Ian Richard Carver Cullen, t/a Ian Cullen & Associates v. Kaisilk Development Ltd

HCA 584/2017

[2019] HKCFI 2206

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 584 OF 2017

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BETWEEN

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J U D G M E N T

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Introduction

1.The plaintiff (“Mr Cullen”) operates a chartered surveyors practice, and provided professional services to the defendant (“Kaisilk”) in respect of seeking appropriate compensation for the resumption by the Government of property owned by Kaisilk. The services were provided under three alleged contracts over a period of some 7½ years, involving hundreds of hours of professional time, and were plainly of real value to Kaisilk. But Kaisilk has not paid one cent for those services. It is, therefore, unsurprising that this claim for payment has been brought.

2.The relevant professional services were provided over the period from May 2000 until around October 2007. But these proceedings were not commenced until by writ dated 13 March 2017. It is, therefore, perhaps equally unsurprising that questions of limitation have been raised.

3.It is in that context that Mr Wilson Leung, Counsel for Kaisilk, began his oral opening submissions by reminding me that the Court is not concerned with morals, and it suffices for his client if its legal case is correct. He submits that it is. Mr Sebastian Hughes, Counsel for Mr Cullen, says otherwise.

4.In order to understand the various legal arguments, it is necessary to identify the factual context to which the legal principles are to be applied. Essentially, this is because there is no significant dispute as to the applicable principles, and the real battleground is to how those principles apply to the particular factual circumstances.

The Facts

5.As might be hoped for in the context of the provision of professional services, there is a reasonably comprehensive document trail. Many of the documents speak for themselves, and there can be little dispute as to what they say. Therefore, much of the well-documented factual history cannot seriously be in dispute. However, some of the documents, in particular the main documents said to identify the contractual rights and obligations of the parties, may require some proper interpretation. Further, a question has been raised about the genuineness or accuracy of a few documents.

6.In setting out and deciding the factual context, I have also had the benefit of the written witness statements and the live oral evidence at trial of Mr Cullen and one of his executive secretary staff members, Ms Kwong Yuk Mui Zennie, and of Mr Tsang Yuk Kiu, a director and shareholder of Kaisilk.

7.Insofar as there are factual disputes, I will resolve them in the usual way by taking into account to some extent the demeanour of the witnesses. I tend to agree with Mr Leung’s submission that the cross-examination evidence was of limited relevance against the matters which can be, or are to be, objectively derived from the documents. Questions of breach and repudiation are judged objectively, not by reference to motive or good faith. The proper interpretation of contracts is another objective exercise. But there were some aspects of the evidence where questions of credibility might have greater impact. I found Mr Cullen to be a more straightforward, honest and helpful witness than Mr Tsang.  For example, Mr Tsang’s witness statement was written in English (reflected also in his occasional answering questions put in English before they had been interpreted), all his conversations with Mr Cullen over many years were in English, and he received and drafted and sent numerous items of correspondence, and assessed various documents, all of which are in English. His attempts in oral evidence to claim difficulty in understanding English-language phone calls and correspondence did not impress. But, in any event and much more importantly, it is necessary to consider what seem to me to be the inherent likelihoods and probabilities identified by the evidence as a whole.

8.Though the contractual relationship between the parties began in 2000, it is necessary to have regard to some prior events.

9.Kaisilk is and was the subsidiary of a larger group of companies involved in property holding and property development. The group also had a construction arm. Over a period of time, Kaisilk built up ownership of various properties at 10-16 Wanchai Road, Wanchai (“Development Site”) and the third floor and roof of 18 Wanchai Road, Wanchai (“Tenement”). It was the intention of Kaisilk to redevelop those properties (together “Properties”), using the group’s construction arm.

10.However, the Properties were in the vicinity of the old Wan Chai Market, and were earmarked for urban renewal by the Land Development Corporation. In consequence, in November 1996, the Lands Department (“LD”) made an offer to acquire the Properties from Kaisilk for $106.567 million. That offer was increased in August 1997 to $128.152 million. In response, Kaisilk offered to sell in January 1998 at the price of $160 million, which price was increased in February 1998 to $176 million. However, as is well known, property prices in Hong Kong generally fell around that period of time. In consequence, on 4 May 1998 the LD made a third and final offer to purchase the Properties at $97.409 million. This was based on a valuation date of June 1997, and in light of the falling property market was apparently substantially higher than the market value for the Properties in May 1998.

11.The third and final offer was expressed to be open for acceptance within 14 days, and so would lapse on 18 May 2018, if not accepted by that date. But it was only in September 1998 that Kaisilk sought to accept the offer, when it was rebuffed.

12.On 6 October 1999, the Secretary for Planning, Environment and Lands made a recommendation to the Chief Executive-in-Council for resumption of the Properties. The recommendation was accepted, and resumption of the Properties was announced by Government Gazette dated 10 December 1999. On the same day, Kaisilk was invited by letters from the LD to apply for compensation.

13.Dissatisfied with the resumption, Kaisilk brought judicial review proceedings in HCAL148/1999 to challenge the decision recommending resumption. The challenge was rejected by Cheung J in his judgment dated 10 March 2000. Not only was the legal basis of the challenge rejected, the judgment pointed out that, against the undisputed fact that the third offer was substantially higher than the then market value, the challenge pursued by Kaisilk was in any event “an exercise in futility… The applicant had decided not to accept the third offer and it has to face the consequence of a falling market”. Looking at the representation of the various parties to those proceedings, whose costs were all borne by Kaisilk, it seems to me that the financial pain suffered was likely to have been ‘not insubstantial’.

14.Shortly before that decision, Mr Cullen came into the picture, apparently on the introduction of a solicitor. The original instructions from Kaisilk, through Mr Tsang, were to provide a Surveyor’s Report dealing with the relevant planning and development issues for use in the legal challenge. The report produced by Mr Cullen, together with a Registered Professional Planner, was dated 21 February 2000. After the unsuccessful court challenge, discussions took place between Mr Tsang and Mr Cullen about potential instructions for Mr Cullen to formulate and negotiate claims for compensation in consequence of the resumption of the Properties.

15.Though there is disagreement about the proper construction or interpretation of it, there is no dispute that a contract was made between Mr Cullen and Kaisilk, on the terms of a letter dated 5 May 2000 sent by Mr Cullen and countersigned as agreed by Mr Tsang for Kaisilk on 8 May 2000 (“1^st Agreement”). The 1^st Agreement set out, and so Mr Cullen and Kaisilk agreed, the scope and terms of service for Mr Cullen’s acting for Kaisilk to obtain full open market value for the resumed Properties. The scope and terms of service were broadly Mr Cullen’s standard terms for provision of consultancy services in a land resumption case.

16.In the 1^st Agreement, the ‘scope of services’ was set out as follows:

“1.1 Undertake land title searches, and property inspection and photography, and assemble and analyse market sales evidence to assess the ‘open market value’ of your Properties at the date of resumption. Such works may be set down in a draft report initially for your review, and when in order, for submission to Lands Department.

1.2 Filing formal notifications of claims, and liaising with you upon the detailed claims for compensation. This may involve particulars on the former tenancy data, and liaison with any tenants upon potential vacation, to support the optimum case/claim for you.

1.3 Following up and negotiating claims with Lands Department LDC Section over a number of months, and if required, lodge follow-up valuations and claims with Lands Department all their independent consultant surveyors.

1.4 Obtain agreement on compensation satisfactory to you, and review ‘Agreement as to Compensation and Indemnity’ document, plus liaising with Government until your receipt of compensation.

1.5 In the event no satisfactory agreement can be reached on the value of your Properties, we can then lodge an application for assessment of compensation in the Lands Tribunal, and prepare a Rule 20 Proof of Evidence upon the appropriate level of compensation due to you.

1.6     Attend the Lands Tribunal, as and when required, to give evidence relative to 1.5 above, to assist this land court in its determination on the amount of compensation for your former interest.”

17.It can be seen that the scope of services specifically envisaged two broad potential stages. The first related to negotiating to a satisfactory conclusion on the claim (paragraphs 1.1 to 1.4 inclusive), and the second related to pursuit of compensation in the Lands Tribunal (paragraphs 1.5 and 1.6). The wording identifies, as is of course appropriate, that the services as might be given in attending the Lands Tribunal, to give evidence on the basis of the Rule 20 document, would be different in nature from negotiating services, as the purpose of giving such evidence would be to assist the court as an expert.

18.Paragraph 2 of the 1^st Agreement related to ‘timeframe’ and provided that in addition to immediate assistance, there would or could be:

“ongoing services on issues 1.1 to 1.5 [probably a typo for 1.6] until satisfactory conclusion, and works will be provided on an open-ended timeframe as from your instructions until your receipt of compensation”.

19.Paragraph 4 of the 1^st Agreement related to ‘scale of charges’ and ‘fee payment’ and was in the following terms:

“Scale Surveying Fees and their Reimbursement

4.1 For all works relative to the preparation and lodging of claims for compensation, we are pleased to adopt the usual HKIS Scale 10 fees. A copy of this HKIS Scale 10 is enclosed for your reference.

4.2 Such surveyors fees can be claimed for reimbursement as a separate head of claim for compensation under S. 10(2)(e)(ii) of CAP 124. This normally means that your company shall have all surveyors fees reimbursed to you, or paid directly by government to this office after case settlement.

4.3 However if for any reason our works do not continue until completion of all compensation payments, including lodging a claim under S 10(2)(e)(ii) for surveyors fees, then our fee shall be payable by your company, and shall be based on the time inputs actually expended on works completed, and charged at the then prevailing HKIS timescale fee rate for the surveyors involved.

Lands Tribunal Hearing Fees

4.4  in the unlikely event that a settlement can not be reached with the acquiring authority, and the case is submitted to the Lands Tribunal, then additional charges for preparation of the Rule 20 document and Court attendance will be on the then prevailing HKIS hourly time-charge rate.

Fee Payment

4.5  Such fees are due for payment within 14 days of works completion and issue of our debit note.”

20.I do not accept the suggestion made by Mr Tsang in evidence that he did not understand that the process might be conducted by negotiation or a formal application leading to a hearing in the Lands Tribunal, or a combination of both. It seems to me that the terms of the 1^st Agreement make it perfectly plain that the intention was to seek to negotiate a result, but that it might be necessary to pursue Lands Tribunal proceedings, and that that would result in a different basis of charging (reflecting the difference in roles that would be taken by Mr Cullen). Mr Tsang understood those terms, and I do not think he would have agreed the terms of the contract which he did not properly understand. His attempt now to suggest a lack of clear understanding weakens his credibility.

21.Attached to the 1^st Agreement was an extract from the relevant HKIS Scale. Scale 10 provides for compensation claims fees on a sliding percentage scale dependent on the total amount of compensation. The notes to Scale 10 identify that the scale fees cover all work undertaken by the professional surveyor when preparing and submitting a claim for compensation and negotiating its settlement, including receiving instructions, inspections, advising the client as to the basis and amount of compensation, obtaining and collecting information necessary to formulate the claim and negotiating a settlement. There is no reference to disbursements.

22.Another paragraph of Scale 10 identifies that the Scale 10 fees are payable to the professional surveyor who handles the case and exclude fees payable for Lands Tribunal appearance, which should be calculated in accordance with Scale 11. Those rates are by reference to minimum amounts per half day session or part thereof, plus an additional fee if a Proof of Evidence (i.e. Rule 20 document) is required, excluding any production, duplicating costs, etc.

23.Mr Cullen and his associates set to work, and within relatively short order had prepared a draft claim for compensation for the consideration and approval of Kaisilk. The claimed sums were $90 million and $3.3 million for the Development Site and Tenement respectively (apparently including adding a factor of +15% “so that there is scope for negotiation and uplift if the [assessed valuation] sums are not accepted”). The draft was sent to Mr Tsang at Kaisilk on 16 June 2000 by Mr Cullen’s letter, which asked him to note that the claim “is considered very aggressive” for the various reasons then set out. Indeed, in a letter dated 5 December 2001, Mr Cullen reminded Mr Tsang that “very aggressive claims were first submitted to seek to influence the final result”. I accept that Mr Tsang was well aware of the “aggressive” nature of the claims first put forward.

24.Kaisilk approved those claims for compensation by the signature of Mr Tsang. (Indeed, all subsequent claims and/or communications with the LD by Mr Cullen were similarly approved by Mr Tsang on behalf of Kaisilk.)

25.In passing, I note that as regards the Development Site there was a slight discrepancy between the claimed sum in the claim form and that referenced in the covering letter. The former suggested $90 million, whereas the latter suggested $87 million. This discrepancy was picked up by the LD. I think it became common ground during the evidence that all parties treated the claim as being to the slightly lower figure.

26.On 3 November 2000, the LD made a ‘without prejudice’ counter offer of $59.442 million and $909,000 for the Development Site and Tenement respectively. In reaching those figures, the LD had appointed a consultant surveyor, Mr James Ng. Mr Cullen sent those counter offers to Kaisilk on 6 November 2000 and recommended reviewing them and meeting with the LD and its consultants.

27.Various meetings took place, and on 27 March 2001 Mr Cullen completed and filed a revised claim with nine annexures, justifying valuations of $88.3 million and $1.36 million respectively. The revised claim also made application for a provisional payment.

28.On 29 April 2001, the LD offered provisional payment of $54,315,900 for the Properties, which Kaisilk accepted.  In fact, as regards the Development Site alone, two provisional payments were made, being $53,497,800 on 5 July 2001 and $3,299,400 on 16 July 2003.

29.On 20 September 2001, the LD wrote to reject the revised claims, expressing its view that the offer of $909,000 for the Tenement was fair and reasonable compensation, but offering the increased sum of $63,108,000 for the Development Site. I accept that this increase was the result of, and directly referable to, Mr Cullen’s efforts on Kaisilk’s behalf. First, that makes chronological sense. Secondly, the evidence identifies the way in which Mr Cullen had sought to persuade Mr Ng that a higher figure than had previously been offered was appropriate. Thirdly, there was no other reason for the LD in effect ‘to bid against itself’.

