RE MARK BERNARD HAPGOOD QC

HCMP 101/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 101 OF 2013

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J U D G M E N T

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The facts

1.  This is an application for admission of Mr Mark Hapgood QC to appear for the plaintiff in HCCL 5/2011 (originally HCA 190/2005) at the trial of the action due to commence on 18 April 2013, with 15 days reserved.

2.  The facts and issues involved in the underlying litigation may be briefly stated.  The plaintiff, a Thai national and resident, became a private banking customer of the defendant bank in 2000.  In late 2001, she was persuaded by and entered into agreement with the defendant to take on a more risky investment in the nature of “margin FX [foreign exchange] trading”.  The plaintiff says that in 2001, the defendant made various representations to her to the effect that she was allowed to “roll over” her open FX contracts with the defendant until such time as she could make a gain.  In 2004, the plaintiff says, the defendant again represented to her to the effect that she could roll over her open FX contracts for a period of 6 months.  According to the plaintiff, she entered into various FX contracts with the defendant in reliance on these representations.  On 7 July 2004, the defendant exercised its “absolute discretion” under the standard term FX agreement to terminate the plaintiff’s account and her then existing open margin FX contracts by one month notice.  The defendant expressed concerns to the plaintiff about her “source of wealth”, the “effective control” of her assets and the “good standing” of her appointed agent, who had a criminal conviction record overseas.

3.  The sudden closing of the plaintiff’s account apparently caused her substantial loss.  She therefore commenced proceedings against the bank for her loss and damage.  The litigation did not go smoothly for the plaintiff. The case went up to the Court of Appeal twice and it was only after the Court of Appeal’s judgment in CACV 78/2008 on 12 September 2008 that the plaintiff was allowed to proceed with her claim by way of an amended statement of claim.  The action was subsequently transferred to the Commercial List and as mentioned, the trial will commence on 18 April 2013.

4.  The applicant, a London specialist whose eminence and experience in the banking field is not in issue, was involved in the case when it was taken up to the Court of Appeal on the second occasion.  He gave an advice on the plaintiff’s claim on that occasion.  When the trial dates were fixed in mid 2012, the plaintiff intended to instruct the applicant to appear for her at the trial.  But at that time he was unavailable.  The present application for admission was only taken out in January 2013 after the applicant had indicated on 9 January 2013 that he would at least be available to fly out to Hong Kong to do the opening submission.  Hopefully, if his other commitments can be settled by mediation which is due to start or has started sometime this month, he would be able to conduct the entire trial for the plaintiff.  In any event, the plaintiff has instructed local senior and junior counsel to represent her at trial.  If admitted, the applicant will lead the local team.

The applicant’s arguments

5.  The application for admission is based on a number of grounds.  First, the case involves issues of unusual difficulty or complexity, arising primarily from points of law.  Secondly, the decision in this case will involve the determination of principles which might impact substantially on the development of Hong Kong law.  Thirdly, suitable local counsel is not available.

6.  In relation to the first ground, that is, unusual complexity and difficulty, various issues have been set out in junior counsel’s certificate dated 14 January 2013 – the effect of the absolute discretion clause; the conflict between such a clause and a customer’s entitlement to roll over her contracts; the impact of the money-laundering legislation; the bank’s duties to the customer including the duty to advise the customer of the relevant risks involved in the transactions in question; the construction and scope of sections 5, 7 and 8 of the Control of Exemption Clauses Ordinance (Cap 71); the construction and scope of section 108 of the Securities and Futures Ordinance (Cap 571) (and its predecessor in the repealed Protection of Investors Ordinance (Cap 335)) and the interrelationship with the Misrepresentation Ordinance (Cap 284); the effect of the “no amendment or waiver clause” in the bank’s standard account opening documentation and whether it is effective to prevent supersession or variation of the parties’ contract by subsequent oral agreement or conduct; assessment of quantum; and finally the customer’s duty to mitigate loss.

7.  As regards the second ground, it is said that it is reasonably foreseeable that the material issues or some of them may require determination by the Court of Final Appeal because they are of great general or public importance, given that the law on banking and contract are themselves both areas of great general or public importance.  The matters involved are weighty and substantial and the issues are of unusual difficulty or complexity.

8.  In relation to these two grounds, it is said that the “no amendment or waiver clause”, which is commonly seen in many contracts, is a clause, the construction of which will involve an issue of great general or public importance.  An unusually difficulty issue regarding the clause that will arise is whether it should be interpreted purely as a matter of contract, irrespective of the banker and customer relationship, or irrespective of whether the clause was contained in a standard document entered into by the customer for the purpose of opening of accounts.  Although there are numerous authorities on the subject, it is submitted, the law in this field is still in a state of development.  The court’s attention is also drawn to the Court of Appeal’s discussion of the relevant case law in its judgment (paras 30 to 35).  It is argued that in relation to the type of clause involved, the law is still developing or capable of development, “because of the absence of decisive authority”.

