DEACONS (a firm) v. WHITE & CASE LTD LIABILITY PARTNERSHIP AND OTHERS

FAMV Nos. 22 and 23 of 2003

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NOS. 22 AND 23 OF 2003 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL FROM
HCMP NO. 2591 OF 2003 AND CACV NO. 178 OF 2003)

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REASONS FOR DETERMINATION

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Mr Justice Ribeiro PJ:

1. On 1st August 2003, we dismissed the application of the 3rd and 4th defendants for leave to appeal to the Court of Final Appeal, with reasons to be given later. We now hand down our reasons.

The action

2. The action which underlies the present application arose out of unsuccessful merger negotiations involving the plaintiff and the first two defendants. The plaintiff and the 2nd defendant are both firms of solicitors in Hong Kong. The latter is associated with the 1st defendant, an international law firm based in New York.

3. Some time after the negotiations had terminated, five lawyers resigned from the plaintiff firm and agreed to join the first two defendants. They included the 3rd defendant, who was, at the time of giving notice of his resignation, a partner described as a "capital partner", with the plaintiff. They also included the 4th defendant, who was, when he resigned, an employee, described as a "salaried partner" of the plaintiff.

4. On 24 June 2002, the plaintiff started proceedings against the defendants. It claims that it had entered into certain agreements with the defendant firms whereby the parties undertook mutual duties of confidentiality in respect of materials disclosed in the course of the merger negotiations and also undertook not to solicit lawyers from each other's firms during the discussions and for a period of 12 months after discussions had terminated if no merger ensued. The plaintiff contends that the defendant firms, by recruiting the 3rd and 4th defendants, and that those defendants, by joining the defendant firms, were each in breach of the agreements and of certain alleged equitable obligations and/or had induced or participated in such breaches by other defendants.

5. Among the reliefs sought against the 3rd and 4th defendants in the Amended Statement of Claim is a final injunction restraining them from "entering into partnership and/or employment with or being engaged in any other capacity by" the first two defendants "until in the case of the 4th defendant, the end of September 2003 and in the case of the 3rd defendant, 1 January 2004" or "for such period as the Court shall deem just". Damages, including exemplary damages, and an account of profits and equitable compensation are also sought.

6. The 3rd and 4th defendants deny the plaintiff's allegations and reject its entitlement to the relief claimed on various grounds. One section of the Defence filed by them was headed "Background to the 3rd and 4th defendants' decisions to resign" set out in paragraphs 9 to 16. In that section, they listed complaints as to how the plaintiff firm was operated and contended that certain named partners in the plaintiff firm, among them a Mr David Zee, were, for a variety of reasons, in breach of their duties as partners. Those are matters which were said to have motivated and led to their decision to resign.

Deputy Judge Poon's orders in March and April

7. In October last year, directions were given for a speedy trial and for the trial to be split between liability and quantum. In January this year, Deputy Judge Poon was designated as the trial judge and became generally seised of the proceedings.

8. The plaintiff applied to the deputy judge for an order to exclude discovery in respect of paragraphs 9 to 16 of the Defence on the grounds that they were irrelevant to any cause of action being asserted in the claim. That application was granted on 13 March 2003 (HCA2433/2002, 13.3.03) and, pursuant to a consequential application by the plaintiff, the deputy judge ordered those paragraphs to be struck out on 1 April 2003. Another order made on 13 March 2003 by the deputy judge related to an application for specific discovery made by the 3rd and 4th defendants. After the plaintiff had consented to discovery in relation to certain items sought, with the exception of a single item, the residue of the application was dismissed by the deputy judge on the grounds of irrelevance to matters arising in the action. In this Determination, these applications and orders are referred to as "the earlier applications" and "the earlier orders" respectively.

Recusal of Deputy Judge Poon

9. On 2 June 2003, at the start of the trial and before dealing with certain outstanding interlocutory applications, Deputy Judge Poon decided to inform the parties "perhaps out of an abundance of caution" that he and Mr David Zee, described by the deputy judge as "a salaried partner" of the plaintiff, had been close friends when at university together and for some time thereafter, but that they had only very infrequently been in contact since the deputy judge joined the Bench in 1993. The court then adjourned to allow the outstanding interlocutory applications to be got in order.

