RICHARDSON GREENSHIELDS OF CANADA (PACIFIC) LTD v. TZE YIM (a firm)

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JUDGMENT OF THE COURT

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Penlington J.A.:

1. These appeals come before us pursuant to a consent order that they be heard together.

2. The first appeal, 93 of 1990, seeks to have set aside an order of Bokhary J. made on the 27th April 1990 whereby he declined to recuse himself from the hearing of three summonses issued by the appellant ("the client") and in particular a summons to dismiss the respondent's ("the broker's") claim for want of prosecution. The grounds for that appeal are that certain remarks were made to the judge by Mr. Michael Thomas Q.C., leading counsel for the broker, which were so prejudicial to the client's case that the trial judge should not have continued to hear the summonses. The second appeal, 121 of 1990, is on the ground that the broker has wilfully failed to comply with a consent order made by Sears J. on 15th June 1989 whereby the client's representatives were to be allowed access to and the right to copy a very large number of documents contained in the broker's offices. That being so the trial judge should have dismissed the broker's claim.

3. The background facts, so far as they are relevant to these appeals, are as follows.

4. In December 1986 the client entered into an agreement with the broker under which shares were bought and sold by the broker on behalf of the client. It is not in dispute that this was a "margin account" in that the client did not pay the broker in cash for purchases of shares as they were made, but his account with the broker was debited with the cost of such purchases. This debit balance was offset by the value of the shares credited to his account, a situation which, while mutually satisfactory when the value of the shares went up or at least remained constant, gave cause for alarm to the broker when share prices fell sharply, as they did on the 19th October 1987. On that day, now commonly known as "Black Monday", world stock markets crashed and Hong Kong was no exception. As a consequence the stock market was closed from the 20th to the 25th of that month. On the 27th the broker liquidated the client's account and, according to the broker's records, there was then a deficit due by the client to the broker of some $65 million.

5. Proceedings were almost immediately instituted for recovery of that amount, a writ and statement of claim being issued on 3rd November 1987. A defence and counterclaim was filed on the 3rd December.

6. The statement of claim has since been amended and now sets out that the broker, on the client's instructions and pursuant to an agreement between them dated the 16th December 1986, acted as the client's share broker and an account was maintained between them recording contracts for the purchase and sale of shares. It was provided in that agreement that confirmation of contracts for the purchase and sale of shares and statements of account as between the broker and the client should be deemed to be treated as authorised and correct unless notice was received by the broker to the contrary within 10 days of such confirmation or statement being sent to the client. Monthly statements of account were duly sent by the broker to the client from December 1986 to the 31st October 1987 and these were not so challenged. The final statement showed that 564,825,631 was owing by the client to the broker. It is also claimed that interest at 8% is payable by the client to the broker on the balance owing, also pursuant to the agreement between them.

7. The client's statement of defence and counterclaim, which has been amended several times, denies that the broker's final statement of account reflects the true position between them. It also claims that the contents of the agreement were not interpreted or explained to the client, that the broker was not entitled to "close out" the client's account when it did so and that the broker failed to obtain a fair market price for the shares which it sold. It puts the broker to strict proof in relation to how the final balance alleged to be owing has been calculated and in particular denies that large parcels of shares and warrants in the Hong Kong Land Co. Ltd. were purchased on instructions of the client.

8. The defence also claims that the broker has failed to produce to the client not only all its documents and records relating to its dealings with the client but also any information or documents evidencing that it had at all material times in its possession custody or control sufficient stocks of shares for all its clients. It is this requirement which has given rise to the summonses before Bokhary J. and to these appeals.

9. The defence is based on what we are told by Mr. Francis Eddis Q.C., leading counsel for the client, was the nature of the relationship between the parties. We are informed that there was a "pool" arrangement whereby when instructions were received from the client to purchase shares the broker would not actually buy those shares in the market for the client but would enter in its books that the client was entitled to an appropriate part of a large pool of such shares that the broker held in its custody. The client claims that if therefore at any given time the broker did not have in its pool enough shares in any particular company to cover the total amount of shares it had contracted to buy for all its clients its claim against the client fails in respect of the shares of that company allegedly purchased for the client. On that basis the client alleges that it is entitled to discovery of all the broker's records relating to all share purchases and sales made on any particular occasion not only on behalf of the client (about which there is, we understand, no dispute) but on behalf of all the broker's other clients.

