A Solicitor v. The Law Society of Hong Kong

CACV 188/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 188 OF 2012

(ON APPEAL FROM THE FINDINGS AND ORDER OF THE

SOLICITORS DISCIPLINARY TRIBUNAL DATED 5TH MARCH 2012

AND 8TH AUGUST 2012)

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BETWEEN

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Hon Stock VP:

Introduction

1.This appeal arises from a finding of a Solicitors Disciplinary Tribunal in relation to the non-payment of a barrister’s fees.

2.Fees were due to the barrister in respect of a civil trial due to commence in the Court of First Instance on 25 February 2008 and to run for seven days.  The brief fee was paid but most of the fees agreed as refreshers were not.

3.Principles 12.04 and 12.05 of the Hong Kong Solicitors Guide to Professional Conduct provide as follows:

“12. 04 Liability of Solicitor for Barrister’s Fees

In the absence of reasonable excuse a solicitor is personally liable as a matter of professional conduct for the payment of a barrister’s proper fees. Failure to obtain funds on account of the barrister’s fees shall not of itself constitute reasonable excuse.

12.05 Payment of Barrister’s fees

A barrister’s fees must be paid or challenged promptly, and in any event, within two months from the submission of a fee note.”

4.The complaint against the solicitor was that in the absence of reasonable excuse he refused and/or failed to pay the fees of the barrister within two months from the submission of the fee note.

5.It was common ground that the barrister issued a fee note, that the fee note referred to fees in fact due to the barrister, and that the fees thereby demanded were never paid.  So the sole issue was whether the solicitor had established a reasonable excuse for the refusal or failure to pay the fees.

6.The solicitor asserted that there was a reasonable excuse for his failure to pay the fees.  That excuse was constituted, he said, by two distinct factors, each one of which sufficed in itself:

(1) that he had entered upon an arrangement with the barrister that the brief would only be delivered on the understanding that the solicitor would himself assume no personal responsibility for the fees and that the barrister would have to look to the client for payment of his brief fee and daily refreshers prior to the start of the trial; and

(2) that in any event the negligence of the Law Society had precluded him from securing payment of fees by the client in that after the solicitor had been adjudicated bankrupt in early October 2008, an intervention agent had been appointed and had passed the papers in the case to new solicitors, by reason of which act the solicitor was deprived of the lien which otherwise he would have enjoyed on the papers and therefore deprived of the security for his costs which that lien creates.

7.By its decision dated 5 March 2012, the Tribunal rejected both limbs of the solicitor’s defence, finding:

(a) as to the first defence, that it was for the solicitor to ensure funds on account, that there was no privity of contract between counsel and client, and that on any view the solicitor remained liable for the barrister’s fees; and

(b) that the action of the Law Society in appointing an intervener and the act of the intervener in passing the client’s papers to a new solicitor were matters which were irrelevant to the issues at hand.

8.By order dated 13 June 2012, the Tribunal censured the solicitor, imposed a fine of $100,000 and condemned the solicitor in costs.

The appeal

9.We are presented with lengthy grounds of appeal which repeat the defences raised before the Tribunal and contend that the Tribunal erred in its assessment of the facts, first, by ignoring the suggested agreement with the barrister that the barrister should himself ensure payment of the brief and refresher fees in advance of the first day of trial; second, by rejecting the solicitor’s contentions as to that agreement, given the absence of a contradicting affidavit or affirmation from the barrister; and, third, in finding that the conduct of the Law Society and its intervention agent was irrelevant.  There is no appeal against the penalty imposed.

10.The written submissions have been supplemented orally before us by the solicitor acting in person.

History

11.The history of the case falls within a relatively narrow compass.  

12.This history is to be considered in the light of the solicitor’s central contention that he and the barrister agreed that all fees including refreshers were to be paid by the client before the first hearing date set for 25 February 2008; that the barrister agreed to waive the solicitor’s personal liability to pay his fees; and that if the client failed to pay all fees due by the first day of trial, including the full amount of “unused refreshers”, the barrister was free to decline further to act for the client.

