XCHRX GATMORE ENTERPRISES S.A. and Another v. THE PEOPLE'S INSURANCE CO. OF CHINA

1993, No. CL 204

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

COMMERCIAL LIST

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J U D G M E N T

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INTRODUCTION

1. On 25th July, I heard the Plaintiffs' summons for directions in this action. Many of the orders to be made on the summons were agreed, or so I thought. I therefore made various orders by consent. Those matters which were not agreed were argued, and I made such additional orders which seemed to me to be appropriate. At the end of the hearing, the Defendant's solicitor, Mr. Nicholas Mallard, indicated that he had some "minor drafting points" on the terms of the order. Since the time alloted for the hearing of the summons had already been substantially exceeded, I suggested that an attempt be made in correspondence to agree the drafting of the various orders I had made, before a draft order incorporating all the orders I had made was submitted to me for my approval.

2. The terms of the order have now been agreed subject to three points. Those three points were not argued before me. The Plaintiffs' solicitor, Mr. Andrew Kinnison, thought that those points had been agreed. So did I. That was why I made consent orders relating to them. Consent orders relating to them having been made, Mr. Kinnison argues, relying on Siebe Gorman & Co. Ltd v. Pneupac Ltd. [1982] 1 All ER 377, that I have no power to allow the three points to which the consent orders related to be argued now.

3. It is correct that I have no power to allow the three points to be argued if the consent orders I made evidenced what Denning M.R. called "a real contract between the parties". Different considerations, though, applied to each of the consent orders I made.

EXPERT EVIDENCE

4. In the summons for directions, the Plaintiffs sought leave to adduce expert evidence on a number of topics. Two of those topics were as follows:

"(a) The law of the PRC relating to the corporate status of PICC, its branches and the authority of branches to enter into contractual relationships on behalf of the head office in Beijing.

(b) The materiality in the Hong Kong and PRC marine hull insurance markets of the non disclosures and mispresentations alleged in the points of defence and counterclaim the Points of Rejoinder and the further and better particulars thereto and the amendments ordered thereto."

In the correspondence which passed between the solicitors before the hearing of the summons for directions, no objection was taken by the Defendant's solicitors to expert evidence being called on those topics. That is still the Defendant's solicitors' position. However, it now emerges that the drafting points which Mr. Mallard wished to raise related to the formulation of these topics, and he accepts that at least one of the drafting points could not properly be regarded as minor. It is, I think, unfortunate that the nature of the drafting points which Mr. Mallard had in mind were not mentioned by him either in correspondence before 25th July or at the hearing itself, but I do not think that there was "a real contract" between the parties relating to the formulation of those topics. What there was was "a real contract" between the parties merely that there should be expert evidence relating to the authority of the provincial branches of the Defendant and the materiality of the alleged non-disclosures and misrepresentations. I therefore permitted the precise formulation of the topics on which there is to be expert evidence to be argued.

(a) The authority of the provincial branches of the Defendant.
The Defendant's solicitors' formulation of the topic on which the evidence is to be adduced is as follows:

" The law of the PRC relating to the corporate status of PICC, its branches and the authority of branches as to the issue of insurance policies."

The issue relating to the authority of the provincial branches of the Defendant arises out the Defendant's allegation that its branches are entitled to issue policies of insurance on their own behalf, and that this policy of insurance was in fact issued by one of its provincial branches. The Defendant therefore contends that the party to the policy of insurance on which the Plaintiffs' claim is based is its provincial branch in Hunan. In my view, the best formulation of the topic on which expert evidence is required is:

" The law of the PRC relating to the corporate status of the PICC and its provincial branches, and the authority of its provincial branches to issue policies of insurance (a) on their own behalf, and (b) on behalf of the head office of the PICC in Beijing."

I have included a reference to the corporate status of both the Defendant and its provincial branches because the authority of the provincial branches to issue policies of insurance may well depend on that corporate status.

(b) The materiality of the alleged non-disclosures and misrepresentations. The Defendant's solicitors' formulation of the topic on which expert evidence is be adduced is as follows:

" The materiality of the non disclosures and misrepresentations alleged in the Points of Defence and Counterclaim and the Points of Rejoinder and the further and better particulars and the amendments ordered thereto."

It is common ground that the word "thereof" should be added after the words "the further and better particulars." Accordingly, the issue which I am being asked to decide is whether the materiality of the non-disclosures and misrepresentations has to be determined by reference only to the practice of the marine hull insurance markets in Hong Kong and the PRC.

5. The arguments on this issue are not straightforward. Mr. Kinnison says that certain observations in Pan Atlantic Insurance Co. Ltd. v. Pine Top Insurance Co. Ltd. [1994] 2 Lloyd's L.R. 427 show that it is only the practice of local markets which are relevant to materiality, whereas Mr. Mallard contends that the practice of other markets are relevant as well. I am in effect being asked to decide whether evidence of the practice in other markets as to materiality is admissible. That is not an issue which I am permitted to decide. That is because a master or judge-in-chambers has no power to rule on the admissibility of expert evidence when an application is made, as it is in this case, under Ord. 38 r. 36 for leave to adduce expert evidence at trial. In Sullivan v. West Yorkshire Passenger Transport Executive [1985] 2 All ER 134, it was held that the issue of admissibility was a matter entirely for the trial judge. The powers of the master or judge-in- chambers are limited to ruling on whether the evidence is genuinely expert evidence, and whether pre-trial disclosure of it should be directed under Ord. 38 r. 37.

6. Accordingly, the order I make as to the formulation of the topic on which expert evidence is to be adduced is that of the Defendant's solicitors. If the parties wish to have a pre-trial ruling on the admissibility of evidence of practice in markets other than Hong Kong and the PRC, they should apply to the trial judge, Findlay J., for the determination of that issue as a preliminary issue.

SUPPLEMENTARY EXPERTS' REPORTS

7. In the summons for directions, the Plaintiff sought the following order:

" There be liberty to exchange [of] supplementary experts reports one month from the exchange of the first reports."

No agreement was reached on the time for the exchange of supplementary experts' reports, because the solicitors could not agree a timetable for the exchange of the first batch of experts' reports. At the hearing of the summons for directions, I laid down a timetable for the exchange of the first batch of experts' reports, but I did not address the question as to the impact which that would have on the time for the exchange of supplementary experts' reports. I assumed that the parties were agreed about that. So did Mr. Kinnison. But that assumption was wrong. The correspondence shows that there had been no "real contract" between the parties on the topic, and I have therefore permitted the time for the exchange of supplementary experts' reports to be argued.

8. The Plaintiffs' solicitors have said in correspondence that if the matter were to be determined by a judge, they would not object to the exchange of supplementary experts' reports taking place within two months of the exchange of the first reports. The Defendant's solicitors contended for three months. In my view, two months is the appropriate length of time, bearing in mind the number of experts, the nature of the expert evidence, the likelihood that an exchange of views between experts on both sides might be appropriate before supplementary reports are exchanged, and the need for the trial to be delayed no longer than is necessary.

9. That, I think, disposes of all outstanding issues, and I shall hear from Mr. Kinnison and Mr. Mallard on the issue of costs.