Stikeman, Elliott (A Firm) v. Wong Ming Yuen and Another
Read the full judgment text of HCA 5943/1982 on BabelCite. This High Court CFI judgment.
1. This is a dispute about lawyers' fees.
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HCA005943/1982
Solicitors fees - Absence of written retainer - Dispute between solicitor and client about the existence and extent of the retainer The court was not prepared to hold that there was any rule nowadays that in the absence of a written retainer, the word of the client was invariably to be preferred to that of the solicitor in the event of a dispute about the existence or extent of a retainer. However, the absence of written confirmation of instructions can be cause for adverse inferences being drawn against the solicitor in an action for disputed fees, and even if the solicitor succeeds on the action, the court will need to consider whether he should be deprived of costs to reflect his degree of blame for allowing a dispute to arise which could have been avoided by following proper practices of confirming instructions in writing.
IN THE SUPREME COURT OF HONG KONG HIGH COURT _____ BETWEEN
_____ Coram: Hon. Rhind, J. Date: l5th July, 1983 __________ JUDGMENT __________ 1. This is a dispute about lawyers' fees. 2. The plaintiffs are the Hong Kong branch of a large Canadian firm of barristers and solicitors, specialising in tax work. Unlike Canada, Hong Kong does not have a fused profession, so that the plaintiff have been confined to doing solicitors' work in Hong Kong. 3. As part of the arrangement under which the Law Society of Hong Kong has permitted the plaintiffs to practise hare, the plaintiffs have undertaken to observe the professional and business ethics applicable to she practice of law in Hong Kong. In particular, the plaintiffs have under to the Law Society of Hong Kong to observe the previsions of the pamphlet for Hong Kong solicitors known as "A Guide to Professional Conduct Solicitors, 1974 Edition". 4. Moreover, in addition to observing the professional ethics applicable to the practice of law in Hong Kong, the plaintiffs have under applicable can to continue to maintain the standards of professional and business ethics in Canada. Illustrative of the standards of professional conduct propected of lawyers in Canada was a hand-book of the Law Society of Upper Canada, which was put in evidence. 5. The 1st defendant is a successful businessman. He is a shareholder and director of several private companies which are known collectively as the Magna Group. His shareholding in those companies is 20%, whilst his uncle, Mr. K.C. Wong, owns 53%. The 1st defendant is the director with special responsibility for finance within the group. 6. One of the companies within the group is the 2nd defendant - Berdaland Co. Ltd. ("Berdaland"). Berdaland, while incorporated and resident in Bermuda, owns two pieces of real estate in Canada, namely: (i) 524, 11th Avenue, Calgary, Alberta ("the 524 property") and (ii) 601, -7th Avenue, Calgary ("the 601 property"). 7. Berdaland's directors and shareholders, including the 1st defendant, and his uncle, K.C. Wong are, for the most part, Hong Kong based. 8. Since the plaintiffs opened their branch in Hong Kong in 1980, their resident partner here has been a Mr. Colson. Assisting him at all material times has been the plaintiffs' consultant, Mr. Hansen, who is also a Senior Lecturer in tax and corporate law at Hong Kong University. 9. There is no dispute that there was a course of dealing between Mr. Colson representing the plaintiffs, and the 1st defendant over r p period commencing 10th December 1981 and finishing on or about 3rd February 1982 in relation to the feasibility of a tax-avoidance scheme which involved, inter alia,"emigrating" the residence of Berdaland Bermuda to Holland with a view to escaping liability for Canadian capital gains tax on the increased value of Berdaland 's real estate in Canada by taking advantage of a double-taxation treaty between the Netherlands and Canada. 10. Did the 1st defendant retain Mr. Colson on 10th December 1981 conduct that feasibility study? That, in essence, is the overshadowing issue in the present case. Mr. Colson contends that he was thus instructed, so that either the 1st defendant or Berdaland are liable to pay the plaintiffs' bill for C$44,707.64, made up of C$40,000 profit costs, and the balance of C$4,707.64 disbursements. 