13.The appellant was the sole practitioner and principal of his firm.  The firm acted for a company in a High Court action, the trial of which was set down for a hearing of eight days due to commence on 25 February 2008.  Leading counsel was instructed.  The barrister with whom we are concerned was instructed to appear for the company as junior counsel.

14.On 12 September 2007, the barrister caused a letter to be sent by his clerk to the solicitor by which he recorded the agreement made as to fees: a brief fee of $80,000, to be paid in three instalments, the latest on 26 November 2007; and a refresher of $30,000 per day.

15.As to payment of refreshers, the terms evidenced by the letter were that if there was a settlement in the three weeks immediately prior to the first day of trial, half the refreshers were to be paid, whereas full refreshers were to be paid if the hearing date was vacated or adjourned on or after the first day of trial.  The back sheet was to be delivered on or before 27 September 2007.  The agreement as to payment of refreshers was further particularised by a letter from the barrister’s clerk dated 21 September 2007: it too says nothing about payment of refreshers before trial.

16.There was no settlement of the action before the first hearing date in February 2008 so, under the agreement reflected by the letters of September 2008, the barrister was entitled to be paid all the refreshers.

17.A brief dated 27 September 2007 was duly sent to the barrister by the firm, and signed by the solicitor.  The agreed brief fee was $80,000 with a daily refresher of $30,000.

18.The fee note at the heart of this dispute is dated 12 March 2008.  It is in the sum of $138,750.  That is constituted by the brief fee of $80,000; one refresher for attendance at court on 27 February 2008 of $30,000 and six days of “unused refreshers” totalling $180,000; plus one conference with leading counsel and client in the sum of $8750 – less $160,000 already paid.

19.The brief fee of $80000 was paid in instalments by late December 2007.  A further $80,000 was paid by cashier order on 25 February 2008 on account of refreshers.  But the remaining sum due for “unused” refreshers was not paid.  Nonetheless counsel continued to act for the client and appeared before the trial judge on 27 February.

20.If the solicitor’s account of his agreement with counsel were true then, absent funds from the client, one might have expected an immediate response from the solicitor to the fee note, telling counsel that he was not in funds and reminding him of the unusual agreement which he and counsel had struck.  But there was no response.

21.The next we see is a letter dated 19 June 2008 from the barrister’s clerk to the solicitor pressing for payment.  It is significant to note that there is yet again nothing in writing in response disputing liability or asserting any agreement by which the barrister had somehow absolved the solicitor of the usual ultimate responsibility.

22.That reminder was followed by yet another letter from the barrister’s clerk dated 9 July 2008 in which the clerk refers to earlier reminders and a conversation about the fees dated 24 June 2008; indeed to earlier reminders, copies of which do not appear in the bundle, in April and May 2008.  The solicitor is, by the latest letter, reminded of his obligation to ensure payment of counsel’s fees within two months of submission of counsel’s fee note; and there is enclosed a draft letter from the barrister to the Bar Association lodging a complaint against the solicitor and looking to the Association for assistance in securing payment of his fees.  The barrister threatens to send the letter if the fees are not paid.

23.On 16 July 2008, the solicitor wrote to the barrister saying:

“You knew full well, and I made it a special point on a number of occasions, that you must protect yourself by actual receipt of your fees before commencement of the trial. It is not a secret to you that I have been having extreme difficulties with [the client] about payment of my costs.”

24.The reply the following day from the barrister is instructive, for he, through his clerk, denies that any fee problems were suggested to him at or before delivery of the brief.  He presses yet again for his fees asserting that there is no excuse for non-payment by the solicitor.

25.Showing remarkable patience (or effrontery if the solicitor’s account be correct) and a desire amicably to resolve the problem, a further letter dated 26 July 2008 was sent by the barrister’s clerk asking for payment.

