FALCON PRIVATE BANK LTD v. BORRY BERNARD EDOUARD CHARLES LTD AND ANOTHER

FAMV No. 49 of 2013

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 49 OF 2013 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL FROM CACV NO. 42 OF 2013)

_____________________

____________________________________

REASONS FOR DETERMINATION

____________________________________

Mr Justice Ribeiro PJ:

1. We dismissed this application for leave to appeal at the hearing, reserving our reasons which we now provide. 

A. The background

2. The plaintiff is a Swiss bank with a Hong Kong branch.  The 1^st defendant is a Hong Kong company having the 2^nd defendant as its sole shareholder and director.  The plaintiff alleges that it mistakenly paid a large sum to a named company which then transferred US$10 million to the 1^st defendant resulting, it contends, in the defendants being constituted trustees of the sum received.  The plaintiff issued a Writ against the defendants in November 2011 and obtained a Mareva injunction and an order for disclosure of the whereabouts of the sum received.

3. Between November 2011 and January 2012, the defendants repeatedly failed to give proper disclosure, resulting in the plaintiff having to obtain a series of orders, including unless orders, aimed at compelling disclosure especially in relation to relevant banking documents. The defendants countered by issuing summonses to discharge the injunction and to strike out the plaintiff’s claim.  They also complained that the plaintiff had obtained a "secret order" ex parte from Sakhrani J authorising it to release affidavits filed to the Swiss and Hong Kong Police.

4. The "secret order" complaint was relied on as a basis for seeking more time for complying with the disclosure orders on the footing that the defendants wanted an assurance that disclosed documents would not be provided to the Swiss and Hong Kong Police.  In his judgment dated 27 January 2012 (“the January judgment”),[1] To J held that there had not been any breach of the plaintiff’s undertaking since it had disclosed the documents with the Court’s leave.  He described the abovementioned arguments for deferring disclosure as “illusory and an obvious delaying tactic”, calling the defendants’ delay in compliance “contumelious”.[2]  He made an unless order requiring the defendants to comply. 

5. In purported compliance, the defendants filed an affidavit stating that the banking documents were not in their possession and that they had been unable to obtain them from the banks concerned.  They provided no evidence of written communications with the banks.  This led the plaintiff to issue a summons dated 10 February 2012 for an order that the unless order should take effect or alternatively for a further unless order requiring the defendants to write to the banks to obtain the records.

B. The decisions leading to applications for recusal

6. The plaintiff’s summons was heard by To J on 22 February 2012.  Mr Colin Wright appeared as counsel for the defendants and sought to resist enforcement arguing that the defendants had duly complied with To J’s order.  He submitted that “A party required to make an affidavit disclosing documents can only do so if the documents are in his possession at the time of the deadline for making the affidavit.”[3]  And that: “Once a party from whom specific discovery is sought swear[s] an affidavit that he does not have the documents sought, that is the end of the matter.”[4] To J made it clear that he considered that argument unsustainable: the disclosure obligation obviously extended to documents in the defendants’ power or control so that, if not in their possession, they should have taken steps to obtain them from the banks.[5]  Mr Wright, however, persisted in making the submission although he was told several times to “move on”.[6]  To J made a further unless order requiring the defendants to write to the banks requesting specified documents and to make specified disclosures.

7. In To J’s judgment dated 22 February 2012 (“the February judgment”), he severely criticised Mr Wright for pressing what the Judge considered to be the wholly unarguable proposition that compliance merely required disclosure of documents actually in the defendants’ possession:

“Such submission is as much an insult to the intelligence of the court as it is a disgrace to the counsel of such seniority who utters it. This comment is made not without regard to counsel’s duty to fearlessly uphold the interest of his client; but such duty does not excuse counsel from misleading the court.”[7]

8. He described as “ludicrous” the argument that he had not allowed adequate time for the defendants to obtain the documents adding:

“The way this matter was conducted by the defendants was to engender to delay. It appears that very experienced counsel and reputable solicitors are part of it.”[8]

9. Holding that the defendants had been guilty of unsatisfactory and inadequate disclosure against a background of contumelious delays and breaches, he ordered them to pay the plaintiff’s costs on an indemnity basis.[9]

