DEACONS v. KEVIN RICHARD BOWERS

bjbj DCCJ 3046 / 2007 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 3046 OF 2007 ------------------------ BETWEEN DEACONS Plaintiff and KEVIN RICHARD BOWERS Defendant ------------------------ Coram: His Honour Judge Thomas Au in Chambers (open to public) Date of Hearing: 15 April 2008 Date of Decision: 15 April 2008 Date of Handing Down Reasons for Decision: 16 April 2008 ------------------------ Reasons for Decision ------------------------ Mr Bowers is a solicitor formerly working for the Plaintiff, Deacons. By way of this action, Deacons claim against Mr Bowers for the total sum of $890,796.94 as various disbursements they say Mr Bowers had incurred when he was handling a case for the client known as in short Wonderyouth. This is the hearing of Deacons application for further and better particulars of the Defence, and Mr Bowers application for specific discovery under O 24, rr 3, 5 and 7 of the Rules of District Court (Cap 336). Background It is Deacons case that, by way of an express email instruction dated 17 August 2005, Mr Bowers then supervising partner, Mr Shaw, asked him not to incur any further costs in relation to the Wonderyouth case. Notwithstanding this, Mr Bowers still proceeded to commit the firm to these further disbursements without any costs on account. Mr Bowers was thus in breach of his employment contract and duty as their solicitors. These disbursements include to a large extent senior and junior counsel s fees engaged by Wonderyouth to conduct its appeal in the Court of Final Appeal on 26 and 27 October 2005. They also include various airfares and hotel charges incurred by Mr Bowers in flying to the Mainland to meet the clients. Wonderyouth has failed to settle these fees and has since gone into liquidation, with insufficient assets to cover Deacons bills. Deacons have since paid the aforesaid counsel s fees. Mr Bowers left Deacons on 16 March 2006. For the purpose of today s applications, Mr Bowers pleaded defence can be summarized as follows: Given the usual practice of solicitors in Hong Kong, it was not unreasonable for him not to have asked Wonderyouth to provide costs on account for these various disbursements in light of (a) the pre-existing relationship between the firm and Wonderyouth, (b) the nature and amount of money involved in the subject matter litigation, and (c) the financial status and reputation of Wonderyouth, and its billing and payment history. For the same reasons, Mr Shaw s email instruction was unreasonable and in any event in breach of the Hong Kong Solicitors Guide for Professional Conduct. Further, he had at the material times been reporting to Deacons Debt Committee on his financial performance of, inter alia, the Wonderyouth case before and after Mr Shaw s email instruction. By reason thereof: The Debt Committee (comprising of Ms Esler, Mr Turnbull and Mr Shaw) was at all materials fully aware of the financial performance of the Wonderyouth case, including the further incurring of the disbursements for conducting the CFA hearing. Deacons had agreed to Mr Bowers continuing to handle and conduct the CFA hearing until its completion without obtaining the relevant costs on account. Mr Shaw s email instruction had been so superseded by these events. Further, even if Mr Bowers were in breach of his employment contract as alleged, Deacons loss was not caused by his breach, as causation was broken by Deacons refusal to accept Mr Yip of Wonderyouth s fee payment proposal and to refuse, in breach of the Professional Code of Conduct, to appear on Wonderyouth s behalf at a subsequent hearing of an enforcement action taken out by Wonderyouth s opponent. Alternatively, for the same reason, Deacons had failed to mitigate their loss. The above defences raise what I regards as the issues relevant to the two applications before me. The specific discovery application At the hearing Mr Bowers has limited himself to 7 classes of documents for discovery instead of 13 as originally set out in his Summons. I will deal with each of them as follows. Class 1: Shaw and/or Esler and/or Turnbull s notes of the Debt Committee meetings with the Defendant from 1 January 2005 until 16 March 2006 It is not seriously disputed, and I so rule, that these notes, if exist and insofar as they are related to the Wonderyouth case, are relevant to the issue as to whether Mr Bower had been regularly reporting the financial aspects of the Wonderyouth case to the Debt Committee. Mr Shaw by his affidavit filed on 3 April 2008 confirms that neither Ms Esler and Mr Turnbull has made any handwritten notes. These documents thus do not exist. Mr Bowers accepts this confirmation as a satisfactory answer to the request for discovery insofar as it relates to Ms Esler and Mr Turnbull s notes. However, Mr Bowers submits