Lee Ting v. Pak C. Kwong

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO.547 OF 1963

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Coram: Briggs, J.

Date of Judgment: 26 January 1968

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REASONS FOR DECISION

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1. By an order of this court dated 22nd July, 1963 Bing S. Kwan practising under the name of Kwan & Co., Chartered Accountants was appointed Receiver of the partnership subsisting then between the plaintiff and the defendant in this action.

2. By a further order of the court dated 29th September 1967, namely, four years later, judgment was entered for the plaintiff for $606,769.55 with costs. At the same time Bing S. Kwan as Receiver was ordered to pay into court all moneys received by him by virtue of his Receivership.

3. Three days before this, on 26th September, 1967 Messrs. Wilkinson & Grist, solicitors for the plaintiff sent the following letter to Bing S. Kwan:

"Dear Sirs,

We write to you with regard to your appointment by order of Mr. Justice Jennings of the 22nd of July 1963 as Receiver of the partnership between Mr. Lee Ting and Mr. Kwong Shun.

We understand that you hold certain monies together with the proceeds of sale of certain chattels belonging to the partnership.

Rumour has reached us that, notwithstanding your duty to the Court and to the parties, you alienated some $40,000.00 of the monies held in trust by you for the Supreme Court.

We treated the remour with suspicion because it seemed incredible to us that a reputable chartered accountant appointed by the Court should act so grossly in breach of faith. However, the law places a duty on a plaintiff to bring to the attention of the Court any default on the part of a Receiver, and we, therefore, as solicitors for Mr. Lee Ting, in this case, must inform the Court of the information which has reached us.

Before we do so, however, we feel that in common justice we should afford you an opportunity to deny the very serious allegation being made against you.

We should be obliged for a detailed answer by noon on Thursday. If such an answer does not reach us by that time on that day, we shall issue a summons returnable at 2.30 p.m. on Tuesday the 3rd October 1967 to call upon you to account to the Court for the monies which have come into your hands since July 1963.

	Yours faithfully,
	(Sd.) Wilkinson & Grist."

4. On the following day Bing S. Kwan replied through his solicitors as follows:

"Dear Sirs,

Re: Tak Hing Building Contractors

Your letter to Messrs. B.S. Kwan & Co. dated 26th September 1967 has been handed to us by Mr. Bing S. Kwan, proprietor of the said company with instructions to reply thereto.

Our client is extremely surprised with the contents of your said letter and also has extremely strong feeling in the tone it is written.

Since you indicated that you would issue a summons returnable at 2.30 p.m. on Tuesday, 3rd October 1967, to report to the Court the remour that has reached you concerning an alleged alienation of the sum of $40,000.00 being moneys held by our client as receiver, you must be of the opinion that the source of the rumour is reliable. If so, please say the source of the rumour as our client intends to take legal action against any person spreading such rumour.

Our client denies most strongly the said allegation and instructs us to enclose herewith his account of all receipts and payments up to 27th September 1967. Please be informed that all payments under the said account have been approved by your client and Mr. Pak C. Kwong in writing and also supporting vouchers can be examined at any time. Your client Mr. Lee Ting went to our client's office at about 11.30 a.m. this morning and Mr. Lee Ting denied to our client that he gave instructions to you to write the said letter to our client. Mr. Lee Ting rang up Mr. Chan Kam Hung in our client's office and Mr. Chan Kam Hung then immediately came over to our client's office and also denied having given instructions to you to write the said letter. Our client shall be obliged if you can supply an explanation in this respect.

Please let us have a reply as soon as possible.

	Yours faithfully,
	(Sd.)"

5. On 4th October, 1967 a summons was filed on behalf of Bing S. Kwan as Receiver in which relief was sought on various grounds, including the fixing of the proper remuneration of the Receiver, the date on which the final documents were to be filed with the Registrar and for an order for his discharge as Receiver. This was supported by an affirmation of Bing S. Kwan which exhibited the two letters which are quoted above.