9.  The written submissions filed on behalf of the applicant also note the recent developments on collateral contracts, composite agreement and parol evidence rule.  It is said that in Hong Kong, the issue of the parol evidence rule has been considered by the Court of Final Appeal in Bank of China (Hong Kong) Ltd v Fung Chin Kan  (2002) 5 HKCFAR 515, and that the modern tendency is to take a far less restrictive view than before.  It is suggested that the relevant arguments on legal principles in the present case will likely end up in the Court of Final Appeal because the proper approach and “juridical basis” to be applied is an issue which is fit for that court.  Moreover, the issue of collateral contract or composite agreement, or waiver and estoppel vis-à-vis the bank’s “no waiver or amendment clause”, is an issue which is again fit for the Court of Final Appeal.

10.  As regards the “absolute discretion clause” and the “no claim clause”, it is submitted that the court will likely have to balance the degree of absolute discretion and exclusion of liability which the bank may legitimately require for itself, against the degree of reasonable protection needed for the customer against arbitrary and devastating action by the bank, to the extent as may be allowed by the principles of construction and the “frontiers of judicial boldness”.

11.  It is also said that the application of the principles of law to the facts may be an even more difficult task in the present case.  In particular, it is said that difficult issues of application will arise in relation to the foreign conviction of the plaintiff’s agent whose good standing the bank has expressed concerns about.  In the present case, it is submitted, it is unclear how and to what extent the defendant will pursue the issues of “tainted source of wealth”, “money-laundering”, and the foreign conviction of the plaintiff’s agent, and the application of the law will be rendered more difficult accordingly.

12.  It is said that the applicant, with his specialist experience of how large international banks operate and supervise their private account holders, is better placed to ensure that all relevant issues are developed in the evidence and brought into focus in legal submissions.

13.  Mr Aiken SC (a member of the plaintiff’s local team of counsel) also highlights the issue of quantum, which he calls “complex”.  He also says that the application of principles of mitigation to complex foreign exchange trading is also an area which is well suited for analysis by an experienced banking lawyer such as the applicant.

14.  Mr Aiken accepts that, in terms of whether the issues involved in the litigation are unusually difficult or complex, this is a borderline case.  However, he stresses that the relevant area of law, that is, to what extent standard terms in a banking contract can be overridden or rendered no longer effective or applicable by a subsequent oral agreement or conduct, despite specific clauses in the contract against that result, is still developing.  Mr Aiken also says that in terms of the facts, the quantification of the plaintiff’s claim and the actual handling of the relevant evidence is suited to somebody with the applicant’s experience and skill.  Likewise, he says that mitigation of loss falls within the same category.  He reminds the court that even the defendant bank has accepted that the question of quantum involves some “modest complexity”.

15.  As regards the third ground, the plaintiff has approached Mr Benjamin Yu SC and Mr Victor Joffe (a London silk who has also been admitted to practise in Hong Kong generally) and both have told the plaintiff that they will not be available to appear for her at trial to lead the local team.

16.  Mr Aiken also relies on “cross-fertilisation” between overseas and local counsel to support his case, given that the applicant, if admitted, will be here to lead three local senior and junior counsel.

17.  Mr Aiken also reminds the court that the defendant has been notified of the present application.  The defendant has voiced its objection to the application by letters, basically on the ground that the case does not warrant the engagement of a London silk.

The Bar’s opposition

18.  The Bar opposes the admission. Mr Chan Chi Hung SC (Ms Ann Lui with him) submits that the case does not involve issues of unusual difficulty or complexity.  Counsel reminds the court that in the Court of Appeal, Stone J said in paragraphs 44 and 46 that the case is a “relatively straightforward commercial dispute between bank and dissatisfied customer”, and “[t]he primary facts of this case are not complex, and for the most part are undisputed”.  What is involved pertains to basic principles of contract and banking law.  Even if it is accepted that some of them may not be covered by any direct authority, this does not necessarily mean that they are of unusual difficulty or complexity.  There are already three local counsel in the legal team of the plaintiff to carry out the necessary research and analysis.  As regards quantum, the court will have the assistance of the parties’ financial experts to work out the figures.  Counsel’s written submissions also note that the plaintiff has already obtained a written advice from the applicant.  There is no reason why the applicant’s views and analysis cannot be incorporated into the plaintiff’s submissions at trial, and there is a question mark as to how much the applicant will be adding to the case by appearing in court merely for the opening submission.

