Wong Sui Kwan v. Cheong Pui Fan
Read the full judgment text of DCCJ 4987/2004 on BabelCite. This District Court judgment.
1. The present two actions concern disputes between two practising solicitors in Hong Kong. Both actions are commenced by the Plaintiff Mr. Wong Sui-kwan, who was the founder and later a consultant of the solicitors firm, S.K. Wong & Lee〔黃萃群、李鉅林律師行〕 (the “Firm”) against the Defendant Ms. Angela Cheong, who has been an assistant solicitor, later a partner, and subsequently the sole proprietress of the Firm at the material times.
Cited by 4 cases · Cites 3 cases
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DCCJ 4987/2004 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO.4987 OF 2004 ________________ BETWEEN
AND DCCJ 5879/2004 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO.5879 OF 2004 ________________ BETWEEN
[Ordered to be tried together pursuant to the order of H.H. Judge Wong dated 30th May 2005] _________________ Coram: Deputy District Judge K.W. Wong in Court Dates of Trial: 13th to 17th, 22nd to 24th February, 2nd, 3rd, 8th, 23rd to 25th May, 10th & 24th June 2006 Date of Handing Down Judgment: 27th October 2006 ______________________ JUDGMENT ______________________ 1.The present two actions concern disputes between two practising solicitors in Hong Kong. Both actions are commenced by the Plaintiff Mr. Wong Sui-kwan, who was the founder and later a consultant of the solicitors firm, S.K. Wong & Lee〔黃萃群、李鉅林律師行〕 (the “Firm”) against the Defendant Ms. Angela Cheong, who has been an assistant solicitor, later a partner, and subsequently the sole proprietress of the Firm at the material times. Brief Background 2.The Plaintiff initially set up his law firm on 3rd October 1983 as a sole proprietor. Mr. Lee Kui Lam (李鉅林) (“KLL”) joined him as a partner on 1st January 1984 and the name of the firm was later renamed to that of the Firm. The Plaintiff later became a consultant to the Firm on 1st November 1992 and remained so until his departure on 30th August 2004. Despite his retirement and changes in the constituting partners of the partnership, the Firm’s name remained unchanged. The Plaintiff left the Firm and set up his own practice the next day (i.e.31st August 2004) under his own name, i.e. “S.K. Wong & Co.” (黃萃群律師行) and in group practice with Messrs. Hui & Lam 3.The Defendant joined the Firm as an Assistant Solicitor in September 1997 and became one of the four partners of the Firm on 1st January 2001. Thereafter, the partners left one by one. It is not in dispute that the Firm was hard-hit by the poor economy of Hong Kong during that time. Income of the Firm dropped substantially. Even the Senior Partner KLL chose to leave the Firm on 31st August 2003 and joined another firm as a consultant. On 1st September 2003, the Defendant became the sole proprietress with the Plaintiff as the consultant to the Firm. 4.After the Plaintiff had become the consultant to the Firm, the Plaintiff was entitled to be paid a commission by the Firm at the end of each month calculated at certain agreed rates on profit costs received in that month from all clients introduced by him. Such commission was applicable regardless of when the profit costs accrued. When the Defendant was one of the partners of the Firm, the applicable rates varied depending on what was left to be distributed to the partners and the consultant for that particular month. Basically, the more the partners could draw for that month the higher would be the Plaintiff’s rate of commission. The Plaintiff’s case is that the basic rate is 30% and it rises up stepwise to 50% according to the formula, depending on the net profit of the Firm. The Plaintiff would still be paid a concessionary rate of 25% even if the Firm was in red. It is the Plaintiff’s case that there was an express oral agreement between the Plaintiff and the Defendant in August 2003 that the old formula would continue to apply in consideration of, inter alia, his agreeing to continue as the consultant to the Firm after the Defendant becoming the sole proprietress of the Firm. This oral agreement was re-confirmed again on 1st September 2003. The Defendant had only paid him commission from September 2003 up to June 2004, leaving that for July and August 2004 outstanding. 5.Furthermore, the Plaintiff alleged that one of the several conditions of the said oral agreement was that the Defendant agreed to cease using his name as part of the Firm’s name when he left the Firm. 6.By DCCJ 4987/04 (“Commission Action”), the Plaintiff claims that the Defendant has failed and/or refused to pay him commission according to the agreed rates pursuant to the abovementioned oral agreement. He therefore seeks the Court’s order for the outstanding commission payments together with an account for ascertaining whether he has been paid the correct amount. 7.By DCCJ 5879/04 (“Name Action”), the Plaintiff claims that in breach of the said oral agreement, the Defendant continues to use his name as part of her firm’s name after 30th August 2004. The Plaintiff claims for damages, an order that the Defendant do remove his name from the Firm’s name and for an injunction restraining the Defendant from continuing using his name “S.K. Wong” or “黃萃群” as part of the Firm’s name. 8.The two claims are contested vigorously by the Defendant. She denies the existence of the oral agreement alleged by the Plaintiff. It is the Defendant’s case that they had agreed at a flat rate of 25% and that agreement was reached in or about October 2003. Basically what the Defendant alleges, as revealed in paragraph 6A of the Amended Defence, is that upon the resignation of KLL as partner on 31st August 2003, the Plaintiff did not leave the Firm. She also did not ask him to do so. The Plaintiff simply “stayed on” as a consultant of the Firm. The agreement on the rate of commission payable to the Plaintiff was only reached more than one month after his staying on. It was only in March and April 2004 when the billing of the Plaintiff was good that she agreed to pay him at 30% upon the Plaintiff’s request. It is the Defendant’s case the Plaintiff was retained on a month to month basis. She also denies existence of any agreement that she would cease using the Plaintiff’s name in the name of the Firm when he left. The Defendant admits that commission in respect of July and August 2004 is outstanding. However, by reasons of her alleged counterclaims, a defence of set-off is pleaded. 9.The Defendant lodges counterclaims in the Commission Action against the Plaintiff on substantial grounds. In essence, the Defendant complains that during June, July and August 2004, the Plaintiff, in direct conflict of interest with the Firm, actively engaged in the preparation for the setting up of the Plaintiff’s new firm in direct competition with hers, with a Mr. S. F. Wong (“SFW”), who at the material times was an assistant solicitor of the Firm. She also alleges that the Plaintiff has incited, solicited and conspired with SFW and one Mr. Yung Ho Kwong (“YHK”), an employee of the Firm, to breach their contracts of employment with the Firm by assisting the Plaintiff in the planning, preparation and setting up his new firm. There is also allegation that the Plaintiff actively solicited the Firm’s clients to transfer their business to his new firm. The Defendant also alleged that the Plaintiff had also during the said three months period, improperly and willfully discounted client’s bills. She claims for damages and asks for an injunction restraining the Plaintiff from attempting to pass off his new firm as a continuation of, or as a successor to her firm, or as associated or connected with hers, by the use of the name “S.K. Wong & Co.”. The new firm opened by the Plaintiff was exactly on the same floor of the Hang Seng Building as the Firm. It is not disputed that the Defendant moved out of the Hang Seng Building to 7th Floor of Club Lusitano on Ice House Street on 29th April 2006, after the trial has commenced. The name of the Firm was changed in the middle of this trial by deleting “& Notaries” from the description as there is no longer any notary working in the Firm after the Plaintiff’s departure. The Defendant also accused the Plaintiff has unreasonably and substantially discounting bills, acting in breach of his implied contractual obligations to the Firm. 10.The grounds of counterclaim are framed under the following three heads:
11.It is pleaded in paragraph 22 of the Amended Defence the following terms are implied into the contract between the Plaintiff and the Defendant:
It is fair to say that many of the above terms said to be implied into the relationship overlap with those in a fiduciary relationship (see paragraph 13 below). The particulars of breach of the above terms relied on were the same as those for breaches of fiduciary duties as set out in paragraph 9 above. 12.The Plaintiff relied on the alleged oral agreement in defence of the counterclaim. Furthermore, the Plaintiff’s position is that the nature of his relationship to the Firm does not give rise to fiduciary duties or those implied terms. He said since the time he became a consultant, and up until the time he departed, he was sort of a freelance practitioner who introduced business to the Firm which then provided the necessary workforce to complete the job. The profit costs generated would then be split between him and the Firm at certain agreed rates. He describes his relationship with the Firm as “symbiosis” whereby both parties derive benefit from such arrangement. He is neither an employee nor a partner of the Firm. He has got his own business registration certificate at the material times and has to pay for his own MPF contribution as a self-employed person. Defendant’s Pleaded Case of Fiduciary Relationship 13.The issues raised by the Plaintiff are simple, straightforward issues of facts. However, the issues raised by the Defendant are more difficult and complicated. It is the Defendant’s case that the relationship of the Plaintiff as a consultant to the Firm gives rise to a fiduciary relationship whereby the fiduciary, i.e. the Plaintiff, owes onerous duties to the beneficiary, i.e. the Defendant. These duties, as pleaded by the Defendant, include:
14.Although in the evidence of the Defendant she said she now on reflection regarded the Plaintiff as her employee, it is not her pleaded case that the employment gives rise to fiduciary relationship. The foundation upon which the Defendant alleges giving rise to a fiduciary relationship is pleaded in section 21A of the Amended Counterclaim as follows:
15.Senior Counsel Mr. Ambrose Ho for the Plaintiff submitted that in Hong Kong quite a number of law firms have consultants. Many of them are neither employees nor partners. According to Mr. Ho S.C., the practice of consultants attaching themselves to certain law firms to carry out their businesses, serve their own clients using those firms’ resources and split the income is indeed very commonplace in Hong Kong. Both the law firms and the consultants can be mutually benefited from such arrangements. Many consultants are consultants to more than one firm. A list comprising names of over 60 of such consultants/partners having the so-called “multiple roles” is also exhibited. Since the distinguishing features of a fiduciary are the obligations of loyalty and fidelity, if consultants are held to owe fiduciary duties to the law firm and are restrained from taking away their clients or their clients’ business from those firms, there will be very serious adverse repercussions in the whole market places. 16.The archetype of a fiduciary relationship is of course the trustee. There are also other classes of persons that have been recognized by the court to stand in a fiduciary relationship to one another – e.g. partners to co-partners, principal and agent, employer and employee, directors and company, solicitors and client. As the Defendant’s pleaded case is not premised on an employment relationship, I will not approach the relationship on such basis despite her allegation in the evidence that she considered the Plaintiff’s her employee. However, there is no reason to suppose that the fiduciary categories are closed. In Hong Kong, there have been judicial authorities that partners and employees of a solicitors firm do owe fiduciary duties to co-partners and their employers e.g. Kao Lee & Yip v Koo Hoi Yan & Others [2003] 3 HKLRD at 296 and Deacons v White & Case [2003] 3 HKLRD 670. However, there has been no decided case on whether a consultant to a law firm owes fiduciary duty to the firm. Mr. Ho S.C. for the Plaintiff submitted that this is perhaps the first of this sort in Hong Kong coming before the court for determination. 17.Ma J (as he then was) in Kao Lee & Yip stated that it is important to recognize that how the fiduciary duties are applied to the facts in any given case can only be determined by reference to the nature and character of the particular relationship in question. He went on to say by way of example in the context of solicitors’ firm at page 313:
18.As acknowledged by Mason J (now NPJ of the CFA) in Hospital Products Ltd v United Surgical Corporation (1984) 55 ALR, High Court of Australia 417 at 454, the courts have declined to define the concept of fiduciary relationship and prefer to develop the law on a case by case basis. As such, in order to see whether the Plaintiff owes the alleged onerous fiduciary duties to the Defendant, and if so, the extent, one has to distill the essence or characteristics of this particular relationship from some of the leading decisions and to examine carefully the nature of the parties’ relationship and their contractual setting in order to find out whether elements of fiduciary duties exist. Credibility of Witnesses 19.The parties, who are practising solicitors and officers of the Court, have given two diametrically different stories concerning whether the oral agreement alleged by the Plaintiff exists. Furthermore, the ascertainment of the arrangement between them, both before and after the Defendant has become the sole proprietress of the Firm, are particularly important because the ultimate analysis of whether a fiduciary relationship exists hinges on the resolution of these factual issues. Credibility and reliability of witnesses are therefore very important. The truthfulness of their evidence will be tested against contemporaneous documents, or the presence or absence of them, and other undisputed or unchallenged evidence. 20.For both actions, the Plaintiff and one Miss Cheung Yuen Siu, Monica (“Monica Cheung”) gave evidence for the Plaintiff’s case at trial. The Defendant is the only witness for her case. The Plaintiff filed three witness statements respectively on 25th April 2005, 26th August 2005 and 13th February 2006. Monica Cheung filed a witness statement on 26th August 2005. The Defendant filed three witness statements respectively dated 25th April 2005, 26th August 2005 and 6th February 2006. Save and except some amendments made to the statements which I consider not material, the Plaintiff and Monica Cheung adopted all their statements while the Defendant only adopted the last two statements as her evidence in chief. They supplemented their evidence by further oral evidence. Both parties rely on two bundles of documents (“Documents Bundle”) the authenticity of which is not in much dispute. I therefore accept all these documents as evidence, subject to attaching of weight to them after hearing evidence from witnesses. 21.Whilst I do not find it necessary to resolve each and every single factual dispute, I would like to make some general observations as to credibility of the three witnesses. Their evidence, including their cross-examination and in particular the two parties, has taken up much time (about ten days) of this trial. 22.Monica Cheung joined the Firm as an accounts clerk in November 1988 and promoted to the position of accountant in 1989. She left the Firm in mid September 2003 after about 15 years of service. She did not work for the Defendant while the latter was the sole proprietress of the Firm. On 31st August 2004 she joined the Plaintiff’s firm. Her evidence was mainly on how the Plaintiff’s commission was calculated according to the applicable rates as well as the practice and authority of the Plaintiff after he had retired as consultant. She illustrated by way of examples how the Plaintiff’s commission was worked out according to a document called “Rider A”. This document recorded the agreed rates of commission before the Defendant became the sole proprietress. She also testified that some of her former colleagues had to sue the Firm before they could get back certain termination compensations. Her evidence was basically unchallenged. After observing her giving evidence in the witness stand my assessment is that she is that kind of a truthful and honest witness. I accept her evidence on all the major points she testified. 23.The Plaintiff was a very experienced solicitor and was first admitted to practice in Hong Kong in 1977 and later also in other jurisdictions. He is also a member of the Law Society’s disciplinary board, a Notary Public and a China Appointed Attesting Officer. No doubt he is a successful solicitor, both in terms of his achievement in the profession and his earning as revealed in the evidence. He was in the witness stand for 6 days and the cross-examination lasted for almost 4 days. I notice from the unchallenged evidence of the Plaintiff that quite a substantial part of the Plaintiff’s practice is in litigation and conveyancing. He was observed to be careful in his answers, and is a cautious, meticulous and tactful person. In general, when he was answering questions on matters which the Defendant had no direct knowledge, e.g. his past arrangement with the Firm on commission, handling of files when KLL was still the senior partner of the Firm, it was the existing staffs who approached SFW for employment, the two preparatory meetings were held in the afternoon of Saturday etc, I find his answers straightforward and coherent. However, for reasons that I shall discuss in the context of the oral agreement, I must say that I am not impressed by and in fact have difficulty to accept his answers on how his oral agreement with the Defendant came about. When faced with questions put to him in the cross-examination about why he did not see fit to put the alleged agreement in writing, which I think goes to the heart of his case, I find his answers evasive and unsatisfactory. His explanation on why he wrote his note dated 12th March 2004 in the manner it appears now is dubious and unconvincing. The clear and obvious meanings of the Notice do not tally with his avowed purpose of writing the Notice. 24.The Defendant, though only admitted in Hong Kong in 1997 and thus is relatively junior as a solicitor, was in fact called to the English Bar in 1990 and admitted as an advocate and solicitor of Malaysia and Singapore in 1991 and 1995 respectively. She joined the Firm as an assistant solicitor in September 1997. She became one of the four partners of the Firm in January 2001 doing mainly commercial works. She was in the witness box for four days and was under heavy cross-examination for three days. Her performance in the witness box is unsatisfactory. She is obviously over-cautious and evasive. One of these examples is revealed when she was referring to the two notes in her handwriting in pages 699 and 700 of the Documents Bundle. When she was cross-examined, she initially regarded the two notes contained her scribbles for brain storming only and were meant to be informal. However, it was also her evidence that both she and the Plaintiff had in the course of that discussion stated what had been exchanged was subject to contract. It will be difficult to envisage that when two persons were engaged in a really informal discussion, they would care to say to each other from the outset what would say was “subject to contract”. She has given me the impression that she will try to play down the importance of whatever evidence relied on by the Plaintiff. Like the Plaintiff, she also tried to avoid answering sensitive questions. Furthermore, many of her answers in relation to the two notes were not contained in her witness statements and came out for the first time in the cross-examination. Some of these answers even changed as the trial went along. Having observed her in the witness stand for four days, she gives me the impression that she is evasive and non-committal as to her answers and is too smart to avoid answering sensitive questions. However, for reasons that I shall discuss in the context of the existence of such agreement, I still prefer to accept the Defendant’s version on the commission arrangement between the parties. In considering the truthfulness of a witness’s evidence, as I have stated above, such evidence will be tested, as far as possible, against undisputed or unchallenged contemporaneous documents. I will not merely placing reliance on a witness’s performance in the witness box. 25In fact, the Defendant does not put in much direct evidence to challenge that part of the evidence on how the Firm was run and its arrangement with the Plaintiff from the establishment of the Firm up to the time she was admitted as partner. It is her case that she was not bound by the various agreements reached by the former partners with the Plaintiff as she was not a party to these agreements. Her position is that those arrangements were irrelevant. She also does not put up much factual evidence to contradict the Plaintiff’s evidence and explanation of the dealings between the Plaintiff and his clients and in the setting up of the Plaintiff’s new firm. What is in dispute is the explanation each party attaches to such facts. So although I do not accept the Plaintiff’s evidence on the existence of the oral agreement on commission and removal of name, I still accept most of the other part of the Plaintiff’s evidence because they are basically unchallenged. Evidence of the Parties The arrangement between the Plaintiff and the Firm prior to the Defendant becoming the sole proprietress 26.As I have said above, this part of the evidence was mainly given by the Plaintiff and was, by and large, unchallenged. It was also supported by the evidence of Monica Cheung. It sets out the background leading to the much disputed events in 2003 and 2004. 27.According to the Plaintiff, the history of the Firm is this. Initially the Plaintiff set up his own practice on 3rd October 1983 in the name of S.K. Wong & Co. as a sole proprietor. Later on 1st January 1984, KLL joined as the other partner of his firm. The Chinese name of KLL was added to the name of the partnership but its name in English remained unchanged until January 1992 when it adopted that of the Firm. On 1st November 1992, the Plaintiff became a consultant to the Firm and remained so until 30th August 2004. In the meantime up to 31st August 2003, KLL was the senior or the dominant partner of the Firm despite several changes to the constitution of the partnership. Some of the changes and events that are relevant to the present proceedings are as follows:
28.Before the Plaintiff became a consultant, clients brought to the Firm by the Plaintiff would be his clients and the files opened would bear his distinctive initial “SKW” in the reference while those introduced by KLL would be KLL’s clients identified by his distinctive initial “KLL” in the file reference. The Plaintiff and KLL each had a complete free hand and unfettered authority in how much their respective clients were to be charged. All clients introduced by the Plaintiff were treated as his clients and likewise, all clients introduced by KLL would be treated as his. They did not have to consult each other on this, nor could they override the other’s decisions. 29.Such system continued after the Plaintiff became the consultant as from 1st November 1992. According to the Plaintiff, he and KLL agreed that those clients bearing SKW’s references would be treated as his clients for the purpose of calculating commission. He would be entitled to commission at the rate of 40% on profit costs received from those clients regardless of when such costs accrued. In case of development project introduced by the Plaintiff to the Firm, the rate of commission shall be subject to negotiation of a higher rate. A memorandum dated 12th October 1992 concerning the rights and obligations of the Plaintiff as a consultant and KLL as the sole proprietor was signed (“1st Memorandum”) (page 185 of the Documents Bundle). It is noted that paragraph (f) of the 1st Memorandum stipulates: “without the agreement of SKW, the firm [Firm] shall not (a) admit partner, nor (b) change its name nor (c) merge with another firm.” 30.If the same client introduced by the Plaintiff comes back with another piece of work, the new instruction will be dealt with by opening of a new file bearing the reference initial of “SKW”. The profit will then be split according to the agreed rate of 40%. This arrangement, “once SKW, always SKW” with regards to clients and commission generated also applies to clients brought to the Firm by KLL, and thus, “once KLL always KLL”. The Plaintiff’s evidence was that they gained “proprietary rights” over clients introduced by them to the Firm. After the Plaintiff’s retirement, any walk-in clients would belong to KLL and be referenced accordingly. 31.In anticipation of So joining the Firm, the Memorandum was amended by deleting paragraph (g) and amending paragraph (f) by adding “(which shall not be unreasonably withheld)” after the word “SKW”. The amended Memorandum was signed by the Plaintiff, KLL and So on 23rd October 1992 (“2nd Memorandum”). Originally paragraph (g) of the 1st Memorandum stipulates that:
The Plaintiff had expressly stated that by this paragraph (g), he was not required to diligently attend to the Firm’s business and devoted his whole time and attention to it. So also wanted to be exempted likewise if he joined the Firm. At the end all decided that there would not be a requirement that each party had to diligently attend to the Firm’s business and devote his whole attention to it. All of them therefore signed next to the deletion of the entire paragraph in the 2nd Memorandum. 32.The Plaintiff said that after he had become the consultant to the firm, there had been a sea change in his status and relationship vis-a-sis the Firm. Upon advice of his accountant he took out his own business registration certificate with the business undertaken being “consultant”. He did not need to bear the loss of the Firm. The Firm did not make any contribution to his MPF. He made his own contribution as a self-employed person. He was neither an employee nor a partner of the Firm. He was not paid any basic or fixed monthly payment nor was he covered by any compulsory employees’ compensation policy taken out by the Firm. It is not in dispute that in the tax return submitted to the Inland Revenue Department by the Defendant, he was not described as an employee. He was not required to abide by instructions contained in the Firm’s “Office General Standing Instructions” (“S.I.”) issued by the Firm such as the working hours of the Firm nor was he restricted in any way as to the number of holidays he was entitled to. He described himself as a free-lance practitioner attached to the Firm, using the Firm’s workforce (both professional and general) to provide services to his clients. He said that he was under no duty to introduce clients to the Firm. By this arrangement, the Firm can also be benefited as it can retain between 50% to 75% of the profit costs (see the following paragraphs) from his clients. The Plaintiff described their relationship whereby both parties can mutually benefit from each other as “symbiosis”. 33.When PKK joined as partner in 1994, the Plaintiff alleged that PKK and KLL had signed a memorandum (“3rd Memorandum”) whereby PKK agreed to be bound by the 1st Memorandum and the 2nd Memorandum. Mr. Lo, counsel for the Defendant, did not concede that the 3rd Memorandum had been signed because the exhibit (page 188 of the Documents Bundle) did not bear their signatures. However, as the Defendant has not put in any evidence to contradict the Plaintiff’s evidence in this respect, I accept it as fact that the 3rd Memorandum was duly signed as alleged and the relationship between the Plaintiff and the Firm remained unchanged after the joining of PKK. 34.It is the Plaintiff’s evidence that after the 1997 handover, the economic climate changed substantially. Under the then arrangement, the Plaintiff would still be receiving 40% regardless of the profit of the partners of the Firm. In early part of September 1998, he discussed with KLL and offered concession on his commission. After some discussions, basically a five-tier scale was agreed between KLL on behalf of the partners of the Firm and the Plaintiff. A document in his and KLL’s handwritings, bearing the words “Rider A” (“Rider A”) came into existence. 35.According to the Plaintiff and Monica Cheung, the new formula works this way. If the net income of the partners remains in the positive domain and is below $150,000, the Plaintiff is entitled to receive commission calculated on costs collected on files bearing SKW reference for that calendar month at the rate of 30%. If the partners are entitled to profits of up to $300,000, then his rate of commission will be 35%. It has been agreed that before this tier kicks in the partners are entitled to retain out of the profit a reserve for the Firm a sum of $110,000. The rates of 40%, 45% and 50% kick in when the profit of the partners rises up to $450,000, $800,000 and over $800,000 respectively. It is the Plaintiff’s case that as long as the clients are producing costs, he will continue to receive commission on costs generated. However, if the Firm is in red, the Plaintiff will receive his commission at a “concessionary rate” of 25%. I shall refer the formula contained in Rider A the Rider A formula. 36.At trial, Monica Cheung said that while she was the accountant of the Firm, she applied every month the Rider A formula and calculated the commission to which the Plaintiff was entitled and drew cheque accordingly for signature of KLL. She also gave the Plaintiff documents showing how much the Firm had received from the Plaintiff’s clients and let him have the profit and loss accounts of the Firm of that month. Monica Cheung illustrated the application of the Rider A formula according to certain hypothetical figures put to her. In the illustration, the total income of the Firm was $2,000,000; the overall expenses of the Firm was $700,000 and costs collected from the Plaintiff’ clients being $500,000. Monica Cheung said that the gross profit of the Firm would be $1,300,000. She would then apply the rates stepwise to see whether the commission rate adopted fell within the corresponding profit bracket. Since by applying the rate of 50% the partners could still get $940,000 as profit after deducting the Plaintiff’s commission of $250,000 (50%) and reserve of $110,000, the applicable rate was therefore 50%. 37.When PKK retired from the Firm, no fresh agreement regarding the Plaintiff’s commission entitlement was made. This Rider A formula continued to apply. 38.Both the Plaintiff and Monica Cheung said after Ada Sze and the Defendant joined the Firm, the above arrangement concerning commission and clients referencing between the Plaintiff and the Firm remained unchanged. It was not in dispute that when Ada Sze, and the Defendant joined as partners together with FCK and KLL, the four of them signed a Memorandum dated 19th December 2000 (“4th Memorandum”). The 4th Memorandum provides in paragraph 5 the following:
39.Ada Sze left in March 2001, less than three months after joining. I have no hesitation to accept the Defendant’s evidence the reason for her leaving the partnership is because she had no drawings at all for two months immediately after joining. The economic condition in Hong Kong was so bad that for a period of six months from November 2001 to April 2002, the Plaintiff and the partners agreed on a different rate of commission. The Plaintiff said that in early November 2001 KLL came to him saying some partners had problem with their income because the costs collected by the Firm had dropped. Since he was the founder of the Firm, he agreed to pool his commissions together with the Firm’s overall income and share with the remaining partners (KLL, FCK and the Defendant) together, as a concession for a period of six months. The ratio of sharing was embodied in a documents dated 24th November 2001 signed by Plaintiff and the partners of the Firm (page 195 of the Documents Bundle”). In short, the four of them were to share the first available profit of $100,000 in equal shares, beyond which each person would be entitled to a different proportions depending on the profit amount. It is noted that the Plaintiff has the highest rates among the four when the profit exceeds $100,000. At the end of the day, for the first three months each received something. However, for the last three months they received nothing as the Firm was in red. It was the Plaintiff case that his entitled rates of commission reverted back to the Rider A formula after this six-month period. 40.Hong Kong was plagued by SARS in 2003, and so was the business of the Firm. KLL told the Plaintiff in May 2003 that because of the increasing overheads and downturn of the Firm’s business, he felt it would be too difficult for him to continue carrying on the Firm’s business. He announced he would be leaving the Firm by the end of August that year when the tenancy of the Firm was due to expire. 41.I believe that the Plaintiff was the person who made decisions about how much “SKW” clients were to be charged. Such practice remained unchanged throughout, even after the Defendant had become the sole proprietress of the Firm and up to 30th August 2004. However, for reasons I shall discuss in this judgment, the Rider A arrangement remained unchanged only up to the time KLL left. 42.As I have stated before, since the above are basically unchallenged, I accept the above evidence of the Plaintiff and Monica Cheung as my finding of facts in these proceedings, subject to what I have stated otherwise. The Lead-up to the Making of the Alleged Agreements Asserted by the Respective Parties The Plaintiff’s version 43.The Plaintiff’s version is this. According to his statements that he had adopted, around end of June or early July 2003, KLL told him and staffs of the Firm that he would be joining another firm of solicitors as consultant. Notices of termination of employment were sent to most of the Firm’s staffs by end of July 2003. 44.On knowing KLL was really committed to his plan of leaving, the Plaintiff, SFW and one Mr. Eddie Chui Ka Fai (“EC”) discussed the possibility of setting up a new partnership, with the Defendant as a consultant, to continue running the Firm’s business. However, at KLL’s suggestion, the partnership plan was revised to include the Defendant. A draft memorandum (page 695 of the Document Bundle) was prepared by them and given to the Defendant in or about August 2003. 45.In the proposal, the Plaintiff would be a partner instead of a consultant, of the proposed partnership. He would also be taking the lion share of profit as well as liability. SFW and the Defendant would have equal share of profit in the new set-up while EC would take on a little bit less when the distributable profit exceeded certain level. The proposal also included a term that the Plaintiff would have veto power in all decisions relating to the partnership affairs and matters. It is also provided in the said draft that upon dissolution of the partnership, the goodwill of the partnership including the partnership’s name goes to the Plaintiff. 46.According to the Plaintiff, the proposal did not receive the Defendant’s welcome. In the afternoon of 7th August 2003 the Defendant went to his room to discuss the terms of the proposed partnership. The Defendant did not want the Plaintiff to be a partner. She wanted the Plaintiff to remain as a consultant to the proposed partnership. She then proposed to have 60% stake of the partnership and SFW together with EC would take up equally the remaining 40%. She requested the Plaintiff to give her a chance running the new partnership. On his request, the Plaintiff said the Defendant wrote down on a piece of paper her proposed terms of the new set-up (page 699 of the Document Bundle). Seven points were jotted down. This piece of paper was given to him (“1st Proposal”). In the evidence in chief, the Plaintiff highlighted two points in the 1st Proposal. They were point 3 “SKW remains on the same terms” and point 7 “SKW’s say in MOA”. The Plaintiff said upon receipt of this 1st Proposal, he wrote down “7/8/03” on the right hand corner and “(firm name)” at the end of point 7 in the presence of the Defendant. 47.The Plaintiff said that the purpose of writing down “(firm name)” at the end of point 7 was to remind her that if he was to leave the Firm, his name would go with him. He said the reference to MOA, which stood for “memorandum of agreement”, was not meant to be a reference to past memorandum as contented by the Defendant but to future memorandum to be drawn up by the proposed partnership. The Plaintiff said the Defendant gave her assurance by saying “of course, of course” and said that that had always been the case. 48.The Plaintiff’s said that the Defendant requested the Plaintiff to stay with the Firm for two years as consultant because the landlord requested the tenancy to be renewed for two years. He said he would agree to it on the basis that he could leave by giving one month notice. The Defendant proposed six months or otherwise she would have no confidence in running the business and to renew the tenancy with the landlord. The Defendant also said she wanted his business to support the Firm’s business. 49.The Plaintiff then brought back the 1st Proposal and asked SFW and EC about their views. They both indicated that they would prefer to become salaried partners instead. So on the next day, i.e. 8th August 2003, the Plaintiff spoke to the Defendant again to convey the two gentlemen’s response to her. She agreed that they would become salaried partners and wrote down on another piece of paper some of her proposed basic terms: $30,000 salary, 20% (meaning 20% of profit as commission) on files introduced and discretionary bonus. The Plaintiff then took with him this second piece of paper and conveyed the Defendant’s proposal to SFW and EC (“2nd Proposal”) (page 700 of the Document Bundle). 50.The two gentlemen’s counter-proposal was: $30,000 per month as salary, 30% commission on files introduced by them, discretionary bonus, a letter of indemnity, the Plaintiff to have the final say, and dissolution on notice. It was the Plaintiff’s case that SFW wrote at the lower portion of the 2nd Proposal their proposed terms except the two dates of “8/8/03” and the words “Dissolution on Notice”, which were put down by the Plaintiff. The Plaintiff said the date 8/8/03 on the top right-hand corner was written by him in the presence of the Defendant while the rest in the presence of SFW. 51.The Defendant appeared not very happy with this counter-proposal. There was then not much progress on the intended partnership in the following days. 52.The Plaintiff said that towards the end of August 2003, on one occasion when he had negotiation with the Defendant in trying to find a solution, he suggested to the Defendant to renew the tenancy with the landlord for one year and then to have a review at the end of the term whether she would continue to run the business. 53.In paragraph 49 of the Plaintiff’s witness statement (page 165 of the Documents Bundle) in the Name Action, he said a few days before the end of August 2003, the Defendant came to see him again in his room. She told him that she had decided to renew the tenancy with the landlord for one year. The Plaintiff had this to say in his said statement,
54.The above was supplemented by paragraph 32 of the Plaintiff’s 2nd statement in the Commission Action (page 140-15 of the Documents Bundle). 55.The Plaintiff reiterated in paragraph 50 of his statement in the Name Action (page 166 of the Documents Bundle) that in August 2003 when he was talking to the Defendant about the proposed partnership, he had emphasized to the Defendant his right to take his name with him and the new set-up should cease using his name as part of its name if he was to leave the Firm. The Plaintiff’s grounds are quoted as follows:
It was the Plaintiff’s case whenever he said to the Defendant that he would take away his name and the Firm had to remove his name from the Firm, the Defendant gave him the assurance and said that that had to be the case. 56.The Plaintiff said upon reaching the said oral agreement as stated in paragraph 53 above, the Defendant went to have the tenancy renewed for one year. 57.In the end, in the afternoon of the 1st September 2003, she gave the two gentlemen offer letters for salaried partners without a letter of indemnity (pages 701 to 702 are the said offer letter to SFW). Billing target of $120,000 was set for each of them. It was the first time these two gentlemen learned of such target. Both of them thought the Defendant not very honourable. Coupled with the unpleasant negotiation throughout, they refused to become salaried partners but preferred to be assistant solicitors. 58.The Plaintiff went on to say in paragraph 53 of the statement in the Named Action (page 167 of the Documents Bundle) that in the afternoon of 1st September 2003 and after the situation of SFW and EC had became clear, i.e. they would rather be assistant solicitors of the Firm of which the Defendant was the sole proprietress, he again confirmed with the Defendant in his room the terms of the said oral agreement upon which he agreed to remain as a consultant of the new firm. He said the Defendant acknowledged and confirmed. 59.The above is basically the Plaintiff’s version of how the alleged oral agreement came about. The Plaintiff further stated in his 1st witness statement in the Commission Action that this agreement was acted upon by the Defendant. 60.It is undisputed that:
The explanations of the parties regarding (ii) to (iv) are different. 61.He said usually commission of a calendar month would be paid by the end of that month or one to two days thereafter. In early October 2003, he had to chase up the Defendant for the commission of September. The Defendant replied that she had a cashflow problem. The Plaintiff asked that she should first pay him $15,000 by depositing the money into one Allied Winner Enterprises Limited (“Allied”) because that would be used to pay his driver. That sum was paid on 3rd October 2003. He continued to chase up for the balance. It was at last paid on 16th October 2003. He added by the end of September 2003, he had already got a list of his files with commission calculated at 25%. 62.Again for the commission of October 2003, he received his list of files with commission calculated at 25% by the end of October 2003. He received the fist part of his commission of $86,184 on 3rd November and the balance of $20,000 on 6th November 2003. He was told by the Defendant the delay was caused by cashflow problem. 63.He said in January 2004 the reserve which the Defendant was entitled to retain out of the profit was agreed to come down to $55,000. The March and April 2004 commission was calculated at 30% simply because the Firm’s income for those two months was in black, not on special request as alleged by the Defendant. He said he was not given any profit and loss account by the Firm’s accountant except for the months of March and April 2004. It could be shown that the Firm had distributable profits for the two calendar months fell within the 30% bracket according to the Rider A formula. 64.The Plaintiff said that there were unhappy incidents that make him lose any confidence in the Defendant. The examples quoted by him include:
65.He therefore decided to leave. On or about Friday, 12th March 2004, he invited the Defendant to lunch at a restaurant Hunan Garden in Central. It is his evidence that during that lunch he informed the Defendant:
66.The Plaintiff said in view of the unpleasant experience that SFW and EC had with the Defendant previously, he believed it prudent to put on record of the said oral notice he served on the Defendant during the said lunch. He therefore wrote a note dated 12th March 2004 (“Notice”) (page 205 of the Documents Bundle”) and delivered the same to her personally on 15th March 2004 in her room. It is the Plaintiff’s case that the Defendant said nothing on receipt of the Notice. It is useful to set out the content of the Notice:
67.After service of the Notice, the Plaintiff said that he had met the Defendant several times and spoke about his departure. The Defendant had never expressed her objection to the removal of his name nor had she challenged the existence of the said agreement. The Defendant did not even respond to his letter of 8th September 2004 when he asked the Defendant to remove his name from that of the Firm by that letter. Defendant’s version 68.The Defendant’s version was entirely different, and can be summarized as follows. She became one of the four partners of the Firm on 1st January 2001. The other three partners were KLL, FCK and Ada Sze. Before she became a partner, KLL had explained how the commission of the Plaintiff was calculated although she did not understand fully. 69.To her surprise, for the first two months after she became a partner, i.e. January and February 2001, there were no drawings for partners at all but the Plaintiff as consultant could still had drawings from the Firm. She said although she considered the arrangement between the Firm and the Plaintiff unfair and unfavourable to the partners, a nil drawing for partners was not something she expected before joining the partnership. This upset very much Ada Sze who demanded a meeting of partners and the Plaintiff regarding, inter alia, the Plaintiff’s arrangement with the Firm on commission. It was the Defendant’s case that the Plaintiff did not agree to any change to his commission arrangement. She could recall Ada Sze soon left the meeting in tears. Ada Sze left the partnership in mid-March 2001. 70.She admitted that she and Ada Sze had been shown Rider A by the Firm’s accounts department. She said in some situations, the Rider A formula did not work well. There might be situations when applying the rate of 25% some surplus for distribution to partners might occur and so the next tier of 30% should bit. However when the higher rate was applied the Firm might be in red and accordingly, the lower rate ought to be engaged. This made the formula difficult to apply. She understood KLL allowed, in a passive manner, Monica Cheung to continue calculating the commission according to the Plaintiff’s understanding in order to avoid a complete fallout with the Plaintiff. 71.She understood that KLL and FCK tried hard to negotiate with the Plaintiff on his commission arrangement. Their effort resulted in the new arrangement for six months from November 2001 to April 2002 during which the partners and the Plaintiff shared the profit of the Firm according to another formula. There is no dispute on the formula being that referred to by the Plaintiff. However, all of them did not have drawings for the last three months (February, March and April, 2002) of this six-month period because the Firm was in red. After this six-month period the original arrangement resumed. However, the Plaintiff’s receipted billings suddenly went up and he received substantial commission at a high rate. It was the Defendant’s case that her other partner FCK was so frustrated that he decided to leave the partnership. FCK complained that he had not received a fair share of the Firm’s profit. FCK left in October 2002. 72.The Defendant said that by the end of 2002 or in early part of 2003, KLL was still trying hard to reach a new arrangement with the Plaintiff regarding commission on the partnership’s behalf. He produced a document entitled “Simple and Stupid Proposal” which KLL believed would make the expenses and income of the Firm distribute in a fairer manner (page 680-10 of the Documents Bundle). The partners and consultant of the Firm were participants of this proposal. The Defendant said that the negotiation broke down which resulted in the Plaintiff coming to see her and discussed the formation of a new partnership without KLL. That did not materialize. 73.Some time in 2003 KLL told her that he got the impression the Plaintiff was going to leave the Firm because he was then actively working with Monica Cheung on statistics and tables. He got the impression the Plaintiff was serious. It was the Defendant repeated evidence in the witness box that KLL “was panic” and “got panic”. So KLL decided to leave the Firm and announced the same in July 2003. KLL comforted her that he would do whatever he could so that she could continue with the Firm. She also thought the Plaintiff would be leaving too. However, by middle of August the Plaintiff seemed not leaving. 74.Regarding the 1st and 2nd Proposals, the Defendant disclosed her case in the examination in chief for the first time. She said by mid August 2003, SFW and EC came to her room and said they were interested to be partners and proposed to her a draft note which the Defendant said “looked like the one on page 695 of the Documents Bundle”. She said she could not confirm because she had not kept copy of the document given her. 75.The two gentlemen had by then been terminated by KLL. The Defendant said she was very surprised to receive this proposal, as they had never discussed with her anything on the proposed partnership. She said it did not look right for assistant solicitors to tell the partner that they would be partners. She did not responded immediately as she was in the middle of some work. She considered that the proposal might have been initiated by the Plaintiff. About two days later she talked to the Plaintiff but he said he had nothing to do with the proposal. He said it was SFW and EC’s idea. He said he preferred to remain a consultant as he did not want all the hassles and liability. That was why he retired long ago from the partnership. He suggested the three forming a partnership. She did not believe it completely but said to the Plaintiff “let’s have a frank discussion”. 76.In the examination in chief, it was the Defendant’s evidence that when the Plaintiff was talking, she jotted down what he had said in her writing. So the 1st Proposal was the Plaintiff’s ideas, not hers. That is how the 1st Proposal came into existence. 77.She continued in her examination in chief that in response to the invitation of the Plaintiff on the same occasion, she took out another piece of paper and wrote down at the top part. Three points were mentioned. They concerned the two gentlemen’s terms as salaried partners. This was how the 2nd Proposal came into existence. She denied having seen the Plaintiff writing the dates and other words on the two pieces of papers as alleged. She reiterated that the two notes were her scribbles for brainstorming. They came into existence on the same date, not on two different dates as alleged. She said both parties said the discussion was subject to contract. The Plaintiff said he would convey the message to the two gentlemen. 78.There were to and fro discussion between the Defendant and the two gentlemen who said they were very happy to be salaried partners. Finally they reached an agreement. Offer letters were given to each of them on 1st September 2003. However, about three to four days after 1st September they came back and said they were worried about liabilities. They requested separate indemnity. The Defendant disagreed and said to them that it was they who requested to be salaried partners. Negotiation broke down and they preferred to be assistant solicitors. Agreement was later reached for them to be assistant solicitors. She prepared letters for the two gentlemen to sign on 9th September 2003. 79.;She denied having reached any oral agreement with the Plaintiff on the commission and removal of name a few days before end of August 2003 and on 1st September 2003 as alleged. Shortly before she became the sole proprietress of the Firm, KLL had told her that she should not agree to continue with the Rider A should the Plaintiff decide to stay on after August 2003. So it would be impossible for her to accept the Plaintiff continuing his relationship with the Firm using the Rider A formula. This was the root problem that made all her partners leave her. 80.She adopted a sort of wait and see attitude and thought the Plaintiff would approach her on the matter of his commission. Towards the end of September 2003, the Defendant said the Plaintiff came to her. They started talking about what rate of commission should be paid to the Plaintiff. It was her evidence that both considered Rider A too complicated and there was too much room for argument. Since Monica Cheung had left, they wanted something simple in all parties’ interest. Initially the Plaintiff wanted a higher percentage of 30%. She said she could not afford it in view of the expenses they had. She would have four assistant solicitors spending most of their time assisting the Plaintiff on his files and her commercial works. She said at the end they reached a compromised rate of 25%. She said it was a fair and reasonable rate. 81.The negotiation started by the end of September 2003 and finalized by mid-October 2003. It was reached shortly before the second payment of the Plaintiff’s September commission on 16th October 2003. 82.She said in respect of commission for September, since no agreement on the commission rate was reached by early October, she agreed to pay initially a sum of $15,000 in favour of Allied upon request of the Plaintiff. It is not in dispute that this $15,000 was for payment of the Plaintiff’s driver and not for any hire purchase or car rental. The balance was paid to him once the agreement on the rate was reached. She denied having any financial problem by end of September 2003. She had maintained some $0.35 to $0.5 million personally for the purpose of the Firm. 83.For October’s commission, she said that the splitting of cheques might be due to time lag in banking in cheques from clients. It had nothing to do with the Firm’s financial position. She produced bank statement in order to show that the Firm had sufficient money in early November to pay the Plaintiff’s commission. She also denied the Firm having issued the list of files for the Plaintiff’s commission in early October 2003 as alleged by the Plaintiff. 84.She also denied having discussed with the Plaintiff on the reduction of reserve from $110,000 to $55,000. 85.The Defendant said the agreed rate of 25% worked well for the first six months. By end of March 2004, the Plaintiff got a very good month in that the receipted costs from his files were substantial. He came to see the Defendant asking for a higher rate. She agreed in view of the good billing of the Plaintiff. 86.The Plaintiff asked the same again for April 2004. Although the billing for that month was not very good, it could be regarded as reasonable and therefore she agreed to the 30% request. 87.The Plaintiff came to her and asked for 30% again for that of May 2004. She declined and said he had to stick to the agreed amount. 88.Concerning the lunch which the Plaintiff said to have had with her on 12th March 2004, the Defendant’s response was that she could not recall. It was because she used to have lunch with the Plaintiff together some once or twice a month. However she categorically denied the Plaintiff having talked to her anything as alleged. She did not recall whether she had received the Notice in March 2004 (page 205 of the Documents Bundle). 89.Regarding the letter from the Plaintiff issued to her in September 2004, she explained at that time the Plaintiff had written a lot of letters, including complaint letters to the Law Society. She was busy responding to all these letters. She was also depressed and was not physically well. She simply did not have the energy to reply. Discussion 90.It is obvious that the two witness statements relied on by the Defendant lack a lot of details which are important and which only came out in her examination in chief and during cross examination. The Defendant’s explanation was that she was under time constraint and had instructed a new firm of solicitors late. The solicitors firm had already done a fantastic job. 91.The Defendant was heavily and extensively cross-examined on the 1st and 2nd Proposals in her own handwriting for the obvious reasons that if it can be shown that the Defendant has ever acknowledged the Plaintiff’s right to have his name back and the old arrangement remains unchanged, it will be more probable that the oral agreement asserted by the Plaintiff exists. It also affects the Defendant’s credibility as a whole. This part of the evidence is not contained in any of her witness statements, not even in her last statement dated 2nd February 2006, which is made less than two weeks before trial. 92.As can be seen from above, she initially testified to the effect that the 1st Proposal was entirely the Plaintiff’s idea and the top part of the 2nd Proposal was hers. However during cross-examination she said that the 1st Proposal was something jotted down by her after they had some discussion. The discussion was informal but they all saw fit to state from the outset that the discussion was “subject to contract”. There were also some inconsistencies on how each of such entries came about. For example, for the 2nd line of the 1st Proposal, it was stated, “40% for SF [SFW] & EC [EC], 60% CPF [the Defendant]”. The Defendant explained shortly before lunch break on the 10th day of trial that the opening shot came from the Plaintiff. It was 50% for the Defendant and 50% for SFW and EC. She added that since she also joined the partnership with a low percentage, she therefore also proposed a smaller percentage to start with. For the sake of discussion she proposed 40% for the two gentlemen and 60% for herself. 93.However, in the afternoon of the same day she was again cross-examined on the same subject. After having talked about each partner’s monthly drawing of $30,000 for the first profit bracket, which was a compromise between the Plaintiff and the Defendant, she said she proposed 70% - 30% and the Plaintiff countered with 50% - 50%. She put down 60% - 40% purely as an agenda for discussion with the two gentlemen. This version of the opening shot coming from her was different from the version advanced by her in the examination in chief, not to mention that this part is totally absent from her statements, and is inconsistent with her evidence in the morning. 94.In addition, her response to point 3 of the 1st Proposal was obviously evasive. She was apparently trying to avoid answering sensitive questions and gave inconsistent answers. It may be useful to set out point 3 here: “SKW [The plaintiff] remains on same term”. A series of questions have been put to her to the effect that if she considered the commission arrangement unworkable, impractical and unfair, why she did not see fit to raise objection there and then when the Plaintiff raised this issue. It was because otherwise it would mean that the new partnership would have to abide by the same Rider A formula which she and KLL considered objectionable. Her response was that they did not actually at that meeting talk about the Plaintiff’s commission with her. She went on to say these terms were not final and was purely for brainstorming. 95.It would be difficult to imagine that this term does not raise an eyebrow. When she was further cross-examined whether there was any discussion, her initial answer was “not to my recollection”. As the cross-examination went on her answer changed to “we did not go into details on point no.3” and “no detailed discussion” and later to “He wanted to stay on the same terms as a consultant, yes. That’s what he said. That’s what I wrote down.” When further pressed she said, “He wanted to stay on the same terms as a consultant, yes. That’s what he said. That’s what I wrote down. … But I told him, “not on the same commission…”. 96.Obviously the Defendant was trying to avoid answering these series of sensitive questions with a view to minimize the impact of these two notes on her case. I must say this part of the Defendant’s evidence is evasive and unreliable. However, for reasons set out in the following paragraph, it does not mean the Plaintiff’s evidence in this respect is reliable. 97.The Plaintiff’s oral evidence is that he asked the Defendant to write down her proposal in a note and this was how the 1st Proposal came about. They are entirely her proposal. In paragraph 36 of his witness statement in the Name Action (page 161 of the Documents Bundle) he says,