11. For his part, the 1st defendant strongly denies ever having given any retainer to the plaintiffs. According to the 1th defendant, any work done or disbursements incurred were not the result of any instructions he g gave, but, instead, stemmed from Mr. Colson's own personal decision to go ahead with this work on his own initiative. As the 1st defendant would have it, the plaintiffs were, in effect, working on a contingency. basis, preparing a tax avoidance scheme in the hope the defendants would be interested in it. The incentive to t ha plaintiffs in all this, according to the 1st defendant, was the prospect of handsome fees if the defendants chose to implement the scheme. 12. In barest out-line, that states the position of the parties on the issue of whether there was a retainer. In a moment, I will dilate on events surrounding the all-important encounter between the 1st defendant and Mr. Colson on 10th December 1981. Meanwhile, I should, perhaps, add that while the issue of whether a retainer existed is dominant in this case, there cap also be subsidiary issues which only become of relevance if the fact of the existence of a retainer is first established. 13. Those subsidiary issues are the extent of the retainer, whether Mr. Colson and Mr. Hansen worked the number of hours they claimed in devising the tax avoidance scheme, and whether any instructions given by the 1st defendant were in his private capacity, in which event he w ill be personally liable, or whether they were given as agent for Berdaland, in which event Berdaland will be liable. 14. The 1st defendant and Mr. Colson first met at what was obviously a business lunch, hosted by Mr. K.C. Wong at the Mandarin Hotel on 2nd July 1981. 15. From having acted for a bank in granting a mortgage to one of the 1st defendant's Bermuda-based companies - Yeoman Ltd. Mr. Colson was already aware by the time of that lunch that the 1st defendant used Bermuda-based companies to hold real estate in Canada. As there is no double-taxation agreement between Canada and Bermuda, Mr. Colson, who is an expert on Canadian taxation, was mystyfied as to why the 1st defendant chose to have his company. hold its Canadian property in what seemed a tax inefficient way, so he broached the 1st defendant on the topic of off-shore holdings of Canadian real estate. 16. Either at the lunch on the 2nd July or at another lunch a fortnight or so later, Mr. Colson explained the advantages to the 1st defendant of Canadian properties being held by companies with a Dutch connection, which enabled advantage to be taken of the double taxation treaty in relation to capital gains 17. The 1st defendant was no greenhorn even then when it came to matters of tax avoidance. through off-shore holdings. Included in his group of companies was one incorporated in the Netherland Antilles for the purpose of holding property in North America in a tax-efficient way. Moreover, the 1st defendant was alert to the possibility of tax avoi-dance schemes generally. Two of his staff informed the court of his con-sulting a Canadian chartered accountant in Hong Kong to advise on a way of avoiding Canadian withholding tax. The 1st defendant is clearly a highly sophisticated businessman. 18. Whether or not the 1st defendant already knew of the double-taxation arrangement between Holland and Canada at the time Mr. Colson spoke to him on this topic at the lunches in July is of no real significance. 19. Immediately after the second of the lunches, Mr. Colson emote' to the 1st defendant :-
20. It was not until about 5th November 1981 that the 1st defendant decided to put Mr. Colson's abilities as a Canadian tax expert to the test. 21. In late October or early November 1981, Berdaland granted what was in effect an option to purchase the 524 property, exerciseable on or . before 30th April 1982. If the purchaser completed, Berrdaland stood to make a capital gain of C$4.6 m. on its original investment. That, in its turn, raised the spectre of the Canadian tax authorities seeking to levy capital gains tax. The rate of such tax being 25%, Berdaland was at risk to part with C$1.15 m. to the Canadian Revenue. 22. On or about 5th November 1981, the 1st defendant caused one of his staff, Mr. Lau (DW2) to put the facts of the Berdaland transaction to Mr. Colson for the purpose of obtaining his views on whether the Canadian capital gains tax could be avoided.This was not the first time Mr. Lau and Mr. Colson had had contact with each other, as Mr. Colson had been acting for a bank, while Mr. Lau had been attending to affairs of Berdaland, in a mortgage. transaction together. 23. Mr. Colson having discussed this Canadian capital gains tax problem with Mr. Hansen and the plaintiffs' senior partner who happened to be visiting Hong Kong, Mr. Colson reported to Mr. Lau by letter dated 10th November 1931 that there was really no way of avoiding the tax unless, instead of selling the property, the shares in Berdaland were sold, the latter being a course which clearly held no attraction for the 1st defendant. 