DAIMLER AG (formerly known as MERCEDES BENZ AG) v. LEIDUCK, HERBERT HEINZ HORST AND ANOTHER

HCA 4089/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.4089 OF 1994

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BETWEEN

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DECISION

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1.   This Decision should be read with reference to the Reasons for Decision that I handed down on 12 March 2013 (“Reasons”) to explain the Order that I had made on 5 February 2013 (“Order”), refusing to strike out the Expert Report of Mr Andrei Dontsov dated 20 December 2012 on the ground that “Mr Dontsov is not a suitable person to be an expert witness for the Plaintiff” and further giving leave to the Plaintiff to adduce and rely on Mr Dontsov’s Supplemental Expert Report dated 1 February 2013.  I shall in this Decision continue to use the abbreviations adopted in the Reasons. 

2.   By a Summons issued on 18 February 2013, the Defendants apply for leave to appeal against the Order (“Leave Application”).  If leave is granted, the Defendants intend to press for the striking out of Mr Dontsov’s 2 reports. 

3.  Leaving aside whether the Defendants should have leave to appeal against the Order, the parties are also divided as to when this Court should deal with the Leave Application. 

4.  To put this controversy in context, the present trial commenced before me on 4 February 2013.  It was originally set down for 16 days up to and including 28 February 2013.  The trial has overrun and was adjourned part heard on 7 March 2013 after 4 more days in Court on 1, 5, 6 and 7 March 2013.  It is presently scheduled to resume in April, May and June with 10 and 11 April, 8, 9, 13, 14 and 15 May and 6 and 7 June 2013 reserved.  Direction has been given earlier for the expert evidence to be taken after the conclusion of the factual testimony, which is still underway.

5.  Against this background, although the Defendants are the intended appellants, they have no desire to press ahead with the Leave Application (or the appeal itself) right away but have asked for the hearing of the Leave Application to be adjourned sine die pending the conclusion of, and judgment in, the present trial.  Notwithstanding their view that I have erred in not excluding Mr Dontsov as the Plaintiff’s expert witness, the Defendants are content for this Court to continue with the trial, including receiving Mr Dontsov’s evidence, and to render judgment taking into account the same.  Depending on the final outcome of the trial, the Defendants may appeal against the judgment or cross appeal in response to an appeal against the judgment by the Plaintiff, as the case may be.  Any such appeal or cross appeal against the Order, if required to be pursued by the Defendants having regard to the final outcome of the trial and if leave be granted by this Court or the Court of Appeal, would then be heard together with the appeal against the judgment.  In short, the Defendants take out the Leave Application to preserve its option to appeal against the Order, which it would press only if it should become necessary for it to do so having regard to the final outcome of the trial.

6.  On the other hand, the Plaintiff is adamant that the Leave Application should be ruled on forthwith by this Court, leaving the Defendants to make up their minds whether (if the Leave Application succeeds) to proceed with the appeal or (if the Leave Application fails) to renew its application for leave to appeal before the Court of Appeal and, if the Court of Appeal grants leave, to decide whether to proceed with the appeal, all in accordance with the rules of the High Court.  In the meantime, the taking of the evidence of the remaining factual witnesses can continue uninterrupted.  However, the expert evidence should be adjourned until all applications for leave to appeal, and the appeal (if any), against the Order have been finally disposed of.  In this way, should the Court of Appeal agree with the Defendants and strike out Mr Dontsov’s reports, the Plaintiff can substitute Mr Dontsov with another expert on Russian company law and company registration system before this Court hears the expert evidence.

Interlocutory appeals to Court of Appeal during trials only in exceptional circumstances

7.  While I agree with Mr John Yan SC for the Plaintiff that each case turns on its own facts, in particular, the nature and effect of the interlocutory order sought to be appealed against and its bearing on the issues to be decided, it can be stated as a matter of general principle that appeals to the Court of Appeal in the course of trials of actions or other substantial hearings of applications are highly undesirable and greatly discouraged.  Apart from disrupting the trial or hearing and adding to the workload of the Court of Appeal, many such interlocutory appeals might eventually turn out to be academic having regard to the final outcome of the trial or hearing.  Consequently, the Court of Appeal may hear an interlocutory appeal in the course of a trial or hearing but only in exceptional circumstances.  See Hong Kong Civil Procedure 2013, Volume 1, p 458, §20/8/12 (citing the English Court of Appeal’s judgment in McGarry (E) Electrical v Burroughs Machines, unreported, 14 April 1986, Transcript No 346).  An example of exceptional circumstances given by the learned authors is where the trial is likely to be lengthy and an application for amendment to pleading is made to the trial judge which is substantial or crucial and which, whether granted or refused, will or may affect the final outcome of the action or is likely to be decisive after litigation.  In such a situation, the trial judge may rule on the application and give the parties leave to appeal, and then adjourn the trial before him to enable the parties to appeal with due expedition to the Court of Appeal who may in its discretion hear the appeal speedily, and thereafter the parties will return before the judge to resume the trial in the light of the decision of the Court of Appeal on the proposed amendment.