30.Consideration of the higher offer took place in meetings and correspondence between Mr Cullen and Mr Tsang/Kaisilk. During the consideration, Kaisilk sent to Mr Cullen an Advice dated 3 December 2001 given by David Holgate QC, which canvassed the answer to three questions posed to him, and the preliminary matter of his view as to the basis for assessing compensation under the Lands Resumption Ordnance. By his letter of 5 December 2001, Mr Cullen responded to the queries based upon the valuation issues and compensation claims, though obviously not from the legal point of view.

31.In the interim, by letter dated 4 December 2001, Mr Cullen wrote to the LD explaining why the increased offer was still not thought to be acceptable. However, that in practice led to a stalemate or breakdown in negotiations. Therefore, on 30 January 2002, Mr Cullen wrote to Kaisilk explaining his view that, in the circumstances that no further negotiations on compensation could at that time be made, there were two options. Option (a) was to accept such offers as had by then been achieved and were available. The alternative option (b) was to apply to the Lands Tribunal for a hearing for the determination of compensation, for either one or both of the Properties. The letter pointed out that if Kaisilk were to choose option (b) professional fees would be required for the preparation of the Rule 20 document and hourly charges for pre-hearing meetings and attendance at the Lands Tribunal. Neither option was immediately chosen.

32.A letter dated 19 March 2002 from Mr Cullen to Kaisilk references a telephone discussion earlier that day, and Mr Cullen’s understanding that Kaisilk was “currently holding the issue of compensation pending until your legal actions against LDC are finally resolved, and that this is now proceeding to the Court of Appeal”.

33.The particular proceedings referenced had been commenced by Kaisilk against the Urban Renewal Authority in HCA 10017/2000. In that action, Kaisilk claimed that the LDC had failed to negotiate, or to continue to negotiate, on terms which were fair and reasonable, and should have acquired the Properties on the same terms as in the third offer. The claim was for damages amounting to the difference between that offer and the sum realised on resumption. The defendant applied to strike out the claim as disclosing no reasonable cause of action, or being frivolous and vexatious, or an abuse of the process of the Court. By judgment dated 12 March 2002, Deputy High Court Judge Woolley struck out the statement of claim and dismissed the action. At the hearing, Kaisilk was represented by Mr Holgate QC and a senior Hong Kong junior, and the Authority was represented by Mr Benjamin Yu SC and a senior Hong Kong junior. As well as bearing its own costs, Kaisilk was ordered to pay the costs of the Authority, to be taxed with a certificate for two counsel. Again, looking at that representation, the financial pain to Kaisilk was likely to have been ‘not insubstantial’.

34.By letter dated 4 July 2002, Mr Cullen took the initiative to pursue his earlier letters of 30 January and 19 March 2002, seeking “early advice upon case status and when [he] might move [the resumption claim] forward to an early conclusion”. He expressed looking forward to a “kind early reply”, and the next day Kaisilk wrote to inform Mr Cullen that the case had been appealed to the appeal court and would be heard on 18 March 2003. Though not expressly stated, this was clearly an instruction to continue the matter on hold, at least until the appeal hearing fixed for some nine months later.

35.In late 2002 and early 2003, the LD chased for a response to its offer, and by letter dated 16 January 2003 Mr Cullen informed the LD of his understanding that Kaisilk was pursuing issues relevant to the case through the courts and that hearing had been set down for early March, after which he would take up compensation matters.

36.The appeal judgment was given on 9 April 2003, and the Court of Appeal unanimously upheld the decision of the Deputy Judge, saying that Kaisilk’s claim was “unsustainable”, “doomed to failure” and an abuse of process, and that assessing various matters “would be a pointless exercise”. Where Kaisilk had to pay its own costs and pay the costs of the respondent, and where the representation was as before the Deputy Judge (except Mr Yu SC’s junior had by then himself taken Silk), once again the level of financial pain is likely to have been ‘not insubstantial’.

37.It may be helpful to interject into the chronology at this point that it is this run of unsuccessful court appearances that Mr Cullen says led to Mr Tsang telling him in no uncertain terms that Kaisilk did not want the claim for resumption compensation to go to a Lands Tribunal hearing, and that Mr Cullen should therefore negotiate the compensation. Mr Cullen says whilst Mr Tsang did not indicate anything specific at the time of the 1^st Agreement (which contemplated at least the possibility of Lands Tribunal proceedings), Mr Tsang later made clear that he did not want to take the case to the Lands Tribunal so that Mr Cullen would have to negotiate this out. These were his instructions from an early stage, and were emphasised in 2002 and 2003, until a sudden change of stance in around late 2006.

38.I accept that, as against that series of recent unsuccessful and no doubt expensive court losses, Mr Tsang did tell Mr Cullen that he did not want to go to the Lands Tribunal, in part for reasons that he always lost in court and, to paraphrase, had become ‘litigation shy’. In his oral evidence, Mr Tsang accepted in terms that he had told Mr Cullen of the lost litigation and that he did not want to go into another trial, albeit that he suggested that that referred only to not seeking to take the failed appeal on to the Court of Final Appeal. I accept Mr Cullen’s version.

39.Indeed, there is plenty of evidence which seems to me to demonstrate the truth of what Mr Cullen says. There is, for example, a later letter dated 10 March 2006 in which Mr Cullen referred to Kaisilk’s indication given that day that “you certainly do not wish to proceed into the Tribunal”. Perhaps more telling is Kaisilk’s letter of 23 March 2006 in which Kaisilk itself stated that “From the very beginning, we had stated to you very clear that we would not consider to proceed any legal action in respect of the captioned matter”. Of course, this was part of the context within which the 2^nd Agreement (as defined below) was later made.

40.On 15 July 2003, Mr Cullen again wrote to Kaisilk seeking instructions to move the compensation claim ahead. Then, following discussions on 9 September 2003, Mr Cullen wrote to Kaisilk on 17 September 2003 (“the September 2003 Letter”). It is important to note the content of this letter, as Kaisilk asserts that it is one of two documents which together comprised a further agreement between the parties. The other is a letter dated 12 February 2004 (“the February 2004 Letter”). Whilst there is no dispute that an agreement was concluded in February 2004 (“2^nd Agreement”), there is a dispute as to which document or documents constitute that agreement, and therefore as to its terms.

41.The first topic covered in the September 2003 Letter was as to “Proposed Commencement of Compensation Negotiations”. Mr Cullen referred to his understanding that Kaisilk was appealing the court judgment, but expressed his view that there was no disadvantage for continuing without prejudice negotiations, and he strongly recommended again taking up dialogue with the LD. Mr Cullen asked Kaisilk to confirm with its legal advisers that he might re-open negotiations at an early date. Clearly, Mr Cullen was again taking the initiative to move matters forward against the delay of his client.

42.The September 2003 Letter also dealt with the question of fees, where Mr Cullen had not received any payment for the work performed by him over the few years since first instructed. As Mr Cullen indicated in oral evidence, the process was very time-consuming, involving a lot of liaison, and for both before and after that date the time records bear this out. In the context of this discussion, Mr Tsang said in his oral evidence that it was beyond his control as to when Mr Cullen might be paid for his three years’ work. According to the 1^st Agreement, he said, payment was not due until he got the compensation, and it was for the government to pay Mr Cullen. So Mr Tsang claimed that it was nothing to do with him that no money had been paid over that three years.

43.What was put forward by Mr Cullen was a “Proposed Contingency Bonus Fee for Increased Compensation”. Paragraph 2.1 referred to the fact that under the original terms of service (i.e. the 1^st Agreement), Mr Cullen was to claim scale surveyor’s fees from the LD, hence no payment would be made from Kaisilk. Paragraph 2.2 stated:

“2.2 However given the very significant time and resources involved in this case, coupled with its long duration, and our intention to obtain the highest and best compensation sum for Kaisilk, we should like to propose a contingency bonus fee payable to IC&A in the event that:

(a)  we are able to increase compensation payable to you as a result of our actions, and

(b)  that the issue is not referred to the Lands Tribunal, therefore not incurring you with further legal or court attendance fees, nor with us having any conflict in giving expert evidence in the Tribunal.”

44.Paragraph 2.3 provided that such a contingency fee would be on a sliding scale, which was then set out. Paragraphs 2.4 stated that such fee would be payable within seven days of Kaisilk’s receipt of the final principle compensation sum, and would be exclusive of interest payments made separately at a later date. Paragraph 2.5 stated that:

“2.5 Such bonus fee shall be exclusive of the reimbursement of Scale 10 surveyor’s fees, so this office will still be able to lodge a claim for fees payable by government at completion of this case.”

45.The letter concluded trusting that the proposed scope and terms of service would be considered reasonable in the circumstances, where there had already been three years’ work on the case, and very extensive submissions had been made and numerous negotiations held to press the LD and its advisers for increases in compensation. The letter asked for confirmation of the arrangements and fee scale by countersigning the letter. But that did not happen.

46.When asked about the September 2003 Letter in cross-examination, Mr Cullen explained that he had no difficulty in becoming an expert witness, as his valuations and claims are all based on facts and honest opinion. But as an advocate he would be able to put in a higher claim which he might not feel able to justify in a Rule 20 document. Hence, he was pointing out that he would be “unshackled” in trying to get higher compensation, by being more aggressive in claims, and that if he acted just as a negotiator he might be able to maintain a claim higher than he would as an expert.

47.The next letter is dated 6 February 2004, from Mr Cullen to Kaisilk, and referring to a meeting that afternoon regarding fees for the comprehensive chartered surveying consultancy service. The letter put forward, “as requested, a revised and reduced contingency fee scale” under which he would be paid by Kaisilk for services related to preparation, lodging and negotiations of claims (and it might be noted there is no reference to potential work at or towards a hearing). The revised table showing the sliding scale was then set out. The letter was not countersigned by Kaisilk.

48.A further similar letter was sent dated 12 February 2004, i.e. the February 2004 Letter. This letter was countersigned to show agreement to its terms by Mr Tsang for Kaisilk on 13 February 2004. Mr Cullen’s case is that the February 2004 Letter comprised and formed the 2^nd Agreement. As already indicated, Kaisilk’s case is that this letter has to be read together with the September 2003 Letter, which together form the 2^nd Agreement.

49.The terms of the February 2004 Letter are the same as the 6 February 2004 letter, including as to the detail in the proposed sliding scale for contingency fee, except that an additional penultimate paragraph has been added. It seems to be more or less common ground that the paragraph was added to make express something which was in reality perhaps unnecessary to express, but which both parties either wished or were content to include. I will consider later whether its inclusion had some effect to the overall commercial balance being agreed. The paragraph read:

“Obviously it is understood that Messrs Kaisilk Development reserves the right whether or not to accept the final compensation offered by LDC or have the matter referred to the Lands Tribunal for determination.”

50.As with the earlier version dated 6 February 2004, the final paragraph of the February 2004 Letter read:

“We trust that our proposed scope and terms of service set out formerly to you, coupled with the above contingency fee scale are considered appropriate in the circumstances. We look forward to again taking up the issues for compensation with LDC’s surveyors upon your kindly confirming such arrangements and fee scale by countersigning this letter and the company chopped and returning this letter to our office.”

51.One question which arises is what was meant in that paragraph by the reference to “our proposed scope and terms of service set out formerly to you”. Mr Cullen says that was a reference back to the 1^st Agreement, which contains that phrase. Kaisilk says it was a reference back to the September 2003 Letter, which also contains that phrase.

52.After receipt of the countersigned version of the February 2004 Letter, Mr Cullen wrote to Kaisilk in the following terms:

“Thank you for your kind confirmation of instructions for us to undertake comprehensive surveying services under a contingency fee scale set out in our letter dated 12^th February 2004.

Given your instructions to now reactivate the issue of compensation with Lands Department (‘LD’), we have prepared and now enclose a short letter requesting LD review our last two claims for your properties, as formulated in detail in late 2001. If this letter is in order for issue out, kindly countersign and return this by fax in the usual way, and we shall then hold an early meeting with LD and/or its appointed surveyors.”

53.The draft was countersigned, and on the same day the engrossed draft was sent to the LD, in which it was informed that Kaisilk had “now instructed [Mr Cullen] to reactivate the issue of compensation”. Mr Cullen invited the LD’s appointed surveyor to hold dialogue on the claims. That dialogue began with a meeting on 19 March 2004, which was reported to Kaisilk by Mr Cullen in his letter of 23 March 2004.

54.The dialogue did not make much progress, and on 29 April 2004 Mr Cullen asked Kaisilk for approval to send a letter in the form of the draft provided. Approval was given and the approval letter was sent to the LD on 30 April 2004, which was copied to Mr Ng. The first paragraph of the letter stated:

“Reference is made to the latest meeting held with your Mr. William Chan and consultant valuation surveyor, Mr. James Ng, on 19 March, and it appears that despite numerous detailed submissions of claims, plus over two years of protracted meetings with your office, there still appears some fundamental differences between our valuation approach and that of your consultant, and hence a significant difference in our assessments of value of the resumed property interests captioned. In the circumstances, our client has instructed us that it appears the only means of settling this extremely long-running issue is to have the compensation determined in the Lands Tribunal.”

55.In his written and oral evidence, Mr Cullen explained that this proposal arose from his suggestion, because he thought it would trigger Mr Ng to revise his assessments upwards and to seek new increased offers from the LD, to save the time and uncertainty of any Lands Tribunal hearing. He made clear that the purpose of the letter was in effect a threat or bluff, and that he had not recommended to Kaisilk actually to push towards a hearing, but rather to make this move to provoke an increased offer. Mr Cullen also acknowledged that whilst a threat should not usually be made unless ultimately one is prepared to follow through with it if necessary, neither he nor Mr Tsang/Kaisilk had changed their intention at that time. They still wanted to avoid an actual hearing. It would nevertheless be necessary to look as if preparing for hearing, including by instructing lawyers and by production of a Rule 20 document, the exchange of which with the LD’s surveyor’s similar document might trigger a better offer. I accept that evidence, and that is what ultimately happened.