24. The plaintiffs made no charge for that work. 25. According to Mr. Colson's recollection, Mr. Lau continued to ply him with queries about whether the tax could be avoided. Mr. Lau denies that. Mr. Lau, who emerged in evidence as a very obedient servant of his employer, is supported by the 1st defendant on this aspect. The 1st defendant's evidence was that, having been told by the plaintiffs in their letter of 10th November 1981 that tax could. not be avoided, he simply resigned himself to the prospect of paying. 26. The stag is now sufficiently set for considering the crucial meeting on 10th December 1981 between Mr. Colson on the one side and the 1st defendant, accompanied by Mr. Lau, on the other. 27. Much court tine was expended on seeking to show whether or not the 1st defendant had a good reason to be at that meeting, other than for the purpose of raising the topic of the imminent Canadian capital gains tax which Berdaland would have to pay if the sale of the 524 property went through on 30th April 1982. The plaintiffs contended the only reasonable explanation of the 1st defendant's being there was that he wanted to raise the important issue of the tax. He had never attended at the plaintiffs' office before, and there was no other business of sufficient moment to explain his being there. 28. According to the Defence, the 1st defendant did have a good reason to attend upon the plaintiffs in person: there were outstanding matter's of importance about the drafting of a mortgage to be resolved, and the 1st defendant's intervention was needed on this. 29. The pursuit of this collateral topic of whether the 1st defendant had a good reason, other than tax, for going to the Plaintiffs' office that day led completely nowhere. Such material as there was failed to give any indication as to whether his appearance at the plaintiffs' office that day was strange or not. 30. I will now set down the opposing versions of what happened in the plaintiffs' office that day. 31. According to Mr.Colson's version, it was the 1st defendant who took the initiative by making it clear that he was anxious for Mr. Colson's firm to find a solution to the problem of avoiding Canadian capital gains tax on the disposal of Berdaland's 524 property. Mr. Colson, not having given any thought to this problem since 10th November 1981 when he had concluded there was no way to avoid the tax, now explained to the 1st defendant and Mr. Lau that it would be very difficult to devise a solution. Despite the difficulty pointed out by Mr. Colson, the 1st defendant, nonetheless, urged him to work on a solution. Explaining further that finding a solution would be along, complicated procedure involving much research, Mr. Colson went on to add that his firm would have to start charging now.Moreover, because of the international dimensions of the problem, Mr. Colson pointed out that he would be consulting with outside lawyers. No reference ties made by Mr. Colson to how much the plaintiffs would be charging for. their services, and nothing was put into writing to record the extent of the retainer or an estimate of the costs. 32. A rather different version came from the let defendant who was substantially corroborated on this by Mr. Lau They say that, having accepted the plaintiffs' verdict on 10th November 1981 that there was no way to avoid the tax, they did not. raise this topic again. It was Mr. Colson who chose to revive this subject. Mr. Colson announced to them that Mr. Hansen had had second thoughts since the letter of 10th November, and while Mr. Colson remained pessimistic regarding the prospects of a successful avoidance scheme, Mr. Hansen was optimistic Mr. Colson went on to describe how there were still some minor points which needed to be clarified before a viable scheme was devised, but he hoped to be in a position to contact them further in due course when the feasibility of the scheme had been fully worked out. The 1st defendant and Mr. Lau listened politely, and without committing themselves in any way indicated they would be interested to hear if there were any develop-ments. Having been disappointed by the plaintiffs once with the negative reply of 10th November 1981, the 1st defendant and Mr. Lau were not all that hopeful of the plaintiffs coming up with anything this time, but if the plaintiffs did, they would listen. 33. Those are the opposing versions of what transpired at the meeting of 10th December 1981. 