8.  The same statement of principle at p 369, §20/5-8/12 of the Annual Practice was cited with approval by the Court of Appeal in Lam Choi King v Yeung Fook Chi [1991] 1 HKC 219 at 226G-227B, which involved an interlocutory appeal against a ruling made in the course of a trial excluding the evidence of a witness called by the plaintiff on the ground that it was irrelevant to the issues for trial.  The Court of Appeal considered the views expressed by the editors of the Annual Practice as to the undesirability of interlocutory appeals in the course of trials to be apposite to the situation before it, although those views were expressed in the context of amendments to pleadings in a system of litigation which envisaged the grant or refusal of leave to bring interlocutory appeals. 

9.  The general disapproval of interlocutory appeals during trial save in exceptional circumstances was said by the Court of Appeal in To Kan Chi v Pui Man Yau [1998] 3 HKC 371 at 387 per Nazareth VP to be “not in doubt” and to have been “reinforced by the increasing emphasis by this court upon case management by the trial judge” (see further paragraph 11 below).  See also CKW Company Limited v Secretary for Justice [2005] 1 HKC 96, an interlocutory appeal against a decision made by a trial judge on the first day of trial refusing to revisit his earlier decision for a split trial of the issues of liability and quantum, at 109A-H per Woo VP citing Lam Choi King and To Kan Chi. 

10.  Having regard to such general principle, it would be obvious that risks that commonly exist where parties wish to appeal against interlocutory orders and directions when the trial or hearing is still ongoing (for example, that the time and costs incurred for the trial or hearing, if continued, or part thereof would be wasted if the proposed interlocutory appeal were successful) are not exceptional circumstances.  See Wang Sin Shin v Nina Kung, HCAP 8/1999, unreported (Chu J, 17 March 2005),§6.

11.  On what may constitute exceptional circumstances, apart from the grant or refusal of leave for substantial or crucial amendments to pleadings having a decisive effect on the final outcome of a lengthy trial as identified in the Annual Practice and adopted by the editors of Hong Kong Civil Procedure (or, I suppose, any other interlocutory orders or directions having such an effect), it seems that an interlocutory appeal to the Court of Appeal may also be allowed to proceed in the middle of a trial or hearing where the judge has erred in principle and the particular matter is not capable of being remedied on appeal post trial.  In support, in To Kan Chi, supra, the only case cited by the parties in which the Court had exercised its discretion to adjourn a trial pending an interlocutory appeal, the trial judge allowed to stand 5 writs of subpoena deuces tecum directed to 5 Government departments requiring them to produce 32 original files to which the Government as a defendant had in its list of documents referred.  The 5 Government departments subpoenaed were however not themselves parties to the proceedings.  Nazareth VP said at 387F-H:

“There remains to be dealt with Mr Barlow's point that interlocutory appeals during trial should be discouraged (see Supreme Court Practice 1997, Vol 1, p 364 para 20/5-8/15), also Lam Choi King v Yeung Fook Chi (t/a Yeung Yat Fat Wood Co) & Ors [1991] 1 HKC 219 at 226G-227D).

That principle is not in doubt, and has been reinforced by the increasing emphasis by this Court upon case management by the trial judge.  However, here it is a matter of non-parties being vexed and probably also oppressed by having to examine the massive files involved.  Moreover, it is not a question of the particular matter being capable of being remedied on appeal post trial, as is ordinarily possible in matters inter partes.  While not underrating the disruptive and potentially prejudicial effect of this appeal upon the plaintiffs, particularly in the context of prolonged hearings, I have no doubt that the non-party Government departments must be permitted to proceed with their appeal.”         

12.  The burden is on the party seeking the adjournment pending the interlocutory appeal to demonstrate that there are exceptional circumstances justifying the adjournment.  It is not for the opposing party to show why the trial or hearing should not be adjourned or show urgency in having to proceed with the trial or hearing as scheduled.  Urgency will only make it more difficult to justify adjourning the trial or hearing.  See Wang Sin Shin v Nina Kung, supra,§5.

13.  Following the coming into force of the Civil Justice Reform which introduces the requirement for leave to bring interlocutory appeals, a party who wishes to appeal against an interlocutory order made in the course of a trial would have to and should issue a summons for leave to appeal within the time prescribed by the rules of the Court for such step to preserve that option.  Unless there are exceptional circumstances justifying the adjournment of the trial pending the interlocutory appeal, adherence to the principle of discouragement of interlocutory appeals during trial would require the judge to continue with the trial as scheduled. Given that one of the objectives of such principle is to prevent the unnecessary pursuit of potentially academic interlocutory appeals, contrary to Mr Yan SC’s submissions, it would in such circumstances be generally appropriate and sensible for the trial judge to adjourn the argument on, and the determination of, the application for leave to appeal sine die with liberty to the applicant to restore after the conclusion of the trial. Otherwise, the applicant for leave would be compelled by the rules of the Court to proceed with the interlocutory appeal upon leave being granted by the trial judge or to seek leave from the Court of Appeal itself if the trial judge declines leave and then to proceed with the appeal if the Court of Appeal gives leave.

