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HCA 1981/2013
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 1981 OF 2013
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BETWEEN
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TSE CHUN WAI |
Plaintiff |
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and |
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LEUNG KWOK KIN JOSEPH
trading as JOSEPH LEUNG & ASSOCIATES |
Defendant |
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| Before: Hon B Chu J in Chambers |
| Date of Hearing: 27 July 2017 |
| Date of Judgment: 16 August 2017 |
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J U D G M E N T
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Introduction
1. In the present case, the plaintiff (P) is claiming from the defendant (D) commission or remuneration of legal costs received and to be received by D from clients and/or business introduced by P.
2. D is a solicitor. He denies P’s claim and on 22 November 2016, he took out a summons under Order 14A of the Rules of the High Court for disposal of the case on point of law.
3. D seeks a determination of the following questions of law or construction :
(a) Whether the agreement of the nature pleaded by P is in contravention of Rule 4 of the Solicitors’ Practice Rules, Cap 159H (“Question (a)”);
(b) If the answer to Question (a) is yes, whether such an agreement is illegal void and/or unenforceable (“Question (b)”).
4. D asks that the action be dismissed if the answers to the above questions be answered in the affirmative. Alternatively, D seeks an order for the statement of claim to be struck out under O 18 r 19(1)(a) as it discloses no reasonable cause of action.
5. On 30 June 2017 Master S Lo ordered that the Question (a) be answered by P in the affirmative, but dismissed D’s other applications and ordered costs against D to be summarily assessed and paid within 14 days (“30.06.17 Order”).
6. D now appeals against the 30.06.17 Order.
7. It is trite that an appeal against a Master’s order to the judge in chambers is by way of an actual rehearing of the application which led to the order under appeal and the judge treats the matters as though it came before him/her for the first time.
8. Counsel Mr Robert Pang SC appeared for D at the hearing before this court with Mr Michael Chai, and Mr Ronald Tang appeared for P.
Background
9. D is and was at all material times the sole practitioner of a solicitor’s firm in Hong Kong. P is not a solicitor practising in Hong Kong nor any legally qualified person.
10. P claims that he has developed an extensive business network and client base and that he has hired agents to reach out to new clients. P alleges that in 2008 he came to know D through a Mr Lam who also introduced clients to D. According to P, he was invited to D’s office in around 2009 to explore the possibility of business cooperation.
11. It was P’s pleaded case that there was an oral agreement reached between him and D (“Commission Agreement”) whereby he agreed to introduce clients to engage D for legal services whilst retaining “extensive contact” with them and maintaining “exclusive control” over their cases and in return D agreed to pay P commission and/or remuneration at the rate of 50% of all the legal costs (excluding disbursements) received and to be received form those clients introduced by P to D (“Commission”).
12. P has provided further and better particulars of his statement of claim, in answer to D’s request, and in particular his case is:
(1) He was not an employee of D as he had to bear all employer’s MPF contribution, and he to refund the employer’s MPF contribution to D.
(2) P only got paid for the client he referred to D and when the bill of costs was settled;
(3) P retained “extensive contact” with the client referred by him as follows:
(i) P keep contacting the client;
(ii) The contact with client introduced by P would not be done by D or his staff without the consent of approval of P;
(iii) The purpose of the management was to avoid keeping P in the dark of his clients’ cases and/or soliciting his clients who might refer a new case to him;
(4) P maintained “exclusive control” over the client referred by him as follows:
(i) After his agents took instructions from the potential clients and recorded them in his form, P would screen the case and decided whether to take it or not;
(ii) D had no right to say yes or no;
(iii) If P took it and chose to refer the case to D then P would hand over the documents to D’s staff members to open file;
(iv) P had full rights to control the use of the information;
(v) If P did not think any of D’s actual staff should attend the conference with client, no one could attend;
(vi) All the settlement offer and money paid to P’s clients had to be through P.