that Mr Shaw s affidavit says that he had himself made some handwritten notes, and only most of which had been destroyed. As such, Mr Bowers further submits that there should be discovery of those notes which have not yet been destroyed. Mr Shaw at the hearing however submits that what he intended to say in the affidavit is that all his handwritten notes have been destroyed. The relevant part of paragraph 3 of his affidavit says as follows: As to my notes, for a number of years (at least four) my practice has been to destroy most of my notes of the Debt Committee meetings after two months. However, I generally did not fully do so where a particular debt was substantial and had not been paid. A small number of the Debt Committee documents relating to [Wonderyouth] were destroyed from time to time, in accordance with my practice. I confirm that those documents which were not destroyed have already been discovered by the plaintiff (emphasis added) I agree with Mr Bowers that the above quoted part of Mr Shaw s affidavit appears to suggest that he has not destroyed all his notes of the Debt Committee relating to the Wonderyouth case. There should thus be a prima facie case for discovery of those notes, but only to the extent that they relate to the Wonderyouth case. However, in light of Mr Shaw s submissions, I think it is for the present stage appropriate for me to order that, within 7 days from today, Mr Shaw shall file a further affidavit clarifying paragraph 3 of his affidavit dated 3 April 2008 as to whether there is still in existence any of the handwritten notes made by him in relation to the Debt Committee s discussions on the Wonderyouth case. Class 2: Emails from the Defendant to Shaw and/or Esler and/or Turnbull from 1 January 2005 until 16 March 2006 Class 3: Emails from Shaw and/or Esler and/or Turnbull to the Defendant from 1 January 2005 until 16 March 2006 Notwithstanding Mr Shaw s submissions, I rule that these documents insofar as they are related to the Wonderyouth case for the period between the date of Mr Shaw s instructions and the departure of Mr Bowers, are relevant. They relate at least to the issue as to (a) whether Mr Bowers had been keeping the Debt Committee aware of all financial aspects (including thus the further incurring of disbursements) of the Wonderyouth case, including the conduct of the CFA hearing, from the date of Mr Shaw s instructions until the time when left Deacons, and (b) whether the Debt Committee had consented to Mr Bowers continued conduct of the Wonderyouth CFA case in incurring further disbursements as well as whether Mr Shaw s instruction had thus been superseded. Mr Shaw at paragraph 4 of his affidavit deposes to the effect that Deacons computer system automatically deletes deleted emails after 90 days. He further confirms that emails, which have not been deleted, have already been disclosed. Mr Bowers submits that Mr Shaw s evidence is insufficient in answering the request for discovery, as it is not even his evidence that the so-called automatically deleted emails could not be reasonably retrieved by proper computer techniques employed by computer experts or technicians to recover lost data. A party is required to take all reasonable steps and best endeavours to discover relevant documents. I accept Mr Bowers submissions that Mr Shaw s above answers fall short of what is required of Deacons to take all reasonable steps to discover these documents. However, in my view the relevant period for discovery should be 17 August 2005 (the date of Mr Shaw s instruction) and 16 March 2006 (the date of Mr Bowers departure). The original period sought is too wide. In the premises, I order that, within 7 days from today, Deacons shall file a further affidavit by Mr Shaw or any other responsible officer of the firm on what are the reasonable steps and endeavours that have been taken by them to try to retrieve the emails exchanged between Mr Bowers, Mr Shaw, Mr Turnbull and Ms Elser concerning the Wonderyouth case for the period between 17 August 2005 and 16 March 2006. Class 4: Financial records from Law 2000/Law 3000 presented to the Defendant during the Debt Committee meetings from 1 January 2005 until 16 March 2006 Relevance of these documents is not in dispute. Mr Shaw deposed in his affidavit to the effect that (a) all the hard copies of any of these presentations have been destroyed, and (b) as confirmed by their computer software development manager, Deacons can no longer retrieve from the computer the documents (other than those already discovered) showing the account department figures as at the time of the Debt Committee s meetings with Mr Bowers. Mr Bowers accepts that he cannot challenge Mr Shaw s above evidence, and it constitutes a sufficient answer to the discovery request. I therefore dismiss Mr Bowers