CHIN KAM CHIU v. FTI CONSULTING, INC AND OTHERS

CACV 114 /2020

[2021] HKCA 464

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 114 OF 2020

(ON APPEAL FROM HCA NO 1347 OF 2019)

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J U D G M E N T

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Hon Kwan VP (giving the Judgment of the Court):

1.  On 16 April 2020, G Lam J handed down his decision (“the Decision”) ordering that the statement of claim be struck out and this action (HCA 1347/2019) be dismissed on the ground that no reasonable cause of action was disclosed and the statement of claim is “wholly and indisputably bad”. ([2020] 2 HKLRD 878) The plaintiff, Chin Kam Chiu (“Chin”), filed a notice of appeal against the Decision on 14 May 2020.

2.  On 8 July 2020, the defendants issued the present summons to strike out the notice of appeal under the inherent jurisdiction of the court, alternatively, for an order that the plaintiff is to provide security for the defendants’ costs of this appeal by making a payment into court in the sum of $463,274.33.

3.  The plaintiff stated in his affirmation in opposition that he agrees to provide security for costs of the appeal by making a payment into court in the amount as sought by the defendants within 28 days of the order.

4.  The Court of Appeal has inherent jurisdiction to strike out a notice of appeal where an appeal is plainly not competent, or where it is frivolous, vexatious or an abuse of process of the court.  An appeal can be struck out where there is no possibility that the grounds of appeal are capable of argument.  This power to strike out a notice of appeal is confined to clear and obvious cases. (Hong Kong Civil Procedure 2021, vol 1, §59/3/6)

5.  The Court of Appeal may also exercise its power to order security for costs of the appeal upon proof of the prima facie case of an abuse or threatened abuse of the process of the court, or where the proceedings are vexatious.  The mere fact that the grounds of appeal are weak is not sufficient to bring the case within this category.  In deciding whether, for the purposes of a security application, an appeal is vexatious or an abuse of the process of the court, the court applies the same test as in the case of applications to strike out a notice of appeal on those grounds. (Hong Kong Civil Procedure 2021, vol 1, §59/10/29)

6.  The question here is whether the Court of Appeal should strike out the notice of appeal or order security for costs to be provided by the plaintiff.

7.  In the written submissions of the plaintiff’s solicitors, they seek an oral hearing stating that further submissions in respect of the merits will be rendered in the oral hearing and appeal.  We think it is appropriate to determine the present summons on paper without an oral hearing.  As mentioned above, the power to strike out a notice of appeal is confined to clear and obvious cases, and the mere fact that the grounds of appeal are weak is not sufficient to bring the case within the vexatious category.  If it is not plain and obvious on the papers there is no possibility that the grounds of appeal are capable of argument, the summons to strike out the notice of appeal will be dismissed.  An oral hearing in this situation is not meant to be a ‘dry run’ of the appeal.  We do not think any useful purpose would be served by an oral hearing.

Background

8.  The background matters have been set out in detail in the Decision at §§6 to 14.  We do not propose to set them out.  For present purpose, a very brief account will suffice.

9.  Chin and others were prosecuted in criminal proceedings by the Customs and Excise Department (“C&E”) on charges of money laundering and conspiracy to export unmanifested cargo^[1].  The 2^nd defendant, FTI Consulting (Hong Kong) Ltd (“FTI HK”), was engaged by C&E to provide forensic accounting services on the money laundering charge and the 9^th defendant, Mr Roderick Sutton, was the principal author of the forensic accounting expert reports (“the Reports”) and gave evidence for the prosecution in the criminal trial.

10.  Following a trial of 97 days in the District Court, Chin was acquitted by HH Judge Tam who held that the evidence was not sufficient to prove the charge of money laundering beyond reasonable doubt.  The judge further stated that even if he had wholly rejected Chin’s evidence and the documents he put forward, he could only place limited weight on the Reports and Mr Sutton’s evidence, which were not sufficient to satisfy the criminal standard of proof.

11.  Chin was aggrieved by the criminal proceedings and brought civil actions against those he held responsible for the ordeal he went through.  This action against the 13 defendants was one of the claims brought by him.  He contended that he would not have been prosecuted without the Reports and Mr Sutton’s evidence.  He issued the writ in this action with a statement of claim in Chinese prepared by him acting in person.

12.  The defendants issued a summons to strike out the statement of claim.  By then, Chin was represented by counsel, who confirmed that there are two causes of action raised in the statement of claim^[2].

13.  The first is a claim for breach of statutory duty.  This is based on the complaint that the defendants were not qualified to give expert evidence in the criminal trial as Mr Sutton was not a “certified public accountant (practising)”^[3] within the meaning of the Professional Accountants Ordinance, Cap 50 (“PAO”) and FTI HK was not a “corporate practice” registered under section 28E of PAO^[4].

14.  The judge rejected the complaint of lack of professional qualification as it appeared to be based on a “fundamental misunderstanding of what qualifications are necessary for a person to give evidence as an expert in legal proceedings” and held that there is no legal basis for any claim arising from the mere fact that Mr Sutton and FTI HK were not a certified public accountant and a corporate practice respectively^[5].

15.  The second head of claim is for malicious prosecution.  The key allegations are that the Reports were false to the defendants’ knowledge, and that the defendants had suppressed genuine commercial transactions in order to meet the demands of C&E.  In reliance on the report, C&E arrested Chin, obtained a restraint order, and prosecuted him.