56.Mr Cullen and Mr Ng then began liaison to agree an Agreed Statement of Facts for use in the Lands Tribunal, but also for use in seeking to obtain the most factually favourable basis upon which both surveyors might subsequently offer an expert valuation. Mr Cullen also continued to send Mr Ng various data to seek to influence his views as to valuation. As regards agreeing a Statement of Agreed Facts, Mr Cullen denied that in that context he would be wearing his expert’s hat. He said he would be wearing no hat, other than that of an intelligent person, and agreement of facts required no negotiation or expression of opinion. This process, and other related matters, continued during 2004 and into 2005. The Agreed Statement of Facts was signed off in November 2005.

57.It is perhaps worth noting that during the process Mr Cullen kept Mr Tsang/Kaisilk fully informed as to his activities on their behalf. One example of such a letter is that written on 2 November 2004, in which Mr Cullen referred again to the “very aggressive stance” in claiming $88.3 million for the Development Site, and that taking into account various matters, “a figure above $80 million does not appear a realistic possibility” if proceeding to the Lands Tribunal. That letter offered analysis to enable Kaisilk to consider whether to accept the then existing offer of $63.108 million or to move the matter forward by starting to prepare a Rule 20 document.

58.During this period, the documents identify that a clear decision was made (on the recommendation of Mr Cullen and approved by Mr Tsang) not to include the Tenement in the Lands Tribunal application. This was because the very aggressive claim in relation to the Tenement would taint the already aggressive figure pursued for the Development Site. It also seems to me that there may have been different commercial considerations in relation to potential expenditure in the context of the much lower value figure for the Tenement.

59.The formal application to the Lands Tribunal was made on 2 February 2005, though this was simply a short giving of a notice.

60.There is a note (in Mr Cullen’s handwriting) of a meeting on 27 October 2005 attended by Mr Tsang, his secretary and assistant and Mr Cullen and Mr Chui. The case overview noted that there would only be progress if proceeding to the Lands Tribunal, and that Mr Ng’s Agreed Statement was still awaited. There is also a notation as to fees, first that under the 1^st Agreement Lands Tribunal fees would be at HKIS hourly fees, and that Rule 20 could be very expensive. Mr Cullen’s suggestion was noted that Kaisilk “pays contingency fee now … Then ICA will only charge $80K lump sum for Rule 20 document + $2,000/hr”. The note concluded that Mr Tsang would “consider if proceeding, after completion of new architect’s plans”. Again, this shows no decision actually to pursue the Lands Tribunal hearing had yet been made.

61.On the following day, 28 October 2005, Mr Chui spoke by telephone to Mr Tsang and noted the content of the call. He recorded that Mr Tsang believed they had only been doing the project in their “spare time” during the last five years, so Mr Chui explained all the hard work performed. He also re-explained the fee proposal made the previous day, and that it might benefit Kaisilk to pay the bonus now, rather than at the end, as the bonus fee would be higher later if more compensation was obtained in the Tribunal. Mr Tsang was to reconsider the proposal and reply.

62.On 8 November 2005, Mr Cullen wrote to Kaisilk enclosing the Agreed Statement of Facts signed off by himself and Mr Ng, and reporting on a “very useful ‘without prejudice’ discussion” which Mr Chui had had with Mr Ng. The summary of the discussion was that Mr Ng was keen to settle the case and not go into the Lands Tribunal, and that Mr Ng felt that once he and Mr Cullen had prepared, filed and exchanged Rule 20 valuations, Mr Ng would then be able to obtain LD approval to increase the offer for settlement, so no hearing would be necessary. In those circumstances, Mr Cullen strongly recommended (amongst other things) that he should now proceed with the Rule 20 document. He asked for confirmation that it was in order for him now to proceed with that for a proposed lump-sum charge of $80,000. He pointed out that those fees would be separate to the contingency bonus fee agreed in 2004.

63.Mr Tsang counter-proposed a lump-sum charge of $40,000, in response to which on 24 November 2005 Mr Cullen explained that a reduced fee exercise might be possible by varying the content of the report, and offered a “special client lump sum fee” of $50,000.

64.There followed further correspondence and discussion, including a telephone discussion between Mr Chui and Mr Tsang on 7 December 2005, leading to Mr Cullen’s letter of 9 December 2005. The letter was to follow up on Mr Tsang’s suggestion to set out a new short summary of works, and fees, for all works until conclusion of the case and Kaisilk’s receipt of the balance of compensation. The letter stated:

“(1)  For Negotiations with Government

The contingency fee scale as already kindly agreed and documented in our letter dated 12^th February 2004.

(2)  For Preparation of “Rule 20” Document

Lump sum fee of $50,000.

(3)  If Proceeding to The Lands Tribunal

HKIS hourly fee charge rates for court attendance, and any pre hearing liaison with legal team.

All such fees to be paid within three days of your receipt of main compensation from Government. Interest can be claimed after your receipt of main compensation, and we shall of course not charge for processing this extra sum due to you.

No other surveying fees or charges will be made for this case to your company.

This office will however lodge a normal claim for surveyors fees with Government to be paid to us, and we shall try to obtain for you at least part or all of the charges under (2) if a settlement is reached. If proceeding to the Lands Tribunal, should the award be higher than Government’s last offer, your legal team can seek ‘costs’ be paid as well, covering (2) and (3), and legal fees.”

65.It seems to me to be clear from that letter that whilst there was consideration of potential fees if a decision were later to be made to go to a Lands Tribunal hearing, no decision in fact to go to hearing had yet been made. The letter is also clearly contemplating fees being paid under each and all of the 1^st Agreement (lodging the normal claim with government), the 2^nd Agreement (the bonus agreed on 12 February 2004) and the 3^rd Agreement (about to be made referring to the lump sum of $50,000). All fees were stated to be payable only after receipt of compensation by Kaisilk.

66.The letter invited confirmation by counter-signatory, but instead Mr Tsang on behalf of Kaisilk wrote back on 15 December 2005 in the following terms:

“… we would like to confirm the followings:-

1.  an extra lump sum fee of HK$50,000.00 will be granted for a detailed ‘Rule 20’ document to be prepared by your office, which will be completed and submitted within one month thereof;

2.  the fee will be paid after our receipt of compensation from the Government; &

3.  no further extra payment to you will be occurred in respect of the captioned matter. Unless this company proceeds to the Lands Tribunal, when court attendance charge is payable at HKIS timecharge rate. However, we have been implied by your Mr. Ian Cullen that the chance for this event is minimal.”

67.Again that letter, and in particular the last numbered paragraph, identifies that no decision had been made to pursue the case to a Lands Tribunal hearing, and the intention was not to do so. Subject to the timing of its filing, the letter concluded the agreement as to payment for the Rule 20 document (“3^rd Agreement”).

68.As to the timing of the filing of the Rule 20 document, Mr Cullen wrote back the following day, 16 December 2005, pointing out that that was not realistically possible, nor was it a problem against the fact that no application had yet been made to the Lands Tribunal for setting down hearing or for the filing of the Rule 20 document. Incidentally, that letter also referred in the context of the likely order of steps in the case that following the filing and exchange of Rule 20 documents, there could be without prejudice negotiations between Mr Cullen and Mr Ng, perhaps leading to an increased offer of compensation acceptable to Kaisilk. Again, this identifies the primary driver for the Rule 20 document; the primary aim was to use it to negotiate compensation, though (as the letter stated) it remained a matter for Kaisilk’s choice if it wished to proceed into the Lands Tribunal for a full hearing.

69.Preparation of the Rule 20 document then began, together with collating the various information for that purpose. In the course of that preparation, Kaisilk expressed to Mr Cullen on 10 March 2006 its wish to “ensure” that the Rule 20 document would be completed soon and would show a figure of close to $100 million. Mr Cullen then proposed an early filing date for the Rule 20 document, and then a long time period before any Lands Tribunal hearing date to enable ample time for negotiation with the Government surveyor to improve terms of a settlement after he had seen the detailed and strong case for compensation. This course seems to have been agreed, and directions were made at the call-over hearing on 14 March 2006.

70.I have already made reference to Kaisilk’s letter dated 23 March 2006, in which it emphasised that it had, from the very beginning, made very clear that it would not consider to proceed any legal action. The letter went on to say that the then present situation contrasted with what Kaisilk had previously been told, that coming events were out of its expectation, and it put on record “that all legal costs to be arised will not be our responsibility”. The letter went on to say that “It is reiterated that we will not pay any legal cost and your [i.e. Mr Cullen’s] cost for any hearing in LT”. Whilst the letter tends to identify that up to that point the intention had been to avoid any actual Lands Tribunal hearing, the last sentence is at least difficult to reconcile with the terms of Kaisilk’s own letter comprising or evidencing the 3^rd Agreement.

71.The Rule 20 document was completed and dated 12 May 2006. Together with its annexes, it fills the better part of one lever arch file. Mr Tsang’s attempt to suggest in oral evidence that the document was somehow ‘thin’ (my word) or “nothing special” (his words) seemed to me to be disingenuous, and of course he had signed off on it. The proposed valuation figure was $103.95 million (exclusive of other compensated losses such as surveyor’s fees and interest). This figure was in line with what Mr Cullen had been asked by Kaisilk to “ensure”.

72.An invoice for the agreed lump sum of $50,000 was issued on 10 May 2006 (albeit subject to a small deduction of $2,500 which Mr Cullen deducted to reflect a contribution to some legal costs).

73.Mr Ng’s Rule 20 document was exchanged with Mr Cullen’s, and it suggested a valuation figure of $68.86 million, which figure effectively comprised the LD’s upwardly revised offer of the compensation sum for the Development Site, being an increase of around $5 million over the previous offer. It seems to me to be obvious that that increased offer was the fruit of Mr Cullen’s efforts, including in his various meetings with Mr Ng in seeking to influence the revised figure which he (and hence the LD) would put forward.

74.Mr Ng’s report was sent to Kaisilk, though it had already been told the revised offer figure. From a telephone note made by Mr Chui of a discussion which he had with someone in Mr Tsang’s office on 17 May 2006, it appears that Kaisilk was understandably pleased with the increased offer. The note also recorded Mr Tsang wanted to meet Mr Cullen regarding future strategy. Mr Chui also noted that “They become more polite now!”, which is at least consistent with the overall thrust of Mr Cullen’s evidence that Mr Tsang and Kaisilk were in general extremely difficult clients, which evidence I accept.

75.On 14 June 2006, Mr Cullen wrote to update Kaisilk on developments. He indicated that his office would prepare a rebuttal document regarding Mr Ng’s Rule 20 document without further charge to Kaisilk, provided that no reduction was made for legal service by the solicitor, and that Mr Cullen received the $120 filing costs for the Rule 20 document, which he pointed out was not his responsibility under the service agreement. Mr Cullen’s Rule 20 rebuttal report was dated 12 July 2006 and, for the detailed reasons included within it, maintained the claim to $103.95 million.

76.On 9 August 2006, the Department of Justice wrote to Kaisilk on behalf of the LD in a “final attempt to settle the claim”. The letter was marked “without prejudice save as to costs”. It offered total compensation in the sum of $68,880,000, less any payment already released, plus any amount payable under section 10(2)(e)(ii), together with statutory interest and the legal costs of the action up to that date. As expected, the offer was clearly based on Mr Ng’s valuation. The validity of that offer was subsequently extended to 30 September 2006.

77.On 24 August 2006, Kaisilk made a “without prejudice save as to costs” counteroffer of $78.5 million, plus interest and costs and other fees. In his evidence, Mr Cullen described that as a “buoyant” figure. That offer was rejected by letter of 13 September 2006, which asked Kaisilk to fix a date for hearing accordingly. Kaisilk forwarded that letter to Mr Cullen on 14 September 2006 and asked for a meeting to discuss the matter as soon as possible.

78.On 15 September 2006, Mr Cullen wrote to explain that he would not be available for a meeting on 18 September but made suggestions as to the steps he anticipated would be taken by Kaisilk on his understanding “you are proposing to now take this issue to the Lands Tribunal”. Mr Cullen explained in evidence that he understood that Mr Tsang and Kaisilk had now changed their mind and decided that it was financially beneficial to proceed with a Lands Tribunal hearing. Essentially, where a new ‘bottom line’ of $68.8 million had been drawn, and where Kaisilk was confident of getting at least some higher figure on the basis of (and with the assistance provided by) Mr Cullen’s Rule 20 reports, it was thought commercially worthwhile to pursue that higher figure. I reject Mr Tsang’s suggestion in evidence that though the letter says the proposal was from Mr Tsang, in fact it was Mr Cullen who really proposed it. The decision whether to accept the offer or press on was Kaisilk’s.

79.On 9 October 2006, Mr Tsang forwarded to Mr Cullen a written opinion received from Kaisilk’s solicitors, seeking Mr Cullen’s opinion on it. Following a meeting held between Mr Cullen and Mr Tsang on 18 October 2006, Mr Cullen provided that opinion by letter of 20 October 2006.

80.It is necessary to consider in detail another part of the same letter, as Kaisilk now asserts that it constituted Mr Cullen’s repudiatory breach of the contractual arrangements. The relevant part of the letter is under the heading “Surveying Fees” which states (emphasis in original):

“3.1 As discussed at the meeting, I am not permitted to act as an independent expert in the L.T. if I have any financial benefit in the final compensation sum awarded. This is a standard court requirement for all experts giving evidence. Therefore our Service Agreement dated 12^th February 2004 regarding a contingency bonus fee payable to us for any increase in compensation achieved for your company will now have to be terminated at the current Government offer level. Therefore, even if the Tribunal awards a higher figure above the current offer of $68.88 million, then no additional contingency bonus will be payable to us. This contract is now effectively concluded now you are to proceed into the Lands Tribunal.

3.2  Under our February 2004 contract, it appears the contingency bonus we have earned through extensive works over many years has resulted in increased compensation as follows: [calculation set out leading to bonus fee figure of $566,280]

3.3 Given that this office has undertaken a really very extensive amount of works on this project for more than five years, and to-date have been paid nothing for all of our services, I would respectfully ask that you make payment for such contingency sum now, prior to proceeding with any Tribunal related works. There can therefore be absolutely no question that any contingency fee arrangement still exists when I am working on L.T. issues or giving evidence to the court, since clearly I must be seen as an impartial expert witness.