application for discovery under this class. Class 5: Invoices/Bill details/Narratives/Receipts/Invoice Reminders/Statements of Account/Covering Letters issued by the Plaintiff to Wonderyouth from 1 January 1998 until 10 April 2006 Deacons have discovered a computer printout from its computer system, giving details of all Mr Bowers invoices to Wonderyouth from 1 January 1998 to 10 April 2006. Mr Shaw submits that that is sufficient for the purpose of discovery as Mr Bowers is now in a position to work out the billing and payment pattern and history concerning Wonderyouth. Further, Mr Shaw contends that the categories of the documents requested are in any event too wide, as it cannot be said that the statement of accounts and covering letters could be relevant to the billing history and creditworthiness of Wonderyouth. Mr Bower concedes that he would limit his request only to the invoices with the narratives and the corresponding receipts. On that footing, he points out that the material data contained in the computer printout is demonstrably incorrect, as it says that all the invoices issued to Wonderyouth have been settled. This cannot be right, submitted by Mr Bowers, as it is Deacons own pleaded case that the invoices concerning at least the subject matter disbursements have not been paid. As such, he is entitled to the discovery of the invoices and receipts as the underlying documents of the printout. I accept Mr Bowers submissions. Given that these documents are relevant to the issues of the billing history and creditworthiness of Wonderyouth, and that the computer printout already disclosed by Deacons has been shown to be inaccurate, I order that Deacons shall discover the invoices with narratives and the corresponding receipts issued by them to Wonderyouth from 1 January 1998 to 10 April 2006. Class 6 Invoices/Bill Details/Narraatives/Receipts/Invoice Reminders/Statements of Account/Covering Letter issued by the Plaintiff to Preston Technology Company Ltd from 1 January 1998 until 10 April 2006 The reference to Preston comes from the Further and Better Particulars of paragraph 6 of the Defence filed by Mr Bowers on 11 February 2008. In his answer to the request to specify his case as to the financial status/reputation of Wonderyouth, he pleads as follows: At all material times, the Plaintiff was aware that [Wonderyouth] was: (i) the owner of a valuable asset in the form of La Salle Court (ii) backed financially by wealthy individuals and/or shareholders; (iii) a good client of the Plaintiff that had paid substantial sums of money to the Plaintiff on a regular basis over an 8 year period (iv) was a company closely associated with [Preston], a company backed by the same wealthy individuals/shareholders as Wonderyouth and a company which was also a good client of the Plaintiff that paid substantial sums of money to the Plaintiff on a regular basis between 1998 and 2006. Notwithstanding this plea, it does not appear to me to be Mr Bowers case that the billing and payment history of Preston had had a bearing on Deacons and his handling of the financial aspects of the Wonderyouth case. It is important to note that paragraph 6 of the Defence (from which these particulars come about) pleads that it is the financial position of the client concerned that is relevant to the solicitor s practice on whether to require the client to make costs on account for disbursements. In the present case, the client concerned is Wonderyouth not Preston. In the premises, I am not satisfied that the documents sought under this class is relevant to any of the issues herein. I therefore dismiss this application for discovery. Class 7: All correspondence and pleadings/court documents created during the conduct of HCMP 388/2006 HCMP 388/2006 is the enforcement proceedings taken out by Wonderyouth s opponent, China Great Wall Finance Company, seeking an order for sale of Wonderyouth s property, the La Salle Court. It is the hearing of this enforcement action that Mr Bowers says Deacons had refused to appear on behalf of Wonderyouth. As set out above, Mr Bowers says this breaks the chain of causation between Deacons loss and his breach of the employment agreement, if any. Deacons have disclosed various documents relating to HCMP 388/2006, but Mr Bowers in his submissions says they have failed to disclose all documents including an affirmation filed by China Great Wall in support of the enforcement proceedings. Mr Bowers submits that this affirmation is relevant as it shows China Great Wall s grounds in support of the application for an order for sale, which had impressed on Wonderyouth the seriousness of the application. That explains why Wonderyouth was so dissatisfied with Deacons refusal to act for them at the hearing, and thus their later decision not to pay Deacons. In the Defence, the