Wong Sui-kwan v. Cheong Pui Fan

DCCJ 4987/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4987 OF 2004

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BETWEEN

AND

DCCJ 5879/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4987 OF 2004

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BETWEEN

[Ordered to be tried together pursuant to the order of H.H. Judge Wong dated 30^th May 2005]

Coram: Deputy District Judge K.W. Wong in Chambers (open to public)

Date of Hearing: 19^th April 2007

Date of Handing Down of Ruling: 18^th May 2007

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RULING

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1.This is the Plaintiff’s application by way of summons dated 30^th January 2007 for leave to appeal to the Court of Appeal against my Judgment in the two actions handed down on 27^th October 2006 after a 16-day trial.

2.The Plaintiff was a former consultant to a firm of solicitors of which the Defendant was the sole proprietress. His name appeared in the name of the Defendant’s firm. The Plaintiff alleged that there existed between the parties an agreement which provided, inter alia, that the rates of commission to which he was entitled would follow the so-called “Rider A formula” and that when he left the firm, the Defendant should cease using his name. By the Commission Action (“DCCJ 4987/04), he requested an account be taken of all files opened in his name and for payment of any sum found due. By the Name Action (“DCCJ 5879/04), he sought an injunction restraining the Defendant from continued using his name in her business. The Defendant counterclaimed in the Commission Action for damages on the ground that the Plaintiff had breached fiduciary duties owed to her. For reasons stated in my said Judgment, including a finding against the existence of the alleged oral agreement, I dismissed the Plaintiff’s Name Action. I concluded that the applicable rate of commission was 25% as asserted by the Defendant instead of that of the Rider A formula. I ordered that accounts be taken of the files opened in the name of the Plaintiff in the Commission Action (i.e. DCCJ4987/04), but to a limited extent. I also dismissed the counterclaim. Now the Plaintiff seeks leave to against my said Judgment in so far as it is against him.

3.There is no dispute between the parties that the relevant test for leave to appeal is set out in Smith v Cosworth Casting Process [1997] WLR 1538 per Lord Woolf MR. Such test is cited with approval in Hong Kong in Ma Bik Yung v Ko Chuen, (unreported) HCMP 4303/1999, 8^th September 1999, Leong JA. The test is this: the court will only refuse leave to appeal if satisfied that the applicant has no realistic prospect of success on the appeal.

Grounds of Appeal

4.Mr. Ambrose Ho, S.C. together with Mr. Sherwin Wong, counsel for the Plaintiff have prepared and relied on their written submission comprising 49 pages in support of the leave application. This submission can be summarized in the following five grounds:

i)    I erred in inferring from the documents containing the Plaintiff’s own handwritten record on commission [Bundle 3B, pages 693 to 694-5] that the rate of commission orally agreed between the parties being a flat rate of 25% without a full consideration of when and how the said record was made (“the wrong inference ground”);

ii)    I failed to have any or sufficient regard to the fact that the Defendant failed to reply to the Plaintiff’s note dated 12^th March 2004 [Bundle 3A, page 205]; and the Plaintiff’s letter’s to the Defendant dated 8^th September 2004 [Bundle 3B, page 708] (“the failure to reply ground”);

iii)   I fail to have any or sufficient regard to the significance of the tentative consensus reached by the parties as evidenced in the 1^st and 2^nd Proposals [Bundle 3B, pages 699 to 700] (“the proposal ground”);

iv)   I erred in making certain findings in paragraphs 105 to 108, and 110 to 121, which are adverse to the Plaintiff (“wrong findings ground”); and

v)   I erred in ordering accounts be taken of files under SKW reference opened by the Firm between 1^st September 1999 and 30^th August 2004, which is an order inconsistent with my finding that commission to the Plaintiff should be paid no matter when such profit costs generated by the Plaintiff accrued (“the wrong order ground”).

5.The above basically seeks to appeal against my findings of facts. It is Mr. Ho’s submission that my conclusion of no agreement as alleged by the Plaintiff is based upon findings of a number of facts, some arrived at by inference, some by assessment of credibility of witnesses and weighing of evidence. It is submitted that appeal against findings of facts made by a process of inference will be approached very differently from findings of primary facts by the appeal court: see Ting Kwok Keung v Tam Dick Yuen [2002] 1 HKC 601 per Bokhary PJ at 611B to E. In drawing inference, the appellate court is in as good a position as the trial judge, and is free to arrive at a conclusion different from that of the trial judge: as per Godfrey JA in Tang Kwok Ming v Daxprofit Scaffolding Ltd [1999] 1 HKC 657 at 663. Furthermore, it is submitted that some of my findings are contrary to documentary evidence that is undisputed or are inconsistent with documents which I have not dealt with. As such, it is submitted the Plaintiff is able to meet the rather low threshold required of in leave application, and leave to appeal should be granted.

6.I have no doubt that Mr. Ho S.C. has correctly stated the position of the law in these areas. Although I do not consider that the Plaintiff has any reasonable chance of success in appealing against many of my primary findings of facts, particularly those after going through a weighing exercise, I have to say that after reading the detailed written submission of counsel for the Plaintiff, I cannot conclude that there is no realistic prospect of success on the part of the Plaintiff in the appeal, given the rather low threshold as set out in Ma Bik Yung. I accordingly grant to the Plaintiff leave to appeal to the Court of Appeal.