3.4  For surveying works related to the L.T. hearing, including pre-hearing conferences with your goodself, counsel, and others, as well as ultimately attending court to give evidence, this office will follow the standard practice of keeping a detailed time log of all activities we undertake. This time will then be charged at the prevailing HKIS hourly fee rate for the surveyors involved, which rates are currently:

Senior partner/principal – Mr. Ian Cullen: $3,000/hr

Qualified surveyor – Mr. Alick Chui: $1,350/hr.

An extract from the HKIS fee booklet confirming these rates is enclosed for your reference. Also as standard, we shall issue out periodic invoices as works progress, and request these be met as per our May 2000 service agreement, a copy of which is also enclosed for your ready reference.

3.5  Providing the L.T. awards more than the current Government offer, I am sure your counsel can ask for costs, and these surveyors timecharge fees and the Rule 20 fee will form a part of your claim for L.T. related professional fees reimbursement.

3.6  I note that under our original service contract for works as set out in our letter dated 5^th May 2000, such L.T. related fees are to be paid within no more than 14 days of the relevant section of works completion and invoicing. Therefore our debit note for preparation of the Rule 20 Proof of Evidence, which debit note was issued on 10^th May 2006, is actually now 5 months overdue for payment. However I am quite agreeable to uphold seeking payment for L.T. related works at the present time, provided your office kindly now makes payment for a contingency fee as assessed in Section 3.2 above, within the next 30 days, for which our debit note is now enclosed.”

81.A debit note for $566,000 was indeed enclosed, dated 20 October 2006. The description of work for which the “agreed contingency scale rate” fee was said to be payable was:

“Comprehensive chartered surveying consultancy services related to preparation and negotiation of claims for compensation, from May 2000 to 17^th October 2006 inclusive.”

82.It is perhaps understandable against that wording that some confusion, at least, arose as to whether or not the contingency fee – though described as a “bonus” or “increase” – had been intended to replace fees otherwise payable under the 1^st Agreement.

83.Because it is Kaisilk’s case that the 20 October 2006 letter contained Mr Cullen’s repudiatory breach, it is perhaps at first blush surprising that Mr Tsang was unable to identify during his oral evidence where or by what words in the letter Mr Cullen was refusing to act as expert witness. Indeed, Mr Tsang was forced to suggest that if it was not mentioned in this letter, it would be in another letter, but he could not identify that either. It is noteworthy how vaguely or weakly the matter is put even in Mr Tsang’s own witness statement. I do not think the stronger statement made orally that he strongly believed Mr Cullen wished no longer to act as expert witness rings true.

84.Of course, Mr Cullen preferred to be paid something, and his looming change of role was an opportunity to request that. Once it was Mr Tsang’s decision to go to the Lands Tribunal, the underlying facts changed. So Mr Cullen politely requested him to close off the contingency fee arrangement, as he did not want any suggestion of inappropriate behaviour when moving to act as an expert. But I reject the idea that Mr Tsang thought at the time that Mr Cullen was actually refusing to act as expert unless the contingency fee was paid. On previous occasions Mr Cullen had pointed out he had not been paid for a significant amount of work done payment, but he continued to work.

85.Further, as the letter states, by closing off the contingency fee arrangement at that point in time, the contingency fee would be capped by reference to the uplift in compensation already achieved, which might save fees for Kaisilk if further uplift were to be achieved (as was reasonably anticipated where the bottom end of the likely bracket for compensation had been set at Mr Ng’s figure). There was also the implicit benefit to Kaisilk that its expert would not be subject to any criticism that might weaken the impact of his expert evidence. In context, that is at least part of the point made, on my reading of the words in bold.

86.Insofar as Mr Leung relies on the submission that the repudiatory breach arose in part from the fact that Mr Cullen simply had no entitlement to payment under the 2^nd Agreement at all because the preconditions for payment had not been met and/or there was want of consideration for the 2^nd Agreement (as to both of which arguments, see below), that does not affect my analysis. My finding is that, whether or not Mr Cullen had a proper legal basis to request payment under the 2^nd Agreement, he was not in fact refusing to act as an expert, and Mr Tung did not think he was in fact refusing to act as an expert.

87.Mr Tsang’s suggestion in oral evidence that the letter, or some other letter, contained Mr Cullen’s recommendation to engage another surveyor to go to the Lands Tribunals is also rejected. In fact, by way of contrast, in the letter Mr Cullen was seeking agreement as to his fees to act as the expert. Even after the alleged repudiatory breach by refusing to act as expert, Mr Cullen in fact continued to provide advice connected to his acting as an expert, and sought agreement as to the charges that would arise from acting as an expert.

88.There followed much correspondence and many telephone conversations relating to negotiation of fees. By letter dated 8 November 2006, Mr Cullen explained to Kaisilk that he could only provide an estimate of the time involved, and hence approximate fees involved, and that Mr Cullen would need to do the bulk of the work though Mr Chui might undertake some work to reduce costs. Also on 8 November 2006, Mr Chui made a file note of the conversation in which Mr Tsang asked for setting a cap (a maximum number of hours) for the hourly charge in the future process including meetings and hearing.

89.There is another note apparently made by Mr Chui as a result of a conversation he had with Mr Tsang, dated 21 November 2006. The note records (emphasis in original):

“Mr. Tsang claimed his last position is:

1.  pay the bonus now;

2.  pay R20 $50,000 after he receive $ from government;

3.  all hourly-rate in hearing fee =

→ Mr. Tsang will pay Full (100%) if the case loss.

→ He must not pay any if the case win (our charge should be paid by the govt/taxation)

He claimed it is diff. from solicitor as solicitor has not get any fee from Govt under ordinance”

90.This note is one of four handwritten notes, on their face made by Mr Chui recording the content of conversations with Mr Tsang or members of his staff, but which were made the subject of a notice challenging authenticity dated 19 May 2019. However, at the PTR, Mr Leung indicated that Kaisilk was content not to rely on the notice challenging authenticity, though he reserved the right to challenge the admissibility, veracity and weight of the documents. When Ms Kwong gave evidence, she accepted under cross examination that the confirmation of the handwritten messages which she gave in her witness statement was based simply on her recognition of the handwriting of (in this case) Mr Chui, but of course she had not actually been there at the time that he wrote them and had not seen him actually write them.

91.Mr Leung understandably did not put to Ms Kwong that the notes were not genuine, as her previous answers would have indicated that she could not have answered that question. But, nor did Mr Leung put to Mr Cullen that the notes were not genuine. This is surprising, as the notes are in effect file notes from Mr Chui so as to provide information to Mr Cullen, so he would be in a position to confirm or refute an allegation of lack of genuineness. Perhaps more importantly, some of the notes have Mr Cullen’s own handwriting on them. On the note I have just dealt with, Mr Cullen has written his response to the points which Mr Chui recorded as having been made to him by Mr Tsang.

92.In any event, not just for that reason but for the reasons I shall touch on below, I accept each of the challenged notes as having been genuinely made on the date it bears, and as containing a fair and accurate summary of the conversation recorded. The notes fit chronologically into the rest of the documentation, and even on occasions cross refer to or generate other unchallenged material. I have no hesitation in accepting the notes as authentic. Though they are produced on a hearsay basis (where Mr Chiu appears to have left Mr Cullen’s employment in perhaps 2009), they seem to me to be admissible, and Mr Leung did not challenge admissibility at trial. I also think they are true, and that the contents are a fair and accurate record of the conversations which took place. Mr Tsang’s attempt to challenge these notes did him little credit, not least when during his cross-examination the challenge seemed to expand to other documents not previously challenged, and where the basis of the challenge was vague and unconvincing. In those circumstances, there is force in Mr Hughes’ suggestion that the challenge to these notes is motivated by recognition that they are injurious to Kaisilk’s case (as indeed I think they are). In my view, the notes are to be given the appropriate weight in the overall context, identifying part of the interaction between Mr Cullen and Mr Tsang.

93.In a note made by Mr Chui dated 5 December 2006, on which Mr Cullen also subsequently made his own notations, Mr Chui recorded (in part) (emphasis in original):

“Mr. Tsang concerned if you pay all our fee and wait for govt rebate, IC&A will not knee to fight for the max. claim from govt and it also shows our fee is some unreasonable if the govt rejects to pay all our fee.

He now suggests IC&A claim the feed to the govt. in any event, we cannot do it for payment, he is willing to pay some fee above the govt payment, but not full.

For example = ICA claim 100

Govt paid 50

Mr. Tsang is willing to pay some 20-30

Alternative, he may pay as full hourly charge, subject to the cap. 30 hours. If we want to charge more, we can build the extra to the government. Of course, if we can successfully to receive all hourly-rate fee, we will rebate the fee he paid to us.

I’ve already told him it is unlikely Ian will accept either of his suggestion.”

94.In another note dated 14 December 2006 and headed “Latest News”, Mr Chui recorded discussion with Mr Tsang’s office relating to counsel’s fee and wanting to change the architect. As regards other fees, Mr Chui noted:

“I repeatedly to stand own position

we can do the cap, but stopped the work after the cap … & we can do a lump-sum hourly-fee for X and [ditto] for Y, but not more.”

95.At the top of the page is an additional note where Mr Chui recorded Mr Tsang’s suggestion that they could set the hourly cap before the hearing date and no need to set the cap for the hearing in court or later if any.

96.By a handwritten note from Mr Cullen to Mr Chui dated 3 February 2007, Mr Cullen asked him to call Fanny Tsang to pass the message to Mr Tsang of his recommendations and suggestions. One recommendation was to have a meeting to review the strengths and weaknesses of the case before proceeding. Mr Chui’s handwritten note of 5 February 2007 records Mr Tsang’s office reply as (emphasis in original):

“1.  it is not necessary for such a meeting, esp with [counsel and solicitor] at this moment as all fees cannot be agreed by all parties.

2.  Mr. Tsang still request our fee on the basis of “bonus fee” to the end (L.T.) & request you to provide evidence / court judgment / any inf’n supporting why bonus fee cannot be continued to the end as he has already checked with HKIS + HKIS replied no such arrangement.”

97.Obviously in response to that second paragraph, Mr Cullen wrote to Kaisilk the following day, 6 February 2007, pointing out the new query on why contingency fees cannot be paid for expert witness work in the Lands Tribunal. He reiterated the change of role from negotiator to expert, and provided an extract from The Ikarian Reefer. At the end of the letter, he pointed out that he had not been paid for any work completed for Kaisilk over the previous six years and that Mr Tsang had agreed in 2006 that this was unreasonable. He pointed to the two fee notes already issued and requested payment of those, out of the large element of compensation already received, including the over $9 million of additional compensation that his actions had brought, before seeking any further services from his office.

98.What the notes clearly show are continuing discussions about Mr Cullen acting as expert evidence, and negotiations as to what fees might be charged for what particular items of work. The notes identify or confirm what is apparent from the totality of the evidence as a whole, namely that Mr Tsang was extremely reluctant that Kaisilk should bear any, or any substantial, costs of obtaining the compensation (even in employing the professional service providers – including solicitors, which Kaisilk kept changing – who would likely maximise the recovery of compensation). It is correct that Mr Cullen was requesting – perhaps with some firmness, but still politely – some payment of some fees, but I do not accept he was simply refusing to do any further work until they had been paid.

99.It seems to me that it was dissatisfaction with Mr Cullen’s approach to and level of fees, and in particular Mr Cullen’s refusal to accept Mr Tsang’s ‘hardball’ approach, that caused Mr Tsang to begin to look elsewhere for another surveyor, on cheaper or preferential fees.

100.As it turns out, and as is often the case, that was probably a false economy. Though I do not need to decide the point, it seems likely that the new surveyor did not perform terribly well. In particular, very little of the new surveyor’s points made during the Lands Tribunal hearing were actually accepted by the tribunal. There seems to be some force in Mr Cullen’s criticism of the new surveyor, and from what I have seen of Mr Cullen and the evidence in this case, I think there must at least be a significant chance that Mr Cullen would have persuaded the tribunal to a higher compensation figure.

101.Those circumstances seem to make it even less attractive for the criticism that is now levelled at Mr Cullen, and they put the counterclaim into context. To be blunt, had Mr Tsang not chosen to dispense with Mr Cullen’s services and to seek a cheaper alternative, it seems at least likely that Mr Cullen might have brought these proceedings to a conclusion earlier and even for a higher sum of compensation.

102.There is a further irony in that the intended cheaper surveyor probably was not very much cheaper in the long term, though it is fair to say that none of his fees was required to be paid by Kaisilk, as they were all recovered from the government (other than, perhaps, the non-refundable deposit, as I do not know what happened to that.)

103.In response to an update as to current status prompted by Mr Cullen on 1 March 2007, Mr Chui was told by Mr Tsang’s office on 6 March 2007 that the case was “on hold”. Whilst that might have been technically correct, the reason appears to have been that Kaisilk was shopping around for alternative lawyers and surveyors. It might also be thought inconsistent to have informed Mr Cullen that the case was “on hold”, if Kaisilk had really thought that Mr Cullen was already in repudiatory breach of the contract, which repudiation was about to be accepted.

104.Mr Cullen was again kept at bay by Kaisilk (whilst it shopped around), as Mr Chui’s note of 11 May 2007 indicates. The note records that Fanny had told him that Mr Tsang was looking for counsel, that his solicitor was helping to negotiate the fee with counsel, and that he did not want a meeting before the instruction of counsel.

105.On 14 May 2007, AA Property Services Ltd (“AA”) responded to Kaisilk’s enquiry and wrote to make a service proposal for one of its surveyors, Mr Patrick Lai, to act as Kaisilk’s expert to assist with the land resumption case in the Lands Tribunal. Part of the proposed work would be for Mr Lai to prepare a Rule 20 document, and then to appear as expert witness. The rates chargeable by Mr Lai and his technical and clerical staff were lower than the rates identified by Mr Cullen for his services. Kaisilk engaged the services of AA by signing acceptance of the letter on 26 July 2007. It might be noted that Kaisilk returned the signed service proposal together with a cheque for $50,000 as a non-refundable deposit.

