Solicitors' Fee

The recent case of Sun Legend Investments Limited v David Ho (18 September 2009) brought to light the fee dispute between a prominent Hong Kong property group, New World and one of the earliest pioneers of "China Practice" lawyers, David Y W Ho.

David Ho was a partner of Baker & McKenzie until December 1994 when he left Baker & McKenzie, together with the entire China Property and Conveyancing team, and set up his own firm, David Y W Ho & Co (the "firm"). David Ho is now in self-imposed "exile" in Beijing and declines to come back to Hong Kong for fear of enforcement against him of a judgment in another case in the sum of HK$32million, according to the judgment in this case.

Sun Legend is the assignee of the proceedings of claims by group companies or joint venture partners (the "developers") of New World Development Company Limited ("NWD"). At the centre of the dispute was Peter Cheng (鄭家成) ("PC"), the second son of Dr. Cheng Yu Tong (鄭裕彤), who controls the New World group. PC is and was a director of NWD.

As the judge (Saunders J) said,

"These proceedings had their genesis in the halcyon days when solicitors were able to charge for conveyancing work in accordance with the Law Society of Hong Kong's scale of fees. That scale was based principally upon the value of the transaction, with the fee rising exponentially as the value of the transaction increased."

Fee Off-setting Arrangement

It goes without saying that David Ho was anxious to obtain the business of New World and in late 1991, when he was still at Baker & McKenzie, proposed to PC a rather "innovative" conveyancing fee off-setting arrangement. The terms of the fee off-setting arrangement were set out in a letter dated 4 October 1991 from Baker & McKenzie to PC but never acknowledged and no further written agreement were entered into. The firm was subsequently instructed verbally by PC and others in the New World group in the China property projects known as Dongguan project (which include the Palm Island Resort, a luxury development) and the Beijing Jingguang Centre offices and apartments project. In November 2001, the retainer of the firm was terminated and dispute arose as to the nature of the fee off-setting agreement.

PC's version is that the developers would not be charged any legal fees for work in excess of the legal fees paid by purchasers. One of the reasons put forward on behalf of the developers was that it was inherently improbable that the fee off-setting agreement advanced by the firm would be acceptable to the developers because other solicitors firms, such as Yung, Yu & Yuen, would not make any charge to the developers.

In the end, the judge "preferred the evidence" of the firm to that of PC. The evidence was against PC, such as contradictions in the terms of the initial public offering (IPO) documentation of a subsidiary of the NWD, the reaction of PC when receiving the bills, the conducts of the developers in paying for other services of the firm.

Fee Disputes

Legal cost or solicitors fee was also the subject of the judicial comments in a number of recent (June 2009) Hong Kong cases.

In one case, the judge said

"On reflection after doing this taxation I ask myself: for these relatively small amounts should court resources be used in such a way? I do not know how much time the parties have used in preparation. For myself I use more than 10 hours for going through the taxation bundle very quickly and preparing for the hearing and writing this decision. Is it right to waste court time like this? Can the dispute be resolved in other ways, not on strict legal basis?"

"The case has been blown out of proportion: it wastes everybody's time and effort for the difference on relatively small amounts. The two bills have now become the subject matter of two proceedings: one in District Court and this section 67 proceeding. The number of hours wasted by two senior solicitors and the supporting law costs draftsmen must be many. Is it worthwhile? The public may get a wrong impression that the legal profession is generating costs for itself."

Rimasia Capital Partners, L.P. v Oldham, Li & Nie

In another case, Rimasia Capital Partners, L.P. v Oldham, Li & Nie (29 April 2009), the master (Master Chan in Chambers) said,

"My comments on the Plaintiff's Statement of costs are those as follows:
(a) It is a simple application.
(b) Travelling expenses are overhead expenses not allowed. I do not consider the photocopying charges on the Plaintiff's side would amount to $1,000.
(c) The time for attendance on client and on the other side is excessive.
(d) Preparation of Documents does not require such long time.
(e) The solicitor in charge is familiar with the proceedings and should not require 7.5 hours in performing items D2 and D3.
(f) It is not necessary to require a senior solicitor to attend a call-over before a master. "

Eric Chan & Co v Wong Kwok Wang Warren

In another case, Eric Chan & Co v Wong Kwok Wang Warren (8 May 2009), a dispute arose as a result of the solicitor in question changing firms (from A firm to B firm, back to A firm again before starting his own). The client was caught in the dispute and further legal fees were incurred in the hearing of the dispute between the law firms. The judge (Lok J in chambers) who was "deeply disappointed by the degree of professionalism" demonstrated by the solicitor in question, said

"It was quite surprising that [the solicitor] switched from one firm to another within such a short period of time, and as a result it caused a lot of inconvenience to his clients like the Plaintiff. From the existing available evidence, it seemed that [the solicitor] had not clarified the position of the Defendant's costs on account before leaving [the previous firm], and consequentially the Defendant was dragged into the dispute over the costs on his account. As [the solicitor] had all along been the handling solicitor of the Defendant's Criminal Case, he certainly owed a duty to the Defendant to resolve the matter. Further, if [the solicitor] had kept proper documentation about the Defendant's costs on account, I do not think that [the previous firm] could just simply issue a fee note forfeiting the whole sum of $700,000 and there had to be numerous hearings in the Taxation Case to resolve the matter. As I see it, the Defendant has a legitimate grievance about the quality of legal services provided by [the solicitor]."

"Secondly, [the solicitor] has included in the [the solicitor's] Bill of Costs for works done by [the solicitor] when he was no longer the solicitor representing the Defendant. In the hearing before Master Kwang, despite that the Defendant was represented by [another] at the relevant time, the learned Master granted leave to [the solicitor] to appear with a view to offer assistance to the court and to explain various matters relating to the charging of legal fees in respect of the Defendant's Criminal Case. For such time spent in the hearing, [the solicitor] was charging the Defendant at an hourly rate which was the same as that charged by a practising solicitor. In other words, the Defendant had to pay 2 sets of legal costs for one single hearing. This is grossly unfair on the Defendant. Obviously, [the solicitor] was appearing in the hearing as a possible witness and not as a solicitor acting on behalf of the Defendant. In such circumstances, [the solicitor] should not be allowed to charge for his service at the same rate of a practising solicitor or at all. Further, so far as the Defendant was concerned, he had already paid the solicitors' fees for the conduct of the trial in the Criminal Case. The dispute over the sum of $700,000 was caused solely by the movement of [the solicitor] from one firm to another, and he should therefore be responsible for assisting the Defendant in resolving the dispute. Rather than offering assistance to the Defendant, [the solicitor] was charging the Defendant for 2 sets of legal costs for one single hearing. In my judgment, such conduct is totally unacceptable."


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