DBS BANK (HONG KONG) LTD v. SIT PAN JIT

HCA 382/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 382 OF 2009

BETWEEN

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DECISION

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THE APPLICATION

1.  At the first Case Management Conference on 12 September 2012, the matter appeared to be quite ready for setting down for trial except for a dispute by the plaintiff over certain parts of the defendant’s expert report, which the plaintiff had taken out a summons dated 29 August 2012 (the striking out summons) asking the court to strike them out on the ground that they fall outside the scope of the Order of Master de Souza dated 11 May 2012 and no leave has been given for the filing of the same.

2.  I adjourned the matter to 8 November 2012 for a 2^nd Case Management Conference, giving the directions that the said summons is to be heard and that the plaintiff should, in the meantime, take out other interlocutory applications as may be advised.

3.  Late in the afternoon yesterday, the plaintiff filed an application, on an urgent basis, to amend its summons to add such grounds as “and/or that they are inadmissible, irrelevant, unnecessary and/or sufficiently probative” in addition to the original.

4.  The defendant has no objection to the amendments to the summons adding the new grounds.  Together with this application, the plaintiff has submitted the supplemental submissions together with four other authorities in support of his argument.

5.  Today, the plaintiff has two matters before this court, viz.:

a.  The summons to strike out the defendant’s certain part of the expert report; and

b.  An order for a bilingual judge for the trial.

6.  The defendant has no objection to the proposal of a bilingual judge for trial.  The arguments are on the striking out application only.

7.  Counsel Harry Liu acts for the plaintiff and Counsel S.H. Lee acts for the defendant.

THE FACTUAL BACKGROUND

8.  The plaintiff’s claim against the defendant is in respect of 10 equity-linked notes (ELNs), which the defendant agreed to invest through his securities account he had opened with the plaintiff bank between 2007 and 2008.  On 18 December 2008, the plaintiff demanded the defendant to pay the shortfall of his securities account for the sum of US$3,427,724.27 with interest.  The defendant refused to pay the said sum, relying on the defences of misrepresentations by the plaintiff’s relationship manager called Mr. Dicky Kong, who had told the defendant that the plaintiff would not take up risky investment for the defendant; that there was no harm to the defendant to accept banking facilities to invest in the ELNs; that ELNs investment was safe, conservative and traditional; that the investment was no more riskier that investment in mutual funds and that it would yield positive return at the end of the investment.[1]

THE ORDER OF EXPERT EVIDENCE

9.  By an order dated 11 May 2012, Master de Souza granted leave to the plaintiff and the defendant to adduce expert evidence by exchange and filing of the expert reports.  Paragraph 5 of the order reads:

“The Expert Report shall cover the following issues:

a. The risk-return characteristics of each of the 10 Equity Linked Noted mentioned in paragraph 21 of the Statement of claim; and

b. The risk of using leverage to purchase Equity Linked Notes;”

10.  The defendant had filed the expert report on 27 July 2012.

THE STRIKING OUT SUMMONS

11.  By the striking out summons, the plaintiff proposed to strike out the following parts of the defendant’s expert report:

a. The sentence “making the risks to an ELN difficult for an investor to assess” in paragraph 11 of the Executive Summary on page 4 of the Report;

b. Paragraph 5 of Section I on page 5 of the Report;

c. The last sentence of paragraph 8.5 of Section II on page 11 of the Report;

d. Paragraph 8.7 of Section II on page 12 of the Report, the words starting from “The following shall include those that are pertinent to risk and return characteristics” including paragraphs 8.7.1 to 8.7.4;

e. The sentence “As such, plenty of exchange between the issuer and the client is necessary to ensure that may product offered should match the client’s needs.” in paragraph 17 of Section 11 on page 24 of the Report;

f. Paragraph 31.1 of Section II on page 30 of the Report;

g. The second sentence of paragraph 35.1.2.9 of Section II on page 34 of the Report;

h. Paragraph 37 of Section II on page 35 of the Report;

i. The second sentence of paragraph 39 of Section III on page 35 of the Report;

j. Paragraph 40.1of Section III on page 35 of the Report;

k. Paragraph 11 of the Conclusion on page 110 of the Report; and

l. Paragraph 12 of the Conclusion on page 110 of the Report.