10. This latter defence had been met in an amended reply and defence to the client's counterclaim as follows:

(it would seem that the word "not" has been omitted from sub-paragraph (a))

11. Presumably what is meant by those two sub-paragraphs is that the broker is not denying that the client has the right to discovery and inspection of all documents relating to the allegation that at all material times the broker had to have enough stock of shares in its pool to satisfy all its clients' purchase orders. The broker says it did have such stock.

12. This requirement to discover not only the documents relative to the client's account but also all other clients' accounts who were dealing in the same shares as the client has led to the difficulties which were before Bokhary J. because, as might have been anticipated, it put an enormous burden on the broker to produce the vast numbers of relevant documents while at the same time preserving the confidentiality of its other clients' business.

13. The extent of that burden was perhaps belatedly realised by the broker when the client issued a summons for specific discovery. It sought, inter alia, the broker's stock records of some 13 leading Hong Kong companies (some sub-divided into shares, rights, warrants, etc.) for the period from the 27th October 1986 to the 27th October 1987 in respect of all of the broker's clients such as to show that at all times it held sufficient stocks of shares for all such clients.

14. When that summons came before Sears J. on the 15th June 1989 it was adjourned sine die with liberty to restore and an order was made by consent in these terms:

SPECIFIC DISCOVERY

15. Pursuant to the terms of the consent order a team from the client's solicitors, plus professional advisers from its accountants, went to the broker's offices daily from mid-July 1989 to mid-September taking with them their own copying machine. Very many documents were provided and copies were made. However, as was perhaps inevitable given the extraordinary wide terms of the order, disputes arose as to what documents came within the terms of that order and whether full inspection had peen allowed of those on which there was agreement. These disputes led to a long and acrimonious correspondence between the solicitors acting for the client and those for the broker. There were some 37 different categories of documents, according to a list prepared by the client's solicitors and included in their skeleton argument before Bokhary J.

16. On the 13th November 1989 the client took out a summons to dismiss the broker's action for want of prosecution on the grounds the broker had failed to comply with the consent order of Sears J. "in that the plaintiff failed and neglected to permit the defendant's representatives to inspect and peruse the documents described in the schedule herewith." The schedule contained the various types of document relating to the client's account with the broker and also those concerning the broker's accounts with other clients who had been dealing in the same shares as the client. There was also a summons to restore the client's application for discovery which had been adjourned sine die by Sears J. Both of these came before Mayo J. on the 19th March 1990 when he made an order that the applications be heard before Bokhary J. on the 17th April. In accordance with that direction the matters came before him on that date and the hearing continued on the 18th, 19th and 20th when it was adjourned part-heard. The hearing was resumed on the 28th and 29th June. Judgment delivered on the 30th.

17. The grounds of appeal in C.A. 93/1990 are that certain comments were made to the judge by Mr. Thomas during the course of the hearing "which were so scandalous and irrelevant so that a reasonable and fair-minded person would be justified in suspecting that any judicial decision made after hearing such submissions would not be made on an impartial and unprejudiced basis". Application was made to Bokhary J. that these comments having been made he should recuse himself from the hearing. In refusing to do so he declared that he had not been influenced in anyway by the comments and would "judge the matter objectively". In doing so, however, the client says that he has applied the wrong test which is not whether the judge himself felt able to continue to be impartial, but whether a fair-minded bystander would reasonably suspect that the judge might not make his judicial decision with a fair and unprejudiced mind. Substantial reliance is placed on the recent decision of this court in Lorrain Osman v. Attorney General [1989] 2 HKLR 437. It is a further ground of appeal that even though Bokhary J. declared that the comments made would not influence him, his subsequent conduct of the hearing was such as, again in the eyes of the fair-minded bystander, to raise doubts as to whether he had in fact been so influenced. Some eight examples or such conduct are listed.