10. Stung by those criticisms, the defendants’ solicitors wrote to the plaintiff’s solicitors asking them to agree to apply for the Judge’s recusal.[10] The latter firm replied that they saw no reason whatsoever for arguing bias.[11]  The defendants’ solicitor then wrote to the Judge asking him to recuse himself from hearing the pending summonses to strike out the plaintiff’s claim and to discharge the injunction.[12]  The plaintiff’s solicitors wrote suggesting that the recusal application should not be entertained[13] and the Judge refused to recuse himself.[14]  The defendants thereupon took out a summons seeking an order for recusal from hearing the pending summonses on the ground of apparent bias.  That recusal summons was heard and dismissed at the start of the hearing on 15 May 2012 and To J proceeded to deal with the striking-out and discharge summonses, dismissing them (save for striking out one sentence in the Statement of Claim) after a four-day hearing on 7 June 2012.

11. On 9 July 2012, To J handed down his reasons (“the July reasons”).  We are only concerned with his dismissal of the recusal summons.  It was common ground that the test was that referred to by the Appeal Committee in Deacons v White & Case Limited Liability Partnership,[15] as follows:

“… The court must first ascertain all the circumstances which have a bearing on the suggestion that the judge was biased. It must then ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility that the tribunal was biased.”

12. The central question was whether the Judge’s criticisms of counsel and solicitors mentioned above were such as to raise a question of apparent bias.  In the July reasons, To J elaborated on his previous criticisms, stating:

“... Mr Wright’s conduct was a deliberate attempt to mislead the court. Not only did he not apologise for what was a very obvious mis-statement of the law, he stood by his submission and now uses the occasion to attack my impartiality. That is a very serious accusation to make against a judicial officer.”[16]

13. He criticised the solicitors for an unfairly selective quotation from the February judgment[17] and, returning to Mr Wright, stated:

“Mr Wright’s conduct was either sheer incompetence or a deliberate attempt to mislead the court. The legal principle was so trite that a counsel of his seniority and experience of twenty-five years since call to the English bar could not have got it wrong. He obstinately insisted on his misleading proposition of the law despite his mistake had been pointed out to him. The only inference is that he deliberately attempted to pull wool over the court’s eyes. That is why I said it was an insult to the court’s intelligence and a disgrace to the counsel. In the circumstances, it was appropriate for the court to express its strong sense of disapproval of such misconduct in the hope that such misconduct will not be repeated and future proceedings will be conducted in a more lawyerly manner.”[18]

14. To J recognized that Mr Wright had a “duty to fearlessly uphold the interest of his client” but, he held that such duty “does not excuse him from deliberately misleading the court”.[19] 

15. The Judge concluded that since his criticism “was well justified and appropriate ... [no] fair-minded and informed bystander would consider the court was biased when making the criticism”.[20]

16. In relation to the allegation that there was apparent bias in the Judge’s time tabling, he criticised the solicitors for seeking directions which were “absolutely ridiculous” and based on their “distorted sense of fairness and deliberately distorted construction of” a Practice Direction which he considered “reflected a total lack of good faith in [the solicitors’] conduct of this litigation”.[21]

17. To J’s overall conclusion was that far from the fair-minded and informed observer concluding that there was a real possibility that the tribunal was biased, such a person “would easily come to the conclusion that the recusal application is not bona fide made.”[22]

18. The defendants’ application for leave to appeal against dismissal of the recusal summons was granted by the Court of Appeal on 28 February 2013.[23] This led the defendants to apply to To J for a stay of the action until final determination of their appeal and a fresh application for To J to recuse himself.  The Judge refused the application for recusal and went on to grant the stay sought by the defendants.  In his judgment dated 8 August 2013 (“the August judgment”), he commented that it was “unfortunate” that the Court of Appeal had granted leave to appeal his recusal decision.  He accepted nevertheless that, given that decision, “the circumstances present a real possibility of apparent bias” so that it would be prudent for him to consult colleagues if in doubt.  He said, however, that he was in no doubt:

“Not with the least disrespect to the Court of Appeal, I am satisfied that if the circumstances of the case were fully understood in their proper context instead of in the context of hearing an application for leave to appeal, the reasonable, fair-minded and well-informed individual would not conclude that there was a real possibility that I would be biased if I were to proceed to hear the case. It is important in a case like this, the judge should not yield to tenuous, trivial or frivolous grounds and should not accede too readily to suggestions of apparent bias.”[24]

19. As to the renewed recusal application, his Lordship considered it “inconceivable that my criticism of counsel could have been taken by the defendants to the length that they took” and that the defendants had decided that attack was the “best means of defence in a hopeless case”.[25]  He concluded:

“... the recusal application is an abuse of process, an attempt to unsaddle a judge whom the defendants think understood the case too thoroughly and wish to avoid.”[26]

C. The Court of Appeal’s reversal of the Judge on recusal

20. The Court of Appeal[27] allowed the defendants’ appeal against To J’s recusal judgment as explained in his July reasons, set aside his decisions to dismiss the striking-out and discharge summonses and remitted those summonses to be dealt with by another judge in the Court of First Instance. 

21. Kwan JA, with whom the other members of the Court agreed, noted that this was an apparent bias case with no one suggesting actual bias.  Her Ladyship referred to the test mentioned above[28] and found the judgment of Doyle CJ in the Supreme Court of South Australia in IOOF Australia Trustees Ltd v SEAS Sapfor Forests Pty Ltd,[29] especially helpful in a case involving friction between Bench and Bar:

“…disqualifying bias is not established merely by pointing to circumstances indicating tension, or even some hostility, between the judge and counsel. The relevant principles are directed towards ensuring the appearance and the reality of a fair hearing. That is, one in which the case on each side is fairly considered. Just as that does not require that a judge approach the merits of the case with no preconceived views about issues that might arise in the case, so long as the judge is willing to listen fairly to argument on either side, so the principle does not require that the judge not have, or at least not disclose, any adverse views about a particular counsel appearing in the case. What is important is that the judge be willing to consider the case presented by that counsel fairly. It is when the hostility between the judge and the counsel is such that the fair-minded observer might reasonably apprehend that the judge will not fairly consider the case being presented for the client that disqualifying bias is present.”

22. Kwan JA recognized that in applying the standard:

“...the fair-minded observer is to be taken to appreciate that a judge has professional training and experience to differentiate between counsel and client, and between counsel and the issues to be decided; that the style and manner of particular counsel may at times prove irritating to a judge (and vice versa); and that occasional departures of judge and counsel from appropriate standards of behaviour in court are nothing more than indications of ordinary human frailty.”[30]

23. And she acknowledged that the Judge, who had shown impartiality in his rulings, had couched his criticisms in severe terms against a background of serial non-compliance by the defendants, and that:

“...it was apparent there was an increasing sense of frustration on the judge’s part that the court orders for disclosure were not obeyed, despite the 1^st and 2^nd Unless Orders, and that the use of colourful expressions in censorious terms in the judgments was merely an indication that the judge was understandably upset by the behaviour of counsel and solicitor, whose conduct of the proceedings he regarded as engendering delay.”[31]

24. However, the Court of Appeal concluded that the Judge’s uncompromisingly expressed finding that the defendants’ legal representatives had deliberately misled the Court, stated not just once, but repeated in a series of decisions spanning more than six months, would inevitably lead a fair-minded and informed observer to conclude that there was a real possibility that the tribunal had lost its detachment and would approach the case with its mind closed to persuasion by those advisers, thus undermining judicial impartiality.[32] The costs of the proceedings which had been set aside and of the appeal to the Court of Appeal were ordered to be paid by the plaintiff, although that order was stayed pending determination of the discharge and striking-out summonses.[33]

D. The plaintiff’s application for leave to appeal

25. The present application for leave to appeal is brought after the Court of Appeal refused the plaintiff’s earlier leave application.[34]

26. The plaintiff submits that two questions of great general or public importance arise on the appeal, namely:

(a) “Whether the principle that a judge properly exercising their [sic] judicial function, for example by criticising the conduct of party’s lawyer in the course of their judgment on a matter which they consider relevant to their decision, cannot by that process be said to be biased (as pronounced by the majority of the England Court of Appeal in Bahai v Rashidian [1985] 1 WLR 1337; and most recently applied in Jemaldeen v A-Z Law Solicitors [2012] EWCA 1431), is part of Hong Kong law.” (Question 1)