THE APPROACH

12.  There is no dispute on the following legal principles:

a. Under Order 38 rule 6 of RHC, unless the parties agree, no expert evidence may be adduced at the trial without leave of court.  See Fung Chun Man v. Hospital Authority HCPI 1113/2006 by Bharwaney J. on 24 June 2011;

b. The court is concerned with proper directions for expert evidence in order not to cause delay and waste of expenses. Faith Bright Development Limited v. Ng Kwok Kuen [2010] 5 HKLRD 425 at 430-431;

c. The parties and their legal representatives have a duty to assist the court in formulating the appropriate expert directions and once given, the directions should be strictly adhered to and the experts, in accordance with their overriding duty to the court, must try their best to comply with the directions.  Chok Yick Interior Design & Engineering Co. Ltd. v. Lai Chi Lun t/a Chi Hung Construction Eng. Co. HCA 1480/2008 by Lam J. on 5 May 2010;

d. Where the proposed expert evidence is plainly inadmissible or irrelevant, the court will refuse admission of such evidence. If the court cannot form a clear view on the relevance or the evidence is clearly relevant, it should grant leave for the evidence to be adduced at the trial. The evidence is relevant if it is helpful to the court in arriving at its decision on one or more of the issues to be resolved.  Wong Hoi Fung v. American International Assurance Company (Bermuda) Limited & Shrila Chan HCA 4576/2001 on 8 October 2002;

e. When there is a dispute over whether expert evidence should be adduced at trial, the court has to examine the pleadings to determine whether the proposed expert evidence is required in the pleaded case.[2]  Yeung Ga Wai v. Lau Ming Shum HCA798/2004 delivered on 19 July 2012.

13.  Mr. Liu has submitted further the authorities on the following issues:

a. An expert may give in evidence statements based on his own experience or study but he cannot be permitted to attempt to point out to a jury matter which the jury could determine for themselves or to formulate his empirical knowledge as a universal law.  Clark v. Ryan (1960) 103 CLR 486 per Dixon CJ and Fu Kor Kuen Patrick v. HKSAR FACC 4/2011 on 24 May 2012 at §26 per Litton PJ and at §52 per Gleenson NPJ;

b. An expert’s function is to educate and not to advocate, far less to purport to determine the ultimate question at issue in the case, which must be a matter for the court alone.  Formosa Taffeta Co. Ltd. v. Banque Indosuez HCA 5165/1997 by Stone J. on 14 January 2009.

14.  The above authorities deal with the proposition that an expert is now allowed to give opinion on liability, which is within the power of the Court.  Mr. Lee has referred me to the authority of Barings PLC & Anor v. Coopers & Lybrand (A firm) & Ors [2001] P.N.L.R. 22 by Evans-Lombe J. on 9 February 2001, the headnote of which (3) said that the court could admit the expert evidence even if the witnesses did express opinions on whether or not the claimants’ officers were negligent (Brwon v. Gould & Swayne [1996] P.N.L.R. 130 distinguished).

15.  Evans-Lombe J. had extensive discussion over this issue by reference to many other cases of the Court holding divergent views over this issue.  One must look at this authority with care in that it was a very special case involving highly complicated areas of financial and banking practices governed by recognized standards and rules of conduct capable of influencing the Court’s decision on the issues that it had to determine.  The court had given special directions on the parameter of the expert evidence.  Having considered all the authorities before him, the learned judge said that he did not read section 3 of the Civil Evidence Act 1972, which is in the same terms of our section 58 of the Evidence Ordinance Cap.8, as rendering relevant that which was irrelevant §41.  At §45, he concluded that the determining factor for admissibility of expert evidence depended upon whether it was helpful for the court to resolve the issues justly.  But the court might still refuse to accept such evidence.  He further said: “Such evidence will not be helpful where the issue to be decided is one of law or is otherwise one on which the Court is able to come to a fully informed decision without hearing such evidence.”

16.  I understand that the issue of whether expert may give opinion on liability is still in the course of development.  However, I find that it is not necessary for me to rely upon this issue for the present applications because the impugned parts of the defendant’s expert report are either found to be outside Master de Souza’s direction or they are clearly within the ability of the judge to come to a fully informed decision without hearing such evidence.

17.  Mr. Liu accepts that for the present application, the plaintiff has the burden to satisfy the court that the impugned parts of the defendant’s expert report are clearly irrelevant or otherwise inadmissible that they should be struck out at the stage of interlocutory proceedings.  Those parts that are not clearly proved to be so should be left for the trial judge’s determination, applying the approach in Wong Hoi Fung.  I should further add that in considering the impugned parts, the court should also bear in mind that if the impugned parts are struck out, the contents of the remaining parts of the expert report will become unclear, misleading or incomprehensible, the court should not strike them out, but should instead leave it to the trial judge.

THE IMPUGNED EXPERT EVIDENCE

18.  I shall adopt my approach in Yeung Ga Wai to determine relevance of the impugned expert evidence.  By reference to §21 of the Statement of claim, on which Master de Souza had made the order for expert evidence, I take the view, which respective counsel agree, that the expert was expected to give his opinion objectively on the risk return characteristics of each of the 10 ELNs and the risk of using leverage to purchase them only.  He was not instructed to give his advice as to what investments should be better or safer for the defendant or for the general public.

