HIND INTERNATIONAL INVESTMENT LTD v. K&L GATES (a firm of solicitors)

HCA 1325/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1325 OF 2011

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D E C I S I O N

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1. This is an application by K&L Gates (“KLG”), the defendant by Main Action and the plaintiff by Counterclaim, for leave to adduce expert evidence.

2. The Main Action was commenced by Hind International Investment Limited (“Hind”) for the return of certain funds deposited by Hind with KLG, a solicitors’ firm whose business is the provision of legal services.  Hind claims that the funds were paid to KLG pursuant to four escrow agreements (“Escrow Agreements”), the authenticity of which is disputed by KLG.  Details of the claims of Hind in the Main Action and the claims of KLG in the Counterclaim are, as gleaned from the pleadings and the skeleton submissions of counsel, set out below.

HIND’S CASE

3. Hind is described in the Amended Statement of Claim as a company incorporated in Hong Kong that carries on the business of watch manufacturing, trading and investments.  According to Hind, Manoj Kumar Jhunjhnuwala (“MKJ”), the 2^nd defendant by Counterclaim and a director of Hind, was informed by Navin Aggarwal (“Aggarwal”), a former partner of KLG, over the phone in about mid 2010 that a client of KLG from the PRC had asked KLG to line up potential investors and/or financiers who would back up this PRC client in a merger and acquisition deal that it intended to do (“proof of funds arrangement”). Aggarwal claimed that the deal was strictly confidential and so could not give MKJ the details about it.  MKJ was also told by Aggarwal that the funds provided by interested financiers would be placed in escrow in KLG’s client account, so that the funds would be secured and would not be used save for the purpose of backing up the financial strength of the PRC client.  The financiers would be entitled to call back the fund placed on short notice, namely 1 or 3 business days, and be able to earn returns as promised by the PRC client in the event the merger and acquisition deal was successful.  Hind relied on what Aggarwal said and made investment by signing various escrow agreements repeatedly with roll-overs.

4. The Escrow Agreements were entered into between KLG and Hind between May 2010 and March 2011, whereby Hind agreed to deposit divers sums into the client account of KLG for KLG to hold them on escrow for and on behalf of Hind and to return the same to Hind at the direction of Hind.  Pursuant to the Escrow Agreements, the respective sums of HK$20,000,000, HK$11,000,000, HK$4,000,000 and HK$10,000,000 (collectively referred to as “Escrow Sums”) were paid into the client account of KLG.

5. The common provisions of the Escrow Agreements are:

(a) KLG shall, upon receipt of a written notice of transfer or withdrawal of the whole or any of the escrow sum, effect the transfer or withdrawal within one or three business days;

(b) In the event KLG does not receive any such written instructions, KLG shall on the respective date specified return the respective escrow sum to Hind forthwith;

(c) The escrow sum may be rolled over for a further period or periods as mutually agreed either by way of written agreement or verbally on the same terms and conditions.

6. A sum of HK$13,592,500 has since been withdrawn from the Escrow Sums kept by KLG and Hind’s claim in the Main Action is for the return of the balance of HK$31,407,500 under various alternative heads – (a) under the Escrow Agreements, (b) by way of damages for breach of the Escrow Agreements, (c) pursuant to the implied trust imposed over the Escrow Sums held by KLG in favour of Hind, or (d) for breach of a duty to take reasonable care for the safe custody and control of the Escrow Sums.

KLG’S CASE

7. The case of KLG is set in the context of the commission of the fraudulent acts by Aggarwal, its former partner.  A raid was conducted by the police at the office of KLG in The Landmark, Central on 9 June 2011, when, in execution of a warrant, materials were seized in relation to a criminal investigation into the activities of Aggarwal.  Aggarwal resigned from KLG on 11 June 2011 and was subsequently sentenced to 12 years’ imprisonment for theft and forgery.  KLG has since then been investigating the misconduct of Aggarwal.

8. Since the revelation of the fraudulent acts of Aggarwal, KLG was sued by some entities that were not clients of KLG but claimed to have deposited monies into the client account of KLG pursuant to various escrow agreements under the auspices of Aggarwal.  It transpired that these entities paid monies into the client accounts of KLG for apparently no legitimate purpose, and obtained exorbitant fees from the client accounts on top of the principals.  The action commenced by Hind is, in KLG’s view, one such action by a non-client entity.