34. Some authorities were brought to my attention which seem to support's rule that where the word of a client is pitted against the word of a solicitor on the subject of-the existence or extent of a retainer, the word of the client is to be preferred because the solicitor has only himself, to blame for not forestalling such a battle of oaths: he should have seen to it from the outset that the retainer was adequately recorded in writing. Those cases are: Wright v. Castle;(1) Wiggins v. Peppin;(2) Allen v. Bone; (3) Crossley v. Crowther;(4) Bean v. Wade;(5) Blyth v. Fladgate; (6) Re Paine;(7) and Griffiths v. Evans.(8) 35. In some ways that sounds like a salutary rule, but I am far from sure it represents the modern law. Apart from Griffiths v. Evans,(8) where Denning L.J.'s remarks were obviously obiter, the cases are all rather old, and seem to be concerned largely with the weighing of affidavit evidence rather than viva voce evidence. 36. That the solicitor has not taken the precaution of seeing that his instructions are adequately recorded in writing is quite likely to give rise to adverse comment from the bench when it comes to evaluating the solicitors evidence, but I tend to doubt that the modern approach would be that the court should mechanically apply a rule which automatically results in the acceptance of the client's word. Certainly, as a matter of practice, the word. of solicitor who has neglected to cover himself by a written record about his retainer is to be treated with circumspection, but I would be surprised if the modern approach were to elevate that to a rule of law. 37. At least in non-contentious matters, no one. these days expects a solicitor to obtain a formal written retainer signed by the client. As Mr. Colson rightly pointed out the client will be insulted if you ask him to do that. The way it is done, however - and this is something that every well-trained solicitor learns very early in his career .7 is that the solicitor writes to the client after the initial interview, confirming what the solicitor is understanding of the instructions is. That way, there can never be any dispute that the solicitor is in principle entitled to charge fees, although, unless there is sufficient elaboration about the fees, there will still be scope for disputes as to quantum. 38. By failing to record anything about fees at the outset, the plaintiffs have not conformed with the ideal practice described in paragraph 16:1 of the. Hong Kong Law Society's Guide to Professional Conduct :-
39. Moreover, by omitting the elementary precaution of seeing to it that the instructions were recorded in writing, Ms. Colson has opened the way for what the Law Society of Upper Canada's Professional Conduct Handbook (Rule 10, Commentary 3) so eloquently. describes as one of those "misunderstandings respecting fees and financial matters" which, "bring the legal profession into disrepute and reflect adversely upon the general administration of justice". 40. A solicitor is expected so to arrange the client's affairs that the client will steer clear of disputes. That expectation is above all extended to disputes between the solicitor and client. In the same way as nothing lowers public esteem for the medical profession more than iatrogenic illness, nothing is more damaging to the legal profession's reputation than disputes between lawyers and their clients. 41. Because a solicitor has neglected to follow the sound practice of seeing to it that the client's instructions get recorded in writing does not necessarily mean that the solicitor will be debarred from recovering his fees in court. (See the Hong Kong Society's Guide to Professional Conduct, 16:6(1)). However, such a solicitor, not being without a certain measure of blame for opening the way through slack practices for this type of dispute to arise, must not be surprised if the court reflects it s view of his blame in the award of costs it makes, should he succeed in his action. As an officer of the court, a solicitor is well advised to follow sound practices which prevent controversies like the present one from ever arising. 42. Rarely these days will there be a dispute about a retainer where the court has nothing to go on but the oral assertions of each side. Normally, there will be correspondence, documents surrounding circum-stances and the like from which the court can draw inferences in its search for which side is telling the truth. Moreover, the court will also consider the inherent probability of each ride's version. 43. In the present case, the court is aided by being able to look at events both before and after the meeting of 10th December 1981. 44. Events occurring before the meeting of 10th December 1981 tend on balance to point towards the Defence version as the more likely. 