16.  The judge held there are several fundamental problems with the claim for malicious prosecution.  The key allegations do not support the contention that the defendants were in substance the prosecutor or that they had initiated the prosecution.  Giving an expert report which was held insufficient to found a conviction cannot without more amount to having “set the law in motion” against the plaintiff on a criminal charge.  Further, there is no plea that the prosecution was without reasonable and probable cause or that the defendants were actuated by malice. For all these reasons, this claim does not get off ground^[6].

The grounds of appeal

17.  Six grounds of appeal are raised in the notice of appeal.

18.  Ground 1 relates to the claim for breach of statutory duty.  It was contended that the judge was wrong to conclude on the true interpretation of sections 29(2)(b) and 28D(2)(b)(i) of PAO that there was no breach of these provisions occasioned by the provision of evidence by a non-practising certified public accountant for the purpose of Chin’s prosecution for money laundering.

19.  The submissions advanced in support of this ground were those raised before the judge and fully addressed in the Decision at §§15 to 25.  The arguments are plainly doomed to failure.

20.  Ground 2 relates to the claim for malicious prosecution.  The main complaint is that the judge did not put to the plaintiff the authorities cited in §§30 to 31 of the Decision^[7].  It was contended that if the judge had done so, the plaintiff would have relied on other authorities which stated the principles on whether the defendant to a claim for malicious prosecution should be held responsible for the prosecution in “wider terms” and it could be shown that the plaintiff’s case was “not hopeless”.

21.  The short answer to this is that in the present application, the only authority cited by the plaintiff that may be considered relevant to the point is Martin v Watson [1996] 1 AC 74, which his counsel had cited to the judge and was considered in §27 of the Decision in which the elements of the tort of malicious prosecution were set out.  The judge had explained in detail why in this fact situation there is no basis to regard the defendants as the relevant prosecutor for the purpose of founding a claim for malicious prosecution.

22.  Ground 2 does not even begin to show in what way the judge’s reasoning is wrong.  It is wholly without basis.

23.  Ground 3 sought to address the holding there was no plea in the statement of claim that the prosecution was without reasonable and probable cause.  It is contended that although there was no express plea to that effect, this could be inferred from the pleading.

24.  The difficulty faced by the plaintiff is insurmountable.  As noted by the judge, the District Judge had ruled there was a case for Chin to answer for the money laundering charge.  The fact that he was acquitted in the end did not mean there was no basis at all to prosecute him or that the prosecution was without reasonable and probable cause.

25.  Ground 4 sought to address the holding there was no plea of malice in the statement of claim and contended that this could be inferred from the pleading.

26.  The judge had in fact considered whether malice could be inferred in this instance (at §38) and held that such inference cannot properly be drawn (at §39).

27.  Ground 5 raised a complaint about the judge’s criticism in §39 of the Decision as regards §21 of the statement of claim, which contained a plea that the defendants knew that the evidence in the Reports was false.  The judge took the view that this plea is tantamount to an allegation of fraud and does not meet the stringent requirements for a plea of fraud.  It was contended that this was not an argument made by the defendants and it was not put to the plaintiff, that fraud is not a constituent of the tort of malicious prosecution, that the absence of pleading the basis of the defendants’ knowledge of the falsehood of the Reports can be cured by providing further particulars, and that the judge had wrongly had regard to Mr Sutton’s evidence which is inadmissible for striking out a claim on the basis of no reasonable cause of action.

28.  The above contentions are untenable or of no consequence.  In §39 of the Decision, the judge was considering whether there is any material in the statement of claim from which malice might be inferred.  He identified §21 of the statement of claim as the only possibility and went on to analyse that paragraph.  In holding that the appropriate degree of particularity as to the alleged knowledge of falsehood was not met, the judge did not hold that fraud is a constituent element of malicious prosecution.  He further held that the lack of pleading cannot be salvaged by the submissions of the plaintiff’s counsel.  As to the judge’s reference to Mr Sutton’s evidence at the end of §39, this is additional and not essential to the main reasoning in the earlier part of that paragraph.

29.  Ground 6 is a complaint that the judge was wrong not to exercise his discretion to give an opportunity to the plaintiff to give further particulars or to amend the statement of claim.

30.  There is no substance in this complaint.  As noted by the judge, no alternative pleading has been put forward by the plaintiff.  Besides, we do not think any amendment could salvage the claims for breach of statutory duty and malicious prosecution, which are “wholly and indisputably bad” as held by the judge.

Conclusion and costs

31.  We are satisfied there is no possibility that the grounds of appeal in the notice of appeal are capable of argument.  They are plainly vexatious.

32.  The plaintiff’s solicitors submitted that the appeal should be heard because it involves a point of law of great and general importance. That is not the case.

33.  There is no good reason for this appeal with vexatious grounds to be heard.  The appropriate course is to strike out the notice of appeal and dismiss the appeal.  We make an order accordingly.

34.  Costs of the present summons should follow the event.  The defendants should also have the costs of the appeal which is dismissed.  We order the plaintiff to pay the defendants’ costs of this summons and of the appeal.  Having considered the defendants’ statement of costs for summary assessment, we reduce the reasonable costs recoverable from $196,193 to $160,000.

35.  The costs order and summary assessment are orders nisi.  The orders will be made absolute if there is no application of any party for variation within 14 days of the handing down of this judgment.