7.My above ruling should have disposed of the Plaintiff’s application. However, as substantial part of the submission seeks to deal with one of my inferences drawn based on the Plaintiff’s own handwritten record of his monthly income [pages 693 to 694-5 of Bundle 3B] (“the Handwritten Records”), which submission is, in my view, misconceived. I would therefore like to deal with such submission in the following paragraphs.

The Plaintiff’s Handwritten Records

8.This ground of appeal concerns my findings set out in paragraph 126 of my said Judgment. In that paragraph, I stated that I have gone through the Handwritten Records and noted that the Plaintiff was paid his commission at 25% for the months of December 2003 and January, February 2004 despite the fact that there was a surplus for the Firm. Based on the recorded figures which go to surplus, if the applicable rate is prescribed by the Rider A formula as the Plaintiff has alleged, the applicable rate should have been 30% instead of 25% now being used. I therefore drew an inference that the rate of commission has been agreed at 25% instead of according to the Rider A formula.

9.The Plaintiff’s argument, in a nutshell, is this. I am wrong in finding that there were surplus for the three months of December 2003 and January and February 2004 as I have mis-interpreted the Handwritten Records. It is also submitted I have wrongly understood the Rider A formula. Accordingly I drew a wrong inference based on mistaken facts.

10.At the hearing of this leave to appeal, Mr. Ho S.C. for the Plaintiff has fairly indicated that according to his instruction, “O/H” written at the “remarks” column on page 694-4 of Bundle 3B stands for “Office Overheads”. Further, he submitted that based on the information contained in that column, there were respectively $20,000, $36,000 and $39,000 that went to the reserve of the firm for the month of December 2003, January and February 2004. The profit and loss position for the month of December and January was recorded as “NIL”, meaning that at least for the months of December and January, the firm recorded no profit and loss. No record on profit and loss was recorded for February 2004.

11.In light of Mr. Ho S.C. indication at the hearing, the Plaintiff’s submission concerning “no surplus” cannot be right. It is apparent that I have made no mistake in saying that there was surplus for the three months in question. After deduction of the Plaintiff’s commission, there is surplus for each of the said three months which goes to “Reserve” of the firm, at least according to the Plaintiff’s own records.

12.Furthermore, how the Rider A formula works has been repeated in paragraphs 32 and 33 of the said written submission. It is a 5-tier scale commission rates. The applicable rate for a particular month depends on the amount of drawings left to partners after (and not before) deduction of the amount of commission to be paid to the Plaintiff and the reserve (if applicable). The rates ranged from 30% to 50%. However if the firm runs at a loss and the partners have no drawings, the concessionary rate of 25% applies. What has been repeated in the submission is basically the same as what the Plaintiff has testified in his evidence in chief and accepted by the Court at trial.

13.Since the rate is determined after the deduction of commission to the Plaintiff, accordingly, one has to go through a process of trial and error in order to find out which rate is applicable. The Plaintiff’s submission is that if after applying the basic rate of 30% the firm is in red, the concessionary rate of 25% applies. However, when the 25% rate is applied it is probable that the firm may revert to the positive domain instead of in red. It is, of course, also equally probable that the firm will remain in the negative when this concessionary rate is used. It entirely depends on how much is earned for that particular month. So, the argument of the Plaintiff runs as this: the fact that the firm’s profit and loss was positive or at break-even is NOT conclusive evidence that the applicable rate should have been 30% for that month: see paragraph 35 of the written submission. It is always possible that when 25% is employed the firm will have certain surplus, i.e. in the positive.

14.Firstly, I do not consider what has been described in the written submission about how this Rider A formula works is different in any material respect from what I have set out in paragraphs 4, 35 and 36 of my said Judgment.

15.Secondly, although the Plaintiff’s proposition as summarized above is a correct one, upon an analysis of the amounts of commission which the Plaintiff has received as well as what has been allocated to reserve for the three months in question as revealed from the Plaintiff’s Handwritten Record, one will immediately find out that the Plaintiff’s argument cannot assist him at all.

16.It is perhaps useful to set out below the following information extracted from page 694-4 of Bundle 3B:

17.It is simple arithmetic that if 25% of a lump sum equals, say, X, 5% of the same lump sum is one-fifth of X. Accordingly 5% commission for the Plaintiff for the three months will be as follows:

18.It will be apparent that even the Plaintiff were to be paid at 30% (i.e. to receive 5% more) with the consequence that the reserve for the month is reduced accordingly, the firm is still in the positive domain! The reserve for the months has not been eroded entirely even the rate is 30%. The firm will still be in the positive domain if the Rider A formula applies, though with a lesser sum as reserve. If the Plaintiff’s version were correct, the Plaintiff should be paid at 30% or should have asked for more if he had not been so paid. He appeared to do nothing and had never asked according to evidence.

19.By reasons of the above I do not think this argument of the Plaintiff can assist him to establish my inference in paragraph 126 wrong or unsafe.

Order 

20.Having concluded that I cannot say the Plaintiff having no realistic prospect of success in the appeal, I order that there be leave to the Plaintiff to appeal in these two Actions. Costs of this application be in the cause of the substantive appeal. I also grant certificate for counsel to the Defendant and certificate for two counsel to the Plaintiff (as the case may be) for this application.

Mr. Ambrose Ho S.C. leading Mr. Sherwin Wong instructed by Messrs S.K. Wong & Co., for the Plaintiff

Mr. Henry Lo instructed by Messrs. Y.S. Lau & Partners, for the Defendant.