FOSHAN HUA DA INDUSTRIAL CO. v. JOHNSON STOKES & MASTER (A FIRM)

HCA12997/95

IN THE HIGH COURT OF

THE HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.12997 OF 1995

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R U L I N G

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1. Objection is taken to the admissibility of evidence which it is proposed to adduce on behalf of the defendant. On 17th December 1997, leave was given to file experts' reports and the defendant's solicitor has done so, that of a Mr Chao Tien-yo, a partner in a Hong Kong firm of solicitors. The plaintiff has filed no such report, and does not intend to adduce expert evidence.

2. Mr Chao has been a solicitor since 1983, admitted in Hong Kong in 1984. He has some 14 years experience as a solicitor in general corporate, commercial finance and banking, and has worked not merely as a partner of the firm which now carries his name, but also with two other firms of high repute in Hong Kong. I have seen his report which was in the bundle presented to the court by the plaintiff before trial, and Mr Chan, S.C., on behalf of the plaintiff, has taken me through certain of the passages in the course of argument. Very broadly summarised; the areas covered by his evidence in that statement are these :

1. They address the question of what services would he expect to be offered or rendered to the client in this case, or a client such as the one in this case, by a reasonably prudent solicitor in the light of such instructions as Mr Yu, the individual solicitor who acted in this case on behalf of the defendant, says he received.

2. Whether the services in fact provided fell below those that he, Mr Chao, would expect of a reasonably prudent solicitor.

3. In such a case as the present, whether there were obvious risks which a reasonable and prudent solicitor should draw to a client's attention, and if so, what they were.

4. Did the service in fact provided fall below that required given such obvious risks as there were.

5. The question which related to the experience of the client : what a reasonably prudent solicitor would have done had the client been an experienced banker. Alternatively, whether a reasonably prudent solicitor would be required to take other steps or a different approach where the client was a Mainland state owned industrial corporation rather than a Hong Kong business house or businessman.

6. As to the non-production of original share certificates, what advice would be given by a reasonably prudent solicitor, and whether the solicitor in this case fell below that standard.

7. As to the scope of acceptable verification. As I read this question - since it has been the subject of argument before me - its effect is to address the question whether verification work allegedly sought by the plaintiff falls within the scope of that which a reasonably prudent solicitor operating in this particular field would normally undertake, and whether he would expect such a solicitor to be in a position to, and to undertake such verification work and, if not, why not?

3. As a result of amendments to the Reply for which I have given leave, the expert will no doubt be asked, if I were to decide to admit his evidence, to examine further questions. But they no doubt will all be directed to issues of the work which a prudent and competent solicitor would be expected to do within the realm of the retainer with which I am concerned. Whatever the ambit of that retainer - and that is an issue of fact which I have yet to determine - the sphere of work, in other words, the area of expertise, is not in issue. We are here concerned with corporate loan facilities of a substantial sum where the security offered is in the form of shares in a company whose sole asset is land, where the lender is a Mainland corporation, the borrower a Hong Kong company, and the company in whose shares the security was offered, a Hong Kong private company.

4. Mr Chan objects to the admissibility of the evidence on a number of bases, and I hope that I do not do his able arguments an injustice when I summarise them briefly thus. He says that the evidence of Mr Chao is dressed up to be that which it self-evidently is not. The argument is that what it in effect is, is an attempt to say what he, Mr Chao, would have done had he been faced with the problem presented by the plaintiff in this case, or rather with the instructions which Mr Deng gave, and that that is not permissible; that Mr Chao is not intending to give evidence about some guidance set down, or some profession wide practice; indeed, he is not addressing the question of practice at all. Further, that he seeks to address and to answer the very question which it is for the court to answer and to determine, and that it is trite that that too is not permissible.

5. He says the expert is asked to address, in particular in Question 9, issues which are irrelevant. Question 9, he says, addresses the scope of the retainer, and the scope of the retainer is a question of fact between the parties - that Mr Yu, the defendant's solicitor as it were, asserts that he did not receive the instructions to carry out verification, and Mr Chan contends that the expert can hardly help on that. I do not think that that is quite the point intended by the proposed evidence as I understand it to be. The purpose is to show whether verification work of this kind would normally come within the purview of those practising in this specialty and, if not, to whom clients would be expected to be referred for the answers to the questions. That does not determine the matter in any way, for a solicitor might nonetheless be foolish enough to accept the instructions, but even so, that is the suggested relevance, as I see it, of the question.

