Deloitte Touche Tohmatsu (A Firm) v. Fortune Pharmacal Co Ltd
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HCA 1326/2007 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 1326 OF 2007 ______________________ BETWEEN
______________________ Before : Deputy High Court Judge J. Harris, S.C. in Chambers Date of Hearing : 21 January 2008 Date of Judgment : 30 January 2008 ______________________ J U D G M E N T ______________________ Introduction 1.This is an appeal from the decision of Master Roy Yu entering summary judgment for HK$2,615,720 in respect of the Plaintiff’s claim for non-payment of fees. 2.The Plaintiff, Deloitte Touche Tomastsu, a well known firm of accountants. By a letter dated 9 March 2006 the Defendant engaged the Plaintiff to provide it with tax advisory services including negotiating a prospective tax liability and a penalty for its late payment (Agreement). The Plaintiff’s services were to be charged for on a time basis. The Plaintiff’s general business terms were incorporated. They included an entire agreement clause in the following terms:
3.On 7 July 2006 the Defendant signed a fee calculation sheet (FCS). This provided for a modification to the payment terms in the Agreement. The Plaintiff was to receive a lump sum of HK$200,000 and a contingency fee. The lump sum was paid. 4.On 20 October 2006 the IRD accepted a proposal put forward by the Plaintiff on behalf of the Defendant that tax of HK$24,681,598 and a penalty of HS$1,800,000 be paid. 5.The Plaintiff submitted a fee note for a contingency fee of HK$2,615,720, which has not been paid and is the subject matter of this action. The contingency fee is calculated on the basis that the FCS provides, as the Plaintiff contends, that a contingency fee is to be paid, at a varying rate, on the difference between HK$50,000,000 and the total tax and penalty imposed. There is no dispute that if the FCS is to be interpreted as the Plaintiff contends that the calculation is correct. Dispute 6.The dispute between the parties concerns how they agreed the contingency fee should be calculated. The Plaintiff contends that the FCS contains the entire variation to the fee provisions in the original Agreement agreed between the parties and that the FCS properly interpreted entitles it to be paid as described in paragraph 5 above. The Defendant disagrees. William Lai explains in his affirmation in opposition to the summary judgment application that at the meeting on 7 July 2006 at which the FCS was signed he agreed that the Plaintiff should be paid a contingency fee and that the FCS illustrated how the contingency fee would be calculated once the Inland Revenue Department (IRD) had come up with a “pre-judgment”. Mr Lai’s evidence was that he was told at the meeting that a pre-judgment was a preliminary assessment by the IRD of the liability for tax and the penalty for late payment that they proposed to impose unless persuaded to reduce it. Mr Cheng Shiu Wai explains in his 2nd affirmation filed on behalf of the Plaintiff that the IRD does not have the practice of issuing pre-judgments, he denies that Mr Lai was told otherwise and that he was told that the FCS was only an illustration of how the contingency fee would be calculated. Defences 7.Mr. Ling submitted that the Defendant has 2 arguable defences. First, and its primary argument, that on its face it is arguable that the FCS was no more than an illustration of the how the contingency fee. Secondly, that even if the court concluded that FCS was to be construed as contended by the Plaintiff there was a collateral agreement made at the meeting on 7 July in consideration of the signing of the FCS that the contingency fee would be calculated by reference to the difference between the tax and penalty charged and the pre-jugdment issued by the IRD. 8.I reject both these arguments. In my view the FCS quite clearly records an agreement that the contingency fee will be payable by reference to the difference between HKS50,000,000 and the amount of tax and penalty imposed. A number of parts of the FCS read together lead me to this conclusion:
9.Mr. Ling placed much reliance on the inclusion of the expression “actual amount saved” at one point in the FCS. He argued that this must refer to the difference between a pre-judgment and the final tax and penalty imposed. I disagree. Even on the Defendant’s case there would never be an “actual amount saved” in the sense described by Mr. Lai because a penalty would never have been imposed. The saving would always be notional. In any event, particularly having regard to the fact that the FCS is not drafted by lawyers, who might be expected to choose the language used with more than normal care, it seems to me that the language is readily read as referring to the “actual” difference between HK$50,000,000 and the amount of tax and penalty imposed. 10.So far as the alleged oral agreement is concerned even if it was made it has no legal effect. Clause 10 of the business conditions referred to above is the type of contractual term expressly included to avoid the kind of dispute that has arisen in this case. It provides that the Agreement contained in the original engagement letter could only be modified or varied in writing. This the FCS did. Clause 10 prevents the Defendant relying on the alleged oral agreement. Mr. Ling argued that clause 10 did not apply to an amendment to an amendment, thus as the alleged oral agreement was a variation to the FCS it was not caught by clause 10. I disagree. Any amendment, modification or variation to the original Agreement would still leave the Agreement in place accept to the extent that it changed it and there is no suggestion, and could not be, that clause 10 was varied. Therefore, any purported oral variation to the FCS would be caught by clause 10. Judgment 11.I, therefore, dismiss the appeal with an order that the Defendant pays the Plaintiff’s costs of the appeal dated 3rd January 2008, to be taxed if not agreed.
Mr Anson M K Wong, instructed by Messrs Chow, Griffiths & Chan, for the Plaintiff Mr Ling Chun Wai, instructed by Messrs S Y Chu & Co, for the Defendant |