26.In his reply dated 28 July 2008 the solicitor said:

“Yes, theoretically I am the one dealing with lay clients on fees. It is however a sad fact that some clients take advantage of that to suit their own ends. I was very wary when it became necessary for [the client] to engage counsel because of counsel fee implications. With that in mind, when [the client] asked me to brief you I told you to ensure that you were fully paid your fees before the start of trial. That is precisely the reason why your brief fee was paid by instalments and your refreshers were to have been paid before the first day of trial.

You were aware of my disputes with [the client] over my fees.  He owes me a great deal in costs but still I have not been pressing him as hard in the past few years as you have been against me.  The case is still proceeding and I hope that you will allow time for [the client] to come up with funds to pay.  I can assure that you are his priority and not me.  Please bear with him for a little longer.”

27.Significantly, the suggestion in the letter that refreshers were to be paid before the first day of trial is not reflected in the written agreement as to fees evidenced by the letters of September 2007.

28.The barrister’s clerk wrote in response on 28 July 2008 denying any knowledge as to why in this particular case the solicitor was having trouble recouping fees from the client, and insisted on payment.  There is then a reply from the solicitor insisting that the solicitor’s “anxiety about your fees drove me at the beginning to strongly suggest to you that for your protection you must require payment of your fees in full in advance.”  A similar assertion was made by the solicitor in response to the Hong Kong Bar Association’s demand dated 4 August 2008.  That demand followed referral of the matter by the barrister to the Bar Association on 1 August 2008.

29.On 6 October 2008, the solicitor was made the subject of a bankruptcy order and on 8 October 2008 the intervening agent was appointed by the Law Society.

30.There was further correspondence, the detail of which is not necessary to relate.  It suffices to state that the matter was reported to the Law Society on 11 November 2008.

31.On 13 November 2008, the case papers were passed to the new solicitors.

The Tribunal proceedings

32.For the purpose of the proceedings before the Tribunal, the solicitor filed an affirmation dated 26 September 2011.  In it he asserts that he made clear to the barrister that he “would only deliver a brief to [him as well as to leading counsel] if I would assume no personal responsibility.  The critical point for me was that counsel would have to take their own steps to protect their fees.”  The fee agreement was to be so structured as to provide for payment of everything, including refreshers, before commencement of the trial.  He said that the brief fee of $80,000 was paid in full by 27 December 2007.  On 25 February 2008, the client gave the barrister a cashier order on account of refreshers due, of $80,000, which fell short of the full sum then due.  According to the solicitor, the client “was well aware of their obligation to pay [the barrister] his refresher in full before start of trial or else [the barrister] would not appear at the trial and I was therefore surprised to find that they only managed to come up with $80,000 for [the barrister’s] refresher.  [The barrister] upon receiving the cashier order for $80,000 did not complain or withdraw from the trial and the trial later began in the morning.”

33.This is an important passage, for there is no suggestion that the barrister thereupon complained that he had not been paid the fees due to him – indeed, it is specifically asserted that he did not complain; there is no suggestion that the solicitor discussed the sudden problem with the barrister or with his client; and the step which the solicitor says was open then to the barrister, namely, to walk away from the case was a step neither threatened nor taken.  This conduct on the part of the barrister and solicitor strongly suggests that what happened accorded with what had been agreed.  It sits comfortably with the barrister’s denial of the solicitor’s case, albeit a denial in correspondence and not on affidavit; put another way, the facts admitted by the solicitor sit ill with his assertion that refreshers were to be paid in full before trial and that his own responsibility for the fees had been waived.  

34.There is a further fact which sits ill with the solicitor’s account, namely, the terms of the letters in September 2007 which assert the agreement as to fees.  This is a point which not surprisingly was pursued at the hearing in cross-examination when it was pointed out that neither letter written in September 2007 by the barrister’s clerk setting out the terms as to the refreshers suggested a requirement that the refreshers be paid in advance.  Well, said the solicitor to the Tribunal, that agreement was made orally.  And he was surprised when counsel was prepared to proceed when, on 25 February 2008, he received only $80,000 instead of his full refreshers.

