RE MR MICHAEL CHARLES FLESCH QC

HCMP 279/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 279 of 2007

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J U D G M E N T

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1.  The Applicant applies to be admitted under section 27(4) of the Legal Practitioners Ordinance, Cap.159 for the purposes of representing Zeta Estates Limited (“ZEL”), the appellant in an appeal due to be heard by the Court of Final Appeal on 5 March 2007.  The Notice of Motion was taken out on 8 February 2007, just over a week ago and a request was made that time be abridged.

2.  The appeal to the Court of Final Appeal is from a decision of the Court of Appeal in a tax matter.  ZEL, a joint venture between three real estate developers, had in the mid 1990s made profits from the letting and sale of various properties in Ap Lei Chau and Tai Tam.  As at 28 February 1998, the company had retained profits of about $407 million.  Dividends were declared and these were paid by way of credits to the accounts that the various shareholders had with the company.  These credits were treated as shareholders’ loans to the company and as such attracted interest payable by the company to the shareholders.  ZEL’s case before the Board of Review (which eventually led to Case Stated proceedings before the Court of First Instance and later to the Court of Appeal) was that the interest payable on the above loans was deductible from the company’s profits under section 16(1)(a) of the Inland Revenue Ordinance, Cap.112.

3.  In the Court of Appeal’s judgment dated 6 March 2006, two main issues were identified : -

“12.   In my view, these paragraphs raised two distinct questions.  The first is whether the new shareholders’ loans were needed ‘in the light of the continuing operations of the appellant having regard to its financial circumstances’.

13.    Secondly, if so, whether the Board’s conclusion that ‘the loans were obtained for the purpose of paying the dividends and the interest expenses were therefore attributable to the dividend payments – so that they could not be said to have been incurred in the production of the appellant’s profits’ is correct.”

4.  Tang JA resolved both issues in favour of the Commissioner of Inland Revenue.  Le Pichon JA agreed with Tang JA on the first issue but did not express any view on the second.  Chu J agreed with Tang JA.

5.  Both issues are now before the Court of Final Appeal.  It is not necessary for me to deal at any length with the arguments that will arise.  Suffice it to say that although there are matters of fact that will have to be gone into (and it seems to a large extent that the appeal involves findings of fact), there are also what appear to be interesting arguments on law.  The appellant’s Case runs to some 48 pages, the respondent’s Case, 56 pages.  The hearing before the Court of Final Appeal is fixed for 3 days.

6.  There is no doubt in my view that the appeal before the Court of Final Appeal is a substantial one and in which the Applicant would make a significant contribution by reason of his expertise.  This factor, sometimes called the CFA factor (see Re Pannick QC [2004] 1 HKLRD 950, at 956-7) is a weighty one in favour of granting the admission sought.

7.  There is, however, one aspect of the application for admission that causes me much concern.  As Mr Edward Chan SC (for the Hong Kong Bar Association) has pointed out, this application has been made at a very late stage.  A short chronology here would be useful : -

(1)    As indicated above, the Court of Appeal handed down its judgment on 6 March 2006.

(2)    The appellant’s Case, signed only by junior counsel, was lodged on 22 August 2006.  The respondent’s Case was lodged on 20 October 2006.  It is not apparent from the appellant’s Case that it had seen the need to engage leading counsel from overseas at any stage up to then : - the proceedings before the Court of First Instance and the Court of Appeal were conducted by junior counsel on both sides.

(3)    The dates before the Court of Final Appeal were fixed on 19 June 2006.

(4)    Only on 5 December 2006 did the solicitors for the Applicant (and for ZEL) write to the Hong Kong Bar Association seeking consent.  This was a 16-page letter containing the requisite certificate from both leading and junior counsel, the said judgment of the Court of Appeal and a number of other enclosures.  The respective Cases of the appellant and the respondent were not provided.  The Hong Kong Bar Association refused to give its consent by a letter dated 12 January 2007.  That letter contained the following words in bold : “Should you wish to proceed with the application for the admission of Mr Michael Flesch QC, please let us know forthwith.”

(5)    The present Notice of Motion was dated 8 February 2007, nearly 4 weeks later.