106.That Mr Lai had, therefore, received a non-refundable $50,000 from Kaisilk before even picking up his pen to begin work might be contrasted with Mr Cullen’s inability to have extracted any money at all from Kaisilk despite having provided years of obviously valuable and beneficial work, which had led to an uplift of millions of dollars in offered compensation. It might be thought that the scene had been set for what followed.

107.Despite having instructed alternate surveyors, Kaisilk kept Mr Cullen on hold. In a handwritten note dated 9 October 2007, Mr Chui recorded that Fanny Tsang told him that Mr Tsang for their service was “not satisfactory”, on which Mr Cullen understandably and, I find, correctly annotated that that meant “= our fee is too high for him!”. The note also recorded being told that the case was on hold, but that did not mean that they would settle with DLO directly.

108.Finally, on the following day, 10 October 2007, Mr Chui recorded that Fanny called him to say that Mr Tsang “has already found other surveyors to follow the case” and that it was “not necessary for us to do anything further”. In effect, this was verbal notice of termination of Mr Cullen’s services. She also said that “if we want to claim anything/fees we have to send the letter to explain. Otherwise, Mr Tsang will not pay anything.” That attitude may not have come as a surprise to Mr Cullen.

109.In his letter of 17 October 2007, Mr Cullen noted that Kaisilk had not responded to his numerous prior communications regarding ongoing case status, and specifically the intention to proceed to the Lands Tribunal on the recommendation that it would determine compensation with the benefit of the Rule 20 valuation document already filed. Mr Cullen expressed his awareness that Kaisilk wished to incur minimal expenses in the exercise, but his earlier indication that continued services relating to court works need to be charged at prevailing HKIS hourly rates. Though Mr Tsang had proposed a cap, nothing further had been heard on this.

110.The letter went on to recognise that Kaisilk could of course seek to engage a less experienced and lower cost surveyor, but Mr Cullen foresaw works duplication and additional expenses, which he then identified. Mr Cullen requested prompt written clarification on whether another firm had been engaged, and if so the timing when his own fees were proposed to be paid.

111.I confess I find the response to Mr Cullen’s letter a little odd. First, it expressed surprised at that letter, when it seems to me to have been the obvious reaction to being told over the phone that services provided over the previous many years were being terminated after preparation of the materials that might be used at a Lands Tribunal hearing. Secondly, all the letter really did was to seek confirmation that the attached list correspondence between Mr Callan and Mr Ng/LD was complete. Upon receiving that confirmation, Kaisilk said it would respond. With the benefit of hindsight, it looks as though Kaisilk was seeking to ensure it had a complete set of materials which it might pass to its new surveyors, before giving a substantive response to Mr Cullen.

112.Mr Cullen’s response was in his letter of 9 November 2007. In it he made reference to the four large box files he maintained in the long-running case, and he pointed out he had not received any response from Kaisilk to a number of letters over the last 12 months. He set out the detail of those letters. Nevertheless, Mr Cullen realistically accepted that his services had been unilaterally terminated and identified the reason was because of “an unwillingness to meet our fee accounts and/or agree fees for our acting in the Lands Tribunal”. In such circumstances, he wholly understandably expressed the view that it would be appropriate to be paid for the services already provided. The letter made reference to the two previous invoices, and provided a further invoice for Scale 10 fees in the sum of $409,700. That fee note was clearly offered on a reduced and without prejudice basis, against the statement that if it was not paid a new fee note would be issued reflective of all works computed in strict accordance with the service contract.

113.Kaisilk’s response was in its letter of 29 November 2007, which Mr Tsang accepted in evidence he had drafted. It refers to the various contractual agreements, defining them as the 1^st Agreement, the 2^nd Agreement and the 3^rd Agreement. Having referred to paragraphs 1.5 and 4.1 of the 1^st Agreement, Mr Tsang made reference to paragraphs 2.2, 2.4 and 2.5 of the September 2003 Letter, which he described as a proposal. He then noted that on 13 February 2004, the 2^nd Agreement was signed, but item 2.5 of the proposal had been omitted, so that the contingency bonus fee was to replace the HKIS charges agreed in the 1^st Agreement.

114.As to the 3^rd Agreement, Mr Tsang suggested that asking for payment for preparation of a detailed Rule 20 document somehow “obviously breached the previous agreement”, which is difficult to follow when the previous agreement specifically envisaged additional charges for that work.  Anyway, he nevertheless went on to set out that the charges confirmed were the contingency fee scale, the lump sum fee of $50,000, and the HKIS hourly fee charge rates for the Lands Tribunal hearing. As to fees, the letter concluded that Mr Cullen was entitled only to claim the contingency fee and the extra fee according to the 2^nd and 3^rd Agreements, which would be paid by Kaisilk within three days upon receipt of final compensation. Of course, it can be noted at once that that simply did not happen. But, Mr Hughes is correct that the letter was clearly asserting that the 2^nd and 3^rd agreements were valid, and that payment would be made in accordance with those agreements in relation to work which it was recognised had been performed or would be performed in accordance with those agreements. Mr Hughes is also correct in noting that the letter makes no suggestion of repudiatory breach by Mr Cullen, nor any agreement being void for want of consideration. Referencing fees for a hearing is also inconsistent with any idea that Mr Cullen had refused to attend a hearing, or that Mr Tsang understood that to be the case. In fact, most of the essential points made expressly or implicitly in that letter are no longer maintained by Kaisilk at this trial.

115.Another paragraph of the letter warrants some scrutiny. Under the heading “Performance of your Services”, Mr Tsang wrote:

“In our opinion, our claim is a straight and standard claim, however you drag the case for several years. The exchange of Rule 20 document was until May 2006. Upon exchange the related document, no one dollar had been increased by Government. Some of your assessment principles had also been challenged. In addition, you also failed to prepare the Rule 20 document in respect of [the Tenement] in accordance with the agreement. For this, we had to appoint a new consultant to do so.”

116.Such are the myriad inaccuracies and untruths in that paragraph, it is difficult to know where to start to identify them. I can deal with some of them. At least a very significant part of the delay had been caused by Kaisilk’s own action and inaction, even in the face of Mr Cullen’s repeated attempts to engage Kaisilk in speeding up the process. The exchange of the Rule 20 document, and the significant efforts expended by Mr Cullen in influencing the content of Mr Ng’s document, obviously did in fact substantially increase the offer of compensation made by Government. No Rule 20 document was required for the Tenement, as it had been deliberately and by agreement left out of the process which would have required such a document. To suggest that a new consultant had to be appointed for that purpose was entirely disingenuous.

117.Of course, against Mr Tsang’s (to my mind) unfair allegations of delay made against Mr Cullen, it might be noted that Mr Lai only filed his Rule 20 document on 28 May 2008, some 10 months after appointment which may not be consistent with Mr Tsang’s suggestion that this was a “straight and standard” claim, though to be fair to Mr Lai he was coming from a standing start. Mr Lai’s valuation was $110 million.

118.On 8 August 2008, solicitors for Mr Cullen wrote to Kaisilk seeking an undertaking to confirm that payment of the Rule 20 agreed fee and the contingency bonus fee would be paid upon Kaisilk’s receipt of final compensation from the government. It might have been thought in the light of Kaisilk’s previous letter of 29 November 2007, which had said precisely that Mr Cullen was entitled to those fees and would be paid them within three days after receipt of final compensation, that that confirmation would have been readily provided. However, by letter from its solicitors dated 29 August 2008, Kaisilk rejected the request. To my mind bizarrely, and giving rise to a fundamental inconsistency, the solicitors said that the reasons for rejecting the request had been briefly given in Kaisilk’s letter of 29 November 2007.

119.Kaisilk’s solicitors’ letter is also in other ways unimpressive. It went on to make a few other points. Most of the points, and the juxtaposition of them, and the tone in which they are written, do little credit to the solicitors’ profession. The points included suggestions that Mr Cullen’s service was provided under an entire contract agreement arrangement so that no fee at all would be payable unless all services were rendered in accordance with the terms and compensation had been received. Contradictorily, it said, Mr Cullen’s fees will be reimbursed by the government. It asserted that 2^nd Agreement clearly superseded the 1^st Agreement, but that termination of the 2^nd Agreement did not entitle Mr Cullen to claim since he violated the requirement of impartiality, and that Mr Cullen had no right whatsoever to charge the client any fee at all, because the service agreements (plural) were all terminated for breach of a fundamental term because of Mr Cullen’s conflict of interest.

120.The letter culminated in a threat that should Mr Cullen “dare to commence” any legal action against Kaisilk, not only would the claims be strenuously opposed but Kaisilk would seek costs on an indemnity basis as well due to the breach of fiduciary duty.

121.This letter of 29 August 2008 is the primary letter on which Kaisilk relies for its alternative time bar argument, because (Mr Leung says) it demonstrated an unequivocal intention not to comply with the payment obligations under any and all of the Agreements, from which time would begin to run for limitation purposes. Two other letters are relied on in this context, one being the letter of 29 November 2007 (see above) and the other a subsequent letter of 1 April 2010 (see below).

122.The claim for compensation in relation to the Tenement was eventually resolved by agreement at the sum of $1,030,000. This was reflected in a consent order dated 11 April 2009.

123.On 10 March 2010, Mr Cullen wrote to Kaisilk. He pointed out that under the terms of the original engagement on the 1^st Agreement the remuneration was to comprise HKIS Scale 10 fees to be sought as a claim under section 10(2)(e)(ii), with an alternative as to HKIS hourly fees to be paid by Kaisilk in the event that services terminated prior to full claims processing and receipt of the Scale 10 fees. Reference was also made to the two subsequent agreements relating to the potential bonus contingency fee if compensation is increased, and the lump sum for preparation of the Rule 20 document. In circumstances where instructions had been terminated due to the unwillingness to agree to pay HKIS scale fees for representing Kaisilk in the Lands Tribunal (as Mr Cullen described it, and as I have found to be correct), and the dispute as to other fees, Mr Cullen sought the inclusion of his Scale 10 fees within the existing claim. As he pointed out, processing such a claim would incur no costs or other outlay. He also sent an invoice for disbursements related to the 1^st Agreement in the sum of $3,830.

124.The response to that letter came from Kaisilk’s solicitors, who on 1 April 2010 in effect simply referred back to their earlier letter of 29 August 2008.

125.Nevertheless, subsequently on 3 September 2010, Kaisilk wrote to Mr Cullen and that asked in circumstances where BD intended to finalise the captioned case (the caption being to the Tenement) Mr Cullen should let Kaisilk have his bill, if any, for submission on Mr Cullen’s behalf to BD. Of course, in response, Mr Cullen pointed out that the relevant matters should include both the Tenement and the Development Site, though he did issue a fee note in the sum of $17,500 as the HKIS Scale 10 fee rate minimum charge.

126.The Lands Tribunal hearing took place over eight days in October and November 2010 – a hearing length which might reflect some complexity in the case. The consequent judgment is dated 20 May 2011. From that judgment, it is apparent that Mr Lai had altered his view as to the open market value of the Development Site to $92 million. Anyway, ultimately the deputy judge sitting as Presiding Officer ordered compensation in the sum of $74,451,000, exclusive of professional fees, interest and costs which were adjourned to a date to be fixed with liberty to apply. The compensation sum was slightly varied on review by decision dated 17 June 2011 to the adjusted figure of $74,257,000.

127.Kaisilk accepted that sum, and on 20 July 2011 acknowledged receipt of $17,459,800, which together with the provisional payments already received reached the total sum awarded. The following month, Kaisilk received the sum of $1,921,121.42 as statutory interest accrued on the balance of the statutory compensation.

128.On 26 November 2013, solicitors for Mr Cullen wrote to Kaisilk demanding payment of the outstanding surveying consulting fees, and enclosed copies of five invoices. The letter also pointed out, amongst other things, that the invoice of 9 November 2007 in the sum of $409,700 was below the total actually due under the 1^st Agreement if billed on a time charge basis under clause 4.3 of that agreement, and if the invoice were not settled the higher figure would be pursued in court. The letter invited mediation or arbitration as a means of resolving the dispute.

129.A holding reply was sent by Kaisilk on 10 December 2013, stating that legal advice was being taken and a reply would be given by mid-January 2014. In response, Mr Cullen’s solicitors extended time for response until 17 February 2014 “but no further”.

130.On 29 January 2004, Kaisilk (not its solicitors) wrote to Mr Cullen’s solicitors. For the first time, the letter was written in Chinese. It asserted that since its files (hundreds in number) had been kept in a small store room following the removal of offices from Central to Kowloon Tong and old staff members had left, time would be needed to retrieve the relevant materials for its lawyer’s consideration. It said it would do its best endeavours to let the solicitors have its decision in due course.

131.In a response dated 6 February 2014, Mr Cullen’s solicitors stated that he would not tolerate any further delay. The letter stated that the writ and statement of claim were being prepared and would be served as soon as they had been finalised, which would require an immediate legal response from Kaisilk and involve costly legal proceedings. Therefore, if Kaisilk wish to avoid this, it must countersign and return the 26 November 2013 letter within seven days, and no further extension of time would be agreed.

132.Kaisilk’s response to that letter apparently included closing its bank account on 14 February 2014. Subsequently, by Chinese language letter in reply dated 17 February 2014, Kaisilk said that it had questioned the claim in August 2008 but no replied had been received, and it had therefore been of the view that the matter came to an end. It said its request for more time was reasonable, to go through old files from 10 years before. The letter ended by suggesting that Kaisilk would claim against Mr Cullen for its losses including interest as a result of Mr Cullen’s delay.

133.On 29 April 2014, Kaisilk took the first steps towards deregistration. It made the relevant application which led to the notice dated 26 March 2015 filed on behalf of the Commissioner of Inland Revenue giving no objection to the company being deregistered. On 1 April 2015, application for deregistration was actually made. By that date, the last piece of correspondence between the solicitors had been more than a year beforehand.