6. But to return to the main issue, I note at the outset the provisions of s.58(1) of the Evidence Ordinance, a provision which is not without its relevance, and which provides as follows :

"Subject to any rules where a person is called as a witness in any civil proceedings his opinion on any relevant matter on which he is qualified to give expert evidence shall be admitted in evidence."

a provision which seems to me renders the evidence prima facie admissible.

7. A number of principles or considerations emerge from the authorities and texts to which my attention has been drawn.

1. It is not permissible for a witness to state what he himself would have done in a given situation, for that does no more than establish his own practice and therefore helps little in the court's task of deciding whether the standard of conduct shown by a defendant solicitor was or was not equal to that exercised by the profession as a whole, or by that section of the profession to which the specialty, if the case concerns a specialty, relates. I shall consider shortly whether that is all that Mr Chao seeks to do.

2. The court is entitled however to receive evidence of "a standard of conduct laid down by a professional institute or sanctioned by common usage", and it is to the forefront of my mind that the contention by the plaintiff is that no such evidence is sought to be given by Mr Chao. The principle is highlighted in an oft cited passage from Midland Bank Trust Co. v. Hett, Stubbs & Kemp [1979] 1 Ch.384 which runs as follows :

"I must say that I doubt the value, or even the admissibility, of this sort of evidence, which seems to be becoming customary in cases of this type. The extent of the legal duty in any given situation must, I think, be a question of law for the court. Clearly, if there is some practice in a particular profession, some accepted standard of conduct which is laid down by a professional institute or sanctioned by common usage, evidence of that can and ought to be received. But evidence which really amounts to no more than an expression of opinion by a particular practitioner of what he thinks that he would have done had he been placed, hypothetically and without the benefit of hindsight, in the position of the defendants, is of little assistance to the court; whilst evidence of the witnesses' view of what, as a matter of law, the solicitor's duty was in the particular circumstances of the case is, I should have thought, inadmissible, for that is the very question which it is the court's function to decide."

There is, though, I think, a danger of construing this passage as some statutory instrument which sought to delineate the boundary outside which nothing else was permissible. It is, for example, permissible for "the plaintiff's counsel to state to a witness what had been done and ask him if an officer of competent skill would have done so", the authority for which proposition is Malton v. Nesbitt [1824]1 CNP 70 referred to at p.143 of Expert Evidence Law and Practice by Trisham Hodgkinson. If a solicitor can answer that question by referring to more than merely what he might have done, but can do so by addressing the risks and special considerations which common experience in a field show are, or are not, thrown up, then if it is a field in which the court itself has not the expertise, I fail to see why the court should not avail itself of the benefit of that experience even though that standard cannot strictly be described as one laid down by a professional institute or sanctioned by common usage. If a solicitor is used to certain work but has seen other solicitors work in the field and has worked for other firms from his junior years on in the field, firms versed in this type of work, can say : "in this field, experience shows that this is what one should do; this is a risk which commonly arises; this is what one should watch out for; this is what can be safely assumed," - then that is, I suppose, a practice of a kind. But however one labels it, it seems to me to fall within the principles which admit expert evidence.

3. It is worth emphasising that mere insistence that those skilled or experienced in a particular sphere would execute a practice, or would regard conduct as safe and in fulfillment of the contractual duty dictated by a retainer, is not evidence which is conclusive of the matter, which is for the court to decide, for nonetheless a court may take the view that the practice, if it is a practice, is insufficient in the circumstances of the case, or the opinion is too generous (see for example, Edward Wong Finance Co. Ltd. v. Johnson Stokes & Master [1984] AC 296).

8. I note that in Bown v. Gould & Swayne (a decision of the English Court of Appeal, unreported dated 24th January 1996), leave to call an expert in a conveyancing matter was refused. Millett LJ (as he then was) commented that :

"The practice of investigating title has settled down sufficiently to be well established and recorded in the textbooks. If it is necessary to assist the judge to understand the proper machinery for the deduction and investigation of title, the proper way to do it is to cite the textbooks."

adding that the case was straightforward. This is not such a case. I neither think that the practice to be adopted is simple or obvious, and it is not suggested that it is a matter to be found in standard, or indeed esoteric, textbooks.