19.  Mr Chan also submits that the legal issues in this case are “fact-sensitive”, borrowing a point made by Stone J in paragraph 43 of the judgment of the Court of Appeal.  It is unlikely that the action will result in determination of legal principles which would have an impact on the development of local jurisprudence.

20.  Mr Chan also complains about the delay in the making of the present application.

The Secretary for Justice’s position

21.  The Secretary for Justice is obviously uncomfortable with the admission sought.  Ms Leona Cheung, for the Secretary, helpfully points out that the observations by the Court of Appeal, relied on rather heavily in support of the application for admission, were made in the different context of the plaintiff’s application to amend her statement of claim.  The question before the court then was whether the plaintiff’s new claims based on the proposed amendments were “bound to fail”.  The Court of Appeal’s observations must therefore be read in that light and as such, they shed little light on the separate question of whether any issue of unusual difficulty or complexity will likely arise in the action.  Ms Cheung further submits that the issues in the action appear to be commonly encountered questions of contractual construction, misrepresentation, estoppel and fact finding exercises on the genuineness of the reasons given by one contracting party to another for the termination of the contract.  The suggested “difficulties” appear to be common features of contested litigation in Hong Kong.  Ms Cheung further submits that the procedural history seems to be, at best, an indication of the difficulty which the plaintiff, as a dissatisfied customer, may have faced or continue to face in terms of differences in arms when litigating with the defendant bank.  This is very different from whether the case involves legal principles of unusual difficulty or complexity or whether their application to the facts is unusually difficult or complicated.

22.  Ms Cheung reminds the court that cross-fertilisation assumes secondary importance when an applicant for admission has failed to satisfy the court that the issues involved in the proceedings are of unusual difficulty or complexity (or are issues which would significantly impact on the development of local jurisprudence), or that his appearance could add a significant dimension to the proper resolution of the issues: Re Crow QC, HCMP 462/2012, 29 May 2012, para 28.

My view

23.  The principles governing the admission of overseas counsel are so well established that it is quite unnecessary to rehearse them here: Re Flesch QC [1999] 1 HKLRD 506; Re McGregor QC [2003] 3 HKLRD 585.  They have been summarised by this court in its recent judgment in Re Perry QC, HCMP 503/2012, 17 April 2012, paras 15 to 18.  In Re Perry QC [2013] 1 HKLRD 145 and in Re Dicker, HCMP 2844/2012, 1 February 2013, this court has also had the opportunity of examining the public interest involved in this type of proceedings in greater detail.  There is no need to repeat what has been said here.

24.  I have given a fuller description of the parties’ submissions in this judgment than usual, because I wish to say that I am in general agreement with the Bar’s and the Secretary’s respective submissions and do not wish to add anything but only a few words of my own.  In view of the forthcoming trial, I would, in particular, refrain from commenting on the issues.

25.  All I wish to say is this:

(1)   Some of the legal issues and authorities involved on liability are interesting ones.  But they are not new.  They have been discussed in standard textbooks.  There are many authorities which deal with the relevant principles and apply them.  The law may be capable of further development, but this does not make the issues involved unusually difficult or complex.

(2)   I certainly do not exclude the possibility that one or more of the issues or arguments might eventually end up in the Court of Final Appeal.  But that is something very much in the future.  Amongst other things, it would depend on how they are to be argued at trial (or on appeal, if any) and how they are to be dealt with by the trial judge (and/or the Court of Appeal, if there is to be an appeal).  Depending on future development, there is nothing to stop the plaintiff from seeking to be represented by overseas counsel at a later stage.

(3)   As for quantum (including mitigation), the issues involved are fact-sensitive.  I do not think they justify the admission of overseas counsel.

(4)   Cross-fertilisation is a very minor consideration in the present case given my above views.

(5)   The burden is certainly on the applicant’s side to satisfy the court that sufficient efforts have been made to locate suitable local counsel to lead the team already assembled for the trial.  Apart from Mr Yu and Mr Joffe, the plaintiff appears to have approached no other senior counsel.  I agree with Mr Chan that there are many senior civil silks in Hong Kong who would be as able and competent as Mr Yu and Mr Joffe to conduct the trial as leader of the existing team, if such a leader is really required given that the plaintiff has already secured the service of Mr Aiken himself.

26.  Having considered all relevant matters, I have come to the conclusion that the application should be dismissed.  I so order.

27.  I thank counsel for their assistance.