98.However, it is noted in paragraph 37 of the same statement (page 162 of the Documents Bundle), the Plaintiff states:
99.There is apparent inconsistency in these two paragraphs. So even the Plaintiff also admitted that at least one of the paragraphs of the 1st Proposal was arrived at after some discussion. This part of the Plaintiff’s written evidence is contrary to the Plaintiff’s oral testimony in the witness box. 100.In the witness box the Plaintiff appeared to paint a picture that the terms in the 1st Proposal were some things or ideas volunteered by the Defendant. In light of these discrepancies, the Plaintiff might not be also telling the truth, or the whole truth. Both parties appear to have testified to the effect that, at least for the 1st Proposal, the contents are arrived at after some sort of discussion and not something volunteered from the other side. 101.The Defendant was asked whether there was any further discussion after writing “8” on the 1st Proposal. She initially said there was none on that occasion. However after having been reminded by counsel for the Plaintiff twice, the Defendant then realized something missing from her answer. After pausing for some while, she began to say that the Plaintiff invited her to state her ideas. She then wrote the 2nd Proposal. 102.In the examination in chief, it was the Defendant’s evidence that the 2nd Proposal was written without discussion. In the cross-examination, initially she said the three points on the 2nd Proposal was “initiated” by her, despite being asked whether there was discussion. She later conceded that she jotted the three points down after discussion with the Plaintiff. She admitted that the manner in which she wrote down the three points was similar to that when she wrote down the points in the 1st Proposal. 103.The fact that the Defendant’s evidence on the two notes is unacceptable does not mean that the Court will automatically accept the Plaintiff’s evidence about the existence of the alleged oral agreement on commission and removal of name. 104.It is fair to say that after reading the Amended Statement of Claim, the Plaintiff’s own witness statements and the written submissions of the Plaintiff’s counsel, the Plaintiff’s case was framed on breach of an oral agreement reached shortly before end of August 2003 and confirmed on 1st September 2003 when it was clear that she would be a sole proprietress. It was his evidence that without the agreement he would not have stayed on with the Defendant as consultant. It was not his pleaded case, nor his alternative case, that the old arrangement continued to bind the Defendant in default of any express agreement. This oral agreement is the only basis for the Plaintiff’s Commission Action and the Name Action. He also acknowledged that this agreement was important to him because the Firm was a new set-up. It is therefore useful to refer to the relevant part of the Plaintiff’s witness statements which the Plaintiff has adopted as his evidence on the conclusion of the oral agreement. Paragraphs 49 and 53 of the Plaintiff’s 1st statement in the Name Action (pages 165 and 167 of the Documents Bundle):
105.I must say that the Plaintiff had not condescended in his pleadings, witness statements or evidence in chief to particulars on the exchanges between the parties which he concluded to constitute the said oral agreement. Neither the date, nor the gist of the conversation which forms the terms of the oral agreement, were given. The Defendant has provided no or no sufficient further and better particulars of this oral agreement despite request. The best particulars seem to be those stated in his three statements. 106.In fact the Plaintiff had been cross-examined more particularly on the last six lines in paragraph 12 of his witness statement on page 116 of the Documents Bundle on the 4th day of the trial. In that part of the statement the Plaintiff wrote,
The questions put to him was, “who else was present on that occasion and whether he was referring to an occasion”. The Plaintiff’s answer is this:
107.The followings are the gist of the questions and answers following on the above answers:
108.From the answers above, I consider the Plaintiff unable to particularize how this oral agreement came about. Initially he was referring to a process but somehow he also referred to an occasion on which the three terms were agreed or reaffirmed. He was shifting between the “process version” and the “occasion version” and is not specific. Furthermore, when asked about whether it has been specified what terms are referred to as the “same terms” on that particular occasion, he then went back to the history and repeated, inter alia, from the 1st Proposal. He was ambiguous as to whether the agreement was one that was reached after a process of negotiation or is an agreement concluded at a particular meeting or a hybrid of both. 109.It is the Plaintiff’s evidence that the Defendant needed his business and without which she would find it difficult to survive. In the cross-examination the Plaintiff said it was a serious degree of necessity. It was his case that she asked him to stay on as a consultant. Given the fact that he was also the founder of the Firm, it is fair to say that around the time the alleged oral agreement was about to be made, the Plaintiff was in a good bargaining position vis-à-vis the Defendant. The Defendant needed his support to her business which was then in an embryonic stage, if at all conceived. It will be difficult for the Defendant to refuse acceding to any request from the Plaintiff to record their agreement in writing. 110.Furthermore, the Plaintiff is observed to be a cautious person. From what has been set out in paragraph 107 above, the Plaintiff admitted such is his character. It is his evidence that in view of the fact that the Defendant was not very honourable and because of the other unhappy or unpleasant incidents more particularly stated in paragraphs 61 and 64 above, he considered it necessary to write the Notice reminding the Defendant the gist of what he had told the Defendant at Hunan Gardens. In fact according to the facts advanced by the Plaintiff, on previous occasions upon a change of the partnership of the Firm, the new partnership always acknowledged in writing among them the Plaintiff’s rights. There were also other written documents drawn up or kept by the Plaintiff evidencing certain agreed arrangement e.g., Rider A, the memorandum recording the departure from the Rider A commission arrangement for 6 months, the Notice dated 12th March 2004, etc. In addition, according to his evidence, the Plaintiff was very concerned about his name and did not want it to be tarnished. So for such an important agreement which concerns his commission arrangement and name it will be inconceivable that the Plaintiff did not even keep any contemporaneous documents about the agreement. It will be unusual and unconvincing that he does not see fit to ask the Defendant for a written acknowledgement, especially it is not expected that the Defendant will put up any resistance if he asks. In fact it is not his evidence that he did ask and was declined. His evidence suggests that he has never asked! 111.The Plaintiff was in fact crossed-examined on this subject. When he was asked why the oral agreement was not put into writing at that time, he repeated his story from the time SFW and EC handed to the Defendant the draft memorandum for a partnership involving four of them, to how the 1st and 2nd Proposals came into existence, then to the time the Defendant coming into his room on which occasion he advised the Defendant to renew the tenancy for one year. Then the Plaintiff said, “… a continuation after the partnership in 2001, …FCK left, there was no new agreement, Ada Sze left, no new agreement.” Upon further pressing, he said, “I’ve explained the background. It is basically the Defendant and myself. …it seems to be a continuation of the firm except leaving on reasonable notice.” His answers to these questions are entirely unsatisfactory. I consider what he had said not answers to the questions. 112.The Plaintiff is also observed to be meticulous and a careful person. He saw fit to record what he said during the 12th March 2004 lunch in the form of a note and then handed the same to the Defendant personally in order to remind her. He also made contemporaneous remarks of when and how he handed the Notice to the Defendant at the foot of his record. The contents of the Notice were reproduced in paragraph 66. It is also useful to set out the handwritten remarks he has made on his own copy (page 205 of the Documents Bundle) here:
113.Obviously, the lunch meeting was important to the Plaintiff otherwise he would not have reduced that into writing and sent the Notice to remind the Defendant. From what he had remarked he also considered it necessary to record accurately when (about 11:55 am in preference to a general description of noon) he gave the Notice to the Defendant. He also considered necessary to record the reason as to why it could not be given on the same date as the lunch. It can be inferred that he anticipated he might in future need to refer to this lunch meeting and the circumstances under which the Notice was given to the Defendant. So he jotted down these remarks to remind himself. From the tone of the Notice, it was written in a legalistic manner and not meant to be a casual reminder. 114.However, despite the fact that he saw the importance of recording the contents of what he had told the Defendant, and somehow trying to be accurate in everything, as revealed in the way he recorded the time, it is strange and unusual that in the Notice he makes no reference to any oral agreement which he alleges to have existed between them. 115.Furthermore, in paragraph 2(c) of the Notice, he wrote this,
116.Paragraphs (a) and (b) of the Notice refer respectively to his leaving by the end of August 2004 and taking away of his name upon his departure. A fair reading of paragraph (c) means that although he is not obliged to give the Defendant notice in advance of the two matters stated in paragraphs (a) and (b), the purpose of informing the Defendant is purely out of good intention. The meaning of such Notice suggests that the Plaintiff considers himself not under any obligation to give notice to the Defendant. This is contrary to what he has contended now – reasonable notice needs be given. 117.However, when the Plaintiff was cross-examined on this Notice, his answer was that “in advance” means “long length of time” and “5½ months long length”. In addition, “not obliged to” means “not obliged to give such long length as notice”. Accordingly, paragraph 2(c) means “although he was not obliged to give such long length of notice of 5½ months to the Defendant, the purpose of giving such long notice of the above matters was entirely out of good intention”. The meaning changes from originally, “not obliged to give any notice” to “not obliged to give such long notice”. I do consider that one really cannot arrive at the meaning now asserted by the Plaintiff without doing violence to paragraph 2(c). His explanation was artificial and unacceptable. 118.If there were really an agreement to give reasonable notice, given the careful and meticulous character of the Plaintiff and his previous conduct in this matter, it is reasonable to expect the Plaintiff to refer in the Notice that he had already given the Defendant sufficient notice pursuant to their agreement or something to that effect and not resorted only to his good intention. The absence of any reference to any oral agreement in this Notice makes the Plaintiff’s story unbelievable. 119.Towards the end of the cross-examination of the Plaintiff, he was asked a question on why he did not see fit to state the agreement in the Notice. The gist of his answers can be summarized as follows:
I am totally unimpressed by his answers and consider the same entirely unsatisfactory and unconvincing. 120.Furthermore, according to the Plaintiff’s evidence, the oral agreement was entered against a background that the Defendant has no confidence to renew the tenancy of the office premises for two years. She wanted him to stay on for two years and if he was to leave, the notice required was six months. The Plaintiff, however, preferred one month notice. The Plaintiff’s evidence is that the Defendant claimed if the notice period was as short as one month, she would have no confidence to renew the tenancy with the landlord. The parties finally agreed on “reasonable notice”. 121.I have doubt to accept the Plaintiff’s evidence in this respect. There bounds to be a lot of uncertainties as to how long a notice constitutes reasonable notice. Given the notice period in their minds are far apart, there is simply too much room for argument on the length of notice required if the parties really agree on “reasonable notice”. If the Defendant really needs the Plaintiff’s business to keep the new firm afloat, I have serious doubt that the Defendant would be contented with “reasonable notice” and relied on the same to renew the tenancy. It does not appear sensible the Defendant will accept the reasonable notice term. By accepting the Plaintiff leaving upon “reasonable notice”, her concern has not been addressed and worries not alleviated. There is simply no guarantee that the Plaintiff would stay on with the Firm for the whole term of the tenancy. The Plaintiff can still leave the Firm together with his clients anytime upon notice before expiry of the tenancy. The oral agreement on reasonable notice is unconvincing. 122.Turning to the commission received by the Plaintiff each month during the period from September 2003 to June 2004, in a nutshell it is the Plaintiff’s case that the old arrangement continues to apply by virtue of the oral agreement. Accordingly, the basic rate of 30% should be applicable. It is only when the Firm is in red that the concessionary rate of 25% applies. The Defendant said the rate was agreed at 25%. Such negotiation started by the end of September 2003 and was concluded in mid October 2003. That was why the commission for October 2003 was split. The Plaintiff attributed the split to cashflow problem as told by the Defendant. For the commission of March and April 2004, the Plaintiff said the rate of 30% was simply the result of application of Rider A. The Defendant, however, claimed that the higher rate was the result of negotiation on individual month basis. These are basically the parties’ positions. 123.The Plaintiff said he was only given the profit and loss statements of the Firm for March and April 2004 (pages 326-9 & 326-10) but not those for other months from September 2003 to August 2004. The payment of 30% of the commission for March and April 2004 tallies with Rider A. Therefore, the Plaintiff contends that the rates for these two months support the existence of the oral agreement. However if it were the Plaintiff’s case that he was not given the profit and loss accounts for other months, question arises as to how the Plaintiff was in a position to ascertain whether he had been paid his fair share of commission each month. According to the Plaintiff, after the departure of his most trusted partner KLL, the Firm became a new set-up. The expenses pattern and overheads therefore must have changed. It is not in dispute that the Firm’s size has also decreased. Therefore, in order to ascertain whether he has received his commission according to Rider A, it is fair to expect that the Plaintiff would take some actions in this respect for verification. However, after reading the Plaintiff’s three statements and hearing his evidence in court, except the incident discussed in the following paragraph, there appears to be no evidence at all showing that he had ever chased after the Defendant, or the accounts department of the Firm for verification evidence. 124.The Plaintiff’s explanation was that he simply trusted the Defendant’s accounts department without verifying against the firm’s profit and loss accounts (page 117 of the Documents Bundle). Furthermore, in paragraph 16 of his 1st statement in the Commission Action (page 118 of the Documents Bundle), he said that he stated in a voucher for November 2003 the words “subject to verification” against his signature. The Plaintiff’s evidence was that for that month, he was asked by the clerk of the accounts department to acknowledge receipt of the cheque for commission. He therefore wrote these words to indicate that he needed supporting documents showing the profit and loss status of the firm in order to verify that he had been paid the correct sum. That is the only piece of evidence from the Plaintiff in support of his contention that the payments he received for the ten months since September 2003 were subject to final verification. 125.The Plaintiff produced certain records (pages 693-1 to 694-5 of the Documents Bundle) which he said were compiled by him every month, both before and after KLL’s departure. In these documents the total costs of the Firm, costs derived from his files and his paid commissions were recorded. It is noted that the costs received by the Firm as per those recorded in the two profit and loss accounts for March and April 2004 and those recorded in these records of the Plaintiff were exactly the same. Furthermore, these documents were basically unchallenged. It can be inferred from these records that the Plaintiff did have some means to know the Firm’s profit and loss. He somehow was able to come up with certain remarks based on the information for his own reference. The documents reveal a picture which is somewhat different from that painted by the Plaintiff. 126.From these records, it is interesting to note that apart from the total costs of the Firm, he jotted down certain remarks under the remarks column for the ten months period from September 2003 to June 2004. It is noted for the month of December 2003, January and February 2004, it was written by the Plaintiff in the remark boxes, inter alia, respectively the following: “(to reserve) à$20k”, “(to reserve) à $36k±”, and “reserve $39,000”. I can find on page 694-4 of the Documents Bundle that for the month of August, 2003, it has been written in the remark box with “surplus: Nil”. The rate of commission for August 2003 payable to the Plaintiff, according to his own record, is 30%. So even there is no surplus, by application of the Rider A formula the Plaintiff is entitled to 30%. However, the Plaintiff’s own records suggest that there was surplus for the month of December 2003, January and February 2004, yet he was paid only 25%. Is it not the Plaintiff’s case that the Rider A formula continues to apply after the Defendant has become the sole proprietress? Is it not the case that 25% only applies when the Firm is in red? If that were the case, for the month of December, January and February when the Firm had surplus according to the Plaintiff’s own record, is it not the case that the Plaintiff would be paid 30% instead of 25%? Why did not the Plaintiff ask? The logical inference is that the agreed rate is 25%. 127.The said records were only disclosed in the middle of trial. The Plaintiff also did not elaborate on these remarks nor was he asked many questions on them. It can be argued that without the Plaintiff’s own clarification, one really cannot be able to come up with a firm conclusion on the matters in the preceding paragraph. However, given the above discussion on the existence of the oral agreement alleged by the Plaintiff, and the lack of evidence concerning the Plaintiff asking for documents to verify his commission during his 12-month stay with the Defendant, his evidence on how he was paid his commission since September 2003 should be treated with skepticism. The picture painted by the Plaintiff is doubtful. 128.On the other hand, according to the bank statement shown by the Defendant (page 681-9 of Documents Bundle), it cannot be said that she experienced financial or cashflow problem as at early November 2003. The balance brought forward from October is about $298,000, which is more than sufficient to pay the Plaintiff. The account balance fluctuated from $167,000 odd to $740,000 odd during the month of November 2003. At any rate the account balance at any time of the month is sufficient to pay off the Plaintiff’s October commission. On a balance, I believe the split cheques for the October commission are caused by events other than cashflow. 129.Senior Counsel for the Plaintiff invited this Court to draw an adverse inference on the fact that the Defendant had failed to produce evidence, which was entirely within her power to do so, to show that she had no financial problem in early October 2003. Even if, which I am not prepared to do so, such inference can be drawn, it is only one of the many considerations that go to the weighing pans for determination of whose evidence is more reliable. I do not consider such inference, if really drawn, is sufficient to tip the balance in favour of the Plaintiff. 130.During cross-examination, the Defendant admitted that in fact the rate of 25% reached between the Plaintiff and the Defendant by mid-October 2003 has further term. At that time, the market was bad. However, there was an understanding between the parties that if the market improved, they could discuss again about the applicable rate. This part of the evidence, again, is not contained in her witness statements. Basically her explanation was that her solicitors had done a fantastic job given the time constraint and she did not want to disclose what transpired between her and her legal advisor. The Defendant’s evidence in this respect is obviously unsatisfactory. However, in considering whether there is an agreement in term as asserted by the Defendant, I will take all the evidence and circumstances into consideration in doing the balancing exercise. I have reminded myself that in exceptional circumstances, I may come to the conclusion that either version of events cannot satisfy the balance of probabilities: see paragraph 6-07 of Phipson On Evidence, 16th ed, 2005. As discussed above, I have to say that the Plaintiff’s evidence on the oral agreement was so unbelievable that even I find many of the Defendant’s evidence unsatisfactory, I have to reject that part of the Plaintiff’s evidence in respect of the oral agreement. After some doubt and hesitation and after taking into consideration all the evidence in this case, including the analysis of evidence set out in the closing submission filed on behalf of the Plaintiff, I prefer to believe that the Defendant’s version on the commission arrangement. The Defendant’s version of story on the commission arrangement is not inconsistent with the documents disclosed, while the Plaintiff’s version is. 131.By reasons of the above, my findings of facts are as follows:
Events That Occurred Prior to his Departure from the Firm 132.The facts on these areas as listed below were not in much dispute although the parties’ explanations were in much dispute. As the Defendant did not much adduce positive evidence to contradict the factual evidence of the Plaintiff, so unless otherwise stated by me, whenever the Plaintiff’s evidence in these areas conflicts with that of the Defendant, I prefer that of the Plaintiff, unless otherwise stated by me. 133.Some time in April 2004, he met Mr. Lam of Messrs. Hui & Lam which was also situated on the same floor of the Hang Seng Bank Building as the Firm. He suggested to the Plaintiff to consider starting a group practice with his firm. According to the Plaintiff, serious discussion started in early June 2004. As regards when he had serious discussion with Mr. Lam I have doubt as to the time asserted by the Plaintiff. It is because according to his letter to the Law Society applying for setting up of a new firm, he did at the same time apply for approval to operate a group practice with Hui & Lam. That letter was dated 4th June 2004. Given group practice involves arrangement on sharing of common facilities and office, I doubt very much whether they could come up with an agreement in only four days in June 2004. However, as the Defendant was in no position to challenge this part of the evidence, and this part of the evidence is immaterial and not in dispute, I accept that they roughly entered into serious talk on the group practice in or about early June 2004. 134.Towards the end of June 2004, he drew up his plan to start his new practice, which was a group practice with Messrs. Hui and Lam with office situated on the same floor of the building as the Firm. The name of his new firm was “S.K. Wong & Co., Solicitors and Notaries” and was approved by the Law Society. He started engaging designers to renovate office and negotiating tenancy matters. These plans were in writings. There is no dispute that many of the documents were found in the room of SFW and were seized by the Defendant in or about end of July 2004. The Defendant then summarily dismissed SFW. 135.In a checklist dated 30th June 2004, he put down “moving files in private” and “closing files in private” (“page 473 of the Document Bundles”). The Plaintiff admitted several boxes of files, company kits and magazines were removed before he left. His explanation was that it merely means removing documents in respect of his own private personal properties like Law Society magazines, and title deeds, documents and company kits the custody of which had been entrusted to him by their owners who were either his close friends or relatives. Since he was about to leave the Firm, he would like to take these documents and company kits out of the office of the Firm as soon as possible. He would also like to arrange for the registered office of these companies changed from the Firm’s address to other address. If no actions were to be taken in respect of these files, then he would arrange to have them closed. So “in private” used in both phrases did not, he contended, connote the meaning of misappropriation or doing something secretly. It was the problem of his English. In fact in another action plan referring to the same category of files drawn up by him, he used the phrases “moving files private” and “closing files private” (page 472 of the Documents Bundle). In light of the latter document, I accept the Plaintiff’s explanation that the phrases mean, “moving and closing private files”. I do not believe that if someone like the Plaintiff is to do something surreptitiously or with a view to mis-appropriate, he will be foolish enough to explicitly write it down to remind himself or his accomplices. 136.The Plaintiff’s evidence was also that during the time when he was the consultant to the Defendant’s Firm, he enjoyed the same freehand as he did before departure of KLL, i.e. issue bills without consulting the Defendant, receiving commission on the files from clients introduced to the Firm based on the “once SKW, always SKW” practice (except the rate which I have already found against the Plaintiff) and signing cheques (both from office accounts and clients’ accounts) singly and without limit. All these were not disputed by the Defendant. I do accordingly accept them as my finding of facts. 137.There appears to be dispute as to whether the Plaintiff “supervised” his files as asserted by the Defendant, or only “assisted the Defendant in supervising” them as alleged by the Plaintiff. The Plaintiff said the Defendant was the sole proprietress of the Firm and she ought to have supervised all files of the Firm. He only admitted that he personally handled the PBIL file (see below). After hearing evidence of the parties, I do consider that the parties are playing with semantics. From the unchallenged evidence, the costs generated by clients introduced by the Plaintiff to the Firm account for about 50% to 60% of the Firm’s total annual income from 1st April 2001 to 31st May 2003. It represents about $9.17 million for 2001/2002 and $5.91 million for 2002/2003 (page 692 of the Documents Bundle). Judging from the great number of files contained in the Plaintiff’s monthly commission reports, substantial work in respect of those files had been done. I do not think realistically the Plaintiff can personally handle all these files. No doubt staffs of the Firm would be handling these files. As revealed in his explanation to the following specific files, he was involved directly and/or supervising some assistant solicitors in handling these files. I accept his explanation that his involvement is to ensure that his files are properly handled, though I accept that he would be involved in these files in different degree and at various stages, depending on the types of files and the handling solicitors. I accept that the Plaintiff was concerned with these files for the obvious reason that if these files were not properly handled these clients would switch to other firms, resulting in loss of revenues to him and to the Firm. I believe as a matter of fact he did not involve in supervision of all his files. 138.During July and August 2004, he wrote to six of his clients, namely,
informing them of his plan to leave the Firm on 30th August 2004 and to set up his own firm. These clients had on-going files with the Firm that could not be finished before 30th August 2004. In these letters he asked them as to whether they would like their file be continued handled by the Firm or by him or by other firm. 139.He also issued to his clients, including those whose cases were being handled by the Firm “Notice of Commencing Practice” for his new firm before he left the Firm. 140.I also accept the Plaintiff’s evidence that the morale of staff working for the Defendant at the material times very low. Despite the fact that KLL had made provisions for staffs of the Firm after his departure, in September 2003 at least one Chiu Man Ki (SFW’s secretary), Law Chi Cheong (a clerk), YHK (the computer technician) and Ida Wong (the Plaintiff’s secretary) had to complain to the Labour Department before they could recover termination compensation from a service company controlled by the Defendant. One assistant solicitor even had to sue the Defendant and later obtained an award in the Labour Tribunal before she could recover her wages and severance payment. This part of the evidence in fact was not in dispute. So I believe that staff morale was low. There was a lack of loyalty to the Firm among staffs. When they learned about the Plaintiff’s intention to set up his new firm together with SFW, these staffs together with Au Yeung Wai Ming took the initiative to approach SFW, who was then entrusted with the work of recruitment, seeking for employment. He was the one who interviewed Au Yeung Wai Ming. The aforesaid six staffs joined the Plaintiff on 31st August 2004. 141.The Plaintiff testified that when SFW learned that he was going to leave, it was SFW who approached him about the possibility of being a partner. There is no evidence in rebuttal from the Defendant. SFW was not summonsed for cross-examination of what the Plaintiff had testified. I accept the Plaintiff’s evidence in this respect. 142.The Plaintiff admitted SFW and he held two meetings in July 2004 in the office of the Firm. Both were in the afternoon of Saturday when there was not even any air-conditioning in the office. He said that he used the office of the designer Mr. Andy Yip for the other meeting, which was held early in the morning (8:15 am) before the normal office hour of the Defendant. SFW had attended the meeting but returned to the Firm when office hours came. This part of the evidence was not challenged. He himself stayed on attending to the rest of the meeting with the designer. He set up two contact points, namely, the designers office and Messrs. Hui & Lam during the setting up period so as to avoid using the Defendant’s resources. It was most unfortunate, according to the Plaintiff, that some of the faxes and emails were still sent through to the Firm’s office. Most of these documents that came through related to purchase of office equipment and computers. He explained that he had delegated the matters to SFW who in turn delegated some of the matters to YHK. The Plaintiff said he had no knowledge of these matters at the time when the faxes and emails came in. 143.It was also the Plaintiff’s evidence that he had reminded SFW to be careful in all his work so as not to breach any rules and regulations as well as duties. In the checklists which he prepared for the setting up of the new office, he had already stated thereon “SF [SFW] to ensure all rules and regulations duly complied with”. He said the purpose of inserting these words is to remind SFW to be careful. He did not want anyone to be in breach of any contractual obligations or get into any kind of trouble. I accept his explanation as this is basically not rebutted. 144.The Defendant has detailed in the Amended Defence and Counterclaim incidences of unlawful, unusual and unreasonable discounting of bills without the Defendant’s prior consent. The Defendant said the discounting was as a sweetener to the Plaintiff’s clients to induce them following the Plaintiff to his new firm, acting in breach of the fiduciary duties owed by the Plaintiff to her. The Defendant’s accusation and Plaintiff’s evidence in rebuttal can be summarized in the following paragraphs. There is no dispute that these clients are clients brought by the Plaintiff to the Firm. E. Lite (Choi’s) Holdings Limited and Associated companies 145.The Defendant said in respect of a bill issued to one of the related companies (bill number 43558), the bill originally issued by the Plaintiff on 22nd July 2003 was at $30,000. This bill was revised and issued on 23rd July 2004 again, about one year later, at an amount of $15,000, i.e. 50% discount given without prior consent of the Defendant. There were at least seven other bills of these groups of companies that had been substantially discounted. 146.The Plaintiff’s explanation is this. These groups of companies were owned and controlled by his long-standing client Mr. Choi Chee Ming. Back in 2002, this client had instructed the Firm to carry out certain distraint actions. A deposit of $100,000 had been paid to defray disbursements to be incurred. However the Firm was slow in these works and as a result, the Plaintiff’s said client took switched to another firm. The deposit, however, became idle in the Firm’s account. Since some bills of this client were outstanding for a very long time, instead of returning the money he negotiated with his client and later came to an agreement whereby this deposit was applied to settle the outstanding bills. The said bill was agreed at $15,000 and settled. The balance was appropriated to other long overdue bills. He considered the discount not unreasonable, especially in view of the bad experience the client had in relation to the earlier distraint proceedings. Furthermore, the said bill related to a follow-up action of purchase of PRC properties that the Plaintiff helped put through. Substantial costs had already been generated for that purchase. So he was exercising his discretion in relation to billing, as he used to doing in the past. Penny’s Bay Investment Co Ltd (“PBIL”) 147.The Defendant’s position was that this was a major client of the Firm. One Mr. Brian Lo was the major shareholder of the company. A substantial amount of legal services were provided to this client relating to the Penny Bay reclamation at Lantau Island. These works included various litigations in the Lands Tribunal, its appeal to the Court of Appeal, judicial review, and its appeal. Substantial costs have been generated. After departure of the Plaintiff, the Defendant found out that the Plaintiff on behalf of the Firm issued a bill number 44532 dated 6th July 2004. The amount initially charged was $268,000. However, without consent of the Defendant, the amount was downward revised to $238,000. Further, much of the work done in 2004 had not been billed at all. The Plaintiff had therefore deliberately and willfully undercharging or failed to charge the correct fees to the detriment of the Firm. 148.The Plaintiff said that Mr. Brian Lo and the companies under his control, including PBIL was introduced to the Firm by him. At Brian Lo’s request, this PBIL file was to be personally handled by him. They both regarded this PBIL file highly confidential. Documents in this file were not even scanned into the documents centre of the Firm. That was with the express consent of KLL when he was the Senior Partner of the Firm. This file was still out of such system when the Defendant became the sole proprietress. He could recall for this particular bill he first of all communicated with Brian Lo on the amount to be billed over the phone, as he usually did, before issue. It should be in the sum of $238,680 (inclusive of disbursements) instead of $268,880. The first issued bill was a mistake. One day after issue he realized the mistake and therefore issued the bill again on 7th July 2004. This was simply a correction of mistake and had nothing to do with undercharging or making of secret profit. Moon Kee Chaan File 149.This matter concerned a litigation conducted on behalf of this client in the District Court. The client won its case at the end. The Defendant’s case was that the Plaintiff issued a bill in the sum of $168,648 on 27th July 2004 on behalf of the Firm. However according to a letter sent by the Firm to the opponent’s law firm together with a skeleton bill, the amount which the Firm asked the other side to settle was $309,283.83 which, according to the Defendant, should be the proper sum for this client to settle. The Defendant was now suing Moon Kee Chaan for outstanding fees. Money paid into the District Court by the opposite party had also been withdrawn by someone unknown. 150.The Plaintiff’s explanation was that before trial his client had sought an indication of the costs from the handling solicitor Jimmy Yuen. He had indicated through Jimmy Yuen that the estimated costs would be $180,000. However, the Firm did not diligently prosecute the action. The writ was issued in 2001 but trial was only concluded in 2004. Since the amount claimed by this client was $300,000, so he thought some concession was necessary. The bill was therefore issued at $168,000. He had no knowledge why Jimmy Yuen issued the skeleton bill to the other side claiming over $300,000. He also did not have any knowledge as to who took away the money paid into the District Court. 151.It had been exhibited in the present actions a witness statement of Mr. Andy Li, a partner of Moon Kee Chaan in DCCJ1670/2005 in which Moon Kee Chaan was sued by the Defendant for balance of fees. Mr. Andy Li also said the indication of fee from Jimmy Yuen was also $180,000 and he was surprised that the Defendant would sue him. He said that his firm served a notice to act in person in that case some time in October 2004. Re Au Get Wee, Nicosia 152.The Defendant’s allegation was that initially, the bill to this client was issued on 27th February 2004 at $10,200. It was not paid but the bill was later revised by the Plaintiff to $5,000 and was settled. The revision was without the Defendant’s knowledge and authorization. 153.The Plaintiff’s said Miss Au was his client who requested the Firm’s lawyer, Jimmy Ng, to accompany her to attend ICAC interview. After issue of the bill the client was slow in payment. Miss Au later called Jimmy Yuen saying that she had no money and requested a discount. He agreed because it was within his power to decide how much a client was to be charged and the revision was reasonable in the circumstances. There was no motive for him to reduce any bill as a sweetener. Re Tsang Kwong Lik, deceased 154.It was the Defendant’s case that a substantial sum of $88,000 was waived by the Plaintiff and only a sum of $68,000 was charged for service rendered. 155.The Plaintiff’s explanation was that this was a difficult probate litigation involving Qing law. He together with another assistant solicitor Mr. Cliff Lau attended the deceased’s mum Madam Leung. There was substantial overlapping of works and Madam Leung was not well off. As such he had decided to waive his part of fees in order to avoid double charging. He admitted that he did not talk to the Defendant before making the said decision because he only did what he normally did in respect of his clients. Legal aid was later granted to Madam Tsang when he was still with the Firm.