9. I think it instructive to state the basic principle, or rather the rationale for the exclusion of opinion evidence generally, which is that opinion evidence is either not sufficiently probative, or that in certain circumstances, questions of opinion can be left to the court. So, for example, if a witness merely says that someone behaved recklessly or negligently, that is of little probative value, for a court does not know then the precise facts upon which he makes that assertion, and his standard of negligence might well not be that to be applied as a matter of law by the court. What a court needs to have are facts, not opinion, and then to form its own opinion on the facts to which the witnesses have deposed. Witnesses are normally, therefore, tied to questions of specific facts and it is the function of the court, not that of the witness, to render judgment upon the appropriateness of the parties' conduct. For a discussion of these fundamental principles, see Zuckerman : The Principles of Criminal Evidence (p.61).

10. According to Wigmore on Evidence :

"We are dealing merely with a broad principle that, whenever the point is reached at which the tribunal is being told that which it is itself entirely equipped to determine without the witness' aid on this point, his testimony is superfluous and is to be dispensed with."

Zuckerman explains the rule in this way :

"An informative explanation of the opinion rule is one which brings out the two aspects that lie at its foundation : the principle of probative usefulness and the principle that the accused's conduct should, as far as practicable, be assessed by the court and not by the witness."

11. The fact that Zuckerman addresses the concept in the context of a work upon criminal law is irrelevant for present purposes, for the principles and rationale are the same.

12. It seems to me that the questions that have to be addressed are these - as far as the proposed evidence is concerned :

1. Is the evidence relevant?

2. Is the issue of fact one which requires the input of specialist knowledge?

3. Is that specialist knowledge or training such that the court cannot be expected to possess?

4. Is the court by the admission of the evidence abdicating its duty to decide itself the ultimate issue by relegating that function to the expert?

13. If the evidence which is proposed to be admitted is such as requires specialist knowledge of a kind which the court cannot be expected itself to possess, and the court is not by the admission of that evidence transferring the ultimate decision of the case to the expert, then it seems to me not to matter whether the expert happens to be a geologist in a case concerning the stability of land; a pediatrician in an action on behalf of a child alleging medical negligence; or a solicitor seasoned in a specialist field in a negligence action against a solicitor.

14. In a jurisdiction as sophisticated as Hong Kong, the panoply of specialisations within legal practice is so broad that to adhere to the notion that a judge is assumed to be equipped to turn his hand to the duties of a solicitor in mergers and takeovers as readily as to the duties of a solicitor in, say, personal injury actions, is to counsel artificially. That is not how things work, and I am not about to pretend to an expertise which I do not possess. Indeed, such pretence would be at the expense of justice.

15. There are a number of questions of fact which I have to decide. Did Mr Yu, or did he not, exercise a reasonable and proper degree of care and skill and judgment? In order to decide this question, I may address whether others exercising the same calling would have come to the same conclusion. If authority is needed for that seemingly trite proposition, it is to be found in Charlesworth on Negligence at paragraph 8.04.

16. I need to know what checks are as a matter of prudent routine conducted. What risks are brought to mind? It is not a question of what a particular solicitor, Mr Chao, would or would not do. It is a question of the risks which experience in this field dictates are real; the options open in terms of advice which that experience dictates ought to be given; what needs to be explained and why; and the viability of taking certain steps; what extra precautions are as a matter of good sense and drawn from experience taken when dealing with Mainland clients, why such steps are necessary; and so on.

17. The long and the short of the matters is that I am of the view that I am likely to be assisted by the evidence which is proposed to call, and that it is evidence about matters outwith my experience; though I accept that the approach of a solicitor in these circumstances, and as in all cases, requires a considerable degree of common sense generally to be applied in the practice of the law, which requirements can be determined by a court even against the background of any specialist field without recourse to the evidence of an expert.

18. I am satisfied that in the circumstances of this case, the evidence is admissible and I should admit it. What weight it will receive is a matter which must await its emergence and testing, and the evidence as a whole.