9. Hind is owned by MKJ and one Dinesh Kumar Jhunjhnuwala.  Hind, MKJ and Anil Kumar Jhunjhnuwala (“AKJ”), the 4^th defendant by Counterclaim, had made a series of personal loans totaling at least HK$66,999,910.00 to Aggarwal between May 2010 and April 2011.  These sums were remitted by Hind, MKJ and AKJ into the client account of KLG.  On various dates between May 2010 and May 2011, Aggarwal caused various sums to be paid out of the client account of KLG, whether by way of purported repayment or in payment of interest or other charges associated with the personal loans.  The sums so paid out were paid to Hind, MKJ, AKJ, Shalini Jhunjhnuwala (“SJ”), the 3^rd defendant by Counterclaim, Radhika Jhunjhnuwala and Dhruv Jhunjhnuwala.

10. KLG disputes the authenticity of the Escrow Agreements and the legitimacy of the proof of funds arrangement.  KLG claims that the monies deposited by Hind, MKJ and AKJ into KLG’s client accounts were personal loans advanced by these parties to Aggarwal and the Escrow Agreements were sham documents created in an attempt to impose liability on KLG for the personal loans of Aggarwal.  In support, KLG points to the fact that no counterparty or underlying transaction was ever identified in the Escrow Agreements, nor had any due diligence ever been conducted.

11. KLG claims that Aggarwal had no authority to issue any of the Escrow Agreements for the alleged proof of funds arrangement and that Hind, MKJ, SJ and AKJ (“Hind parties”) were unreasonable in believing that Aggarwal had such authority, if they in fact so believed, because the alleged transactions were so extraordinary and unusual that they must fall outside the scope of the ordinary business of a firm of solicitors like KLG.

12. The defence of KLG is premised upon the advancing of substantial loans by the Hind parties to Aggarwal in his personal capacity and the Escrow Agreements were shams created to impose liability on KLG in the event Aggarwal failed to repay the loans.  KLG counterclaims against the Hind parties for conspiracy to defraud KLG and that the Hind parties should account to KLG as constructive trustee for monies and/or assets misappropriated by Aggarwal and for damages or restitution.

Issues in question

13. In KLG’s view, one of the main issues between the parties is whether Aggarwal had authority to bind KLG with the Escrow Agreements entered into for the sake of the purported proof of fund arrangement.  Hence, KLG suggests that the court has to determine whether or not:

(a) The use of the purported escrow agreement were of such an unusual nature that they fell outside the scope of the ordinary business of KLG, a firm of solicitors practicing commercial, corporate and financial law and provides business law services (“Issue One”); and

(b) The alleged proof of funds arrangement was so extraordinary or at odds with the common commercial practice in Hong Kong such that it fell outside the scope of the ordinary business of KLG (“Issue Two”).

14. The expert evidence that KLG seeks to adduce is for the purpose of assisting the court in the determination of the above issues, details of which, as set out in its summons filed on 5 September 2013 (“Summons”), are:

(a) In relation to Issue One, evidence by an expert in the field of legal practice in Hong Kong on

(i) How often, under what circumstances and how escrow letters are utilized by a firm of solicitors in Hong Kong who practices commercial, corporate and financial law and provides business law services?  What are the typical terms included in such escrow letters under the prevalent practice in Hong Kong?

(ii) By reference to the nature, contents and effect of the Escrow Agreements, identify their features which were consistent or inconsistent with the aforesaid usage by a firm of solicitors in Hong Kong that practices commercial, corporate and financial law and provides business law services.

(b) In relation to Issue Two, evidence by an expert in the field of commercial, corporate and financial practice in Hong Kong on

(i) What are the purpose, common features, mechanism and/or modus operandi of a “proof of fund” arrangement as utilized in commercial, corporate and/or financial transactions in Hong Kong?

(ii) By reference to the purpose, features, mechanism and/or modus operandi of a “proof of fund” arrangement asserted by Hind in this Action, identify their features which were consistent or inconsistent with those identified under (b)(i) above.