35.The affirmation then turns to the effect of the intervention after the bankruptcy adjudication and the passing of the file to new solicitors, a step which he said prevented him from pursuing the fees on behalf of the barrister.

36.At the hearing before the Tribunal, the solicitor represented himself, addressed the Tribunal in some detail and also testified.  The reasonable excuse advanced for non-payment of the barrister’s fees was this suggested agreement between the barrister and himself, for the barrister to ensure that all fees were paid before trial.  How the barrister was to ensure that is not stated.  “The agreement,” he said “was always that [the barrister] would have to look to the client direct for payment. … I said [to the barrister] very clearly that I would not undertake any personal responsibility to pay him.”

37.It is obvious from the exchanges between the Tribunal and the solicitor, that these assertions were viewed sceptically by the Tribunal, the Chairperson pointing out that: “… we only have your word for it.  There is no written document or any contemporaneous documents supporting your assertion or allegation that you have no obligation to pay counsel.  … You did not write to [the barrister] to set out your case, you did not write to him to set out the terms, as alleged by you, that you do not have the obligation to pay.  If you think it is so important, why didn’t you write to [him] yourself and set out the terms of the payment?  We can’t find a single letter from you to [him] setting out the alleged agreement that you are not obliged to pay him that he should look to the lay client for payment.”  The solicitor suggested that it was difficult for him to put it in writing.  A little later, another member of the Tribunal asked: “Why didn’t you secure for yourself a written waiver of sorts saying he will not charge you if you didn’t get paid?  You said it wasn’t right, but why was it not right?”  Answered the solicitor: “It wasn’t the proper thing to do.  When you are trying to establish a working relationship with your counsel, I would imagine that you try not to offend the other side.”

38.As for the impact of the intervention, the Tribunal pointed out to the solicitor that that fact did not explain why he nonetheless did not chase the client for the money or threaten, let alone institute, proceedings against the client.

The Tribunal’s findings

39.The findings of the Tribunal are relatively brief.  The history of the case and the essence of the solicitor’s defence are accurately summarised.  The Tribunal found that the solicitor was duty bound to pay the fees and that the solicitor had not established a reasonable excuse for failing to do so.  As for the defences advanced, if there was an arrangement that all counsel’s fees were to be paid in full before trial it was, said the Tribunal, the solicitor’s obligation to require his client to provide costs on account and the failure to obtain sufficient funds on hand was not of itself a reasonable excuse to exempt the solicitor from payment of those fees.  

40.As to the second limb of the solicitor’s defence, that which alleged negligence on the part of the Law Society, the Law Society’s intervention was, said the Tribunal, a red herring for even if the solicitor had lost his lien on the case papers, he had not lost his cause of action against his client for payment and he simply chose not to pursue the client either before he, the solicitor, was adjudicated bankrupt or after his discharge from bankruptcy.  

41.Accordingly, the complaint was proved.

Analysis

42.There is, on the face of the findings, what appears to be a strange omission from the Tribunal’s reasons.  It is the absence of any finding as to whether there was or was not an agreement by the barrister not to look to the solicitor for his fees and to take the risk that he might not be paid.  If indeed there was such an agreement, the question would then arise whether it could constitute a reasonable excuse.  The omission may be said to be surprising given how obvious it is from the transcript that the Tribunal did not believe the account proffered by the solicitor.

43.It might be said to be implicit from its stated reasons that the Tribunal took the view that it was not open to a solicitor to absolve himself by agreement with the barrister from the code of professional conduct evidenced by the Guide; and in that regard, as to which we have not been addressed, that train of thought is almost certainly correct.  