19.  I shall now consider each of the impugned parts of the defendant’s expert report as set out in the plaintiff’s summons and in §11 above:

a. The sentence “making the risks to an ELN difficult for an investor to assess” is, in my view, not objectionable.  Mr. Liu submits that it refers to the general public instead of the defendant, comparing it with the case of Citibank NA v. Noble Treasure Ltd. HCA 2639/2008 by DHCJ Au Yeung on 23 December 2010.  In this case, the Deputy Judge was considering the parameter for the expert evidence. She took the view that the issue should be confined to the 1st defendant alone, not generally.  It was on this ground that she disallowed expert evidence to be given generally.  It is different from the terms of Master de Souza’s order, which permits the expert to give his opinion generally.  It should not be struck out.

b. Paragraph 5 of Section I of the report refers to the explanation by the expert on his opinion as to how investment risks should be assessed.  Mr. Liu opposes it on the same ground of it being general.  For the same reasons, I do not agree with him.  It should not be struck out.

c. The last sentence of §8.5, which reads “Investment in alternatives is advised as it is expected to bring the benefit of diversification to an investment portfolio – lower risks without sacrificing returns.”  I find that this is clearly outside the term of Master de Souza’s order.  As such, I exercise my discretion to strike it out.  To do so will not affect the other contents of the report.

d. Paragraph 8.7 of Section II:  I consider that 8.7.1, 8.7.2 and 8.7.3 are relevant because the expert was comparing ELNs with mutual funds investment.  They should not be struck out.  §8.7.4 should be struck out because the expert was embarking on the exercise of make evaluation of the factual evidence of the case.  He even gave his comments on the evidence of the witnesses, which is not permissible under Fu Kwok Kuen, Patrick supra.

e. Mr. Liu opposes the sentence in paragraph 17 of Section II on the ground of it being general in nature, which I dismiss.  He also argues that the expert was not qualified to make the comments on the proper practice, for which I have reservation, not least that it should be subject to cross-examination at the trial.  Applying Wong Hoi Fung’s case, I refuse to strike it out.

f. Paragraph 31.1 of Section II is clearly another example of the expert making reference to the factual evidence to evaluate the risk in question.  It is case specific.  I agree that it should be struck out.

g. The second sentence of paragraph 35.1.2.9, which Mr. Liu says that it is referring to other investors and is therefore irrelevant.  I disagree.  I consider it forms part of the explanation in this paragraph.  To cut it out from this paragraph will make the meaning of this paragraph unclear.  I refuse to strike it out.

h. Paragraph 37 reads “Given the complexity, the use of leverage to purchase these instruments can be deemed inappropriate”.  It is clearly referring to someone like the defendant, not an objective view.  I strike out this sentence.

i. The second sentence reads “Clearly, investors and advisors should treat the use of leverage with due care.”  Mr. Liu objects on the ground of its general nature.  For the same reasons, I disagree with him.  I consider that this statement is an objective statement, unlike paragraph 37.

j. I find that paragraph 40.1 of Section III should not be struck out because it was the explanation for the expert to say that it was risky to use leverage to buy ELNs.  I refuse to strike it out.

k. Mr. Liu says that paragraph 11 of the Conclusion of the report is objectionable because of his objections above. I disagree with him. I refuse to strike out this paragraph.

l. Mr. Liu opposes paragraph 12 of the Conclusion on the same ground as paragraph 11 above.  I refuse to strike out this paragraph.

20.  In short, I strike out the following:

1. The last sentence of paragraph 8.5 of Section II on page 11 of the Report;

2. Paragraph 8.7.4 of Section II on page 12 of the Report;

3. Paragraph 31.1 of Section II on page 30 of the Report; and

4. Paragraph 37 of Section II on page 35 of the Report.

21.  As to the issue of bilingual judge, I have considered the submissions in Mr. Liu’s skeleton submissions.  The hearing will involve hearing lengthy telephone recording in Punti dialect, the length of which will be around three CDs.  In the circumstances, I agree that the trial should be conducted by a bilingual judge. I shall now give directions on the setting down of the matter for trial:

a. Leave be given to the plaintiff to set down for trial within 42 days from the date hereof for a 11-day trial before a bilingual judge.  There should be a pre-trial review hearing of 30 minutes before the trial judge on a date to be fixed 12 weeks before the date of trial.  At the pre-trial review, the parties shall prepare the transcript of the video tapes, raise the issue of recusal, if any, and confirm the length of the trial by counsel.

b. Costs of this 2^nd Case Management Conference be in the cause.

22.  As to the costs of the plaintiff’s summons for today’s argument, the plaintiff succeeds in striking out three and half of the total of 12 items.  Also, the plaintiff should also bear the extra time and costs for the late application for amendment of the summons and the additional materials in support of his additional grounds as well.  I now make an order nisi that the plaintiff shall pay 60% of the defendant’s costs to the defendant for its application to strike out, including the costs reserved, with a certificate for counsel, such costs are to be summarily assessed by the court, unless the parties apply to vary it by 26 November 2012.  Unless otherwise directed, the summary assessment of costs shall be on paper by the defendant filing and serving the schedule of costs within 7 days from 26 November 2012, absent application to vary, and by the plaintiff filing and serving the objections within 7 days thereafter.