XCHRX KO CHI KEUNG v. LEE PING YAN ANDREW

HCA 18029/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 18029 OF 1999

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D E C I S I O N

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1. This is the Defendant's appeal against the order of Master Kwan dated 31 October 2000 whereby leave was given to the parties to adduce expert evidence at the trial of this action, to be limited to one expert for each party. The Defendant seeks in this appeal to set aside that order and the dismissal of the Plaintiff's application for leave.

2. The Plaintiff brings this action alleging that the Defendant breached a written agreement under which the Plaintiff agreed to provide services as an accounting and financial expert in respect of fund-raising and the application for listing of a company at the Hong Kong Stock Exchange. The Defendant defends the claim mainly on the ground that the Plaintiff failed to provide his services as agreed. The Defendant also avers that there was subsequently an agreement to discharge the agreement now relied upon by the Plaintiff. Further, the Defendant also relies on 2 alternative lines of defence, namely, misrepresentation on the Plaintiff's part and the Defendant's right to terminate the agreement to provide services by reason of the Plaintiff's failure to provide his services.

3. The Defendant argues that the learned Master erred in making the aforesaid order because no relevant (and therefore admissible) expert evidence is involved. The Plaintiff resists this appeal on the following grounds :

(1) after an application was made under RHC O 38 r 36/37, the court has no power to bar a party from adducing expert evidence at trial;

(2) relevance and admissibility of expert evidence is a matter for the determination by the trial judge. A Master or Judge in Chambers cannot rule on admissibility: Hong Kong Civil Practice 2001, paragraph 38/36/1;

(3) the expert evidence proposed to be adduced is relevant:

(a) it can explain what occurs to shareholdings in a proposed floatation;

(b) it can provide a calculation as to the Plaintiff's current share entitlement in the company which is to be publicly listed.

These issues will be dealt with under separate headings below.

The Court's Jurisdiction to Rule on Admissibility of Expert Evidence

4. By reason of the court's remarks in Woodford and Ackroyd v Burgess [2000] CP Report 79 (this decision was not cited at the hearing before the learned Master), I propose to deal with the Plaintiff's points (1) and (2) above under this heading.

5. In the light of the UK Court of Appeal's decision in Sullivan v West Yorkshire Passenger Transport Executive [1985] 2 All ER 134, it used to be thought that:

"Although the Court has power under O 38 r 4 to limit the number of medical or other expert witnesses to be called at the trial, it has no power under this rule or under its inherent jurisdiction, where a party has made due application under this rule, to bar that party from calling an expert witness at the trial, e.g.: expert actuarial evidence, and at the interlocutory stage, the Master or the Judge in Chambers is not entitled to rule on the admissibility of such evidence ......"

6. The jurisdictional issue was raised and considered in Woodford (above). The Court of Appeal in the UK said:

"Looking at the matter first apart from the authority, it is in my judgment clearly eminently desirable for the cheap and expeditious disposal of cases that there should be a power to rule prior to trial that evidence, be it expert or non-expert, is admissible or not admissible. If it is ruled not admissible then all the costs of rebutted evidence will be saved and it may be that the party which wished to adduce the evidence which has been declared non-admissible will either abandon or compromise his case. If on the other hand the evidence is ruled admissible, the party who thought it could submit that it was inadmissible may be the more willing to compromise"

The Court of Appeal also observed that there would be many cases where it would be inopportune to exercise any power, if it exists, before trial because the trial judge would often (or usually) be the best person to decide the question. The Court of Appeal then decided that the High Court has the power (under its inherent jurisdiction) to rule on the admissibility of expert evidence. It went on to refer to the following passages in Bown v Gould & Swayne [1996] PNLR 130:

"...... in reliance upon .... Sullivan [above] ....[counsel] submits that the judge had no jurisdiction to rule this expert evidence inadmissible, and to refuse [to give leave pursuant to O 38 r 36]

...... In my judgment, however, the point is a bad one .... Good sense surely dictates that such an issue should be resolved before trial and thereby without incurring the very considerable, and perhaps entirely unnecessary, expense of instructing experts, commissioning their reports, and securing their attendance at trial. I speak of experts in the plural, because it cannot be doubted that had the Plaintiff procured such an expert's report, the defendants for their part would, without difficulty, have found an expert to express the contrary view. It would, to my mind, be most unfortunate if no machinery or opportunity existed for obtaining a ruling upon such an issue before trial."

7. The Court of Appeal in Bown, however, appears to have proceeded on 2 bases which may be relevant to the present appeal:

(1) there is a difference between conventional interlocutory directions such as are ordinarily sought initially from the Master and an order made by the High Court Judge, not by way of appeal from the Master, but rather on a pre-trial review.

(2) the parties in Bown plainly consented to a ruling being made and this conferred jurisdiction upon the court.