156.The Defendant said that in respect of two bills dated 26th and 29th July 2004 for relevant work done by the Plaintiff as China Appointed Officer for the respective sums of $2,925 and $1,350, the Plaintiff had unreasonably and without her knowledge waived the fees totally. 157.The Plaintiff’s explanation was simply this. For the larger bill the service was provided to his client who had brought substantial business to him. For the smaller one it was service provided to one of his old friends and ex-colleagues whom he knew for over 20 years. This old friend needed attestation of papers for his lawyers’ examination in China. So he had decided to do to each of them all a favour. 158.The Defendant put in no evidence to establish the Plaintiff’s motive to injure the Firm by giving the discount. The fact that certain bills were discounted does not mean that they were done with ulterior motives. The Defendant’s position is basically premised on a fiduciary relationship that she has yet to establish. On a balance I accept the Plaintiff’s explanation on the alleged discounting and/or reduction of fees in respect of all the aforesaid bills. I accept that it was within his power to set the fees chargeable to his clients. Even if there is implied in their relationship a requirement of good faith, I accept his explanation and that he exercised his power bona fide. Names of the Plaintiff’s firm and the Firm 159.It is not in dispute that the firm set up by the Plaintiff as from 31st August 2004 is called “S.K.Wong & Co. Solicitors & Notaries” in English and “黃萃群律師行” in Chinese whereas those for the Firm are “S.K.Wong & Lee, Solicitors & Notaries” and “黃萃群 李鉅林 律師行” respectively. It was not in dispute that the words “& Notaries” were deleted some time after trial had started in February 2006. The Plaintiff’s firm was in group practice with Messrs. Hui & Lam. The name of the group practice is “S.K.Wong & Co., Hui & Lam in Group Practice”, and in Chinese “黃萃群律師行、許林律師行, 律師聯合執業事務所”. The application to carry on the said firm in the form of a partnership with SFW and in group practice was made to the Law Society by the Plaintiff on 4th June 2004. The name of the Plaintiff’s firm and the group practice has been approved by the Law Society vide its letter of 30th June 2004 (page 209 of Documents Bundle). The address of the Plaintiff’s firm and the group practice was rooms 2001-4 of Hang Seng Building, which is next to that of the Firm operated by the Defendant occupying room 2008 of the same building. 160.It is the Plaintiff case that the use of his own name complies with Rule 2A of the Solicitors’ Practice Rules which stipulates, inter alia, that the name of a firm shall consist solely of the name or names of one or more solicitors who are principals in the firm. 161.It is also undisputed evidence that despite the fact that there were no notaries working in the Firm, the Defendant continued to use the words “Solicitors & Notaries” in the Firm’s name until 17th February 2006, i.e. day 5 of the trial, after the Plaintiff had opened his case and made a point about this “misrepresentation” that the Defendant wrote a letter to the landlord to have the words “& Notaries” removed from the main directory board of the Building and on the directory board in the corridor of the 20th Floor. The Firm moved out of the Hang Seng Building to 7 th Floor of Club Lusitano on Ice House Street on 29th April 2006. 162.It is also undisputed evidence that the Law Society’s “Law List” website shows the Defendant’s Firm to have an Internet homepage at home.hkstar.com/~skwl (page 326-93A of the Documents Bundle). After departure of the Plaintiff the information on this Firm’s website still shows that the Firm has 6 solicitors and 15 staff members, including the Plaintiff as consultant. It is still called “S.K. Wong & Lee, Solicitors & Notaries”. The Defendant does not dispute that the webpage of the Firm no longer represents the true position. It is her explanation that she cannot update the website without the appropriate passwords which YHK has refused to disclose. Further it does not occur to her to inquire if it is possible to remove the website altogether, and therefore she has not asked the Law Society to remove the homepage connection from that of the Law Society. 163.It was the evidence of the Defendant that the similarity in name of the Plaintiff’s firm and the Firm and their location had caused confusion to her clients and third parties. Letters and faxes intended for the Plaintiff’s firm were received by the Firm. She believed likewise, those intending for the Firm would be sent to the Plaintiff’s firm. The Defendant’s evidence was that one Ms. Lin Lai Ling, who had initially intended to instruct the Firm, bumped into the Plaintiff’s office, thinking that she was visiting the Firm. She was even asked to change the payee of a relevant cheque from that of the Firm to that of the Plaintiff’s firm. 164.The Plaintiff’s explanation is this. Ms. Lin Lai Ling was his client who instructed him to purchase a landed property when he was still with the Firm in January 2003. In or about late 2004, Ms. Lin was able to sell the property at a very good price. Not knowing that he had left the Firm, she stated in the provisional agreement that she would be instructing the Firm and accordingly the cheque for the initial deposit was drawn in favour of the Firm. She came to his firm with the provisional agreement. It was the Plaintiff’s evidence that when he realized the cheque had been made in favour of the Firm, he explained to Ms. Lin that if she insisted to instruct him, she had to ask the drawer to alter the payee of the cheque. Given a good price had been fetched, he advised against such a change otherwise the purchaser might make use of the opportunity to re-open the bargain. He said he had advised Ms. Lin to continue using the Firm in the transaction and denied having suggested to Ms. Lin to change the payee of the cheque. 165.It is not the Defendant’s evidence that she had directly talked to Ms. Lin. However, it was the Plaintiff’s evidence that he did talk to her. After hearing the evidence of the parties I accept the Plaintiff’s evidence and his explanation regarding Ms. Lin’s case. Any Fiduciary Duties Between the Parties 166.In Hospital Products, the question of whether the distributor owes fiduciary obligations to the manufacturer under an exclusive distributorship agreement falls to be determined by the High Court of Australia. Briefly, United States Surgical Corporation (“USSC”), the manufacturer of certain surgical devices appointed the Hospital Products Ltd (“HPI”) to be its exclusive Australian distributor. However, unknown to USSC, HPI and others had dishonestly copied, commenced and developed a manufacturing capacity of USSC products with a view to compete with USSC. HPI acted as exclusive distributor for USSC from April to December 1979 when it terminated the distributor agreement. Shortly before such termination, HPI had deferred fulfilling orders placed by hospitals. The purpose was to enable it fulfill existing customers’ orders with HPI products which were identical to those of USSC immediately after termination of the agreement. USSC later sued HPI on various causes of actions, including passing off, breach of confidence, unfair competition and breach of fiduciary duties. At first instance, the Supreme Court of NSW held that HPI and others were liable to account for profits by selling non-USSC products on the Australian market between December 1979 and November 1980. The Court of Appeal held that USSC was entitled to relief by way of constructive trust over the assets of HPI controlled by the Appellant. 167.HPI appealed to the High Court of Australia. It was held by the majority (4:1, Gibbs CJ dissenting) of the High Court of Australia that there were express terms of contract arising out of the distributorship agreement that the distributor, i.e. HPI, would devote its best efforts to distributing USSC’s surgical products and building up market for those products in Australia, to the common benefit of USSC and the HPI. The majority of the High Court (4:1 with Mason J (now an NPJ of the CFA) dissenting) held that the relationship between the manufacturer and the sole distributor was not ordinarily productive of a fiduciary duty, and no such duty came into existence in that case, notwithstanding that a fraudulent scheme was involved, although Keane J agreed with Mason J in his concluded order with diverged reasoning. It is therefore useful to understand the criteria adopted by the Australian High Court in the Hospital Products case by reference to which the fiduciary relationship may be determined. 168.In Hospital Products, Gibbs CJ observed that the Court of Appeal has attempted to improve a test stated by the first instance judge by which it may be determined whether a relationship, not within one of the accepted categories, is a fiduciary one. The learned CJ doubted whether it was fruitful to attempt to make a general statement of the circumstances in which a fiduciary relationship will be found to exist. It is because fiduciary relations are of different types, carrying different obligations and a test which might seem appropriate to determine whether a fiduciary relationship existed for one purpose might be quite inappropriate for another. He went on to cite various circumstances that have been decided to be indicative of a fiduciary relationship but yet in some situations the presence of such circumstances is simply not sufficient. It is perhaps useful to summarize his passage of judgment at pages 433-4 of Hospital Products under the following heads:
169.Gibbs CJ took the view that even the Court of Appeal test was applied, he was not convinced the test was satisfied. It is because he did not consider HPI did undertake, whether by representation or contractual provision, to act solely in the interests of USSC and not in its own interests. He concluded on page 435 that HPI owed no fiduciary duties USSC and had this to say:
170.So in a nutshell, Gibbs CJ considered that (1) the pure commercial nature of relationship entered into by parties at arm’s length on equal footing and (2) HPI was not contractually bound to place its interest after the interest of USSC, or in other words, HPI was not bound to act for the best interest of USSC to the exclusion of its own interest are the two critical features rendering HPI not a fiduciary to USSC. 171.His views were basically shared by Wilson J: see pages 470-1 of Hospital Products. 172.Although Deane J agreed with the constructive trust relief sought by USSC (and therefore was one of the dissenting judges together with Mason J), his reasoning was different from that advanced by Mason J. He considered that the requirement of HPI to use its “best efforts” to build up the market for, and distribute, the products in Australia “to the common benefit” of both HPI and USSC did not of itself impose a general fiduciary duty on the distributor to seek no profit or benefit for itself or to disregard its own interests where they conflicted with the manufacturer’s. HPI was in breach of the contract with a view to appropriating for itself at the expenses of USSC: see pages 473-5 of Hospital Products. So the criteria adopted by the learned judge appears to be the same as the second point raised by the Chief Justice of Australia, namely, if there is no requirement in the relationship that a party has to subordinate its own interests to those of the other, the relationship is unlikely be a fiduciary one. 173.In analyzing whether a fiduciary exists, Dawson J acknowledged that despite existence of clear examples, no satisfactory single test has emerged which served to identify a relationship being fiduciary. When he came to the principles, his had this to say in his judgment (at page 488-9):
174.The above principle is a variation on the theme of the first criterion set by Gibbs CJ (see paragraphs 169-70 above). It is also an elaboration of the principle of Mason J (see the paragraph below). If the vulnerability is not something inherent in the nature of the relationship but arises because a party, who bargains on more or less equal footing with the other, fails and/or has not taken sufficient steps to protect himself, equity will not intervene by imposing a fiduciary duty on the other party. 175.Mason J found that there existed a fiduciary relationship between HPI and USSC, though only a limited one: see page 455 of Hospital Products. He has stated his test on page 454-5. His statement was cited with approval in Hong Kong by Ma J (as he then was) in Kao Lee & Yip v Koo Hoi Yan & Others [2003] 3 HKLRD 296 at 311 with further elaboration, which I consider to be a consolidation of some of the abovementioned principles. It will be useful to set out the relevant part of the judgment of Ma J below (page 311D – F):
176.Ma J also shared the view of the learned author Finn in his classic work Fiduciary Obligations (1977) that it is almost impossible to give a precise and satisfactory definition of fiduciary relationships: see page 311B of Kao Lee & Yip. 177.Mr. Lo, counsel for the Defendant submitted a test for fiduciary duties which is basically the “trust and confidence” proposition stated above. However, both Hospital Products and Kao Lee & Yip considered that there is simply no single test to determine whether a relationship is a fiduciary one. Suffice to say that mere entrusting someone with a job or jobs and relying on him to look after his own interest in that matter per se is insufficient. 178.Mason J had also stated another important principle which has recently been reiterated in the Court of Appeal case of Esquire (Electronics) Limited v The Hong Kong And Shanghai Banking Corporation Limited and Another, CACV 312/2005, 12th October 2006 (unreported). The principle is this: what was required before the nature of the fiduciary duty could be determined was to have close regards to the terms of the contract and the factual circumstances surrounding and giving birth to the contract. The following passage of Mason J in Hospital Products (per page 445) was cited with approval in Esquire (as per Hon. Stock JA at page 62[para 141]):
179.So in recognizing fiduciary duties, the court must give effect to the contract between the parties and not to take those so-called “fiduciary duties” in isolation. The intention of the parties and nature of the contract are of paramount importance. Any fiduciary duty must not contradict the parties’ intention and terms of the agreement, but rather must fulfill those intentions and give effect to the terms. 180.Furthermore, the learned author in Chapter One of TG Youdan’s Equity, Fiduciaries and Trusts (1989) has stated that pursuit of each other’s interest, even it also brings benefit to the other is insufficient to found a fiduciary relationship without something more: see page 31. His proposition in that chapter (pages 32 and 54), which I think is one of the most important characteristic features giving rise to a fiduciary relation, is that in such a relationship, one party is expected to act in the interests of the other or their joint interests to the exclusion of his own several interest (my emphasis). The placing of trust and confidence may be a feature in such relationship but the presence of such features are insufficient to give rise to such relationship according to what have been stated in the preceding paragraphs. 181.I will in this decision applying the above principlesto determine whether the Plaintiff in the present action is a fiduciary owing general fiduciary to the Defendant as pleaded. That will be a balancing exercise. 182.The pleaded case of the Defendant is that the authorization of the Plaintiff by the Defendant to:
makes the Plaintiff a fiduciary of the Defendant. Accordingly, the matters stated in paragraphs 26 to 34 of the Amended Defence and Counterclaim constitutes breaches of such duties. When considering whether such duty arises I consider it necessary to take into account of the following facts. These facts are based on my primary finding of facts stated above:
183.Applying the criteria extracted from the above authorities, I do not consider that the Plaintiff owes any fiduciary obligations to the Defendant simply by reasons of the Defendant reposing the said three matters set out in the preceding paragraphs. 184.Firstly, as stated by Mason J in Hospital Products and affirmed in the Court of Appeal case of Esquire, it is important to find the subject matter over which the alleged fiduciary obligations extend. It is determined by the character of the venture for which the association between the Plaintiff and the Defendant exists. In my judgment, the venture that the parties engaged is basically referral of clients procured by the Plaintiff to the Firm who then provides services. Both parties then split the profit costs generated. The Plaintiff did not want all the hassles and worries of loss. What he needs is somebody to serve his clients. So the Firm provides the manpower. On the other hand, the Firm, initially led by KLL and later by the Defendant, can deploy their own staffs to provide service to the Plaintiff’s clients as well as their own clients. With entrepreneur vision, they can exercise their skills and manage the Firm in such way that profit can be maximized out of such arrangement. This makes perfect commercial sense. It is an arrangement for the benefit of both parties. In my judgment, it is no different from an ordinary commercial deal. The only difference is that the parties to the deals are professionals and the business professional services. 185.The “once SKW, always SKW” arrangement is part of the agreement between the parties in this commercial relationship. Even when the Firm was running at a loss the Plaintiff would still be paid his commission. Essential in this agreement is that the Plaintiff can retain his clientele which is effectively his lifeblood. Such arrangement renders unsustainable any argument that in the contract between the parties there exists a term, either express or implied, to the effect that the Plaintiff’s clientele would become the Firm’s once introduced to the Firm and the Plaintiff cannot thereafter procure his clients to follow him when he leaves the Firm. The Defendant’s imposition of general fiduciary duties, inter alia, is in direct contradiction with this contract foundation. Such duties, if existed, mean that the Plaintiff will be permanently fixed to the Defendant and is unable to divorce from the Defendant otherwise he may lose his clientele with the Firm and is cut off from his lifeblood. It certainly is not something the Plaintiff has contracted. It offends the principle set by Mason J in Hospital Products as particularly stated in paragraph 178 above. 186.Secondly, as stated above, the Plaintiff has authority to issue bills and set the appropriate level of fees for files introduced by him to the Firm without any references to KLL or the Defendant. In my judgment, it is within the parties’ contemplation that in order to keep clients of the Plaintiff to continue staying with the Firm, the Plaintiff may discount bills. Such discounting may sometimes operate for benefit of both parties. In extreme cases the discounting may be to such an extent that, in the view of the Defendant, she may suffer loss, at least for that particular piece of work. This situation of conflict becomes apparent when the business is so bad that the fees charged fall below cost. It means the more clients the Plaintiff introduced to the Firm, the more loss the Firm would suffer despite the cruel reality that the Defendant still has to pay 25% of the profit costs to the Plaintiff. There is simply no term between the parties that obliges the Plaintiff to consider the interest of the Firm before he considers his own interest, as in the case of fiduciary. This is what the Plaintiff is entitled to according to contract. He is not obliged to consider the Firm’s (and thus the Defendant’s) interest before he considers his own interest, not to mention that he has to consider the Defendant’s interest to the exclusion of his own interest. If he were under such obligation, it would not have been necessary for KLL to make special arrangement with him for six months in 2001/2002, for any unwilling to share would amount to a breach of fiduciary duty. This situation is similar to that of the parties in Hospital Products. How can it be said therefore that the Plaintiff is subject to the “not to conflict” and “not to profit” core fiduciary duties? 187.Thirdly, the Defendant did not give detailed explanation as to why she authorized the Plaintiff to sign cheques, both for clients and office account without limit. One of the reasons she gave was that while she was away she needed somebody to sign cheques on her behalf. There was no reason why she cannot delegate the same to his assistant solicitors or manager with ceiling, or make special arrangement with banks that certain signatories are required if the amount exceeds a certain level. I believe that is also a problem faced by many solicitors in sole proprietorship in Hong Kong. In the present case, the Defendant simply trusted the Plaintiff. However, as stated above, the fact that one person subjectively trusted another is neither necessary for nor conclusive of the existence of a fiduciary relationship. It is not a situation that the Defendant did not have right to say how she wishes the matter to be served. She is the sole proprietress and has every right to dictate how her business is to be conducted. I do not intend to be harsh to the Defendant. However, her alleged vulnerability position is something that she chooses to be in. Alternatively, she is simply stuck in such situation by failing to make a better arrangement. If the Plaintiff had engaged in a fraudulent course of conduct by abuse of this authority to sign cheques he can be sued for breach of contract, and perhaps with equitable sanction. However, that does not mean that the Plaintiff is, if that happens, in breach of any fiduciary obligation. The present complaints entirely have nothing to do with the issue of cheques. 188.Fourthly, as I have stated above, this is basically a commercial deal between two professionals who agreed to associate together in a way they prefer for common benefit. The Plaintiff and the Defendant had expressly excluded the association in the form of partnership and employment. The Defendant did not choose to change anything, save and except the arrangement on the rate of commission. 189.In the Defendant’s evidence, she considered the Plaintiff remaining with the Firm on her tacit agreement. She said if she could not come to term with the Plaintiff on the rate of commission, he has to leave. At the end she managed to strike a deal with the Plaintiff at 25% flat, which was at least an improvement of the Rider A formula. Look in that perspective the Defendant is not powerless to terminate the relationship. At least she saw the matter that way. It was the evidence of the Plaintiff that the he contributed some 50% to marginally less than 60% billing of the Firm before the Defendant became the sole proprietress. The Plaintiff cannot be said in a position of dominance or advantage. So applying the criteria of Gibbs CJ in Hospital Products, it will be difficult for the Defendant to argue any fiduciary duty arising in such relationship. 190.Fifthly, regarding the alleged substantial discounting of bills, I have already accepted the Plaintiff explanation in this respect. I also accept that the discounting is within the power and authority of the Plaintiff because he has all along had such power to set the fees for his files. This was so even when the Defendant became the sole proprietress. Like the situation of signing cheques, it is up to the Defendant to agree with the Plaintiff as to how his files were to be billed. The fact that she entrusted the same to the Plaintiff, in my view, did not give rise to a fiduciary duty. It is the Defendant who permits herself to be in such a “vulnerable” situation. If she considers that the Firm cannot make any profit when the fees charged by the Plaintiff falls below certain level, she could set a rate, just as what she did in respect of the rate of commission. I do not think that equity should be invoked to give extra protection to the Defendant simply because the Defendant allowed this “vulnerable” situation to occur. 191.Sixthly, for supervision of files, I do not think that the Plaintiff has been imposed of such duty. He was only concerned with his files and therefore took part in the conduct of some of them. Even if he were entrusted with such duty, by reasons of the principles set out above, no fiduciary duties will automatic arise. 192.For the above reasons, I conclude that the Plaintiff did not stand in a fiduciary relation to the Defendant. The three matters relied on by the Defendant are simply insufficient to give rise to a fiduciary relationship which requires the Plaintiff to take care of her own interest to the exclusion of the Plaintiff’s own interest. The basis for the breaches identified in the Amended Defence And Counterclaim falls. All her counterclaims based on breach of fiduciary duties must fail. Breach of Implied Terms of Contract 193.The same set of breaches is relied upon by the Defendant to found a case on breach of implied terms. The basis upon which the Defendant alleged to give rise to the implied terms set out in earlier part of this judgment has not been clearly set out. My conclusion is that the Defendant has failed to discharge her burden of proof. In any event, even if I were wrong, the breaches identified by Mr. Lo, counsel for the Defendant in his closing submission, which are set out below, did not amount to breach of such implied terms. Use of the Defendant’s Premises for the Plaintiff’s Competing Practice 194.It is undisputed that the Plaintiff and the Defendant were not operating their business side by side before 30th August 2004. The main thrust of the Defendant’s attack is that the Plaintiff held at least two meetings at the Defendant’s premises while still acting as the Defendant’s consultant. Ma J (as he then was) in Kao Lee & Yip (at page 315 of that judgment) discussed how far the fiduciaries are (in the context of partners and employees), while still being in partnership or employment with a law firm, permitted by law to make arrangements for their future. He set out some principles for guidance as follows:
So even assuming the Plaintiff is a fiduciary to the Defendant (which I have already ruled against such conclusion), he is allowed to do preparatory activities to start up his business outside office hour. 195.In the circumstances of this case, since the Plaintiff is neither a partner nor an employee of the Defendant, nor otherwise a fiduciary, I consider that the criteria to which the Plaintiff is subject should be more relax than those applicable for a fiduciary. In my judgment, it is insignificant as to where the activities took place so far as it causes no extra expenses, i.e. damage, to the Defendant and, of course, outside the hours within which the Plaintiff is contractual bound to commit to the Defendant. There is no evidence as to what damages the Defendant has suffered. It is the unchallenged evidence of the Plaintiff that there was no air-conditioning in the room. There is no evidence as to the extra utilities expenses that the Defendant had incurred as a result of these activities. So I do not consider the Defendant has sustained any damage under this head, even if there is such implied terms. The question as to whether there is procuring breach of contract will be dealt with in the latter part of this judgment. Solicitation of the Firm’s Staff 196.My finding of facts show that it is the employees who approached the Plaintiff instead of the other way round (see the head of procuring breach of contract), there is no breach even if there is such implied terms as pleaded. Removal of Firm’s Property 197.The allegation of the Defendant is simply based on these words “moving files in private” found printed in certain checklist seized by the Defendant. There is in fact no direct evidence from the Defendant to substantiate her claim under this head. I have already accepted the Plaintiff’s explanation in the earlier part of this judgment concerning moving of files, company kits and documents as well as the PBIL files, I do not consider that the Defendant’s claim under this head substantiated. Soliciting and Enticing the Firm’s Clients 198.In the early part of this judgment, it has been shown that the relationship of the parties is such that the Plaintiff has every right over his clients. There is no evidence from the Defendant showing that the clients allegedly being enticed away or solicited were clients other than those introduced by the Plaintiff to the Firm. I do not think it can be implied into the relationship between the parties against solicitation of one’s own clients. Undercharging 199.In my judgment, it is entirely a matter of whether what the Plaintiff has done is within his power, authority and is reasonable. As I have accepted his explanation, I do not consider there is any breach, even there are implied terms as pleaded. Goodwill and Passing-off 200.In view of my findings that the oral agreement about the name does not exist, the Defendant, being the sole remaining partner to the Firm, is entitled to the use of the name of the Firm. It is the Defendant’s pleaded case (paragraph 34(a) of the Amended Defence And Counterclaim) that the Plaintiff is seeking to pass off his new firm as a continuation of, or a successor to, her firm. The main complaints are:
201.The Defendant seeks an injunction to restrain the Plaintiff, whether by himself, his employees or agents, etc from passing off, or attempting to pass off, his firm as her firm, i.e. the Firm or connected with the Firm by the use in relation of the name “S.K. Wong & Co.”. It is strange that the Defendant does not seek to restrain the use of the Chinese name “黃萃群” in the relief. 202.In the course of closing submission made by counsel of the parties, some other issues crop up. For the purpose of this judgment two issues, which I think goes to the heart of the Plaintiff’s defence, are worth discussing. The first issue was this. It was contended by the Defendant that by the 1st Memorandum, the Plaintiff had in effect assigned his business to KLL together with the goodwill of the business in 1992. Since goodwill attached to the business and includes the names of the business, it would therefore be contrary to any concept of good faith for the Plaintiff to use his own name again. The authority for this proposition is the English Court of Appeal case of Newman v Adlem [2006] FSR 16. The other issue is that once a business has been sold, the vendor is not entitled to canvass the customers of the old firm, and may be restrained from soliciting any person, who is a customer of the old firm prior to the sale. The authority for this proposition is the House of Lords case of Trego v Hunt [1896] AC 7. One can immediately realize the force of these arguments. Newman v Adlem 203.In Newman v Adlem [2006] FSR 16 one Mr. Richard T Adlem used his own name to set up quite a number of businesses, and among them a funeral directors business at a Chapel of Rest built by him. Many of these businesses were in his own name “Richard T Adlem”. He sold this funeral directors business to a purchaser who later on-sold it to the plaintiff. He acted as consultant but later recommenced his own business under the name of “Richard T Adlem”. The English Court of Appeal held in Newman that:
204.Mr. Ho S.C. for the Plaintiff argued that this authority is only applicable to scenario where the two names are exactly the same. It is distinguishable from the present case in that the two businesses have distinctly different trading names, i.e. “S.K. Wong & Lee, Solicitors” by the Defendant and “S.K. Wong & Co., Solicitors and Notaries” by the Plaintiff Furthermore, in Newman, the Defendant’s advertisement went so far as suggesting that Newman was the usurper to the name. Accordingly the court found that it was deceptive and held that Newman’s claim succeeded. It was not so in the present case. For the reasons submitted by Mr. Ho S.C. I accept that Newman is only applicable to situation that the two names are exactly the same. 205.It is also noted in the Plaintiff’s case, and I accept it as the Plaintiff’s explanation, that there has been effort on his part to make a clear distinction between the two names. In fact, the Defendant did not have a notary public working for her but she fails to take proper action to remove the words “& Notaries” from the directory and signboard of the Hang Seng Building until after the trial commenced. The hyper-link from the Law Society’s website to the Defendant’s is not disconnected even after trial, at least as at the time the Defendant was cross-examined in the witness box. The web page shows that the Plaintiff is still a consultant to the Firm. On the other hand, the Plaintiff states clearly that his firm is in group practice with Messrs. Hui & Lam. It is obvious that the name “Lee” and the Chinese “李鉅林” do not feature in the new firm’s name at all. It is not in dispute that this is also used in the building’s signboards and in his firm’s stationery. There is also no evidence that the Plaintiff has suggested that the Firm has ceased business or closed down and the Plaintiff’s firm is a continuation of the Firm. 206.I accept that the Plaintiff has endeavour to distinguish his firm from hers while the Defendant appears not paying any attention as to what she represented her Firm to be after the Plaintiff’s departure. If the Defendant had been diligent in removing the description of “& Notaries” and discontinuance the use of the webpage, confusion could be minimized. People may have some surprise at first but there can be very little chance of genuine confusion, if prompt steps were taken by the Defendant to remove “& Notaries” and disconnecting the use of the web page. The explanation that she does not have the password and it does not occur to her that she could disconnect the web from the Law Society hyperlink are no answer to her continuing use of the webpage, which contains incorrect information and serve to confuse her clients. 207.Argument has arisen as to whether by the Memorandum signed between the Plaintiff and KLL in 1992 when he became the consultant, i.e. the 1st Memorandum, the Plaintiff had assigned an “exclusive right” or only a “non-exclusive right” to KLL and therefore his successors to use the Firm’s name. In Newman, it was held by a majority of 2:1 that upon the sale of the goodwill in the business, there was a conveyance of the exclusive right to use the business name “Richard T. Adlem, Funeral Director”, in connection with the business, to the purchaser. The dissenting judge, Lady Justice Arden, found that there was merely a conveyance of non-exclusive right. The approach adopted by the learned judge is by a detailed analysis of the factual matrix and construction of the extent of sale covered by the agreement. 208.I think it would be impossible to imply into the 1st Memorandum an implied term that upon departure of the Plaintiff, the Plaintiff was entitled to set up another practice with exactly the same name as the Firm, both in English and in Chinese. Newman has expressly prohibited that. The question is whether the Plaintiff and KLL have intended an exclusive or non-exclusive right to use that part of the name “S.K. Wong” and in Chinese “黃萃群”. The 1st Memorandum is silent on this. 209.It is the Plaintiff’s evidence, and I have already accepted, that the Plaintiff has reserved his rights over his clientele. He has unfettered authority in the way he handled his clients and on the amount charged without reference to the Defendant. The fact that KLL panicked supported the finding that the Plaintiff can take away his entire clientele. It is trite law that after the sale of one’s business, he will not be restrained from doing the same business again. However, Rule 2A of the Solicitors’ Practice Rules stipulates that the name of a law firm is to consist solely of the names of one or more solicitors who are principals in the firm. If it were implied in the 1st Memorandum that the Plaintiff also granted to KLL and thus the Defendant an exclusive right to use his name, it would mean that the Plaintiff would never set up his own practice in Hong Kong. The parties could not have intended it and I do not accept there is such an implied term in the 1st Memorandum. So even it can be argued that Newman is applicable, I am afraid the assignment is non-exclusive. I consider that the present case is distinguishable from Newman. 210.Furthermore, In Parker-knoll Ltd v Knoll International [1962] RPC 265, a person (or company) has a right to use its own name even if that may cause confusion. Lord Denning MR said at page 275:
He said this in relation to infringement but went on to say he would apply the same test to passing off. 211.From the above, it is within the contemplation of the parties that the Plaintiff could leave and has its own practice. Since the only firm name he could use must consist of his name, I do consider, taking into consideration of all the circumstances of this case, the use of the Plaintiff’s own name is bona fide. Even if it can be argued that a part of the name, namely “S.K. Wong” has been assigned by the 1st Memorandum, I am not convinced that the assignment is exclusive. The 1st Memorandum does not pose a prohibition against the Plaintiff to his name. Trego v Hunt 212.Trego v Hunt [1896] AC 7 is the authority for the proposition that where the goodwill of a business is sold without further provision (my emphasis), the vendor may set up a rival business, but he is not entitled to canvass the customers of the old firm, and may be restrained from soliciting any person, who was a customer of the old firm prior to the sale, to continue to deal with the vendor or not to deal with the purchaser. The proposition is basically rested upon the principle that a man may not derogate from his own grant: see page 25 as per Lord Macnaghten. 214.Passing off is concerned with misrepresentations made by a trader that damages the goodwill of another. The classic statements on “passing off” was stated by Lord Diplock in Star Industrial v Yap Kwee Kor [1976] FSR 256 at 269 and approved by our Court of Final Appeal in Tin Tin Yat Pao (International) Ltd (in Liquidation) v Tin Tin Publication Development Ltd [2000] 3 HKC 1 at page 7 by Mason NPJ:
215.A passage by Lord Macnaghten in Commissioners of Inland Revenue v Muller & Co’s Margarine Ltd [1901] AC 217 at 223-224 concerning “Goodwill” was also referred to by Mason NPJ In Tin Tin:
216.It is settled law that a party does not have an exclusive right to a name and passing off recognizes no “exclusive right” to any name or mark: see Harrods v Harrodian School [1996] R.P.C. 697 CA. As discussed about, there is no implied term in the parties’ arrangement that the Plaintiff cannot use his own name in his new practice. There is nothing misleading or false in the Plaintiff’s representation of his firm to the public. His firm has the Plaintiff, i.e. S.K. Wong while the Defendant’s only used to have S.K. Wong and no longer has any connection with S.K. Wong. The Plaintiff also has his right to use his own name: see paragraph 209 above. So in the absence of any actionable misrepresentation or deception on the part of the Plaintiff, he cannot be liable for any action on passing off nor liable for infringing the Defendant’s Firm’s intellectual property right in the use of its name. 217.I accept that the location of the two firms and the similarities of the firm’s name may have caused confusion to their respective clients and prospective clients. However, no one is entitled to be protected against confusion because it is one of the misfortunes that occur in life. It may simply arise from collision of two independent rights. If that occurs neither parties can complain. It is settled law that mere confusion, without any misrepresentation, is insufficient to found one’s claim on passing off. 218.Regarding certain letters and documents seized by the Defendant from SFW’s room which she has alleged to have infringed her copyright in respective those documents, it is obvious that no evidence is shown by the Defendant that the originality of these documents came from her or the Firm. 219. By reasons of the above, the Defendant’s counterclaim on passing off fails. Procuring Breach of Contract 220.The Defendant basically contends that:
221.The news about the leaving of the Plaintiff is no secret to the staffs of the Defendant. Given that many of them have unhappy experience with the Defendant when KLL departed the Firm – they needed to threaten suing the Firm and one of an ex-assistant solicitor even sued the Firm in the Labour Tribunal before they could recover their terminal compensation, staff morale was understandably low. I do not think these staffs would prefer to stay with the Defendant, if choice is available, especially when they saw the two founders of the Firm were leaving one by one. These two pillars of the Firm brought in substantial fees to the Firm. Now that the two founders were leaving one by one. These staffs should be concerned about their own future and would no doubt choose to move to a greener pasture. 222.In fact it is undisputed evidence that two out of the four assistant solicitors of the Firm even left the Firm and join other firms before the Plaintiff did. I accept that it is more likely than not that SFW approached the Plaintiff. All other staffs who approached SFW later tendered notice of resignation to the Defendant. As such I do not think that the Plaintiff procured the Defendant’s employees to leave. On the other hand, the Defendant has not put in sufficient evidence to show that it was the Plaintiff who poached her employees. Neither is there sufficient evidence from the Defendant to show unlawful interference with the Defendant’s business. The mere fact of departure of six staffs at around the same time to join the Plaintiff is insufficient to found an action on such tort. 223.To succeed on a claim of inducing breach of contract, the Defendant has to show that the Plaintiff induced or procured those breaches. As finding of facts which I have accepted, the Plaintiff had taken steps to remind SFW to comply with all rules and regulations in the preparatory steps. There is unchallenged evidence that one meeting was held at the designer’s office before the Firm’s office hours commenced. His setting up of two contact points for setting up of his new firm at the designer’s office and Messrs. Hui and Lam was also not challenged. The Plaintiff also said, and I accept, that he had expressly stated that the office of the Firm should not be used as a contact point. I accept his explanation that for reasons unknown to him and without his knowledge, faxes and emails were sent to YHK, although such conduct on the part of SFW and YHK shows a prima facie breach of fidelity on their part as employees. 224.Other facts relied on by Defendant include the two meetings held at the Firm’s office by the Plaintiff together with at least YHK and SFW. The Plaintiff admitted this part of the evidence although he said that the two meetings were all held in the afternoon of Saturdays which was outside office hours. Question arisen as to whether, YHK and SFW, who were then employees of the Plaintiff and therefore owed fiduciary duty to the Defendant have committed breach of such duties by holding meetings at the Defendant’s premises. 225.I consider it is useful to apply the principles set out by Ma J (as he then was) in Kao Lee & Yip and summarized by me in paragraph 194 above. In the present case, it was the Defendant’s evidence, which was not disputed by the Plaintiff, that employees of the Firm were subject to the S.I. published by the Firm (pages 620 to 634 of the Documents Bundle). Paragraph 13 of Part III of the S.I. stipulates:
226.I think it will be impossible to argue that conference room or any room inside the Firm’s office is not part of the facilities of the Firm. There is no evidence that SFW and YHK had got permission from the office manager to use the Firm’s conference room for meetings. In my judgment, SFW and YHK were in apparent breach of the S.I. that forms part of their contract by using the Firm’s resources and facilities for the two preparatory meetings with the Plaintiff. 227.In order to found a tort on inducing breach of contract, one of the elements to be shown is that the alleged tortfeasor must be shown to have actual or constructive knowledge of the existence of the contract: see page 151 of The Law of Torts, 10th edition by Margaret Brazier & John Murphy (1999) Butterworths. However there is no evidence on the part of the Defendant showing that the Plaintiff had knowledge of the terms of the S.I.. 228.There is a fundamental ingredient to this type of tort that loss should be showed to have suffered by the Defendant. In the present case, counsel for the Defendant Mr. Lo has invited the Court to infer that what the Plaintiff did must result in damage to the Defendant. However for the breach brought about by the use of the Defendant’s premises twice outside office hour, I do not think that the Defendant had suffered any actual damage, apart from the costs of electricity for the lighting. There is, however, no evidence from the Defendant showing how much the electricity costs are or the actual damage that she indeed has suffered. I consider that the Defendant has failed to establish her case against the Plaintiff under this head of claim. Accounts Taken 229.In the Commission Action, the Plaintiff asks for accounts to be taken of:
230.Mr. Ho S.C. submitted that the choice of 1st September 1999 was that businesses in Hong Kong are normally required to keep their records for 7 years. The Plaintiff also asks for usual directions in connection with giving of the accounts, such as verification by affidavit, notice of objection, discovery of documents relating to the accounts, interim payment, interest and costs. 231.The fact that I find against the Plaintiff in respect of the existence of the oral agreement does not mean that all relieves sought by the Plaintiff fail. It is because by paragraph 11 of the Amended Defence And Counterclaim of the Defendant, the Defendant admitted that commission for the months of July and August 2004 had not been paid to the Plaintiff. She then went on to plead a defence of set-off and counterclaim. As the Court has found against her in respect of all her counterclaims, her defence of set-off must fail. 232.Furthermore, my finding of facts is that the old practice when KLL was with the Firm applies to the time when the Defendant was the sole proprietress. As such, the Plaintiff is entitled to be paid commission for all files introduced by him to the Firm. It will therefore be just and equitable to order taking of accounts because without which it will almost be impossible to ascertain the amount of commission to be paid to the Plaintiff. Such profit costs to be paid are subject to the qualifications that I am going to set out in the following paragraphs. 233.The accounts proposed to be made by the Defendant can be divided into three categories, namely, files opened between 1st September 1999 and 30th August 2004 with “SKW” reference with bills:
234.I do not think the liability to pay the 1st category of bills is in dispute. However, the Defendant only admitted outstanding payment to the extent of two months, i.e. July and August 2004. Mr. Lo, counsel for the Defendant, admitted on the 14th day of the trial that the commission for the months of July and August 2004 payable to the Plaintiff amounted to $148,266.75, calculated at the rate of 25%. The Plaintiff said that he had not been provided with profit and loss account of the Firm to verify what the applicable rate of commission is for that particular month. However, in view of the Court’s findings in favour of the Defendant in respect of the 25% commission rate and there is no genuine dispute on the commission received by the Plaintiff for the first ten months since 1st September 2003, it is therefore unnecessary to order an account of the 1st category save and except the said two months in respect of which commission is outstanding. 235.Concerning the 2nd category, consistent with my findings that, inter alia, his clientele belongs to him, I think the Defendant has to pay commission for those bills, though they may be settled after 30th August 2004. I will so order the Defendant to state such account, and make payment accordingly. 236.As regards the 3rd category, Mr. Ho S.C. for the Plaintiff submitted that the claim of which is pursuant to paragraph (d) of the 1st Memorandum (page 184 of the Documents Bundle). Mr. Lo, counsel for the Defendant contended that there is implied into the agreement between the Plaintiff and KLL that the payment of commission is only for so long as the Plaintiff is the consultant of the Firm. I do not consider that Mr. Lo has made out a case on the ground of implied term. However, given that the Plaintiff has already started written to his clients asking whether they would follow him to his new firm, even before its commencement, it will be reasonable to expect that he has completed this exercise within a couple of days after the commencement of his practice. If upon his invitation to make a choice his clients have chosen to desert him, and continue patronizing the Firm, I do not think the Plaintiff can still claim commission for those files. These clients have made an election. They have already switched to the Defendant perhaps because some other attractions. In my judgment, these clients should no longer be regarded as “clients introduced to the Firm by SKW” and therefore outside the ambit of clause (d) of the 1st Memorandum. 237.In the circumstances, for the 3rd category I consider it just and equitable to restrict the account for profit costs in respect of services rendered to 30th September 2004, i.e. one month after his departure. 238.I consider it impossible in the situation to adopt an approach that borders on any mathematical exactness. In arriving at the decision of one extra month from the Plaintiff’s departure I have adopted an approach of “reasonable approximation” and take all the circumstances of the case into account, including the matters which I have stated in the preceding paragraphs. This is the approach adopted by Ma J in Kao Lee & Yip. I consider by then all the Plaintiff clients have been approached by him and had responded. If they elected to stay with the Defendant, they would have already done so by then. 239.I do not consider that the Defendant has any good reason to object the taking of accounts of files opened as from 1st September 1999. Costs 240.Substantial time was incurred at trial for the resolution of factual issues and legal issues (raised in the counterclaim in the Commission Action). The Plaintiff fails totally in his Name Action. The usual rule of costs to follow the event applies. As a rough estimate, it will be fair for the purpose of costs and taxation that one-sixth of the trial time be apportioned to the Name Action. If one single brief is delivered for the two Actions, counsel fee will accordingly be apportioned. 241.The remaining time is apportioned to the Commission Action. As the Plaintiff fails in establishing the oral agreement, it will be reasonable for the Plaintiff to bear a certain proportion of the Defendant’s costs in defending his claim. However, at the same time the Defendant is totally defeated in all her counterclaim, it is also reasonable that she will bear all the Plaintiff’s costs in defending the counterclaim. If the two sets of costs were equal, I would have ordered that there be no order as to costs in the Commission Action. However, they are not. I consider that the parties spent more time in establishing facts and making submission for the counterclaim than those for the claim. In the circumstances of this case and for the purpose of taxation, I consider it fair and equitable that the Defendant should bear one-quarter of the Plaintiff’s total costs incurred in his claim and counterclaim in the Commission Action. Conclusion and Orders 242.For reasons I have stated above, I make the following orders: The Commission Action
The Name Action
For both Actions
Mr. Ambrose Ho S.C. leading Mr. Paul H. M. Leung instructed by Messrs. S.K. Wong & Co., for the Plaintiff Mr. Henry Lo instructed by Messrs. Y.S. Lau & Partners, for the Defendant Appeal allowed: see CACV145/2007 and CACV146/2007 dated: 14 February 2008 |
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