8.  In previous applications for the admission of overseas counsel, the court had amply alerted the professions to the dangers of delay in making a timeous application.  In Re McGregor QC [2003] 3 HKLRD 585, at 594 (at paragraph 21(6)), the court said : -

“By now, it should be abundantly clear to any applicant for admission that the application should be made in a timely manner.  This warning has been made in a number of cases, among them, Re Goldblatt QC and Re Kosmin QC.  In Re Badenoch QC (No 2) [1999] 2 HKLRD 215 at p.216I-J, Chan CJHC said :

‘I would take this opportunity of reiterating yet again that in future any failure in complying with the guidelines without good reasons will not be tolerated.  If such failure results in the court refusing an application for admission and hence, in any detriment to a litigant’s interest, the blame will lie on those who have the conduct of the litigation and this may well be visited by further litigation for negligence or for costs.’

9.  In Re Flesch QC [1999] 1 HKLRD 506, at 516I-J, Chan CJHC said : -

“An application for admission should be made as soon as practicable after it has been decided that overseas counsel will be briefed to appear in the Hong Kong courts.  Where a hearing date has already been fixed, that should also be disclosed in the application.  In any event, if an application is made less than two weeks before the hearing date, it will not normally be entertained, even if it is by consent, unless there are exceptional circumstances.”

The present Notice of Motion was taken out less than 4 weeks before the hearing for which the Applicant seeks admission.

10.  In my judgment, the need to make an application for admission in good time (invariably in the hands of the party seeking an applicant’s services or his solicitors) cannot be over-emphasized.  It goes without saying that the lateness of an application will not be a factor to allow an application for admission where, apart from the lateness, an admission is not warranted.  However, it is also important to point out that even where, as in the present case, an admission might otherwise be justified, the delay factor may be taken into account in refusing the admission.  The public interest (which, I reiterate, is the single paramount factor) has, as one of its facets, the fairness to the other party in the proceedings in which overseas counsel is sought to be admitted.  Timeous applications which result in the admission of overseas counsel would enable the other party or parties to consider whether they too might wish to engage overseas counsel.  Timeous applications would also prevent any attempt to gain a tactical advantage in a late engagement of overseas counsel in the knowledge that the other side would find it difficult, particularly in a case involving a specialist area, to engage at short notice a suitable overseas counsel.  If a hearing merits the admission of overseas counsel of one side, the court would benefit from the other side having one as well.  This is a point that Mr Chan made this morning and has some attraction to it.  These considerations apart, where a late application is made, the court is entitled to a full and proper explanation.  In the absence of one, it is to be assumed there is no proper explanation.  By itself, it may justify the court in refusing an application for admission.  It is a matter simply of candour and where it is perceived to be a lack of it, a court may well regard the application as not being justified.

11.  In the present case, the affirmation in support of the application makes no attempt to explain the delay.  Nothing is said about when exactly it was decided to engage the Applicant and why it was felt necessary to do so in the light of the fact that only junior counsel had been engaged throughout the proceedings in the Court of First Instance and in the Court of Appeal, and why it was now regarded as somehow inadequate to have only local senior counsel in the Court of Final Appeal.

12.  This morning, Mr Robert Whitehead SC (who appears for the Applicant with Mr Dawes) has told the court that the Applicant had been instructed sometime ago and even drafted substantial parts of the Case.  Quite why this was not revealed in the Case itself (contrary to the practice and procedure of the Court of Final Appeal) is not readily apparent or explicable.  It is furthermore not evident why, despite the Applicant’s said involvement in the case, an earlier application for admission was not sought.  As I have indicated, the dates for the hearing before the Court of Final Appeal were fixed as early as June last year.  Mr Whitehead explained that the three joint venture partners comprising ZEL had been debating for some time the question whether the Applicant ought to be instructed to appear at the appeal.

13.  As Mr Whitehead has effectively accepted, there is really no or no acceptable explanation for the delay.  The lack of an explanation is fatal in the present case.  I have to say that the way that the present application has been made and prepared leaves much to be desired.  Mr Whitehead ultimately argued that the justice of the situation merited the admission of the Applicant.  In my judgment, there is no injustice were the application to be refused.  ZEL will then be represented by both leading and junior counsel in the Court of Final Appeal.  The fact that there may be no prejudice to the respondent in the appeal before the Court of Final Appeal (which is not necessarily the case anyway) does not advance the Applicant’s cause too much in the present case.

14.  For the above reasons, the application is refused.