The Court of Appeal in Woodford found that point (2) above was only an alternative ratio (and therefore not strictly binding). The Court of Appeal in Woodford also found the distinction made in point (1) above to be a rather artificial one. However, having referred to the passages in Sullivan in which the Court of Appeal concluded that there is no power under O 38, r 36 or r 40 to rule on the admissibility of expert evidence before trial, the Court of Appeal in Woodford did not differ from the conclusion (referred to in point (1) above) and went on to decide that the court has power to do so under its inherent jurisdiction and/or O 33, r 3.

8. If the approach in Woodford is followed:

(a) there is clearly jurisdiction on the part of High Court Judges to rule on the admissibility of expert evidence at pre-trial review hearings;

(b) there is doubt as to whether there is jurisdiction to do so on the part of the Masters;

(c) there is doubt as to whether there is jurisdiction to do so on the part of High Court Judges on appeal from orders made by the Master pursuant to O 38 (or indeed at hearings other than pre-trial reviews).

9. I conclude that while the Court of Appeal's conclusion in Woodford that the High Court has jurisdiction to decide on the admissibility of expert evidence before trial is correct, the distinction (which seems to be maintained in that decision) between the court's jurisdiction at pre-trial review hearings and that on other occasions is invalid. Since I am not in law bound by the UK Court of Appeal, I will decline to follow that part of its decision.

10. The Plaintiff argues that the difference between pre-trial reviews and some other types of interlocutory hearing is that a pre-trial review is part of the trial, albeit the judge hearing the pre-trial review may not be the trial judge. I do not agree with that analysis. In my view, the matter is ultimately one of discretion on the part of the High Court (be it the Master or the Judge in Chambers). When it is clear and obvious that the expert evidence is relevant (or irrelevant), the discretion should normally be exercised in not deferring the determination on admissibility until trial so as to save time and costs and to promote certainty in litigation. On the other hand, if the relevance (or irrelevance) of the expert evidence is not clear and obvious, the discretion should usually be exercised to defer that issue for it to be raised at trial.

11. Having come to the above conclusion, I now turn to consider the Plaintiff's point (3) above, namely, the relevance of the expert evidence proposed to be adduced herein.

Whether the Expert evidence is Relevant?

12. The first matter which the Plaintiff contends is relevant is that the expert can explain what occurs to shareholdings in a proposed floatation. First, I do not agree that this is a matter involving expertise. As the Defendant correctly points out in his skeleton submissions, each company will reorganize its shares according to its own requirements. Further, what the other companies do to their shareholdings on floatation is entirely irrelevant to the issues raised by the pleadings in this action.

13. The second matter which the Plaintiff contends is relevant is the calculation of the Plaintiff's current share entitlement in the company proposed to be listed. Again, I disagree with this contention in view of the following averments in the Amended Statement of Claim :

(1) according to paragraph 5d thereof, the Plaintiff would be remunerated (among other things) by the transfer of 2.5% of the Defendant's existing shareholding in Cari Holdings Limited ("Cari Holdings") to him;

(2) according to paragraph 5A thereof, the above was equivalent to 2.2% of the shares in Cari Holdings;

(3) according to paragraph 5B thereof, the above would be transformed into (a) 2.2% of the shares in the company to be listed; or (b) 2.2% of the quantity of the shares of the company to be listed used to swap for 100% of the Cari Holdings shares;

(4) according to paragraph 7b thereof, the Plaintiff's share rights were increased to 5% of the Defendant's existing shareholding in Cari Holdings (equivalent to 4.4% of all the Cari Holdings shares);

(5) according to paragraph 8A thereof, the Defendant became a trustee of, in effect, 5% of its shareholding in Cari Holdings for the Plaintiff;

(6) according to paragraph 20 thereof, the Defendant became a trustee for the Plaintiff to the extent of 2.2% of the shares of the company to be listed, or 2.2% of the quantity of those shares used to swap for 100% of the Cari Holdings shares.

These averments show that the Plaintiff has no difficulty in formulating his claim regarding his alleged share entitlement. I agree with the Defendant's argument that it is unnecessary for any expert to give evidence as to the above matters. The calculation of the Plaintiff's share entitlement according to the terms of the agreement between the parties, based on the Defendant's shareholding in Cari Holdings and/or the quantity of shares of the company to be listed, can be worked out by the Court with the parties' assistance using the relevant materials which may be produced at trial.

Conclusion

14. For the above reasons, I conclude that :

(1) there is jurisdiction to determine the relevance (and therefore admissibility) of expert evidence in this appeal;

(2) the issues raised in this case are sufficiently clear and obvious for the discretion to be exercised in determining the question now.

15. Having regard to the circumstances of this case (which are set out above), I consider that the Plaintiff's application should be dismissed. The appeal is allowed and the learned Master's order is set aside.