10. When it resumed sitting on 5th June 2003, all the defendants invited Deputy Judge Poon to recuse himself, pointing out that Mr Zee was, contrary to the deputy judge's belief, in fact a "capital partner" with the plaintiff, having assumed that status in January 1998. Mr Zee was therefore effectively a party with a personal interest in the outcome of the proceedings. After reviewing the recent authorities and applying a "reasonable apprehension of bias" test to his circumstances, the deputy judge acceded to the application and recused himself by a ruling dated 9th June 2003 (HCA2433/2002, 9.6.03).

11. Deputy Judge Gill was designated trial judge in place of Deputy Judge Poon and commenced dealing with the outstanding interlocutory applications on 19 June 2003. However, the applicants decided to challenge the earlier orders made by Deputy Judge Poon with a view to arguing that, having recused himself from the trial, he ought equally not to have dealt with the earlier interlocutory applications so that those orders should be set aside.

Application before Ma JA

12. As two of the earlier orders, namely, those resulting from the plaintiff's applications to limit discovery and to strike out paragraphs 9-16 had been perfected, the deputy judge was functus officio, and, being out of time for appealing, the applicants had to seek an extension of time for appealing from the Court of Appeal. This they did by taking out a summons before Ma JA, sitting as a single judge of the Court of Appeal, on 17th June 2003. No extension of time was needed in relation to the third of the earlier orders.

13. On 20th June the application for an extension of time came before Ma JA (HCMP2591/2003, 20.6.03). He dismissed it on two grounds. First, he held that there had been unacceptable delay in bringing the application. Although the delay was relatively slight, it was held to be unacceptable given that there had been an order for a speedy trial and given the recusal of Deputy Judge Poon and the impending trial before Deputy Judge Gill. Secondly, the extension of time was refused on the ground that the appeal would be pointless or academic in nature, since no grounds had been advanced for believing that if it were to be successful, leading to the earlier applications being re-argued before Deputy Judge Gill, there was any prospect of obtaining orders in any way different from the earlier orders made by Deputy Judge Poon.

In the Court of Appeal

14. The applicants sought to challenge Ma JA's decision before the Court of Appeal by a summons issued on 20th June 2003 seeking to reverse Ma JA's decision. That application was heard at the same time as the appeal, brought within time, against the third of the earlier orders, namely, that concerning the specific discovery which had been refused by Deputy Judge Poon. Rogers VP (with whom Le Pichon JA agreed) dismissed both the application for time and the substantive appeal (HCMP 2591/2003 and CACV 178/2003, 11.7.03, Reasons 15.7.03).

15. After having considered certain authorities and the arguments advanced by Mr Edward Chan SC, then appearing for the applicants, his Lordship concluded that an attack upon the earlier orders could not "be challenged on the basis that there was a reasonable apprehension of bias". He also upheld Ma JA's exercise of discretion in refusing a time extension on the grounds of delay and, having apparently been addressed by Mr Chan SC on the underlying merits of the earlier applications, upheld Deputy Judge Poon's view that the relief sought was irrelevant.

The application before the Appeal Committee

16. The application for leave to appeal is brought under section 22(1)(b) of the Hong Kong Court of Final Appeal Ordinance which is in the following terms :-

"An appeal shall lie to the Court...... at the discretion of ...... the Court, from any other judgment of the Court of Appeal in any civil cause or matter, whether final or interlocutory, if, in the opinion of ...... the Court ...... the question involved in the appeal is one which, by reason of its great general or public importance, or otherwise, ought to be submitted to the Court for decision."

17. In the Notice of Motion and the applicants' skeleton argument, questions variously formulated were advanced as having the requisite importance and as being deserving of reference to the Court of Final Appeal for decision. At their core, and at the forefront of the submissions advanced by Mr Michael Bunting SC, appearing with Mr Ashley Burns for the applicants, was the proposition that the correct test for determining whether a judge's decision should be regarded as vitiated by apparent bias had been rendered doubtful by the manner in which the Court of Appeal had disposed of the appeal below. It was submitted that the Court of Appeal had applied a test whereby the court ascertains for itself whether the judicial conduct under review gives rise to a real risk of bias, without any consideration being given as to how that question might be answered by a fair-minded and informed observer. In so doing, the applicants argued, the Court of Appeal had propounded a test which differs materially from the test now generally accepted in other relevant jurisdictions. Whether the correct test in Hong Kong is that advanced by the Court of Appeal or that adopted in such other jurisdictions was submitted to be a question of great general or public importance which ought to be decided by the Court of Final Appeal.