18. The comments complained of are not set out in the grounds of appeal but were contained in a letter from the client's solicitors to the broker's solicitors dated the 23rd April 1990 and are set out in the decision of Bokhary J. They are as follows:

19. So far as the first comment is concerned Mr. Eddis argues that the implication of that remark was that the defence was not being conducted in an impartial and fully professional manner and as the credibility of the affidavits sworn by the client's solicitor, Mr. Keung, were in issue that was very serious. Mr. Keung is not the client's son, but one of his partners is. It is said that these are suggestions that the defence is being conducted so as to achieve delay and that the reference to the father/son relationship of the client and his solicitor's partner lends particular support to that view.

20. The second comment is objected to on the basis that it was an attempt to impress Bokhary J. with the views of another judge and, again, even if he was not in fact so influenced the fair-minded bystander would have thought he might be.

21. The fundamental principle involved here is set out in the classic statement of Lord Hewart CJ in R. v. Sussex Justices [1924] 1 KB 256 at 259:

"It is of fundamental importance that justice should not only be done but should be seen to be done".

22. There have been many cases following that decision such as Metropolitan Properties Co. (FGC) Ltd. v. Lannon [1969] 1 QB 577 and Allinson v. General Council of Medical Education and Registration [1984] 1 QB 750. In Hong Kong the leading authority prior to Lorrain Osman was Shek Kam Tin v. Chan Fuk Sang and others [1979] HKLR 532 a case cited to Bokhary J. and with which he was very familiar. In the Lorrain Osman case Cons V.P. quoted the following words of Ackner L.J. in R. v. Liverpool City Justices, ex parte Topping [1983] 1 WLR 119 at p. 123:

"In our view, therefore, the correct test to apply is whether there is the appearance of bias rather than whether there is actual bias".

and this passage from the judgment of Lord Denning in Metropolitan Properties Co. (F.G.G.) Ltd. v. Lannon and Others [1969] 1 QB 577 at p. 599:

"The court will not enquire whether he did in fact favour one side unfairly. Suffice it that responsible people might think he did. The reason is plain enough. Justice must be rooted in confidence; once confidence is destroyed then right minded people go away thinking: 'The judge was biased'."

Bokhary J. was also referred to Shek Kam Tin v. Chan Puk Sang and others in which he had been one of the counsel. There in a personal injuries claim a division of this court was inadvertently informed not only of a payment into court but of the amount of that payment. Although reference is made to a similar position occurring in England and being reported in The Times when the English Court of Appeal continued to hear the appeal, Roberts C.J. said at 531 that:

"the respondents might feel if the appeal went against them that the court may have been prejudiced by its knowledge of the amount paid in".

Strong reliance is placed on this case because, as opposed to R. v. Sussex Justices and Lorrain Osman v. Attorney General, it is a case not of the judicial officer having done something wrong himself but where he has been told of a prejudicial fact.

23. Bokhary J. had no difficulty with the second of Mr. Thomas' comments. He considered that no fair-minded person could possibly believe that he could be influenced by what Mayo J. was reported to have said. We entirely agree.

24. He dealt comprehensively with the effect of Mr. Thomas first comment and its alleged implications and said that he took it very seriously. He was referred to and fully considered all the relevant authorities, and has also stated that he did not take into account the costs involved in aborting a hearing which was into its fourth day. Moreover, he said that he accepted the explanation given by junior counsel for the brokers that all Mr. Thomas was seeking to do was to underline the accuracy of the figure he was supplying the court as to the amount of interest which was running from day to day. Before us it is argued that this was not the proper test and that Bokhary J. has misdirected himself in considering the implications of the remark made by leading counsel. We do not consider that a fair-minded, knowledgeable bystander would have thought that the fact that the judge had been made aware of the relationship between the client and his solicitor's partner would of itself have led him to doubt in any way the reliability of the solicitor's affidavits.