(b) “Whether apprehended bias is established in every case where there is a criticism that an advocate for a party has misled the court (as held by the Court of Appeal at §64) or whether the general test for apprehended bias applies in such cases, so as to require an examination through the eyes of the fair minded and informed observer of all the facts and circumstances giving rise to the judge’s criticism, including whether such criticism was reasonable or justified, in which event the judge should be recused.” (Question 2)

27. In his oral submissions on behalf of the plaintiff, Mr Charles Manzoni SC translated those questions into two essential propositions, namely:

(a) That the Court of Appeal had erred in that it had purported to propagate a new principle whereby it was obligatory for a judge who had levelled serious criticisms against counsel or solicitors in the course of proceedings to recuse himself from those proceedings.  That submission was based on a sentence contained in paragraph 64 of the Court of Appeal’s judgment where Kwan JA stated: “Having come to the view that counsel had deliberately attempted to mislead the court, it must logically follow that counsel would thereby forefeit the privilege given by his profession to be listed to by the court with an open mind”.

(b) Secondly, that the Court of Appeal had erred in that it had failed to determine whether To J’s criticisms of Mr Wright were justified since there is a principle, based on the Bahai case cited in Question 1, which establishes that where a judge’s criticisms of counsel are justified, such criticisms can never justify an application for the judge’s recusal.

28. We shall deal with this application on the basis of those two propositions.

D.1 The first proposition

29. We reject the first proposition since it is abundantly clear that the Court of Appeal cannot properly be understood to have been adopting a principle of the kind suggested.  Kwan JA’s statement must be read in its proper context.  There is no question of a judge somehow having automatically to recuse himself just because he has seriously criticised counsel or solicitors appearing in a case.  The test is that involving the objective standard of the fair-minded and informed observer referred to above, applied in the relevant particular context.  It is always a fact-specific inquiry.

30. Kwan JA examined in detail each of the criticisms made by To J in its context provided by each of his January, February, July and August judgments.[35] Her Ladyship cited relevant authority and accurately set out the established test which was common ground[36] and, far from applying any mechanical rule requiring automatic recusal founded simply on the fact of serious criticism, was at pains to note that the true test required all the circumstances having a bearing on apparent bias to be ascertained and assessed;[37] that it is not enough merely to point to tension or even hostility between the judge and counsel, there being no rule that the judge must have or disclose no adverse views about a particular counsel appearing in the case;[38] that the fair-minded observer “is to be taken to understand that the judge has sworn an oath to do justice and is trained to and will differentiate between counsel and client, and between counsel and the issues to be decided”;[39]and that the party seeking recusal is required to “articulate the relevant reasoning by which the fair-minded observer would attribute a level of prejudgment justifying recusal”.[40]  This approach is wholly inconsistent with Mr Manzoni’s first proposition.

D.2  The second proposition

31. The Bahai decision involved the Judge finding that the solicitor for one of the parties had at the trial, knowingly put forward a case for his client which he knew to be false.  In consequence, the Judge ordered an inquiry under either O 62 r 8 or the inherent jurisdiction, as to whether the solicitor should personally be liable for the costs of the action.  The Judge also referred the matter to the Law Society.  It was argued that the Judge should have transferred the costs issue to some other judge.  The majority of the English Court of Appeal rejected that submission.  The costs issue had arisen in the action tried by the judge and it was held to be his duty to deal with it.  That was obviously a fact-specific conclusion which arose in a context totally different from ours. 

32. Mr Manzoni, however, sought to rely on the following two sentences from the judgment of Balcombe LJ[41] for suggesting that a principle exists that a justified criticism can never be a ground for recusal:

“A judge properly exercising his judicial function, eg, by criticising the conduct of a party’s solicitor in the course of his judgment on a matter which he considers relevant to his decision, cannot by that process be said to be biased. Bias is the antithesis of the proper exercise of a judicial function.”