The test for apparent bias

18. In 1993, the law on this topic was as set out by the House of Lords in R v Gough [1993] AC 646. Lord Goff (at p 670) thought it "unnecessary, in formulating the appropriate test, to require that the court should look at the matter through the eyes of a reasonable man, because the court in cases such as these personifies the reasonable man." Instead, the proper approach was for the reviewing court,

"...... having ascertained the relevant circumstances, ...... [to] ask itself whether, having regard to those circumstances, there was a real danger of bias on the part of the relevant member of the tribunal in question, in the sense that he might unfairly regard (or have unfairly regarded) with favour, or disfavour, the case of a party to the issue under consideration by him......"

19. As Lord Hope was subsequently to point out in Porter v Magill [2002] 2 WLR 37 at §100, the Gough approach was at odds with the approaches adopted in Australia, Scotland and in the jurisprudence of the Strasbourg Court :-

"The 'reasonable likelihood' and 'real danger' tests which Lord Goff described in R v Gough have been criticised by the High Court of Australia on the ground that they tend to emphasise the court's view of the facts and to place inadequate emphasis on the public perception of the irregular incident: Webb v The Queen (1994) 181 CLR 41, 50, per Mason CJ and McHugh J. There is an uneasy tension between these tests and that which was adopted in Scotland by the High Court of Justiciary in Bradford v McLeod 1986 SLT 244. ...... the High Court of Justiciary adopted a test which looked at the question whether there was suspicion of bias through the eyes of the reasonable man who was aware of the circumstances: see also Millar v Dickson 2001 SLT 988, 1002-1003. This approach, which has been described as 'the reasonable apprehension of bias' test, is in line with that adopted in most common law jurisdictions. It is also in line with that which the Strasbourg court has adopted, which looks at the question whether there was a risk of bias objectively in the light of the circumstances which the court has identified: Piersack v Belgium (1982) 5 EHRR 169, 179-180, paras 30-31; De Cubber v Belgium (1984) 7 EHRR 236, 246, para 30; Pullar v United Kingdom (1996) 22 EHRR 391, 402-403, para 30. In Hauschildt v Denmark (1989) 12 EHRR 266, 279, para 48 the court also observed that, in considering whether there was a legitimate reason to fear that a judge lacks impartiality, the standpoint of the accused is important but not decisive: 'What is decisive is whether this fear can be held objectively justified.'"

20. However, recent English authority has resulted in a convergence between the English test and the test in other relevant jurisdictions. Such convergence was considered necessary in consequence of the Human Rights Act 1998, as the Court of Appeal explained in In re Medicaments and Related Classes of Goods (No 2) (CA) [2001] 1 WLR 700 at §85, (although the court also pointed out (at §§64-66) that steps in the direction of convergence had already been taken in Locabail (UK) Ltd v Bayfield Properties Ltd [2000] QB 451 at 477-8). Having considered the "reasonable apprehension of bias" test developed in Strasbourg, Lord Phillips MR (giving the judgment of the Court) formulated the test applicable in England and Wales as follows (at §85) :-

"The court must first ascertain all the circumstances which have a bearing on the suggestion that the judge was biased. It must then ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility, or a real danger, the two being the same, that the tribunal was biased."

21. This shift away from the Gough test was endorsed by the House of Lords in Porter v Magill (above), which slightly amended its formulation to drop reference to "a real danger" (per Lord Hope at §103). This marked an acceptance in England and Wales, as in the other jurisdictions mentioned, that the view of the fair-minded and informed observer as to whether a reasonable apprehension of bias arises may differ from the reviewing court's own view, and that it is through the prism of such an observer's perception that the court should consider whether the case is one of apparent bias.

22. A refinement relevant to the present application was also considered in the recent authorities. As is generally accepted, the reviewing court must ascertain the facts relevant to the challenge. After those facts are found, the reasonable apprehension test is applied to those facts. However, a difficulty sometimes arises as to whether one or more of the relevant facts should be taken as established. Since it is generally accepted that it is insufficient simply to accept in all cases the tribunal's declaration regarding the fact in question at face value (eg, as to whether it knew of an allegedly disqualifying connection) and also that the tribunal should not be subjected to cross-examination, how is the court to deal with a fact that may be highly relevant, but which is controversial? In the present case, this is said to be relevant to Deputy Judge Poon's declaration that when he made the earlier orders, he had been unaware of Mr Zee's status as a "capital" partner, the acceptability of that assertion having been put in issue by the applicants.