134.In the application for deregistration, certain conditions were asserted or declared by Mr Tsang as being met. They have been the subject of some criticism, but I think the criticism is either misplaced or too strong. Mr Hughes criticised the declarations that (a) the company had not been in business for the previous three months, (b) there were no outstanding liabilities, and (c) Kaisilk was not a party to any legal proceedings. Firstly, by 1 April 2015, I think Kaisilk had not been in business for the previous three months. It was a special purpose vehicle holding property intended for redevelopment, but whose property had been resumed. There is no evidence that the compensation received was held for another deployment by Kaisilk on any other business. Secondly, whilst there had been correspondence in which Mr Cullen asserted liabilities owed to him, Mr Tsang might have formed the view by discussions with his advisers that no liability was actually owed. The fight in correspondence had gone quiet. Also, whether or not there were liabilities is in effect the subject matter of these proceedings. Thirdly, it is the simple fact that Kaisilk was not at the time of the declaration a party to any legal proceedings. Whilst it is correct that there had been the clear threats of legal proceedings, those threats had been made over a lengthy period of time. The last threat was by letter of 6 February 2014, which identified that a writ and statement of claim were being prepared and would be served as soon as they had been finalised, and that no further extension of time would be agreed, but no writ had actually been served even 14 months later.

135.The delay has been explained by Mr Cullen as arising from being wholly occupied as an expert in two large pieces of litigation, and proceeding on the basis of advice that limitation time ran from the date of receipt of compensation by Kaisilk.

136.As it happened, by the time Mr Cullen’s claim was prepared, Kaisilk had been deregistered. Therefore, Mr Cullen made application for Kaisilk to be restored to the Register of Companies. The application was made by way of originating summons dated 4 March 2016, and was supported by Mr Cullen’s affidavit sworn two days earlier. Ultimately, the company was restored to the Register by order of 18 October 2016. That order was made by consent, on the joint application of the solicitors for Mr Cullen and the solicitors for the holding company of Kaisilk, Mr Tsang and a Ms Sun, another former director.

The Battleground

137.Mr Cullen brings his claim under each of the 1^st Agreement, the 2^nd Agreement and the 3^rd Agreement. Under the 1^st Agreement, Mr Cullen claims the sum of $1,086,227 in accordance with paragraph 4.3 of that agreement, calculated using the time logs annexed to the amended statement of claim. Under the 2^nd Agreement, Mr Cullen claims the bonus contingency fee in the sum of $566,280. Under the 3^rd Agreement, Mr Cullen claims the extra lump sum fee of $50,000, or the reduced sum of $47,500 after taking into account the credit previously given. There is also a claim to disbursements in the sum of $10,363.30, the breakdown of which is also particularised in the annexure.

138.Kaisilk denies that it is liable to make any payment to Mr Cullen, broadly on the basis that: (1) all of the claims under all three of the agreements are time-barred; (2) in any event, the contingency bonus fee which might have been payable under the 2^nd Agreement never became payable, as it would only be payable if Kaisilk was able to avoid having to initiate and pursue proceedings in the Lands Tribunal, whereas those proceedings were ultimately necessarily pursued; (3) in any event, the 2^nd Agreement and the 3^rd Agreement were both unenforceable for want of consideration; and (4) none of the agreements contained any term for reimbursement of disbursements, so Mr Cullen is not entitled to recover them.

139.Kaisilk also counterclaims on the ground that Mr Cullen wrongfully refused to act as expert witness in the Lands Tribunal unless Kaisilk immediately paid the contingency fee, a fee which Kaisilk says it had no obligation to pay. This forced Kaisilk to engage a new surveyor to act as expert witness, which resulted in delay to the claim and the receipt of compensation. Kaisilk says it is entitled to lost bank interest which would otherwise have been earned on the compensation sum had it been received earlier. There is also a circularity of loss argument, that Mr Cullen cannot claim any fees after the initiation of the Lands Tribunal proceedings by notice dated 2 February 2005, as all those fees were wasted.

The 1^st Agreement

140.Other than some relatively minor challenge to the quantum of the claim by reference to Annex A to the claim, there is no dispute that the work logged on that annexure was done, and the time taken to do it was spent. As already stated, the defence to the claim is on the assertion that the claim is time-barred by limitation.

141.I accept Mr Leung’s submission that if the limitation period has expired, then the action is necessarily barred, unless the plaintiff can bring himself within one of the specific statutory extension provisions. It is not a matter of discretion or fairness, and the court has no power to extend time merely because it might be thought “unconscionable” for the defendant to rely on the Limitation Ordinance.

142.It is common ground that for contractual claims the cause of action accrues, and hence time starts running for the purpose of limitation, upon breach of the contract. Hence, where Mr Cullen’s claim is an allegation of failure to make payment, the key question is to ask when payment was due.

143.This necessarily requires focus on and the proper interpretation of paragraph 4.5 of the 1^st Agreement which deals with “Fee Payment”.

144.There is no dispute as to the applicable principles for contractual interpretation. Albeit in slightly varying ways, they have been frequently restated. I might do so as follows.

145.The court must identify the intention of the parties by reference to what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean. 

146.The court does so by putting focus on the meaning of the relevant words in their documentary, factual and commercial context, which has to be assessed in the light of (1) the natural and ordinary meaning of the clause, (2) any other relevant provisions of the document, (3) the overall purpose of the clause and the document, (4) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (5) commercial common sense.

147.Contractual construction is a unitary exercise, involving an iterative process by which each of the rival meanings is checked against the provisions of the contract and its commercial consequences are investigated.  The iterative process is often laborious, and may require the court to go forwards and backwards painstakingly between the various words and phrases, occurring in different parts of the document, which give rise to the problem.  This process must be followed.

148.If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other. However, the fact that a contractual provision may, in some situations, have unwelcome consequences for one of the parties is not a valid reason to depart from its clear and explicit wording.

149.As already set out, paragraphs 4.3 and 4.5 of the 1^st Agreement provide that:

“4.3  However if for any reason our works do not continue until completion of all compensation payments, including lodging a claim under S 10(2)(e)(ii) for surveyors fees, then our fee shall be payable by your company, and shall be based on the time inputs actually expended on works completed, and charged at the then prevailing HKIS timescale fee rate for the surveyors involved.

4.5  Such fees are due for payment within 14 days of works completion and issue of our debit note.”

150.Mr Leung submits that on the plain and natural meaning of paragraph 4.5, this means that the payment was due within 14 days of (1) a particular item or items of work having been completed by Mr Cullen, and (2) Mr Cullen having issued a debit note in respect of such work. In other words, there are two conditions, both of which must be met. Logically, the debit note would come after the completion of the item or items of work, and so the 14 days would run from then. Time for limitation purposes would run from the expiry of those 14 days.

151.Mr Leung also made the submission that it is not unusual for a debt not to arise until actually demanded, so for there to be a condition such as the requirement for a debit note or invoice before fees for work would become payable. He says this construction has the attraction of clarity and simplicity, but Mr Hughes’ proposed construction is “startling” because it is not only contrary to the wording, it makes little objective commercial sense, not least against the potential time taken from the start of Mr Cullen’s engagement until Kaisilk’s final receipt of compensation. That process might involve lengthy negotiation with a government department, which Mr Cullen himself described as sometimes “slow and bureaucratic”, and where the speed of negotiation might be affected by a client who is slowing in giving instructions, then potential Lands Tribunal proceedings, with the possibility of a review and an appeal.

152.Hence, if the debit note dated 9 November 2007 in the scale fee figure of $409,700 is to be treated as the debit note issued under the 1^st Agreement on a time basis instead, then time expired for limitation purposes on 23 November 2013.

153.The corollary of Mr Leung’s submissions that time starts to run from the expiry of 14 days after the issue of the debit note is that no liability to pay arises until the issue of the debit note. Hence, Mr Leung says that if it is Mr Cullen’s case that he has never issued a debit note in relation to the 1^st Agreement (because the scale fee is inapplicable and he did not issue a debit note by reference to time spent), that simply means that the explicit condition in paragraph 4.5 for such a debit note has never been fulfilled, and there is simply no cause of action. On that last point, I disagree. Even on Mr Leung’s argument, I do not think the form of the debit note or demand is important; rather, what is important is the making of a demand for payment, and there can be no doubt that Mr Cullen frequently demanded payment of his fees on the alternate time basis numerous times before the issue of the writ. The precise amount due on that basis was always subject to checking and discussion as has indeed happened at the trial by reference to the time set out in Annex A.

154.Mr Hughes submits that the agreed date for payment was within 14 days from completion of the compensation payments, not upon issuance of the debit note, the issue of which he describes as a mere formality and superfluous. He says that the obligation to pay arises from the work done pursuant to paragraphs 1.1 to 1.6 of the 1^st Agreement, within the open-ended timeframe in paragraph 2, leading to the compensation he says is referred to in paragraphs 2 and 4.5.

155.Leaving aside whether a debit note is a condition, fees are due only after “works completion”, so that is a phrase which must be construed. As I have touched on above, the scope of services under the 1^st Agreement potentially had two broad stages, being (1) negotiation and (2) proceeding to the Lands Tribunal. I think it might be recognised that (as in this case) there may be an overlap, in that negotiation may well continue whilst Lands Tribunal proceedings are afoot, and the commencement and apparent pursuit of proceedings is a well-trodden negotiating path.

156.So, on an ordinary meaning of the words, works might be complete either (1) at the end of negotiations leading to agreement on compensation at a satisfactory level – referenced in paragraph 1.4 – or (2) at the end of proceedings when the Lands Tribunal determines the amount of compensation – referenced in paragraph 1.6. In either instance, the completion of the works involves the actual receipt of compensation by the client, in the sum either agreed or ordered.

157.On the terms of paragraph 2 of the 1^st Agreement, the works are to be provided from first instructions on an ongoing and open-ended timeframe basis until satisfactory conclusion, which must mean until receipt of compensation.

158.As to fee charges, paragraph 4 of the 1^st Agreement makes the distinction between (1) scale fees and their reimbursement – paragraphs 4.1 and 4.2 – and (2) additional charges at an hourly rate for evidence preparation and court attendance – paragraph 4.4. But, even if both sets of fees become chargeable, I do not think it would be the proper construction to suggest that there has been “works completion” prior to the receipt of compensation. The “works” would be of two kinds, one paid for by scale fees and the other at an hourly rate, and those two different kinds of “works” would only be “complete” at the end of the whole process of doing those “works”. I do not accept the suggestion that paragraph 4.5 is referring to “items of work”.  That is not what it says, and not what the words actually used mean; “works completion” means completion of all works, not just one or more “items” of work. Hence, both types of fee would be payable upon the receipt of compensation.

159.The distinction between the types of fees chargeable may be important for a different reason. Fees relative to the preparation and lodging of claims for compensation, chargeable on the HKIS Scale 10 basis, can be claimed for reimbursement as a separate head of claim for compensation under section 10(2)(e)(ii), either paid directly by Government after case settlement or reimbursable by Government to the client if the client has already paid.

160.Fees relative to the preparation of evidence and court attendance do not form a separate head of claim for compensation. Rather, they are likely to be costs in the Lands Tribunal proceedings (similar to the costs of any other expert opinion evidence deployed by a party to court proceedings). Depending on the incidence of costs, those fees are likely to be recoverable by the client as part of the costs of the proceedings. If those costs have been charged at the prevailing HKIS hourly time charge rates, they are likely to be allowed at those rates.

161.But both sets of fees seem to me to be payable only at the end of the process. Scale fees are paid as part of the compensation, obviously at the time of receipt of the compensation. The additional charges are essentially part of the costs of the process which results in a determination leading to receipt of the compensation. Of course, ongoing or interim fee notes might be issued in relation to time charges, but the completion of works would not have occurred until the conclusion of the proceedings for which that time is charged. On that basis, it is the completion of works which triggers the obligation of payment, and the debit notes merely identify the amount of money for which payment should be made.

162.Paragraph 4.3, however, deals with the situation where the service provider does not continue his works until completion of all compensation payments, including lodging a claim under section 10(2)(e)(ii). The clause bites if that situation arises “for any reason”, which incidentally I would think is not limited to termination by the client. (Though it probably does not matter in this case, I would think that the service provider would be entitled to end the contract upon reasonable notice.) The question arises as to whether that paragraph 4.3 changes the above analysis.

163.Paragraph 4.3 is important, because it is common ground that the parties in this case are or were in such a situation. A reason has arisen as a result of which Mr Cullen’s works did not continue until completion of all compensation payments, including lodging a claim under section 10(2)(e)(ii). Mr Cullen accepted in oral evidence that paragraph 4.3 provided for the circumstances under which he could not lodge a claim with the Government, so that hourly charges would be applicable.

164.Hence, the competing interpretations seem to me to be as follows.

165.The first alternative is that because Mr Cullen cannot or will not continue his works until completion of all compensation payments, he will not be in a position to lodge a claim under the section, so the clause triggers an alternative entitlement to charge on a time basis. The measure of time is on the time “actually expended on works completed”. As all his works have been completed, there is “works completion” and he is entitled to issue a debit note which is due and payable within 14 days.

166.The second alternative is that though Mr Cullen cannot or will not continue his works until completion of all compensation payments, and so he is entitled to the alternative basis of charging on a time basis, the time charges are merely a proxy for the claim which would otherwise be made by or for him under section 10(2)(e)(ii) at the end of the compensation process, and which would have been received only upon or after the receipt of compensation by the client. Hence, the time charges should be received and only become payable at the end of the process.

167.Stepping back and looking at the commercial purpose of the whole arrangement in the 1^st Agreement, it is an agreement by which Mr Cullen was asked to and agreed to provide services for which he would be paid. He would be paid on the scale or time basis set out, depending on the nature of the work. The payment to be made to the service provider is payment for his work, or “works” as it is described. (It may be obvious, but the “works” to be provided under the 1stAgreement are the works of Mr Cullen and his staff, and of no other firm.) The provision of services – that is, doing the “works” – starts from the first instructions and is on an open-ended timeframe. The target for the provision of services is to assist with the receipt of compensation. In many, if not most, cases the provision of services will continue right through to the receipt of compensation. Compensation might be received through negotiated agreement, or it might be received after a determination of the Lands Tribunal. Either way, the “works” would not be completed until the compensation had been received.

168.Objectively viewed, the parties also sensibly provided by paragraph 4.3 for circumstances which might arise for any number of reasons (hence the reference to “any reason”), in which the provision of services – that is, the “works” – would not continue until completion of all compensation payments, including payment of scale fees. In such circumstances, the service provider would be entitled to charge for – or “based on” – the time input actually expended on the works which he did complete. At that point, the service provider’s obligations under the contract have ended. 