15. The experts identified by KLG for the questions relating to Issue One is Mr David Norman, the sole proprietor of Messrs David Norman & Co who has been a practicing solicitor for nearly 30 years in Hong Kong.  As for Issue Two, the expert proposed by KLG is Mr Christopher Howe, the managing director and co-founder of Anglo Chinese Corporate Finance Limited, who has over 35 years experience in the finance industry in Hong Kong.

Legal principles

16. There being no substantive disagreement between the parties as to the legal principles applicable in considering whether expert opinion should be admitted, I will adopt the summary of the relevant principles in the skeleton submissions of Ms Lok, who has indicated her reliance on the case of Re Ocean Time Development Ltd [2008] 2 HKLRD 393 in support:

(a) Expert evidence is admissible under section 58 of the Evidence Ordinance (Cap 8) where there is a recognized expertise governed by recognized standards and rules of conduct capable of influencing the court’s decision on any of the issues which it had to decide, but it is not necessary to have a recognizable profession for there to be a recognizable body of expertise in relation to the matter in question.

(b) The proposed expert should have a sufficient familiarity with and knowledge of such expertise to render his opinion potentially of value in resolving those issues.

(c) The burden to establish the above is on the party seeking to call the expert evidence.

(d) Evidence meeting the above test may be excluded if the court considers that it is irrelevant, in the sense that it is not helpful to the court in resolving any issue justly.  Issues of law or issues on which the court is able to come to a fully informed decision without hearing such evidence are specific examples given by Ms Lok as situations where expert evidence is not helpful.

17. On the question of relevance, Ms Lok specifically drew my attention to what Chu J (as she then was) said in Wong Hoi Fung v American International Assurance Co. (Bermuda) Ltd[2002] 3 HKLRD 507:

“… where the court cannot form a clear view on the relevance of the proposed expert evidence or where it considers the proposed evidence is clearly relevant, then it should grant leave for the evidence to be adduced at the trial.”

18. Applying the aforesaid legal principles to the present case, Ms Lok put it to me that the expert evidence would assist the trial judge to decide firstly, whether or not the Escrow Agreements were so extraordinary and out of line with the prevalent practice that they fell outside the ordinary scope of the business of KLG, and secondly, whether or not the alleged proof of funds arrangement was so extraordinary and out of line with the prevalent practice that it fell outside the ordinary scope of the business  of KLG.

RECOGNIZED EXPERTISE

19. With the expert evidence proposed in respect of Issue Two, one of the grounds relied on by Mr Maurellet in opposing the application is that the expert evidence in the field of corporate finance is not related to any identifiable body of expertise, skill or learning in relation to proof of fund arrangements.  He cautioned that, when considering whether there exists a recognizable body of expertise, it is not enough to say that the expert is a member of a professional body or someone who exercises skill, experience and expertise in a particular field.  He pointed out that in the Re Ocean Timecase, expert evidence by a liquidator was excluded on the basis that there was no separate or identifiable body of expertise peculiar to liquidators in relation to the manner of the sale of property, the matter in question in the case.

20. Ms Lok took a different view and contended that how people go around using proof of fund arrangement to facilitate acquisition and merger deals is a highly specialized area, involving specialized rules and regulations like the listing rules and they are handled by a group of specialized people.  The conclusion arrived at on the basis of the specific facts in the Re Ocean case does not, in her view, in any way affect the general principle established by the case, viz., it is not necessary to have a recognizable profession in order for there to be a recognizable body of expertise in relation to the matter in question.

21. Mergers and acquisitions are highly regulated matters and corporate financing is an important aspect of such deals.  To ensure compliance with the relevant rules and regulations, the guidance and assistance of parties who have the relevant experience in the field will no doubt be enormously helpful.  It is notable that in Hong Kong, advising on corporate finance is a type of regulated activities under the Securities and Futures Ordinance (Cap 571)[1] and licensing requirements may be applicable.  Even though the individuals who provide such advisory services may not belong to a particular recognized professional team, I have no problem in finding that there is recognition of their expertise, which expertise is capable of influencing the court’s decision on the issues that KLG seeks to have their opinion on.

22. There was no suggestion from Mr Maurellet that the knowledge and experience of a solicitor with years of practice of commercial law is not a recognized field of expertise that would offer insight peculiar to the adoption of escrow agreements in commercial transactions.  Even if that had been the stance that he took, I would not have agreed with him.