relevant plea of the break of causation is at paragraph 48, which says as follows: Further and in the alternative, even if the Defendant did act in breach of the Employment Agreement (which is denied), the Defendant avers that any such breach of contract did not cause any loss or damage to the Plaintiff. The Defendant avers that the chain of causation (arising from any breach of the Employment Agreement by the Defendant) was broken by the Plaintiff and that the became the sole cause of Wonderyouth failure and/ or refusal to pay the Plaintiffs outstanding fees/ profit costs and disbursements when the Plaintiff informed the Managing Director of Wonderyouth, Yip Heon Wai, Dennis ( ) on 7 April 2006 that notwithstanding the fact that the Plaintiff was on the court record as acting for Wonderyouth in the Enforcement Action as at 10 April 2006, the Plaintiff would not appear on behalf of Wonderyouth at the (15 minute) hearing of China Great Wall Finance Company s Originating Summons in the Enforcement Action on 10 April 2006 unless Wonderyouth paid the Plaintiff all outstanding fees/ profit costs and disbursements in the sum of about HK$890,000. Notwithstanding that on 7April 2007 Yip made an offer to the Plaintiff on behalf of Wonderyouth that (i) Wonderyouth would make an immediate part payment of the Plaintiff s outstanding fees/ profit costs and disbursements in the sum of either HK$200,000 or HK$400,000 and that (ii) Wonderyouth would settle the balance of the Plaintiff s outstanding fees/ profit costs and disbursements shortly after the hearing in the Enforcement Action on 10 April 2006, the Plaintiff (through Esler and Shaw) refused to accept Wonderyouth s offer and refused to appear on behalf of Wonderyouth at the hearing in the Enforcement Action on 10 April 2006 in breach of the Hong Kong Solicitors Guide to Professional Conduct. In my view, under this plea, the relevant pleaded facts concerning any things that are related to HCMP 388/2006 are (a) whether there was an hearing on 10 April 2006 of the order for sale application, (b) whether Deacons refused to act for Wonderyouth at that hearing, (c) whether an order for sale was made. Mr Bowers accepts that insofar as these elements are concerned, the disclosed documents in relation to HCMP 388/2006 are adequate. In my judgment, any other documents relating to HCMP 388/2006, including the supporting affirmation, are not relevant to any material issues under this plea. I therefore dismiss this application for discovery. Class 10: All correspondence and pleadings/court documents created during the conduct of FACV 9/2005 The only relevant part concerning the conduct of Wonderyouth s CFA case as pleaded in the Defence is that the case was to be heard two months from Mr Shaw s instruction dated 17 August 2005. There is no plea that any other aspects of Mr Bowers handling of the CFA case had also made his conduct in incurring those further disbursements without costs on account reasonable I am therefore not satisfied that the documents sought under this class are relevant to any of the pleaded issues. I dismiss this application for discovery. Class 12 All Invoices/Bill Details/Narratives/Receipts/Invoice Reminders/Statements of Account/Covering Letter issued by the Plaintiff to Wonderyouth in connection with any intended sale/mortgage of La Salle Court It is Mr Bowers pleaded case that at the material time, Deacons property department had also acted for Wonderyouth to mortgage the La Salle Court. Properly read, Mr Bowers pleaded case is that, by also acting for Wonderyouth, Deacons was aware of Wonderyouth s financial position. However, this issue has nothing to do with Deacons billing of Wonderyouth or Wonderyouth s payment of those bills for the mortgage transaction. It is not Mr Bowers pleaded case that because Wonderyouth could pay Deacons for the mortgage transaction (which fees I understand are usually deducted from the money advanced under the mortgage), that Deacons were contented with his incurring further disbursements in the Wonderyouth s CFA case. For the above reasons, I am not satisfied that the documents sought are relevant to the proceedings. I dismiss this application for discovery. Application for Further and Better Particulars Given Mr Bowers filing of Further and Better Particulars of the Defence on 11 February 2008 and 12 April 2008, when the matter comes before me, there are only six outstanding requests (namely requests 2(a), 2(c), 4(b), 5, 6, and 7, as set out in the Summons) that need to be determined. I will deal with them as follows. Request 2 Request 2 is in relation paragraph 11 of the Defence, which pleads as follows; The Debt Committee meetings would usually involve Shaw and/or Esler and/or Turnbull presenting every financial aspect of all of the matters under the overall supervision