169.Up to that point, it was clearly understood that fees were to be payable only after receipt of compensation – either as part of the compensation, or as part of the costs of litigating for compensation. The fact that in some circumstances after ending his works early, the surveyor may have to wait a long time for payment might be thought commercially unattractive is not conclusive against that interpretation. It might be asked, in those circumstances, why the client should suddenly become liable for immediate payment of fees in every possible set of circumstances in which the provision of services has concluded earlier (“any reason” including “every reason”). Indeed, if as Kaisilk alleges in this case, the only reason why Mr Cullen has ceased to provide services and cannot lodge a claim under the section is because of his own repudiatory breach, it might be asked why Kaisilk should have to pay him earlier rather than at the time the contract plainly otherwise envisages, namely only after Kaisilk has received its compensation.

170.As I agree with Mr Leung’s submission that the correct interpretation must make sense for all possible factual circumstances, this may point to the correct interpretation being that time for payment remains when compensation is received, notwithstanding that Mr Cullen’s “works” might end earlier and not continue up to that point. The point may have more force if, as in this case, it is said that the repudiatory breach gives rise to a counterclaim, by which the innocent party might be able to set off or extinguish any money as would otherwise have been payable to the one in breach.

171.On the other hand, the “works” being performed under the 1^st agreement are Mr Cullen’s works.  Once he has ceased work or ceased to be obliged to continue works under the 1^st Agreement “for any reason”, his “works” are “completed”. Under the contract viewed against its commercial purpose, that is “works completion”. If Mr Cullen issues a debit note relating to the completion of those works (as he did), it is due for payment within 14 days.

172.Therefore, on balance, but there being only one correct interpretation, I prefer the first alternative I identified above. On that basis, the claim under the 1^st Agreement for the time charges in lieu of the scale fees is time-barred.

173.Lest it be important for any purpose, had I not found the claim to be time-barred I would have allowed it in the revised sum provided to me to take account of deductions from the time logs accepted by Mr Hughes as appropriate. Hence, the figure would have been $1,030,667.

174.As to the claim for disbursements, it is based on an assertion that charging separately for disbursements is industry practice. Mr Cullen did not call any evidence as to what is industry practice. However, such a practice seems to me to be likely, if not even obvious. Most professionals charge fees on a basis which does not include disbursements (though I accept Mr Leung has a point when he says that might not be so for barristers). AA included a right to include charging for disbursements and their contract (though I acknowledge the contrary argument that that means unless expressed, they could not have charge for disbursements). Lastly, I have made reference to some part of the HKIS standards which appear to recognise disbursements as being separately chargeable on top of the HKIS fees, where the HKIS might be expected to reflect industry standards. Subject to any limitation point, I would allow the claim for disbursements.

175.As to the alternative time-bar argument, which arises only if Kaisilk fails on its primary time-bar argument, there is no dispute as to the applicable principles. In the case of anticipatory breach, time would run from the date upon which the plaintiff becomes able to sue. On this basis, the factual question arises as to whether Kaisilk’s breach may be anticipatory in the sense that it made it clear that it would not be able to perform, or simply would not perform, its contractual obligations before the date on which they were due to be performed.

176.Mr Leung’s submissions are based upon the three letters pleaded in the defence which I have already identified: Kaisilk’s letter dated 29 November 2007, and its solicitors’ letters dated 29 August 2008 and 1 April 2010. In short, I do not think those letters individually or collectively amount to the sufficiently clear and unequivocal intention not to perform the obligations under the 1^st Agreement.

177.The 1 April 2010 letter merely refers back to the 29 August 2008 letter, and in my view adds nothing to it. I accept Mr Hughes’ submission that the 29 August 2008 letter is “just a belligerent, confusing and self-contradictory letter that does not really say anything”, and I have commented already on the content of that letter. Whilst I acknowledge that belligerence may not matter because, as Mr Leung says, the more belligerent the tone the clearer the rejection of payment might be. But, such is the confusion in the letter, both internally and externally, referring as it does back to the 29 November 2007 letter, that I do not regard it as anything like sufficiently clear or unequivocal to set time running for limitation purposes. Nor do I think the 29 November 2007 letter is sufficiently clear, even as regards the 1^st Agreement, when the letter is viewed as a whole. Indeed, I reject the suggestion that one might focus simply on the penultimate words of the letter to see whether or not the rejection is clear and manifest. It seems to me that necessarily one considers the letters as a whole, and in context.

The 2^nd Agreement

178.Perhaps the first point to be made in relation to the 2^nd Agreement is that, despite earlier suggestions, it is now neither side’s case that the 2^nd Agreement replaced the 1^st Agreement. That seems to me to make sense. Whichever document or documents comprise the 2^nd Agreement, the deliberate use of the words “bonus” and “increase” point strongly to the idea that any payment under the 2^nd Agreement would be additional or extra to any payment under the 1^st Agreement.

179.The contest between the parties is as to whether the terms of the 2^nd Agreement are to be found only in the February 2004 Letter (as Mr Cullen says) or to be found in both the September 2003 Letter and the February 2004 Letter which must be read together (as Kaisilk says).

180.A pleading point possibly arises. In the amended statement of claim, which asserts that the 2^nd Agreement was in writing in the terms set out in the February 2004 Letter, and that the bonus contingency fee payable was to be made in addition to the payment of fees under the 1^st Agreement, the particulars included (at paragraph 14(b)) the allegation that (emphasis in original):

“The [February 2004 Letter] expressly referred to both payment fees under the 1^st Agreement and to payment of the Bonus Contingency Fee by stating as follows: “We trust that our proposed scope and terms of service set out formerly to you, coupled with the above contingency fee scale are considered appropriate in the circumstances…”

181.In the defence and counterclaim, which asserts that the 2^nd Agreement (unhelpfully defined as “the Purported 2^nd Agreement”) was contained in the September 2003 Letter and the February 2004 Letter, there is only a general denial to paragraph 14 of the claim. Mr Hughes submits, therefore, that it is not open to Mr Leung to argue that the words “our proposed scope and terms of service set out formerly to you” do not refer back to the 1^st Agreement.

182.I disagree. The purpose of pleadings is to assert the material facts upon which the claim and defence respectively are put forward. I think that paragraph 14(b) of the claim is essentially an argument as to the proper construction of the 2^nd Agreement. That is a matter of law, and I do not think that it needed to be specifically traversed in the defence. But in any event, I think the defence sufficiently pleads Kaisilk’s case as to what comprises the 2^nd Agreement, and the rest is for argument in submission.

183.It may be helpful to say a few words about the subject matter of the 2^nd Agreement, and how that subject matter might differ from that of the 1^st Agreement, under which the primary method for payment (at least for negotiation of compensation) is by way of scale charges. Scale charges are payable, and likely recoverable from government, simply as part of the fair compensation arising from the resumption of land. This seems to me at least in part to recognise that it is entirely appropriate for a property owner whose property has been resumed to engage the services of various professionals to advise him and to assist in negotiating with government so as to obtain the appropriate and fair level of compensation. Such fees do not seem to me to be dependent upon whether there is one offer made by government, or a series of offers perhaps increasing over time. In other words, even though they are scale fees, these fees cannot really be regarded as ‘success fees’.

184.But, an agreement relating to a contingent bonus fee is specifically a fee relating to, and calculated by reference to the degree of, what might be regarded as ‘success’. It is payable only in circumstances where the professional’s services have generated an increase in the offer over an amount previously offered. The bonus fee is comprised in a small share of that increase, and it is an important feature that the calculation of fee is tied just to the increase, and not the overall or total compensation sum.

185.As to the terms of the 2^nd Agreement, it seems to be common ground that if I were to conclude that the September 2003 Letter did form part of the agreement, then there was a condition that the bonus contingency fee would not be payable if Kaisilk elected to proceed to a Lands Tribunal hearing. This is because paragraph 2.2 of that letter provides that the contingency bonus fee would be payable in the event that Mr Cullen was able to increase compensation as a result of his actions, and that the issue is not referred to the Lands Tribunal, therefore not causing Kaisilk to incur further legal or court attendance fees.

186.Mr Hughes’ submission is essentially that whilst there had been some negotiation in, and the context is identified by, the September 2003 Letter, that did not comprise part of the 2^nd Agreement. As he put it, the February 2004 Letter was months later and a very different document in nature. He relies on the fundamental principle that earlier negotiations or unsigned earlier drafts of a proposed contract do not form part of the contract, and ought usually to be disregarded for the purposes of the construction exercise.

187.Mr Hughes points to the fact that the September 2003 Letter is headed “Proposed Commencement of Compensation Negotiations”, and he says that proposal was never signed. But, the proposed recommencement of negotiations, and the strong recommendation to take up dialogue with LD, were really only the factual circumstances in which the more relevant following section of the letter arose. Mr Hughes is on firmer ground in that that section also identifies a “proposal”, because it is headed “Proposed Contingency Bonus Fee for Increased Compensation”, allowing him to say that that proposal was never signed, and that Mr Tsang said during cross-examination he regarded it as a “proposal”.

188.But I am not sure that really answers the necessary question. Until any agreement is reached, there are only proposals and counter-proposals. The question is whether when Kaisilk signed back the February 2004 Letter, it agreed merely the terms in that letter alone, or whether they also agreed to wider terms, being those found in part in the September 2003 Letter.

189.In essence, the proposal in the September 2003 Letter was that in the given circumstances Mr Cullen “should like to propose a contingency bonus fee”. I agree with Mr Hughes that the language of this letter is typical of the polite and gentlemanly language to be found in all of Mr Cullen’s correspondence, even at times when there must have been a degree of frustration felt by him. He proposed that he should like such a fee in the event that he could increase the compensation payable without Kaisilk having to incur the costs of going to the Lands Tribunal. He proposed the basis of calculating that fee as a percentage of the increase in compensation achieved, by reference to a sliding scale. He proposed that such a fee would be payable within seven days of the receipt of the final principal compensation sum, and that the bonus fee would be exclusive of the reimbursement of Scale 10 fees, in other words the fees for which Mr Cullen would be able to lodge a claim to government under the existing 1^st Agreement.

190.I would interject at this point to note that in the section dealing with the event upon which a proposed contingency bonus fee would be payable, that there was the additional reference to “nor with us having any conflict in giving expert evidence in the Tribunal”. That was clearly a recognition on Mr Cullen’s part that charging a contingency fee of any sort might indeed give rise to potential conflict if he were to have to give expert evidence. As he pointed out, in negotiations he would be acting as an advocate for Kaisilk, but in the Lands Tribunal his role would have changed to that of an independent expert.

191.That seems to me to be important when construing the terms of the 2^nd Agreement. The proposal for it recognised that the very essence was to provide for a type of fee which would not be appropriate if the matter were to proceed to a hearing in the Lands Tribunal.

192.It is correct that the proposal in the September 2003 Letter was not countersigned, despite the request that it be so signed in the last paragraph. That paragraph contained the phrase “We trust that our proposed scope and terms of service are considered reasonable in the circumstances …”. I agree with Mr Leung that the reference to “proposed scope and terms of service” is a reference to those proposed in the September 2003 Letter itself. It is in the circumstances referred to in the September 2003 Letter that this proposal is put forward, which it is hoped is “considered reasonable”.

193.Between the September 2003 Letter and the February 2004 Letter, clearly there were some further discussions between the parties. That is evident from the 6 February 2004 letter which refers to the meeting that day regarding fees. As the letter identifies, it was in answer to the request made to Mr Cullen to put forward a revised and reduced contingency fee scale. That is what the letter then did by reference to a sliding scale amended from that previously proposed.

194.There must also have been some further discussion between the parties following that letter, because although the contingency fee sliding scale appears to have been agreed a further amendment was made beyond the terms of the 6 February 2004 letter in the February 2004 Letter. The amendment was to add the paragraph recognising that it was Kaisilk’s right whether or not to accept final compensation offered or have the matter referred to the Lands Tribunal for determination.

195.As I have set out above, the last paragraph of the 6 February 2004 letter was maintained in the February 2004 Letter. It had the same phrase or sentence “We trust that our proposed scope and terms of service set out formerly to you, coupled with the above contingency fee scale are considered appropriate in the circumstances.”

196.Where it is common ground, now, that the 2^nd Agreement did not replace the 1^st Agreement, two possible interpretations of that sentence seem to arise. The first is that the reference to the “proposed scope and terms of reference set out formerly to you” was a reference to those proposed in the September 2003 Letter. The second is that it was a reference to those proposed in, and agreed by, the letter which became the 1^st Agreement.

197.Mr Leung submits that it is the former because, if it is not, then the kind of terms you would expect as to when the contingency bonus fee might be paid, and that it is on top of fees payable under the 1^st Agreement, would not exist in the 2^nd Agreement.

198.Mr Hughes submits that if it is the latter, for which he argues, that fully explains why terms relating to timing of payment and that the contingency bonus fee is on top of the fees payable under 1^st Agreement did not need to be repeated, for those matters are already dealt with in the 1^st Agreement. That is why, he says, terms relating to those matters do not have to be looked for and found in the September 2003 Letter.

199.During closing submissions, an argument was identified which might go to support that construction. That argument turns on the paragraph that was added to the February 2004 Letter that was not in the 6 February 2004 letter, and might be put as follows. Often in the negotiation of an agreement, no part of the agreement is agreed until all parts of the agreement are agreed. This is because the perceived commercial cost or value in any one part might be differently assessed or impacted by another part. Perhaps a classic example of that would be the variation of unit price depending upon the total number of units sold and purchased. In this case, Mr Cullen might be taken objectively to have been content to agree a contingency bonus fee only in the event that the matter was not taken to the Lands Tribunal on his originally proposed fee structure. But he might not have been content with that conditional payment on a revised and lower fee structure. Once the agreement was to include a clear recognition that all control over whether or not the matter would go to the Lands Tribunal lay in the hands of Kaisilk, Mr Cullen might only agree to that if the conditional basis for payment were removed.

