Background

The plaintiff law firm sued a former salaried consultant, alleging that she had breached duties owed to her employer by undercharging a major client, failing to keep proper time and attendance records, removing case files on departure, and causing the firm to lose the chance to recover substantial additional fees.

The consultant had managed the client relationship, issued interim and final bills, written off significant time costs, and later resigned to join another firm that took over the client’s matter. The employer claimed damages of more than HK$15 million (plus related costs), arguing that she had no authority to discount fees to that extent and had failed to preserve proper records.

Judge’s findings

The court dismissed the employer’s claim in full and ordered it to pay the employee’s costs. The court accepted that, as an employee, the defendant owed duties of loyalty, good faith and fidelity, including a duty to have regard to the employer’s interests.

However, the court was not satisfied that the employee had breached those duties by writing off time or agreeing the level of fees charged to the client. On the evidence, she had broad authority to bill, negotiate fees, write off time and vary hourly rates without prior partner approval, so long as she acted reasonably.

The court also found that the employer’s time records were materially unreliable. They contained implausible or excessive entries, so they could not simply be treated as recoverable chargeable time.

The employer also failed to prove that the additional lost fees were properly chargeable or recoverable from the client. In particular, it did not put forward sufficiently persuasive evidence to support its reconstructed bill of costs.  

Although the court found that the employee had failed to keep time sheets after resigning, contrary to internal requirements, the employer still could not show that this caused any recoverable loss.

The allegations about missing attendance notes, document retention, file removal and deletion of workstation data also failed, either because the breach itself was not proved or because no loss flowing from it was established.

Key takeaways

Although this case arose in a law firm and focused heavily on time recording, the court’s analysis of an employee’s duties has wider significance for employers managing senior staff. In particular, where a senior employee is allowed in practice to exercise broad commercial discretion, it may be difficult for the employer later to argue that the employee acted outside their authority.

The case also shows that having internal rules is only part of the picture. Even where an employer can show that an employee failed to follow those rules, it still needs to prove that the breach caused actual loss if it wants to recover damages.

The court also placed significant weight on the firm’s actual operating practices, rather than subsequent attempts to narrow the employee’s authority or to recharacterise the write-offs as unauthorised.

Practical implications for employers  

The decision highlights several practical points for employers in Hong Kong when managing senior employees, especially around departures and client or customer relationships:

• If senior employees can offer discounts, waive charges or negotiate pricing, the scope of that authority should be clearly documented. It also helps to set approval thresholds and build in a review process for significant decisions.
• The case is likely to be especially relevant to businesses in the professional services sector that charge for services on a time-cost basis, such as law firms, accounting firms and consultancies, because disputes over billing discretion, write-offs and the reliability of time records can have a direct impact on revenue recovery.
• If management routinely allows broad discretion or overlooks departures from internal rules, that may later weaken arguments that the employee acted outside policy or authority.
• Employers should also plan carefully for departures involving key client-facing employees. Clear guardrails on file ownership, document preservation, system access, handover steps and communications with clients can reduce the risk of disputes.