defendant.  Leave to appeal was granted by Yam, J. on 14 December 2004 for clarification of the absence of any reasoning by the adjudicator for her decision on the issues disputed by the 1st defendant.

8.  The appeal is supposed to be heard this morning and I find the follow questions worthy of argument.  There are four questions in total:

(1)	Can a person hold himself out as the agent of a purported principal and bind the principal to the contract that it has purportedly made for it (see paras 8-022 to 8-023 of Bowstead and Reynolds on Agency, 17th Edition)?
(2)	Does a director of a company as a director per se have apparent authority to bind the company (see paras 8-038 to 8-041 of Bowstead and Reynolds on Agency, 17th Edition, section 157 of the Companies Ordinance, Cap. 32 and paras 8.301 and 8.402 of Palmer’s Company Law, Volume 2)?
(3)	Was there a question of breach by the 2nd defendant of his warranty of authority of being an agent of the 1st defendant (see para 8.061 of Palmer’s Company Law, Volume 2)?
(4)	The tribunal disbelieved the witness for the 1st defendant that the 1st defendant did not know the actions of the 2nd defendant.  Can that decision amount to a finding that the 1st defendant therefore knew what the 2nd defendant had purportedly done in the name of the 1st defendant (see Hopps v. Tinling (CT) & Company Limited [1929] 2 KB 1 at 21)?

9.  Unfortunately, the 1st defendant did not appear in the appeal even at half past 10 when everybody has appeared and the court properly assembled.  I therefore have not been given the benefit of any submission by the 1st defendant on the four questions that I have raised, and in the circumstances I have no choice but to dismiss the appeal and I dismiss it with costs.

(Discussion re costs)

10.  Mr Shaw has appeared this morning.  He is a solicitor of over 10 years standing.  I accept that $4,000 per hour is a reasonable rate.  This morning’s hearing took nearly an hour and he has also handled the appeal for the respondent and did all the work including the perusal of the transcript, receiving the documents and so on.  I accept these would amount to about an hour’s work and therefore, in total, I accept that $8,000 is a reasonable sum for the purpose of taxation and I therefore apply gross assessment and assess the costs payable by the 1st defendant to the claimant in the appeal at $8,000.