RELEVANCE TO THE ISSUES

23. Mr Maurellet raised a number of concerns about the relevance, or rather the lack of it, of the expert evidence sought to be adduced.  Citing the cases of Clarke v Marlborough Fine Art [2003] CP Rep 30 and Fung Chun Man v Hospital Authority (HCPI 1113/2006 24 June 2011) in support, Mr Maurellet stressed that the court has to be satisfied that the expert evidence is likely to be of real assistance to the determination of the issues before it.

24. In the case of Clarke v Marlborough, directions had already been given for the evidence of an art expert Hoffield, who was instructed to give his professional opinion upon aspects of the relationship between an artist and a gallery, including terms of trade and dealing, and levels of remuneration achieved by the gallery.  The court dismissed the application for permission to adduce the report of a second art expert, a Mr Silbermans.  In paragraph 13 of the judgment, Patten J said –

“It seems to me that the Court can perfectly adequately assess whether the terms agreed with [the artist] were significantly out of line by knowing the rates of commission or profit and the terms commonly obtained by galleries at the relevant time. This is essentially factual information and much of it is contained in the report of Mr Hoffield to which I have already referred. Mr Silbermans’ report … adds no relevant factual information and is more likely than not to give rise to a further layer of expert evidence leading to a dispute which is largely hypothetical.”

25. Mr Maurellet referred me to the principles on the exercise of discretion under Order 38 rule 36 of the Rules of the High Court, as stated in paragraphs 9-13 of the judgment of Bharwaney J in the Fung Chun Mancase. In particular, paragraph 9 of the judgment reads as follows –

“The enactment of the CJR did not result in a change to O.38, r.36 of the Rules of the High Court. However, after the enactment of the CJR, it is clear that the court’s discretion, whether or not to grant leave to a party to adduce expert evidence, is to be exercised within the ambit of the court’s management powers. Those powers must be exercised in the light of the underlying objectives of the Civil Justice Reform, including the need to ensure the cost effectiveness of the proceedings; to ensure that the case is dealt with expeditiously; to ensure reasonable proportionality having regard to the amount of money involved, the importance of the case, the complexity of the issues, and the financial position of each party; to ensure procedural economy in the conduct of the proceedings; and to ensure fairness between the parties.”

26. Mr Maurellet described the matter in issue as one about the knowledge of the parties, with the case of KLG premised on the knowledge of the Hind parties of Aggarwal’s fraud, while the case of Hind is premised on the knowledge of KLG, and its approval and acquiescence of, the Escrow Agreements.  This, according to Mr Maurellet, is the primary case and in his opinion, the expert evidence will be of no assistance at all since what solicitors’ firms do in similar circumstances is completely irrelevant to the state of mind of the officers of Hind when the Escrow Agreements were executed.  That being the case and given that it is KLG’s case that the relevance of the expert evidence goes to the issue whether Aggarwal had authority to bind KLG with the Escrow Agreements, that is, the contract claim of the Hind parties, Mr Maurellet submitted that the court would not have to determine the issues to be put to the expert since they only come into the picture if and when the KLG loses its primary case that there was actual knowledge on the part of the Hind parties, that is, they knew that the Escrow Agreements were shams.

27. Mr Maurellet argued that whether the alleged proof of fund arrangement existed is merely a matter of credibility of the witnesses of the Hind parties, and it is not permissible to adduce expert evidence for the purpose of rebutting the evidence of the Hind parties on what they were told by Aggarwal.  It is his contention that the expert evidence will not be of any real assistance for determining whether Aggarwal’s acts fell within the usual business of KLG as that is a question of fact which will have to be determined on the basis of essentially factual information.

28. In relation to the expert evidence about the prevalent practice of solicitors in entering escrow agreements that is proposed for the determination of Issue One, Mr Maurellet pointed out that the partners of KLG are experienced corporate and commercial lawyers who can speak from their own experience as to the prevalence of use of escrow agreements and their typical terms.  In his view, asking a solicitor from another firm to give evidence is a wholly artificial exercise when the expert can only speak of his own experience in a particular firm.  As the only discernible purpose of the expert opinion will be to buttress the evidence of the witnesses of KLG, Mr Maurellet pointed out that such purpose is not proper use of expert evidence.