of the individual fee earner concerned on a large computer screen . The original requests under this paragraph are as follows: List each example of every financial aspects on which the Defendant relies; Is it the Defendant s case that at those Debt Committee meetings any of disbursements listed in paragraph 12 to 19 [i.e, the presently claimed items of disbursements] were discussed with the Defendant? And If the answer to request 2(b) is , specify: each of the disbursement discussed; (ii) the dates on which each of those disbursements were discussed; and (iii) who was present at each such discussion. By his latest Further and Better Particulars filed in April, Mr Shaw accepts that Mr Bowers has properly answered request 2(a). By his Further and Better Particulars filed in February, Mr Bowers answers requests 2(b) and (c) as follows: 2(b) Yes. 2(c) The Defendant will not be in a position to provide further and better particulars in respect to this request until the Plaintiff has given discovery of a complete set of Shaw and/or Esler and/or Turnbull s notes of the relevant Debt Committee meetings and of Shaw and/or Esler and/or Turnbull s emails to the Defendant during the relevant period for or on behalf of the Debt Committee and/or a complete record of the financial information presented to the Defendant during the relevant Debt Committee meetings. Mr Shaw submits that Mr Bowers answer for request 2 (c) is inadequate and insufficient. These are proper particulars that they should be given even before discovery. In any event, Mr Shaw further submits, as discovery has now been provided by Deacons by way of its two lists of documents filed, Mr Bowers should not have any problems in giving these particulars. Although accepting that these are particulars properly requested, Mr Bowers submits that the Court has in the above just ordered further discovery or affirmation on discovery to be filed by Deacons, he needs to wait until then before he could give the particulars. I disagree with Mr Bowers. These are proper particulars of the Defence, which Mr Bowers should be in a position to give them even before discovery is complete: For request 2(c)(i), even without discovery, Mr Bowers should be in a position to specify whether his case is that all or any particular items of the disbursements pleaded in the Statement of Claim have been discussed with him at the Debt Committee meetings, albeit he may not be able to give the exact dates of the meetings at which each of these items was discussed. For request 2(c)(ii), even if Mr Bowers cannot give the exact dates of these discussions now as he apparently has kept no record of his own relating to these dates, given he has pleaded such a case in the first place, he should at least be in a position to give an approximate period of time where these related discussions were said to have been held. For request 2(c)(iii), similarly Mr Bowers should be in position to say whether in his case in those meetings where the related discussions were held, usually who of Mr Shaw, Ms Esler and Mr Turnbull would attend. I therefore make an order that Mr Bowers shall provide particulars to request 2(c) within 14 days from today. Requests 4(b), 5, 6 and 7 In Mr Bowers Further and Better Particulars provided in February, he repeats his previous answer set out under request 2(c) (as quoted in paragraph 45 above) as particulars given under these requests. Given my order above requiring him to provide particulars under request 2(c) within 14 days, Mr Bowers fairly accepts that he would not object to the same order being made for these requests. I therefore also make an order that Mr Bowers do provide further and better particulars under requests 4(b), 5, 6 and 7 within 14 days from today. Costs In relation to Mr Bowers application for specific discovery, he is only partially successful in light of my orders made above. Moreover, even for those that I have made an order, the Court has also narrowed the scope of such discovery. In the premises, and taking into account the circumstances leading to the application, I regard it as fair and just to make an order that 30% of the costs of and occasioned by this application, including the costs of its hearing today and any reserved costs, be to Mr Bowers, to be grossly assessed at HK$15,000.00. In relation to Deacons application for Further and Better Particulars, Deacons has substantially succeeded. There is no reason why costs should not follow the event. I therefore order that costs of and occasioned by the application, including its hearing today and any reserved costs, be to Deacons, to be grossly assessed at HK$11,700.00. (Thomas Au) District Judge Plaintiff, represented by Mr. G. SHAW of Deacons. Defendant, in person, present. Paragraph 16.3. 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