HKCFI 1772
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
COMPANIES WINDING-UP PROCEEDINGS NO 354 OF 2016
||IN THE MATTER of section 327 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Chapter 32 of the Laws of Hong Kong
||IN THE MATTER of Luen Ford Industrial Company Limited
|Before: Hon Harris J in Court
|Date of Hearing: 6 September 2017
|Date of Decision: 27 July 2018
D E C I S I O N
1. On 5 September 2016 the Petitioner, Fung, Wong, Ng & Lam LLP, issued a statutory demand for non-payment by the Company (“Luen Ford”) of a debt of HK$10,000,000. The alleged debt arose from the dishonouring of three cheques for HK$6,000,000, HK$1,000,000 and HK$3,000,000 (“Cheques”). The first cheque was undated. The second and third cheques were dated 30 July and August 2016 respectively.
2. The Petitioner is a firm of solicitors and one of the shareholders of Luen Ford was a client. The cheques were delivered to the Petitioner to settle legal fees and disbursements, although there is a dispute as to whether this was outstanding fees and disbursements or future fees and disbursements. Luen Ford says there is a bona fide dispute about the amount, if anything, that the Petitioner is owed and that action for recovery cannot be taken until the fees and disbursements have been taxed.
3. Understanding the circumstances in which Luen Ford came to provide the cheques and its reasons for countermanding them requires an examination of the work carried out by the Petitioner and counsel it retained.
4. Woo Koo Ping and his son Eric Woo (“Woos”) carried on a garment manufacturing business in Hong Kong and the Mainland. In 2014 the companies through which they operated the business encountered serious financial difficulties. In October 2014 the Woos caused petitions to be issued for the winding up of six companies (“Companies”). At the same time as the petitions were presented successful applications were made to me for the appointment of provisional liquidators over the Companies. The Companies were wound up on 31 October 2016. Luen Ford is Eric Woo’s personal investment company.
5. The reason why the provisional liquidations lasted so long was because attempts were made to restructure the debt of the Companies. I heard all hearings in the winding-up proceedings. My impression was the Companies had been put into provisional liquidation specifically with a view to restructuring the debt: see  of my decision of 31 October 2016 in HCCW 297 to 301 of 2014. Initially the attempts to restructure the debt was initiated by the Provisional Liquidators. It was the evidence of the Woos filed in the winding-up proceedings that they became disillusioned with the Provisional Liquidator’s efforts and began themselves to formulate restructuring plans.
6. The Woos instructed Wilkinson & Grist to issue the petitions to wind up the Companies and appointment provisional liquidators. It would appear that when the provisional liquidations did not progress as the Woos anticipated they blamed Wilkinson & Grist for misleading them and replaced them with WMC Partners (“WMC”). It was WMC who instructed Ms Priscilla Wong to represent the Companies and act for the Woos in various other litigation they were parties to.
7. The Woos got into a dispute with WMC and between 12 July and 14 August 2015 the Woos transferred their various cases to the Petitioner in place of WMC. It appears that it was Ms Wong who introduced the Woos to Mr Raymond Ng, the partner in the Petitioner who had conduct of the Woos various matters.
8. It is Mr Ng’s evidence that he proposed to the Woos that the Petitioner charge them a fixed monthly fee of HK$280,000 for representing them in the litigation that had been transferred to the Petitioner. Mr Ng says that this was agreed, although the Woos dispute this. Nothing of significant turns on this. It might be thought surprising that given the amount of work involved Mr Ng did not think it necessary to at least confirm the alleged agreement in writing. It is, however, typical of what in my view was the totally unprofessional way in which Mr Ng dealt with fees.
9. The Petitioner obtained signed standard letters of engagement from the Woos for the various proceedings transferred to the Petitioner. There is no evidence of Mr Ng ever providing any fee estimates to the Woos or obtaining their agreement to counsel’s fees. Mr Ng says in  of his 3rd affirmation that “I understand that Ms Wong’s hourly rate was agreed at the time when WMC engaged Ms Wong and we followed the arrangement with the Woos.” I assume that by “arrangement” Mr Ng refers to Ms Wong’s hourly rate of HK$8,000. There is no evidence of the Woos ever being asked to agree the brief fees included in the fee notes I refer to later in these reasons.
10. The only bills Mr Ng has been able to produce are dated 1 December 2015, 4 February 2016, 29 March 2016, 1 June 2016, and 30 September 2016. They include the Petitioner’s own fees totalling HK$1,960,000 (which is seven months work) and Ms Wong’s fees of HK$7,538,425. As will become apparent the Petitioner has never sent the Woos bills for a significant proportion of the disbursements (in the form of Ms Wong’s fees) that Mr Ng contends are payable and were intended to be settled by the three cheques.
11. Mr Ng has also not produced any receipts for payment other than for the amounts referred to in the fees notes dated 1 December 2015, 4 February 2016, 29 March 2016 and 1 June 2016 totalling HK$9,660,000. Mr Ng has not produced any documents, or attempted to explain in his affirmations, how much Ms Wong has received other, presumably, for the sum referred to in the 4 February 2016...