45. The plaintiffs by their letter of 10th November 1981had come down fairly emphatically in favour of the view that nothing could be done about the Canadian capital gains tax Not long after that letter was sent, Mr. Hansen did undergo a change of view, so that ho became more optimistic about the prospects for tax avoidance. The factors I have mentioned in this paragraph are more consistent with Mr. Colson approaching the 1st defendant and Mr. Lau on the topic of whether it might be worth looking further into this capital gains issue, rather than the other way around. 46. However, the history of events subsequent to 10th December 1981 leads overwhelmingly to the inference that Mr. Colson's version,is to be preferred. 47. If what the 1st defendant and Mr. Lau say about never having retained the plaintiffs is true, then it is an utterly amazing circum-stance that Mr. Lau, acting on the 1st defendant's behalf, asked Mr. Colson to send in his bill as soon as it became apparent on or about 3rd February 1982 that the 1st defendant had decided against going ahead with the tax avoidance scheme. Asking a solicitor for a bill is about as unequivocal a piece of evidence as there could be that you have retained him. 48. The 1st defendant sought to explain away the request for a bill on the basis of friendship, courtesy and Chinese custom, rather than as an acknowledgement that services had been rendered at his request. That explanation by the 1st defendant struck me as nothing more than empty cant. The 1st defendant and Mr. Colson were the merest of acquaintances not friends; a perusal of the correspondence commencing with the letter sent to the plaintiffs on 9th February 1982 on the let defendant's instructions shows courtesy to have been super-ficial to the point of non-existence when the 1st defendant is concerned with money matters; a Chinese custom of paying for services which have not been ordered is wholly novel to me, and I suspect it has been invented ad hoc by the 1st defendant in an endeavour to explain away what is otherwise irrational conduct. 49. Not only did the 1st defendant ask for a bill, but, in a whole series of letters written by his agents between 9th February 1982 and 28th April 1982, he has impliedly acknowledged that he was in principle liable to pay the plaintiffs, the only dispute being about quantum. Several times in that correspondence he acknowledges he will. settle the plaintiffs' account once the details have been verified. Further implied acknowledgement that the plaintiffs have been working for him occurs in the passage the 1st defendant caused to be included in the letter of April 1st 1982 "....... a detailed list of dates on which you and your agents have rendered the aforesaid services to us". 50. It was not until 7th May 1982, at a meeting between Mr. Colson and the let defendant to try amicably to settle the bill that the 1st defendant for the first time came up with the suggestion that he had never retained the plaintiffs at all. That suggestion from the 1st defendant reeks of recent invention, and can in no way be reconciled with the preceding correspondence. 51. Having had ample opportunity to observe the 1st defendant. and his assistants in the box, and from my overall knowledge of the evidence in this case, I have little doubt that the let defendant would have told the plaintiffs almost immediately after the 3rd February 1982 that he had not retained them, and was therefore not obliged to pay them anything, if that in fact had been the position. 52. That the 1st defendant had in fact instructed Mr. Colson as, and when, Mr. Colson said he did is borne out by such correspondence as there is between 10th December 1981 and 3rd February 1982, as well as by. the conduct of the 1st defendant and his assistants. 53. For a. start, the mere fact that the 1st defendant gave the plaintiffs the name and telex number of his Bermudan lawyers on or before 17th December 1981. only really maces sense on the basis that the 1st defendant had already instructed the plaintiffs to research the tax avoidance scheme by then. Is it really conceivable that the plaintiffs were consulting the 1st defendant's Bermudan solicitors on Bermudan law unless the 1st defendant had instructed them to do so? Then there is the actual content of the plaintiffs' telex to the Bermudan lawyers on 17th December 1981 and of the plaintiffs' letter to Mr. Lau of the same date, enclosing a copy of that telex. 54. In that telex the plaintiffs state explicitly "We have been asked to advise the shareholders of Berdaland ........" 