200.Having considered that argument, I think the problem with it is that it can never have been in doubt in either Mr Cullen’s or Kaisilk’s minds (subjectively or objectively) that the decision whether or not to accept an offered sum or instead go to the Lands Tribunal was the decision of Kaisilk alone. Whilst that decision might be influenced by the advice of Mr Cullen, the actual decision was Kaisilk’s because it was the owner of the Properties for which compensation was being paid after resumption. Therefore, I do not think this additional paragraph does more than re-state the obvious, which is why on the evidence it was not in any way contentious.

201.Again stepping back, what seems to me objectively to have happened was that Mr Cullen put forward a proposal, much of which was not significantly controversial except the pricing structure. The factual matrix identifies that Kaisilk’s concern to pay as little as possible for any service was well known to both parties to the discussions. It asked for a reduction. That is why the later letters focus on the revision and reduction in the contingency fee scale, because that was the focus of the discussions and what was requested. Therefore, the revised fee scale in the February 2004 Letter was to be coupled with the scope and terms of service set out previously and proposed in the September 2003 Letter.

202.I acknowledge Mr Hughes has focused on the word “coupled” in the last sentence of the February 2004 Letter. But what seems to me to be “coupled” with the “scope and terms of service set out formerly” is “the above contingency fee scale” (my emphasis). In the following sentence, Mr Cullen asked Kaisilk to confirm “such arrangements and fee scale”. Objectively viewed, I consider the February 2004 Letter was saying that Mr Cullen would do the work on the terms of service or arrangements previously set out in the September 2003 Letter, but on the above revised contingency fee scale rather than the scale identified in that letter.

203.I have also already referred to part of the context for the making of the 2^nd Agreement being that Mr Tsang had made clear that Kaisilk did not want to go to a Lands Tribunal hearing, which would at least be some support for the conditional wording in paragraph 2.2(b) of the September 2003 Letter being part of the 2^nd Agreement.

204.There is also force in Mr Leung’s submission that if the February 2004 Letter where the complete contract, it is difficult to understand the conditions which would trigger Kaisilk’s payment obligation. If the fee is by reference to an “uplift” or “increase” in offers, it is to be remembered that the LD’s offers were all made on a without prejudice basis, and those offers might not necessarily reflect the LD’s open stance in the Lands Tribunal proceedings, or be reflected in the Lands Tribunal’s ultimate decision. As Mr Leung submits, there is some difficulty with the idea that Mr Cullen was somehow to be rewarded for an increase which had not yet crystallised, and that seems in any event inconsistent with the wording of the February 2004 Letter which refers to the total compensation sum “achieved” and the increase in compensation “achieved”.

205.But Mr Leung’s point has less force if focus is not on the LD’s without prejudice offers, but on the figure put forward by its expert in the Rule 20 document filed for the Lands Tribunal. Realistically, that figure might be expected to provide the bottom end of the bracket within which any determination would be made. It might therefore be said that an increase to at least that bottom end figure had been “achieved”. Hence, in the context of Mr Cullen’s later seeking to close off the 2^nd Agreement, it might make sense to see an uplift to $68.88 million as having already been “achieved”, enabling a contingency bonus fee to be calculated and ‘banked’ at that crystallised level of increase over previous offers.

206.But on balance I do not think that would be correct. The essence of the 2^nd Agreement was to provide for a bonus fee of a type inapt if the case were to be pursued to a determination. The incentive for Mr Cullen was to push up the LD in negotiation to a figure which would satisfy Kaisilk, so that it would not have to go to – and run the risk of going to – a determination. But if the matter were to be pursued to a determination, that would mean that nothing had yet been actually “achieved” and it would not be until the determination.

207.As to Kailsilk’s assertion that there was a want of consideration for the 2^nd Agreement, because it is trite that past consideration is no consideration, I disagree. My analysis above as to the nature of a contingency bonus fee payable by reference to a percentage of the uplift achieved through negotiation seems to me to be part of the answer to the suggestion that there was want of consideration in respect of the 2^nd Agreement.

208.Further, in light of the amount of work done and the amount of time expended up to that point, where Mr Cullen had not been paid anything, his unwillingness to recommence negotiations unless KDL also agreed to a payment of a bonus contingency fee would provide sufficient consideration to support the 2^nd Agreement. Mr Leung submitted that this point was not pleaded by Mr Cullen, but I agree with Mr Hughes that it is sufficiently identified within the pleading at paragraphs 11 to 14 of the amended statement of claim. Where scale fees are not dependent on time input, and where there has been a protracted period of negotiations yet to lead to a satisfactory conclusion, those circumstances and the continuation of work over a time and to an extent previously unanticipated would in my view constitute sufficient consideration for the bonus contingency fee agreement, providing for a fee on top of the scale fees.

209.Further, there are no express terms relating to the parties’ right to terminate the 1^st Agreement, which likely means that both parties would be able to bring the contract to an end upon the giving of reasonable notice. But one provision of the 1^st Agreement expressly recognises that the works to be performed under it might not continue for various reasons (“any reason”). So another way of looking at it objectively might be that, in his polite way, Mr Cullen was using the non-exercise of his legal rights to bring the contractual arrangements to an end as consideration for the contingency bonus fee, by which Kaisilk was able to ensure that (1) it could continue to receive the benefit of his services, and (2) the fees to be paid under the 1^st Agreement would otherwise continue to be on a scale fee basis, rather than on a time basis which in the protracted circumstances may well be higher.

210.I also agree with Mr Hughes’ submission based upon the decision of the Court of Appeal in Chong Cheng Lin Courtney v. Cathay Pacific Airways Ltd [2011] 1 HKLRD 10. At §51, Andrew Cheung J (as he then was) pointed out that the law must not depart from the reality of everyday life for no good reason. Hence, it would take very compelling reasons for the court to hold that what were regarded as contractual arrangements by the parties actually had no contractual force in law for want of consideration. On my view of the evidence set out above, there are no such compelling reasons.

211.As to the alternative time bar argument, I have already rejected that for reasons given above. In short, the first of the three letters relied on by Kaisilk expressly asserted that Mr Cullen was entitled to payment under the 2^nd Agreement and would be paid after its receipt of compensation. The second letter purported to reject payment on the basis of the first letter which said the very opposite. The third letter merely referred back to the second letter.

The 3^rd Agreement

212.The construction of the 3^rd Agreement is straightforward. Under the terms of the 1^st Agreement, it was envisaged that work might be required in the production of a Rule 20 document, and if so that it would be chargeable on a time basis by reference to HKIS hourly time charge rates.

213.The 3^rd Agreement was in essence an agreement to vary the terms of the 1^st Agreement, by providing for a lump sum cap on fees (which would otherwise fall to be calculated strictly in accordance with the time spent), to exclude any other payment unless the matter were to require court attendance (where arguably other preparatory work before court attendance would be chargeable), and to provide a specific timing for payment of the fee, namely only after Kaisilk’s receipt of compensation from the Government.

214.It was no part of the 1^st Agreement that Kaisilk must actually use the Rule 20 document in its Lands Tribunal proceedings before it had any obligation to pay Mr Cullen for producing it. That would be nonsensical in circumstances where it was always open to Kaisilk to change experts, as in fact it did in this case.

215.The idea that there was a want of consideration because the work to be performed under the 3^rd Agreement had been identified as within the scope of the 1^st Agreement makes absolutely no sense to me. If the work in producing a Rule 20 document were to be conducted, Kaisilk agreed to pay the additional charges for it. What Kaisilk achieved under the 3^rd Agreement was a beneficial manner of and certainty in the fixed amount of payment for the work which it asked to be performed.

216.One of the benefits obtained by Kaisilk was that it was able, and indeed only obliged, to make payment for the Rule 20 document after it had received compensation. Hence, even if it is correct that the claim to fees otherwise payable under the 1^st Agreement is time-barred, the claim to the sum due under the 3^rd Agreement is not.

217.For reasons which I have already given, the alternative time bar argument is also inapplicable to the 3^rd Agreement. In short, the first of the three letters relied on by Kaisilk expressly asserted that Mr Cullen was entitled to payment under the 3^rd Agreement and would be paid after its receipt of compensation (which was one of the express terms). The second letter purported to reject payment on the basis of the first letter which said the very opposite. The third letter merely referred back to the second letter.

The Counterclaim

218.The counterclaim depends upon a finding that Mr Cullen committed a repudiatory breach of the 1^st Agreement. I have found objectively that he did not. That is the end of the matter.

219.Nevertheless, had I found there to be any proper basis for a counterclaim, I would have rejected the suggestion that the Lands Tribunal proceedings would have finished at least two years earlier than they did. The only realistic delay was the time taken for Mr Lai to get up to speed and produce his Rule 20 document. As Mr Leung conceded in closing submissions, his better argument might be to a period of delay of about one year.

220.But in any event, the damages claimed by Kaisilk on the basis of alleged lost interest on sums which would have been in in its bank account earlier happened seems to me to be too speculative against the other circumstances of the case for an award of damages.

221.I have in mind, in particular, the view I have already expressed as to the at least realistic possibility that the compensation determined by the Lands Tribunal would have been somewhat higher had Mr Cullen been the expert dealing with Mr Ng and appearing at the relevant hearing. In his witness statement, Mr Cullen set out some aspects where Mr Lai made concessions which he would not have done, and where he failed to use an analysis that he would have done, which may well have led to a marked difference in the compensation figure determined.

222.I also have in mind that at whatever time the compensation sum would have been received, as a special purpose vehicle Kaisilk may simply have paid on the compensation to another company in the group, as by reference to the bank account disclosure given it seems to have done, so that the money would not simply have been sitting in its bank account collecting interest. It seems to me it would be difficult for Kaisilk, through Mr Tsang, to say otherwise unless Mr Tsang were also to accept that the company was emptied and deregistered in order to seek to render it judgment proof in the face of Mr Cullen’s claims.

223.As to the submission that all time spent after the Lands Tribunal notice was filed on 2 February 2005 would be disallowed if Mr Cullen is found to have repudiated, I also reject that. I have accepted as a fact that until some point after the exchange of Mr Cullen’s and Mr Ng’s Rule 20 documents, there was no intention to pursue the matter to the Lands Tribunal. Hence, whilst the work performed by Mr Cullen before his services were terminated might have to some extent been used in the Lands Tribunal had they not been terminated, that work was actually performed in order to forward the negotiations, as indeed happened. The circularity of claim point would therefore fail.

224.One other point might be made on the counterclaim. If, as Kaisilk says, the claim is time-barred, it is difficult to see why the counterclaim would not be similarly time-barred (though, as Mr Leung points out, that has not been pleaded for Mr Cullen as it must have been under RHC O.18 r.18).

Summons to join a party limited to the purposes of costs

225.Mr Cullen has applied for the joinder of Mr Tsang as a party to these proceedings, for the purposes of costs only. The application is made pursuant to section 52A of the High Court Ordinance and RHC O.62 r.6A. The summons was served on Kaisilk on 28 August 2019, and on Mr Tsang on 2 September 2019 (the first day of the trial). Whilst the summons contained an application for abridgement of time, I declined to deal with it on the first day of the trial and instead invited further argument during closing submissions.

226.The relevant principles applicable on such an application have been canvassed by Mimmie Chan J in Focus Investment Ltd v. Tang Shing Bor [2012] 5 HKLRD 853. Such an application contemplates a two-stage process. First, the court will consider whether the party should be joined for the purposes of costs. Secondly, that party should be given a reasonable opportunity to attend a hearing for the court to consider the matter further.

227.At the first stage, the court should refuse joinder only if it is plain and obvious that the application amounts to an abuse of process, by reason of delay or other misconduct by the applicant, or because the application is manifestly so fundamentally misconceived as to be an abuse. Arguments and documents for the first stage should be limited to this purpose. At the second stage, the court would consider whether the costs order should be made against the non-party as being in the interests of justice to do so.

228.During cross-examination, and because Mr Tsang had only just been served with the summons and had insufficient time to consider it and take advice, I did not permit Mr Hughes to put questions which might have been relevant only to the second stage, either on an assumption that I would accede to joinder of Mr Tsang at the first stage, or on some sort of rolled up approach (which might be appropriate in other cases). Of course, it might be that some relevant material for consideration is to be found in the evidence relating to the broad issues for trial.

229.On that basis, Mr Hughes relies on the following matters confirmed by Mr Tsang during cross-examination. Kaisilk is a shell company with no assets; it is not trading, and its only prior purpose for existence was to hold the Properties, and thereafter to claim and collect the compensation following the resumption of the Properties; its bank account was closed in February 2014 (which was during the course of correspondence between solicitors about this claim); steps were taken to deregister the company from March 2014; the solicitors for Mr Cullen were not informed of the steps at the time, and until much later.

230.On that material, Mr Hughes submits that he can satisfy the relatively low threshold for seeking an order in terms of paragraph 1 of the summons.

231.Mr Leung, who of course acts for the existing defendant Kaisilk and not for Mr Tsang personally, suggested that this application might be adjourned to another short hearing pending the making of this Judgment, including any costs orders.

232.At this point, and on the materials currently available, I think the appropriate order to make is to require Kaisilk and its solicitors to provide the name and address of the party who is giving instructions and funding those solicitors. It seems likely to be Mr Tsang, but I would like the appropriate confirmation.  The information should be provided within three days, and upon the information being provided, the funder will be joined without further order as a party to the proceedings for the purposes of costs only, and that person shall be at liberty to file evidence (as to costs only) and to attend a hearing at which the Court shall consider the matter further.

Costs

233.Mr Cullen has succeeded to some extent. But, that degree of success against the context of the wider dispute, I anticipate there may be costs arguments for which I should first allow the parties the opportunity to reds this Judgment and its potential costs implications.

234.I shall, therefore, decline to make a costs order, even a nisi order at this stage, and shall adjourn costs to be argued on a date to be fixed with 30 minutes reserved. The funder identified in accordance with my above direction may also make submissions on that occasion, so that I can deal with all questions of costs in one go.

Mr Sebastian Hughes, instructed by Hampton, Winter & Glynn, for the plaintiff

Mr Wilson Leung, instructed by Wat & Co, for the defendant