44.I am satisfied that the particular arrangement upon which the solicitor said he entered with the barrister would constitute a breach of duty to the client as well as to the court, wherefore it could not amount to a reasonable excuse.  It envisaged the barrister walking away from the case on the first day of trial if, by that last moment, he was not paid; thereby leaving the client in the lurch either to face the trial unrepresented or to seek an adjournment, in either of which event the court’s efficient functioning would adversely be affected.  A solicitor owes a continuing duty to his client to represent him conscientiously and he is not absolved from that duty by instructing counsel (see Principles 5.12; 6.01 and 12.03) and it seems to me self evident that to place a client – let alone the court of trial – in the position in which this solicitor says he was prepared to see the client (and the court) placed, is to act contrary to that duty.  He ought either have secured funds on account in good time or, in good time, ceased to act.  His story, even if true, could not constitute a reasonable excuse.

45.But, in any event, the account upon which the solicitor seeks to absolve himself is one which, I am satisfied, he has failed to establish; the factual issue not addressed by the Tribunal.  Since this is an appeal by way of rehearing (see section 13(1) of the Legal Practitioners Ordinance, Cap. 159; and Order 59 r.3(1) of the Rules of the High Court thereby rendered applicable) it is open to this Court to make factual findings, and to draw inferences of fact and to give any judgment which ought to have been made by the Tribunal from which the appeal is brought (See O 59 r 10(3)).

46.I have sufficiently highlighted in the earlier course of this judgment the various indicia which point to the truth of the matter.  We are not disadvantaged by not having heard oral testimony for we have the advantage of the relevant correspondence, of the solicitor’s affirmation, of the transcript of the proceedings before the Tribunal and we have also heard what the solicitor has had to say to us in submissions when we pointed to those indicia which lay against his account.

47.In his submissions to us, he said that he did not, upon their receipt, challenge letters from the barrister that one might have expected to be challenged because he did not want to lend dignity to the barrister’s “deplorable” behaviour, as he characterised it.  That retort speaks volumes as to the truth of the matter; for if anyone should know the value of written denials, it is a solicitor.  He asserted before us, as he had before the Tribunal, that leading counsel knew full well what the arrangement with the barrister complainant had been.  If so, why, we asked, had he not sought supporting testimony from leading counsel; because, he answered, it was by then “water under the bridge”.  Given that the solicitor’s professional reputation was at stake, the truth of the fee arrangement was hardly water under the bridge.

48.I regard the explanations offered to this Court by the solicitor as singularly unattractive, coming as they do from an officer of the court.

49.It is evident from the transcript that the Tribunal itself did not believe the solicitor’s story.  In so far as the appellant suggests that the Tribunal was, in the absence of an affidavit or affirmation from the barrister, duty bound to accept the solicitor’s contentions in his own affirmation, that is not correct.  The burden of establishing a reasonable excuse lies on the solicitor and where an explanation is offered which is either inherently incredible or is contradicted by contemporaneous documentation, a tribunal of fact is entitled not to accept it.  In this particular case, the explanation was indeed contradicted by contemporaneous documentation (emanating from the barrister) and by the absence of contemporaneous documentation from the solicitor supporting his assertions, where (were his account accurate) such documentation could reasonably be expected.

50.I agree with the Tribunal that the intervention after the solicitor’s bankruptcy did not constitute a reasonable excuse for his failure to pay the fees.  The bankruptcy order was made well after the fees became due and there was no attempt by him in that period or after his discharge from bankruptcy to secure the fees from the client.

Result

51.In my judgment, the appeal is without merit and should be dismissed.  I would make an order nisi that the appellant pay the respondent’s costs of the appeal to be taxed if not agreed.

Hon Kwan JA:

52.I agree with the judgment of the Vice President.

Hon Barma JA:

 53.I too agree.

Hon Stock VP:

54.Accordingly, the appeal is dismissed.  There will be a costs order nisi that the appellant do pay the respondent’s costs of the appeal to be taxed if not agreed.

Applicant/Appellant – acting in person 

Ms Debora SY Poon, instructed by T.K. Tsui & Co., for the Respondent