29. The case of Holladay v Fred Kan & Co (unreported, HCA 12723/1996, 13 October 1997) was relied on by Mr Maurellet to illustrate his point and he referred to the following passage from the judgment of Barnett J:

“The particulars of breach upon which the Plaintiff seeks to rely are matters of fact and/or law which will be for the judge to determine, again with the assistance of counsel where necessary. As far as I can see, no questions of practice or particular standards of conduct arise on which it would be appropriate for a solicitor to help the court.”

30. Another case referred to by Mr Maurellet is JJ Coughlan v Ruparelia [2003] PNLR 4.  In that case, the question of whether the acts of a solicitor were within the firm’s ordinary business was decided without the benefit of any expert evidence.  Mr Maurellet read out a number of passasges from the judgment in that case to show that the court was fully capable to examine the details of the transactions and then come to a conclusion that the transactions were so out of line that they did not come within the ordinary course of a solicitor’s business.

31. Mr Maurellet submitted that the above points apply with even greater force in respect of the expert evidence proposed for the determination of Issue Two, stressing that whether the proof of fund arrangement existed is a matter of factual and not expert evidence.  In his view, since the expert evidence of Mr Howe can only be of relevance to the question of whether the proof of fund arrangement was within the scope of the ordinary business of a solicitors’ firm, it is preposterous to claim that the evidence of a financier would be of assistance to the court.

32. In addition, referring to the business of Hind as being that of a watch manufacturer, and not that of a corporate finance business or a solicitors’ firm, Mr Maurellet stressed that there is no reason why the Hind parties should know what a High Court judge would not have known.  There is simply no basis to infer what they would or should have known on the basis of the knowledge of experts in those fields.

33. The suggestion that determination of the issues would merely be a matter of the credibility of the witnesses was challenged by Ms Lok.  In her view, although that will be one aspect of the finding, credibility cannot be tested in vacuum.  There is a need for objective facts, to enable the judge to test the probability or improbability of what the Hind parties say, to determine whether their case of reliance on what Aggarwal said was reasonable or rational, and that, she said, has to be tested objectively.

34. Ms Lok considered Mr Maurellet’s reliance on the Clarke v Marlborough Fine Art case as misplaced.  She pointed out that in theClarke case, the court had already allowed the opinion of a first expert and its decision to disallow the evidence of a second expert to be adduced was partly based on the fact that much of the information that would be provided by the second expert was already contained in the first expert report.

35. As regards the Fung Chun Man case, Ms Lok sought to distinguish it, pointing to the fact that it is a personal injury case and that the application in that case was made too late as the trial date would be affected.  In any event, Ms Lok did not agree that the Fung Chun Man case propounded a different test given that Barma J (as he then was) said, in paragraph 15 of the judgment, that

“In summary, the expert evidence must be in a recognized discipline, reasonably required to enable the court to resolve the issues in dispute, and proportionate.”

36. To persuade me that the present case is not the same as the Holladay v Fred Kan & Co case, Ms Lok repeatedly assured me that, unlike that case, the experts in the present case will not be answering the questions of fact to be determined by the trial judge and they would not be giving their opinion on what they would have done had they been in the position of KLG.  She pointed out that the court in the Re Ocean case had clearly demonstrated reluctance to accept expert opinion on a question of law where the court would be well placed to deal with such a question.  In contrast, the prevalent practice of a solicitors’ firm is outside the normal experience of the judge and so the court will be assisted by the expert opinion.

37. With the JJ Coughlan case, Ms Lok stressed that the case is not one about expert evidence.  Furthermore, in her view, even if no one thought about adducing expert evidence in that case, that does not mean that expert evidence would not be necessary in the present case.  In particular, she pointed to the statement in the Wong Hoi Fung case that supports the granting of leave to adduce expert evidence if the court cannot form a clear view on the relevance of the proposed expert evidence.

38. Ms Lok also took issue with the suggestion that Hind should be regarded merely as watch manufacturers.  She specifically drew my attention to paragraph 1 of the Amended Statement of Claim where Hind was described as a company carrying on business as watch manufacturing, trading and investments.

Issue One

39. In respect of Issue Two, given that the business of Hind does include investments, I agree that there is some basis to expect Hind to have some knowledge about corporate finance matters.  If the criteria set out in paragraph 16 above are satisfied, a case for allowing expert evidence to be adduced in respect of Issue Two may well be made out. 