13. D terminated the Commission Agreement on 31 January 2013. It is P’s case that pursuant to the Commission Agreement, P had referred clients from 2009 to 31 January 2013 to D but D failed to pay P the substantial part of the Commission estimated at not less than HK$10m. P claims D was in breach of the Commission Agreement or alternatively, P is entitled to a reasonable remuneration on a quantum meruit basis. P seeks among other things an account to be taken of the Commission or remuneration.
14. On the other hand, it is D’s case that the Commission Agreement did not exist, and D was employed by P. D also takes issue as to P’s allegation that the people named in the annex to the statement of claim were clients introduced by P to D at the material time.
15. It is D’s case that the Commission Agreement was illegal, void and unenforceable and D is not entitled to claim on the basis of quantum meruit.
16. P’s response to the illegality issue is that it was D who shared profit costs and had breached Rule 4, and that P’s receipt of Commission would not result in any “criminal culpability” on his part, and that the Commission Agreement was therefore enforceable against D.
Question (a)
17. The learned Master ruled that Question (a) must be answered in the affirmative. P confirmed the acceptance of this answer at the end of the hearing before the Master.
18. There is no appeal against the Master’s answer in respect of Question (a).
19. Rule 4 of the Solicitors’ Practice Rules (“Rule 4”) provides as follows:
“Sharing with non-qualified persons
A solicitor shall not share or agree to share with any person not being a solicitor practising in Hong Kong his profit costs in respect of any business whether by way of paying or agreeing to pay a commission on business introduced by any such person not being a solicitor, or otherwise:
Provided that—
(a) a solicitor carrying on practice on his own account may agree to pay an annuity or other sum out of profits to a retired partner or predecessor or the dependants or legal personal representative of a deceased partner or predecessor;
(b) a solicitor who has agreed in consideration of a salary to do the legal work of an employer who is not a solicitor may agree with such employer to set off his profit costs received in respect of contentious business from the opponents of such employer or the costs paid to him as the solicitor for such employer by third parties of non-contentious business, against the salary so paid or payable to him and the reasonable office expenses incurred by such employer in connection with such solicitor and to the extent of such salary and expenses; and
(c) a solicitor whose firm is a party to an Association may share fees and profits with the foreign firm or firms in that Association.”
20. Having considered P’s claim in the statement of claim, I agree that the alleged Commission Agreement as pleaded by P was in contravention of Rule 4, and Question (a) must be answered in the affirmative.
Question (b)
21. I then come to Question (b).
22. Mr Pang had referred this court to Tinsley v Milligan [1994] 1 AC 341, and submitted that even though Tinsley had been overruled by the majority of the 9 Lord Justices of the UK Supreme Court full bench in Patel v Mirza [2016] UKSC 42, Tinsley remains binding on this court by reason of the Hong Kong Court of Appeal’s decision in Kan Wai Chung v Hau Wun Fai [2016] 5 HKC 585. It was further stated in Kan Wai Chung that the majority approach in Tinsley was adopted in Hong Kong and approved by the Court of Final Appeal[1].
23. In Tinsley, the plaintiff was the sole owner of a property although both she and the defendant had contributed to the purchase price and it was the understanding that they were joint beneficial owners. The purpose of that arrangement was to enable the defendant with the connivance of the plaintiff to make false claims for social benefits. The parties later fell out and the plaintiff asserted the sole ownership of the property and the defendant counterclaimed for a declaration that the plaintiff held the property on trust for the parties in equal shares. The plaintiff’s claim was dismissed and the defendant’ counterclaim was allowed. The plaintiff appealed.
24. The Court of Appeal (by a majority) dismissed the plaintiff’s appeal on the ground that in the circumstances the public conscience would not be affronted if the defendant’s counterclaim were to succeed.
25. The House of Lords unanimously rejected the “public conscience” test, but by a three to two majority upheld the Court of Appeal’s decision. The leading speech was given by Lord Browne-Wilkinson. His starting point was that title to property could pass under an unlawful transaction; but he held that the court would not assist an owner to recover the property if he had to rely on his own illegality to prove his title[2].
26. As submitted by Mr Tang, the ratio as decided by the majority of the House of Lords can be found in the following passage of Lord Browne-Wilkinson:
“… In my judgment the time has come to decide clearly that...
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