CAPITAL WEALTH FINANCE CO LTD v. LAI YUEH HSING AND OTHERS

HCA 686/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 686 OF 2012

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D E C I S I O N

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THE APPLICATION

1.  This is the hearing of the Plaintiff’s (“P’s”) Summons to compel the 1^st and 2^nd Defendants (“Ds”) to comply with paragraph 1.a of the CMC Order made on 23 March 2016 for the production of the documents (“the documents”), namely, the documents or materials used and considered by their expert to compile the expert report on the authenticity of the signature of Mr. Ku in the share custodial agreement, to P’s solicitors, subject to the undertaking under O.24 for P’s expert to compile the expert report in response to D’s expert report, by delivering the same at Room 2406, Alliance Building, 130-136 Connaught Road Central, Hong Kong within 3 days from the date of the Order, failing which Ds be barred from adducing the expert evidence regarding the authenticity of Mr. Ku in the share custodial agreement and/or strike out the relevant paragraphs: 12.A.3, 12.A.7 to 12.A.13 of the Amended Defence.

2.  This application is contested by Ds.  The parties are legally represented.[1]

3.  As disclosed below, because of the sudden change of the expert, who initially was P’s expert, became Ds’ expert without prior knowledge of P, P now asks this Court to give leave for it to change its expert and to hold that Ds’ expert report should not be admissible in evidence because of conflict of interest on the part of the expert.  But these applications are without a summons in support thereof.

FACTUAL BACKGROUND

4.  The facts of this matter are rather complicated as described by Senior Counsel for Ds.[2]  However, relevant to this application is the fact that P claims against Ds for three loans, one of which involved a share custodial agreement allegedly signed by a Mr. Ku.  Such share custodial agreement will determine the validity of this loan, namely the second loan, allegedly made by P to D1.  Mr. Ku had, in another action, denied having signed those shares custodial agreement.  The court in another action had found that Mr. Ku did not sign the shares custodial agreement.  However, Ds in these proceedings seek to rely upon the expert evidence to say that Ku’s signature on the shares custodial agreement was genuine.  For this purpose, Ds had taken out discovery applications to obtain more than 20 documents containing Mr. Ku’s original signatures for the relevant period during which the shares custodial agreement was executed.

5.  By an order dated 23 March 2016, Ds were ordered to produce the documents within 28 days from the date of the said order to P for P’s expert to compile the expert report in response to Ds’ expert report.

6.  Until now, Ds have not delivered the documents to P in compliance of the order.

The disputes between the parties

7.  Ds now argue that it is unnecessary to do so for the following reasons:

(a) P’s nominated expert, Mr. SC Leung, had prepared an expert report and there was no suggestion that Mr SC Leung’s views were arrived at non-independently or [not] impartially or incompetently;

(b) Insofar as P seeks to now engage a different expert, the Court should not accede to such request, as this falls squarely within the undesirable “expert shopping” rubric and on the facts, is contrary to the underlying objectives in relation to the case management of these proceedings; and

(c) In any event, §1(a) of the Order dated 23 March 2016 had been complied with as the expert report had been compiled by the P’s nominated expert.[3]

8.  The circumstances in which P now asks the Court to grant leave to change its expert become relevant for the determination of the issues today.

9.  It will be convenient to say that P had been relying upon Mr. Leung as its expert as it had nominated him as its expert to the court.  The Plaintiff only became aware around 4:00 pm on 9 May 2016, when it received Mr. Shum’s Affirmation (for Ds), that the 1^st and 2^nd Defendants had engaged a further expert (having already obtained expert evidence from Mr. Radley), and that this expert was Mr. Leung.  Further, Mr. Leung had already produced a report for the 1^st and 2^nd Defendants which is dated 14th March 2016.  The 1^st and 2^nd Defendants stated that this report had been exhibited to the affidavit of Mr. Tommy Chan in support of the application to have all relevant legal actions heard together, but this affidavit was only served on the Plaintiff at the same time as the Affirmation of Mr. Shum on 9th May 2016.[4]

10.  P therefore submits that due to no fault of itself, it has to change its expert because there is a clear conflict of interest of Mr. Leung and his evidence should not be admissible.[5]

11.  It is against the above factual background that this Court has to determine the issues before it.

DISCUSSION

12.  Ds’ argument will succeed only if this Court holds that despite the facts above, P’s nominated expert Mr. Leung has to remain as P’s expert and that he had therefore prepared his expert report, which Ds now use to defend their case against P.  If this Court holds against Ds, P is entitled to change its expert, in which circumstances, Ds had not complied with my Order dated 23 March 2016, a breach that may result in an “Unless Order” to be made against Ds.

13.  Ds’ argument that Mr. SC Leung should remain P’s expert notwithstanding that he had been retained as Ds’ expert and had compiled an expert report in favour of Ds’ case is based upon the fact that P had not accused the expert’s expertise in compiling his report and that to allow P to change its expert is tantamount to allowing experts shopping.

14.  Although P has not challenged Mr. S C Leung’s expert report in respect of independency, impartiality or incompetency, P has challenged Mr. S C Leung’s integrity as an expert who was in conflict of interest when he accepted Ds’ instructions to act for them, having received instructions from P in the first place.  Whether the challenge of integrity, if successful, will allow P to change its expert will be for this Court to determine today.