23. The importance of the judge's knowledge of a key fact to the existence of any apparent bias was acknowledged in Locabail (UK) Ltd v Bayfield Properties Ltd (above, at 477) :-

"When applying the test of real danger or possibility (as opposed to the test of automatic disqualification under the Dimes case, 3 HL Cas 759 and Ex parte Pinochet (No 2) [2000] 1 AC 119) it will very often be appropriate to inquire whether the judge knew of the matter relied on as appearing to undermine his impartiality, because if it is shown that he did not know of it the danger of its having influenced his judgment is eliminated and the appearance of possible bias is dispelled. As the Court of Appeal of New Zealand observed in Auckland Casino Ltd v Casino Control Authority [1995] 1 NZLR 142, 148, if the judge were ignorant of the allegedly disqualifying interest: 'there would be no real danger of bias, as no one could suppose that the judge could be unconsciously affected by that of which he knew nothing ...'"

24. In the Medicaments case, the proper approach, applying the reasonable apprehension of bias test to such contested questions of fact, especially questions relating to the state of the judge's knowledge, was explained as follows (at §86) :-

"The material circumstances will include any explanation given by the judge under review as to his knowledge or appreciation of those circumstances. Where that explanation is accepted by the applicant for review it can be treated as accurate. Where it is not accepted, it becomes one further matter to be considered from the viewpoint of the fair-minded observer. The court does not have to rule whether the explanation should be accepted or rejected. Rather it has to decide whether or not the fair-minded observer would consider that there was a real danger of bias notwithstanding the explanation advanced."

The test applied by the Court of Appeal in the present case

25. It is argued for the applicants that if the correct test had been applied, notwithstanding what may well have been an honest oversight on the part of the deputy judge, the fact that the pleadings made it patent that Mr Zee was an equity partner, ought inevitably to have caused the Court of Appeal to hold that a fair-minded and informed observer would have had genuine difficulty accepting the deputy judge's statement that he was unaware of Mr Zee's status as partner. Accordingly, it was suggested, the Court of Appeal should have taken the deputy judge to have known that fact and to have held that this inevitably gave rise to a reasonable apprehension of bias.

26. The applicants contend that Rogers VP (at §§16-19) applied instead a test which eschews the views of the fair-minded and informed observer in favour of the court's own views. In other words, he propounded a test similar to the Gough test and different from the converged "reasonable apprehension of bias" tests mentioned above, giving rise to a question of great general or public importance as to what the correct test in Hong Kong is.

27. In our view, it is not arguable that Rogers VP sought to propound or is capable of being taken as propounding any competing test. In the Ruling leading to his recusal, Deputy Judge Poon undoubtedly applied the "reasonable apprehension of bias" test based on Medicaments and Porter v Magill. In paragraph 7, he stated :-

"Recently, the real danger test has been 'modestly adjusted' by the English Court of Appeal in Medicaments and Related Classes of Goods (No2) [2001] 1 WLR 700 and the House of Lords in Porter v Magill [2002] 2 WLR 37 to take into account the jurisprudence of the European Court of Human Rights and to bring it in harmony with what is known as 'the reasonable apprehension of bias test', which has been applied in most common law jurisdictions. The test, now modified, may be formulated thus. The court must first ascertain all the circumstances which have a bearing on the suggestion that the judge was biased. It must then ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility that the tribunal was biased : see Medicaments and Related Classes of Goods (No 2), para 85 at pp 726 and 727; Porter v Magill, para 103 at pp 83-84"

28. Moreover, in the same paragraph, the deputy judge cited the recent decision of Rogers VP in Phoon Lee Piling Co Ltd v The Hong Kong Housing Authority, 20 May 2003, CA, unreported; where, at §20, Rogers VP stated :-

"The law relating to judicial bias has been considered recently in the case of Porter v Magill [2002] 2 AC 357. Lord Hope considered the various authorities in relation to judicial bias and in particular R v Gough [1993] AC 646 and what had been said in Webb v The Queen (1994) 181 CLR 41 and what had been said in the Court of Appeal in the case then under appeal. At page 494, Lord Hope summarized his conclusions. The test which emerged would be phrased along the following lines: The court must first ascertain all the circumstances which have a bearing on the suggestion that the judge was biased. It must then ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility that the tribunal was biased."

29. When, some three weeks or so later, Rogers VP handed down the Court of Appeal's Reasons for Judgment in the present case, he had plainly not changed his view as to the applicable test. At §16, he referred to §§7-9 in the deputy judge's Ruling, commenting : "It seems to me that the deputy judge in paragraph 7 to 9 of his ruling of 9 June 2003 set out the judicial approach to the matter correctly", following this immediately with a reference to a point made in Medicaments. He was therefore clearly adopting as correct the reasonable apprehension of bias test approved in Medicaments and Porter v Magill.