6. The summons came before me in Chambers on 5th October, 1967. At the hearing the plaintiff was represented by counsel and leading counsel and the Receiver was represented by counsel. An order was made that the Receiver should submit the final accounts by 9th October and should pay a certain sum into court. The question of the remuneration of the Receiver, his discharge and the costs of the summons were reserved.

7. On 2nd November 1967 the summons again came before me and by consent it was ordered that all the money paid into court by the Receiver less $10,000 should be paid out to the solicitors for the Receiver. No other order was made. On this occasion the plaintiff was represented by his solicitor only, the Receiver was represented by counsel and leading counsel. On 13th January the summons came before me a third time and the remuneration of the Receiver was fixed at the rate of 5%. An order was made for the payment out of court to the solicitor for the Receiver of the $10,000 there remaining in court. The receiver was discharged.

8. At the hearing the Receiver was represented by counsel and leading counsel and a request was made that the costs of the Receiver should be paid personally by Messrs. Wilkinson & Grist. I adjourned this matter because the representative of Messrs. Wilkinson & Grist who was then appearing was not familiar with the case.

9. The matter finally came before me on 20th January, 1968 when the question of costs was argued. I ordered that the Receiver was to have his costs of the summons. I also made an order that such part of the costs of the Receiver which were caused by the instruction and engagement of counsel and leading counsel should be paid by Messrs. Wilkinson & Grist personally.

10. Mr. Ian Bond of Messrs. Wilkinson & Grist admitted at this hearing that the letter of 26th September was not written on the instructions of his client, but he did say that it had issued with counsel's approval. Despite the reply to that letter no explanation has been afforded to Bing S. Kwan of why such allegations were made: the source of the rumour has not been divulged and no apology has been offered. In an affidavit filed on 18th January, 1968 Mr. Bond has this to say:-

"The allegations contained in our said letter dated 26th September 1967 were the subject of subsequent hearings and such allegations were not finally refuted until the filing of the Deputy Registrar's Certificate which in itself is sufficient rebuttal of the said allegations and their implied withdrawal."

11. It has been pointed out to me that the allegations contained in the letter in question are of the most damaging nature especially as Bing S. Kwan is a professional man, an accountant and was at the time an officer of the court. It is not unreasonable therefore, says his counsel that he should do all that he could to defend himself: it is not unreasonable that he should instruct counsel, and leading counsel to that end. And this is what he has done. Normally in a summons of this nature a Receiver might not seek to be represented by solicitors, certainly counsel would not have to be briefed. It was necessary in this case but it would not have been so had the offending letter not been issued. And the matter has been made more serious as no apology or explanation has been given. Since the letter was issued without the instruction of the plaintiff it would be wrong for him to bear the costs incurred by the Receiver. Messrs. Wilkinson & Grist should bear such costs personally.

12. Mr. Ian Bond contented himself into stating that this was not a proper case for the making of such an order. He said the only case when a solicitor is ordered to pay costs personally is where the court has been misled. That was not the case here. Even if it would be said that his firm was guilty of negligence or what is sometimes referred to as oppressive conduct towards their client such negligence or conduct (if it existed) did not mislead the court and without this element his firm should not be ordered to pay the costs of the Receiver (whatever other order might be made on taxation).

13. In my view this matter is governed by O.82 r.8. In writing the offending letter I think the firm of solicitors was guilty of misconduct in the sense in which that word is used in that rule.

14. I am satisfied that Bing S. Kwan acted reasonably in instructing both counsel and leading counsel when faced as he was with such a damaging allegation as the letter contained. It follows therefore that the cost of so engaging and instructing counsel was directly attributable to the sending of the letter. This was entirely the fault of the solicitors and I think it only proper that Messrs. Wilkinson & Grist should bear the cost of this under O.62 r.8.

Dated 26th January, 1968.

Representation:

Bernacchi Q.C. & Mills-Owens (Philip K.H. Wong & Co.) for Receiver/Applicant.

Bond (Wilkinson & Grist) for Plaintiff.