No sufficiently exceptional circumstances

14.  Mr Yan SC observes that it is unusual for an applicant for leave to appeal against an interlocutory order made in the course of a trial to advocate the continuation of the trial and the adjournment of the hearing of the leave application until after the conclusion of the trial.  That may well be the case.  However, the course proposed by the Defendants is on authorities correct unless the Plaintiff can point to the existence of exceptional circumstances. 

15.  After careful consideration of the competing submissions forcefully made for both sides by Counsel, for which I am grateful, I am not persuaded that there are any such circumstances for the following reasons.

16.  First, I agree with Mr Horace Wong SC for the Defendants that, on a proper analysis of the nature of the determination to be made by the Court at the end of this trial and of the significance to that determination of the particular issue to which the expert evidence relates, it is uncertain that the evidence to be given by Mr Dontsov, whether accepted or rejected, would be decisive of this trial.  In this regard:

(1)     I have for present purpose reviewed the pleadings and the evidence so far adduced again. Without going into unnecessary details, it is sufficient to say that they raise a multitude of factual and legal issues of liability and quantum. 

(2)     Even if one focuses just on quantum, the Defendants present their case on damages under 3 different heads, of which Mr Leiduck’s alleged loss of the opportunity to sell his IRC shares to Stern-Stroy is only one.  The Plaintiff challenges both the credibility in fact and viability in law of those 3 claims.

(3)     Even if one zooms in on Mr Leiduck’s alleged loss of the opportunity to sell his IRC shares to Stern-Stroy, the expert evidence goes to the existence or otherwise of Stern-Stroy in 1994.  It is but one of the many facets of the whole body of evidence relevant to Stern-Stroy’s status in 1994.  Mr Leiduck Jr, Dr Olga Salman and Ms Mitsie Johnson, the Defendants’ factual witnesses on damages, have also testified as to their respective alleged dealings relating to Stern-Stroy in 1994. 

(4)     It is further clear from the pleadings, the cross-examination of the Defendants’ said witnesses and the Plaintiff’s opening submissions on Mr Leiduck’s claim that the Injunction had deprived him of the opportunity to sell 70% of his shares in IRC to Stern-Stroy in 1994 that the non-existence of Stern-Stroy in 1994 is but one of a number of bases upon which the Plaintiff disputes the credibility and viability of such claim. 

(5)     In short, the expert evidence is directly relevant to only a sub-issue arising under one of the 3 heads of damages claimed by the Defendants. 

(6)     Even if the Court should reject Mr Leiduck’s case of loss of the opportunity to sell his IRC shares to Stern-Stroy as being incredible, whether due to Mr Dontsov’s evidence or not, it may still direct an inquiry if it is satisfied that the other 2 heads of damages are arguable.

17.  I have not overlooked the effect that a finding of the non-existence of Stern-Stroy in 1994 may have on the general credibility of Mr Leiduck Jr and therefore on the sustainability of the Defendants’ case on damages under the other 2 heads given that Mr Leiduck is the only witness on such claims.  However, this has to be put in perspective.  Due to the peculiar preceding procedural history (which need not be gone into for present purpose), the current trial is not the inquiry of damages itself.  What this Court is required to determine at the end of the trial is whether it should exercise the discretion to order an inquiry.  Insofar as the aspect of damages is concerned, this Court would refuse to order an inquiry only if it is satisfied that none of the claimed heads of damages is sustainable.  See Yukong Line v Rendsburg[2001] 2 Lloyds Rep 113 at 120, §35.  Given that the Court is only required to form a provisional view as to the sustainability of the claimed heads of damages, it is only concerned with credibility in the sense of whether the testimony on damages is capable of being believed.  It is not necessary for this Court to form or express any final view on damages unless it is satisfied that the evidence thereon is so incapable of belief that none of the 3 claimed heads of damages is sustainable. 

18.  Second, it also follows from the above analysis of the significance of the expert evidence that:

(1)     Depending on whether an inquiry is eventually ordered and, if not, the reasons therefor, it might not even be necessary at the end of the day for the Defendants to appeal against the Order.

(2)     Even if the Defendants should have to pursue, and further succeed in, the appeal against the Order, the striking out of Mr Dontsov’s evidence is likely to cause a retrial but only of a limited scope.