40. The seeking of leave for adducing the evidence of a commercial lawyer for assisting the court in respect of Issue One is however quite another thing.  There has been no suggestion at all that any of the Hind parties is in the business of the provision of legal services.  The issue to be decided by the trial judge is not whether the action of a solicitor meets the standard expected of someone of his or her knowledge and experience, but whether a lay client ought to have known what the prevalent practice and standards were for carrying out the legal transactions handled by the solicitor whose service had been allegedly retained.  Expert evidence may have been useful in the former instance especially if the practice in question is a highly specialized one. However, in the latter case, if such knowledge is peculiar to practitioners in a particular field of practice only and the trial judge would not himself or herself have known about it without the assistance of an expert, I cannot see how the expert evidence can be of help in deciding what the lay client ought to have known when it dealt with its solicitor.

41. That would have dealt with the permissibility of the proposed evidence in respect of Issue One.  However, before I turn to consider Issue Two, I would say a word about another ground of objection raised by Mr Maurellet.  Mr Maurellet contested the need to have an independent expert when the partners of KLG will be qualified to give such evidence themselves.  I do share his concern as they claim to be practitioners in the relevant field and they should have commensurate, if not more extensive, experience as Mr Norman in the ins and outs of the legal practice relating to escrow agreements.  Ms Lok has not provided any explanation why the opinion of Mr Norman is to be preferred over that of the partners of the firm.  I do not see any good reason for such preference myself.

42. For the above reasons, leave for expert evidence to be adduced for addressing the questions in paragraph 14(a)(i) and (ii) above is refused.

Issue Two

43. In relation to the expert evidence sought in respect of the prevalent practice relating to proof of funds arrangements, I cannot see any force in the argument of Mr Maurellet that whether the expert evidence sought to be adduced is relevant should be determined by reference only to what he referred to as the primary case of KLG.  KLG has put in issue the legitimacy of the proof of funds arrangement, and has clearly indicated its intention to rely on the extraordinary and unusual features of the alleged transactions.  KLG also claims that Aggarwal had no authority to issue any of the Escrow Agreements for the alleged proof of funds arrangement and that the Hind parties were unreasonable in believing that Aggarwal had such authority, if they in fact so believed, because the alleged transactions were so extraordinary and unusual that they must fall outside the scope of the ordinary business of a firm of solicitors like KLG.

44. In paragraph 12 of the judgment of the Wong Hoi Fung case, Chu J (as she then was) stated clearly that “… the evidence must be relevant, in the sense that it is helpful to the court in arriving at its decision on one or more of the issues to be resolved …”.  It is therefore clear that, to be admissible, expert evidence does not have to pertain to each and every issue in question. 

45. Information about the prevalent practice relating to how proof of fund arrangements are put in place will assist the trial judge in assessing whether or not the alleged proof of funds arrangement was so extraordinary that it fell outside the scope of the ordinary business of a firm of solicitors such as KLG, and if the expert considers its features to be so extraordinary, whether they render the alleged reliance of the Hind parties on what Aggarwal told them, presuming that to be true, to be objectively irrational and unreasonable.  As expert evidence on the question in paragraph 14(b)(i) above will be helpful to the court, it is relevant. 

46. I should mention that I do not consider the JJ Coughlan case to be particularly helpful.  I am so minded not because it is not a case on expert evidence, but because there was no challenge on the findings of fact relating to the extraordinariness of the terms of the transaction in that case.  In the present case, Mr Maurellet took issue with characterizing the terms of the Escrow Agreements as unusual on the basis of the annualized interest rate when the deposits were allegedly intended for a term of 1-3 months.  He also stressed that the high returns for the deposits were meant to be paid out by the PRC client had the alleged merger and acquisition deal materialized.

47. I note also that the court in the JJ Coughlan case was concerned with the question of whether the act of a solicitor was something that is in the ordinary course of a solicitor’s business so that the partners of the solicitor should be held liable as well.  On the basis of a number of false statements in the agreement and the abnormality of the underlying scheme it related to, the court held that what the solicitor did in that case was outside the ordinary course of a solicitor’s business.  The counterclaim of KLG in the present case extends beyond the liability of a firm for the act of one of its partners, it puts in issue the fides of the Hind parties as well.  I therefore do no think the JJ Coughlan case casts any doubt on the relevance of the expert evidence sought under paragraph 14(b)(i) above, but even if it does, following the decision in Wong Hoi Fung, I should still grant leave for such evidence to be adduced.