55. Far from supporting the 1st defendant's hypothesis that Mr. Colson had spoken of looking into some minor problems, that letter and telex show that the 1st defendant was made aware that the plaintiffs were looking into a complicated problem with Dutch, Canadian and Bermudan aspects to be researched'. 56. The sheer volume and complexity of the research that the plaintiffs undertook makes it intrinsically unlikely, in my view, that the plaintiffs would have embarked on such a feasibility. study unless they knew they had instructions from the outset. 57. Further support for the view that the plaintiffs did in fact have instructions is to be found in their long memorandum dated 20th January 1982 to the 1st defendant. The opening paragraph of that memorandum and the first sentence under the heading "Cost" both recite that the plaintiffs. have been working on this problem for a month. I think it hardly likely that lawyers who understood themselves to be working on a contingency basis would bother to bore the recipient of the letter with a detail like that. The more likely explanation for including that detail was that the plaintiffs knew and the 1st defendant knew that they had been working for him. 58. As the 1st defendant would have it, the plaintiffs were working on what layers commonly describe as a contingency basis. Less legalistically, this was referred to in the evidence as offering a package deal". The feasibility study, according to the Defence, was meant to result in the putting together of a package which the 1st defendant was free to accept or decline without any prior obligation. 59. There is no doubt from the 1st defendant's memorandum of 28th January 1982 that, at least by that date, he envisaged a scheme at an all-inclusive maximum price. Perhaps that is what he wanted all along. Such a scheme, though, is in no way incompatible with the plaintiffs having been retained by the 1st defendant to carry out the feasibility study. The Defence seemed to think that if. the 1st defendant had been thinking in terms of a package deal he could not. have retained the plaintiffs. 60. I think the allusions to "package deal" in the case were a red herring, and semantically, I think the word was used with different meanings at different stages. 61. According to the Defence, the big attraction to the plaintiffs in the contingency arrangement postulated by the Defence was the enorlsous fee the plaintiffs would collect if the scheme were implemented. Surprisingly, though, for someone who is supposed to be working for contingency fees, the plaintiffs are not to be paid a fixed amount but within a range - C$175,000 to C$225,000. Moreover, the 1st defendant may terminate the implementation of the proposal at. any time, paying the plaintiffs the actual costs incurred on a time basis up' to the date of termination... presumably, on the Defence version, time would only start to be clocked up from the moment the 1st defendant decided to implement, the scheme. 62. Do the Defence seriously expect anyone to suppose that the plaintiffs undertook work. on that basis? 63. Inherent probability, as I have already indicated, is against solicitors undertaking work of the magnitude the plaintiffs did here without firm instructions. Might there be something peculiar to the plaintiffs which might prompt them to embark on unsolicited work? It was vaguely hinted by the Defence that the plaintiffs, being new to Hong Kong, might have been short of clients, and so went off on a frolic of their own in the hope of making some money. Such a suggestion was clearly without the slightest foundation. The plaintiffs are obviously an immensely successful firm with highly prestigious clients. I think that has been part of the plaintiffs' undoing in the present case. Their clients are obviously the super-wealthy who do not need to question bills. This has allowed the plaintiffs to lapse into bad practices when it comes to tieing up the money side of dealing with clients. 64. Though Mr. Colson was far from the perfect witness, I preferred his evidence to the combined testimony of the 1st defendant and Mr. Lau on the material aspects of the existence of the retainer. 65. Mr. Lau gave me the impression of being so totally lacking in. independence that I could not feel his evidence added any weight to the 1st defendant's. I got the impression he was prepared to say whatever he thought would best help his boss. The same could be said of Mr. Lau too, but this was of no significance as his evidence was only on peripheral matters. 66. Mr. Colson, while being in my view a basically honest witness, was also at times rather vague or even caroless. I thought long and hard on his evidence before concluding in the light of all the evidence in the case that any unsatisfactory features in his evidence were attributable to nothing worse than carelessness. In particular, I was given cause to ponder by the following parts of his evidence:-