25. It is argued for the client that Bokhary J.'s decision on this aspect of the appeal was made "per incuriam" in that he did not appear to be aware of the correct test to be applied and that we can therefore substitute our own discretion for his. We are in fact quite satisfied that Bokhary J. was fully aware of the correct test to be applied, as is contained in the various authorities to which he has referred. We are satisfied that he has exercised his decision on proper principles and we see no reason to interfere with it. We would further add that we have considered fully the further complaint made in the grounds of appeal that, at the resumed hearing and thereafter, having heard the comments made by leading counsel for the brokers and having refused to recuse himself from hearing the matter, Bokhary J. conducted the hearing and proceedings subsequent to it in a manner which might have led the fair-minded bystander to feel that he had been prejudiced against the client. We are quite satisfied that there is nothing in any of these points which in any way gives us reason to believe that the fair-minded bystander would have come to that conclusion.

26. Turning now to the grounds of appeal in CA 121 of 1990, Bokhary J. said in his judgment of 30th June 1990 that the summons, in that it sought dismissal for want of prosecution, was misconceived because there simply had not, on any view, been any want of prosecution on the broker's  part such as to render its claim liable to dismissal. he then treated the summons as one for dismissal on the ground of failure to obey an interlocutory order. We have no doubt he was right to do so.

27. Bokhary J. then went on:

28. Before us Mr. Eddis has taken us through these various categories of documents and has endeavoured to show deliberate failure to obey the consent order. He has pointed out variations between letters of various dates from the broker's solicitors and affidavits sworn by its officers. He does not dispute that the implementation of the consent order must have placed a very heavy burden on the brokers who had to accommodate a team from the client's solicitors in their office with their copying machine for a period of some three months. No doubt a great deal of time was required of members of the broker's staff in looking up the documents and making them available, while at the same time preserving the confidentiality of their other clients' business. However he emphasizes that it was a consent order and that the brokers, on professional advice, had freely entered into the agreement embodied in that order in order to escape the enormous burden of having to comply with an order for specific discovery. It was easier for them to allow the client's team into their office to inspect all relevant documents for a period of three months, inconvenient as that must have been. All that the client now seeks is that this order be extended and that his representatives be allowed to re-enter the broker's office with their own copying machine and to resume the exercise which occupied the summer of 1989.

29. We have again carefully considered the various categories of documents which have been referred to and which are set out in the tables annexed to the broker's skeleton argument. We have also considered the voluminous correspondence which has passed between the solicitors for each of the parties. We are satisfied that with the best will in the world the terms of the consent order were such that it was inevitable that disputes would arise as to what documents were and what were not available for the inspection of the client's representatives. We entirely agree with the view taken by Bokhary J. that there is no evidence that the brokers have deliberately disregarded the terms of the consent order. Clearly there are some conflicts between various letters and affidavits but in the light of the enormous scope of the order this is understandable. We certainly do not consider that these inconsistencies are such as would in any way justify the dismissal of this very substantial claim. We are satisfied that Bokhary J. exercised his discretion on this aspect of the matter in accordance with the correct principles and we see no reason to interfere with that discretion.

30. We have also considered the question of whether there should have been an "unless" order. As we understand it what the client seeks is an order that his representatives be again allowed into the offices of the broker. We consider that this would only lead to further difficulties such as have already been experienced. We agree with Bokhary J. that while the making of the consent order for discovery in the terms of the original summons must have been seen as a relatively easy way to overcome the problems involved, this short cut did not achieve the purpose for which it was intended and there is no point in repeating the exercise. We understand that some 11,000 additional documents have in fact now been copied and are available on payment of copying charges. If any further documents are required then the client can pursue his normal remedy of issuing a summons for specific discovery.

31. Complaint is also made that Bokhary J. dismissed the summons for discovery which had been restored by the order of Mayo J. We are however also satisfied that this summons was not pursued at the hearing before Bokhary J. and that under the circumstances he was right to dismiss it. We are also satisfied that the order he made as to costs was perfectly proper and and that this was a matter very much within his discretion.

32. The broker is entitled to its costs of these appeals which are to be taxed and paid forthwith.