48. The question in paragraph 14(b)(ii) above however stands upon a different footing.  Despite the strenuous efforts of Ms Lok, I do not agree that the comparison that Mr Howe is to be asked to carry out is not, in effect, a determination of the question that should be left to the trial judge. Analogy can be drawn from the case of Clarke v Marlborough Fine Art cited by Mr Maurellet.  In that case, the court specifically stated that, with information about the rates of commission and the usual terms obtained by galleries provided by the first expert, the court could itself assess whether the terms agreed between the artist and the gallery were significantly out of line.

49. Similar observations can be found in the Holladaycase.  In that case, Barnett J relied on the following passage from the judgment of Lord Denning M.R. in the case of Carradine Properties Ltd v D.J. Freeman & Co (citation?) –

“It seems to me that in an appropriate case an expert can give evidence in a solicitors’ negligence case, just as a medical man can give evidence in a medical negligence case or an engineer in a motor accident case. But that is only expert evidence as to the best and accepted practice in a profession or trade. A man with expertise in a profession or trade can give evidence of the practice, but he cannot give evidence as to whether in this particular case there was negligence or not.”

50. With the expert opinion given on the matters in paragraph 14(b)(i) above, the trial judge will be adequately equipped with the necessary information to form his or her view about consistencies or inconsistencies between the alleged proof of fund arrangement and the prevalent practice.  That is a question to be determined by the judge.

PROPORTIONALITY

51. The lack of proportionality is also a ground relied upon by Mr Maurellet in opposing the application for leave to adduce expert opinion.  He reiterated his opinion that the proposed expert evidence will not provide real assistance to the court and it will not help in the determination of any issue at all or an issue that will be the main focus of the trial.  He also expressed his doubt in respect of the cogency of such evidence, submitting that the matters could easily be covered by factual evidence and submissions of the parties.  The time and money that will have to be expended in obtaining the expert opinion are, in his view, clearly disproportionate to the resultant costs, complication and lengthening of the trial and thus not in line with the objective of CJR of dealing with cases efficiently and expeditiously.

52. Ms Lok has made three points on the proportionality issue.  Firstly, the size of the claim of the Main Action itself is substantial and so is the Counterclaim. Secondly, the case is of great importance to KLG when allegations of misdeeds have been made and the names of professional people are at stake.  Lastly, the costs of expert evidence are always subject to the control of the court.  The directions sought are, in Ms Lok’s submission, framed in such a way as to align with the issues in question; they are precise and they are aimed at cutting costs.  The Hind parties can elect not to engage their own experts and they can cross examine the experts of KLG.  In light of the above, KLG should not be denied the opportunity to better their case by adducing expert evidence.

53. With the permissible scope of expert evidence now restricted to the matters in paragraph 14(b)(i) only, and bearing in mind the amount of money involved and the importance of the case to KLG, I take the view that the time and costs for seeking the expert opinion in question are not disproportionate. Since Mr Maurellet did not raise any objections to the proposed directions in the Summons, I grant leave for expert evidence on the matters in paragraph 14(b)(i) above to be adduced as per the directions set out in paragraphs 1-6 of the Summons, save that paragraphs 1 and 2 thereof shall be replaced by the following:

1. Each of (a) KLG and (b) the Hind parties be at liberty to adduce expert evidence by an expert in the field of commercial, corporate and financial practice in Hong Kong on the matters set out in paragraph 14(b)(i) above;

2. Such expert evidence shall be in the form of a written report, to be exchanged and filed within 42 days from the date hereof.

COSTS

54. As to the costs of this application, KLG has succeeded in getting leave for only the opinion of one of the experts sought to be adduced, and the scope of the opinion proposed has also been cut down.  I do not think either KLG or the Hind parties can be regarded as entirely successful in the prosecution or opposition of the application.  I therefore make an order nisi that 50% of the costs of the application be costs in the cause, with certificate for one counsel, to be taxed if not agreed.