15.  To the second issue of expert shopping, Ds rely upon the legal principles enunciated in Law Chung Fai v Lam Ming Kuen (unreported, HCPI 96/2008, Bharwaney J. 13 September 2010).  The first question is for the Court to determine whether the facts as disclosed above amount to expert shopping.  Obviously, the facts in the above authority referred to the situation where a party who had instructed his own expert who had produced the original expert report sought to apply for leave from the court to call a substitute expert.  See paragraph 9(d).  P in this case has not produced any original expert report from Mr. SC Leung.  There seems to be no question of substitution of P’s expert.  The application for the change of its expert is because Mr. SC Leung has, without its prior knowledge or consent, become Ds’ expert and had also compiled a report for Ds.

16.  To accede to Ds’ suggestion to order Mr. SC Leung to be P’s expert, in my view, amounts to the Court ordering a single joint expert for the parties despite P’s objection and also despite the fact that the expert had obtained Ds’ instructions to compile a report which is obviously adverse to P’s interest.

17.  This suggestion should be rejected for the following reasons:

(a) This idea of appointing single joint expert (SJE) had been considered by the Working Party on CJR. At paragraph 630 of the Final Report, the Working Party stated clearly that SJE might be a bad idea in many cases. Whilst the Working Party saw the benefit of making a SJE, this should be done by encouragement of the court and by consent of the parties. See paragraph 634.

(b) The situation is clear that P opposes to this suggestion, challenging the integrity of the expert;

(c) The report compiled by Mr. SC Leung was done on Ds’ instructions only, without any knowledge or consent of P, not to mention both parties’ instructions. It may be doubtful if Mr. Leung was acting independently. In a water-leakage dispute trial, the Recorder had criticized that the experts were not acting independently as he said “The experts were accompanied in that meeting by representatives of the solicitors and, in addition, representatives of the 1st defendant and 2nd defendant. This, in my view was an inappropriate way in which to conduct such a meeting.” See paragraph 104 of Parlico Ltd v New Accord Holdings Ltd & Another (unreported, HCA 1665/2010, Recorder Houghton SC, 10 March 2015).

(d) In the circumstances, it is obviously unfair to P that this Court should force Mr. SC Leung upon P. P is bound to lose this argument on the authenticity of Mr. Ku’s signature as Mr. SC Leung has compiled his report against it. It cannot challenge Mr. SC Leung’s expert report at trial.

18.  Having rejected Ds’ suggestion on the choice of expert by P, the only alternative for this Court will be to allow P to choose its own expert.

19.  As to whether Mr. SC Leung’s expert report should be admissible in evidence should be for the trial judge.

20.  Ds submit that the summons should be dismissed because the order did not spell out the way documents should be produced and it was not for P to ask this Court to make an Unless Order against them, given the fact that they were amenable to producing the documents at the premises of the solicitors for Ds, which P’s solicitors refused to accept.  If P’s solicitor had proposed other ways such as the neutral venue for production of the documents or a mutual laboratory for testing the documents, Ds may consider accepting such proposal.  But P did not make such proposal before taking out the application.

21.  Ds are conscious of their obligation to produce the documents in accordance with the terms of the court order dated 23 March 2016.  But they are also concerned about the way P’s expert will deal with documents. This Court deliberately left room for negotiation between the parties as to the best way to satisfy both parties’ concern.  I considered that they would adopt a cooperative approach in solving their differences, in default of which, they may come to court for directions.  However, today’s application, because of the intervening facts, has turned out to be P asking this Court to make the order for leave to change its expert, to rule on the admissibility of D’s expert report and for an Unless Order.

22.  I have taken on board that P’s summons had not asked for leave to change its expert or on the admissibility of Ds’ expert report.  However, for case management purpose, this Court will dispose of the matters in one hearing without the parties coming back again if it is possible to do so without causing any prejudice to any one of them.  This I shall now do.

23.  In view of my finding of the facts and having considered the situation that P is now in an impossible position with Mr. SC Leung as its expert, I consider that there is no prejudice to Ds if I allow P to appoint another expert.  Today, P’s counsel has informed me that P has already instructed an expert in Australia.  I shall therefore make an order that Ds shall produce the documents in the following manner:

(a) Within 14 days from the appointment of P’s expert, P shall inform Ds’ solicitors the way its expert in Australia would examine the documents;

(b) Ds’ solicitors shall within 7 days thereafter confirm whether such methods of examination of the documents are acceptable; and if not, should state the reasons and in what ways they would be acceptable;

(c) The documents shall be produced within 7 days after the parties’ solicitors have come to an agreement;

(d) Liberty to apply.

24.  Because of the above difficulties, this Court will not accede to P’s request for an Unless Order as P has not been able to identify its own expert in place of Mr. Leung.  This Court shall make an order in terms as follows:

(a) The Order made on 23 March 2016 shall be varied for production of documents as per paragraph 23 above;

(b) P shall within 28 days from the date hereof inform this Court in writing the identity of its own expert in place of Mr. Leung;

(c) Liberty to apply.

25.  As to the costs of this application, Ds ask for costs of the application as this Court had not made the Unless Order.  P submits that Ds had failed in their argument on expert shopping and it was reasonable for P to come to court for the directions on production.  It is obvious that the application for an Unless Order was overtaken by the subsequent events.  The hearing can be saved had the solicitors for the respective parties adopted a more cooperative approach in negotiating the solutions for their disagreement.  Solicitors of both parties had not put forth any proposals of resolving their disputes for production of the documents.  I shall therefore treat this as a summons for directions and the usual costs of such hearing shall be costs in the cause (with counsel’s certificate).  So I order.