19.  Given the multiple issues of liability and quantum raised by the Defendants’ claim for damages pursuant to the Undertaking, I believe Mr Wong SC is right in pointing out that his clients would find it necessary to appeal against the Order only if they establish liability on the part of the Plaintiff to pay damages if loss or damage was caused to the Defendants as a result of the Injunction but fail to show a prima facie case on damages wholly or primarily because of the Court’s acceptance of Mr Dontsov’s evidence.

20.  The possibility of a retrial on fresh evidence and the prejudices normally associated with such a retrial (for example, that the time and costs of the original trial or part thereof would have been wasted; that strategy for the cross-examination of the relevant witnesses would have revealed; that the Court and the parties would have to reconsider all the other relevant evidence after a long lapse of time etc) are inherent in every appeal on the ground that the Court has erred in receiving or excluding particular evidence and therefore cannot usually be exceptional circumstances. 

21.  That said, I should make it clear that I am not indifferent to the fact that this trial is lengthy. Indeed, it has become far more prolonged than originally estimated by the parties.  Both the parties and the Court have invested considerable time and/or costs in this trial and will have to continue to do so until its conclusion. In approaching the question whether the Defendants should be compelled to take a course of action that would bring final resolution to the argument over Mr Dontsov’s standing as the Plaintiff’s expert witness before Mr Dontsov and the Defendants’ expert witness give evidence, the Court is naturally concerned about the potential prejudice to the parties arising from the prospect of a retrial necessitated by an interlocutory error on its part. 

22.  However, as submitted by Mr Wong SC, under Order 59 rule 11(3) of the Rules of the High Court, the Court of Appeal may order a new trial on any question without interfering with the finding or decision on any other question or on a part of the matter in controversy.  Given the place that the expert evidence has in the whole scheme of things, even if the Defendants should succeed in their appeal against the Order after the conclusion of this trial, it is to my mind unlikely that the Court of Appeal would not fashion its order to avoid any unnecessary wastage of costs and time by exercising its power under Order 59 rule 1(3) and order a re-trial of the whole proceedings, rather than limiting the retrial only to the questions to which the expert evidence relates.  In my view, all that is likely to be required is for the same Court to rehear the expert evidence, from a new expert insofar as the Plaintiff is concerned, and to review all the findings that have taken into account the expert evidence, including if required a reassessment of Mr Leiduck Jr’s general credibility in his testimony on all 3 heads of damages. 

23.  In this connection, Mr Yan SC invites me to bear in mind the worst case scenario of the parties not being able to fix the retrial before the same Court so that there would have to be a complete retrial of the whole question of whether there should be an inquiry as to damages before another judge.  While there is in theory such a risk, I can presently see no or no apparent circumstance that suggests that it would materialise in this case.

24.  Lastly, Mr Yan SC also highlights the window of opportunity that has been presented by the particular course that this trial has taken.  However, the objective of avoidance of interlocutory appeals during trials that might turn out to be academic would as a matter of principle dictate against propelling the Defendants’ intended appeal against the Order simply on the ground that it may be expedient to do so in the circumstances of this trial.

25.  Further, adopting the course suggested by the Plaintiff, while the dates in April, May and June now allotted for the continuation of the trial may not all go to waste because of the outstanding testimony from the factual witnesses, the further application for leave to appeal (if required) and the appeal before the Court of Appeal by the Defendants (if any) would cause disruption to the trial if those proceedings cannot be concluded before this Court is otherwise ready to hear the expert witnesses.  Given the state of the Court of Appeal’s workload and diary, such timely hearing and determination by the Court of Appeal is highly unlikely unless an early date be given.  I am, however, unable to say with any degree of confidence whether the Court of Appeal would be prepared to expedite this matter.  This is particularly so in light of the Court of Appeal’s general disapproval of interlocutory appeals during trials.  The suitability of Mr Dontsov as an expert witness for the Plaintiff is different from say the issue as to whether Mr Leiduck should be permitted to give evidence at this trial via video link, in respect of which the Court of Appeal had intervened at very short notice on what was practically the eve of this trial because any delay would have rendered nugatory the appeal against Mr Justice L Chan’s decision refusing to allow Mr Leiduck to testify via video link.  Mr Leiduck would have had to either travel from Germany to personally attend Court in Hong Kong against medical advice or let the trial proceed without his evidence.  In contrast, as analysed above, the erroneous admission of expert evidence for the Plaintiff from Mr Dontsov can be remedied on appeal post trial by a retrial of the issues to which such evidence relates.    

26.  For these reasons, I adjourn the hearing of the Leave Application with liberty to the Defendants to restore the same within the time limited for it to appeal against the final judgment herein or to cross appeal in the event of an appeal against such judgment by the Plaintiff, as the case may be, failing which the Leave Application shall stand dismissed.

27.  I shall hear the parties on costs on 11 April 2013.