67. Mr. Hansen, whom I found to be an entirely reliable. witness, contradicted Mr. Colson on this. As far as Mr. Hansen was concerned, he treated the 1st defendant just like any other client. If, as Mr. Colson contends, he took special precautions in recording the work done for the 1st defendant, I find it surprising that he did not take the one step which would have really protected the plaintiffs, namely, writing the 1st defendant a letter with explicit details of work done to date, costs incurred so far, and.detailed estimates of costs for the future. 68. Further, Mr. Colson was net always as careful as he might have been in assertions ho made in correspondence with the 1st defendant over the bill. In his letter of 19th April 1982, Mr. Colson claimed, "Our records are designed so that we are able to tell our clients what we did and how much time we spent doing it on a daily basis". When the 1st defendant took the plaintiffs up on this in Berdaland's letter of 20th April 1982 and in subsequent correspondence, it quickly became apparent that Mr. Colson's description of the abilities of his firm's record-keeping system was exaggerated,. and he was not able to tell the 1st defendant what the plaintiffs had done and how much time was spent doing it on a daily basis:I was satisfied the records accurately showed the time spent on the 1st defendant's affairs, and I was also satisfied the records generally showed with varying degrees of precision what had been done without necessarily showing when it had been done, but the records were not up to the task of showing what the plaintiffs had done and how much time was spent doing it on a daily basis. 69. Despite my reservations about Mr. Colson as a witness, I concluded on balance, at the end of the day, that his version of events on the 10th December 1981 was correct, so I accordingly hold that the plaintiffs were retained. 70. The extent of that retainer is the next problem. It looks very much as if initially the plaintiffs' instructions were limited to devising a method for avoiding the capital gains tax in relation to Berdaland's disposal of the 524 property. 71. It is clear from the evidence as a whole that, on or about the 8th or 9th January 1982, or maybe even a few. days earlier, the 1st defendant impliedly consented to the retainer being expanded to include advising on the capital. gains position in relation to all the Canadian properties owned by all his off-shore companies. Thus, the plaintiffs I were required to consider the overall impact of Canadian capital gains tax in relation to Berdaland's other property i.e. the 601 property, as well as to advise or. the position of Yeoman Ltd. and Sun Ngai Ltd. 72. It would have been an artificial exercise for the plaintiffs to consider.the position of Berdaland's 524 property in isolation; their instructions from the 1st defendant obviously evolved as their research progressed. 73. At no point did the let defendant say words, for example, to the effect of ''I now instruct you Messrs Stickman, Elliott to consider how Berdaland's property known as 601 might be affected by Canadian capital gains tax'', but, I am satisfied, that it was mutually under-stood between the 1st defendant and Mr. Colson that the instructions were enlarged to include the companies and property I have mentioned. 74. From the let defendant's point of view, there was no sense in confining his instructions to Berdaland's 524 property. By extending his instructions to encompass all his companies owning land in Canada, the 1st defendant stood ultimately to save C$1.8 m. by way of Canadian capital gains tax, rather than just the C$1.15 m. arising from Berdaland's 524 property. 75. That the plaintiffs' instructions embraced all those companies and their Canadian properties I have referred to emerges as a matter of common sense inference from considering the contents of the plaintiffs' memorandum of 20th January 1982 and the 1st defendant's draft letter of 28th January 1982. 76. How much work did the let defendant want the plaintiffs to do and what could he reasonably be expected to pay for it? 77. I am satisfied that the let defendant gave the plaintiffs the go-ahead to come up with a solution to his Canadian capital gains tax problems, and obviously he has to pay them for costs he might reasonably have contempated they would incur. 78. If Mr. Colson had seen fit to follow the principles set out in the Hong Kong Law Society's Guide to Professional Conduct, the problem now presented to the court could never have arisen. I quote from that Guide, which embodies the wisdom distilled from the experience of generations of solicitors:-
