RE JONATHAN CROW QC

HCMP 1079/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1079 OF 2015

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REASONS FOR JUDGMENT
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1.  At the conclusion of the hearing, I refused this application for admission of Mr Jonathan Crow QC under section 27(4) of the Legal Practitioners Ordinance (Cap 159) for the purposes of advising, representing and appearing on behalf of Allied Weli Development Limited (“Allied Weli”) in its appeals in CACV 222/2014 and CACV 35/2015 and “in any applications or proceedings incidental thereto”. I now give my reasons.

2.  Allied Weli, an investment holding company, was the defendant in HCA 1656/2012.  It was an action brought by the plaintiff, Penta Investment Advisers Ltd (“Penta”), a hedge fund manager, against Allied Weli for an amount due under a deed of guarantee dated 24 June 2011 (“the Deed”) regarding a placement exercise of which a subsidiary of Allied Weli was the sub‑placing agent, or for damages for repudiatory breach of the Deed.  The main issues in dispute were the due execution of the Deed and the authority, actual or apparent of Allied Weli’s permanent managing director (a Ms Liao) to execute the Deed, binding on the defendant.  There was also an issue as to whether Penta, as opposed to the “funds” managed by Penta, suffered any substantial loss as a result of the breach of the Deed.  The case came for trial before Anderson Chow J on liability and on quantum respectively, who by two judgments dated 14 October 2014 and 21 January 2015 found in favour of Penta on liability and assessed damages in the sum of $210,366,448 together with interest.  Dissatisfied with the judgments, Allied Weli brought the two appeals, which will be heard together on 23 and 24 July 2015. Allied Weli was represented by local senior and junior counsel at the hearings before the judge.  It wished to bring in Mr Crow to lead both local counsel at the hearing of the two appeals, and thus the application for admission.

3.  Moving the admission, Mr Kim submitted that the appeals are of “unusual difficulty and complexity” in law; the Court of Appeal’s determination in the appeals “will likely have a positive impact on the development of local jurisprudence in … the law of contract and damages”; and the appeals involve a significant amount of money.

4.  When pressed at the hearing, Mr Kim identified two grounds of appeal which he said were of unusual difficulty and complexity, namely, paragraph 14(4) in the notice of appeal in CACV 222/2014 and paragraph 4(2) in the notice of appeal in CACV 35/2015:

“14(4) In any event, as the learned judge recognised at paragraph 56 of his judgment, a third party cannot rely upon the formal validity of an instrument bearing the seal of a company ‘if the very nature of the transaction is such as to put him upon inquiry. If the nature of the transaction is such as to excite reasonable apprehension that the transaction is entered into for purposes apparently unrelated to the company’s business, it will put the person dealing with the company upon inquiry’: see Northside Developments v the Registrar General 93 ALR 385 at 393 per Mason CJ (a passage quoted by the learned judge). The learned judge was wrong to hold that there was nothing in the nature of the transaction relating to the Deed which was such as to put Penta upon inquiry. The effect of the Deed (if it had been validly executed) would have been to impose upon Hennabun the obligation to guarantee the performance of shares in Mascotte Holdings Limited, a company in which Hennabun had no direct or indirect shareholding. There was no obvious relationship between the Deed and Hennabun’s business. Nonetheless, Hennabun stood to assume very substantial liabilities under the Deed, without gaining anything in return. Those matters alone were sufficient to put Penta upon inquiry.”

“4(2) even if it were correct (which it is not) that Penta is entitled to claim damages to reflect any difference between the placement price and the ultimate sale price of any Shares, on the true construction of the Deed Penta was in any event only entitled to claim the Guarantee Amount (as defined in clause 6 of the Deed) if and to the extent that it had suffered some economic loss as a result of itself acquiring and still holding some Disposal Shares as at the Confirmation Date whose value had fallen below the placement price under the Share Placement: as the learned Judge rightly held, Penta had not acquired any Shares, and accordingly it had suffered no loss.”

5.  The application was opposed by the Bar, and patently the Secretary for Justice was not impressed by the application either.

6.  The principles governing admission of overseas counsel are so well established that they need no elaboration here.

7.  Likewise, the judgments of Anderson Chow J set out clearly the issues and arguments involved, as well as the reasons why he found against Allied Weli.  There is no need to repeat them here.  The case will soon be before the Court of Appeal, and the less I say about the issues, the better.

8.  For the purposes of explaining my refusal of the admission application, all I need say is that the issues raised in the appeals are not unusually difficult or complex.  In this regard, I note that Mr Nigel Kat SC, Mr Justin Ho with him (for the Bar), actually submitted that the appeals raised only “straightforward issues in what is a straightforward commercial case”.

9.  I agree with both Mr Kat and Mr Suen (for the Secretary for Justice) that the grounds of appeal, including the two grounds specifically relied on by Mr Kim at the oral hearing, do not raise any legal principles that are not well established.  Rather, they raise questions of interpretation of the articles of association of Allied Weli, which are fact sensitive matters involving no unusual difficulty or complexity; they also turn on a finding, based on the facts and evidence in the case, regarding the true intention of Ms Liao when she wrote her signature on the Deed, but in the space beneath the words “in the presence of” where, on the face of it, witnesses to the execution of the Deed were supposed to sign.  Paragraph 14(4) recited above does not challenge the legal principle stated there but only concerns the facts obtaining in the case, a matter which cannot possibly be described as unusually difficult or complex.

10.  As regards quantum, whether Penta has suffered any substantial loss is certainly a matter to be ventilated before the Court of Appeal.  But it is by no means an unusually difficult or complex question.

11.  Nor can I see how the resolution of these issues might substantially impact on the development of local jurisprudence.

12.  In the circumstances of the present case, the quantum of the judgment entered against Allied Weli is a factor which carries very little weight in the court’s consideration of where the public interest lies.  On the facts, it is plain that the public interest lies against admitting the applicant (who is no doubt an eminent practitioner of high standing and suitably qualified were he to be admitted – but nothing turns on that in this case).

13.  For these reasons, the application was refused.  With respect, it was quite a hopeless application from the outset and indeed admission ought never to have been sought, particularly bearing in mind the costs (public funds), time and efforts that an admission application would inevitably entail.