30. It is unnecessary for us to comment definitively on the applicable test. It suffices for present purposes to note that both the applicants and the respondent agree that the test in Hong Kong is the reasonable apprehension of bias test developed as aforesaid and that the Court of Appeal was of a like mind. There is accordingly no question of great general or public importance dividing the parties or the court below as to what the proper test is. At the highest, it may be arguable that Rogers VP misapplied the proper test, but not that the Court of Appeal had sought to propound a different test or that its judgment casts doubt on the test considered applicable. Whether there was any such misapplication in the present case - and we are not to be taken to be suggesting that there was - is not a question of great general or public importance.

The Appeal Committee's discretion and the earlier orders

31. Mr Bunting's stance was that in principle, whenever a decision was shown to have been tainted by a reasonable apprehension of bias, it had to be set aside, it being perfectly irrelevant whether the impugned tribunal had made the correct decision or whether some other tribunal was likely to arrive at exactly the same decision. Accordingly, although invited to do so, he declined to advance any arguments with a view to showing that the paragraphs in the Defence which had been struck out or that the discovery which had been excluded or refused were capable of being resuscitated as relevant to some issue in the action.

32. In our view, Mr Bunting's position on principle may be well-founded if the submission were being made to a court having to determine whether a particular decision below was tainted by a reasonable apprehension of bias. It would not be an answer in that context to say that the orders made should be upheld because they were right, even if tainted.

33. However, that is not the context of the present application. Here, the applicants are seeking permission to raise the question of apparent bias before the final appellate court where an appeal is not as of right. Section 22(1)(b) provides that an appeal shall lie to the Court at its discretion (exercised by this Appeal Committee) :-

"...... if, in the opinion of the ...... Court, ...... the question involved in the appeal is one which, by reason of its great general or public importance, or otherwise, ought to be submitted to the Court for decision."

34. The Appeal Committee has on many occasions made it plain that leave to appeal will not be granted where the question said to arise, however important it may appear in its formulation, is academic as between the parties.

35. In the present case, we have no reason to believe that if, upon the applicants succeeding on the proposed appeal, the Court of Appeal's decision and Deputy Judge Poon's orders were to be set aside and the discovery and striking out issues re-argued before Deputy Judge Gill or any other judge, the applicants have any prospect of establishing the relevance and viability of that pleading or any entitlement to the discovery in question. Success in the appeal would therefore not have any impact whatsoever on the scope of discovery or on any other procedural or substantive aspect of the action. Unlike the situation in Millar v Dickson [2002] 1 WLR 1615, involving a test case, there would be no wider impact on persons other than the parties. The applicable principles would not be in issue on the proposed appeal and the debate would merely be as to whether they were correctly applied in the present case. Save in highly exceptional circumstances, a question which is wholly lacking in any practical impact would not be regarded by the Appeal Committee as one which "ought to be submitted to the Court for decision".

36. A further discretionary consideration weighs against the grant of leave. As noted above, part of the relief claimed involves final injunctions of limited duration against the 3rd and 4th defendants. All aspects of the injunctive relief claimed, including the duration of any maintainable injunctions, are of course highly controversial as between the parties. However, if leave to appeal is granted, the further adjournment this would entail would render the injunctive relief claimed nugatory in any event, giving rise to possible prejudice to the plaintiff. Given that even victory on appeal would not result in any countervailing benefit to the applicants in any practical terms, the infliction of such possible prejudice on the respondent is hard to justify.

37. For the foregoing reasons, the application for leave to appeal fell to be dismissed.

38. We make the following orders:-

(a) An order nisi that the costs of and occasioned by this application be paid forthwith by the 3rd and 4th defendants to the plaintiff, such costs to be taxed if not agreed.

(b) Representations with a view to varying this order nisi should be made in writing and filed with the Registrar of the Court and served on the other side within 14 days of the date when this Determination is handed down.

(c) In the event that any representations are filed, the other party should file and serve any representations in reply within 14 days of being served.

(d) If representations are filed and if the Appeal Committee should be desirous of hearing oral argument, the parties will be notified accordingly.

(e) If representations are made and oral arguments not required, the Appeal Committee will hand down in its written determination as to costs.

(f) In the event that no representations are filed within 14 days of handing down as aforesaid, the order as to costs shall automatically become an order absolute.