33. Those sentences are taken out of context.  In the preceding paragraph, Balcombe LJ referred to Myers v Elman[42] as authority for saying that the relevant costs application should normally be tried by the judge who heard the action while acknowledging that there was a discretion to direct that the application be heard by another judge and observing that it ought only to be exercised for compelling reasons.  His Lordship was merely stating that in the context of Bahai, the judge’s criticisms were relevant to his decision to inquire whether an order should be made against the solicitor personally and were made as part of his judicial function.  It therefore did not constitute a compelling reason for recusing himself from dealing with those costs.  We do not accept that Bahai lays down any fresh legal principle.  It merely provides an example of the established principle’s application in the specific context of a judge’s duty to deal with costs.  

34. A further aspect of the second proposition involves the suggestion that it was incumbent on the Court of Appeal to conduct an inquiry into whether To J’s criticism of counsel and solicitors was justified or reasonable, because (so it was argued) there should be no recusal if the criticisms are justified.  We have already rejected the proposition that the fact that the criticisms are justified means that there must be no recusal.  There will certainly be cases where justified criticisms may be expressed by the judge in terms and in contexts which will not require recusal.  But equally, in some cases, applying the standard of the fair-minded and informed observer, the context and nature of the criticism may be such that recusal ought to follow even though the criticism was justified.  Everything depends on the circumstances. 

35. There is no obligation on either the judge or the Court of Appeal to conduct an inquiry into whether the judge’s criticisms of counsel or solicitors was justified.  It would be otiose in the case of a judge who would presumably only have made the criticisms if he believed (rightly or wrongly) them to be justified and one would expect his reasons for making them to be evident.  And if a review of the justification for the criticism had to be undertaken on appeal, it would potentially mean an expensive piece of satellite litigation.  More to the point, such an inquiry is unnecessary to the proper operation of the fair-minded observer standard.

36. Of course, if a judge makes criticisms without any discernible rhyme or reason or which are obviously unfair and unreasonable, this might be factored into what the fair-minded and informed observer might apprehend in terms of apparent bias.  Conversely, if the criticisms appear capable of being justified, any appellate court would be slow to conclude from the mere fact of such criticisms, that the fair-minded and informed observer would apprehend a risk of bias.  But even if the criticisms are or may be justified, if they are couched in terms or made in a context which raise doubts as to whether the judge can continue to adjudicate with the detachment and impartiality essential to the judicial process, his recusal may be properly required. 

E. Not a case for interfering with the Court of Appeal’s decision

37. In cases where a judge finds it necessary to criticise the legal representatives of a party appearing in a case, the question of whether recusal should follow requires all relevant circumstances to be taken into account and policy considerations to be balanced against each other.

38. Judges must be wary of unjustified applications for their recusal motivated by tactical or forum-shopping considerations.  By its very nature, it is generally in quite exceptional cases that recusal is called for.  As Kwan JA noted, Judges can generally be expected to exercise proper judicial standards even after they have found it necessary to criticise wayward legal representatives.  Judges should accordingly feel confident of appellate support if they continue with the case where there are no reasonable grounds for apprehending a risk of bias.  On the other hand, if there is a real possibility that a risk of bias might objectively be apprehended, this should be recognized and they should prudently arrange for a colleague take over the proceedings. To press on with hearing the matter in such cases poses a risk of costs being thrown away if, on appeal, it is held (as in the present case) that the judge should not have continued to hear the case.  Even if there is a suspicion that forum shopping motivates an application, the fact and appearance of judicial impartiality must have priority and the prudent course should be followed where a real risk of apprehended bias exists.

39. In making these comments, we merely apply the well-known standard of the fair-minded and informed observer.  In a context like the present, we agree with Kwan JA that Doyle CJ’s observation is helpful.  His Honour stated:

“It is when the hostility between the judge and the counsel is such that the fair-minded observer might reasonably apprehend that the judge will not fairly consider the case being presented for the client that disqualifying bias is present.”

40. The Court of Appeal was entitled to conclude that the line had been crossed in the present case.  This is not a case for the exercise to be repeated in the Court of Final Appeal.  The irritation and frustration evident in To J’s judgments is wholly understandable.  However, it is an error to think that because criticism of counsel and solicitors may be justified, the context and nature of such criticism cannot ever constitute a basis for recusal. 

41. We accordingly refused leave to appeal with costs to the defendants.