79. Mr. Colson, apparently, works on rather different principles. In his own words,"We are not in the habit of contacting clients to bring them up to date with what we are doing". 80. There is no doubt that, ideally, the plaintiffs should have kept the 1st defendant better informed about what work was being done, and about the likely costs being incurred, but I do not think for one moment it would have affected the 1st defendant attitude about wanting the plaintiffs to continue with the work. The 1st defendant was playing for high stakes - a saving of over C$1.8 m. for his companies was in issue Considered in isolation, 044,000 odd for lawyers' fees might: at first blush sound a lot, but it is pretty small beer compared to the potential saving for the client. 81. To run up a bill of that magnitude without forewarning to the ordinary client would obviously be unacceptable in respect of most classes of business passing through a solicitor's office. However, the 1st defendant, as, a sophisticated businessman with an extremely complicated problem, and with much at stake, should not have been surprised at the size of the bill. Moreover, the solicitors were racing against a dead-line, so their failure to conform with the Hong Kong Law Society's recommended practices becomes more understandable. 82. I do not think that any of the work undertaker, by the plaintiffs was unnecessary. I am satisfied the 1st defendant kept leading them on to believe he would cause his companies to implement the scheme, so the plaintiffs were. merely acting reasonably in readying themselves for the implementation of the scheme. 83. I do not pretend to understand the plaintiffs' work-recording system. Mr. Colson has written long letters about it and much of his evidence was devoted to this topic. The only point that came across clearly to me was that the plaintiffs' do record the hours of lawyers' work performed for each client. How Mr. Colson compiled the list (Agreed Bundle 301-305) of points researched together with the approximate hours spent on each frankly eluded me,I gathered it included a large element of memory and guess-work. 84. By contrast, I had no problem understanding how the table of hours (Agreed Bundle 313-315) came into existence, and what is more, I accept it as honest and accurate. 85. I am satisfied that not only Mr. Colson and Mr. Hansen in Hong Kong, but also the lawyers in the plaintiffs' Canadian and London offices worked the hours claimed en the 1st defendant's problem. Moreover, the 1st defendant knew, so I an satisfied, that work of this magnitude was being performed for him. Further, he was made aware from the outset that disbursements like the Dutch lawyers' fees were being made on his behalf, and those disbursements do not go beyond what the 1st defendant should have contemplated. 86. If anything, the 1st defendant got off lightly with the bill ultimately presented to him. Through no fault of the plaintiffs, the 1st defendant decided not to go ahead with the scheme, but the plaintiffs, nonetheless, charged him not much more than two thirds of their normal time rate, taking the attitude that it might be unduly harsh to charge the full rate for work which ultimately proved of no benefit to the client. 87. The 1st defendant is the one who gave the plaintiffs their instructions throughout. It was suggested by the Defence that, should it be found the 1st defendant did give a retainer, then there should be a further finding of fact he did so on behalf of the 2nd defendant. I cannot go along with that suggestion. Rather than acting on behalf of the 2nd defendant, the 1st defendant seems to have been acting on behalf of himself and other shareholders in their private capacity. The 1st defendant's conduct in extending the plaintiffs instructions to include advising on the capital gains position with regard to Yeoman Ltd. and Sun Ngai Ltd. is not compatible with his acting for the 2nd defendant. The true position seems to have been that the 1st defendant was acting for himself and the other shareholders . including his wife and K.C. Wong in the Magna Group of private com- panies. 88. In view of the foregoing, I enter judgment against the 1st defendant for C$44,707.64, being the full amount claimed.
Representation: K.H. Woo (Deacons) for plaintiffs M. Bunting AW. Ling & Co.) for defendants (1)3 MER 12, page 5 (2)2 BEAV, page 1237 (3)(1841) 4 BEAV 493 (4)(1851) 9 HARE 384 (5)2 T.L.R. 157 (6)(1891) 1 C h 337 (7)(1912) 28 T.L.R. 201 (8)(1953) 2 All E.R. 1364 at 1369 |